Kearny Financial Corp. Reports Fourth Quarter and Fiscal Year End 2021 Results

Thursday, 29. July 2021 22:15

FAIRFIELD, N.J., July 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 June 30, 2021 of $18.5 million, or $0.24 per diluted share, compared to $16.4 million, or $0.20 per diluted share, for the quarter ended March 31, 2021. The results for the quarter ended June 30, 2021 were favorably impacted by a provision for credit loss reversal of $4.9 million, reflecting the impact of an improved economic forecast and credit risk outlook.

For the fiscal year ended June 30, 2021, the Company reported net income of $63.2 million, or $0.77 per diluted share, compared to $45.0 million, or $0.55 per diluted share, for the fiscal year ended June 30, 2020. Excluding the impact of non-recurring items, including items associated with the Company’s acquisition of MSB Financial Corp. (“MSB”), net income for the fiscal year ended June 30, 2021 would have been $66.7 million, or $0.81 per diluted share.

Craig L. Montanaro, President and Chief Executive Officer, commented, “This fiscal year, while challenging in many respects, represented a significant step forward in our evolution as a full-service community bank. The incremental reallocation of our balance sheet, with a particular focus on high-value commercial loan and deposit relationships, has led to noteworthy improvements in net interest margin, net income and earnings per share. Along with our improved performance has come a cultural evolution for the Company, with an enhanced focus, both strategically and financially, on technological excellence and the client experience. While these elements are crucial to our future prosperity, we must stay true to our core beliefs that our people, performance and relationships are the bedrock of our success. To us, this means never straying from our roots in the communities that we serve and retaining the local decision making authority which has defined us for over 130 years.”

Fiscal Year End 2021 Highlights

  • Net income increased 40.6%, to $63.2 million, while earnings per share increased 39.5%, to $0.77 per diluted share.
  • Net interest margin increased 30 basis points to 2.75%, while net interest income increased 23.5% to $184.5 million.
  • Completed acquisition of MSB on July 10, 2020 adding total assets of $581.9 million, net loans of $530.2 million and total deposits of $460.2 million.
  • Core non-maturity deposits, excluding acquired balances, grew $712.5 million, or 27.5%, including organic growth of 29.4% in non-interest-bearing deposits.
  • Gain on sale of loans increased $2.4 million, or 75.0%, largely driven by increased mortgage banking activity.

Balance Sheet Summary

  • Total assets at June 30, 2021, were $7.28 billion, a decrease of $74.3 million, or 1.0%, from March 31, 2021 and an increase of $525.6 million, or 7.8%, from June 30, 2020.
  • Deposits totaled $5.49 billion at June 30, 2021, an increase of $110.9 million, or 2.1%, from March 31, 2021 and $1.1 billion, or 23.8%, from June 30, 2020. For those same comparative periods core non-maturity deposits increased by $33.1 million and $1.02 billion, respectively.
  • Loans receivable totaled $4.85 billion at June 30, 2021, an increase of $53.2 million, or 1.1%, from March 31, 2021 and $353.0 million, or 7.8%, from June 30, 2020.
  • Investment securities totaled $1.72 billion at June 30, 2021, a decrease of $91.1 million, or 5.0%, from March 31, 2021 and an increase of $296.7 million, or 20.9%, from June 30, 2020.
  • Borrowings totaled $685.9 million at June 30, 2021, a decrease of $179.9 million, or 20.8% from March 31, 2021 and $487.3 million, or 41.5% from June 30, 2020.

Operating Results

Performance Highlights

  • Return on average assets (“ROAA”) improved to 1.01% and 0.86%, for the quarter and year ended June 30, 2021, respectively. Excluding the impact of non-recurring items, ROAA would have been 1.04% and 0.91% for the same comparative periods.  
  • Return on average equity improved to 7.01% and 5.79% for the quarter and year ended June 30, 2021, respectively, while return on average tangible equity improved to 8.81% and 7.22% for the same comparative periods. Excluding the impact of non-recurring items, return on average tangible equity would have been 9.04% and 7.61% for the quarter and year ended June 30, 2021, respectively.

Net Interest Income and Net Interest Margin

  • Net interest margin increased four basis points to 2.87% for the quarter ended June 30, 2021 and 30 basis points to 2.75% for the year ended June 30, 2021. The increase in net interest margin was largely the result of a reduction in the cost of interest-bearing liabilities and an increase in the average balance of non-interest-bearing deposits, partially offset by a decrease in the yield on interest-earning assets.
  • Net interest income increased by $532,000 to $48.2 million for the quarter ended June 30, 2021 from $47.6 million for the quarter ended March 31, 2021. Included in net interest income, for the quarters ended June 30, 2021 and March 31, 2021, was purchase accounting accretion of $3.1 million and $4.8 million, respectively. For the year ended June 30, 2021, net interest income increased by $35.2 million, or 23.5%, to $184.5 million from $149.4 million for the year ended June 30, 2020.

Non-Interest Income

  • Fees and service charges totaled $1.3 million for the quarter ended June 30, 2021, unchanged from the quarter ended March 31, 2021. For the year ended June 30, 2021 fees and service charges decreased by $1.0 million to $5.6 million, largely attributable to a decrease of $836,000 in loan pre-payment penalty income to $3.8 million.
  • Gain on sale and call of securities totaled $313,000 for the quarter ended June 30, 2021 compared to $18,000 for the quarter ended March 31, 2021. For the year ended June 30, 2021, gain on sale and call of securities totaled $767,000 compared to $2.3 million for the year ended June 30, 2020.
  • Gain on sale of loans decreased by $580,000 to $363,000 for the quarter ended June 30, 2021 from $943,000 for the quarter ended March 31, 2021. The decrease was largely attributable to the strategic decision to retain a comparatively greater percentage of originated loans within the portfolio. For the year ended June 30, 2021, gain on sale of loans totaled $5.6 million compared to $3.2 million for the year ended June 30, 2020. This growth largely reflected increases in both the volume and net price of residential mortgage loans originated and sold during the period and, to a lesser extent, $352,000 of gains on sale of Paycheck Protection Program (“PPP”) loans.
  • For the year ended June 30, 2021, a non-recurring bargain purchase gain of $3.1 million was recognized in conjunction with the acquisition of MSB.
  • Included in other income for the quarter and year ended June 30, 2021 were non-recurring gains of $205,000 and $1.0 million, respectively, attributable to the sale of properties which previously served as a Kearny Bank retail branch locations and were sold in connection with branch consolidation activities.

Non-Interest Expense

  • Non-interest expense increased by $2.2 million to $32.0 million for the quarter ended June 30, 2021 compared to $29.8 million for the quarter ended March 31, 2021. The increase was largely attributable to asset impairment charges of $2.0 million as described in further detail below.
  • Non-interest expense increased by $18.3 million to $125.9 million for the year ended June 30, 2021 compared to $107.6 million for the year ended June 30, 2020. This increase was largely attributable to increases in personnel, technology and occupancy expense associated, in part, with the MSB acquisition, along with increases in merger-related expense, FDIC insurance expense and other expense.
  • Included in other expense for the quarter and year ended June 30, 2021 were asset impairment charges totaling $2.0 million and $2.7 million, respectively. These charges, for the quarter and year ended June 30, 2021, primarily reflected net losses of $1.2 million and $1.9 million, respectively, arising from the transfer of various branch and administrative facilities to held-for-sale status. An additional impairment of $800,000 was recognized during the quarter ended June, 30, 2021 attributable to the partial write-down of the value of the Company’s equity investment in a start-up financial technology company whose remaining book value totaled $200,000 as of that date.
  • Also included in other expense, for the quarter and year ended June 30, 2021, were provisions for credit losses on off-balance sheet credit exposures, as required under the Current Expected Credit Loss (“CECL”) standard, of $443,000 and $1.2 million, respectively. No such expense was recorded in the fiscal year ended June 30, 2020.
  • The efficiency and non-interest expense ratios were 60.86% and 1.75%, respectively, for the quarter ended June 30, 2021 and 60.16% and 1.72%, respectively, for the year ended June 30, 2021. Excluding the impact of non-recurring items, the efficiency and non-interest expense ratios for the year ended June 30, 2021 would have been 58.22% and 1.62%, respectively.

Income Taxes

  • Income tax expense totaled $7.0 million for the quarter ended June 30, 2021 compared to $5.7 million for the quarter ended March 31, 2021, resulting in effective tax rates of 27.6% and 25.9%, respectively. For the year ended June 30, 2021, income tax expense was $21.3 million compared to $12.3 million for the year ended June 30, 2020 resulting in effective tax rates of 25.2% and 21.5%, respectively.

Asset Quality

  • The balance of non-performing loans totaled $79.8 million, or 1.64% of total loans, at June 30, 2021, compared to $71.4 million, or 1.49% of total loans, at March 31, 2021 and $36.7 million, or 0.82% of total loans, at June 30, 2020.
  • As of June 30, 2021, the Company had active COVID-19 payment deferrals on 10 loans totaling $5.6 million, representing 0.12% of total loans.
  • Net charge offs totaled $656,000, or 0.05% of average loans, for the quarter ended June 30, 2021 compared to $750,000, or 0.06% of average loans, for the quarter ended March 31, 2021. Net charge offs for the quarter were largely attributable to the partial charge-off of one wholesale commercial business loan totaling $592,000. For the year ended June 30, 2021, net charge offs totaled $1.6 million, or 0.03% of average loans, compared to $144,000, or 0.00% of average loans, for the year ended June 30, 2020.
  • For the quarter and year ended June 30, 2021, the Company recorded provision for credit loss reversals of $4.9 million and $1.1 million, respectively, compared to provision for credit losses of $1.1 million for the quarter ended March 31, 2021 and $4.2 million for the year ended June 30, 2020. The provision reversals for the quarter and year ended June 30, 2021 primarily reflected an improved economic forecast and credit risk outlook resulting in a release of reserves within multiple loan segments. By comparison, the provision for the year ended June 30, 2020 was largely attributable to increases in qualitative factors associated with the economic impact of COVID-19.
  • The Allowance for Credit Losses (“ACL”) totaled $58.2 million, or 1.19% of total loans, at June 30, 2021, a decrease from $63.8 million, or 1.32% of total loans at March 31, 2021 and an increase from $37.3 million, or 0.82% of total loans, at June 30, 2020. As previously disclosed, on July 1, 2020, the Company adopted ASU 2016-13, also known as the CECL standard. At adoption, the Company increased its ACL by $19.6 million and $536,000, respectively, for loans and off-balance sheet credit exposures and recognized a cumulative effect adjustment that reduced stockholders’ equity by $14.2 million, net of tax.
  • On July 10, 2020 the Company completed its acquisition of MSB, which resulted in an increase to the ACL of $9.0 million. Of this increase, $3.9 million was attributable to PCD loans and was recorded as an adjustment to their amortized cost basis. The remaining $5.1 million increase was attributable to non-PCD loans and was recorded via a provision for credit losses.

Capital

  • During the quarter and year ended June 30, 2021, the Company repurchased 3,031,820 and 10,567,073 shares of common stock at a cost of $38.5 million and $119.0 million, or $12.68 and $11.26 per share, respectively.
  • For the quarter ended June 30, 2021, the Company increased its quarterly cash dividend to $0.10 per common share. For the year ended June 30, 2021, cash dividends paid totaled $0.35 per share, an increase of 20.7% from the year ended June 30, 2020.
  • Book value per share totaled $13.21 at June 30, 2021, an increase of $0.23 from March 31, 2021 and $0.25 from June 30, 2020, while tangible book value per share totaled $10.49 at June 30, 2021, an increase of $0.13 from March 31, 2021 and $0.10 from June 30, 2020.
  • At June 30, 2021, the Company’s ratio of tangible equity to tangible assets equaled 11.72% 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.

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
             
Summary Balance SheetAt   Variance
(Dollars and Shares in Thousands,June 30,March 31,Varianceor Change
Except Per Share Data, Unaudited)20212021or ChangePct.
Assets            
Cash and cash equivalents$67,855 $108,991 $(41,136) -37.7%
Securities available for sale 1,676,864  1,778,970  (102,106) -5.7%
Securities held to maturity 38,138  27,168  10,970  40.4%
Loans held-for-sale 16,492  5,172  11,320  218.9%
Loans receivable 4,851,394  4,798,239  53,155  1.1%
Less: allowance for credit losses on loans (58,165) (63,762) 5,597  -8.8%
Net loans receivable 4,793,229  4,734,477  58,752  1.2%
Premises and equipment 56,338  60,360  (4,022) -6.7%
Federal Home Loan Bank stock 36,615  45,578  (8,963) -19.7%
Accrued interest receivable 19,362  20,562  (1,200) -5.8%
Goodwill 210,895  210,895  -  0.0%
Core deposit intangible 3,705  3,888  (183) -4.7%
Bank owned life insurance 283,310  281,765  1,545  0.5%
Deferred income taxes, net 29,323  32,230  (2,907) -9.0%
Other real estate owned 178  178  -  0.0%
Other assets 51,431  47,760  3,671  7.7%
Total assets$7,283,735 $7,357,994 $(74,259) -1.0%
             
Liabilities            
Deposits:            
Non-interest-bearing$593,718 $545,746 $47,972  8.8%
Interest-bearing 4,891,588  4,828,706  62,882  1.3%
Total deposits 5,485,306  5,374,452  110,854  2.1%
Borrowings 685,876  865,763  (179,887) -20.8%
Advance payments by borrowers for taxes 15,752  15,300  452  3.0%
Other liabilities 53,857  38,667  15,190  39.3%
Total liabilities 6,240,791  6,294,182  (53,391) -0.8%
             
Stockholders' Equity            
Common stock 790  820  (30) -3.7%
Paid-in capital 654,396  691,280  (36,884) -5.3%
Retained earnings 408,367  397,594  10,773  2.7%
Unearned ESOP shares (26,753) (27,239) 486  -1.8%
Accumulated other comprehensive income 6,144  1,357  4,787  352.8%
Total stockholders' equity 1,042,944  1,063,812  (20,868) -2.0%
Total liabilities and stockholders' equity$7,283,735 $7,357,994 $(74,259) -1.0%
             
Consolidated capital ratios            
Equity to assets 14.32% 14.46% -0.14%   
Tangible equity to tangible assets (1) 11.72% 11.89% -0.17%   
             
Share data            
Outstanding shares 78,965  81,943  (2,978) -3.6%
Book value per share$13.21 $12.98 $0.23  1.7%
Tangible book value per share (2)$10.49 $10.36 $0.13  1.2%

____________________

(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 StatementFor the three months ended   Variance
(Dollars and Shares in Thousands,June 30,March 31,Varianceor Change
Except Per Share Data, Unaudited)20212021or ChangePct.
Interest income            
Loans$47,562 $49,307 $(1,745) -3.5%
Taxable investment securities 8,304  7,891  413  5.2%
Tax-exempt investment securities 355  410  (55) -13.4%
Other interest-earning assets 549  705  (156) -22.1%
Total Interest Income 56,770  58,313  (1,543) -2.6%
             
Interest expense            
Deposits 5,156  6,670  (1,514) -22.7%
Borrowings 3,451  4,012  (561) -14.0%
Total interest expense 8,607  10,682  (2,075) -19.4%
Net interest income 48,163  47,631  532  1.1%
(Reversal of) provision for credit losses (4,941) 1,126  (6,067) -538.8%
Net interest income after (reversal of) provision
for credit losses
 53,104  46,505  6,599  14.2%
             
Non-interest income            
Fees and service charges 1,325  1,325  -  0.0%
Gain on sale and call of securities 313  18  295  1638.9%
Gain on sale of loans 363  943  (580) -61.5%
Income from bank owned life insurance 1,545  1,530  15  1.0%
Electronic banking fees and charges 452  456  (4) -0.9%
Other income 400  1,194  (794) -66.5%
Total non-interest income 4,398  5,466  (1,068) -19.5%
             
Non-interest expense            
Salaries and employee benefits 17,777  16,965  812  4.8%
Net occupancy expense of premises 2,998  3,433  (435) -12.7%
Equipment and systems 3,575  3,823  (248) -6.5%
Advertising and marketing 581  567  14  2.5%
Federal deposit insurance premium 490  488  2  0.4%
Directors' compensation 749  748  1  0.1%
Other expense 5,816  3,792  2,024  53.4%
Total non-interest expense 31,986  29,816  2,170  7.3%
Income before income taxes 25,516  22,155  3,361  15.2%
Income taxes 7,033  5,732  1,301  22.7%
Net income$18,483 $16,423 $2,060  12.5%
             
Net income per common share (EPS)            
Basic$0.24 $0.20 $0.04    
Diluted$0.24 $0.20 $0.04    
             
Dividends declared            
Cash dividends declared per common share$0.10 $0.09 $0.01    
Cash dividends declared$7,710 $7,205 $505    
Dividend payout ratio 41.7% 43.9% -2.2%   
             
Weighted average number of common
shares outstanding
            
Basic 77,658  80,673  (3,015)   
Diluted 77,680  80,690  (3,010)   


 For the three months ended   Variance
Average Balance Sheet DataJune 30,March 31,Varianceor Change
(Dollars in Thousands, Unaudited)20212021or ChangePct.
Assets            
Interest-earning assets:            
Loans receivable, including loans held for sale$4,817,980 $4,816,592 $1,388  0.0%
Taxable investment securities 1,720,838  1,674,223  46,615  2.8%
Tax-exempt investment securities 63,047  73,573  (10,526) -14.3%
Other interest-earning assets 117,212  169,291  (52,079) -30.8%
Total interest-earning assets 6,719,077  6,733,679  (14,602) -0.2%
Non-interest-earning assets 609,762  617,440  (7,678) -1.2%
Total assets$7,328,839 $7,351,119 $(22,280) -0.3%
             
Liabilities and Stockholders' Equity            
Interest-bearing liabilities:            
Deposits:            
Interest-bearing demand$1,930,193 $1,831,617 $98,576  5.4%
Savings 1,118,402  1,084,981  33,421  3.1%
Certificates of deposit 1,934,650  1,904,234  30,416  1.6%
Total interest-bearing deposits 4,983,245  4,820,832  162,413  3.4%
Borrowings:            
Federal Home Loan Bank advances 665,802  865,690  (199,888) -23.1%
Other borrowings 6,670  -  6,670  0.0%
Total borrowings 672,472  865,690  (193,218) -22.3%
Total interest-bearing liabilities 5,655,717  5,686,522  (30,805) -0.5%
Non-interest-bearing liabilities:            
Non-interest-bearing deposits 566,632  525,018  41,614  7.9%
Other non-interest-bearing liabilities 52,292  57,018  (4,726) -8.3%
Total non-interest-bearing liabilities 618,924  582,036  36,888  6.3%
Total liabilities 6,274,641  6,268,558  6,083  0.1%
Stockholders' equity 1,054,198  1,082,561  (28,363) -2.6%
Total liabilities and stockholders' equity$7,328,839 $7,351,119 $(22,280) -0.3%
             
Average interest-earning assets to average
interest-bearing liabilities
 118.80% 118.41% 0.39% 0.3%
             


 For the three months ended 
 June 30,March 31,Variance
Performance Ratio Highlights20212021or Change
Average yield on interest-earning assets:         
Loans receivable, including loans held for sale 3.95% 4.09% -0.14%
Taxable investment securities 1.93% 1.89% 0.04%
Tax-exempt investment securities (1) 2.25% 2.23% 0.02%
Other interest-earning assets 1.87% 1.67% 0.20%
Total interest-earning assets 3.38% 3.46% -0.08%
          
Average cost of interest-bearing liabilities:         
Deposits:         
Interest-bearing demand 0.27% 0.34% -0.07%
Savings 0.15% 0.21% -0.06%
Certificates of deposit 0.71% 0.96% -0.25%
Total interest-bearing deposits 0.41% 0.55% -0.14%
Borrowings:         
Federal Home Loan Bank advances 2.07% 1.85% 0.22%
Other borrowings 0.07% 0.00% 0.07%
Total borrowings 2.05% 1.85% 0.20%
Total interest-bearing liabilities 0.61% 0.75% -0.14%
          
Interest rate spread (2) 2.77% 2.71% 0.06%
Net interest margin (3) 2.87% 2.83% 0.04%
          
Non-interest income to average assets
(annualized)
 0.24% 0.30% -0.06%
Non-interest expense to average assets
(annualized)
 1.75% 1.62% 0.13%
          
Efficiency ratio (4) 60.86% 56.15% 4.71%
          
Return on average assets (annualized) 1.01% 0.89% 0.12%
Return on average equity (annualized) 7.01% 6.07% 0.94%
Return on average tangible equity (annualized) (5) 8.81% 7.57% 1.24%

____________________

(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.
   


Year-to-Year Comparative Financial Analysis
             
Summary Balance SheetAt   Variance
(Dollars and Shares in Thousands,June 30,June 30,Varianceor Change
Except Per Share Data, Unaudited)20212020or ChangePct.
Assets            
Cash and cash equivalents$67,855 $180,967 $(113,112) -62.5%
Securities available for sale 1,676,864  1,385,703  291,161  21.0%
Securities held to maturity 38,138  32,556  5,582  17.1%
Loans held-for-sale 16,492  20,789  (4,297) -20.7%
Loans receivable, including yield adjustments 4,851,394  4,498,397  352,997  7.8%
Less: allowance for credit losses on loans (58,165) (37,327) (20,838) 55.8%
Net loans receivable 4,793,229  4,461,070  332,159  7.4%
Premises and equipment 56,338  57,389  (1,051) -1.8%
Federal Home Loan Bank of New York stock 36,615  58,654  (22,039) -37.6%
Accrued interest receivable 19,362  17,373  1,989  11.4%
Goodwill 210,895  210,895  -  0.0%
Core deposit intangible 3,705  3,995  (290) -7.3%
Bank owned life insurance 283,310  262,380  20,930  8.0%
Deferred income tax assets, net 29,323  25,480  3,843  15.1%
Other real estate owned 178  178  -  0.0%
Other assets 51,431  40,746  10,685  26.2%
Total assets$7,283,735 $6,758,175 $525,560  7.8%
             
Liabilities            
Deposits:            
Non-interest-bearing$593,718 $419,138 $174,580  41.7%
Interest-bearing 4,891,588  4,011,144  880,444  21.9%
Total deposits 5,485,306  4,430,282  1,055,024  23.8%
Borrowings 685,876  1,173,165  (487,289) -41.5%
Advance payments by borrowers for taxes 15,752  16,569  (817) -4.9%
Other liabilities 53,857  53,982  (125) -0.2%
Total liabilities 6,240,791  5,673,998  566,793  10.0%
             
Stockholders' Equity            
Common stock 790  837  (47) -5.6%
Paid-in capital 654,396  722,871  (68,475) -9.5%
Retained earnings 408,367  387,911  20,456  5.3%
Unearned ESOP shares (26,753) (28,699) 1,946  -6.8%
Accumulated other comprehensive income 6,144  1,257  4,887  388.8%
Total stockholders' equity 1,042,944  1,084,177  (41,233) -3.8%
Total liabilities and stockholders' equity$7,283,735 $6,758,175 $525,560  7.8%
             
Consolidated capital ratios            
Equity to assets 14.32% 16.04% -1.72%   
Tangible equity to tangible assets (1) 11.72% 13.29% -1.57%   
             
Share data            
Outstanding shares 78,965  83,663  (4,698) -5.6%
Book value per share$13.21 $12.96 $0.25  1.9%
Tangible book value per share (2)$10.49 $10.39 $0.10  1.0%
             


Summary Income StatementFor the year ended   Variance
(Dollars and Shares in Thousands,June 30,June 30,Varianceor Change
Except Per Share Data, Unaudited)20212020or ChangePct.
Interest income            
Loans$198,515 $187,003 $11,512  6.2%
Taxable investment securities 31,238  39,321  (8,083) -20.6%
Tax-exempt investment securities 1,652  2,393  (741) -31.0%
Other interest-earning assets 2,955  4,491  (1,536) -34.2%
Total Interest Income 234,360  233,208  1,152  0.5%
             
Interest expense            
Deposits 31,535  58,852  (27,317) -46.4%
Borrowings 18,316  25,002  (6,686) -26.7%
Total interest expense 49,851  83,854  (34,003) -40.6%
Net interest income 184,509  149,354  35,155  23.5%
(Reversal of) provision for credit losses (1,121) 4,197  (5,318) -126.7%
Net interest income after (reversal of) provision for credit losses 185,630  145,157  40,473  27.9%
             
Non-interest income            
Fees and service charges 5,622  6,647  (1,025) -15.4%
Gain on sale and call of securities 767  2,250  (1,483) -65.9%
Gain on sale of loans 5,574  3,186  2,388  75.0%
Loss on sale of real estate owned -  (28) 28  -100.0%
Income from bank owned life insurance 6,267  6,225  42  0.7%
Electronic banking fees and charges 1,717  1,245  472  37.9%
Bargain purchase gain 3,053  -  3,053  0.0%
Other income 1,751  194  1,557  802.6%
Total non-interest income 24,751  19,719  5,032  25.5%
             
Non-interest expense            
Salaries and employee benefits 68,800  62,015  6,785  10.9%
Net occupancy expense of premises 12,673  11,424  1,249  10.9%
Equipment and systems 14,870  11,755  3,115  26.5%
Advertising and marketing 2,161  2,788  (627) -22.5%
Federal deposit insurance premium 1,940  286  1,654  578.3%
Directors' compensation 2,993  3,079  (86) -2.8%
Merger-related expenses 4,349  951  3,398  357.3%
Debt extinguishment expenses 796  2,156  (1,360) -63.1%
Other expense 17,303  13,170  4,133  31.4%
Total non-interest expense 125,885  107,624  18,261  17.0%
Income before income taxes 84,496  57,252  27,244  47.6%
Income taxes 21,263  12,287  8,976  73.1%
Net income$63,233 $44,965 $18,268  40.6%
             
Net income per common share (EPS)            
Basic$0.77 $0.55 $0.22    
Diluted$0.77 $0.55 $0.22    
             
Dividends declared            
Cash dividends declared per common share$0.35 $0.29 $0.06    
Cash dividends declared$28,538 $23,733 $4,805    
Dividend payout ratio 45.1% 52.8% -7.7%   
             
Weighted average number of common shares outstanding            
Basic 82,387  82,409  (22)   
Diluted 82,391  82,430  (39)   
             


 For the year ended   Variance
Average Balance Sheet DataJune 30,June 30,Varianceor Change
(Dollars in Thousands, Unaudited)20212020or ChangePct.
Assets            
Interest-earning assets:            
Loans receivable, including loans held for sale$4,866,436 $4,568,816 $297,620  6.5%
Taxable investment securities 1,571,452  1,291,516  279,936  21.7%
Tax-exempt investment securities 74,604  111,477  (36,873) -33.1%
Other interest-earning assets 200,435  122,278  78,157  63.9%
Total interest-earning assets 6,712,927  6,094,087  618,840  10.2%
Non-interest-earning assets 620,934  595,158  25,776  4.3%
Total assets$7,333,861 $6,689,245 $644,616  9.6%
             
Liabilities and Stockholders' Equity            
Interest-bearing liabilities:            
Deposits:            
Interest-bearing demand$1,726,190 $1,041,188 $685,002  65.8%
Savings 1,066,794  831,832  234,962  28.2%
Certificates of deposit 1,931,887  2,032,046  (100,159) -4.9%
Total interest-bearing deposits 4,724,871  3,905,066  819,805  21.0%
Borrowings:            
Federal Home Loan Bank Advances 931,148  1,236,139  (304,991) -24.7%
Other borrowings 2,563  56,957  (54,394) -95.5%
Total borrowings 933,711  1,293,096  (359,385) -27.8%
Total interest-bearing liabilities 5,658,582  5,198,162  460,420  8.9%
Non-interest-bearing liabilities:            
Non-interest-bearing deposits 518,149  334,522  183,627  54.9%
Other non-interest-bearing liabilities 65,737  60,236  5,501  9.1%
Total non-interest-bearing liabilities 583,886  394,758  189,128  47.9%
Total liabilities 6,242,468  5,592,920  649,548  11.6%
Stockholders' equity 1,091,393  1,096,325  (4,932) -0.4%
Total liabilities and stockholders' equity$7,333,861 $6,689,245 $644,616  9.6%
             
Average interest-earning assets to average interest-bearing liabilities 118.63% 117.24% 1.39% 1.2%
             


 For the year ended   
 June 30,June 30,Variance
Performance Ratio Highlights20212020or Change
Average yield on interest-earning assets:         
Loans receivable, including loans held for sale 4.08% 4.09% -0.01%
Taxable investment securities 1.99% 3.04% -1.05%
Tax-exempt investment securities (1) 2.21% 2.15% 0.06%
Other interest-earning assets 1.47% 3.67% -2.20%
Total interest-earning assets 3.49% 3.83% -0.34%
          
Average cost of interest-bearing liabilities:         
Deposits:         
Interest-bearing demand 0.41% 1.10% -0.69%
Savings 0.31% 0.81% -0.50%
Certificates of deposit 1.10% 2.00% -0.90%
Total interest-bearing deposits 0.67% 1.51% -0.84%
Borrowings:         
Federal Home Loan Bank Advances 1.97% 1.99% -0.02%
Other borrowings 0.06% 0.74% -0.68%
Total borrowings 1.96% 1.93% 0.03%
Total interest-bearing liabilities 0.88% 1.61% -0.73%
          
Interest rate spread (2) 2.61% 2.22% 0.39%
Net interest margin (3) 2.75% 2.45% 0.30%
          
Non-interest income to average assets 0.34% 0.29% 0.05%
Non-interest expense to average assets 1.72% 1.61% 0.11%
          
Efficiency ratio (4) 60.16% 63.66% -3.50%
          
Return on average assets 0.86% 0.67% 0.19%
Return on average equity 5.79% 4.10% 1.69%
Return on average tangible equity (5) 7.22% 5.10% 2.12%
          


Five-Quarter Financial Trend Analysis
                
Summary Balance SheetAt
(Dollars and Shares in Thousands,June 30,March 31,December 31,September 30,June 30,
Except Per Share Data, Unaudited)20212021202020202020
Assets               
Cash and cash equivalents$67,855 $108,991 $129,694 $145,818 $180,967 
Securities available for sale 1,676,864  1,778,970  1,695,893  1,508,542  1,385,703 
Securities held to maturity 38,138  27,168  29,549  31,576  32,556 
Loans held-for-sale 16,492  5,172  12,601  20,170  20,789 
Loans receivable 4,851,394  4,798,239  4,828,634  4,954,750  4,498,397 
Less: allowance for credit losses on loans (58,165) (63,762) (63,386) (64,860) (37,327)
Net loans receivable 4,793,229  4,734,477  4,765,248  4,889,890  4,461,070 
Premises and equipment 56,338  60,360  61,181  61,808  57,389 
Federal Home Loan Bank stock 36,615  45,578  45,578  55,118  58,654 
Accrued interest receivable 19,362  20,562  19,826  20,368  17,373 
Goodwill 210,895  210,895  210,895  210,895  210,895 
Core deposit intangible 3,705  3,888  4,151  4,420  3,995 
Bank owned life insurance 283,310  281,765  280,235  278,639  262,380 
Deferred income taxes, net 29,323  32,230  30,846  33,319  25,480 
Other real estate owned 178  178  178  178  178 
Other assets 51,431  47,760  49,278  49,468  40,746 
Total assets$7,283,735 $7,357,994 $7,335,153 $7,310,209 $6,758,175 
                
Liabilities               
Deposits:               
Non-interest-bearing$593,718 $545,746 $518,828 $487,710 $419,138 
Interest-bearing 4,891,588  4,828,706  4,793,785  4,552,202  4,011,144 
Total deposits 5,485,306  5,374,452  5,312,613  5,039,912  4,430,282 
Borrowings 685,876  865,763  865,651  1,077,540  1,173,165 
Advance payments by borrowers for taxes 15,752  15,300  16,100  17,008  16,569 
Other liabilities 53,857  38,667  48,448  51,689  53,982 
Total liabilities 6,240,791  6,294,182  6,242,812  6,186,149  5,673,998 
                
Stockholders' Equity               
Common stock 790  820  849  895  837 
Paid-in capital 654,396  691,280  724,389  769,269  722,871 
Retained earnings 408,367  397,594  388,376  378,134  387,911 
Unearned ESOP shares (26,753) (27,239) (27,726) (28,212) (28,699)
Accumulated other comprehensive income 6,144  1,357  6,453  3,974  1,257 
Total stockholders' equity 1,042,944  1,063,812  1,092,341  1,124,060  1,084,177 
Total liabilities and stockholders' equity$7,283,735 $7,357,994 $7,335,153 $7,310,209 $6,758,175 
                
Consolidated capital ratios               
Equity to assets 14.32% 14.46% 14.89% 15.38% 16.04%
Tangible equity to tangible assets (1) 11.72% 11.89% 12.32% 12.81% 13.29%
                
Share data               
Outstanding shares 78,965  81,943  84,938  89,510  83,663 
Book value per share$13.21 $12.98 $12.86 $12.56 $12.96 
Tangible book value per share (2)$10.49 $10.36 $10.33 $10.15 $10.39 

____________________

(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 HighlightsJune 30,March 31, December 31, September 30,June 30,
(Dollars in Thousands, Unaudited)20212021202020202020
Cash and cash equivalents               
Cash and due from depository institutions$21,463 $20,502 $23,968 $18,628 $20,391 
Interest-bearing deposits in other banks 46,392  88,489  105,726  127,190  160,576 
Total cash and cash equivalents$67,855 $108,991 $129,694 $145,818 $180,967 
                
Securities available for sale               
Debt securities:               
Municipal and state obligations$34,603 $43,060 $47,763 $50,877 $54,054 
Asset-backed securities 242,989  250,741  255,407  258,801  172,447 
Collateralized loan obligations 189,880  169,776  196,685  196,398  193,788 
Corporate bonds 158,351  173,462  167,168  122,276  143,639 
Trust preferred securities -  2,881  2,866  2,773  2,627 
Debt securities 625,823  639,920  669,889  631,125  566,555 
                
Mortgage-backed securities:               
Collateralized mortgage obligations 13,739  16,800  20,510  25,770  30,903 
Residential pass-through securities 744,491  806,655  705,991  625,715  561,954 
Commercial pass-through securities 292,811  315,595  299,503  225,932  226,291 
Mortgage-backed securities 1,051,041  1,139,050  1,026,004  877,417  819,148 
Total securities available for sale$1,676,864 $1,778,970 $1,695,893 $1,508,542 $1,385,703 
                
Securities held to maturity               
Debt securities:               
Municipal and state obligations$25,824 $27,168 $29,549 $31,576 $32,556 
Debt securities: 25,824  27,168  29,549  31,576  32,556 
                
Mortgage-backed securities:               
Commercial pass-through securities 12,314  -  -  -  - 
Mortgage-backed securities 12,314  -  -  -  - 
Total securities held to maturity$38,138 $27,168 $29,549 $31,576 $32,556 
                
Total securities$1,715,002 $1,806,138 $1,725,442 $1,540,118 $1,418,259 
 


 At
Supplemental Balance Sheet HighlightsJune 30,March 31, December 31, September 30,June 30,
(Dollars in Thousands, Unaudited)20212021202020202020
Loan portfolio composition:               
Commercial loans:               
Multi-family$2,039,260 $2,055,396 $2,076,483 $2,110,300 $2,059,568 
Nonresidential 1,079,444  1,110,765  1,123,695  1,124,330  960,853 
Commercial business 168,951  183,181  202,010  255,888  138,788 
Construction 93,804  95,533  90,398  79,178  20,961 
Total commercial loans 3,381,459  3,444,875  3,492,586  3,569,696  3,180,170 
One- to four-family residential mortgage loans 1,447,721  1,323,485  1,305,351  1,353,197  1,273,022 
Consumer loans:               
Home equity loans and lines of credit 47,871  59,721  65,298  71,540  82,920 
Other consumer loans 3,259  3,445  4,123  4,136  3,991 
Total consumer loans 51,130  63,166  69,421  75,676  86,911 
Total loans, excluding yield adjustments 4,880,310  4,831,526  4,867,358  4,998,569  4,540,103 
Unaccreted yield adjustments (28,916) (33,287) (38,724) (43,819) (41,706)
Loans receivable, net of yield adjustments 4,851,394  4,798,239  4,828,634  4,954,750  4,498,397 
Less: allowance for credit losses on loans (58,165) (63,762) (63,386) (64,860) (37,327)
Net loans receivable$4,793,229 $4,734,477 $4,765,248 $4,889,890 $4,461,070 
                
Loan portfolio allocation:               
Commercial loans:               
Multi-family 41.8% 42.5% 42.7% 42.2% 45.3%
Nonresidential 22.1% 23.0% 23.1% 22.5% 21.2%
Commercial business 3.5% 3.8% 4.2% 5.1% 3.1%
Construction 1.9% 2.0% 1.8% 1.6% 0.4%
Total commercial loans 69.3% 71.3% 71.8% 71.4% 70.0%
One- to four-family residential mortgage loans 29.7% 27.4% 26.8% 27.1% 28.1%
Consumer loans:               
Home equity loans and lines of credit 0.9% 1.2% 1.3% 1.4% 1.8%
Other consumer loans 0.1% 0.1% 0.1% 0.1% 0.1%
Total consumer loans 1.0% 1.3% 1.4% 1.5% 1.9%
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 
Nonaccrual loans 79,767  71,416  71,472  44,837  36,691 
Total nonperforming loans 79,767  71,418  71,472  45,075  36,696 
Other real estate owned 178  178  178  178  178 
Total nonperforming assets$79,945 $71,596 $71,650 $45,253 $36,874 
                
Nonperforming loans (% total loans) 1.64% 1.49% 1.48% 0.91% 0.82%
Nonperforming assets (% total assets) 1.10% 0.97% 0.98% 0.62% 0.55%
                
Allowance for credit losses on loans (ACL):               
ACL to total loans 1.19% 1.32% 1.30% 1.30% 0.82%
ACL to nonperforming loans 72.92% 89.28% 88.69% 143.89% 101.72%
Net charge offs$656 $750 $109 $67 $38 
Average net charge off rate (annualized) 0.05% 0.06% 0.01% 0.01% 0.00%
                


 At
Supplemental Balance Sheet HighlightsJune 30,March 31, December 31, September 30,June 30,
(Dollars in Thousands, Unaudited)20212021202020202020
Funding by type:               
Deposits:               
Non-interest-bearing deposits$593,718 $545,746 $518,828 $487,710 $419,138 
Interest-bearing demand 1,902,478  1,923,184  1,752,699  1,561,135  1,264,151 
Savings 1,111,364  1,105,481  1,075,122  1,025,245  906,597 
Certificates of deposit 1,877,746  1,800,041  1,965,964  1,965,822  1,840,396 
Interest-bearing deposits 4,891,588  4,828,706  4,793,785  4,552,202  4,011,144 
Total deposits 5,485,306  5,374,452  5,312,613  5,039,912  4,430,282 
                
Borrowings:               
Federal Home Loan Bank advances 665,876  865,763  865,651  1,077,540  1,167,429 
Overnight borrowings 20,000  -  -  -  - 
Depositor sweep accounts -  -  -  -  5,736 
Total borrowings 685,876  865,763  865,651  1,077,540  1,173,165 
                
Total funding$6,171,182 $6,240,215 $6,178,264 $6,117,452 $5,603,447 
                
Loans as a % of deposits 87.7% 88.2% 89.9% 97.4% 101.2%
Deposits as a % of total funding 88.9% 86.1% 86.0% 82.4% 79.1%
Borrowings as a % of total funding 11.1% 13.9% 14.0% 17.6% 20.9%
                
Funding by source:               
Retail funding:               
Non-interest-bearing deposits$593,718 $545,746 $518,828 $487,710 $419,138 
Interest-bearing demand 1,902,478  1,923,184  1,752,699  1,561,135  1,264,151 
Savings 1,111,364  1,105,481  1,075,122  1,025,245  906,597 
Certificates of deposit 1,398,808  1,508,494  1,658,277  1,775,189  1,773,257 
Total retail deposits 5,006,368  5,082,905  5,004,926  4,849,279  4,363,143 
Depositor sweep accounts -  -  -  -  5,736 
Total retail funding 5,006,368  5,082,905  5,004,926  4,849,279  4,368,879 
                
Wholesale funding:               
Certificates of deposit (listing service)$20,322 $32,952 $43,112 $57,251 $35,760 
Certificates of deposit (brokered) 458,616  258,595  264,575  133,382  31,379 
Total wholesale deposits 478,938  291,547  307,687  190,633  67,139 
FHLB advances 665,876  865,763  865,651  1,077,540  1,167,429 
Overnight borrowings 20,000  -  -  -  - 
Total wholesale funding 1,164,814  1,157,310  1,173,338  1,268,173  1,234,568 
                
Total funding$6,171,182 $6,240,215 $6,178,264 $6,117,452 $5,603,447 
                
Retail funding as a % of total funding 81.1% 81.5% 81.0% 79.3% 78.0%
Wholesale funding as a % of total funding 18.9% 18.5% 19.0% 20.7% 22.0%


Summary Income StatementFor the three months ended
(Dollars and Shares in Thousands,June 30,March 31, December 31, September 30,June 30,
Except Per Share Data, Unaudited)20212021202020202020
Interest income               
Loans$47,562 $49,307 $49,466 $52,180 $46,192 
Taxable investment securities 8,304  7,891  7,707  7,336  9,769 
Tax-exempt investment securities 355  410  433  454  487 
Other interest-earning assets 549  705  787  914  903 
Total interest income 56,770  58,313  58,393  60,884  57,351 
                
Interest expense               
Deposits 5,156  6,670  8,647  11,062  12,439 
Borrowings 3,451  4,012  5,193  5,660  4,462 
Total interest expense 8,607  10,682  13,840  16,722  16,901 
Net interest income 48,163  47,631  44,553  44,162  40,450 
(Reversal of) provision for credit losses (4,941) 1,126  (1,365) 4,059  174 
Net interest income after (reversal of) provision for credit losses 53,104  46,505  45,918  40,103  40,276 
                
Non-interest income               
Fees and service charges 1,325  1,325  1,896  1,076  1,696 
Gain (loss) on sale and call of securities 313  18  813  (377) 19 
Gain on sale of loans 363  943  2,378  1,890  1,348 
Income from bank owned life insurance 1,545  1,530  1,596  1,596  1,537 
Electronic banking fees and charges 452  456  404  405  325 
Bargain purchase gain -  -  -  3,053  - 
Other income 400  1,194  67  90  77 
Total non-interest income 4,398  5,466  7,154  7,733  5,002 
                
Non-interest expense               
Salaries and employee benefits 17,777  16,965  17,081  16,977  15,527 
Net occupancy expense of premises 2,998  3,433  3,120  3,122  2,688 
Equipment and systems 3,575  3,823  3,902  3,570  2,948 
Advertising and marketing 581  567  513  500  751 
Federal deposit insurance premium 490  488  490  472  286 
Directors' compensation 749  748  748  748  769 
Merger-related expenses -  -  -  4,349  447 
Debt extinguishment expenses -  -  796  -  - 
Other expense 5,816  3,792  3,860  3,835  3,475 
Total non-interest expense 31,986  29,816  30,510  33,573  26,891 
Income before income taxes 25,516  22,155  22,562  14,263  18,387 
Income taxes 7,033  5,732  5,614  2,884  4,698 
Net income$18,483 $16,423 $16,948 $11,379 $13,689 
                
Net income per common share (EPS)               
Basic$0.24 $0.20 $0.20 $0.13 $0.17 
Diluted$0.24 $0.20 $0.20 $0.13 $0.17 
                
Dividends declared               
Cash dividends declared per common share$0.10 $0.09 $0.08 $0.08 $0.08 
Cash dividends declared$7,710 $7,205 $6,706 $6,917 $6,449 
Dividend payout ratio 41.7% 43.9% 39.6% 60.8% 47.1%
                
Weighted average number of common shares outstanding               
Basic 77,658  80,673  85,120  86,008  80,678 
Diluted 77,680  80,690  85,123  86,009  80,680 


 For the three months ended
Average Balance Sheet DataJune 30,March 31, December 31, September 30,June 30,
(Dollars in Thousands, Unaudited)20212021202020202020
Assets               
Interest-earning assets:               
Loans receivable, including loans held for sale$4,817,980 $4,816,592 $4,871,268 $4,958,293 $4,567,229 
Taxable investment securities 1,720,838  1,674,223  1,544,095  1,350,511  1,369,014 
Tax-exempt investment securities 63,047  73,573  79,044  82,603  89,263 
Other interest-earning assets 117,212  169,291  266,114  247,543  141,964 
Total interest-earning assets 6,719,077  6,733,679  6,760,521  6,638,950  6,167,470 
Non-interest-earning assets 609,762  617,440  632,084  624,252  605,876 
Total assets$7,328,839 $7,351,119 $7,392,605 $7,263,202 $6,773,346 
                
Liabilities and Stockholders' Equity               
Interest-bearing liabilities:               
Deposits:               
Interest-bearing demand$1,930,193 $1,831,617 $1,683,222 $1,464,238 $1,189,044 
Savings 1,118,402  1,084,981  1,058,675  1,006,075  876,580 
Certificates of deposit 1,934,650  1,904,234  1,899,406  1,988,689  1,879,039 
Total interest-bearing deposits 4,983,245  4,820,832  4,641,303  4,459,002  3,944,663 
Borrowings:               
Federal Home Loan Bank advances 665,802  865,690  1,057,958  1,130,836  1,202,522 
Other borrowings 6,670  -  -  3,568  96,770 
Total borrowings 672,472  865,690  1,057,958  1,134,404  1,299,292 
Total interest-bearing liabilities 5,655,717  5,686,522  5,699,261  5,593,406  5,243,955 
Non-interest-bearing liabilities:               
Non-interest-bearing deposits 566,632  525,018  502,479  479,141  380,067 
Other non-interest-bearing liabilities 52,292  57,018  73,683  79,620  72,007 
Total non-interest-bearing liabilities 618,924  582,036  576,162  558,761  452,074 
Total liabilities 6,274,641  6,268,558  6,275,423  6,152,167  5,696,029 
Stockholders' equity 1,054,198  1,082,561  1,117,182  1,111,035  1,077,317 
Total liabilities and stockholders' equity$7,328,839 $7,351,119 $7,392,605 $7,263,202 $6,773,346 
                
Average interest-earning assets to average interest-bearing liabilities 118.80% 118.41% 118.62% 118.69% 117.61%


 For the three months ended
 June 30,March 31, December 31, September 30,June 30,
Performance Ratio Highlights20212021202020202020
Average yield on interest-earning assets:               
Loans receivable, including loans held for sale 3.95% 4.09% 4.06% 4.21% 4.05%
Taxable investment securities 1.93% 1.89% 2.00% 2.17% 2.85%
Tax-exempt investment securities (1) 2.25% 2.23% 2.19% 2.20% 2.18%
Other interest-earning assets 1.87% 1.67% 1.18% 1.48% 2.54%
Total interest-earning assets 3.38% 3.46% 3.45% 3.67% 3.72%
                
Average cost of interest-bearing liabilities:               
Deposits:               
Interest-bearing demand 0.27% 0.34% 0.47% 0.60% 0.72%
Savings 0.15% 0.21% 0.33% 0.57% 0.81%
Certificates of deposit 0.71% 0.96% 1.22% 1.50% 1.82%
Total interest-bearing deposits 0.41% 0.55% 0.75% 0.99% 1.26%
Borrowings:               
Federal Home Loan Bank advances 2.07% 1.85% 1.96% 2.00% 1.47%
Other borrowings 0.07% 0.00% 0.00% 0.04% 0.13%
Total borrowings 2.05% 1.85% 1.96% 2.00% 1.37%
Total interest-bearing liabilities 0.61% 0.75% 0.97% 1.20% 1.29%
                
Interest rate spread (2) 2.77% 2.71% 2.48% 2.47% 2.43%
Net interest margin (3) 2.87% 2.83% 2.64% 2.66% 2.62%
                
Non-interest income to average assets
(annualized)
 0.24% 0.30% 0.39% 0.43% 0.30%
Non-interest expense to average assets
(annualized)
 1.75% 1.62% 1.65% 1.85% 1.59%
                
Efficiency ratio (4) 60.86% 56.15% 59.01% 64.69% 59.16%
                
Return on average assets (annualized) 1.01% 0.89% 0.92% 0.63% 0.81%
Return on average equity (annualized) 7.01% 6.07% 6.07% 4.10% 5.08%
Return on average tangible equity (annualized) (5) 8.81% 7.57% 7.52% 5.08% 6.35%

____________________

(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.
   


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-GAAPFor the three months ended
(Dollars in Thousands,June 30,March 31, December 31, September 30,June 30,
Except Per Share Data, Unaudited)20212021202020202020
Adjusted net income:               
Net income (GAAP)$18,483 $16,423 $16,948 $11,379 $13,689 
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 
Branch consolidation expenses and impairment charges 870  264  243  -  - 
Net effect of sales and calls of securities (220) (13) (571) -  - 
Debt extinguishment expenses -  -  558  -  - 
Reversal of income tax valuation allowance (12) -  (523) -  - 
Net effect of sales of other assets (144) (587) -  -  - 
Adjusted net income$18,977 $16,087 $16,655 $15,012 $14,115 
                
Calculation of pre-tax, pre-provision net revenue:               
Net income (GAAP)$18,483 $16,423 $16,948 $11,379 $13,689 
Adjustments to net income (GAAP):               
Provision for income taxes 7,033  5,732  5,614  2,884  4,698 
(Reversal of) provision for credit losses (4,941) 1,126  (1,365) 4,059  174 
Pre-tax, pre-provision net revenue (non-GAAP)$20,575 $23,281 $21,197 $18,322 $18,561 
                
Adjusted earnings per share:               
Weighted average common shares - basic 77,658  80,673  85,120  86,008  80,678 
Weighted average common shares - diluted 77,680  80,690  85,123  86,009  80,680 
                
Earnings per share - basic (GAAP)$0.24 $0.20 $0.20 $0.13 $0.17 
Earnings per share - diluted (GAAP)$0.24 $0.20 $0.20 $0.13 $0.17 
                
Adjusted earnings per share - basic (non-GAAP)$0.24 $0.20 $0.20 $0.17 $0.17 
Adjusted earnings per share - diluted (non-GAAP)$0.24 $0.20 $0.20 $0.17 $0.17 
                
Adjusted return on average assets:               
Total average assets$7,328,839 $7,351,119 $7,392,605 $7,263,202 $6,773,346 
                
Return on average assets (GAAP) 1.01% 0.89% 0.92% 0.63% 0.81%
Adjusted return on average assets (non-GAAP) 1.04% 0.88% 0.90% 0.83% 0.83%
                
Adjusted return on average equity:               
Total average equity$1,054,198 $1,082,561 $1,117,182 $1,111,035 $1,077,317 
                
Return on average equity (GAAP) 7.01% 6.07% 6.07% 4.10% 5.08%
Adjusted return on average equity (non-GAAP) 7.20% 5.94% 5.96% 5.40% 5.24%
                


Reconciliation of GAAP to Non-GAAPFor the three months ended
(Dollars in Thousands,June 30,March 31, December 31, September 30,June 30,
Except Per Share Data, Unaudited)20212021202020202020
Adjusted return on average tangible equity:               
Total average equity$1,054,198 $1,082,561 $1,117,182 $1,111,035 $1,077,317 
Less: average goodwill (210,895) (210,895) (210,895) (210,895) (210,895)
Less: average other intangible assets (3,825) (4,045) (4,317) (4,341) (4,124)
 $839,478 $867,621 $901,970 $895,799 $862,298 
                
Return on average tangible equity (non-GAAP) 8.81% 7.57% 7.52% 5.08% 6.35%
Adjusted return on average tangible equity (non-GAAP) 9.04% 7.42% 7.39% 6.70% 6.55%
                
Adjusted non-interest expense ratio:               
Non-interest expense (GAAP)$31,986 $29,816 $30,510 $33,573 $26,891 
Non-recurring transactions:               
Merger-related expenses -  -  -  (4,349) (447)
Branch consolidation expenses and impairment charges (1,239) (375) (347) -  - 
Debt extinguishment expenses -  -  (796) -  - 
Non-interest expense (non-GAAP)$30,747 $29,441 $29,367 $29,224 $26,444 
                
Non-interest expense ratio (GAAP) 1.75% 1.62% 1.65% 1.85% 1.59%
Adjusted non-interest expense ratio (non-GAAP) 1.68% 1.60% 1.59% 1.61% 1.56%
                
Adjusted efficiency ratio:               
Non-interest expense (non-GAAP)$30,747 $29,441 $29,367 $29,224 $26,444 
                
Net interest income (GAAP)$48,163 $47,631 $44,553 $44,162 $40,450 
Total non-interest income (GAAP) 4,398  5,466  7,154  7,733  5,002 
Non-recurring transactions:               
Net effect of sales and calls of securities (313) (18) (813) -  - 
Bargain purchase gain -  -  -  (3,053) - 
Net effect of sales of other assets (205) (837) -  -  - 
Total revenue (non-GAAP)$52,043 $52,242 $50,894 $48,842 $45,452 
                
Efficiency ratio (GAAP) 60.86% 56.15% 59.01% 64.69% 59.16%
Adjusted efficiency ratio (non-GAAP) 59.08% 56.36% 57.70% 59.83% 58.18%
                


Reconciliation of GAAP to Non-GAAPFor the year ended
(Dollars in Thousands,June 30,June 30,
Except Per Share Data, Unaudited)20212020
Adjusted net income:      
Net income (GAAP)$63,233 $44,965 
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  878 
Branch consolidation expenses and impairment
charges
 1,377  749 
Net effect of sales and calls of securities (804) (1,575)
Debt extinguishment expenses 558  1,520 
Reversal of income tax valuation allowance (535) (591)
Net effect of sales of other assets (731) - 
Tax benefit arising from the adoption of the CARES Act provisions -  (1,624)
Adjusted net income$66,731 $44,322 
       
Calculation of pre-tax, pre-provision income:      
Net income (GAAP)$63,233 $44,965 
Adjustments to net income (GAAP):      
Provision for income taxes 21,263  12,287 
(Reversal of) provision for credit losses (1,121) 4,197 
Pre-tax, pre-provision income$83,375 $61,449 
       
Adjusted earnings per share:      
Weighted average common shares - basic 82,387  82,409 
Weighted average common shares - diluted 82,391  82,430 
       
Earnings per share - basic (GAAP)$0.77 $0.55 
Earnings per share - diluted (GAAP)$0.77 $0.55 
       
Adjusted earnings per share - basic (non-GAAP)$0.81 $0.54 
Adjusted earnings per share - diluted (non-GAAP)$0.81 $0.54 
       
Adjusted return on average assets:      
Total average assets$7,333,861 $6,689,245 
       
Return on average assets (GAAP) 0.86% 0.67%
Adjusted return on average assets (non-GAAP) 0.91% 0.66%
       
Adjusted return on average equity:      
Total average equity$1,091,393 $1,096,325 
       
Return on average equity (GAAP) 5.79% 4.10%
Adjusted return on average equity (non-GAAP) 6.11% 4.04%
       
Adjusted return on average tangible equity:      
Total average equity$1,091,393 $1,096,325 
Less: average goodwill (210,895) (210,895)
Less: average other intangible assets (4,133) (4,564)
 $876,365 $880,866 
       
Return on average tangible equity (non-GAAP) 7.22% 5.10%
Adjusted return on average tangible equity (non-GAAP) 7.61% 5.03%


       
 For the year ended
Reconciliation of GAAP to Non-GAAPJune 30,June 30,
(Dollars in Thousands, Unaudited)20212020
Adjusted non-interest expense ratio:      
Non-interest expense (GAAP)$125,885 $107,624 
Non-routine transactions:      
Merger-related expenses (4,349) (951)
Branch consolidation expenses and impairment charges (1,961) (720)
Debt extinguishment expenses (796) (2,156)
Non-interest expense (non-GAAP)$118,779 $103,797 
       
Non-interest expense ratio (GAAP) 1.72% 1.61%
Adjusted non-interest expense ratio (non-GAAP) 1.62% 1.55%
       
Adjusted efficiency ratio:      
Non-interest expense (non-GAAP)$118,779 $103,797 
       
Net interest income (GAAP)$184,509 $149,354 
Total non-interest income (GAAP) 24,751  19,719 
Non-routine transactions:      
Net effect of sales and calls of securities (1,144) (2,234)
Bargain purchase gain (3,053) - 
Net effect of sales of other assets (1,042) 342 
Total revenue (non-GAAP)$204,021 $167,181 
       
Efficiency ratio (GAAP) 60.16% 63.66%
Adjusted efficiency ratio (non-GAAP) 58.22% 62.09%
       

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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