Breaking Down Kearny Financial Corp. (KRNY) Financial Health: Key Insights for Investors

You're looking at Kearny Financial Corp. (KRNY) right now, wondering if their recent uptick in profitability is a signal to buy or just a temporary head-fake in a tough rate environment, and honestly, it's a mixed bag you need to dissect now. The good news is the bank's net income for the quarter ended September 30, 2025, rose sharply to $9.5 million, a clear win driven by easing funding costs and a Net Interest Margin that expanded to 2.10%, showing their liability-sensitive balance sheet is starting to pay off. But here's the quick math on the risk: while total assets sit at a solid $7.65 billion, total nonperforming loans jumped to $64.6 million, up significantly from the prior quarter, with construction credits being a particular sore spot. We need to map out precisely where that credit stress is concentrated and what management's plan is to keep that dividend of $0.11 per share flowing, because that's the real near-term driver for many investors.

Revenue Analysis

You need to know where Kearny Financial Corp. (KRNY) actually makes its money, not just the top-line number. For the fiscal year ended June 30, 2025, the company reported total annual revenue of approximately $151.63 million. The good news is that this figure represents a solid rebound, showing a year-over-year revenue growth rate of 12.84%. That's a defintely positive trend after a couple of challenging years.

The revenue structure for a regional bank like Kearny Financial Corp. is pretty straightforward, but the recent shifts are what matter most. The vast majority of their income comes from two main sources: Net Interest Income (NII) and Non-interest Income. NII is the difference between the interest they earn on loans and investments and the interest they pay out on deposits and borrowings-the core business of banking.

Here's the quick math on how those segments contributed to the overall revenue stream in the 2025 fiscal year. You can see the heavy reliance on the core lending business, but the non-interest side is where the volatility and opportunity lie.

What this breakdown hides is the recent turbulence. While the total revenue grew, the primary engine-Net Interest Income-actually decreased by $7.7 million, or 5.4%, in FY 2025 compared to the prior year. This is a direct consequence of the higher-for-longer interest rate environment, which squeezes the net interest margin (NIM) as funding costs rise faster than asset yields.

The big, significant change that drove the overall revenue growth was in the Non-interest Income segment. This segment soared, increasing by a massive $21.0 million to reach $19.1 million for the fiscal year. But don't get too excited; this wasn't from a new, repeatable business line. It was primarily due to the absence of an $18.1 million pre-tax loss from an investment securities portfolio repositioning that had hit the prior year's numbers. That's a one-time cleanup, not a sustainable growth driver.

So, the near-term risk is clear: the core lending margin is under pressure, and the spectacular non-interest income growth is non-recurring. The opportunity is in the trend toward the end of the fiscal year. For the quarter ended September 30, 2025, Net Interest Income improved to $37.7 million, showing some stabilization. This is a critical metric to watch for signs of a true NII recovery.

• Watch the NIM closely; it's the real indicator.
• Non-interest income is not a reliable growth engine right now.
• Core business is facing interest rate headwinds.

For a deeper dive into the company's overall financial health, check out Breaking Down Kearny Financial Corp. (KRNY) Financial Health: Key Insights for Investors.

Profitability Metrics

You need to know if Kearny Financial Corp. (KRNY) is truly turning a corner after a tough period, and the 2025 fiscal year (FY) data says they are, but they are still playing catch-up to the industry. The direct takeaway is that while the bank delivered $26.1 million in net income for FY 2025, a massive swing from the prior year's loss, its core profitability ratios like Return on Assets (ROA) remain significantly below the regional bank average.

For a bank, the most critical profitability metric is the Net Interest Margin (NIM), which acts as its gross profit margin. Kearny Financial Corp.'s NIM for the full FY 2025 was 1.88%, which is low. However, the trend is your friend here: the NIM expanded aggressively in the latter half of the year, hitting 2.00% in Q4 FY 2025 and then rising to 2.10% in the subsequent Q1 FY 2026. That is a clear sign that proactive balance sheet management and lower funding costs are starting to pay off.

The operational profit, or Pre-Tax, Pre-Provision (PTPP) net revenue, also shows this upward momentum. The PTPP earnings per share hit $0.19 in the first quarter of fiscal 2026, which is a strong 18.8% quarter-over-quarter increase. This metric strips out the noise of loan loss provisions and taxes, showing the true earning power of the core business. You can see the shift from a defensive stance to growth clearly in this number.

Here's the quick math on the latest quarter's margins (Q1 FY 2026): Total revenue was approximately $43.5 million (Net Interest Income of $37.7 million plus Non-Interest Income of $5.8 million). The net income of $9.5 million translates to a Net Profit Margin of about 21.8% for the quarter. That's a strong margin for a regional bank, but it needs to be sustained. You can dive deeper into the shareholder base by Exploring Kearny Financial Corp. (KRNY) Investor Profile: Who's Buying and Why?

When you compare Kearny Financial Corp.'s performance to the industry, the need for continued improvement is obvious. The company's Return on Assets (ROA) for FY 2025 was only 0.34%, and its Return on Equity (ROE) was 3.48%. To be fair, the average for US regional banks in Q2 2025 was a much healthier 0.96% ROA and 9.06% ROE. The gap is wide, but the recent quarterly trend is pointing in the right direction.

Operational efficiency is where Kearny Financial Corp. is making concrete, actionable moves. The company reported a non-interest expense to average assets ratio of 1.58% for FY 2025, which they noted as disciplined expense management. Still, they are not resting. They have initiated a strategic partnership with The Lab Consulting to implement Robotic Process Automation (RPA) and AI to streamline operations and reduce operating expenses. Plus, they are consolidating three branch locations, a classic cost-cutting move that will reallocate capital to higher-return opportunities. This is defintely a management team that understands the need to cut costs and scale efficiently.

We can summarize the key profitability metrics and their comparison in this table:

The key for investors is monitoring the NIM and ROA expansion in the coming quarters. If the NIM can hold above 2.10% and the operational efficiency gains from the new AI/RPA initiatives start to materially reduce the non-interest expense ratio, the ROA gap will start to close. Finance: track the quarterly non-interest expense to NII ratio and target a 5% improvement by Q3 FY 2026.

Debt vs. Equity Structure

When you look at how Kearny Financial Corp. (KRNY) funds its operations, you're essentially asking: how much of the business is financed by borrowing (debt) versus shareholder money (equity)? For banks, this is always a nuanced picture because customer deposits are a form of debt, but the core balance sheet tells a clear story about financial leverage.

As of the end of the 2025 fiscal year, Kearny Financial Corp. was leaning heavily on debt, which is typical for a financial institution but still warrants close attention. The company's total borrowings (debt) stood at approximately $1.26 billion as of June 30, 2025. This debt is primarily structured as:

• Long-term Debt: Around $1.11 billion.
• Short-term Debt: Approximately $150.00 million.

The total stockholders' equity, the capital cushion provided by owners, was approximately $753.2 million as of September 30, 2025.

The Debt-to-Equity Reality Check

The most important metric here is the Debt-to-Equity (D/E) ratio, which shows how much debt the company uses for every dollar of equity. For the 2025 fiscal year, Kearny Financial Corp.'s D/E ratio was approximately 1.68. This means the company uses about $1.68 in debt financing for every dollar of equity capital.

Here's the quick math on why that 1.68 number matters: the average D/E ratio for US Regional Banks in late 2025 is closer to 0.5. Kearny Financial Corp.'s ratio is significantly higher, indicating a much greater reliance on non-deposit borrowings like Federal Home Loan Bank (FHLB) advances to fund its loan portfolio. That's a big gap to watch.

It's a high-leverage model, but they are still considered 'well-capitalized.'

Near-Term Debt Management and Funding

The good news is that management is actively working to optimize its funding mix. Borrowings actually decreased by $50.0 million between June 30, 2025, and September 30, 2025, primarily by reducing FHLB advances. This shows a deliberate effort to manage funding costs, which is crucial in a volatile rate environment.

The company has also been shifting its funding from FHLB advances into brokered Certificates of Deposit (CDs), reflecting a search for more favorable funding costs. Plus, Kearny Financial Corp. maintains a substantial liquidity buffer, with available secured borrowing capacity of $2.54 billion through the FHLB and the Federal Reserve Discount Window as of September 30, 2025. This capacity, representing 33.2% of total assets, provides a strong backstop against any short-term liquidity stress. While there are no recent major public debt issuances or credit rating changes (beyond the Town of Kearny's municipal debt), the regulatory capital ratios remain above the 'well-capitalized' threshold, which is a key indicator of financial stability for a bank.

To dive deeper into the overall risk profile, check out the full post on Breaking Down Kearny Financial Corp. (KRNY) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Kearny Financial Corp. (KRNY) has the cash to cover its near-term obligations, and the 2025 fiscal year data gives a clear, if nuanced, answer. The short takeaway is that the bank's liquidity ratios look healthy, but the cash flow story shows a reliance on financing activities to manage the balance sheet.

For a regional bank like Kearny Financial Corp., liquidity is less about inventory and more about deposits and immediately available funds. Still, the traditional ratios give us a baseline for their ability to cover short-term liabilities (current liabilities) with short-term assets (current assets).

• Current Ratio: As of June 2025, the Current Ratio was a strong 1.2. This means Kearny Financial Corp. had $1.20 in current assets for every $1.00 in current liabilities.
• Quick Ratio: The Quick Ratio, which excludes less-liquid assets like inventory (not a major factor for a bank anyway), stood at approximately 1.04. Both figures confirm a solid, immediate liquidity position, which is defintely a strength.

Analysis of Working Capital Trends

Working capital management for a bank translates directly to managing the flow of deposits and borrowings against loans and investments. The trend in the 2025 fiscal year shows proactive balance sheet management to reduce expensive funding sources.

Total assets for Kearny Financial Corp. were approximately $7.74 billion at the end of the fiscal year. A key positive trend was the reduction in outstanding borrowings, which stood at $1.26 billion at December 31, 2024, a decrease of $220.9 million from the prior quarter. This reduction was largely fueled by a growth in deposits, which reached $5.71 billion by March 31, 2025. This shift from wholesale funding (borrowings) to core deposits is a positive signal for long-term funding stability and cost of funds.

Cash Flow Statements Overview (FY 2025)

The cash flow statement for the fiscal year ended June 30, 2025, tells the full story of where the cash came from and where it went. Here's the quick math on the three main activities (all figures in millions):

The total net change in cash and equivalents was a healthy inflow of $103.41 million for the year. This is a strong result, especially considering the bank paid out $27.63 million in dividends. The positive Investing Cash Flow of $41.11 million is noteworthy, as it suggests the bank was net selling securities or seeing high maturities, rather than aggressively adding to the investment portfolio, which freed up capital.

Potential Liquidity Concerns or Strengths

The most significant strength is the available secured borrowing capacity. As of December 31, 2024, Kearny Financial Corp. had access to an additional $2.32 billion in secured borrowing capacity from the Federal Home Loan Bank (FHLB) and the Federal Reserve Discount Window. This massive buffer, representing about 30.0% of total assets, is the real backstop for any unexpected deposit outflows (which are a primary risk for any bank). The overall positive cash flow of over $100 million is also a clear positive. Still, you should review the Mission Statement, Vision, & Core Values of Kearny Financial Corp. (KRNY) to understand their long-term strategy for maintaining this funding mix.

Valuation Analysis

You're looking at Kearny Financial Corp. (KRNY) and trying to figure out if you're getting a deal or buying into an overhyped bank. My take, based on the latest November 2025 metrics, is that the stock looks cheap on a book value basis, but its high dividend payout ratio flags a risk you need to watch. It's a classic value trap versus deep value debate.

As of late November 2025, Kearny Financial Corp. is trading around $6.66 per share. Over the last 12 months, the stock has been volatile, hitting a 52-week high of $8.55 and a 52-week low of $5.45. Year-to-date, the stock has actually decreased by about 5.9% from its starting price of $7.08 at the beginning of 2025. The market is defintely hesitant, and that's usually where opportunity or danger lies.

Is Kearny Financial Corp. Overvalued or Undervalued?

When you look at banks, the price-to-book (P/B) ratio is your most important yardstick. It tells you what the market thinks the bank is worth compared to its net asset value on paper. For Kearny Financial Corp., the P/B ratio is currently around 0.6x. That's a significant discount to the value of its assets, which often signals an undervalued stock, or at least one facing serious market skepticism.

The Price-to-Earnings (P/E) ratio, which measures the price you pay for every dollar of annual earnings, is currently around 13.55x on a trailing twelve-month basis. This is lower than the broader market P/E, but it's not a screaming bargain for a regional bank. Looking forward, the projected P/E for the 2025 fiscal year is even lower, at about 7.91x, suggesting analysts expect earnings to improve. We don't use Enterprise Value-to-EBITDA (EV/EBITDA) for banks because their primary earnings come from interest income, not operational earnings like a typical industrial company.

Dividend Health and Analyst View

The stock offers a compelling forward dividend yield of approximately 6.9%, which is very high and attractive to income investors. But here's the quick math: the annual payout is $0.44 per share, and the payout ratio is a high 93.6%. This means nearly all of the company's earnings are going straight out the door as dividends. While the yield is great, a payout ratio this close to 100% leaves very little room for error if earnings dip, increasing the risk of a dividend cut down the line. It's a great yield, but it's not a rock-solid one.

The analyst consensus on Kearny Financial Corp. is currently a 'Hold.' The general sentiment is neutral, but the breakdown is more nuanced. Most firms have a 'Hold' rating, but there is at least one 'Buy' rating and zero 'Sell' ratings, which is a mixed signal. The consensus 12-month price target is $7.75, implying an upside of about 16.4% from the current price. This suggests the street believes the stock is currently undervalued but lacks a clear catalyst for a swift price change.

• Dividend Yield: 6.9% (High-yield, but risky).
• Annual Payout: $0.44 per share.
• Payout Ratio: 93.6% (Leaves little margin for safety).
• Analyst Consensus: Hold (Consensus target: $7.75).

For a deeper dive into the bank's operational performance and risk profile, you should check out the full analysis: Breaking Down Kearny Financial Corp. (KRNY) Financial Health: Key Insights for Investors.

Risk Factors

You're looking at Kearny Financial Corp. (KRNY) and seeing the recent margin expansion, but honestly, a seasoned analyst focuses on what can break that trend. The core risks for Kearny Financial Corp. fall into three buckets: credit quality, interest rate exposure, and funding stability. You need to map these risks to the latest numbers, especially the recent uptick in nonperforming loans.

The most immediate operational risk is credit quality, which is showing pressure. As of September 30, 2025, total nonperforming loans jumped to $64.6 million, a sharp increase from $45.6 million just three months earlier. Here's the quick math: that pushes the nonperforming assets ratio up to 0.84% of total assets from 0.59%. A significant chunk of that increase, $20.5 million, is tied up in construction loans that are 90+ days past due and still accruing interest. That's a defintely a red flag in a slowing real estate market.

The company's management has been proactive, recording a provision for credit losses of $1.8 million in the quarter ended June 30, 2025, which included an $805,000 reserve for a non-performing wholesale commercial and industrial (C&I) loan. They've suggested the large net charge-offs of $1.0 million in the September 2025 quarter were largely driven by cleaning up the final wholesale C&I loan in the portfolio, but still, rising nonperformers warrant attention.

• Monitor nonperforming loans, especially in multi-family and construction.
• Watch the Allowance for Credit Losses (ACL) ratio, which stood at 0.78% of total loans as of September 30, 2025.

The external risk for any bank right now is interest rate risk. Kearny Financial Corp. is what we call 'asset-sensitive,' meaning its assets (mostly loans) reprice faster than its liabilities (mostly deposits). While this helped net interest margin (NIM) expand to 2.00% in Q4 FY2025, it's a double-edged sword if rates move too fast. A hypothetical immediate +200 basis points rate shock would decrease the bank's Economic Value of Equity (EVE) by 24.2% and net interest income (NII) by 7.2% over 12 months. That's a material exposure to Federal Reserve policy.

Another key financial risk is funding. While total deposits were $5.63 billion as of September 30, 2025, a high proportion-about 36%, or $2.04 billion-are uninsured deposits. In a period of market stress, a bank's ability to maintain liquidity is crucial. The good news is that Kearny Financial Corp. has strong mitigation strategies in place. Their Common Equity Tier 1 (CET-1) ratio was a robust 14.49% at the end of FY2025, well above regulatory minimums. Plus, their available secured borrowing capacity with the Federal Home Loan Bank (FHLB) and the Federal Reserve Discount Window was substantial at $2.54 billion as of September 30, 2025. That's a solid liquidity buffer, representing 33.2% of total assets.

Finally, there's a strategic risk around the dividend. For fiscal year 2025, the company reported GAAP earnings of $0.42 per share but paid an annualized dividend of $0.44 per share. That puts the payout ratio at an unsustainable 104.8% of GAAP earnings. Management will have to deliver sustained earnings growth or face a tough decision on the dividend, which is a major draw for income investors.

For a deeper dive into the bank's performance, check out the full analysis at Breaking Down Kearny Financial Corp. (KRNY) Financial Health: Key Insights for Investors.

Your next step: Compare Kearny Financial Corp.'s 0.78% ACL-to-loan ratio against its regional bank peers to see if their reserve level is adequate to cover the rising $64.6 million in nonperforming loans.

Growth Opportunities

You're looking for a clear path forward on Kearny Financial Corp. (KRNY), and the picture for fiscal year 2025 shows a bank that's turning the corner by focusing hard on efficiency and margin. They are not chasing the massive growth rates of a tech stock, but they have a solid, actionable plan to boost their bottom line.

Analyst consensus points to a significant jump in profitability. The forecast annual earnings for 2025 are projected to be around $29,489,000, with revenue estimated at $158,298,000. That's a serious improvement, and it's driven by a few core strategic moves, not just a rising tide lifting all boats.

• Revenue Growth Projections: Forecast annual revenue growth rate is about 10.03%.
• Earnings Per Share (EPS): The company earned $0.42 per share for the full fiscal year 2025.

Key Growth Drivers: Efficiency and Margin Expansion

The biggest driver isn't a massive acquisition, but an internal operational overhaul. In September 2025, Kearny Financial Corp. announced a strategic partnership with The Lab Consulting to accelerate operational efficiency. This isn't just buzzword-heavy consulting; it's a concrete investment in digital transformation.

They are implementing Robotic Process Automation (RPA) and AI-enabled document processing to eliminate manual, repetitive tasks. This is a direct play for cost optimization, which, in the banking world, is defintely the fastest way to increase net income. This focus on efficiency is exactly what you want to see in a regional bank.

The other major lever is the Net Interest Margin (NIM). Management was confident about continued strong margin expansion into the final quarter of fiscal 2025. This expansion is fueled by two things: a decrease in the cost of funds (a 24 basis point decrease in Q3 FY 2025) and growth in their loan portfolio, specifically in non-residential mortgage loans.

Strategic Initiatives and Competitive Edge

Kearny Financial Corp. is doubling down on its core franchise while modernizing its offerings. The company continues to expand its products and services into new markets, maintaining an omnichannel environment for its clients. For example, they've established a Private Client Group and an Investment Services division to deepen relationships with consumer, commercial, municipal, and non-profit clients.

Here's the quick math on their competitive advantages:

The stock's valuation, trading at a discount to tangible book value, is a clear opportunity for patient investors, especially considering the uptick in bank merger activity. This discount, combined with improving margins, suggests the market hasn't fully priced in the operational improvements. You can learn more about their long-term vision in their Mission Statement, Vision, & Core Values of Kearny Financial Corp. (KRNY).

Next Step: Monitor Q1 Fiscal Year 2026 results for concrete evidence of cost savings from the new AI/RPA initiatives, as this will confirm the long-term earnings trajectory.