KRNY

Kearny Financial Corp. 10-Q Summary: Period Ended December 31, 2025

Business Context and Reporting Period

This is a Quarterly Report (Form 10-Q) for Kearny Financial Corp. (KRNY), a Maryland corporation operating primarily through its subsidiary, Kearny Bank. The report covers the quarterly and six-month periods ended December 31, 2025. The company is an accelerated filer with approximately 64.7 million shares of common stock outstanding as of January 31, 2026.

Key Financial Metrics

Material Changes vs. Prior Periods

• Profitability: Net income for the quarter increased 44% to $9.45 million from $6.57 million in the prior year quarter. For the six-month period, net income rose 50% to $18.96 million from $12.66 million.
• Net Interest Income (NII): NII increased $5.4 million (16.4%) for the quarter and $10.6 million (16.3%) for the six months. This was driven primarily by a decrease in interest expense due to lower costs on interest-bearing liabilities and reduced borrowing balances, partially offset by lower yields on investment securities.
• Asset Composition: Total assets decreased $119.6 million to $7.62 billion from June 30, 2025. Net loans receivable declined $58.3 million, while investment securities available for sale decreased $12.6 million.
• Non-Interest Income: Increased $698,000 for the quarter, driven by higher fees and service charges ($1.3 million vs. $627,000), including loan-related fees from a construction loan payoff.
• Non-Interest Expense: Increased $1.6 million for the quarter to $31.2 million, primarily due to higher salaries and employee benefits (merit increases and incentives) and increased technology expenses.
• Asset Quality: Nonperforming assets increased to $51.3 million (0.67% of total assets) from $45.6 million at June 30, 2025. The ACL decreased to $45.0 million (0.78% of loans) from $46.2 million, reflecting net charge-offs of $1.75 million over the six months.

Guidance, Outlook, and Risks

• Dividends: The company declared a quarterly cash dividend of $0.11 per share on January 21, 2026, payable February 18, 2026.
• Capital Position: The company remains well-capitalized. As of December 31, 2025, the Common Equity Tier 1 capital ratio was 14.67%, significantly exceeding the 4.50% minimum requirement.
• Liquidity: Liquidity is strong with $147.3 million in cash and equivalents and $1.00 billion in available-for-sale securities. The company has $1.98 billion in additional borrowing capacity at the Federal Reserve and FHLB without pledging additional collateral.
• Interest Rate Risk: The company utilizes an Asset/Liability Management (ALM) program. Economic Value of Equity (EVE) analysis indicates sensitivity to rate changes; a +300 basis point shock would decrease EVE by 29.82%, while a -300 basis point shock would increase EVE by 23.45%.
• Risks: Key risks include changes in interest rates, credit quality deterioration (specifically in multi-family and commercial real estate), and general economic conditions. The company noted no material changes to risk factors from the prior year.

Investor Verification Checklist

• Nonperforming Asset Concentration: Verify the specific drivers of the $5.7 million increase in nonperforming assets, particularly the rise in nonperforming multi-family mortgage loans.
• Loan Portfolio Mix: Confirm the impact of the $90.5 million decrease in multi-family mortgage loans on future yield stability.
• Deposit Repricing: Review the details of the $69.8 million migration from interest-bearing to non-interest-bearing deposits to assess the sustainability of the lower cost of funds.
• Derivative Valuation: Assess the impact of the decrease in the fair value of interest rate derivatives on the balance sheet and future earnings volatility.
• Expense Management: Monitor the trajectory of non-interest expenses, specifically the recurring nature of the increased salary and technology costs.