Kearny Financial Corp. Announces Fourth Quarter and Fiscal Year End 2024 Results and Declaration of $0.11 Per Share Cash Dividend

FAIRFIELD, N.J., July 25, 2024 (GLOBE NEWSWIRE) -- Kearny Financial Corp. (NASDAQ GS: KRNY) (the “Company”), the holding company of Kearny Bank (the “Bank”), reported a GAAP net loss for the quarter ended June 30, 2024 of $90.1 million, or $1.45 per diluted share, attributable to a non-cash, after-tax, goodwill impairment of $95.3 million. Excluding the impact of the goodwill impairment and other non-recurring transactions, adjusted net income for the quarter ended June 30, 2024 was $5.6 million, or $0.09 per diluted share, as compared to net income of $7.4 million, or $0.12 per diluted share, for the quarter ended March 31, 2024.

“Goodwill impairment in no way affects our ongoing strategy or our ability to serve the banking needs of our clients,” said Craig L. Montanaro, President & Chief Executive Officer. “It also has no impact on our financial condition, robust liquidity position, or peer-leading regulatory capital ratios. This impairment simply reflects the impact of the current interest rate environment on bank stock prices, including our own.”

For the fiscal year ended June 30, 2024, the Company reported a GAAP net loss of $86.7 million, or $1.39 per diluted share, compared to GAAP net income of $40.8 million, or $0.63 per diluted share, for the fiscal year ended June 30, 2023, primarily attributable to the non-cash goodwill impairment mentioned above. Excluding the impact of the goodwill impairment and other non-recurring transactions, adjusted net income for the fiscal year ended June 30, 2024 was $28.2 million, or $0.45 per diluted share, as compared to adjusted net income of $50.6 million, or $0.78 per diluted share, for the fiscal year ended June 30, 2023.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on August 26, 2024, to stockholders of record as of August 12, 2024.

“Despite the challenging interest rate environment we have plenty of positive news to report this quarter,” Mr. Montanaro said. “The performance of our commercial real estate and multifamily portfolios continues to be outstanding, with non-performing assets having improved by $15.7 million, or 0.17% of assets, from June 30, 2023. Our deposit origination efforts, including those via our digital channel, have continued to gain traction with non interest-bearing deposits growing $12.3 million, or 2.1%, quarter-over-quarter. In addition, we now anticipate a net interest margin inflection in the near-term, as our retail time deposit portfolio has repriced above 4.00% and non-maturity deposit disintermediation has meaningfully slowed.”

Mr. Montanaro concluded by noting, “As described in greater detail later in this release, we fully charged-off a $3.3 million non-performing commercial & industrial lending relationship this quarter. We do not view this charge-off as a reflection of any broader weakness in our loan portfolio, but rather a borrower-specific event.”

Balance Sheet

• Total assets were $7.68 billion at June 30, 2024, a decrease of $158.5 million, or 2.0%, from March 31, 2024 and a decrease of $381.4 million, or 4.7%, from June 30, 2023.
• Investment securities totaled $1.21 billion at June 30, 2024, a decrease of $29.7 million, or 2.4%, from March 31, 2024 and a decrease of $165.6 million, or 12.1%, from June 30, 2023. The decrease for the year was largely driven by the sale of available-for-sale securities, which was part of the investment securities portfolio repositioning executed in December 2023.
• Loans receivable totaled $5.73 billion at June 30, 2024, a decrease of $25.5 million, or 0.4%, from March 31, 2024 and a decrease of $96.6 million, or 1.7%, from June 30, 2023. The decrease for the year was largely driven by multi-family and nonresidential mortgage loans.
• Deposits were $5.16 billion at June 30, 2024, a decrease of $50.9 million, or 1.0%, from March 31, 2024 and a decrease of $471.1 million, or 8.4%, from June 30, 2023. The decrease from March 31, 2024 was driven by a $40.1 million decline in interest bearing government deposits and a $36.1 million decline in retail certificates of deposits (“CDs”), partially offset by growth in non-interest bearing and consumer savings deposits. Excluding brokered CDs, deposits decreased $238.8 million, or 4.8%, from June 30, 2023, driven by a $177.9 million decline in retail CDs and a $105.2 million decline in consumer savings deposits, partially offset by growth in other deposit categories.
• Borrowings were $1.71 billion at June 30, 2024, a decrease of $12.4 million, or 0.7%, from March 31, 2024 and an increase of $203.0 million, or 13.5%, from June 30, 2023.
• At June 30, 2024, the Company maintained available secured borrowing capacity of $1.82 billion, of which $1.44 billion was immediately accessible via in-place collateral and $381.4 million represented the market value of unpledged securities.
• Goodwill was $113.5 million at June 30, 2024, a decrease of $97.4 million, or 46.2%, from March 31, 2024 and June 30, 2023. The Company recognized a non-cash goodwill impairment, as noted above.
  

Earnings

Net Interest Income and Net Interest Margin

• Net interest margin contracted five basis points to 1.84% for the quarter ended June 30, 2024 and 40 basis points to 1.94% for the year ended June 30, 2024. The decreases for the quarter and the year were driven by increases in the cost of interest-bearing liabilities, increases in the average balances of interest-bearing borrowings and decreases in the average balances of interest-earning assets, partially offset by higher yields on interest-earning assets and decreases in the average balances of interest-bearing deposits.
• For the quarter ended June 30, 2024, net interest income decreased $1.0 million to $33.3 million from $34.3 million for the quarter ended March 31, 2024. Included in net interest income for the quarters ended June 30, 2024 and March 31, 2024, respectively, was purchase accounting accretion of $612,000 and $734,000, and loan prepayment penalty income of $366,000 and $61,000.
• For the year ended June 30, 2024, net interest income decreased $33.3 million to $142.6 million from $175.9 million for the year ended June 30, 2023. Included in net interest income for the years ended June 30, 2024 and 2023, respectively, was purchase accounting accretion of $2.6 million and $5.3 million, and loan prepayment penalty income of $879,000 and $895,000.

Non-Interest Income

• For the quarter ended June 30, 2024, non-interest income increased $1.6 million to income of $5.8 million from income of $4.2 million for the quarter ended March 31, 2024. Non-interest income for the quarter ended June 30, 2024 included a contract renewal bonus of $750,000 related to a licensing agreement with a third-party vendor. Included in other income for the quarter ended March 31, 2024 was an $884,000 non-recurring loss attributable to the sale of three related nonperforming commercial real estate loans held-for-sale. No such losses were recorded during the quarter ended June 30, 2024.
• Income from BOLI increased $170,000 to $3.2 million for the quarter ended June 30, 2024 from $3.0 million for the quarter ended March 31, 2024. BOLI income included a total of $1.1 million in non-recurring payments on two life insurance policies in the current period, partially offset by a $392,000 non-recurring exchange charge related to the December 2023 BOLI restructure. For the quarter ended March 31, 2024, BOLI income included a $631,000 non-recurring payment on one life insurance policy.
• For the year ended June 30, 2024, non-interest income decreased $4.7 million to a loss of $2.0 million. The decrease was primarily attributable to a pre-tax loss of $18.1 million related to the investment securities portfolio repositioning executed during December 2023 compared to a pre-tax loss of $15.2 million on the sale of securities in the prior year period. Included in other income for the year ended June 30, 2023 was a nonrecurring gain of $2.9 million attributable to the sale of a former branch location. No such gains were recorded during the year ended June 30, 2024.
  

Non-Interest Expense

• For the quarter ended June 30, 2024, non-interest expense increased $97.5 million, or 335.5%, to $126.6 million from $29.1 million for the quarter ended March 31, 2024, driven by a non-cash goodwill impairment recognized in the current quarter. Excluding the goodwill impairment, adjusted non-interest expense increased $122,000, or 0.4%, to $29.2 million from $29.1 million in the prior quarter, driven primarily by a nonrecurring increase in post-retirement benefits expense.
• For the year ended June 30, 2024, non-interest expense increased $91.4 million, or 73.9%, to $215.2 million from $123.8 million for the year ended June 30, 2023, driven by non-cash goodwill impairment, as noted above. Excluding the goodwill impairment, adjusted non-interest expense decreased $4.4 million, or 3.6%, to $117.8 million from $122.2 million in the prior year period. The decrease was primarily attributable to decreases in salary and employee benefits expenses, occupancy, advertising and other expenses, which resulted from a continued execution of the company-wide operating efficiency initiative previously announced in December 2022.
• Salaries and employee benefits decreased $6.4 million, or 8.4%, for the year ended June 30, 2024 reflecting lower average headcount and a decrease in incentive payments tied to origination volume, partially offset by annual merit increases. Included in salaries and employee benefits for the year ended June 30, 2023 was $757,000 of severance expense from a workforce realignment.
• For the year ended June 30, 2023, the Company recorded $800,000 in branch consolidation expense, of which $250,000 was recorded in occupancy expense and $550,000 was recorded in other expense. No such expenses were recorded during the year ended June 30, 2024.

Income Taxes

• Income tax expense was reduced by $917,000 for the quarter ended June 30, 2024 compared to an expense of $1.7 million for the quarter ended March 31, 2024. The decrease in income tax expense for the quarter was mainly attributable to a partial reversal of the deferred tax liability associated with the goodwill impairment, as discussed above.
• Income tax expense totaled $5.9 million for the fiscal year ended June 30, 2024 compared to $11.6 million for the fiscal year ended June 30, 2023. The decrease in income tax expense was due to lower pre-tax income, partially offset by $5.7 million of tax expense related to the surrender of BOLI policies during the fiscal year ended June 30, 2024.

Asset Quality

• The balance of non-performing assets increased $336,000 to $39.9 million, or 0.52% of total assets, at June 30, 2024, from $39.5 million, or 0.50% of total assets, at March 31, 2024. The balance of non-performing assets was $55.6 million, or 0.69% of total assets, at June 30, 2023. The decrease from June 30, 2023 was primarily driven by the January 2024 sales of three related non-performing commercial real estate loans held-for-sale and the Company’s sole Other Real Estate Owned asset.
• Net charge-offs totaled $3.5 million, or 0.25% of average loans, on an annualized basis, for the quarter ended June 30, 2024, compared to $286,000, or 0.02% of average loans, on an annualized basis, for the quarter ended March 31, 2024. For the year ended June 30, 2024, net charge-offs totaled $10.0 million, or 0.17% of average loans, compared to $810,000, or 0.01% of average loans, for the year ended June 30, 2023.
• The charge-offs recorded during the quarter ended June 30, 2024 were primarily driven by a $3.3 million non-performing commercial and industrial loan relationship with a masonry and concrete business (the “borrower”). This relationship was originated in 2021 and is secured by the borrower’s business assets and receivables, as well as the personal guarantee of the principal. The borrower had made consistent and timely payments on these loans until recently, when the business ceased operations due to operating losses and litigation. The Company is currently pursuing all available remedies against the borrower and guarantor.
• For the quarter ended June 30, 2024, the Company recorded a provision for credit losses of $3.5 million, compared to $349,000 for the quarter ended March 31, 2024. The provision for credit loss expense for the quarter ended June 30, 2024 was primarily driven by the charge-offs described above. For the years ended June 30, 2024 and 2023, the Company recorded a provision for credit losses of $6.2 million and $2.5 million, respectively.
• The allowance for credit losses (“ACL”) was $44.9 million, or 0.78% of total loans, at June 30, 2024, unchanged from March 31, 2024, and a decrease of $3.8 million from $48.7 million, or 0.83% of total loans, at June 30, 2023. The decrease in the ACL from June 30, 2023 was largely attributable to a reduction in reserves for individually evaluated loans, resulting from the charge-offs noted above.
  

Capital

• At June 30, 2024 the Company's tangible equity to tangible assets ratio increased to 8.43% while the Company's Common Equity Tier 1 Capital Ratio increased to 14.79%. All of the Company's capital ratios remained strong and were significantly in excess of regulatory well-capitalized standards.
• At June 30, 2024, book value per share totaled $11.70 while tangible book value per share totaled $9.90.
• At June 30, 2024, total stockholders’ equity included after-tax net unrealized losses on securities available for sale of $93.0 million, partially offset by after-tax unrealized gains on derivatives of $29.6 million. After-tax net unrecognized losses on securities held to maturity of $11.7 million were not reflected in total stockholders’ equity.
  

This earnings release should be read in conjunction with Kearny Financial Corp.’s Q4 2024 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:
Keith Suchodolski, Senior Executive Vice President and Chief Operating Officer, or
Sean Byrnes, Executive Vice President and Chief Financial Officer
Kearny Financial Corp.
(973) 244-4500

Category: Earnings

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The following tables provide a reconciliation of certain financial measures calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) (as reported) and non-GAAP measures. 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. 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.

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