Company History and Evolution

Kearny Financial Corp. (KRNY) is a New Jersey-based bank holding company that has weathered the ups and downs of the financial industry for over a century. Founded in 1884 as the Kearny Building and Loan Association, the company has evolved and expanded its operations to become a leading provider of financial services in the Northeast region.

The company's history is marked by a series of strategic acquisitions and mergers that have strengthened its presence and diversified its lending portfolio. In 1929, the company changed its name to Kearny Federal Savings and Loan Association, reflecting its growing focus on mortgage lending. Over the next several decades, Kearny Federal Savings and Loan Association continued to expand its branch network and lending operations, weathering economic challenges such as the Great Depression and the savings and loan crisis of the 1980s.

In 2014, the company underwent a major transition when it converted from a mutual holding company structure to a fully public company and changed its name to Kearny Financial Corp. This conversion allowed the company to access the public equity markets and expand its business. In the years following the conversion, Kearny Financial Corp. made several strategic acquisitions to grow its asset base and branch network across New Jersey.

Strategic Acquisitions and Challenges

A key milestone for the company was the acquisition of Atlas Bank in 2018, which significantly increased Kearny's presence in northern New Jersey and diversified its loan portfolio. However, the integration of Atlas Bank's operations presented some challenges in the following years as the company worked to fully realize the benefits of the deal.

In 2020, Kearny Financial Corp. faced another challenge when the COVID-19 pandemic significantly impacted the economy and its operations. Like many banks, Kearny had to navigate the uncertain environment, provide relief to impacted customers, and manage its own liquidity and capital levels. Despite these headwinds, the company was able to maintain its financial performance and continue serving its communities.

Current Operations

Today, Kearny Financial Corp. operates primarily through its wholly-owned subsidiary, Kearny Bank, which provides a range of banking services to both consumer and commercial customers. The company's lending portfolio is well-diversified, with a significant focus on multi-family, nonresidential, and commercial business loans, as well as one- to four-family residential mortgages and consumer loans.

Financials

As of September 30, 2024, Kearny Financial Corp. reported total assets of $7.77 billion, a 1.2% increase from the prior year's figure of $7.68 billion. The company's loan portfolio stood at $5.79 billion, up 0.7% from the previous year's $5.75 billion. This growth was driven primarily by a 0.5% increase in commercial loans and a 0.7% rise in one- to four-family residential mortgages.

The company's net interest income for the three months ended September 30, 2024 was $32.45 million, down 17.0% from $39.16 million in the same period of the previous year. This decline was largely attributable to a 21.0% increase in interest expense, which rose to $50.81 million from $42.01 million in the prior-year quarter. The net interest margin decreased by 30 basis points to 1.80% during this period.

Kearny Financial Corp. has also demonstrated a strong commitment to asset quality, with a nonperforming asset ratio of 0.51% as of September 30, 2024, consistent with the previous year's level. The company's allowance for credit losses on loans stood at $44.92 million, or 0.78% of total loans, at the end of the first quarter of fiscal year 2025.

For the most recent fiscal year 2024, Kearny Financial Corp. reported revenue of $140.60 million and a net loss of $86.67 million. The company generated operating cash flow of $43.97 million and free cash flow of $42.62 million during this period.

In the most recent quarter (Q1 2025), the company reported revenue of $37.07 million, which remained flat compared to the prior year quarter. However, net income decreased by 38.0% to $6.09 million, primarily due to a decrease in net interest income as the cost of deposits increased. The company generated operating cash flow of $2.54 million and free cash flow of $1.18 million during this quarter.

Liquidity and Capital Position

In terms of capital, Kearny Financial Corp. remains well-capitalized, with a Tier 1 capital to risk-weighted assets ratio of 13.62% and a total capital to risk-weighted assets ratio of 14.48% as of September 30, 2024. These ratios exceed the regulatory requirements for a well-capitalized institution, providing the company with a solid foundation for future growth and resilience in the face of economic challenges.

The company's liquidity position remains strong, with $155.57 million in cash and cash equivalents as of September 30, 2024. Additionally, Kearny Financial Corp. had $2.06 billion in available secured borrowing capacity with the Federal Home Loan Bank (FHLB) and Federal Reserve Discount Window as of that date, representing an increase of $240 million from June 30, 2024.

The company's debt-to-equity ratio stood at 1.84 as of September 30, 2024, while both the current ratio and quick ratio were 2.21, indicating a solid short-term liquidity position.

Total deposits increased by $312.4 million, or 6.1%, to $5.47 billion as of September 30, 2024, from $5.16 billion as of June 30, 2024. This growth was largely driven by an increase in brokered certificates of deposit, which totaled $733.3 million as of September 30, 2024, up from $408.2 million as of June 30, 2024. Conversely, total borrowings decreased by $229.9 million to $1.48 billion as of September 30, 2024, from $1.71 billion as of June 30, 2024, primarily due to a decrease in FHLB borrowings.

Resilience and Future Outlook

Despite the challenges posed by the COVID-19 pandemic and the ongoing economic uncertainty, Kearny Financial Corp. has demonstrated its ability to navigate turbulent waters. The company's diversified lending portfolio, strong asset quality, and well-capitalized position have allowed it to weather the storm and continue to serve its customers and communities.

Looking ahead, Kearny Financial Corp. remains focused on expanding its lending and deposit-gathering capabilities, while also exploring strategic acquisitions and partnerships to further strengthen its position in the Northeast region. The company's management team has a proven track record of prudent risk management and disciplined growth, which should serve the company well as it navigates the evolving financial landscape.

Conclusion

In conclusion, Kearny Financial Corp. is a resilient and well-positioned bank holding company with a long and storied history of serving its customers and communities. By maintaining a diversified lending portfolio, strong asset quality, and a well-capitalized balance sheet, the company has demonstrated its ability to weather the challenges of the past and position itself for continued success in the years to come. The company's focus on traditional banking and lending operations, primarily in the United States market, has allowed it to maintain stability even in the face of economic headwinds. While recent quarters have seen some pressure on net interest income due to rising deposit costs, Kearny Financial Corp.'s strong liquidity position and diversified loan portfolio provide a solid foundation for future growth and resilience in an evolving financial landscape.