Credit Losses and Loan Performance - The allowance for credit losses (ACL) totaled $44.9 million at June 30, 2024, representing 0.78% of total loans, down from $48.7 million or 0.83% at June 30, 2023, a decrease of $3.8 million [51]. - The annualized net charge-off rate increased to 0.17% for the year ended June 30, 2024, up from 0.01% for the year ended June 30, 2023, reflecting a rise of 16 basis points [48]. - The total non-performing loans were $39.9 million at June 30, 2024, down from $42.6 million at June 30, 2023 [51]. - The ACL allocated to multi-family mortgage loans was $24.1 million, representing 46.02% of total loans in that category as of June 30, 2024 [51]. Loan and Securities Portfolio - Total loans outstanding were $5.75 billion at June 30, 2024, compared to $5.85 billion at June 30, 2023, indicating a reduction in loan volume [51]. - The investment securities portfolio decreased to $1.21 billion at June 30, 2024, from $1.37 billion at June 30, 2023, a year-over-year decline of $165.6 million [54]. - Total securities available for sale decreased from $1,227,729 thousand in 2023 to $1,072,833 thousand in 2024, a decline of approximately 12.7% [67]. - Total debt securities available for sale amounted to $601,780 thousand in 2024, down from $648,184 thousand in 2023, representing a decrease of about 7.1% [67]. - The carrying value of residential pass-through securities available for sale dropped from $436,151 thousand in 2023 to $337,264 thousand in 2024, a reduction of approximately 22.7% [67]. - The total carrying value of mortgage-backed securities available for sale fell from $579,545 thousand in 2023 to $471,053 thousand in 2024, a decrease of approximately 18.7% [67]. Deposits and Funding - Certificates of deposit maturing within one year were $1.49 billion in 2024, down from $1.90 billion in 2023, indicating a decrease of about 21.6% [75]. - As of June 30, 2024, 68.2% of certificates of deposit were $100,000 or more, compared to 70.6% in 2023, showing a decline in higher balance deposits [76]. - The total average deposits decreased from $5,974,860 thousand in 2023 to $5,345,822 thousand in 2024, reflecting a decline of about 10.5% [79]. - The total amount of brokered certificates of deposit was approximately $408.2 million, accounting for 7.9% of total deposits as of June 30, 2024 [77]. - Wholesale funding amounted to $2.12 billion, representing approximately 27.6% of total assets as of June 30, 2024 [172]. - Public funds deposits from local government entities totaled $531.5 million, accounting for 10.3% of total deposits as of June 30, 2024 [174]. Interest Rate and Risk Management - The weighted average nominal interest rate for total average deposits increased to 2.29% in 2024 from 1.31% in 2023 [79]. - The weighted average interest rate on FHLB advances increased to 5.07% in 2024 from 4.92% in 2023 [82]. - Kearny Bank utilized interest rate derivatives with a total notional amount of $2.75 billion to manage interest rate exposure [86]. - The company’s interest rate risk analysis measures the sensitivity of projected net interest income (NII) over a one-year period, utilizing a static balance sheet assumption [270]. - The Economic Value of Equity (EVE) is calculated to assess the impact of interest rate movements on the present value of expected cash flows from assets and liabilities [271]. - The company acknowledges that future interest rates and their effects on net interest income are unpredictable and based on numerous assumptions [276]. Regulatory and Compliance - Kearny Bank's regulatory capital requirements include a common equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6.0%, and a total capital ratio of 8.0% [103]. - As of June 30, 2024, Kearny Bank exceeded all regulatory capital requirements and was classified as "well capitalized" with a total risk-based capital ratio of 10.0% or greater [110]. - Kearny Financial must comply with consolidated capital requirements applicable to savings and loan holding companies with $3 billion or more in consolidated assets, and was in compliance as of June 30, 2024 [136]. - Kearny Bank did not opt into the community bank leverage ratio framework, which requires maintaining a leverage ratio of greater than 9.0% [109]. - Kearny Bank must file notice with the Federal Reserve Board at least thirty days before paying a dividend, which may be disapproved under certain conditions [113]. Economic and Operational Risks - Economic conditions, including inflation, could negatively impact the company's results of operations and financial condition [166]. - The company faces risks associated with system failures and cyber-security threats that could disrupt operations and negatively affect earnings [176][177]. - Severe weather events and natural disasters could lead to increased loan delinquencies and reduced demand for products and services, adversely impacting financial performance [167]. - Increased competition from financial services technology companies may pressure the company to lower interest rates or fees, affecting profitability [170]. - Changes in tax laws and regulations could adversely affect the company’s financial condition and results of operations, potentially increasing regulatory compliance costs [184]. Human Resources and Corporate Governance - Kearny Bank employed 552 employees as of June 30, 2024, with approximately 60% identifying as female [90]. - The company’s ability to attract and retain key personnel is crucial for executing its business strategy and maintaining client relationships [193]. - The company’s Board of Directors oversees the Asset/Liability Management (ALM) program to manage interest rate risk, which is operationally managed by the Asset/Liability Management Committee (ALCO) [269]. - The company’s Board of Directors actively engages in cybersecurity oversight, with the Risk Committee responsible for monitoring the information security program [197]. Investment Strategy and Performance - Kearny Financial's investment strategy includes actively managing its investment securities portfolio, which may lead to realized losses affecting net income [148]. - The company may incur impairment charges if the fair value of investment securities declines below their carrying value, impacting financial results [158]. - Gains from the sale of residential mortgage loans totaled $602,000 for the year ended June 30, 2024, a decline of 20.8% from $760,000 in the previous year [156]. - As of June 30, 2024, the company had investment securities with fair values of approximately $1.19 billion, including $150.1 million in gross unrealized losses [160].
Kearny Financial(KRNY) - 2024 Q4 - Annual Report