Earnings

Kearny's September Earnings Rise 40% as Seven-Quarter Margin Expansion Ends

The Tip Desk · November 8, 2026 · 4 min read

For the quarter ended September 30, 2026, net interest margin fell 3 bps to 2.23% as the last COVID-era wholesale position repriced, while net income rose 40% to $10.0 million, or $0.16 a share.

Kearny Financial Corp. (KRNY), the holding company of Kearny Bank, reported net income of $10.0 million, or $0.16 a share, for the quarter ended September 30, 2026, up 40.0% from $7.2 million, or $0.11 a share, in the quarter ended June 30, 2026. Net interest income decreased $294,000 to $40.1 million.

The prior quarter had included a $1.6 million discrete tax charge, $745,000 of severance, and $262,000 of other real estate owned acquisition expense. The effective tax rate fell to 20.7% from 34.9%. Pre-tax, pre-provision net revenue rose 14.0% to $13.5 million, or $0.21 a share.

Net interest margin compressed 3 bps to 2.23%, ending seven consecutive quarters of expansion. The company said higher asset yields were offset by the repricing of its final remaining COVID-era wholesale funding position and by lower purchase-accounting accretion and loan prepayment penalty income.

Net interest income decreased $294,000 to $40.1 million. Excluding loan prepayment penalty income and purchase accounting accretion, net interest income increased $132,000. Average loan yields rose 10 bps to 4.84% and average loan balances grew 0.9%, lifting total interest income $2.2 million, or 2.7%, to $84.2 million.

Total interest expense rose $2.5 million, or 6.1%, to $44.2 million. Deposit interest expense increased $1.4 million, or 4.5%, and borrowing interest expense rose $1.2 million, or 10.4%. The average cost of interest-bearing deposits increased 15 bps to 2.68%, including a 116 bps rise in the cost of brokered CDs to 4.03%. Average interest-bearing deposits declined 1.3% to $4.77 billion, including a $107.8 million, or 16.0%, drop in average brokered CDs to $565.2 million. Average interest-bearing demand deposits rose 2.9% to $2.27 billion. Average FHLB advances rose 11.2% to $1.14 billion.

Loans receivable increased $105.1 million, or 1.8%, to $5.98 billion, a 7.2% annualized growth rate. Multifamily mortgage loans fell $63.2 million to $2.44 billion. Nonresidential mortgage rose $29.9 million to $1.05 billion, commercial and industrial loans rose $7.4 million to $231.4 million, and construction rose $39.8 million to $303.0 million.

Total deposits increased $123.9 million, or 2.2%, to $5.83 billion, an 8.7% annualized growth rate, primarily driven by interest-bearing demand deposits, which rose $144.3 million to $2.36 billion. Non-interest-bearing deposits were essentially unchanged at $790.2 million. Retail CDs rose $15.3 million to $1.199 billion and brokered CDs were little changed at $755.3 million. Period-end borrowings were $1.14 billion, down $15.0 million, or 1.3%.

Non-interest expense decreased $2.1 million, or 6.1%, to $31.8 million, improving the efficiency ratio to 70.20% from 74.09%. Salary and benefits fell $883,000 to $19.4 million after a $745,000 non-recurring severance charge in the prior quarter. Advertising and marketing fell $365,000 to $381,000. Non-interest income decreased $110,000, or 2.1%, to $5.2 million, primarily due to a $122,000 write-down on one other real estate owned property.

Net charge-offs rose to $277,000, or 0.02% of average loans annualized, from $49,000. Nonperforming assets increased $3.2 million to $56.6 million, or 0.73% of assets, with nonaccrual loans at $51.2 million and OREO at $5.4 million. The provision for credit losses was $830,000, essentially unchanged from $822,000. The allowance for credit losses rose $553,000 to $46.0 million, or 0.77% of loans.

Tangible book value per share decreased $0.19, or 1.9%, to $9.88, and tangible equity to tangible assets fell to 8.37% from 8.62%, primarily reflecting quarterly changes in the fair value of available-for-sale securities. At September 30, 2026, stockholders’ equity included after-tax net unrealized losses on available-for-sale securities of $90.6 million, partially offset by after-tax unrealized gains on derivatives of $13.1 million. The board declared a quarterly cash dividend of $0.11 a share, unchanged from the prior quarter, with a 70.0% payout ratio versus 97.7%.

President and Chief Executive Officer Craig L. Montanaro said ongoing loan repricing and balance sheet remixing are expected to support further margin expansion in the quarters ahead.

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