Kearny Financial Corp. Announces Fourth Quarter and Fiscal Year End 2023 Results and Declaration of Cash Dividend

FAIRFIELD, N.J., July 27, 2023 (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 June 30, 2023 of $12.0 million, or $0.19 per diluted share, compared to $10.3 million, or $0.16 per diluted share, for the quarter ended March 31, 2023.

For the fiscal year ended June 30, 2023, the Company reported net income of $40.8 million, or $0.63 per diluted share, compared to $67.5 million, or $0.95 per diluted share, for the fiscal year ended June 30, 2022. Net income for the years ended June 30, 2023 and June 30, 2022 was impacted by various non-recurring items, as described in further detail below.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on August 23, 2023 to stockholders of record as of August 9, 2023.

Craig L. Montanaro, President and Chief Executive Officer, commented, “The current operating environment for community banks remains challenging. An inverted yield curve, intense competition for deposits and slowing demand for loans all present near-term earnings headwinds for our industry. Despite these challenges I am pleased to report our success on several fronts.”

Mr. Montanaro continued, “As expected, the rate of our net interest margin compression slowed, declining nine basis points quarter-over-quarter. Our operating efficiency initiative continues to gain traction, with adjusted non-interest expense down 2.7% from the prior quarter and 9.8% from our December 2022 non-interest expense run rate. We improved our capital position, increasing tangible common equity by 33 basis points from the prior quarter, while continuing to reduce outstanding shares via our repurchase program. Finally, our loan charge-off rate remains industry-leading, with full fiscal year 2023 net charge-offs of $810,000, or 0.01% of average loans.”

Mr. Montanaro concluded, “While it remains to be seen how long this current environment persists, our balance sheet and risk profile position us well for long-term success. In the meantime, we remain committed to serving our clients and our communities, while continuing to build franchise and shareholder value.”

Balance Sheet

• Total assets were $8.06 billion at June 30, 2023, a decrease of $284.5 million, or 3.4%, from March 31, 2023 and an increase of $344.9 million, or 4.5%, from June 30, 2022.
• Cash and cash equivalents totaled $70.5 million at June 30, 2023, a decrease of $124.1 million, or 63.8%, from March 31, 2023 and a decrease of $31.1 million, or 30.6%, from June 30, 2022.
• Investment securities totaled $1.37 billion at June 30, 2023, a decrease of $42.6 million, or 3.0%, from March 31, 2023 and a decrease of $88.2 million, or 6.0%, from June 30, 2022.
• Loans receivable totaled $5.83 billion at June 30, 2023, a decrease of $136.9 million, or 2.3%, from March 31, 2023 and an increase of $411.6 million, or 7.6%, from June 30, 2022. The decrease for the quarter and the increase for the year were largely driven by multi-family and nonresidential mortgage loans.
• Deposits were $5.63 billion at June 30, 2023, a decrease of $174.2 million, or 3.0%, from March 31, 2023 and a decrease of $233.1 million, or 4.0%, from June 30, 2022. Excluding brokered certificates of deposit (“CDs”), deposits decreased $53.7 million, or 1.1%, from March 31, 2023 and $100.1 million, or 2.0%, from June 30, 2022. Excluding brokered CDs, the decrease for both the quarter and the year were largely driven by a decline in savings deposits, partially offset by growth in retail CDs.
• The aggregate amount of uninsured deposits was $1.77 billion at June 30, 2023. Excluding collateralized deposits of state and local governments, and deposits of the Bank’s wholly-owned subsidiary and holding company, the aggregate amount of uninsured deposits was $710.4 million, or 12.6% of total deposits.
• Borrowings were $1.51 billion at June 30, 2023, a decrease of $104.9 million, or 6.5%, from March 31, 2023 and an increase of $605.5 million, or 67.2%, from June 30, 2022. At June 30, 2023, borrowings comprised $1.41 billion of advances from the Federal Home Loan Bank of New York and $100.0 million from unsecured fed funds lines of credit.
• At June 30, 2023, the Company maintained available secured borrowing capacity of $2.44 billion, of which $1.96 billion was immediately accessible via in-place collateral and $477.0 million represented the market value of unpledged securities.

Earnings

Performance Highlights

• Return on average assets was 0.59% and 0.50% for the quarters ended June 30, 2023 and March 31, 2023, respectively, and 0.51% and 0.93% for the years ended June 30, 2023 and 2022, respectively.
• Return on average equity was 5.58% and 4.69% for the quarters ended June 30, 2023 and March 31, 2023, respectively, and 4.66% and 6.86% for the years ended June 30, 2023 and 2022, respectively.
• Return on average tangible equity was 7.41% and 6.20% for the quarters ended June 30, 2023 and March 31, 2023, respectively, and 6.17% and 8.77% for the years ended June 30, 2023 and 2022, respectively.
  

Net Interest Income and Net Interest Margin

• Net interest margin contracted nine basis points to 2.11% for the quarter ended June 30, 2023 and 60 basis points to 2.34% for the year ended June 30, 2023. The decrease for the quarter was due largely to an increase in the cost of interest-bearing deposits, partially offset by an increase in the yield on interest-earning assets. The decrease for the year was due largely to increases in the cost and average balance of interest-earning liabilities, partially offset by increases in yield on and average balance of interest-earning assets.
• For the quarter ended June 30, 2023, net interest income decreased $2.2 million to $40.2 million from $42.4 million for the quarter ended March 31, 2023. Included in net interest income for the quarters ended June 30, 2023 and March 31, 2023, respectively, was purchase accounting accretion of $887,000 and $711,000, and loan prepayment penalty income of $185,000 and $103,000.
• For the year ended June 30, 2023, net interest income decreased $20.7 million to $175.9 million from $196.6 million for the year ended June 30, 2022. Included in net interest income for the years ended June 30, 2023 and 2022, respectively, was purchase accounting accretion of $5.3 million and $9.0 million, and loan prepayment penalty income of $895,000 and $5.4 million.
  

Non-Interest Income

• For the quarter ended June 30, 2023, non-interest income increased $2.0 million to $3.7 million. The increase was primarily attributable to a loss on sale of loans of $2.4 million during the quarter ended March 31, 2023.
• For the year ended June 30, 2023, non-interest income decreased $11.2 million to $2.8 million. The decrease was primarily attributable to a loss of $15.2 million on the sale of securities during the current year, partially offset by a non-recurring gain of $2.9 million attributable to the sale of a former branch location.

Non-Interest Expense

• For the quarter ended June 30, 2023, non-interest expense decreased $1.6 million, or 5.2%, to $28.8 million from $30.4 million for the quarter ended March 31, 2023. The decrease was primarily attributable to branch consolidation expense recorded in the comparative period and a decrease in salaries and benefits expense.
• For the year ended June 30, 2022, non-interest expense decreased $2.0 million to $123.8 million from $125.7 million for the year ended June 30, 2022. The decrease was primarily attributable to decreases in occupancy, equipment and systems, directors’ compensation and salaries and benefits expenses, partially offset by an increase in federal deposit insurance premiums.
• For the year ended June 30, 2023, the Company recorded $800,000 of branch consolidation expense, of which $250,000 was recorded in occupancy expense and $550,000 was recorded in other expense, and $757,000 of severance expense from a workforce realignment. For the year ended June 30, 2022, the Company recorded $1.9 million of branch consolidation expense and impairment charges, of which $1.5 million was recorded in occupancy expense and $420,000 was recorded in other expense, and $800,000 of expense from the early termination of a contract with a service provider.
• The efficiency and non-interest expense ratios were 65.60% and 1.41%, respectively, for the quarter ended June 30, 2023, as compared to 68.96% and 1.47%, respectively, for the quarter ended March 31, 2023. The efficiency and non-interest expense ratios were 69.28% and 1.53%, respectively, for the year ended June 30, 2023, as compared to 59.71% and 1.73%, respectively, for the year ended June 30, 2022.

Income Taxes

• Income tax expense totaled $3.4 million for the quarter ended June 30, 2023 compared to $2.9 million for the quarter ended March 31, 2023, resulting in an effective tax rate of 21.9% and 22.0%, respectively. Income tax expense totaled $11.6 million for the year ended June 30, 2023 compared to $24.8 million for the year ended June 30, 2022, resulting in an effective tax rate of 22.1% and 26.9%, respectively.
  

Asset Quality

• The balance of non-performing assets decreased $1.9 million to $55.6 million, or 0.69% of total assets, at June 30, 2023, from $57.4 million, or 0.69% of total assets, at March 31, 2023. The balance of non-performing assets was $92.2 million, or 1.19% of total assets, at June 30, 2022.
• Net charge-offs totaled $82,000, or 0.01% of average loans, on an annualized basis, for the quarter ended June 30, 2023, compared to $206,000, or 0.01% of average loans, on an annualized basis, for the quarter ended March 31, 2023. For the year ended June 30, 2023, net charge-offs totaled $810,000, or 0.01% of average loans, compared to $3.6 million, or 0.07% of average loans, for the year ended June 30, 2022.
• For the quarter ended June 30, 2023, the Company recorded a reversal of credit losses of $306,000, compared to a provision for credit losses of $451,000 for the quarter ended March 31, 2023. The reversal for the quarter ended June 30, 2023 was largely driven by a decrease in the balance of loans receivable, partially offset by a net increase in reserves on loans individually analyzed for impairment. For the years ended June 30, 2023 and 2022, the Company recorded a provision for credit losses of $2.5 million and a reversal of credit losses of $7.5 million, respectively.
• The allowance for credit losses was $48.7 million, or 0.83% of total loans, at June 30, 2023, compared to $49.1 million, or 0.82% of total loans, at March 31, 2023 and $47.1 million, or 0.87% of total loans, at June 30, 2022.

Capital

• For the quarter ended June 30, 2023, book value per share increased $0.21, or 1.6%, to $13.20 while tangible book value per share increased $0.17, or 1.7%, to $9.96. For the year ended June 30, 2023, book value per share increased $0.18, or 1.4%, to $13.20 while tangible book value per share increased $0.06, or 0.6%, to $9.96.
• During the quarter and year ended June 30, 2023, the Company repurchased 812,506 and 2,820,398 shares of common stock at a cost of $6.4 million and $27.4 million, or $7.83 and $9.73 per share, respectively.
• At June 30, 2023, total stockholders’ equity included after-tax net unrealized losses on securities available for sale of $111.1 million, partially offset by after-tax unrealized gains on derivatives of $41.5 million. After-tax net unrecognized losses on securities held to maturity of $10.9 million were not reflected in total stockholders’ equity.
• At June 30, 2023, the Company’s tangible equity to tangible assets ratio equaled 8.35% 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 Q4 2023 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.

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

Category: Earnings

Kearny Financial Corp.
Consolidated Balance Sheets
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Kearny Financial Corp.
Consolidated Statements of Income
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