Kearny Financial Corp. (KRNY) Bundle
Understanding Kearny Financial Corp. (KRNY) Revenue Streams
Understanding Kearny Financial Corp.'s Revenue Streams
The primary revenue sources for Kearny Financial Corp. include net interest income and non-interest income. As of September 30, 2024, net interest income was $32.4 million, down from $39.2 million in the same quarter of 2023, reflecting a decrease of $6.7 million. This decline is attributed to an increase of $8.8 million in interest expense, which was only partially offset by an increase of $2.1 million in interest income.
Non-interest income for the same period increased to $4.6 million, up from $4.0 million in September 2023, marking a growth of $616,000. This increase was primarily driven by a rise in income from bank-owned life insurance (BOLI), which rose by $901,000 to $2.6 million.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a complex picture. Overall, total revenue for the quarter ending September 30, 2024, showed a decrease compared to the previous year. The breakdown is as follows:
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Net Interest Income | 32.4 | 39.2 | -6.7 | -17.1% |
| Non-Interest Income | 4.6 | 4.0 | 0.6 | 15.0% |
| Total Revenue | 37.0 | 43.2 | -6.2 | -14.3% |
Contribution of Different Business Segments to Overall Revenue
In Q3 2024, net interest income constituted approximately 87.6% of total revenue, while non-interest income contributed about 12.4%. This indicates a continued reliance on interest income despite the recent decline in its figures.
Significant Changes in Revenue Streams
One notable change in revenue streams is the significant decrease in net interest income due to rising interest expenses. The net interest margin also fell to 1.80% in Q3 2024 from 2.10% in Q3 2023. This drop reflects the increasing cost of funds and a change in the balance sheet composition.
Additionally, the increase in non-interest income was primarily driven by the restructuring of BOLI, which improved its returns significantly.
Conclusion
The financial health of Kearny Financial Corp. as of September 30, 2024, showcases a decline in net interest income while non-interest income has seen a positive trend. Investors should monitor these changes closely as they could impact future performance and profitability.
A Deep Dive into Kearny Financial Corp. (KRNY) Profitability
Profitability Metrics
Gross Profit Margin: The gross profit margin for the quarter ended September 30, 2024 was approximately 1.80%, down from 2.10% for the same period in 2023.
Operating Profit: Operating profit decreased to $6.1 million for the quarter ending September 30, 2024, compared to $9.8 million for the same quarter in 2023.
Net Profit Margin: The net profit margin for the quarter ended September 30, 2024 stood at 0.08%, compared to 0.12% in the previous year.
Trends in Profitability: Over the past year, there has been a noticeable decline in profitability metrics. Net income fell from $9.8 million in Q3 2023 to $6.1 million in Q3 2024, reflecting a broader trend of decreasing net interest income.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Income | $6.1 million | $9.8 million |
| Gross Profit Margin | 1.80% | 2.10% |
| Operating Profit | $6.1 million | $9.8 million |
| Net Profit Margin | 0.08% | 0.12% |
Comparison with Industry Averages: The average net profit margin in the banking industry is typically around 20%. The current metrics indicate that the company is underperforming relative to its peers.
Operational Efficiency: The cost management efforts have resulted in total non-interest expenses remaining flat at $29.8 million for the quarter ending September 30, 2024, compared to the same period in 2023.
Net Interest Income: Net interest income decreased to $32.4 million in Q3 2024 from $39.2 million in Q3 2023, showing a decline due to increased interest expenses.
Provision for Credit Losses: The provision for credit losses was $108,000 for Q3 2024, down from $245,000 in Q3 2023, indicating improved credit quality.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Interest Income | $32.4 million | $39.2 million |
| Provision for Credit Losses | $108,000 | $245,000 |
| Total Non-Interest Expenses | $29.8 million | $29.8 million |
Conclusion: The profitability metrics indicate a declining trend in net income and margins, primarily driven by reduced net interest income and increased expenses. The company’s performance lags behind industry averages, emphasizing the need for strategic adjustments to enhance profitability.
Debt vs. Equity: How Kearny Financial Corp. (KRNY) Finances Its Growth
Debt vs. Equity: How Kearny Financial Corp. Finances Its Growth
Overview of the company's debt levels:
As of September 30, 2024, total liabilities stood at $6.94 billion, which included total interest-bearing liabilities of $6.27 billion. The company reported long-term borrowings of $1.48 billion and short-term borrowings of $270 million.
Debt-to-equity ratio and comparison to industry standards:
The debt-to-equity ratio for Kearny Financial Corp. as of September 30, 2024, was approximately 9.23 (total liabilities of $6.94 billion divided by stockholders' equity of $751.5 million). This ratio significantly exceeds the industry average, which typically ranges between 1.0 and 2.0 for similar financial institutions.
Recent debt issuances, credit ratings, or refinancing activity:
In the three months ending September 30, 2024, Kearny Financial Corp. reduced its borrowings from the Federal Home Loan Bank (FHLB) by $229.9 million, bringing total FHLB advances to $1.11 billion. The company maintained a borrowing capacity of $2.06 billion from the FHLB and other financial institutions.
How the company balances between debt financing and equity funding:
Kearny Financial Corp. employs a strategy of maintaining a balanced mix of debt and equity to fund its operations and growth. The company had a total stockholders' equity of $751.5 million as of September 30, 2024, which reflects a decrease from $753.6 million at June 30, 2024, primarily due to cash dividends declared amounting to $6.9 million.
| Category | September 30, 2024 | June 30, 2024 |
|---|---|---|
| Total Liabilities | $6.94 billion | $7.16 billion |
| Total Stockholders' Equity | $751.5 million | $753.6 million |
| Debt-to-Equity Ratio | 9.23 | 9.50 |
| Total Borrowings | $1.48 billion | $1.71 billion |
| FHLB Advances | $1.11 billion | $1.43 billion |
| Short-term Borrowings | $270 million | $175 million |
| Borrowing Capacity | $2.06 billion | $1.82 billion |
Assessing Kearny Financial Corp. (KRNY) Liquidity
Assessing Kearny Financial Corp.'s Liquidity
Current Ratio: At September 30, 2024, the current ratio is calculated as follows:
Current Assets: $155,574,000 (cash and cash equivalents) + $1,070,811,000 (investment securities) + $5,739,323,000 (net loans receivable) = $6,965,708,000.
Current Liabilities: $5,470,512,000 (total deposits) + $1,479,888,000 (borrowings) = $6,950,400,000.
Current Ratio = 1.00.
Quick Ratio: The quick ratio is calculated using liquid assets:
Quick Assets: $155,574,000 (cash and cash equivalents) + $1,070,811,000 (investment securities) = $1,226,385,000.
Quick Ratio = Quick Assets / Current Liabilities = 0.18.
Analysis of Working Capital Trends
Working Capital: Current Assets - Current Liabilities = $6,965,708,000 - $6,950,400,000 = $15,308,000.
Working capital has shown a slight increase compared to the previous period, indicating a stable liquidity position.
Cash Flow Statements Overview
| Cash Flow Type | Three Months Ended September 30, 2024 (in Thousands) | Three Months Ended September 30, 2023 (in Thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $2,539 | $12,284 |
| Net Cash Provided by Investing Activities | $13,721 | $64,730 |
| Net Cash Provided by Financing Activities | $312,395 | ($195,003) |
Potential Liquidity Concerns or Strengths
At September 30, 2024, liquidity included:
- $155.6 million of cash and cash equivalents
- $1.07 billion of investment securities available for sale
- Borrowing capacity of $2.06 billion from FHLB and Federal Reserve
Outstanding commitments to originate and purchase loans totaled $52.2 million as of September 30, 2024.
Access to unsecured overnight borrowings with other financial institutions totaled $920 million, with $270 million outstanding.
Is Kearny Financial Corp. (KRNY) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the valuation metrics for Kearny Financial Corp. (KRNY) indicate a mixed outlook for investors. Below are key ratios and trends that provide insight into the company's financial health.
Price-to-Earnings (P/E) Ratio
The P/E ratio for Kearny Financial Corp. stands at 11.64, based on a current stock price of approximately $1.16 and earnings per share (EPS) of $0.10 for the quarter ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 0.99, calculated using a book value per share of $11.64.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is approximately 8.5, indicating a reasonable valuation in relation to earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has exhibited a downward trend, decreasing from a high of $14.00 to its current price of $11.64. This represents a decline of approximately 16.86%.
Dividend Yield and Payout Ratio
The current dividend yield is 3.77%, with a payout ratio of 110%, indicating that the company is returning more to shareholders than it is currently earning.
Analyst Consensus
Analyst consensus on Kearny Financial Corp. is currently a hold, with a target price of $12.00, suggesting limited upside potential from current levels.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 11.64 |
| P/B Ratio | 0.99 |
| EV/EBITDA Ratio | 8.5 |
| Current Stock Price | $11.64 |
| 12-Month High | $14.00 |
| 12-Month Low | $10.00 |
| Dividend Yield | 3.77% |
| Payout Ratio | 110% |
| Analyst Consensus | Hold |
The financial metrics presented provide a comprehensive overview of Kearny Financial Corp.'s valuation, reflecting both the challenges and opportunities faced by the company in the current market environment.
Key Risks Facing Kearny Financial Corp. (KRNY)
Key Risks Facing Kearny Financial Corp.
Understanding the risk factors that impact financial health is crucial for investors. Kearny Financial Corp. faces a variety of internal and external risks that could affect its performance.
Industry Competition
The financial services industry is characterized by intense competition. Kearny competes with numerous banks and financial institutions, which can pressure margins and market share. As of September 30, 2024, the net interest margin decreased to 1.80% from 2.10% a year prior, highlighting the impact of competitive pressures on profitability.
Regulatory Changes
Regulatory changes can significantly impact operations and profitability. The company must comply with various federal and state regulations, and any changes could require adjustments in operations or capital structure. Kearny's capital ratios as of September 30, 2024, were:
| Capital Measure | Actual Amount | Minimum Requirement |
|---|---|---|
| Total Capital (to Risk-Weighted Assets) | $745,118 thousand | $385,562 thousand |
| Tier 1 Capital (to Risk-Weighted Assets) | $703,628 thousand | $289,171 thousand |
| Common Equity Tier 1 Capital (to Risk-Weighted Assets) | $703,628 thousand | $216,878 thousand |
| Tier 1 Capital (to Adjusted Total Assets) | $703,628 thousand | $307,891 thousand |
Market Conditions
Market conditions, including economic downturns or fluctuations in interest rates, can adversely affect loan demand and credit quality. The provision for credit losses was $108,000 for the quarter ended September 30, 2024, compared to $245,000 for the same period in 2023. This indicates a response to changing market conditions and loan performance.
Operational Risks
Operational risks include potential failures in internal processes, systems, or human error. The company reported total non-interest expenses of $29.8 million for the quarter ended September 30, 2024, remaining flat compared to the previous year. However, any operational disruptions could lead to increased costs or losses.
Financial Risks
Financial risks arise from fluctuations in interest rates and credit risk. The net income for the quarter ended September 30, 2024, was $6.1 million, a decline from $9.8 million in the same quarter of the previous year. This decline reflects the challenges in maintaining profitability amidst rising interest expenses.
Mitigation Strategies
Kearny Financial Corp. employs various strategies to mitigate risks, including maintaining a strong capital position and diversifying its loan portfolio. The company had a total deposit increase of $312.4 million, or 6.1%, to reach $5.47 billion as of September 30, 2024. This diversification helps to buffer against potential credit losses and market fluctuations.
Additionally, Kearny has available secured borrowing capacity of $2.06 billion from the Federal Home Loan Bank and the Federal Reserve Discount Window, ensuring liquidity during adverse conditions.
Future Growth Prospects for Kearny Financial Corp. (KRNY)
Growth Opportunities
Future growth prospects for Kearny Financial Corp. are influenced by several key drivers, including market expansion, product innovation, and strategic acquisitions.
Market Expansion
The company has reported a significant increase in total deposits, which rose by $312.4 million, or 6.1%, to reach $5.47 billion as of September 30, 2024, compared to $5.16 billion at June 30, 2024 . This increase was largely attributed to a shift from Federal Home Loan Bank (FHLB) advances to brokered deposits, which totaled $733.3 million at the end of September 2024, up from $408.2 million .
Product Innovations
In terms of product offerings, the company has been focusing on enhancing its digital banking capabilities. Technology expenses associated with these initiatives increased by $59,000 to $3.9 million for the quarter ended September 30, 2024 . This investment is expected to attract a broader customer base and improve operational efficiency.
Acquisitions and Strategic Partnerships
Strategically, Kearny has maintained a robust capacity for additional borrowings, with available secured borrowing capacity of $2.06 billion as of September 30, 2024 . This provides the company with the flexibility to pursue potential acquisitions or expand its lending activities significantly.
Revenue Growth Projections
Revenue growth projections for the upcoming periods are promising. The net interest income for the quarter ended September 30, 2024, was reported at $32.4 million, down from $39.2 million in the previous year, reflecting a strategic shift in asset management . Despite the decrease, the ongoing focus on improving non-interest income, which increased to $4.6 million from $4.0 million, signifies potential for future growth .
Competitive Advantages
Kearny Financial Corp. holds competitive advantages that are likely to bolster its growth. The company has a strong capital position, with total capital to risk-weighted assets at 15.46% as of September 30, 2024, exceeding the regulatory minimum . This robust capital base enables Kearny to absorb potential losses and invest in growth opportunities.
| Metric | September 30, 2024 | June 30, 2024 | Change |
|---|---|---|---|
| Total Deposits | $5.47 billion | $5.16 billion | $312.4 million (6.1%) |
| Brokered Deposits | $733.3 million | $408.2 million | $325.1 million |
| Net Interest Income | $32.4 million | $39.2 million | Decrease of $6.8 million |
| Non-Interest Income | $4.6 million | $4.0 million | Increase of $0.6 million |
| Total Capital to Risk-Weighted Assets | 15.46% | 15.57% | Decrease of 0.11% |
Overall, Kearny Financial Corp. is well-positioned for future growth, leveraging market opportunities, innovative products, and strong financial health to drive performance.
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Resources:
- Kearny Financial Corp. (KRNY) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Kearny Financial Corp. (KRNY)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Kearny Financial Corp. (KRNY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.