10q10k10q10k.net

What changed in Kearny Financial Corp.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Kearny Financial Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+282 added−292 removedSource: 10-K (2024-08-23) vs 10-K (2023-08-25)

Top changes in Kearny Financial Corp.'s 2024 10-K

282 paragraphs added · 292 removed · 231 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

111 edited+18 added−21 removed161 unchanged
Biggest changeThe following table presents allowance for credit losses ratios, along with the components of their calculation, for the periods indicated: At June 30, 2023 2022 (Dollars in Thousands) Allowance for credit losses - loans $ 48,734 $ 47,058 Total loans outstanding $ 5,850,476 $ 5,436,576 Total non-performing loans $ 42,627 $ 70,321 Allowance for credit losses as a percent of total loans outstanding 0.83 % 0.87 % Allowance for credit losses to non-performing loans 114.33 % 66.92 % 11 Table of Contents The following table presents the ratio of net charge-offs (recoveries) to average loans outstanding by loan category, along with the components of the calculation, for the periods indicated: For the Years Ended June 30, 2023 2022 2021 Net charge-offs (recoveries) Average loans outstanding Net charge- offs as a percent of average loans outstanding Net charge-offs (recoveries) Average loans outstanding Net charge- offs as a percent of average loans outstanding Net charge-offs Average loans outstanding Net charge- offs as a percent of average loans outstanding (Dollars in Thousands) Multi-family mortgage $ 493 $ 2,718,428 0.02 % $ 1,896 $ 2,056,595 0.09 % $ — $ 2,075,450 0.00 % Nonresidential mortgage 39 1,005,943 0.00 % 1,834 1,036,205 0.18 % 80 1,104,052 0.01 % Commercial business 335 188,794 0.18 % 33 190,023 0.02 % 1,429 223,518 0.64 % Construction — 176,185 0.00 % — 105,095 0.00 % — 76,309 0.00 % One- to four-family residential mortgage (2) 1,683,929 — % (147) 1,487,208 (0.01) % 9 1,331,779 0.00 % Home equity loans — 66,479 — % (27) 67,849 (0.04) % 32 88,961 0.04 % Other consumer (55) 2,805 (1.96) % — 2,993 0.00 % 32 4,048 0.79 % Unaccreted yield adjustments — (15,440) 0.00 % — (23,568) 0.00 % — (37,681) 0.00 % Total $ 810 $ 5,827,123 0.01 % $ 3,589 $ 4,922,400 0.07 % $ 1,582 $ 4,866,436 0.03 % Our loan portfolio experienced an annualized net charge-off rate of 0.01% for the year ended June 30, 2023, a decrease of six basis points from the 0.07% rate for the year ended June 30, 2022. 12 Table of Contents Allocation of Allowance for Credit Losses on Loans.
Biggest changeThe following table presents allowance for credit losses ratios, along with the components of their calculation, for the periods indicated: At June 30, 2024 2023 (Dollars in Thousands) Allowance for credit losses - loans $ 44,939 $ 48,734 Total loans outstanding $ 5,748,750 $ 5,850,476 Total non-performing loans $ 39,882 $ 42,627 Allowance for credit losses as a percent of total loans outstanding 0.78 % 0.83 % Allowance for credit losses to non-performing loans 112.68 % 114.33 % 11 Table of Contents The following table presents the ratio of net charge-offs (recoveries) to average loans outstanding by loan category, along with the components of the calculation, for the periods indicated: For the Years Ended June 30, 2024 2023 2022 Net charge-offs (recoveries) Average loans outstanding Net charge- offs as a percent of average loans outstanding Net charge-offs (recoveries) Average loans outstanding Net charge- offs as a percent of average loans outstanding Net charge-offs (recoveries) Average loans outstanding Net charge- offs as a percent of average loans outstanding (Dollars in Thousands) Multi-family mortgage $ 398 $ 2,675,429 0.01 % $ 493 $ 2,718,428 0.02 % $ 1,896 $ 2,056,595 0.09 % Nonresidential mortgage 5,855 953,125 0.61 % 39 1,005,943 0.00 % 1,834 1,036,205 0.18 % Commercial business 3,844 163,560 2.35 % 335 188,794 0.18 % 33 190,023 0.02 % Construction — 208,111 0.00 % — 176,185 0.00 % — 105,095 0.00 % One- to four-family residential mortgage (76) 1,704,957 0.00 % (2) 1,683,929 0.00 % (147) 1,487,208 (0.01) % Home equity loans — 63,367 0.00 % — 66,479 0.00 % (27) 67,849 (0.04) % Other consumer — 2,800 0.00 % (55) 2,805 (1.96) % — 2,993 0.00 % Unaccreted yield adjustments — (18,853) 0.00 % — (15,440) 0.00 % — (23,568) 0.00 % Total $ 10,021 $ 5,752,496 0.17 % $ 810 $ 5,827,123 0.01 % $ 3,589 $ 4,922,400 0.07 % Our loan portfolio experienced an annualized net charge-off rate of 0.17% for the year ended June 30, 2024, an increase of 16 basis points from the 0.01% rate for the year ended June 30, 2023. 12 Table of Contents Allocation of Allowance for Credit Losses on Loans.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: • general economic conditions, either nationally or in our market areas, that are worse than expected; • changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; • our ability to access cost-effective funding; • fluctuations in real estate values and both residential and commercial real estate market conditions; • demand for loans and deposits in our market area; • our ability to implement changes in our business strategies; • competition among depository and other financial institutions; • inflation and changes in the interest rate environment that reduce our margins and yields, or reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets; • adverse changes in the securities markets; • changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; • changes in monetary or fiscal policies of the U.S.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: • general economic conditions, either nationally or in our market areas, that are worse than expected; • changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; • our ability to access cost-effective funding; • fluctuations in real estate values and both residential and commercial real estate market conditions; • demand for loans and deposits in our market area; • our ability to implement changes in our business strategies; • competition among depository and other financial institutions; • inflation and/or changes in the interest rate environment that reduce our margins and yields, or reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets; • adverse changes in the securities markets; • changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; • changes in monetary or fiscal policies of the U.S.
Such actions can include, among others, the issuance of a cease and desist order, assessment of civil money penalties, removal of officers and directors and the appointment of a receiver or conservator. Activities and Powers. Kearny Bank derives its lending, investment and other powers primarily from the applicable provisions of the New Jersey Banking Act and the related regulations.
Such actions can include, among others, the issuance of a cease and desist order, assessment of civil money penalties, removal of officers and directors and appointment of a receiver or conservator. Activities and Powers. Kearny Bank derives its lending, investment and other powers primarily from the applicable provisions of the New Jersey Banking Act and the related regulations.
FDIC regulations require nonmember banks to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8%, and a 4% Tier 1 capital to total assets leverage ratio.
FDIC regulations require nonmember banks to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio.
The current requirements implement recommendations of the Basel Committee on Banking Supervision and certain requirements of federal law. For purposes of the regulatory capital standards, common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital.
The current requirements implement recommendations of the Basel Committee on Banking Supervision and certain requirements of federal law. For purposes of the regulatory capital standards, common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 capital and additional Tier 1 capital.
Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and 25 Table of Contents • Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.
Such required compliance programs are intended to supplement existing 25 Table of Contents compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; • Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.
We generally offer fixed-rate and adjustable-rate balloon mortgage loans on multi-family and nonresidential properties with final stated maturities ranging from three to 15 years with amortization terms which generally range from 15 to 30 years. Our commercial mortgage loans are primarily secured by properties located in New Jersey, New York and the surrounding states. Commercial Business (C&I) Loans.
We generally offer fixed-rate and adjustable-rate balloon mortgage loans on multi-family and nonresidential properties with final stated maturities ranging from three to 15 years with amortization terms which generally range from 15 to 30 years. Our commercial mortgage loans are primarily secured by properties located in New Jersey, New York and the surrounding states. Commercial and Industrial Business (C&I) Loans.
CJB Investment Corp. is a New Jersey Investment Company and remained active through the three-year period ended June 30, 2023. 189-245 Berdan Avenue LLC was formed during the year ended June 30, 2023 for the purpose of ownership and operation of commercial real estate.
CJB Investment Corp. is a New Jersey Investment Company and remained active through the three-year period ended June 30, 2024. 189-245 Berdan Avenue LLC was formed during the year ended June 30, 2023 for the purpose of ownership and operation of commercial real estate.
A bank’s compliance with such a plan must be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status adequately capitalized status.
A bank’s compliance with such a plan must be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the adequately capitalized status.
Critically undercapitalized institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after such status is triggered. These actions are in addition to other discretionary supervisory or enforcement actions that the FDIC may take. As of June 30, 2023, Kearny Bank was well capitalized. Dividend Limitations.
Critically undercapitalized institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after such status is triggered. These actions are in addition to other discretionary supervisory or enforcement actions that the FDIC may take. As of June 30, 2024, Kearny Bank was well capitalized. Dividend Limitations.
A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. Kearny Bank did not opt into the community bank leverage ratio framework as of June 30, 2023. Regulations issued by the NJDBI establish generally similar regulatory capital standards for New Jersey-chartered savings banks such as Kearny Bank.
A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. Kearny Bank did not opt into the community bank leverage ratio framework as of June 30, 2024. Regulations issued by the NJDBI establish generally similar regulatory capital standards for New Jersey-chartered savings banks such as Kearny Bank.
All of our securities carry market risk insofar as increases in market interest rates have caused, and may continue to cause, a decrease in their market value. We believe that unrealized and unrecognized losses on securities held at June 30, 2023, are a function of changes in market interest rates and credit spreads, not changes in credit quality.
All of our securities carry market risk insofar as increases in market interest rates have caused, and may continue to cause, a decrease in their market value. We believe that unrealized and unrecognized losses on securities held at June 30, 2024, are a function of changes in market interest rates and credit spreads, not changes in credit quality.
Consolidated regulatory capital requirements identical to those applicable to the subsidiary depository institutions (including the community bank leverage ratio alternative) apply to savings and loan holding companies with $3 billion or more of consolidated assets, including Kearny Financial. Kearny Financial was in compliance with the holding company capital requirements and the capital conservation buffer as of June 30, 2023.
Consolidated regulatory capital requirements identical to those applicable to the subsidiary depository institutions (including the community bank leverage ratio alternative) apply to savings and loan holding companies with $3 billion or more of consolidated assets, including Kearny Financial. Kearny Financial was in compliance with the holding company capital requirements and the capital conservation buffer as of June 30, 2024.
As of June 30, 2023, Kearny Bank met the qualified thrift lender test. Acquisition of Control. Under the federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire control of a savings and loan holding company.
As of June 30, 2024, Kearny Bank met the qualified thrift lender test. Acquisition of Control. Under the federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire control of a savings and loan holding company.
Advances from the FHLB are typically secured by our FHLB capital stock and certain investment securities as well as residential and commercial mortgage loans that we choose to utilize as collateral for such borrowings. Additional information about our FHLB advances is included under Note 11 to the audited consolidated financial statements.
Advances from the FHLB are typically secured by our FHLB capital stock and certain investment securities as well as residential and commercial mortgage loans that we choose to utilize as collateral for such borrowings. Additional information about our FHLB advances is included under Note 10 to the audited consolidated financial statements.
At June 30, 2023, corporate bonds issued by large financial institutions were consistently rated by Moody’s and S&P well above the thresholds that generally support our investment grade assessment with such ratings equaling BBB- or higher by S&P or Baa3 or higher by Moody’s, where rated by those agencies.
At June 30, 2024, corporate bonds issued by large financial institutions were consistently rated by Moody’s and S&P well above the thresholds that generally support our investment grade assessment with such ratings equaling BBB- or higher by S&P or Baa3 or higher by Moody’s, where rated by those agencies.
At June 30, 2023, our primary market area consisted of the counties in which we currently operate branches, including Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset and Union counties in New Jersey and Kings (Brooklyn) and Richmond (Staten Island) counties in New York.
At June 30, 2024, our primary market area consisted of the counties in which we currently operate branches, including Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset and Union counties in New Jersey and Kings (Brooklyn) and Richmond (Staten Island) counties in New York.
The following table sets forth the maturities of our loan portfolio at June 30, 2023. Demand loans, loans having no stated maturity and overdrafts are shown as due in one year or less. Loans are stated in the following table at contractual maturity and actual maturities could differ due to prepayments.
The following table sets forth the maturities of our loan portfolio at June 30, 2024. Demand loans, loans having no stated maturity and overdrafts are shown as due in one year or less. Loans are stated in the following table at contractual maturity and actual maturities could differ due to prepayments.
At June 30, 2023, each of our collateralized loan obligations were consistently rated by Moody’s and/or S&P well above the thresholds that generally support our investment grade assessment with such ratings equaling AAA by S&P or Aaa by Moody’s, where rated by those agencies.
At June 30, 2024, each of our collateralized loan obligations were consistently rated by Moody’s and/or S&P well above the thresholds that generally support our investment grade assessment with such ratings equaling AAA by S&P or Aaa by Moody’s, where rated by those agencies.
Other than securities issued or guaranteed by the U.S. government or its agencies, we did not hold securities of any one issuer having an aggregate book value in excess of 10% of our equity at June 30, 2023.
Other than securities issued or guaranteed by the U.S. government or its agencies, we did not hold securities of any one issuer having an aggregate book value in excess of 10% of our equity at June 30, 2024.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution and its holding company, the classification of assets by the institution and the adequacy of an institution’s allowance for credit losses.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities and examination policies, including the imposition of restrictions on the operation of an institution and its holding company, the classification of assets by the institution and the adequacy of an institution’s allowance for credit losses.
We operate from our administrative headquarters in Fairfield, New Jersey and other administrative locations throughout the state of New Jersey. As of June 30, 2023, we had 43 branch offices. The Company maintains a website at www.kearnybank.com.
We operate from our administrative headquarters in Fairfield, New Jersey and other administrative locations throughout the State of New Jersey. As of June 30, 2024, we had 43 branch offices. The Company maintains a website at www.kearnybank.com.
Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. At June 30, 2023, Kearny Bank has exercised the opt-out election regarding the treatment of Accumulated Other Comprehensive Income.
Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. At June 30, 2024, Kearny Bank has exercised the opt-out election regarding the treatment of Accumulated Other Comprehensive Income.
Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to opt out of the sharing of certain personal financial information with unaffiliated third parties. • Banking organizations are required to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security incident” that arises to the level of a “notification incident” has occurred.
Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to opt out of the sharing of certain personal financial information with unaffiliated third parties; and • Regulations requiring banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security incident” that arises to the level of a “notification incident” has occurred.
The Bank’s Loan Committee consists of the Chief Executive Officer, Chief Lending Officer, Chief Credit Officer, Chief Risk Officer and other members of senior management. Loans which exceed certain thresholds, as defined within our policies, are submitted to the Bank’s Loan Committee and/or Board of Directors for approval. 8 Table of Contents Asset Quality Collection Procedures on Delinquent Loans.
The Bank’s Loan Committee consists of the Chief Executive Officer, Chief Lending Officer, Chief Credit Officer, Chief Risk Officer and other members of senior management. Loans which exceed certain thresholds, as defined within our policies, are submitted to the Bank’s Loan Committee and/or Board of Directors for approval. Asset Quality Collection Procedures on Delinquent Loans.
Our competition for deposits and loans comes from other insured depository institutions located in our primary market area as well as out-of-market depository institutions operating via online channels and from non-depository institutions including mortgage banks, finance companies, insurance companies, brokerage firms and financial technology companies. Lending Activities General.
Our competition for deposits and loans comes from other insured depository institutions located in our primary market area as well as out-of-market depository institutions operating via online channels and from non-depository institutions including mortgage banks, finance companies, insurance companies, brokerage firms and financial technology companies. 4 Table of Contents Lending Activities General.
Internal audit resources perform credit review functions utilizing guidance from regulatory and Institute of Internal Auditors standards in addition to assessing the adequacy of, and adherence to, internal credit policies and loan administration procedures and adherence to regulatory guidance. Our compliance resources monitor adherence to relevant lending-related and consumer protection-related laws and regulations. 10 Table of Contents Classification of Assets.
Internal audit resources perform credit review functions utilizing guidance from regulatory and Institute of Internal Auditors standards in addition to assessing the adequacy of, and adherence to, internal credit policies and loan administration procedures and adherence to regulatory guidance. Our compliance resources monitor adherence to relevant lending-related and consumer protection-related laws and regulations. Classification of Assets.
The ACL at June 30, 2023 is maintained at a level that is management’s best estimate of lifetime expected credit losses inherent in loans at the balance sheet date.
The ACL at June 30, 2024 is maintained at a level that is management’s best estimate of lifetime expected credit losses inherent in loans at the balance sheet date.
Any property acquired as the result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned until it is sold or otherwise disposed of. When other real estate owned is acquired, it is recorded at its fair market value less estimated selling costs.
Any property acquired as 8 Table of Contents the result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned until it is sold or otherwise disposed of. When other real estate owned is acquired, it is recorded at its fair market value less estimated selling costs.
This category of securities is comprised of two floating-rate corporate debt obligations issued by large financial institutions and subordinated debt representing profitable, well-capitalized, small- to mid-sized community banks located mainly in the mid-Atlantic region of the U.S.
This category of securities is comprised of two floating-rate corporate debt obligations issued by large financial institutions and subordinated debt representing, small- to mid-sized community banks located mainly in the mid-Atlantic region of the U.S.
As part of our acquisition of MSB, we acquired PCD loans with a par value of $69.4 million and an allowance for credit losses of $3.9 million. Additional information about our PCD loans is presented in Note 5 to the audited consolidated financial statements. 9 Table of Contents Nonperforming Assets.
As part of our acquisition of MSB Financial Corp., we acquired PCD loans with a par value of $69.4 million and an allowance for credit losses of $3.9 million. Additional information about our PCD loans is presented in Note 4 to the audited consolidated financial statements. Nonperforming Assets.
Additional information regarding our use of interest rate derivatives and our hedging activities is presented in Note 1 and Note 12 to the audited consolidated financial statements. 19 Table of Contents Subsidiary Activity At June 30, 2023, Kearny Bank was the only wholly-owned operating subsidiary of Kearny Financial Corp.
Additional information regarding our use of interest rate derivatives and our hedging activities is presented in Note 1 and Note 11 to the audited consolidated financial statements. 19 Table of Contents Subsidiary Activity At June 30, 2024, Kearny Bank was the only wholly-owned operating subsidiary of Kearny Financial Corp.
New Jersey law generally limits the amount that a savings bank may lend to a single borrower and related entities to 15% of the institution’s capital funds. Accordingly, as of June 30, 2023, our legal loans to one borrower limit was approximately $104.3 million.
New Jersey law generally limits the amount that a savings bank may lend to a single borrower and related entities to 15% of the institution’s capital funds. Accordingly, as of June 30, 2024, our legal loans to one borrower limit was approximately $103.3 million.
At June 30, 2023, our derivative instruments were comprised of interest rate swaps, caps and a floor with a total notional amount of $2.23 billion. These instruments are intended to manage the interest rate exposure relating to certain wholesale funding positions and assets that were outstanding at June 30, 2023.
At June 30, 2024, our derivative instruments were comprised of interest rate swaps, caps and a floor with a total notional amount of $2.75 billion. These instruments are intended to manage the interest rate exposure relating to certain wholesale funding positions and assets that were outstanding at June 30, 2024.
Additional information about our past due loans is presented in Note 5 to the audited consolidated financial statements. Nonaccrual Loans.
Additional information about our past due loans is presented in Note 4 to the audited consolidated financial statements. Nonaccrual Loans.
Additional borrowing capacity up to 50% of our total assets may be authorized with the approval of the FHLB’s Board of Directors or Executive Committee. In addition, we had the capacity to borrow additional funds totaling $990.0 million via unsecured overnight borrowings from other financial institutions and $415.0 million from the FRB without pledging additional collateral.
Additional borrowing capacity up to 50% of our total assets may be authorized with the approval of the FHLB’s Board of Directors or Executive Committee. In addition, we had the capacity to borrow additional funds totaling $789.0 million via unsecured overnight borrowings from other financial institutions and $381.8 million from the FRB without pledging additional collateral.
Our ongoing technology transformation will impact nearly every area of the Company including the residential and commercial lending functions, retail deposit gathering, risk management and back office operations.
Our ongoing technology transformation has, and will continue to, impact nearly every area of the Company including the residential and commercial lending functions, retail deposit gathering, risk management and back office operations.
Additional information about our classification of assets is presented in Note 5 to the audited consolidated financial statements.
Additional information about our classification of assets is presented in Note 4 to the audited consolidated financial statements.
In addition, we had the capacity to borrow additional funds totaling $990.0 million via unsecured overnight borrowings from other financial institutions and $1.55 billion and $415.0 million from the Federal Home Loan Bank of New York and FRB, respectively, without pledging additional collateral. • Continue Our Technology Transformation Given the ongoing evolution of our business towards digital channels, we have invested significant human resources and capital towards enhancing both our internal and client-facing technology systems.
In addition, we had the capacity to borrow additional funds totaling $789.0 million via unsecured overnight borrowings from other financial institutions and $1.06 billion and $381.8 million from the Federal Home Loan Bank of New York and FRB, respectively, without pledging additional collateral. • Continue Our Technology Transformation Given the ongoing evolution of our business towards digital channels, we have invested significant human resources and capital towards enhancing both our internal and client-facing technology systems.
Based upon the market value of investment securities and mortgage loans that are posted as collateral for FHLB advances at June 30, 2023, we are eligible to borrow up to an additional $1.55 billion of advances from the FHLB as of that date.
Based upon the market value of investment securities and mortgage loans that are posted as collateral for FHLB advances at June 30, 2024, we are eligible to borrow up to an additional $1.06 billion of advances from the FHLB as of that date.
This table shows contractual maturities and does not reflect re-pricing or the effect of prepayments. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. At June 30, 2023, securities with a carrying value of $40.4 million are callable within one year.
This table shows contractual maturities and does not reflect re-pricing or the effect of prepayments. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. At June 30, 2024, securities with a carrying value of $31.8 million are callable within one year.
At June 30, 2023 and 2022, certificates of deposit maturing within one year were $1.90 billion and $1.47 billion, respectively. Historically, a significant portion of the certificates of deposit remain with us after they mature.
At June 30, 2024 and 2023, certificates of deposit maturing within one year were $1.49 billion and $1.90 billion, respectively. Historically, a significant portion of the certificates of deposit remain with us after they mature.
At June 30, 2023, our largest single borrower had an aggregate outstanding loan exposure of approximately $98.9 million comprising six multi-family mortgage loans. At June 30, 2023, this lending relationship was current and performing in accordance with the terms of their loan agreements. Loan Originations, Purchases, Sales and Repayments.
At June 30, 2024, our largest single borrower had an aggregate outstanding loan exposure of approximately $96.9 million comprising six multi-family mortgage loans. At June 30, 2024, this lending relationship was current and performing in accordance with the terms of their loan agreements. 7 Table of Contents Loan Originations, Purchases, Sales and Repayments.
The year-over-year net decrease in the securities portfolio totaled $88.2 million which largely reflected repayments and sales that were partially offset by purchases.
The year-over-year net decrease in the securities portfolio totaled $165.6 million which largely reflected repayments and sales that were partially offset by purchases.
The investments authorized for purchase under the investment policy approved by our Board of Directors include U.S. government and agency mortgage-backed securities, U.S. government agency debentures, municipal obligations, corporate bonds, asset-backed securities, collateralized loan obligations and subordinated debt. 13 Table of Contents The carrying value of our mortgage-backed securities totaled $710.0 million at June 30, 2023 and comprised 51.7% of total investments and 8.8% of total assets as of that date.
The investments authorized for purchase under the investment policy approved by our Board of Directors include U.S. government and agency mortgage-backed securities, U.S. government agency debentures, municipal obligations, corporate bonds, asset-backed securities, collateralized loan obligations and subordinated debt. 13 Table of Contents The carrying value of our mortgage-backed securities totaled $593.9 million at June 30, 2024 and comprised 49.1% of total investments and 7.7% of total assets as of that date.
In the absence of, or as a complement to, such ratings, we rely upon our own internal analysis of the issuer’s financial condition to validate its investment grade assessment. The carrying value of our asset-backed securities totaled $136.2 million at June 30, 2023 and comprised 9.9% of total investments and 1.7% of total assets as of that date.
In the absence of, or as a complement to, such ratings, we rely upon our own internal analysis of the issuer’s financial condition to validate its investment grade assessment. The carrying value of our asset-backed securities totaled $80.4 million at June 30, 2024 and comprised 6.7% of total investments and 1.0% of total assets as of that date.
At June 30, 2023, commercial business loans totaled $146.9 million, or 2.5% of our loan portfolio. We originate commercial term loans and lines of credit to a variety of clients in our market area. Our commercial term loans generally have terms of up to 10 years.
At June 30, 2024, commercial and industrial business loans totaled $142.7 million, or 2.5% of our loan portfolio. We originate commercial term loans and lines of credit to a variety of clients in our market area. Our commercial term loans generally have terms of up to 10 years.
Our commercial lines of credit have terms of up to one year and are generally floating-rate loans. Construction Lending. At June 30, 2023, construction loans totaled $226.6 million, or 3.9% of our loan portfolio.
Our commercial lines of credit have terms of up to one year and are generally floating-rate loans. Construction Lending. At June 30, 2024, construction loans totaled $209.2 million, or 3.6% of our loan portfolio.
Such loans are generally originated by, and sourced from, the same resources and markets as those loans originated and held in our portfolio. Our mortgage banking business strategy resulted in the recognition of $760,000 in gains associated with the sale of $103.8 million of mortgage loans held for sale during the year ended June 30, 2023.
Such loans are generally originated by, and sourced from, the same resources and markets as those loans originated and held in our portfolio. Our mortgage banking business strategy resulted in the recognition of $602,000 in gains associated with the sale of $79.1 million of mortgage loans held for sale during the year ended June 30, 2024.
As of that date, Kearny Bank had two wholly-owned subsidiaries, CJB Investment Corp. and 189-245 Berdan Avenue LLC.
As of that date, Kearny Bank had three wholly-owned subsidiaries, CJB Investment Corp., 189-245 Berdan Avenue LLC and Kearny Wealth Management LLC.
Our philosophy is to provide superior, personalized service to our clients. In addition, we intend to increase core non-maturity deposit accounts by growing business banking relationships through expanded product lines tailored to meet our target business customers’ needs.
Our philosophy is to provide superior, personalized service to our clients. In addition, we intend to increase core non-maturity deposit accounts by growing business banking relationships through the establishment of dedicated business development teams and expanded product lines tailored to meet our target business customers’ needs.
We also offer fixed-rate and adjustable-rate home equity lines of credit with terms of up to 20 years. 7 Table of Contents Other Consumer Loans. At June 30, 2023, other consumer loans totaled $2.5 million, or 0.04% of our loan portfolio.
We also offer fixed-rate and adjustable-rate home equity lines of credit with terms of up to 20 years. Other Consumer Loans. At June 30, 2024, other consumer loans totaled $2.7 million, or 0.05% of our loan portfolio.
The carrying value of our securities representing obligations of state and political subdivisions totaled $16.1 million at June 30, 2023 and comprised 1.2% of total investments and less than 1.0% of total assets as of that date.
The carrying value of our securities representing obligations of state and political subdivisions totaled $12.9 million at June 30, 2024 and comprised 1.1% of total investments and less than 1.0% of total assets as of that date.
Additional information about the ACL at June 30, 2023 and 2022 is presented in Note 6 to the audited consolidated financial statements. Investment Securities At June 30, 2023, our investment securities portfolio totaled $1.37 billion and comprised 17.0% of our total assets.
By comparison, at June 30, 2023, our securities portfolio totaled $1.37 billion and comprised 17.0% of our total assets. Additional information about our investment securities at June 30, 2024 is presented in Note 3 to the audited consolidated financial statements.
A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk: • Total reported loans for construction, land development and other land represent 100% or more of the bank’s capital; or • Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total capital or the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. 24 Table of Contents The guidance provides that the strength of an institution’s lending and risk management practices with respect to such concentrations will be taken into account in supervisory guidance on evaluation of capital adequacy.
A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk: • Total reported loans for construction, land development and other land represent 100% or more of the bank’s capital; or 24 Table of Contents • Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total capital or the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.
Our FHLB advances mature as follows: At June 30, 2023 2022 (In Thousands) By remaining period to maturity: Less than one year $ 972,500 $ 520,000 One to two years 103,500 22,500 Two to three years 6,500 103,500 Three to four years — 6,500 Four to five years 200,000 — Greater than five years — — Total advances 1,282,500 652,500 Fair value adjustments (688) (1,163) Total advances, net of fair value adjustments $ 1,281,812 $ 651,337 At June 30, 2023, we utilized interest rate contracts to effectively extend the duration and fix the cost of our FHLB advances maturing in less than one year.
Our FHLB advances mature as follows: At June 30, 2024 2023 (In Thousands) By remaining period to maturity: Less than one year $ 1,328,500 $ 972,500 One to two years 6,500 103,500 Two to three years — 6,500 Three to four years 200,000 — Four to five years — 200,000 Greater than five years — — Total advances 1,535,000 1,282,500 Fair value adjustments (211) (688) Total advances, net of fair value adjustments $ 1,534,789 $ 1,281,812 At June 30, 2024, we utilized interest rate contracts to effectively extend the duration and fix the cost of our FHLB advances maturing in less than one year.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
Management cannot predict what assessment rates will be in the future. Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
As of that date, an additional $9.6 million of loans were held and committed for sale into the secondary market. Home Equity Loans. At June 30, 2023, home equity loans totaled $43.5 million, or 0.7% of our loan portfolio. Our home equity loans are fixed-rate loans for terms of generally up to 20 years.
As of that date, an additional $6.0 million of loans were held and committed for sale into the secondary market. Home Equity Loans. At June 30, 2024, home equity loans totaled $44.1 million, or 0.8% of our loan portfolio. Our home equity loans are fixed-rate loans for terms of generally up to 20 years.
During the year ended June 30, 2022, proceeds from sales of securities available for sale totaled $100.3 million and resulted in no gross gains and gross losses of $565,000. During the year ended June 30, 2021, proceeds from sales of securities available for sale totaled $98.1 million and resulted in gross gains of $1.2 million and gross losses of $470,000.
During the year ended June 30, 2023, proceeds from sales of securities available for sale totaled $105.2 million and resulted in no gross gains and gross losses of $15.2 million. During the year ended June 30, 2022, proceeds from sales of securities available for sale totaled $100.3 million and resulted in no gross gains and gross losses of $565,000.
In fiscal 2024, we plan to accelerate our digital strategy, spearheaded by the adoption of a cloud-based, best-in-breed digital banking platform, and continue to serve our clients’ needs in an omnichannel environment while expanding our products and services into new markets in an efficient and cost-effective manner. • Focus on Relationship Banking and Core Deposits We focus on the acquisition and retention of core non-maturity deposit accounts and expanding customer relationships.
In fiscal 2025, we will continue our digital strategy, spearheaded by our recently adopted cloud-based, best-in-breed digital banking and online account opening platform, and continue to serve our clients’ needs in an omnichannel environment while expanding our products and services into new markets in an efficient and cost-effective manner. • Focus on Relationship Banking and Core Deposits We focus on the acquisition and retention of core non-maturity deposit accounts and expanding customer relationships.
The carrying value of our corporate bonds totaled $135.0 million at June 30, 2023 and comprised 9.8% of total investments and 1.7% of total assets as of that date.
The carrying value of our corporate bonds totaled $131.8 million at June 30, 2024 and comprised 10.9% of total investments and 1.7% of total assets as of that date.
Therefore, no allowance for credit losses was recorded at that time. During the year ended June 30, 2023, proceeds from sales of securities available for sale totaled $105.2 million and resulted in no gross gains and gross losses of $15.2 million.
Therefore, no allowance for credit losses was recorded at that time. During the year ended June 30, 2024, proceeds from sales of securities available for sale totaled $104.1 million and resulted in no gross gains and gross losses of $18.1 million.
During the year ended June 2023, we announced the adoption of a company-wide operating efficiency initiative that included the optimization and reduction of vendor spend, the automation or outsourcing of routine activities, and the realignment of our workforce.
In December 2022, we announced the adoption of a company-wide operating efficiency initiative that included the optimization and reduction of vendor spend, the automation or outsourcing of routine activities, and the realignment of our workforce.
At June 30, 2023, our liquid assets included $70.5 million of short-term cash and equivalents supplemented by $1.23 billion of investment securities classified as available for sale which can be readily sold or pledged as collateral, if necessary.
At June 30, 2024, our liquid assets included $63.9 million of short-term cash and equivalents 3 Table of Contents supplemented by $1.07 billion of investment securities classified as available for sale, which can be readily sold or pledged as collateral, if necessary.
The outstanding balance of our collateralized loan obligations totaled $377.0 million at June 30, 2023 and comprised 27.4% of total investments and 4.7% of total assets as of that date. This category of securities is comprised entirely of structured, floating-rate securities representing securitized commercial loans to large, U.S. corporations.
The outstanding balance of our collateralized loan obligations totaled $389.5 million at June 30, 2024 and comprised 32.2% of total investments and 5.1% of total assets as of that date. This category of securities is comprised entirely of structured, floating-rate securities representing securitized commercial loans to large, U.S. corporations.
At June 30, 2023, we had $1.28 billion of FHLB advances outstanding, excluding a net fair value adjustment of $688,000, at a weighted average interest rate of 4.92%. At June 30, 2022, we had $652.5 million of FHLB advances outstanding, excluding a net fair value adjustment of $1.2 million, at a weighted average interest rate of 2.17%.
At June 30, 2024, we had $1.54 billion of FHLB advances outstanding, excluding a net fair value adjustment of $211,000, at a weighted average interest rate of 5.07%. At June 30, 2023, we had $1.28 billion of FHLB advances outstanding, excluding a net fair value adjustment of $688,000, at a weighted average interest rate of 4.92%.
For a portion of our short-term brokered certificates of deposit we utilized interest rate contracts to effectively extend their duration and to fix their cost. 17 Table of Contents The following table sets forth the distribution of average deposits for the periods indicated and the weighted average nominal interest rates for each period on each category of deposits presented: For the Years Ended June 30, 2023 2022 2021 Average Balance Percent of Total Deposits Weighted Average Nominal Rate Average Balance Percent of Total Deposits Weighted Average Nominal Rate Average Balance Percent of Total Deposits Weighted Average Nominal Rate (Dollars In Thousands) Non-interest-bearing deposits $ 644,543 10.79 % — % $ 624,666 11.37 % — % $ 518,149 9.88 % — % Interest-bearing demand 2,349,802 39.33 1.73 2,067,200 37.64 0.25 1,726,190 32.92 0.41 Savings 896,651 15.00 0.37 1,088,971 19.83 0.11 1,066,794 20.35 0.31 Certificates of deposit 2,083,864 34.88 1.64 1,711,276 31.16 0.52 1,931,887 36.85 1.10 .
For a portion of our short-term brokered certificates of deposit we utilized interest rate contracts to effectively extend their duration and to fix their cost. 17 Table of Contents The following table sets forth the distribution of average deposits for the periods indicated and the weighted average nominal interest rates for each period on each category of deposits presented: For the Years Ended June 30, 2024 2023 2022 Average Balance Percent of Total Deposits Weighted Average Nominal Rate Average Balance Percent of Total Deposits Weighted Average Nominal Rate Average Balance Percent of Total Deposits Weighted Average Nominal Rate (Dollars In Thousands) Non-interest-bearing deposits $ 595,266 11.14 % — % $ 644,543 10.79 % — % $ 624,666 11.37 % — % Interest-bearing demand 2,308,893 43.19 2.91 2,349,802 39.33 1.73 2,067,200 37.64 0.25 Savings 662,981 12.40 0.50 896,651 15.00 0.37 1,088,971 19.83 0.11 Certificates of deposit 1,778,682 33.27 2.92 2,083,864 34.88 1.64 1,711,276 31.16 0.52 .
At June 30, 2023, multi-family mortgage loans totaled $2.76 billion, or 47.2% of our loan portfolio, while nonresidential mortgage loans totaled $968.6 million, or 16.6% of our loan portfolio. We originate commercial mortgage loans on a variety of multi-family and nonresidential property types, including loans on mixed-use properties which combine residential and commercial space.
At June 30, 2024, multi-family mortgage loans totaled $2.65 billion, or 46.0% of our loan portfolio, while nonresidential mortgage loans totaled $948.1 million, or 16.5% of our loan portfolio. We originate commercial mortgage loans on a variety of multi-family and nonresidential property types, including loans on mixed-use properties which combine residential and commercial space.
(2) For information on loans acquired in the MSB acquisition, see Note 3 to the audited consolidated financial statements. Additional information about our loans is presented in Note 5 to the audited consolidated financial statements. Loan Approval Procedures and Authority. Senior management recommends, and the Board of Directors approves, our lending policies and loan approval limits.
Additional information about our loans is presented in Note 4 to the audited consolidated financial statements. Loan Approval Procedures and Authority. Senior management recommends, and the Board of Directors approves, our lending policies and loan approval limits.
The key components of our business strategy are as follows: • Maintain Robust Capital and Liquidity Levels As demonstrated by the June 30, 2023 Tier 1 Leverage ratios of the Company and the Bank of 9.07% and 8.15%, respectively, we currently maintain, and plan to continue to maintain, capital levels in excess of regulatory minimums and internal capital adequacy guidelines.
The key components of our business strategy are as follows: • Maintain Robust Capital and Liquidity Levels As demonstrated by the June 30, 2024 Common Equity Tier 1 Capital ratios of the Company and the Bank of 14.79% and 13.65%, respectively, we currently maintain, and plan to continue to maintain, capital levels in excess of regulatory minimums and internal capital adequacy guidelines.
Total average deposits $ 5,974,860 100.00 % 1.31 % $ 5,492,113 100.00 % 0.28 % $ 5,243,020 100.00 % 0.60 % As of June 30, 2023 and 2022, the aggregate amount of certificates of deposit of $250,000 and over was $883.7 million and $897.4 million, respectively.
Total average deposits $ 5,345,822 100.00 % 2.29 % $ 5,974,860 100.00 % 1.31 % $ 5,492,113 100.00 % 0.28 % As of June 30, 2024 and 2023, the aggregate amount of certificates of deposit of $250,000 and over was $633.0 million and $883.7 million, respectively.
Depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria may elect to use the optional community bank leverage ratio framework, which requires maintaining a leverage ratio of greater than 9%, to satisfy the regulatory capital requirements, including the risk-based requirements.
The FDIC has the authority to establish higher capital requirements for individual institutions where deemed necessary. 22 Table of Contents Depository institutions and their holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria may elect to use the optional community bank leverage ratio framework, which requires maintaining a leverage ratio of greater than 9.0%, to satisfy the regulatory capital requirements, including the risk-based requirements.
The activities of New Jersey savings banks are subject to extensive regulation including restrictions or requirements with respect to loans to one borrower, dividends, permissible investments and lending activities, liquidity, transactions with affiliates and community reinvestment.
As a nonmember New Jersey savings bank with federally insured deposits, Kearny Bank is subject to extensive regulation by the NJDBI and the FDIC. The activities of New Jersey savings banks are subject to extensive regulation including restrictions or requirements with respect to loans to one borrower, dividends, permissible investments and lending activities, liquidity, transactions with affiliates and community reinvestment.
The decrease in the portfolio included a $38.1 million decrease in the fair value of the available for sale securities portfolio to an unrealized loss of $156.1 million at June 30, 2023 from an unrealized loss of $118.0 million at June 30, 2022.
The decrease in the portfolio included a $25.5 million increase in the fair value of the available for sale securities portfolio to an unrealized loss of $130.7 million at June 30, 2024 from an unrealized loss of $156.1 million at June 30, 2023.
The following table discloses our designation of certain loans as special mention or adversely classified during each of the two years presented: At June 30, 2023 2022 (In Thousands) Special mention $ 17,674 $ 12,740 Substandard 75,777 81,650 Doubtful 75 165 Total classified loans $ 93,526 $ 94,555 Individually Evaluated Loans .
The following table discloses our designation of certain loans as special mention or adversely classified during each of the two years presented: At June 30, 2024 2023 (In Thousands) Special mention $ 50,876 $ 17,674 Substandard 67,738 75,777 Doubtful 86 75 Total classified loans $ 118,700 $ 93,526 Individually Evaluated Loans .
It is funded primarily from funds deposited by financial institutions and proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members pursuant to policies and procedures established by the Board of Directors of the FHLB.
Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by financial institutions and proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members pursuant to policies and procedures established by the Board of Directors of the FHLB.
Such benefits include medical, dental, vision, long term disability benefits, AD&D and group life insurance, additional supplement plans, Health Advocacy and Employee Assistance programs, generous paid time off and the ability to participate in charitable events during work time.
We offer our employees competitive compensation including incentive programs, together with a comprehensive benefits package designed to enhance the employee experience. Such benefits include medical, dental, vision, long term disability benefits, AD&D and group life insurance, additional supplement plans, Health Advocacy and Employee Assistance programs, generous paid time off and the ability to participate in charitable events during work time.
By comparison, at June 30, 2022, our securities portfolio totaled $1.46 billion and comprised 18.9% of our total assets. Additional information about our investment securities at June 30, 2023 is presented in Note 4 to the audited consolidated financial statements.
Additional information about the ACL at June 30, 2024 and 2023 is presented in Note 5 to the audited consolidated financial statements. Investment Securities At June 30, 2024, our investment securities portfolio totaled $1.21 billion and comprised 15.7% of our total assets.
The balance of borrowings at June 30, 2023 included overnight line of credit borrowings from the FHLB totaling $125.0 million and unsecured overnight borrowings from other financial institutions totaling $100.0 million.
The balance of borrowings at June 30, 2024 included overnight line of credit borrowings from the FHLB totaling $175.0 million. There were no unsecured overnight borrowings from other financial institutions at June 30, 2024.
The following table shows the principal balances of portfolio loans originated, purchased, acquired and repaid during the periods indicated: For the Years Ended June 30, 2023 2022 2021 (In Thousands) Loan originations: (1) Commercial loans: Multi-family mortgage $ 602,206 $ 911,021 $ 256,223 Nonresidential mortgage 114,184 231,159 96,238 Commercial business 91,803 140,051 104,628 Construction 87,669 86,448 50,382 One- to four-family residential mortgage 197,839 415,602 553,194 Consumer loans: Home equity loans 26,014 18,634 15,804 Other consumer 1,095 1,167 1,227 Total loan originations 1,120,810 1,804,082 1,077,696 Loan purchases: Commercial loans: Multi-family mortgage — 55,847 — Nonresidential mortgage — — 21,351 Commercial business 46 146 251 One- to four-family residential mortgage 656 67,396 60,105 Total loan purchases 702 123,389 81,707 Loans acquired from MSB (2) — — 530,693 Loan sales: (1) Commercial business (655) (1,035) (44,450) Total loans sold (655) (1,035) (44,450) Loan repayments (706,860) (1,343,081) (1,311,576) Decrease due to other items (4,097) (5,797) (1,911) Net increase in loan portfolio $ 409,900 $ 577,558 $ 332,159 ________________________________________ (1) Excludes origination and sales of one- to four-family mortgage loans held for sale.
The following table shows the principal balances of portfolio loans originated, purchased, acquired and repaid during the periods indicated: For the Years Ended June 30, 2024 2023 2022 (In Thousands) Loan originations: (1) Commercial loans: Multi-family mortgage $ 23,742 $ 602,206 $ 911,021 Nonresidential mortgage 79,938 114,184 231,159 Commercial business 98,469 91,803 140,051 Construction 85,608 87,669 86,448 One- to four-family residential mortgage 131,529 197,839 415,602 Consumer loans: Home equity loans 18,011 26,014 18,634 Other consumer 4,007 1,095 1,167 Total loan originations 441,304 1,120,810 1,804,082 Loan purchases: Commercial loans: Multi-family mortgage — — 55,847 Commercial business — 46 146 One- to four-family residential mortgage 60,341 656 67,396 Total loan purchases 60,341 702 123,389 Loan sales: (1) Commercial business — (655) (1,035) Total loans sold — (655) (1,035) Loan repayments (593,756) (706,860) (1,343,081) Decrease due to other items (728) (4,097) (5,797) Net (decrease) increase in loan portfolio $ (92,839) $ 409,900 $ 577,558 ________________________________________ (1) Excludes origination and sales of one- to four-family mortgage loans held for sale.

… 70 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+16 added−21 removed81 unchanged
Biggest changeUnlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies. An economic downturn could, therefore, result in losses that materially and adversely affect our business. Inflationary pressures and rising prices may affect our results of operations and financial condition.
Biggest changeIf we experience an economic downturn or a prolonged economic recession occurs in the economy as a whole, borrowers will be less likely to repay their loans as scheduled. Unlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, pay our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet expenses, or to fulfill obligations such as repaying borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.
The composition and allocation of our investment portfolio has historically emphasized U.S. agency mortgage-backed securities and U.S. agency debentures. While such assets remain a significant component of our investment portfolio at June 30, 2023, prior enhancements to our investment policies, strategies and infrastructure have enabled us to diversify the composition and allocation of our securities portfolio.
The composition and allocation of our investment portfolio has historically emphasized U.S. agency mortgage-backed securities and U.S. agency debentures. While such assets remain a significant component of our investment portfolio at June 30, 2024, prior enhancements to our investment policies, strategies and infrastructure have enabled us to diversify the composition and allocation of our securities portfolio.
The inability to attract and retain key personnel could adversely affect our business. The successful execution of our business strategy is partially dependent on our ability to attract and retain experienced and qualified personnel. Failure to do so could adversely affect our strategy, client relationships and internal operations. Item 1B. Unresolved Staff Comments Not applicable.
The successful execution of our business strategy is partially dependent on our ability to attract and retain experienced and qualified personnel. Failure to do so could adversely affect our strategy, client relationships and internal operations. Item 1B. Unresolved Staff Comments Not applicable.
Congress that could further alter the regulation of the bank and non-bank financial services industries and the manner in which companies within the industry conduct business. In addition, federal and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied.
Congress that could further alter the regulation of the bank and non-bank financial services industries and the manner in which companies within the industry conduct business. 33 Table of Contents In addition, federal and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied.
Any of these events could have a material adverse effect on our financial condition and results of operations. 33 Table of Contents While our Board of Directors takes an active role in cybersecurity risk tolerance, we rely to a large degree on management and outside consultants in overseeing cybersecurity risk management.
Any of these events could have a material adverse effect on our financial condition and results of operations. While our Board of Directors takes an active role in cybersecurity risk tolerance, we rely to a large degree on management and outside consultants in overseeing cybersecurity risk management.
Additionally, the operation of the acquired branches may adversely affect our existing profitability, and we may not be able to achieve results in the future similar to those achieved by the existing banking business or manage growth resulting from the acquisition effectively.
Additionally, the operation of the acquired branches may adversely affect our existing profitability, and we may not be able to 34 Table of Contents achieve results in the future similar to those achieved by the existing banking business or manage growth resulting from the acquisition effectively.
Our allowance for credit losses on loans was 0.83% of total loans at June 30, 2023 and significant additions to our allowance could materially decrease our net income. 30 Table of Contents In addition, bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs.
Our allowance for credit losses on loans was 0.78% of total loans at June 30, 2024 and significant additions to our allowance could materially decrease our net income. In addition, bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs.
In general, the larger the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income.
When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income.
Additionally, at June 30, 2023, $1.23 billion, or 89.3% of our investment securities, are classified as available for sale and reported at fair value with unrealized gains or losses excluded from earnings and reported in other comprehensive income, which affects our reported equity.
Additionally, at June 30, 2024, $1.07 billion, or 88.8% of our investment securities, are classified as available for sale and reported at fair value with unrealized gains or losses excluded from earnings and reported in other comprehensive income, which affects our reported equity.
At June 30, 2023, $672.0 million, or 11.9% of our total deposits, consisted of public funds deposits from local government entities in the state of New Jersey, such as townships, counties and school districts. These deposits are collateralized by letters of credit from the FHLB or through the pledge of eligible investment securities.
At June 30, 2024, $531.5 million, or 10.3% of our total deposits, consisted of public funds deposits from local government entities in the state of New Jersey, such as townships, counties, school districts and charter schools. These deposits are collateralized by letters of credit from the FHLB or through the pledge of eligible investment securities.
If we are forced to pay higher rates on our public funds accounts to retain those funds, or if we are unable to retain such funds and we are forced to rely on other sources of funds for our lending and investment activities, such as borrowings from the FHLB, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our public funds deposits, which would adversely affect our net interest income.
If we are forced to pay higher rates on our public funds accounts to retain those funds, or if we are unable to retain such funds and we are forced to rely on other sources of funds for our lending and investment activities, such as borrowings from the FHLB, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our public funds deposits, which would adversely affect our net interest income. 32 Table of Contents Information Security Risks associated with system failures, service interruptions or other performance exceptions could negatively affect our earnings.
Beginning in March 2022, in response to rising inflation, the Federal Reserve Board’s Federal Open Market Committee systemically increased the target rate from 0.00% – 0.25% to 5.25% – 5.50% in July 2023. In addition, at June 30, 2023, short-term rates were meaningfully lower than long-term rates, which results in an inverted yield curve.
Beginning in March 2022, in response to rising inflation, the Federal Reserve Board’s Federal Open Market Committee systemically increased the target rate from 0.00% – 0.25% to 5.25% – 5.50% in July 2023. In addition, at June 30, 2024, the yield curve has remained inverted as short-term rates remain higher than long-term rates.
When interest rates rise, the demand for mortgage loans tends to fall and may reduce the number of loans we can originate for sale. Weak or deteriorating economic conditions also tend to reduce loan demand.
When interest rates rise, as they have in the current environment, the demand for mortgage loans tends to fall and may reduce the 29 Table of Contents number of loans we can originate for sale. Weak or deteriorating economic conditions also tend to reduce loan demand.
We are required to periodically test our goodwill and identifiable intangible assets for impairment. The impairment testing process considers a variety of factors, including the current market price of our common stock, the estimated net present value of our assets and liabilities, and information concerning the terminal valuation of similarly situated insured depository institutions.
The impairment testing process considers a variety of factors, including the current market price of our common stock, the estimated net present value of our assets and liabilities, and information concerning the terminal valuation of similarly situated insured depository institutions.
In addition, changes to regulatory requirements could increase our costs of regulatory compliance and may significantly affect the markets in which we do business, the markets for and value of our loans and investments, and our ongoing operations, costs and profitability. Business Issues We hold certain intangible assets, including goodwill, which could become impaired in the future.
In addition, changes to regulatory requirements could increase our costs of regulatory compliance and may significantly affect the markets in which we do business, the markets for and value of our loans and investments, and our ongoing operations, costs and profitability.
If an impairment loss is recorded, it will have little or no impact on the tangible book value of our common stock or our regulatory capital levels, but recognition of such an impairment loss could significantly restrict Kearny Bank’s ability to make dividend payments to Kearny Financial and therefore adversely impact our ability to pay dividends to stockholders. 34 Table of Contents We cannot guarantee that our allocation of capital to various alternatives, including stock repurchase plans, will enhance long-term stockholder value.
If an impairment loss is recorded, it will have little or no impact on the tangible book value of our common stock or our regulatory capital levels, but recognition of such an impairment loss could significantly restrict Kearny Bank’s ability to make dividend payments to Kearny Financial and therefore adversely impact our ability to pay dividends to stockholders.
Also, any sudden or prolonged market downturn in the U.S. or abroad as a result of the above factors or otherwise could result in a decline in revenues and adversely affect our results of operations and financial condition, including capital and liquidity levels. 29 Table of Contents Our inability to achieve profitability on new branches may negatively affect our earnings.
Also, any sudden or prolonged market downturn in the U.S. or abroad as a result of the above factors or otherwise could result in a decline in revenues and adversely affect our results of operations and financial condition, including capital and liquidity levels.
Any decline in the credit quality of these securities exposes us to the risk that the market value of the securities could decrease which may require us to write down their value and could lead to a possible default in payment. Source of Funds Our reliance on wholesale funding could adversely affect our liquidity and operating results.
Any decline in the credit quality of these securities exposes us to the risk that the market value of the securities could decrease which may require us to write down their value and could lead to a possible default in payment.
As of June 30, 2023, our securities portfolio totaled $1.37 billion, or 17.0% of our total assets. Investment securities typically have lower yields than loans. For the year ended June 30, 2023, the weighted average yield of our investment securities portfolio was 3.55%, as compared to 4.00% for our loan portfolio.
As of June 30, 2024, our securities portfolio totaled $1.21 billion, or 15.7% of our total assets. Investment securities typically have lower yields than loans. For the year ended June 30, 2024, the weighted average yield of our investment securities portfolio was 4.38%, as compared to 4.45% for our loan portfolio.
These changes may require us to invest significant management attention and resources to make any necessary changes to operations to comply and could have an adverse effect on our business, financial condition and results of operations. Changes to tax laws and regulations could adversely affect our financial condition or results of operations.
These changes may require us to invest significant management attention and resources to make any necessary changes to operations to comply and could have an adverse effect on our business, financial condition and results of operations. The performance of our multi-family loans could be adversely impacted by regulation.
At June 30, 2023, we had investment securities with fair values of approximately $1.36 billion on which we had approximately $171.7 million in gross unrealized losses and $274,000 of gross unrealized gains.
At June 30, 2024, we had investment securities with fair values of approximately $1.19 billion on which we had approximately $150.1 million in gross unrealized losses and $2.9 million of gross unrealized gains.
In addition, changes in interest rates can affect the average life of loans and securities. For example, an increase in interest rates generally results in decreased prepayments of loans and mortgage-backed securities, as borrowers are less likely to refinance their debt.
In addition, changes in interest rates can affect the average life of loans and securities. For example, a reduction in interest rates generally results in increased prepayments of loans and mortgage-backed securities, as borrowers refinance their debt in order to reduce their borrowing cost.
Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on our financial condition and results of operations.
Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on our financial condition and results of operations. Our commercial lending exposes us to additional risk. Over the past several years, we have increased our focus on commercial lending.
Our business plan calls for us to execute a variety of strategies to allocate and deploy any excess capital including, but not limited to, continued organic balance sheet growth and diversification, implementation of stock repurchase plans and payment of regular cash dividends.
We cannot guarantee that our allocation of capital to various alternatives will enhance long-term stockholder value. Our business plan calls for us to execute a variety of strategies to allocate and deploy any excess capital including, but not limited to, continued organic balance sheet growth and diversification, and payment of regular cash dividends.
Inflation rose sharply at the end of 2021 and has remained at an elevated level through 2022 and 2023. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
A component of our business strategy is to sell a portion of residential mortgage loans originated into the secondary market, earning non-interest income in the form of gains on sale.
Income from secondary mortgage market operations is volatile, and we may incur losses with respect to our secondary mortgage market operations that could negatively affect our earnings. A component of our business strategy is to sell a portion of residential mortgage loans originated into the secondary market, earning non-interest income in the form of gains on sale.
In 2006, the FDIC, the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “Guidance”).
If our regulators were to curtail our commercial real estate lending activities, our earnings and/or dividend paying capacity could be adversely affected. In 2006, the FDIC, the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “Guidance”).
The actions that we take in response to competition may adversely affect its results of operations and financial condition. These consequences could be exacerbated if we are not successful in introducing new products and other services, achieving market acceptance of its products and other services, developing and maintaining a strong client base, or prudently managing expenses.
These consequences could be exacerbated if we are not successful in introducing new products and other services, achieving market acceptance of its products and other services, developing and maintaining a strong client base, or prudently managing expenses. 31 Table of Contents Funding Our reliance on wholesale funding could adversely affect our liquidity and operating results.
Among other sources of funds, we rely on wholesale funding, including short- and long-term borrowings, brokered deposits and non-brokered deposits acquired through listing services, to provide funds with which to make loans, purchase investment securities and provide for other liquidity needs.
Among other sources of funds, we rely on wholesale funding, including short- and long-term borrowings and brokered deposits, to provide funds with which to make loans, purchase investment securities and provide for other liquidity needs. On June 30, 2024, wholesale funding totaled $2.12 billion, or approximately 27.6% of total assets.
Consequently, declines in the fair value of these instruments resulting from changes in market interest rates have, and may continue to, adversely affect stockholders’ equity. If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings will decrease.
Consequently, declines in the fair value of these instruments resulting from changes in market interest rates have, and may continue to, adversely affect stockholders’ equity.
Information Security Risks associated with system failures, service interruptions or other performance exceptions could negatively affect our earnings. Information technology systems are critical to our business. We use various technology systems to manage our client relationships, general ledger, securities investments, deposits, and loans.
Information technology systems are critical to our business. We use various technology systems to manage our client relationships, general ledger, securities investments, deposits, and loans.
An economic downturn or prolonged recession may result in the deterioration of the quality of our loan portfolio and reduce our level of deposits, which in turn would hurt its business. If we experience an economic downturn or a prolonged economic recession occurs in the economy as a whole, borrowers will be less likely to repay their loans as scheduled.
An economic downturn or prolonged recession may result in the deterioration of the 30 Table of Contents quality of our loan portfolio and reduce our level of deposits, which in turn would hurt its business.
For the year ended June 30, 2023, gains attributable to the sale of residential mortgage loans totaled $760,000, or approximately 27.6% of our non-interest income, a decline of $1.7 million from $2.4 million for the year ended June 30, 2022.
For the year ended June 30, 2024, gains attributable to the sale of residential mortgage loans totaled $602,000, a decline of $158,000 from $760,000 for the year ended June 30, 2023.
Asset Quality and Interest Rate Changes in interest rates or the shape of the yield curve may adversely affect our profitability and financial condition. We derive our income mainly from the difference or spread between the interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities.
Interest Rate Our business and financial performance are impacted by market interest rates and movements in those rates. We derive our income mainly from the difference or spread between the interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the larger the spread, the more we earn.
Accordingly, we could suffer losses as a result of our failure to properly anticipate and manage these risks. 35 Table of Contents We could be adversely affected by failure in our internal controls.
Accordingly, we could suffer losses as a result of our failure to properly anticipate and manage these risks. We could be adversely affected by failure in our internal controls. A failure in our internal controls could have a significant negative impact not only on our earnings, but also on the perception that clients, regulators and investors may have of us.
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. Our stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which has and could continue to adversely affect our results of operations and financial condition. Severe weather could harm our business.
Our level of non-owner occupied commercial real estate equaled 553% of Bank total risk-based capital at June 30, 2023, however our commercial real estate loan portfolio increased by only 31% during the preceding 36 months. 31 Table of Contents Income from secondary mortgage market operations is volatile, and we may incur losses with respect to our secondary mortgage market operations that could negatively affect our earnings.
Our level of non-owner occupied commercial real estate equaled 537% of Bank total risk-based capital at June 30, 2024, however our commercial real estate loan portfolio increased by only 19% during the preceding 36 months.
A failure in our internal controls could have a significant negative impact not only on our earnings, but also on the perception that clients, regulators and investors may have of us. We continue to devote a significant amount of effort, time and resources to continually strengthening our controls and ensuring compliance with complex accounting standards and banking regulations.
We continue to devote a significant amount of effort, time and resources to continually strengthening our controls and ensuring compliance with complex accounting standards and banking regulations. The inability to attract and retain key personnel could adversely affect our business.
Our net interest spread and net interest margin are at risk of being reduced due to potential increases in our cost of funds that may outpace any increases in our yield on interest-earnings assets. Interest rates also affect how much money we lend. For example, when interest rates rise, the cost of borrowing increases and loan originations tend to decrease.
As a result, a flattening or an inversion of the yield curve is likely to have a negative impact on our net interest income. Interest rates also affect how much money we lend. For example, when interest rates rise, the cost of borrowing increases and loan originations tend to decrease.
Not being able to maintain or replace those funds as they mature would adversely affect our liquidity. Paying higher interest rates to maintain or replace funding would adversely affect our net interest margin and operating results.
In the future, this funding may not be readily replaced as it matures, or we may have to pay a higher rate of interest to maintain it. Not being able to maintain or replace those funds as they mature would adversely affect our liquidity.
Moreover, given that we actively manage our investment securities portfolio classified as available for sale, we may sell securities which could result in a realized loss, thereby reducing our net income. Our commercial lending exposes us to additional risk. Over the past several years, we have increased our focus on commercial lending.
Moreover, given that we actively manage our investment securities portfolio classified as available for sale, we may sell securities which could result in a realized loss, thereby reducing our net income. 28 Table of Contents Asset Quality If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings will decrease.
If these assets are considered to be either partially or fully impaired in the future, our earnings would decrease. At June 30, 2023, we had approximately $213.4 million in intangible assets on our balance sheet comprising $210.9 million of goodwill and $2.5 million of core deposit intangibles.
At June 30, 2024, we had approximately $115.5 million in intangible assets on our balance sheet, comprised of $113.5 million of goodwill and $1.9 million of core deposit intangibles. We are required to periodically test our goodwill and identifiable intangible assets for impairment.
The occurrence of any system failures, service interruptions or other performance exceptions could damage our reputation and result in a loss of clients and business thereby subjecting us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.
If these vendors encounter any of these issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
Removed
Further, if we were unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, which have come under greater scrutiny in light of recent bank failures, it may have a material adverse effect on our financial condition and results of operations.
Added
Our net interest spread and net interest margin have been and may in the future be reduced by potential increases in our cost of funds that may outpace any increases in our yield on interest-earnings assets.
Removed
On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations.
Added
In addition, it may take longer for our assets to reprice to adjust to a new rate environment because fixed rate loans do not fluctuate with interest rate changes and adjustable rate loans often have a specified initial fixed rate period before reset.
Removed
On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California Department of Financial Protection and Innovation (the “DFPI”), on March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services and on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the DFPI, and in each case the FDIC was appointed receiver for the failed institution.
Added
An economic downturn could, therefore, result in losses that materially and adversely affect our business. Inflation has had, and may continue to have a negative effect on our results of operations and financial condition. Inflation rose sharply at the end of 2021 and has remained at an elevated level through the first half of calendar 2024.
Removed
These banks had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits. These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.
Added
The actions that we take in response to competition may adversely affect its results of operations and financial condition.
Removed
These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. 28 Table of Contents If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on our financial condition and results of operations.
Added
Paying higher interest rates to maintain or replace funding would adversely affect our net interest margin and operating results. A lack of liquidity could adversely affect our financial condition and results of operations and result in regulatory limits being placed on the Company. Liquidity is essential to our business.
Removed
We must maintain sufficient funds to respond to the needs of depositors and borrowers. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also receive funds from loan repayments, investment maturities and income on other interest-earning assets.
Added
We rely on our ability to gather deposits, make investments and effectively manage the repayment and maturity schedules of loans to ensure that there is adequate liquidity to fund our operations and pay our obligations.
Removed
While we emphasize the generation of low-cost core deposits as a source of funding, there is strong competition for such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff.
Added
An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity. Our most important source of funds is deposits.
Removed
Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of New York advances, federal funds purchased and brokered certificates of deposit.
Added
Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff, which are strongly influenced by external factors such as changes in interest rates, local and national economic conditions, the availability and attractiveness of alternative investments, and perceptions of the stability of the financial services industry generally and of our institution specifically.
Removed
Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.
Added
Further, the demand for deposits may be reduced due to a variety of factors such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, the monetary policy of the FRB, or regulatory actions that decrease customer access to particular products.
Removed
Our financial flexibility would be severely constrained if we were unable to maintain our access to funding or if adequate financing were not available at acceptable interest rates. Further, if we were required to rely more heavily on more expensive funding sources to support liquidity, our revenues may not increase proportionately to cover our increased costs.
Added
If customers move money out of bank deposits and into other investments such as money market funds, we would lose a relatively low-cost source of funds, which would increase our funding costs and reduce net interest income. Any changes made to the rates offered on deposits to remain competitive with other financial institutions may also adversely affect profitability and liquidity.
Removed
In this case, our operating margins and profitability would be adversely affected. If alternative funding sources were no longer available to us, we may need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets.
Added
Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities and borrowings from the FHLB. We have the capacity to borrow additional funds from the FHLB as well as from the FRB without pledging additional collateral, and via unsecured overnight borrowings from other financial institutions.
Removed
As of June 30, 2023, we had a net unrealized loss of $156.1 million on our available-for-sale investment securities portfolio as a result of the rising interest rate environment. Our investment securities totaled $1.37 billion, or 17.0% of total assets, at June 30, 2023. The details of this portfolio are included in Note 4 to the consolidated financial statements.
Added
Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable, could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets, changes in the value of investment securities, negative views and expectations about the prospects for the financial services industry, a decrease in our business activity as a result of a downturn in markets, or adverse regulatory actions against us.
Removed
We have expanded our presence throughout our market area and we intend to pursue further expansion through de novo branching or the purchase of branches from other financial institutions. The profitability of our expansion strategy will depend on whether the income that we generate from the new branches will offset the increased expenses resulting from operating these branches.
Added
We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations. These third party vendors are sources of operational and informational security risk to us, including risks associated with operational errors, information system interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information.
Removed
We expect that it may take a period of time before these branches can become profitable, especially in areas in which we do not have an established presence. During this period, the expense of operating these branches may negatively affect our net income.
Added
Multi-family loans generally involve risk of legislation and government regulations involving rent control and rent stabilization, which are outside the control of the borrower or the Company, and could impair the value of the collateral for the loan or the future cash flows of such properties.
Removed
If our regulators were to curtail our commercial real estate lending activities, our earnings, dividend paying capacity and/or ability to repurchase shares could be adversely affected.
Added
As a result of these restrictions, it is possible that rental income on certain rent-regulated properties might not rise sufficiently over time to satisfy increases in the loan rate at repricing or increases in overhead expenses (e.g., utilities, taxes, etc.). Changes to tax laws and regulations could adversely affect our financial condition or results of operations.
Removed
On June 30, 2023, wholesale funding totaled $2.15 billion, or approximately 26.6% of total assets. 32 Table of Contents In the future, this funding may not be readily replaced as it matures, or we may have to pay a higher rate of interest to maintain it.
Added
Business Issues We hold certain intangible assets, including goodwill, which have been partially impaired and could become further impaired in the future. If these assets are further or fully impaired in the future, our earnings would decrease.
Removed
In addition, we outsource a majority of our data processing to certain third-party service providers. If these service providers encounter difficulties, or if we have difficulty communicating with them, our ability to timely and accurately process and account for transactions could be adversely affected.
Removed
On August 1, 2022, we announced that our Board authorized a new stock repurchase plan to acquire up to 4,000,000 shares of the Company’s outstanding common stock.
Removed
Repurchases are made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance.
Removed
The Inflation Reduction Act of 2022, which was signed into law on August 16, 2022, contains a number of changes to U.S. federal tax laws.

… 1 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeAt June 30, 2023, our net investment in property and equipment totaled $48.3 million. Additional information regarding our properties as of June 30, 2023, is presented in Note 8 to the audited consolidated financial statements.
Biggest changeAt June 30, 2024, our net investment in property and equipment totaled $44.9 million. Additional information regarding our properties as of June 30, 2024, is presented in Note 7 to the audited consolidated financial statements.
At June 30, 2023, the Company operated 43 branch offices located in Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset and Union counties, New Jersey and Kings and Richmond counties, New York. At June 30, 2023, 18 of our branch offices are leased with remaining terms between seven months and nine years.
At June 30, 2024, the Company operated 43 branch offices located in Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset and Union counties, New Jersey and Kings and Richmond counties, New York. At June 30, 2024, 18 of our branch offices are leased with remaining terms between seven months and nine years.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeAt June 30, 2023, there were no lawsuits pending or known to be contemplated against us that would be expected to have a material effect on operations or income. Item 4. Mine Safety Disclosures Not applicable. 36 Table of Contents PART II
Biggest changeAt June 30, 2024, there were no lawsuits pending or known to be contemplated against us that would be expected to have a material effect on operations or income. Item 4. Mine Safety Disclosures Not applicable. 36 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+2 added−3 removed5 unchanged
Biggest changeThis current plan has no expiration date. 37 Table of Contents Stock Performance Graph. The following graph compares the cumulative total shareholder return on the Company’s common stock with the cumulative total return on the NASDAQ Composite Index and a peer group of the S&P U.S.
Biggest changeThe following graph compares the cumulative total shareholder return on the Company’s common stock with the cumulative total return on the NASDAQ Composite Index and a peer group of the S&P U.S. SmallCap Banks Index, in each case assuming an investment of $100 as of June 30, 2019. Total return assumes the reinvestment of all dividends.
SmallCap Banks Index 100 92 69 116 107 87 The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. The S&P U.S. SmallCap Banks Index includes all major exchange (NYSE, NYSE American and NASDAQ) traded banks under $15 billion in market capitalization in S&P’s coverage universe.
SmallCap Banks Index 100 75 126 116 95 116 The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. The S&P U.S. SmallCap Banks Index includes all major exchange (NYSE, NYSE American and NASDAQ) traded banks under $15 billion in market capitalization in S&P’s coverage universe.
For discussion of corporate and regulatory limitations applicable to the payment of dividends, see “Item 1. Business-Regulation.” As of August 18, 2023, there were 4,207 registered holders of record of the Company’s common stock.
For discussion of corporate and regulatory limitations applicable to the payment of dividends, see “Item 1. Business-Regulation.” As of August 19, 2024, there were 4,040 registered holders of record of the Company’s common stock.
Removed
Set forth below is information regarding the Company’s stock repurchases during the fourth quarter of the fiscal year ended June 30, 2023.
Added
The Company did not repurchase any shares of its common stock during the fourth quarter of the fiscal year ended June 30, 2024. 37 Table of Contents Stock Performance Graph.
Removed
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs April 1-30, 2023 596,479 $ 7.91 596,479 1,720,774 May 1-31, 2023 216,027 $ 7.62 216,027 1,504,747 June 1-30, 2023 — $ — — 1,504,747 Total 812,506 $ 7.83 812,506 1,504,747 On August 1, 2022, the Company announced the authorization of a new stock repurchase plan to repurchase up to 4,000,000 shares.
Added
At June 30, 2019 2020 2021 2022 2023 2024 Kearny Financial Corp. $ 100 $ 63 $ 95 $ 92 $ 61 $ 57 NASDAQ Composite Index 100 127 184 141 178 231 S&P U.S.
Removed
SmallCap Banks Index, in each case assuming an investment of $100 as of June 30, 2018. Total return assumes the reinvestment of all dividends. At June 30, 2018 2019 2020 2021 2022 2023 Kearny Financial Corp. $ 100 $ 102 $ 64 $ 97 $ 93 $ 62 NASDAQ Composite Index 100 108 137 199 152 192 S&P U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

69 edited+15 added−15 removed27 unchanged
Biggest changeTo quantify the impact of a potential goodwill impairment charge at June 30, 2023, the impact of a five percent impairment charge on goodwill would result in a reduction in pre-tax income of approximately $10.5 million. 40 Table of Contents Financial Overview The following financial information and other data in this section are derived from our audited consolidated financial statements and should be read together therewith: At June 30, 2023 2022 2021 (In Thousands) Balance Sheet Data: Cash and equivalents $ 70,515 $ 101,615 $ 67,855 Assets 8,064,815 7,719,883 7,283,735 Net loans receivable 5,780,687 5,370,787 4,793,229 Investment securities available for sale 1,227,729 1,344,093 1,676,864 Investment securities held to maturity 146,465 118,291 38,138 Goodwill 210,895 210,895 210,895 Deposits 5,629,183 5,862,256 5,485,306 Borrowings 1,506,812 901,337 685,876 Stockholders' equity 869,284 894,000 1,042,944 For the Years Ended June 30, 2023 2022 2021 (Dollars in Thousands, Except Per Share Amounts) Summary of Operations: Interest income $ 293,724 $ 226,272 $ 238,085 Interest expense 117,859 29,669 49,851 Net interest income 175,865 196,603 188,234 Provision for (reversal of) credit losses 2,486 (7,518) (1,121) Net interest income after provision for (reversal of) credit losses 173,379 204,121 189,355 Non-interest income 2,751 13,934 21,026 Non-interest expenses 123,751 125,708 125,885 Income before taxes 52,379 92,347 84,496 Income tax expense 11,568 24,800 21,263 Net income $ 40,811 $ 67,547 $ 63,233 Per Share Data: Net income per share - Basic and diluted $ 0.63 $ 0.95 $ 0.77 Weighted average number of common shares outstanding (in thousands): Basic 64,804 70,911 82,387 Diluted 64,804 70,933 82,391 Cash dividends per share $ 0.44 $ 0.43 $ 0.35 Dividend payout ratio (1) 70.2 % 45.1 % 45.1 % ________________________________________ (1) Represents cash dividends declared divided by net income. 41 Table of Contents At or For the Years Ended June 30, 2023 2022 2021 Performance ratios: Return on average assets (ratio of net income to average total assets) 0.51 % 0.93 % 0.86 % Return on average equity (ratio of net income to average total equity) 4.66 % 6.86 % 5.79 % Return on average tangible equity (ratio of net income to average tangible equity) (1) 6.17 % 8.77 % 7.22 % Net interest rate spread 2.09 % 2.86 % 2.61 % Net interest margin 2.34 % 2.94 % 2.75 % Average interest-earning assets to average interest-bearing liabilities 115.66 % 118.93 % 118.63 % Efficiency ratio (2) 69.28 % 59.71 % 60.16 % Non-interest expense to average assets 1.53 % 1.73 % 1.72 % Asset Quality Ratios: Non-performing loans to total loans 0.73 % 1.30 % 1.64 % Non-performing assets to total assets 0.69 % 1.19 % 1.10 % Net charge-offs to average loans outstanding 0.01 % 0.07 % 0.03 % Allowance for credit losses to total loans 0.83 % 0.87 % 1.19 % Allowance for credit losses to non-performing loans 114.33 % 66.92 % 72.92 % Capital Ratios: Average equity to average assets 10.85 % 13.52 % 14.88 % Equity to assets at period end 10.78 % 11.58 % 14.32 % Tangible equity to tangible assets at period end (3) 8.35 % 9.06 % 11.72 % ________________________________________ (1) Average tangible equity equals average total stockholders’ equity reduced by average goodwill and average core deposit intangible assets.
Biggest changeIn the future, changes in projected future cash flows, discount rate assumption, or market estimates may result in further impairment of goodwill. 40 Table of Contents Financial Overview The following financial information and other data in this section are derived from our audited consolidated financial statements and should be read together therewith: At June 30, 2024 2023 2022 (In Thousands) Balance Sheet Data: Cash and equivalents $ 63,864 $ 70,515 $ 101,615 Assets 7,683,461 8,064,815 7,719,883 Net loans receivable 5,687,848 5,780,687 5,370,787 Investment securities available for sale 1,072,833 1,227,729 1,344,093 Investment securities held to maturity 135,742 146,465 118,291 Goodwill 113,525 210,895 210,895 Deposits 5,158,123 5,629,183 5,862,256 Borrowings 1,709,789 1,506,812 901,337 Stockholders' equity 753,571 869,284 894,000 For the Years Ended June 30, 2024 2023 2022 (Dollars in Thousands, Except Per Share Amounts) Summary of Operations: Interest income $ 328,868 $ 293,724 $ 226,272 Interest expense 186,274 117,859 29,669 Net interest income 142,594 175,865 196,603 Provision for (reversal of) credit losses 6,226 2,486 (7,518) Net interest income after provision for (reversal of) credit losses 136,368 173,379 204,121 Non-interest income (1,993) 2,751 13,934 Non-interest expenses 215,151 123,751 125,708 (Loss) income before taxes (80,776) 52,379 92,347 Income tax expense 5,891 11,568 24,800 Net (loss) income $ (86,667) $ 40,811 $ 67,547 Per Share Data: Net (loss) income per share - Basic and diluted $ (1.39) $ 0.63 $ 0.95 Weighted average number of common shares outstanding (in thousands): Basic 62,444 64,804 70,911 Diluted 62,444 64,804 70,933 Cash dividends per share $ 0.44 $ 0.44 $ 0.43 Dividend payout ratio (1) (31.9) % 70.2 % 45.1 % ________________________________________ (1) Represents cash dividends declared divided by net income. 41 Table of Contents At or For the Years Ended June 30, 2024 2023 2022 Performance Ratios: Return on average assets (ratio of net income to average total assets) (1.10) % 0.51 % 0.93 % Return on average equity (ratio of net income to average total equity) (10.51) % 4.66 % 6.86 % Return on average tangible equity (ratio of net income to average tangible equity) (1) (13.64) % 6.17 % 8.77 % Net interest rate spread 1.57 % 2.09 % 2.86 % Net interest margin 1.94 % 2.34 % 2.94 % Average interest-earning assets to average interest-bearing liabilities 114.73 % 115.66 % 118.93 % Efficiency ratio (2) 153.02 % 69.28 % 59.71 % Non-interest expense to average assets 2.73 % 1.53 % 1.73 % Asset Quality Ratios: Non-performing loans to total loans 0.70 % 0.73 % 1.30 % Non-performing assets to total assets 0.52 % 0.69 % 1.19 % Net charge-offs to average loans outstanding 0.17 % 0.01 % 0.07 % Allowance for credit losses to total loans 0.78 % 0.83 % 0.87 % Allowance for credit losses to non-performing loans 112.68 % 114.33 % 66.92 % Capital Ratios: Average equity to average assets 10.46 % 10.85 % 13.52 % Equity to assets at period end 9.81 % 10.78 % 11.58 % Tangible equity to tangible assets at period end (3) 8.43 % 8.35 % 9.06 % ________________________________________ (1) Average tangible equity equals average total stockholders’ equity reduced by average goodwill and average core deposit intangible assets.
Business” of this Annual Report on Form 10-K, as well as in Note 10 to the audited consolidated financial statements. Borrowings.
Business” of this Annual Report on Form 10-K, as well as in Note 9 to the audited consolidated financial statements. Borrowings.
In assessing impairment, we have the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount.
In assessing impairment, we have the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of our single reporting unit is less than its carrying amount.
(2) Efficiency ratio equals non-interest expense divided by the sum of net interest income and non-interest income. (3) Tangible equity equals total stockholders’ equity reduced by goodwill and core deposit intangible assets. Comparison of Financial Condition at June 30, 2023 and June 30, 2022 Executive Summary.
(2) Efficiency ratio equals non-interest expense divided by the sum of net interest income and non-interest income. (3) Tangible equity equals total stockholders’ equity reduced by goodwill and core deposit intangible assets. Comparison of Financial Condition at June 30, 2024 and June 30, 2023 Executive Summary.
Additional information about our borrowings at June 30, 2023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 11 to the audited consolidated financial statements. Other Liabilities.
Additional information about our borrowings at June 30, 2024 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 10 to the audited consolidated financial statements. Other Liabilities.
In addition to the commitments noted above, we are party to standby letters of credit totaling approximately $115,000 at June 30, 2023 through which we guarantee certain specific business obligations of our commercial customers. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
In addition to the commitments noted above, we are party to standby letters of credit totaling approximately $160,000 at June 30, 2024 through which we guarantee certain specific business obligations of our commercial customers. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Additional information regarding the allowance for credit losses and the associated provision recognized during the year ended June 30, 2023 is presented under “Item 1, Business” on this Annual Report on Form 10-K as well as in Note 1 and Note 6 to the audited consolidated financial statements as well as the Comparison of Financial Condition at June 30, 2023.
Additional information regarding the allowance for credit losses and the associated provision recognized during the year ended June 30, 2024 is presented under “Item 1, Business” on this Annual Report on Form 10-K as well as in Note 1 and Note 5 to the audited consolidated financial statements as well as the Comparison of Financial Condition at June 30, 2024.
Comparison of Operating Results for the Years Ended June 30, 2022 and June 30, 2021 A comparison of our operating results for the years ended June 30, 2022 and June 30, 2021 can be found in our Annual Report on Form 10-K for the year ended June 30, 2022, filed with the SEC on August 26, 2022. 48 Table of Contents Liquidity and Commitments Liquidity, represented by cash and cash equivalents, is a product of operating, investing and financing activities.
Comparison of Operating Results for the Years Ended June 30, 2023 and June 30, 2022 A comparison of our operating results for the years ended June 30, 2023 and June 30, 2022 can be found in our Annual Report on Form 10-K for the year ended June 30, 2023, filed with the SEC on August 25, 2023. 48 Table of Contents Liquidity and Commitments Liquidity, represented by cash and cash equivalents, is a product of operating, investing and financing activities.
For additional information regarding our outstanding lending commitments at June 30, 2023, see Note 17 to the audited consolidated financial statements. Capital Consistent with our goals to operate as a sound and profitable financial organization, Kearny Financial and Kearny Bank actively seek to maintain our well capitalized status in accordance with regulatory standards.
For additional information regarding our outstanding lending commitments at June 30, 2024, see Note 16 to the audited consolidated financial statements. Capital Consistent with our goals to operate as a sound and profitable financial organization, Kearny Financial and Kearny Bank actively seek to maintain our well capitalized status in accordance with regulatory standards.
As of June 30, 2023, Kearny Financial and Kearny Bank exceeded all capital requirements of the federal banking regulators and were considered well capitalized.
As of June 30, 2024, Kearny Financial and Kearny Bank exceeded all capital requirements of the federal banking regulators and were considered well capitalized.
At June 30, 2023, the most severe historical loss rate for multi-family and nonresidential mortgages loans was 1.72%. Management performed a hypothetical sensitivity analysis to understand the impact of a change in a key input on our ACL.
At June 30, 2024, the most severe historical loss rate for multi-family and nonresidential mortgages loans was 1.69%. Management performed a hypothetical sensitivity analysis to understand the impact of a change in a key input on our ACL.
As of the same date, we had $125.0 million outstanding via our overnight line of credit with the FHLB.
As of the same date, we had $175.0 million outstanding via our overnight line of credit with the FHLB.
See Note 1 to our audited consolidated financial statements for a detailed discussion of our accounting policies and methodologies for establishing the ACL. Management believes the following information may enable investors to better understand the changes in our ACL. Our ACL totaled $48.7 million and $47.1 million at June 30, 2023 and 2022, respectively.
See Note 1 to our audited consolidated financial statements for a detailed discussion of our accounting policies and methodologies for establishing the ACL. Management believes the following information may enable investors to better understand the changes in our ACL. Our ACL totaled $44.9 million and $48.7 million at June 30, 2024 and 2023, respectively.
Business” of this Annual Report on Form 10-K, as well as in Note 4 to the audited consolidated financial statements. Loans Held-for-Sale. Loans held-for-sale totaled $9.6 million at June 30, 2023 as compared to $28.9 million at June 30, 2022 and are reported separately from the balance of net loans receivable.
Business” of this Annual Report on Form 10-K, as well as in Note 3 to the audited consolidated financial statements. Loans Held-for-Sale. Loans held-for-sale totaled $6.0 million at June 30, 2024 as compared to $9.6 million at June 30, 2023 and are reported separately from the balance of net loans receivable.
At June 30, 2023, outstanding loan commitments relating to loans held in portfolio totaled $251.2 million compared to $510.5 million at June 30, 2022. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
At June 30, 2024, outstanding loan commitments relating to loans held in portfolio totaled $280.9 million compared to $251.2 million at June 30, 2023. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
At June 30, 2023, if the four-quarter national unemployment rate forecast had been 9% rather than an average of approximately 4.0%, our ACL as a percent of total loans would have increased 33 basis points from 0.83% to 1.16%. This sensitivity analysis includes the impact to both the quantitative and qualitative components of our ACL.
At June 30, 2024, if the four-quarter national unemployment rate forecast had been 9% rather than an average of approximately 4.0%, our ACL as a percent of total loans would have increased 37 basis points from 0.78% to 1.15%. This sensitivity analysis includes the impact to both the quantitative and qualitative components of our ACL.
Liquidity, at June 30, 2023, included $70.5 million of short-term cash and equivalents and $1.23 billion of investment securities available for sale which can readily be sold or pledged as collateral, if necessary. In addition, we have the capacity to borrow additional funds from the FHLB, FRB or via unsecured overnight borrowings.
Liquidity, at June 30, 2024, included $63.9 million of short-term cash and equivalents and $1.07 billion of investment securities available for sale which can readily be sold or pledged as collateral, if necessary. In addition, we have the capacity to borrow additional funds from the FHLB, FRB or via unsecured overnight borrowings.
(4) Includes average balances of non-interest-bearing deposits of $644.5 million, $624.7 million and $518.1 million for the years ended June 30, 2023, 2022 and 2021, respectively. (5) Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(4) Includes average balances of non-interest-bearing deposits of $595.3 million, $644.5 million and $624.7 million for the years ended June 30, 2024, 2023 and 2022, respectively. (5) Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
Additional information about the allowance for credit losses at June 30, 2023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 1 and Note 6 to the audited consolidated financial statements. Other Assets.
Additional information about the allowance for credit losses at June 30, 2024 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 1 and Note 5 to the audited consolidated financial statements. 43 Table of Contents Other Assets.
Excluding collateralized deposits of state and local governments, and deposits of the Bank’s wholly-owned subsidiary and holding company, uninsured deposits totaled $710.4 million, or 12.6% of total deposits, at June 30, 2023 compared to $792.1 million, or 13.5% of total deposits, at June 30, 2022. Additional information about our deposits at June 30, 2023 is presented under “Item 1.
Excluding collateralized deposits of state and local governments, and deposits of the Bank’s wholly-owned subsidiary and holding company, uninsured deposits totaled $764.4 million, or 14.8% of total deposits, at June 30, 2024 compared to $710.4 million, or 12.6% of total deposits, at June 30, 2023. Additional information about our deposits at June 30, 2024 is presented under “Item 1.
Changes in managements’ judgement of qualitative loss factors could result in a significant change to the ACL. As described in Note 1, qualitative loss factors are applied to each portfolio segment with the amounts judgmentally determined by the relative risk to the most severe loss periods identified in the historical loan charge-offs of a peer group of similar-sized regional banks.
As described in Note 1, qualitative loss factors are applied to each portfolio segment with the amounts judgmentally determined by the relative risk to the most severe loss periods identified in the historical loan charge-offs of a peer group of similar-sized regional banks.
The balance of other liabilities, including advance payments by borrowers for taxes and other miscellaneous liabilities, decreased by $2.8 million to $59.5 million at June 30, 2023 from $62.3 million at June 30, 2022. The change in the balance of other liabilities generally reflected normal operating fluctuations within these line items. Stockholders’ Equity.
The balance of other liabilities, including advance payments by borrowers for taxes and other miscellaneous liabilities, increased by $2.4 million to $62.0 million at June 30, 2024 from $59.5 million at June 30, 2023. The change in the balance of other liabilities generally reflected normal operating fluctuations within these line items. Stockholders’ Equity.
The decrease in net income reflected a decrease in net interest income, an increase in the provision for credit losses and a decrease in non-interest income, partially offset by a decrease in non-interest expense and a decrease in income tax expense.
The net loss also reflected a decrease in net interest income, a decrease in non-interest income and an increase in the provision for credit losses, partially offset by a decrease in non-interest expense, excluding goodwill impairment, and a decrease in income tax expense.
One- to four-family residential mortgage loan origination volume, excluding loans held-for-sale, totaled $197.8 million for the year ended June 30, 2023 and was supplemented with loan purchases totaling $656,000. Home equity loan and line of credit origination volume for the same period totaled $26.0 million. Additional information about our loans at June 30, 2023 is presented under “Item 1.
One- to four-family residential mortgage loan origination volume, excluding loans held-for-sale, totaled $131.5 million for the year ended June 30, 2024 and was supplemented with loan purchases totaling $60.3 million. Home equity loan and line of credit origination volume for the same period totaled $18.0 million. Additional information about our loans at June 30, 2024 is presented under “Item 1.
The decrease in deposit balances reflected a $189.2 million decrease in interest-bearing deposits coupled with a $43.9 million decrease in non-interest-bearing deposits. Borrowings from the FHLB and other sources are generally available to supplement our liquidity position or to replace maturing deposits. As of June 30, 2023, our outstanding balance of FHLB advances, excluding fair value adjustments, totaled $1.28 billion.
The decrease in deposit balances reflected a $459.4 million decrease in interest-bearing deposits coupled with a $11.6 million decrease in non-interest-bearing deposits. Borrowings from the FHLB and other sources are generally available to supplement our liquidity position or to replace maturing deposits. As of June 30, 2024, our outstanding balance of FHLB advances, excluding fair value adjustments, totaled $1.54 billion.
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. Net interest margin decreased 60 basis points to 2.34% for the year ended June 30, 2023, from 2.94% for the year ended June 30, 2022.
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. Net interest margin decreased 40 basis points to 1.94% for the year ended June 30, 2024, from 2.34% for the year ended June 30, 2023.
As of that same date, we also had access to unsecured overnight borrowings with other financial institutions totaling $990.0 million, of which $100.0 million was outstanding. Deposits decreased $233.1 million to $5.63 billion at June 30, 2023 from $5.86 billion at June 30, 2022.
As of that same date, we also had access to unsecured overnight borrowings with other financial institutions totaling $789.0 million, of which none was outstanding. Deposits decreased $471.1 million to $5.16 billion at June 30, 2024 from $5.63 billion at June 30, 2023.
Business” of this Annual Report on Form 10-K, as well as in Note 5 to the audited consolidated financial statements. Nonperforming Loans and TDRs. Nonperforming loans decreased by $27.7 million to $42.6 million, or 0.73% of total loans, at June 30, 2023 from $70.3 million, or 1.30% of total loans, at June 30, 2022.
Business” of this Annual Report on Form 10-K, as well as in Note 4 to the audited consolidated financial statements. Nonperforming loans. Nonperforming loans decreased by $2.7 million to $39.9 million, or 0.70% of total loans, at June 30, 2024 from $42.6 million, or 0.73% of total loans, at June 30, 2023.
The aggregate balance of other assets, including premises and equipment, FHLB stock, interest receivable, goodwill, core deposit intangibles, bank owned life insurance, deferred income taxes, OREO and other assets, increased by $73.6 million to $829.8 million at June 30, 2023 from $756.2 million at June 30, 2022.
The aggregate balance of other assets, including premises and equipment, FHLB stock, interest receivable, goodwill, core deposit intangibles, bank owned life insurance, deferred income taxes, OREO and other assets, decreased by $112.7 million to $717.1 million at June 30, 2024 from $829.8 million at June 30, 2023.
As of June 30, 2023, we had the capacity to borrow additional funds totaling $1.55 billion and $415.0 million from the FHLB and FRB, respectively, without pledging additional collateral. We had the ability to pledge additional securities to borrow an additional $477.0 million at June 30, 2023.
As of June 30, 2024, we had the capacity to borrow additional funds totaling $1.06 billion and $381.8 million from the FHLB and FRB, respectively, without pledging additional collateral. We had the ability to pledge additional securities to borrow an additional $381.4 million at June 30, 2024.
The provision for credit losses increased by $10.0 million to a provision for credit losses of $2.5 million for the year ended June 30, 2023, compared to a reversal of credit losses of $7.5 million for the year ended June 30, 2022.
The provision for credit losses increased by $3.7 million to a provision for credit losses of $6.2 million for the year ended June 30, 2024, compared to provision for credit losses of $2.5 million for the year ended June 30, 2023.
Non-Interest Income . Non-interest income decreased by $11.2 million to $2.8 million for the year ended June 30, 2023. Loss on sale and call of securities was $15.2 million during the year ended June 30, 2023 compared to $559,000 recorded during the earlier comparative period.
Non-Interest Income . Non-interest income decreased by $4.7 million to $2.0 million for the year ended June 30, 2024. Loss on sale and call of securities was $18.1 million during the year ended June 30, 2024 compared to a loss of $15.2 million recorded during the earlier comparative period.
The decrease between the comparative periods resulted from an increase of $88.2 million in interest expense, partially offset by an increase of $67.5 million in interest income.
The decrease between the comparative periods resulted from an increase of $68.4 million in interest expense, partially offset by an increase of $35.1 million in interest income.
During the year ended June 30, 2023, we sold $103.8 million of residential mortgage loans, resulting in a net gain on sale of $760,000, and $25.3 million of commercial mortgage loans, resulting in a net loss on sale of $2.5 million. 42 Table of Contents Net Loans Receivable.
During the year ended June 30, 2024, we sold $79.1 million of residential mortgage loans, resulting in a net gain on sale of $602,000, and $10.8 million of commercial mortgage loans, resulting in a net loss on sale of $884,000. 42 Table of Contents Net Loans Receivable.
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. Net Interest Income . Net interest income decreased by $20.7 million to $175.9 million for the year ended June 30, 2023.
Results for the years ended June 30, 2024 and June 30, 2023 were impacted by various non-recurring items, as described in further detail below. Net Interest Income . Net interest income decreased by $33.3 million to $142.6 million for the year ended June 30, 2024.
Business” of this Annual Report on Form 10-K, as well as in Note 5 to the audited consolidated financial statements. 43 Table of Contents Allowance for Credit Losses. At June 30, 2023, the ACL totaled $48.7 million, or 0.83% of total loans, reflecting an increase of $1.7 million from $47.1 million, or 0.87% of total loans, at June 30, 2022.
Business” of this Annual Report on Form 10-K, as well as in Note 4 to the audited consolidated financial statements. Allowance for Credit Losses. At June 30, 2024, the ACL totaled $44.9 million, or 0.78% of total loans, reflecting a decrease of $3.8 million from $48.7 million, or 0.83% of total loans, at June 30, 2023.
Loans held-for-sale consisted of residential mortgage loans of $9.6 million at June 30, 2023 as compared to residential mortgage loans and commercial mortgage loans of $7.1 million and $21.7 million, respectively, at June 30, 2022.
Loans held-for-sale consisted of residential mortgage loans of $6.0 million at June 30, 2024 as compared to residential mortgage loans of $9.6 million at June 30, 2023.
For the Years Ended June 30, 2023 2022 2021 Average Balance Interest Average Yield/ Cost Average Balance Interest Average Yield/ Cost Average Balance Interest Average Yield/ Cost (Dollars in Thousands) Interest-earning assets: Loans receivable (1) $ 5,827,123 $ 233,147 4.00 % $ 4,922,400 $ 190,520 3.87 % $ 4,866,436 $ 202,240 4.16 % Taxable investment securities (2) 1,532,961 54,855 3.58 1,622,475 32,746 2.02 1,571,452 31,238 1.99 Tax-exempt securities (2) 30,332 694 2.29 55,981 1,273 2.27 74,604 1,652 2.21 Other interest-earning assets (3) 115,390 5,028 4.36 82,802 1,733 2.09 200,435 2,955 1.47 Total interest-earning assets 7,505,806 293,724 3.91 6,683,658 226,272 3.39 6,712,927 238,085 3.55 Non-interest-earning assets 563,131 598,712 620,934 Total assets $ 8,068,937 $ 7,282,370 $ 7,333,861 Interest-bearing liabilities: Interest-bearing demand $ 2,349,802 $ 40,650 1.73 $ 2,067,200 $ 5,123 0.25 $ 1,726,190 $ 7,028 0.41 Savings 896,651 3,351 0.37 1,088,971 1,190 0.11 1,066,794 3,299 0.31 Certificates of deposit 2,083,864 34,162 1.64 1,711,276 8,895 0.52 1,931,887 21,208 1.10 Total interest-bearing deposits 5,330,317 78,163 1.47 4,867,447 15,208 0.31 4,724,871 31,535 0.67 FHLB advances 1,101,658 37,734 3.43 679,388 14,067 2.07 931,148 18,314 1.97 Other borrowings 57,468 1,962 3.41 72,841 394 0.54 2,563 2 0.06 Total borrowings 1,159,126 39,696 3.42 752,229 14,461 1.92 933,711 18,316 1.96 Total interest-bearing liabilities 6,489,443 117,859 1.82 5,619,676 29,669 0.53 5,658,582 49,851 0.88 Non-interest-bearing liabilities (4) 704,136 678,143 583,886 Total liabilities 7,193,579 6,297,819 6,242,468 Stockholders' equity 875,358 984,551 1,091,393 Total liabilities and stockholders' equity $ 8,068,937 $ 7,282,370 $ 7,333,861 Net interest income $ 175,865 $ 196,603 $ 188,234 Interest rate spread (5) 2.09 % 2.86 % 2.67 % Net interest margin (6) 2.34 % 2.94 % 2.80 % Ratio of interest-earning assets to interest-bearing liabilities 1.16 1.19 1.19 ________________________________________ (1) Loans held-for-sale and non-accruing loans have been included in loans receivable and the effect of such inclusion was not material.
For the Years Ended June 30, 2024 2023 2022 Average Balance Interest Average Yield/ Cost Average Balance Interest Average Yield/ Cost Average Balance Interest Average Yield/ Cost (Dollars in Thousands) Interest-earning assets: Loans receivable (1) $ 5,752,496 $ 256,007 4.45 % $ 5,827,123 $ 233,147 4.00 % $ 4,922,400 $ 190,520 3.87 % Taxable investment securities (2) 1,438,200 63,313 4.40 1,532,961 54,855 3.58 1,622,475 32,746 2.02 Tax-exempt securities (2) 14,718 336 2.28 30,332 694 2.29 55,981 1,273 2.27 Other interest-earning assets (3) 131,019 9,212 7.03 115,390 5,028 4.36 82,802 1,733 2.09 Total interest-earning assets 7,336,433 328,868 4.48 7,505,806 293,724 3.91 6,683,658 226,272 3.39 Non-interest-earning assets 541,859 563,131 598,712 Total assets $ 7,878,292 $ 8,068,937 $ 7,282,370 Interest-bearing liabilities: Interest-bearing demand $ 2,308,893 $ 67,183 2.91 $ 2,349,802 $ 40,650 1.73 $ 2,067,200 $ 5,123 0.25 Savings 662,981 3,293 0.50 896,651 3,351 0.37 1,088,971 1,190 0.11 Certificates of deposit 1,778,682 51,938 2.92 2,083,864 34,162 1.64 1,711,276 8,895 0.52 Total interest-bearing deposits 4,750,556 122,414 2.58 5,330,317 78,163 1.47 4,867,447 15,208 0.31 FHLB advances 1,458,941 53,948 3.70 1,101,658 37,734 3.43 679,388 14,067 2.07 Other borrowings 184,768 9,912 5.36 57,468 1,962 3.41 72,841 394 0.54 Total borrowings 1,643,709 63,860 3.89 1,159,126 39,696 3.42 752,229 14,461 1.92 Total interest-bearing liabilities 6,394,265 186,274 2.91 6,489,443 117,859 1.82 5,619,676 29,669 0.53 Non-interest-bearing liabilities (4) 659,710 704,136 678,143 Total liabilities 7,053,975 7,193,579 6,297,819 Stockholders' equity 824,317 875,358 984,551 Total liabilities and stockholders' equity $ 7,878,292 $ 8,068,937 $ 7,282,370 Net interest income $ 142,594 $ 175,865 $ 196,603 Interest rate spread (5) 1.57 % 2.09 % 2.86 % Net interest margin (6) 1.94 % 2.34 % 2.94 % Ratio of interest-earning assets to interest-bearing liabilities 1.15 1.16 1.19 ________________________________________ (1) Loans held-for-sale and non-accruing loans have been included in loans receivable and the effect of such inclusion was not material.
This decrease was largely the result of principal repayments of $124.7 million, sales of $120.4 million and a $38.1 million decrease in the fair value of the portfolio to a net unrealized loss of $156.1 million, partially offset by purchases of $166.5 million.
This decrease was largely the result of principal repayments of $133.0 million and sales of $122.2 million, partially offset by purchases of $74.0 million and a $25.5 million increase in the fair value of the portfolio to a net unrealized loss of $130.7 million.
The fair value of our single reporting unit exceeded its carrying value and no impairment charges were recorded for the year ended June 30, 2023. Determining fair value of our single reporting unit is subject to uncertainty as it is reliant on projected future cash flows, discount rate assumption, and market estimates.
Determining fair value of our single reporting unit is subject to uncertainty as it is reliant on projected future cash flows, discount rate assumption, and market estimates.
Our ACL on individually analyzed loans decreased $315,000 during the year ended June 30, 2023. 39 Table of Contents Goodwill. We have goodwill of $210.9 million at June 30, 2023.
Our ACL on individually analyzed loans decreased $2.6 million during the year ended June 30, 2024. 39 Table of Contents Goodwill.
Investment securities held to maturity increased by $28.2 million to $146.5 million at June 30, 2023 from $118.3 million at June 30, 2022. The increase was largely the result of purchases of $40.4 million, partially offset by principal repayments of $12.1 million. Additional information regarding investment securities at June 30, 2023 is presented under “Item 1.
Investment securities held to maturity decreased by $10.7 million to $135.7 million at June 30, 2024 from $146.5 million at June 30, 2023. The decrease was largely the result of principal repayments of $10.9 million, partially offset by purchases of $300,000. Additional information regarding investment securities at June 30, 2024 is presented under “Item 1.
Loss on sale of loans was $1.6 million for the year ended June 30, 2023 compared to a gain on sale of loans of $2.5 million during the earlier comparative period. The current year included a loss of $2.5 million that resulted from the sale of a non-performing commercial mortgage loan held-for-sale.
Loss on sale of loans was $282,000 for the year ended June 30, 2024 compared to a loss of $1.6 million during the earlier comparative period. The decrease in loan sale losses was largely attributable to a loss of $2.4 million on the sale of a non-performing commercial mortgage loan held-for-sale in the prior comparative period.
The increase was largely attributable to a provision for credit losses of $2.5 million, primarily driven by loan growth, partially offset by a reduction in the expected life of the loan portfolio. Partially offsetting the provision for credit losses were net charge-offs of $810,000, of which $396,000 had been individually reserved for within the ACL at June 30, 2022.
The decrease was largely attributable to a provision for credit losses of $6.2 million, primarily driven by an increase in the provision for individually evaluated loans. Partially offsetting the provision for credit losses were net charge-offs of $10.0 million, of which $3.4 million had been individually reserved for within the ACL at June 30, 2023.
Year Ended June 30, 2023 versus Year Ended June 30, 2022 Year Ended June 30, 2022 versus Year Ended June 30, 2021 Increase (Decrease) Due to Increase (Decrease) Due to Volume Rate Net Volume Rate Net (In Thousands) (In Thousands) Interest and dividend income Loans receivable $ 36,040 $ 6,587 $ 42,627 $ 2,337 $ (14,057) $ (11,720) Taxable investment securities (1,901) 24,010 22,109 1,030 478 1,508 Tax-exempt securities (590) 11 (579) (423) 44 (379) Other interest-earning assets 876 2,419 3,295 (2,157) 935 (1,222) Total interest-earning assets $ 34,425 $ 33,027 $ 67,452 $ 787 $ (12,600) $ (11,813) Interest expense: Interest-bearing demand $ 802 $ 34,725 $ 35,527 $ 1,216 $ (3,121) $ (1,905) Savings (243) 2,404 2,161 67 (2,176) (2,109) Certificates of deposit 2,320 22,947 25,267 (2,192) (10,121) (12,313) Borrowings 10,324 14,911 25,235 (3,489) (366) (3,855) Total interest-bearing liabilities $ 13,203 $ 74,987 $ 88,190 $ (4,398) $ (15,784) $ (20,182) Change in net interest income $ 21,222 $ (41,960) $ (20,738) $ 5,185 $ 3,184 $ 8,369 Provision for Credit Losses .
Year Ended June 30, 2024 versus Year Ended June 30, 2023 Year Ended June 30, 2023 versus Year Ended June 30, 2022 Increase (Decrease) Due to Increase (Decrease) Due to Volume Rate Net Volume Rate Net (In Thousands) Interest and dividend income Loans receivable $ (3,024) $ 25,884 $ 22,860 $ 36,040 $ 6,587 $ 42,627 Taxable investment securities (3,545) 12,003 8,458 (1,901) 24,010 22,109 Tax-exempt securities (355) (3) (358) (590) 11 (579) Other interest-earning assets 758 3,426 4,184 876 2,419 3,295 Total interest-earning assets (6,166) 41,310 35,144 34,425 33,027 67,452 Interest expense: Interest-bearing demand (720) 27,253 26,533 802 34,725 35,527 Savings (1,017) 959 (58) (243) 2,404 2,161 Certificates of deposit (5,620) 23,396 17,776 2,320 22,947 25,267 Borrowings 18,186 5,978 24,164 10,324 14,911 25,235 Total interest-bearing liabilities 10,829 57,586 68,415 13,203 74,987 88,190 Change in net interest income $ (16,995) $ (16,276) $ (33,271) $ 21,222 $ (41,960) $ (20,738) Provision for Credit Losses .
Due to a significant decline in bank stock prices, triggered by regional bank failures, we performed a quantitative goodwill impairment during the fourth quarter of the year ended June 30, 2023. The quantitative goodwill impairment test compares the estimated fair value of the reporting unit with its carrying amount, including goodwill.
Due to the continued impact of higher interest rates and a sustained decline in the banking industry share prices, including our own, we performed a quantitative goodwill impairment during the fourth quarter of the year ended June 30, 2024. The quantitative goodwill impairment test compares the estimated fair value of the reporting unit with its carrying amount, including goodwill.
The remaining changes in the other components of non-interest expense between comparative periods generally reflected normal operating fluctuations within those line items. Provision for Income Taxes . Provision for income taxes decreased by $13.2 million to $11.6 million for the year ended June 30, 2023, from $24.8 million for the year ended June 30, 2022.
No such expenses were recorded during the year ended June 30, 2024. The remaining changes in the other components of non-interest expense between comparative periods generally reflected normal operating fluctuations within those line items. Provision for Income Taxes .
The following table sets forth information concerning balances and interest rates on our short-term borrowings at and for the periods shown: At or For the Years Ended June 30, 2023 2022 2021 (Dollars in Thousands) Balance at end of year $ 1,175,000 $ 625,000 $ 390,000 Average balance during year $ 900,997 $ 476,142 $ 646,896 Maximum outstanding at any month end $ 1,280,000 $ 684,000 $ 815,000 Weighted average interest rate at end of year 5.42 % 1.72 % 0.33 % Weighted average interest rate during year 4.49 % 0.58 % 1.08 % The following table discloses our contractual obligations and commitments as of June 30, 2023: June 30, 2023 Less than One Year One to Three Years Over Three Years to Five Years Over Five Years Total (In Thousands) Contractual obligations Operating lease obligations $ 3,445 $ 6,254 $ 4,904 $ 4,305 $ 18,908 Certificates of deposit 1,896,132 94,472 21,365 5,582 2,017,551 Federal Home Loan Bank Advances 972,500 110,000 200,000 — 1,282,500 Total contractual obligations $ 2,872,077 $ 210,726 $ 226,269 $ 9,887 $ 3,318,959 Commitments Undisbursed funds from approved lines of credit (1) $ 87,467 $ 20,942 $ 4,123 $ 56,961 $ 169,493 Construction loans in process (1) 58,485 — — — 58,485 Other commitments to extend credit (1) 23,261 — — — 23,261 Total commitments $ 169,213 $ 20,942 $ 4,123 $ 56,961 $ 251,239 ________________________________________ (1) Represents amounts committed to customers. 49 Table of Contents In addition to the loan commitments noted above, the pipeline of loans held for sale included $11.7 million of in process loans whose terms included interest rate locks to borrowers that were paired with a best-efforts commitment to sell the loan to a buyer at a fixed price and within a predetermined timeframe after the sale commitment is established.
The following table sets forth information concerning balances and interest rates on our short-term borrowings at and for the periods shown: At or For the Years Ended June 30, 2024 2023 2022 (Dollars in Thousands) Balance at end of year $ 1,400,000 $ 1,175,000 $ 625,000 Average balance during year $ 1,314,686 $ 900,997 $ 476,142 Maximum outstanding at any month end $ 1,490,000 $ 1,280,000 $ 684,000 Weighted average interest rate at end of year 5.47 % 5.42 % 1.72 % Weighted average interest rate during year 5.52 % 4.49 % 0.58 % The following table discloses our contractual obligations and commitments as of June 30, 2024: June 30, 2024 Less than One Year One to Three Years Over Three Years to Five Years Over Five Years Total (In Thousands) Contractual obligations Operating lease obligations $ 3,390 $ 6,622 $ 3,994 $ 2,847 $ 16,853 Certificates of deposit 1,487,483 106,362 8,126 5,390 1,607,361 Federal Home Loan Bank Advances 1,328,500 6,500 200,000 — 1,535,000 Total contractual obligations $ 2,819,373 $ 119,484 $ 212,120 $ 8,237 $ 3,159,214 Commitments Undisbursed funds from approved lines of credit (1) $ 74,822 $ 21,380 $ 3,626 $ 57,474 $ 157,302 Construction loans in process (1) 75,672 — — — 75,672 Other commitments to extend credit (1) 47,946 — — — 47,946 Total commitments $ 198,440 $ 21,380 $ 3,626 $ 57,474 $ 280,920 ________________________________________ (1) Represents amounts committed to customers. 49 Table of Contents In addition to the loan commitments noted above, the pipeline of loans held for sale included $16.0 million of in process loans whose terms included interest rate locks to borrowers that were paired with a best-efforts commitment to sell the loan to a buyer at a fixed price and within a predetermined timeframe after the sale commitment is established.
Net loans receivable increased by $409.9 million, or 7.6%, to $5.78 billion at June 30, 2023 from $5.37 billion at June 30, 2022.
Net loans receivable decreased by $92.8 million, or 1.6%, to $5.69 billion at June 30, 2024 from $5.78 billion at June 30, 2023.
The balance of borrowings increased by $605.5 million, or 67.2%, to $1.51 billion at June 30, 2023 from $901.3 million at June 30, 2022 which included overnight borrowings totaling $225.0 million and $250.0 million at June 30, 2023 and 2022, respectively. The increase was primarily driven by a net increase in FHLB advances.
The balance of borrowings increased by $203.0 million, or 13.5%, to $1.71 billion at June 30, 2024 from $1.51 billion at June 30, 2023 which included overnight borrowings totaling $175.0 million and $225.0 million at June 30, 2024 and 2023, respectively.
The remaining change generally reflected normal operating fluctuations within these line items. Deposits. Total deposits decreased by $233.1 million, or 4.0%, to $5.63 billion at June 30, 2023 from $5.86 billion at June 30, 2022. Included in total deposits are brokered and listing service time deposits of $640.5 million and $773.5 million at June 30, 2023 and 2022, respectively.
Total deposits decreased by $471.1 million, or 8.4%, to $5.16 billion at June 30, 2024 from $5.63 billion at June 30, 2023. Included in total deposits are brokered and listing service time deposits of $408.2 million and $640.5 million at June 30, 2024 and 2023, respectively.
The following table presents information regarding the Bank’s regulatory capital levels at June 30, 2023: June 30, 2023 Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in Thousands) Total capital (to risk-weighted assets) $ 695,417 13.31 % $ 417,853 8.00 % $ 522,316 10.00 % Tier 1 capital (to risk-weighted assets) 659,783 12.63 % 313,389 6.00 % 417,853 8.00 % Common equity tier 1 capital (to risk-weighted assets) 659,783 12.63 % 235,042 4.50 % 339,505 6.50 % Tier 1 capital (to adjusted total assets) 659,783 8.15 % 323,922 4.00 % 404,902 5.00 % The following table presents information regarding the consolidated Company’s regulatory capital levels at June 30, 2023: June 30, 2023 Actual For Capital Adequacy Purposes Amount Ratio Amount Ratio (Dollars in Thousands) Total capital (to risk-weighted assets) $ 770,621 14.75 % $ 418,015 8.00 % Tier 1 capital (to risk-weighted assets) 734,987 14.07 % 313,511 6.00 % Common equity tier 1 capital (to risk-weighted assets) 734,987 14.07 % 235,133 4.50 % Tier 1 capital (to adjusted total assets) 734,987 9.07 % 324,170 4.00 % For additional information regarding regulatory capital at June 30, 2023, see Note 15 to the audited consolidated financial statements. 50 Table of Contents Impact of Inflation The financial statements included in this document have been prepared in accordance with accounting principles generally accepted in the United States of America.
The following table presents information regarding the Bank’s regulatory capital levels at June 30, 2024: June 30, 2024 Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in Thousands) Total capital (to risk-weighted assets) $ 688,597 14.42 % $ 382,034 8.00 % $ 477,542 10.00 % Tier 1 capital (to risk-weighted assets) 651,620 13.65 % 286,525 6.00 % 382,034 8.00 % Common equity tier 1 capital (to risk-weighted assets) 651,620 13.65 % 214,894 4.50 % 310,402 6.50 % Tier 1 capital (to adjusted total assets) 651,620 8.44 % 308,656 4.00 % 385,820 5.00 % The following table presents information regarding the consolidated Company’s regulatory capital levels at June 30, 2024: June 30, 2024 Actual For Capital Adequacy Purposes Amount Ratio Amount Ratio (Dollars in Thousands) Total capital (to risk-weighted assets) $ 743,741 15.57 % $ 382,247 8.00 % Tier 1 capital (to risk-weighted assets) 706,764 14.79 % 286,685 6.00 % Common equity tier 1 capital (to risk-weighted assets) 706,764 14.79 % 215,014 4.50 % Tier 1 capital (to adjusted total assets) 706,764 9.15 % 309,031 4.00 % For additional information regarding regulatory capital at June 30, 2024, see Note 14 to the audited consolidated financial statements. 50 Table of Contents Impact of Inflation The financial statements included in this document have been prepared in accordance with accounting principles generally accepted in the United States of America.
Total assets increased by $344.9 million, or 4.5%, to $8.06 billion at June 30, 2023 from $7.72 billion at June 30, 2022. The increase primarily reflected an increase in net loans receivable, partially offset by a decrease in investment securities. Investment Securities.
Total assets decreased by $381.4 million, or 4.7%, to $7.68 billion at June 30, 2024 from $8.06 billion at June 30, 2023. The decrease primarily reflected decreases in investment securities, net loans receivable and goodwill. Investment Securities. Investment securities available for sale decreased by $154.9 million to $1.07 billion at June 30, 2024 from $1.23 billion at June 30, 2023.
Comparison of Operating Results for the Years Ended June 30, 2023 and June 30, 2022 Net Income . Net income for the year ended June 30, 2023 was $40.8 million, or $0.63 per diluted share, a decrease of 39.6% from $67.5 million, or $0.95 per diluted share for the year ended June 30, 2022.
Net loss for the year ended June 30, 2024 was $86.7 million, or $1.39 per diluted share, a decrease of $127.5 million from net income of $40.8 million, or $0.63 per diluted share for the year ended June 30, 2023. The net loss was primarily attributable to a non-cash, after tax, goodwill impairment charge of $95.3 million.
The increased cost of interest-bearing liabilities and yield on interest-earning assets is the result of higher market interest rates that were caused by an increase in the federal funds target rate from 0% - 0.25% in March 2022 to 5.00% - 5.25% in May 2023. 45 Table of Contents Details surrounding the composition of, and changes to, net interest income are presented in the table below which reflects the components of the average balance sheet and of net interest income for the periods indicated.
The decrease reflected 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. 45 Table of Contents Details surrounding the composition of, and changes to, net interest income are presented in the table below which reflects the components of the average balance sheet and of net interest income for the periods indicated.
Detail regarding the change in the loan portfolio is presented below: June 30, 2023 June 30, 2022 Increase/ (Decrease) (In Thousands) Commercial loans: Multi-family mortgage $ 2,761,775 $ 2,409,090 $ 352,685 Nonresidential mortgage 968,574 1,019,838 (51,264) Commercial business 146,861 176,807 (29,946) Construction 226,609 140,131 86,478 Total commercial loans 4,103,819 3,745,866 357,953 One- to four-family residential mortgage 1,700,559 1,645,816 54,743 Consumer loans: Home equity loans 43,549 42,028 1,521 Other consumer 2,549 2,866 (317) Total consumer loans 46,098 44,894 1,204 Total loans 5,850,476 5,436,576 413,900 Unaccreted yield adjustments (21,055) (18,731) (2,324) Allowance for credit losses (48,734) (47,058) (1,676) Net loans receivable $ 5,780,687 $ 5,370,787 $ 409,900 Commercial loan origination volume for the year ended June 30, 2023 totaled $895.9 million, comprised of $716.4 million of commercial mortgage loan originations, $91.8 million of commercial business loan originations and construction loan disbursements of $87.7 million.
Detail regarding the change in the loan portfolio is presented below: June 30, 2024 June 30, 2023 Increase/ (Decrease) (In Thousands) Commercial loans: Multi-family mortgage $ 2,645,851 $ 2,761,775 $ (115,924) Nonresidential mortgage 948,075 968,574 (20,499) Commercial business 142,747 146,861 (4,114) Construction 209,237 226,609 (17,372) Total commercial loans 3,945,910 4,103,819 (157,909) One- to four-family residential mortgage 1,756,051 1,700,559 55,492 Consumer loans: Home equity loans 44,104 43,549 555 Other consumer 2,685 2,549 136 Total consumer loans 46,789 46,098 691 Total loans 5,748,750 5,850,476 (101,726) Unaccreted yield adjustments (15,963) (21,055) 5,092 Allowance for credit losses (44,939) (48,734) 3,795 Net loans receivable $ 5,687,848 $ 5,780,687 $ (92,839) Commercial loan origination volume for the year ended June 30, 2024 totaled $287.8 million, comprised of $103.7 million of commercial mortgage loan originations, $98.5 million of commercial business loan originations and construction loan disbursements of $85.6 million.
The qualitative component of our ACL, which is largely based on management’s judgment of qualitative loss factors, decreased $6.5 million. Our ACL totaled $48.7 million at June 30, 2023 and the amount allocated to our collectively evaluated multi-family and nonresidential mortgage loans was $32.0 million, of which $23.3 million was attributable to qualitative loss factors.
Our ACL totaled $44.9 million at June 30, 2024 and the amount allocated to our collectively evaluated multi-family and nonresidential mortgage loans was $29.7 million, of which $19.7 million was attributable to qualitative loss factors. Changes in managements’ judgement of qualitative loss factors could result in a significant change to the ACL.
The $1.7 million increase in our ACL was primarily driven by our collectively evaluated loans. The quantitative component of our ACL, which is largely based on the national unemployment rate forecast, increased $8.5 million, which largely resulted from loan growth, slower prepayment speeds and a higher forecasted national unemployment rate.
The quantitative component of our ACL, which is largely based on the national unemployment rate forecast, increased $4.0 million, which largely resulted from slower prepayment speeds. The qualitative component of our ACL, which is largely based on management’s judgment of qualitative loss factors, decreased $5.3 million.
The current year loss was the result of a previously announced wholesale restructuring that involved the sale of $120.4 million of available for sale securities. The proceeds of the sale were reinvested in higher yielding securities.
The current year loss was the result of our securities portfolio repositioning that involved the sale of $122.2 million of available for sale securities in December 2023. Proceeds of the sale were utilized to retire higher-cost wholesale funding and to reinvest in loans yielding approximately 7.0%.
In addition, other comprehensive loss, net of tax, was $13.7 million, which was driven by a decline in the fair value of our available for sale securities, partially offset by an increase in the fair value of our derivatives portfolio.
Other comprehensive income during the year ended June 30, 2024 reflected the reclassification of a net realized loss on the sale of securities available for sale out of accumulated other comprehensive loss due to an investment securities repositioning and an increase in the fair value of our available for sale securities, partially offset by a decrease in the fair value of our derivatives portfolio.
The increase was primarily attributable to a non-recurring gain of $2.9 million from the sale of a former branch location and a $1.8 million increase in income from investment services. These increases were partially offset by $356,000 of non-recurring gains on asset disposals in the earlier comparative period.
Other non-interest income decreased $2.9 million to $3.4 million for the year ended June 30, 2024. The decrease was primarily attributable to a non-recurring gain of $2.9 million from the sale of a former branch location in the earlier comparative period. Electronic banking fees and charges increased $598,000 to $2.4 million for the year ended June 30, 2024.
The following table sets forth the distribution of, and changes in, deposits, by type, at the dates indicated: June 30, 2023 June 30, 2022 Increase/ (Decrease) (In Thousands) Non-interest-bearing deposits $ 609,999 $ 653,899 $ (43,900) Interest-bearing deposits: Interest-bearing demand 2,252,912 2,265,597 (12,685) Savings 748,721 1,053,198 (304,477) Certificates of deposit 2,017,551 1,889,562 127,989 Interest-bearing deposits 5,019,184 5,208,357 (189,173) Total deposits $ 5,629,183 $ 5,862,256 $ (233,073) Uninsured deposits totaled $1.77 billion as of June 30, 2023 compared to $1.53 billion as of June 30, 2022.
The following table sets forth the distribution of, and changes in, deposits, by type, at the dates indicated: June 30, 2024 June 30, 2023 Increase/ (Decrease) (In Thousands) Non-interest-bearing deposits $ 598,366 $ 609,999 $ (11,633) Interest-bearing deposits: Interest-bearing demand 2,308,915 2,252,912 56,003 Savings 643,481 748,721 (105,240) Certificates of deposit (retail) 1,199,127 1,377,028 (177,901) Certificates of deposit (brokered and listing service) 408,234 640,523 (232,289) Interest-bearing deposits 4,559,757 5,019,184 (459,427) Total deposits $ 5,158,123 $ 5,629,183 $ (471,060) Uninsured deposits totaled $1.77 billion as of June 30, 2024, unchanged from June 30, 2023.
The remaining changes in the other components of non-interest income between comparative periods generally reflected normal operating fluctuations within those line items. Non-Interest Expense . Non-interest expense decreased by $2.0 million to $123.8 million for the year ended June 30, 2023. Salaries and employee benefits expense decreased by $675,000 to $75.6 million for the year ended June 30, 2023.
The increase was primarily driven by a non-recurring contract renewal bonus of $750,000 recorded in the current period related to a licensing agreement with a third-party vendor. The remaining changes in the other components of non-interest income between comparative periods generally reflected normal operating fluctuations within those line items. Non-Interest Expense .
Net occupancy expense of premises decreased by $2.1 million to $12.0 million for the year ended June 30, 2023.
Included in salaries and employee benefits for the year ended June 30, 2023 was $757,000 of severance expense from a workforce realignment. Net occupancy expense of premises decreased by $1.0 million to $11.0 million for the year ended June 30, 2024. This decrease was primarily due to decreases in rent expense, depreciation expense, and building repairs and maintenance expense.
At June 30, 2023, we had non-accrual TDRs totaling $6.9 million, a decrease of $6.6 million from $13.5 million at June 30, 2022. Additional information about nonperforming loans and TDRs at June 30, 2023 is presented under “Item 1.
The decrease in nonperforming loans was largely attributable to a decrease of $6.7 million in nonperforming nonresidential mortgage loans, partially offset by an increase of $3.5 million in nonperforming multi-family mortgage loans. Additional information about nonperforming loans and reportable loan modifications at June 30, 2024 is presented under “Item 1.
Stockholders’ equity decreased by $24.7 million to $869.3 million at June 30, 2023 from $894.0 million at June 30, 2022. The decrease in stockholders’ equity during the year ended June 30, 2023 largely reflected dividends totaling $28.7 million and share repurchases totaling $27.4 million.
Stockholders’ equity decreased by $115.7 million to $753.6 million at June 30, 2024 from $869.3 million at June 30, 2023.
The decrease in the effective tax rate was primarily due to lower taxable income, as well as non-taxable payouts on life insurance policies, noted above, during the 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 year ended June 30, 2024.
The current year includes $250,000 of non-recurring occupancy expenses related to the consolidation of two retail branch locations. Equipment and systems expense decreased by $1.3 million to $14.6 million for the year ended June 30, 2023. This decrease was largely attributable to a prior period non-recurring expense of $800,000 from the early termination of a contract with a service provider.
FDIC insurance premiums increased $847,000 to $6.0 million for the year ended June 30, 2024. This increase was largely attributable to an updated assessment rate from the FDIC. 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.
These items were partially offset by net income of $40.8 million. 44 Table of Contents Book value per share increased by $0.18 to $13.20 at June 30, 2023 while tangible book value per share increased by $0.06 to $9.96 at June 30, 2023.
Book value per share decreased by $1.50 to $11.70 at June 30, 2024 while tangible book value per share decreased by $0.06 to $9.90 at June 30, 2024. 44 Table of Contents During the year ended June 30, 2024, we repurchased 1,504,747 shares of common stock at a cost of $11.2 million, or $7.40 per share.
Removed
In the future, changes in projected future cash flows, discount rate assumption, or market estimates could result in material goodwill impairment.
Added
The $3.8 million decrease in our ACL was largely attributable to a reduction in reserves for individually evaluated loans, primarily driven by the charge-off on three related non-performing commercial real estate loans transferred to held-for-sale and sold during the year ended June 30, 2024.
Removed
Investment securities available for sale decreased by $116.4 million to $1.23 billion at June 30, 2023 from $1.34 billion at June 30, 2022.
Added
The carrying value of our single reporting unit exceeded its respective fair value, resulting in the recognition of a non-cash, pre-tax goodwill impairment of $97.4 million for the year ended June 30, 2024. As a result, the Company’s goodwill decreased from $210.9 million at June 30, 2023 to $113.5 million at June 30, 2024.
Removed
The decrease in nonperforming loans was largely attributable to a decrease of $15.4 million in nonperforming nonresidential mortgage loans and a decrease of $7.5 million in nonperforming multi-family mortgage loans. TDRs are loans where we have modified the contractual terms of the loan as a result of the financial condition of the borrower.
Added
The decrease in other assets largely reflected the recognition of a non-cash, pre-tax goodwill impairment of $97.4 million and a $13.0 million decrease in OREO. The decrease in OREO was a result of the sale of our sole OREO asset in January 2024. The remaining change generally reflected normal operating fluctuations within these line items. Deposits.
Removed
Subsequent to their modification, TDRs are placed on non-accrual until such time as satisfactory payment performance has been demonstrated, at which time the loan may be returned to accrual status. At June 30, 2023, we had accruing TDRs totaling $10.5 million, an increase of $1.8 million from $8.7 million at June 30, 2022.
Added
The increase was primarily driven by a net increase in advances from the FHLB and the Federal Reserve Bank of New York (“FRBNY”). FRBNY advances consisted of $100.0 million in borrowings under the Bank Term Funding Program (“BTFP”) which included favorable terms and conditions as compared to FHLB advances and brokered deposits.
Removed
The increase in other assets largely reflected a $24.6 million increase in FHLB stock, a $23.8 million increase in the fair value of our derivatives portfolio and a $12.8 million increase in OREO. The increase in OREO was a result of our acquisition of a $13.0 million nonresidential real estate property through foreclosure.
Added
The decrease in stockholders’ equity during the year ended June 30, 2024 reflected a net loss of $86.7 million, primarily driven by a non-cash, after-tax, goodwill impairment of $95.3 million, dividends totaling $27.6 million, and share repurchases totaling $11.2 million, partially offset by other comprehensive income, net of tax, of $6.3 million.
Removed
On August 1, 2022, we announced that the Board of Directors had authorized a new stock repurchase plan to repurchase up to 4,000,000 shares, and the completion of our previous stock repurchase plan, which authorized the repurchase of 7,602,021 shares.

… 19 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−1 removed18 unchanged
Biggest changeThe relatively low level of interest rates prevalent at June 30, 2022 precluded the modeling of certain falling rate scenarios. 51 Table of Contents The following tables present the results of our internal EVE and NII analyses as of June 30, 2023 and 2022, respectively: June 30, 2023 1 to 12 Months 13 to 24 Months Change in Interest Rates $ Amount of EVE % Change in EVE $ Amount of NII % Change in NII $ Amount of NII % Change in NII (Dollars in Thousands) +300 bps 507,998 (32.36) % 154,552 (5.26) % 168,366 (3.87) % +200 bps 571,129 (23.95) % 156,274 (4.20) % 167,683 (4.26) % +100 bps 673,314 (10.35) % 160,344 (1.71) % 173,170 (1.13) % 0 bps 751,040 — 163,132 — 175,143 — -100 bps 799,675 6.48 % 163,455 0.20 % 173,319 (1.04) % -200 bps 814,293 8.42 % 161,284 (1.13) % 166,473 (4.95) % -300 bps 849,208 13.07 % 158,526 (2.82) % 156,507 (10.64) % June 30, 2022 1 to 12 Months 13 to 24 Months Change in Interest Rates $ Amount of EVE % Change in EVE $ Amount of NII % Change in NII $ Amount of NII % Change in NII (Dollars in Thousands) +300 bps 1,089,795 (15.37) % 178,865 (13.62) % 214,839 (1.68) % +200 bps 1,156,219 (10.21) % 187,601 (9.40) % 215,528 (1.36) % +100 bps 1,239,935 (3.71) % 198,126 (4.32) % 219,594 0.50 % 0 bps 1,287,700 — 207,069 — 218,501 — -100 bps 1,272,203 (1.20) % 205,241 (0.88) % 204,568 (6.38) % There are numerous internal and external factors that may contribute to changes in our EVE and its sensitivity.
Biggest changeThe model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates. 51 Table of Contents The following tables present the results of our internal EVE and NII analyses as of June 30, 2024 and 2023, respectively: June 30, 2024 1 to 12 Months 13 to 24 Months Change in Interest Rates $ Amount of EVE % Change in EVE $ Amount of NII % Change in NII $ Amount of NII % Change in NII (Dollars in Thousands) +300 bps 331,842 (41.07) % 127,382 (8.51) % 135,753 (10.66) % +200 bps 400,548 (28.87) % 131,003 (5.91) % 140,351 (7.64) % +100 bps 483,724 (14.10) % 135,289 (2.83) % 146,594 (3.53) % 0 bps 563,098 — 139,236 — 151,955 — -100 bps 640,024 13.66 % 144,991 4.13 % 157,821 3.86 % -200 bps 693,495 23.16 % 148,189 6.43 % 159,928 5.25 % -300 bps 767,451 36.29 % 150,478 8.07 % 160,093 5.36 % June 30, 2023 1 to 12 Months 13 to 24 Months Change in Interest Rates $ Amount of EVE % Change in EVE $ Amount of NII % Change in NII $ Amount of NII % Change in NII (Dollars in Thousands) +300 bps 507,998 (32.36) % 154,552 (5.26) % 168,366 (3.87) % +200 bps 571,129 (23.95) % 156,274 (4.20) % 167,683 (4.26) % +100 bps 673,314 (10.35) % 160,344 (1.71) % 173,170 (1.13) % 0 bps 751,040 — 163,132 — 175,143 — -100 bps 799,675 6.48 % 163,455 0.20 % 173,319 (1.04) % -200 bps 814,293 8.42 % 161,284 (1.13) % 166,473 (4.95) % -300 bps 849,208 13.07 % 158,526 (2.82) % 156,507 (10.64) % There are numerous internal and external factors that may contribute to changes in our EVE and its sensitivity.
Removed
The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates.

Other KRNY 10-K year-over-year comparisons