Kearny Financial Corp. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37399

KEARNY FINANCIAL CORP.

(Exact name of registrant as specified in its charter)


Maryland		30-0870244
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

120 Passaic Ave., Fairfield, New Jersey		07004
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code

973-244-4500

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	KRNY	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filers,” “accelerated filers,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: November 2, 2021.

$0.01 par value common stock — 75,049,972 shares outstanding

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

INDEX


		Page Number
PART I—FINANCIAL INFORMATION

Item 1:	Financial Statements

	Consolidated Statements of Financial Condition at September 30, 2021 (Unaudited) and June 30, 2021	1

	Consolidated Statements of Income for the Three Months Ended September 30, 2021 and September 30, 2020 (Unaudited)	2

	Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2021 and September 30, 2020 (Unaudited)	4

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2021 and September 30, 2020 (Unaudited)	5

	Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2021 and September 30, 2020 (Unaudited)	6

	Notes to Consolidated Financial Statements (Unaudited)	8

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3:	Quantitative and Qualitative Disclosure About Market Risk	49

Item 4:	Controls and Procedures	51

PART II—OTHER INFORMATION

Item 1:	Legal Proceedings	52

Item 1A:	Risk Factors	52

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3:	Defaults Upon Senior Securities	52

Item 4:	Mine Safety Disclosures	52

Item 5:	Other Information	52

Item 6:	Exhibits	53

SIGNATURES		54

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In Thousands, Except Share and Per Share Data)


	September 30,			June 30,
	2021			2021
	(Unaudited)
Assets
Cash and amounts due from depository institutions	$	16,592		$	21,463
Interest-bearing deposits in other banks		37,478			46,392
Cash and cash equivalents		54,070			67,855
Investment securities available for sale (amortized cost $1,648,192 and $1,666,853, respectively), net of allowance for credit losses of $0 at September 30, 2021 and June 30, 2021		1,651,156			1,676,864
Investment securities held to maturity (fair value $38,673 and $39,610, respectively), net of allowance for credit losses of $0 at September 30, 2021 and June 30, 2021		37,497			38,138
Loans held-for-sale		12,884			16,492
Loans receivable		4,789,339			4,851,394
Less: allowance for credit losses on loans		(51,785	)		(58,165	)
Net loans receivable		4,737,554			4,793,229
Premises and equipment		55,236			56,338
Federal Home Loan Bank ("FHLB") of New York stock		36,615			36,615
Accrued interest receivable		19,541			19,362
Goodwill		210,895			210,895
Core deposit intangibles		3,524			3,705
Bank owned life insurance		284,871			283,310
Deferred income tax assets, net		27,771			29,323
Other real estate owned		178			178
Other assets		51,896			51,431
Total Assets	$	7,183,688		$	7,283,735

Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest-bearing	$	631,344		$	593,718
Interest-bearing		4,763,795			4,891,588
Total deposits		5,395,139			5,485,306
Borrowings		720,990			685,876
Advance payments by borrowers for taxes		16,222			15,752
Other liabilities		36,914			53,857
Total Liabilities		6,169,265			6,240,791

Stockholders' Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized; none issued and outstanding		-			-
Common stock, $0.01 par value; 800,000,000 shares authorized; 75,799,972 shares and 78,964,859 shares issued and outstanding, respectively		758			790
Paid-in capital		616,894			654,396
Retained earnings		420,701			408,367
Unearned employee stock ownership plan shares; 2,709,420 shares and 2,759,594 shares, respectively		(26,266	)		(26,753	)
Accumulated other comprehensive income		2,336			6,144
Total Stockholders' Equity		1,014,423			1,042,944
Total Liabilities and Stockholders' Equity	$	7,183,688		$	7,283,735

See notes to unaudited consolidated financial statements.

- 1 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended
	September 30,
	2021			2020
Interest Income
Loans	$	48,230		$	52,811
Taxable investment securities		8,212			7,336
Tax-exempt investment securities		333			454
Other interest-earning assets		431			914
Total Interest Income		57,206			61,515

Interest Expense
Deposits		4,065			11,062
Borrowings		3,551			5,660
Total Interest Expense		7,616			16,722
Net Interest Income		49,590			44,793
(Reversal of) provision for credit losses		(5,400	)		4,059
Net Interest Income after (Reversal of) Provision for Credit Losses		54,990			40,734

Non-Interest Income
Fees and service charges		607			445
Gain (loss) on sale and call of securities		1			(377	)
Gain on sale of loans		1,006			1,890
Income from bank owned life insurance		1,561			1,596
Electronic banking fees and charges		407			405
Bargain purchase gain		-			3,053
Other income		218			90
Total Non-Interest Income		3,800			7,102

Non-Interest Expense
Salaries and employee benefits		18,617			16,977
Net occupancy expense of premises		4,547			3,122
Equipment and systems		3,825			3,570
Advertising and marketing		392			500
Federal deposit insurance premium		492			472
Directors' compensation		803			748
Merger-related expenses		-			4,349
Other expense		3,127			3,835
Total Non-Interest Expense		31,803			33,573
Income before Income Taxes		26,987			14,263
Income tax expense		7,272			2,884
Net Income	$	19,715		$	11,379

See notes to unaudited consolidated financial statements.

- 2 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Continued)

(In Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended
	September 30,
	2021		2020
Net Income per Common Share (EPS)
Basic	$	0.26	$	0.13
Diluted	$	0.26	$	0.13
Weighted Average Number of Common Shares Outstanding
Basic		74,537		86,008
Diluted		74,556		86,009

See notes to unaudited consolidated financial statements.

- 3 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Unaudited)


	Three Months Ended
	September 30,
	2021			2020
Net Income	$	19,715		$	11,379
Other Comprehensive (Loss) Income, net of tax:
Net unrealized (loss) gain on securities available for sale		(4,981	)		788
Net realized (gain) loss on sale and call of securities available for sale		(1	)		265
Fair value adjustments on derivatives		1,164			1,645
Benefit plan adjustments		10			19
Total Other Comprehensive (Loss) Income		(3,808	)		2,717
Total Comprehensive Income	$	15,907		$	14,096

See notes to unaudited consolidated financial statements.

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Data, Unaudited)


	Common Stock					Paid-In			Retained			Unearned ESOP				Accumulated Other Comprehensive
	Shares			Amount		Capital			Earnings			Shares				Income		Total
Balance - June 30, 2020		83,663		$	837	$	722,871		$	387,911		$	(28,699	)		$	1,257	$	1,084,177

Cumulative effect of change in accounting principle - Topic 326		-			-		-			(14,239	)		-				-	$	(14,239	)
Balance - July 1, 2020 as adjusted for change in accounting principle		83,663		$	837	$	722,871		$	373,672		$	(28,699	)		$	1,257	$	1,069,938
Net income		-			-		-			11,379			-				-		11,379
Other comprehensive loss, net of income tax		-			-		-			-			-				2,717		2,717
ESOP shares committed to be released (50 shares)		-			-		(100	)		-			487				-		387
Stock option expense		-			-		456			-			-				-		456
Restricted stock plan shares earned (69 shares)		-			-		1,016			-			-				-		1,016
Cancellation of shares issued for restricted stock awards		(7	)		-		(49	)		-			-				-		(49	)
Shares issued in conjunction with the acquisition of MSB Financial Corp.		5,854			58		45,075			-			-		-		-		45,133
Cash dividends declared ($0.08 per common share)		-			-		-			(6,917	)		-				-		(6,917	)
Balance - September 30, 2020		89,510		$	895	$	769,269		$	378,134		$	(28,212	)		$	3,974	$	1,124,060


	Common Stock						Paid-In			Retained			Unearned ESOP			Accumulated Other Comprehensive
	Shares			Amount			Capital			Earnings			Shares			Income			Total
Balance - June 30, 2021		78,965		$	790		$	654,396		$	408,367		$	(26,753	)	$	6,144		$	1,042,944

Net income		-			-			-			19,715			-			-			19,715
Other comprehensive loss, net of income tax		-			-			-			-			-			(3,808	)		(3,808	)
ESOP shares committed to be released (50 shares)		-			-			133			-			487			-			620
Stock option expense		-			-			456			-			-			-			456
Stock repurchases		(3,158	)		(32	)		(38,964	)		-			-			-			(38,996	)
Restricted stock plan shares earned (72 shares)		-			-			962			-			-			-			962
Cancellation of shares issued for restricted stock awards		(7	)		-			(89	)		-			-			-			(89	)
Cash dividends declared ($0.10 per common share)		-			-			-			(7,381	)		-			-			(7,381	)
Balance - September 30, 2021		75,800		$	758		$	616,894		$	420,701		$	(26,266	)	$	2,336		$	1,014,423

See notes to unaudited consolidated financial statements.

- 5 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Unaudited)


	Three Months Ended
	September 30,
	2021			2020
Cash Flows from Operating Activities:
Net income	$	19,715		$	11,379
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		1,502			1,425
Net accretion of premiums, discounts and loan fees and costs		(1,845	)		(4,723	)
Deferred income taxes and valuation allowance		3,120			855
Bargain purchase gain		-			(3,053	)
Amortization of intangible assets		181			265
Amortization of benefit plans’ unrecognized net gain		20			21
(Reversal of) provision for credit losses		(5,400	)		4,059
Loans originated for sale		(60,620	)		(121,596	)
Proceeds from sale of mortgage loans held-for-sale		65,234			124,105
Gain on sale of mortgage loans held-for-sale, net		(1,006	)		(1,890	)
Realized (gain) loss on sale/call of investment securities available for sale		(1	)		377
Realized gain on disposition of premises and equipment		(1	)		-
Increase in cash surrender value of bank owned life insurance		(1,561	)		(1,596	)
ESOP, stock option plan and restricted stock plan expenses		2,038			1,859
Increase in interest receivable		(179	)		(1,294	)
Decrease (increase) in other assets		963			(3,456	)
Increase in interest payable		5			62
Decrease in other liabilities		(16,751	)		(663	)
Net Cash Provided by Operating Activities		5,414			6,136

Cash Flows from Investing Activities:
Purchases of:
Investment securities available for sale		(82,000	)		(259,381	)
Proceeds from:
Repayments/calls/maturities of investment securities available for sale		99,889			120,894
Repayments/calls/maturities of investment securities held to maturity		605			940
Sales of investment securities available for sale		-			19,600
Purchase of loans		(19,601	)		(21,586	)
Net decrease in loans receivable		83,205			104,354
Additions to premises and equipment		(400	)		(1,367	)
Proceeds from cash settlement of premises and equipment		1			-
Redemption of FHLB stock		-			6,881
Net cash acquired in acquisition		-			4,296
Net Cash Provided by (Used in) Investing Activities	$	81,699		$	(25,369	)

See notes to unaudited consolidated financial statements.

- 6 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Thousands, Unaudited)


	Three Months Ended
	September 30,
	2021			2020
Cash Flows from Financing Activities:
Net (decrease) increase in deposits		(89,927	)		150,000
Repayment of term FHLB advances		(390,000	)		(865,000	)
Proceeds from term FHLB advances		390,000			775,000
Net increase (decrease) in other short-term borrowings		35,000			(68,635	)
Net increase (decrease) in advance payments by borrowers for taxes		470			(355	)
Repurchase and cancellation of common stock of Kearny Financial Corp.		(38,996	)		-
Cancellation of shares repurchased on vesting to pay taxes		(89	)		(49	)
Dividends paid		(7,356	)		(6,877	)
Net Cash Used in Financing Activities		(100,898	)		(15,916	)
Net Decrease in Cash and Cash Equivalents		(13,785	)		(35,149	)
Cash and Cash Equivalents - Beginning		67,855			180,967
Cash and Cash Equivalents - Ending	$	54,070		$	145,818

Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Income taxes, net of refunds	$	6,011		$	5,371
Interest	$	7,611		$	16,660

Non-cash investing and financing activities:
Fair value of assets acquired, net of cash and cash equivalents acquired	$	-		$	567,816
Fair value of liabilities assumed	$	-		$	523,926

See notes to unaudited consolidated financial statements.

- 7 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The unaudited consolidated financial statements include the accounts of Kearny Financial Corp. (the “Company”), its wholly-owned subsidiary, Kearny Bank (the “Bank”) and the Bank’s wholly-owned subsidiary, CJB Investment Corp. The Company conducts its business principally through the Bank. Management prepared the unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), including the elimination of all significant inter-company accounts and transactions during consolidation.

Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, income, comprehensive income, changes in stockholders’ equity and cash flows in conformity with GAAP. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the unaudited consolidated financial statements have been included. The results of operations for the quarter ended September 30, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other period.

The data in the consolidated statement of financial condition for June 30, 2021 was derived from the Company’s 2021 Annual Report on Form 10-K. That data, along with the interim unaudited financial information presented in the consolidated statements of financial condition, income, comprehensive income, changes in stockholders’ equity and cash flows should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s 2021 Annual Report on Form 10-K.

The accounting and reporting policies of the Company conform to U.S. GAAP and to general practice within the financial services industry. A discussion of these policies can be found in Note 1, Summary of Significant Accounting Policies, included in the Company’s 2021 Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies since June 30, 2021.

We have reclassified certain amounts in the prior period's financial statements to conform to the current period's presentation. Specifically, effective July 1, 2021, loan prepayment penalty income was reclassified to interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Interest income and non-interest income for all periods presented reflect this reclassification.

Update to Significant Accounting Policies

Allowance for Credit Losses on Loans ("ACL"). In accordance with the ACL policy, the methodology is reviewed no less than annually. During the quarter ended September 30, 2021, the Company updated the econometric factors used in the determination of the probability of default for certain loan portfolio segments used in its ACL methodology for pooled loans. Econometric factors are selected based on the correlation of the factor to credit losses for each loan portfolio segment. Effective July 1, 2021, the primary econometric factors utilized in the determination of the probability of default for each loan portfolio segment is the national unemployment rate (“NUR”). Prior to July 1, 2021, NUR and gross domestic product (“GDP”) econometric factors were used in the determination of the probability of default for each loan portfolio segment.

- 8 -

2. SUBSEQUENT EVENTS

The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of September 30, 2021, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date this document was filed.

3. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU 2019-12, “Income taxes (Topic 740); Simplifying the Accounting for Income Taxes”. ASU 2019-12 provides amendments intended to reduce the cost and complexity in accounting for income taxes while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 removes the following exceptions from ASC 740, Income Taxes: (i) exceptions to the incremental approach for intraperiod tax allocation; (ii) exceptions to accounting for basis differences when a foreign subsidiary becomes an equity method investment or a foreign equity method investment become a subsidiary; and (iii) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 provides the following amendments that simplify and improve guidance with Topic 740: (i) franchise taxes that are based partially on income; (ii) transactions that result in a step up in the tax basis of goodwill; (iii) separate financial statements of legal entities that are not subject to tax; (iv) enacted changes in tax laws in interim periods; and (v) employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. For public business entities, the amendments in the ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted ASU 2019-12 in July 2021, and its adoption did not have a significant impact on the Company’s audited consolidated financial statements.

- 9 -

4. SECURITIES

At September 30, 2021, there was no allowance for credit losses on available for sale securities. The following tables present the amortized cost, gross unrealized gains and losses and estimated fair values for available for sale securities and the amortized cost, gross unrecognized gains and losses and estimated fair values for held to maturity securities as of the dates indicated:


	September 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(In Thousands)
Available for sale:
Debt securities:
Obligations of state and political subdivisions	$	33,235	$	676	$	-	$	-	$	33,911
Asset-backed securities		232,448		2,668		56		-		235,060
Collateralized loan obligations		253,458		90		105		-		253,443
Corporate bonds		160,996		2,667		142		-		163,521
Total debt securities		680,137		6,101		303		-		685,935

Mortgage-backed securities:
Collateralized mortgage obligations (1)		11,300		226		-		-		11,526
Residential pass-through securities (1)		693,483		6,109		10,279		-		689,313
Commercial pass-through securities (1)		263,272		4,285		3,175		-		264,382
Total mortgage-backed securities		968,055		10,620		13,454		-		965,221

Total securities available for sale	$	1,648,192	$	16,721	$	13,757	$	-	$	1,651,156

(1)

Government-sponsored enterprises.


	June 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
			(In Thousands)
Available for sale:
Debt securities:
Obligations of state and political subdivisions	$	33,800	$	803	$	-	$	-	$	34,603
Asset-backed securities		240,217		2,835		63		-		242,989
Collateralized loan obligations		189,873		177		170		-		189,880
Corporate bonds		155,622		2,802		73		-		158,351
Total debt securities		619,512		6,617		306		-		625,823

Mortgage-backed securities:
Collateralized mortgage obligations (1)		13,420		319		-		-		13,739
Residential pass-through securities (1)		744,196		7,443		7,148		-		744,491
Commercial pass-through securities (1)		289,725		5,738		2,652		-		292,811
Total mortgage-backed securities		1,047,341		13,500		9,800		-		1,051,041

Total securities available for sale	$	1,666,853	$	20,117	$	10,106	$	-	$	1,676,864

(1)

Government-sponsored enterprises.

- 10 -


	September 30, 2021
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Allowance for Credit Losses		Fair Value
	(In Thousands)
Held to maturity:
Debt securities:
Obligations of state and political subdivisions	$	25,191	$	1,084	$	-	$	-	$	26,275
Total debt securities		25,191		1,084		-		-		26,275

Mortgage-backed securities:
Commercial pass-through securities (1)		12,306		92		-		-	$	12,398
Total mortgage-backed securities		12,306		92		-		-		12,398

Total securities held to maturity	$	37,497	$	1,176	$	-	$	-	$	38,673

(1)

Government-sponsored enterprises.


	June 30, 2021
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Allowance for Credit Losses		Fair Value
	(In Thousands)
Held to maturity:
Debt securities:
Obligations of state and political subdivisions	$	25,824	$	1,204	$	-	$	-	$	27,028
Total debt securities		25,824		1,204		-		-		27,028

Mortgage-backed securities:
Commercial pass-through securities (1)		12,314		268		-		-	$	12,582
Total mortgage-backed securities		12,314		268		-		-		12,582

Total securities held to maturity	$	38,138	$	1,472	$	-	$	-	$	39,610

(1)

Government-sponsored enterprises.

Excluding the balances of mortgage-backed securities, the following table presents the amortized cost and estimated fair values of debt securities available for sale and held to maturity, by contractual maturity, at September 30, 2021:


	September 30, 2021
	Amortized Cost		Fair Value
	(In Thousands)
Debt securities:
Due in one year or less	$	5,946	$	5,992
Due after one year through five years		37,244		38,288
Due after five years through ten years		370,928		374,340
Due after ten years		291,210		293,590
Total	$	705,328	$	712,210

- 11 -

Sales of securities available for sale were as follows for the periods presented below:


	Three Months Ended
	September 30,
	2021		2020
	(In Thousands)
Available for sale securities sold:
Proceeds from sales of securities	$	-	$	19,600

Gross realized gains	$	-	$	-
Gross realized losses		-		(385	)
Net gain on sales of securities	$	-	$	(385	)

Calls of securities available for sale during the quarter ended September 30, 2021 and September 30, 2020 resulted in gross gains of $1,000 and $8,000, respectively. During the quarter ended September 30, 2021 and September 30, 2020, there were no gains or losses recognized on sales of securities held to maturity.

The carrying value of securities pledged for borrowings at the FHLB and other institutions, and securities pledged for public funds and other purposes, were as follows as of the dates presented below:


	September 30,		June 30,
	2021		2021
	(In Thousands)
Securities pledged:
Pledged for borrowings at the FHLB of New York	$	152,656	$	170,120
Pledged to secure public funds on deposit		164,239		137,778
Pledged for potential borrowings at the Federal Reserve Bank of New York		335,889		274,076
Total carrying value of securities pledged	$	652,784	$	581,974

The following tables present the gross unrealized losses on securities and the estimated fair value of the related securities, aggregated by investment category and length of time that securities have been in a continuous unrealized loss position within the available for sale portfolio at September 30, 2021 and June 30, 2021:


	September 30, 2021
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses
	(Dollars in Thousands)
Securities Available for Sale:
Asset-backed securities	$	6,076	$	9	$	5,640	$	47		2	$	11,716	$	56
Collateralized loan obligations		51,738		12		58,680		93		9		110,418		105
Corporate bonds		28,881		142		-		-		6		28,881		142
Commercial pass-through securities		123,354		2,799		15,707		376		7		139,061		3,175
Residential pass-through securities		450,719		10,279		-		-		10		450,719		10,279

Total	$	660,768	$	13,241	$	80,027	$	516		34	$	740,795	$	13,757

- 12 -


	June 30, 2021
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses
	(Dollars in Thousands)
Securities Available for Sale:
Asset-backed securities	$	12,159	$	63	$	-	$	-		2	$	12,159	$	63
Collateralized loan obligations		36,741		9		58,605		161		8		95,346		170
Corporate bonds		15,952		73		-		-		4		15,952		73
Commercial pass-through securities		145,055		2,652		-		-		7		145,055		2,652
Residential pass-through securities		424,112		7,148		-		-		10		424,112		7,148

Total	$	634,019	$	9,945	$	58,605	$	161		31	$	692,624	$	10,106

At September 30, 2021 and June 30, 2021, there were no held to maturity securities with unrecognized losses.

Available for sale securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or from other factors. An impairment related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the consolidated statement of income when management intends to sell, or may be required to sell, the securities before they recover in value. The issuers of these securities continue to make timely principal and interest payments and none of these securities were past due or were placed in nonaccrual status at September 30, 2021. Management believes that the unrealized losses on these securities are a function of changes in market interest rates and credit spreads, not changes in credit quality. Therefore, no allowance for credit losses was recorded at September 30, 2021.

At September 30, 2021, the held to maturity securities portfolio consisted of one agency commercial mortgage-backed security and obligations of state and political subdivisions. The commercial mortgage-backed security is issued by a U.S. government agency and is implicitly guaranteed by the U.S. government. The obligations of state and political subdivisions in the portfolio are highly rated by major rating agencies and have a long history of no credit losses. None of the securities in the Company’s held to maturity portfolio were in an unrealized loss position at September 30, 2021. The Company regularly monitors the obligations of state and political subdivisions sector of the market and reviews collectability including such factors as the financial condition of the issuers as well as credit ratings in effect as of the reporting period.

- 13 -

5. LOANS RECEIVABLE

The following table sets forth the composition of the Company’s loan portfolio at September 30, 2021 and June 30, 2021:


	September 30,			June 30,
	2021			2021
	(In Thousands)
Commercial loans:
Multi-family mortgage	$	1,978,681		$	2,039,260
Nonresidential mortgage		1,023,391			1,079,444
Commercial business		169,392			168,951
Construction		112,226			93,804
Total commercial loans		3,283,690			3,381,459

One- to four-family residential mortgage		1,483,106			1,447,721

Consumer loans:
Home equity loans		44,912			47,871
Other consumer		3,020			3,259
Total consumer loans		47,932			51,130

Total loans		4,814,728			4,880,310

Unaccreted yield adjustments		(25,389	)		(28,916	)

Total loans receivable, net of yield adjustments	$	4,789,339		$	4,851,394

- 14 -

Past Due Loans

Past due status is based on the contractual payment terms of the loans. The following tables present the payment status of past due loans as of September 30, 2021 and June 30, 2021, by loan segment:


	September 30, 2021
	Multi- Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Current	$	1,960,662	$	990,979	$	169,152	$	111,165	$	1,475,160	$	44,770	$	3,019	$	4,754,907
Past due:
30-59 days		-		-		-		1,061		2,198		72		-		3,331
60-89 days		-		245		4		-		1,253		-		1		1,503
90 days and over		18,019		32,167		236		-		4,495		70		-		54,987
Total past due		18,019		32,412		240		1,061		7,946		142		1		59,821

Total loans	$	1,978,681	$	1,023,391	$	169,392	$	112,226	$	1,483,106	$	44,912	$	3,020	$	4,814,728


	June 30, 2021
	Multi- Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Current	$	2,023,166	$	1,046,553	$	168,550	$	93,804	$	1,439,501	$	47,828	$	3,258	$	4,822,660
Past due:
30-59 days		-		-		-		-		382		6		1		389
60-89 days		-		-		-		-		2,734		5		-		2,739
90 days and over		16,094		32,891		401		-		5,104		32		-		54,522
Total past due		16,094		32,891		401		-		8,220		43		1		57,650

Total loans	$	2,039,260	$	1,079,444	$	168,951	$	93,804	$	1,447,721	$	47,871	$	3,259	$	4,880,310

Nonperforming Loans

Loans are generally placed on nonaccrual status when contractual payments become 90 or more days past due or when the Company does not expect to receive all principal and interest payments (“P&I”) owed substantially in accordance with the terms of the loan agreement, regardless of past due status. Loans that become 90 days past due, but are well secured and in the process of collection, may remain on accrual status. Nonaccrual loans are generally returned to accrual status when all payments due are brought current and we expect to receive all remaining P&I payments owed substantially in accordance with the terms of the loan agreement. Payments received in cash on nonaccrual loans, including both the principal and interest portions of those payments, are generally applied to reduce the carrying value of the loan. The Company did not recognize interest income on non-accrual loans during the three months ended September 30, 2021 and 2020.

- 15 -

The following tables present information relating to the Company’s nonperforming loans as of September 30, 2021 and June 30, 2021:


	September 30, 2021
	Multi- Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Performing	$	1,957,735	$	987,641	$	168,718	$	110,140	$	1,471,322	$	43,207	$	3,020	$	4,741,783
Nonperforming:
90 days and over past due accruing		-		-		-		-		-		-		-		-
Nonaccrual loans with allowance for credit losses		5,359		11,141		4		-		5,337		335		-		22,176
Nonaccrual loans with no allowance for credit losses		15,587		24,609		670		2,086		6,447		1,370		-		50,769
Total nonperforming		20,946		35,750		674		2,086		11,784		1,705		-		72,945

Total loans	$	1,978,681	$	1,023,391	$	169,392	$	112,226	$	1,483,106	$	44,912	$	3,020	$	4,814,728


	June 30, 2021
	Multi- Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Performing	$	2,020,734	$	1,042,257	$	168,039	$	91,576	$	1,428,551	$	46,127	$	3,259	$	4,800,543
Nonperforming:
90 days and over past due accruing		-		-		-		-		-		-		-		-
Nonaccrual loans with allowance for credit losses		8,300		12,612		236		-		7,422		452		-		29,022
Nonaccrual loans with no allowance for credit losses		10,226		24,575		676		2,228		11,748		1,292		-		50,745
Total nonperforming		18,526		37,187		912		2,228		19,170		1,744		-		79,767

Total loans	$	2,039,260	$	1,079,444	$	168,951	$	93,804	$	1,447,721	$	47,871	$	3,259	$	4,880,310

Troubled Debt Restructurings (“TDRs”)

TDRs are loans where the Company has modified the contractual terms of the loan as a result of the financial condition of the borrower. Subsequent to their modification, TDRs are placed on non-accrual until such time as satisfactory payment performance has been demonstrated, at which time the loan may be returned to accrual status. On a case-by-case basis, the Company may agree to modify the contractual terms of a loan to assist a borrower who may be experiencing financial difficulty, as well as to preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a TDR. The Company had TDRs totaling $20.1 million and $17.8 million as of September 30, 2021 and June 30, 2021, respectively. The allowance for credit losses associated with the TDRs presented in the tables below totaled $725,000 and $256,000 as of September 30, 2021 and June 30, 2021, respectively. As of September 30, 2021, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured in a TDR.

- 16 -

The following tables present total TDR loans at September 30, 2021 and June 30, 2021:


	September 30, 2021
	Accrual				Non-accrual				Total
	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
	(Dollars In Thousands)
Commercial loans:
Multi-family mortgage loans		-	$	-		2	$	5,718		2	$	5,718
Nonresidential mortgage		3		253		4		2,069		7		2,322
Commercial business		4		3,786		4		612		8		4,398
Construction		-		-		1		2,086		1		2,086
Total commercial loans		7		4,039		11		10,485		18		14,524

One- to four-family residential mortgage		30		4,362		7		1,007		37		5,369

Consumer loans:
Home equity loans		4		146		1		34		5		180
Total		41	$	8,547		19	$	11,526		60	$	20,073


	June 30, 2021
	Accrual				Non-accrual				Total
	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
	(Dollars In Thousands)
Commercial loans:
Multi-family mortgage loans		-	$	-		1	$	2,896		1	$	2,896
Nonresidential mortgage		1		105		6		2,275		7		2,380
Commercial business		3		3,755		6		693		9		4,448
		-		-		1		2,228		1		2,228
Total commercial loans		4		3,860		14		8,092		18		11,952

One- to four-family residential mortgage		18		2,216		20		3,405		38		5,621

Consumer loans:
Home equity loans		4		159		3		68		7		227
Total		26	$	6,235		37	$	11,565		63	$	17,800

- 17 -

The following tables present information regarding troubled debt restructurings that occurred during the three months ended September 30, 2021 and 2020:


	Three Months Ended September 30, 2021
	# of Loans		Pre-modification Recorded Investment		Post-modification Recorded Investment
	(Dollars In Thousands)
Multi-family mortgage loans		1	$	2,987	$	2,972
Total		1		2,987		2,972


	Three Months Ended September 30, 2020
	# of Loans		Pre-modification Recorded Investment		Post-modification Recorded Investment
	(Dollars In Thousands)
One- to four-family residential mortgage		1		309		308
Total		1	$	309	$	308

During the three months ended September 30, 2021 and 2020, there were no charge-offs related to TDRs. During quarter ended September 30, 2021 and 2020, there were no troubled debt restructuring defaults.

Loan modifications generally involve a reduction in interest rates and/or extension of maturity dates and also may include step up interest rates in their modified terms which will impact their weighted average yield in the future. The loans which qualified as TDRs during the quarter ended September 30, 2021 and 2020, capitalized prior past due amounts and modified the loan’s repayment terms.

In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System (the “FRB”) and the Federal Deposit Insurance Corporation (the “FDIC”), issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extension of repayment terms, or other delays in payment that are insignificant. Provisions of the CARES Act largely mirrored the provisions of the interagency statement, providing that modified loans were not to be considered TDRs if they were performing at December 31, 2019 and other considerations set forth in the interagency statements were met. Borrowers considered current are those that were less than 30 days past due at the time a modification program was implemented or at December 31, 2019.

On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law. The $900 billion relief package includes legislation that extends certain relief provisions of the CARES Act that were set to expire on December 31, 2020. This legislation extends this relief to the earlier of 60 days after the national emergency declared by the President is terminated or January 1, 2022. As of September 30, 2021, the Company had 13 non-TDR loan modifications granted under the CARES Act totaling approximately $5.6 million.

- 18 -

Individually Analyzed Loans

Effective July 1, 2020, individually analyzed loans include loans which do not share similar risk characteristics with other loans. TDR’s will generally be evaluated for individual impairment, however, after a period of sustained repayment performance which permits the credit to be returned to accrual status, a TDR would generally be removed from individual impairment analysis and returned to its corresponding pool. As of September 30, 2021, the carrying value of individually analyzed loans totaled $72.9 million, of which $61.9 million were considered collateral dependent.

For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral, less costs to sell, and the amortized cost basis of the loan as of the measurement date. See Note 12 for additional disclosure regarding fair value of individually analyzed collateral dependent loans.

The following tables presents the carrying value and related allowance of collateral dependent individually analyzed loans at the dates indicated:


	September 30, 2021
	Carrying Value		Related Allowance
	(In Thousands)
Commercial loans:
Multi-family mortgage	$	20,946	$	1,218
Nonresidential mortgage (1)		32,412		4,194
Commercial business (2)		178		-
Construction		2,086		-
Total commercial loans		55,622		5,412

One- to four-family residential mortgage (3)		6,230		257

Consumer loans:
Home equity loans (3)		70		-

Total	$	61,922	$	5,669


	June 30, 2021
	Carrying Value		Related Allowance
	(In Thousands)
Commercial loans:
Multi-family mortgage	$	18,526	$	1,368
Nonresidential mortgage (1)		32,891		4,724
Commercial business (2)		183		-
Construction		-		-
Total commercial loans		51,600		6,092

One- to four-family residential mortgage (3)		7,612		420

Consumer loans:
Home equity loans (3)		31		-

Total	$	59,243	$	6,512

(1)

Secured by income-producing nonresidential property.

(2)

Secured by business assets.

(3)

Secured by one- to four-family residential properties.

- 19 -

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. The Company uses the following definitions for risk ratings:

Pass – Loans that are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.

Special Mention – Loans which do not currently expose the Company to a sufficient degree of risk to warrant an adverse classification but have some credit deficiencies or other potential weaknesses.

Substandard – Loans which are inadequately protected by the paying capacity and net worth of the obligor or the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans which have all of the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values.

Loss – Loans which considered uncollectible or of so little value that their continuance as assets is not warranted.

- 20 -

The following table presents the risk category of loans as of September 30, 2021 by loan segment and vintage year:


	Term Loans by Origination Year for Fiscal Years ended June 30,
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
	(In Thousands)
Multi-family mortgage:
Pass	$	74,697	$	279,921	$	255,968	$	336,773	$	299,878	$	664,830	$	-	$	1,912,067
Special Mention		-		-		-		26,836		5,051		4,814		-		36,701
Substandard		-		-		-		-		2,791		27,122		-		29,913
Doubtful		-		-		-		-		-		-		-		-
Total multi-family mortgage		74,697		279,921		255,968		363,609		307,720		696,766		-		1,978,681
Non-residential mortgage:
Pass		31,464		98,113		68,198		56,159		60,264		629,554		6,142		949,894
Special Mention		-		-		-		23,520		4,102		8,931		-		36,553
Substandard		-		730		-		-		4,934		31,280		-		36,944
Doubtful		-		-		-		-		-		-		-		-
Total non-residential mortgage		31,464		98,843		68,198		79,679		69,300		669,765		6,142		1,023,391
Commercial business:
Pass		14,749		41,653		10,924		5,114		11,778		14,869		64,267		163,354
Special Mention		-		-		72		-		2,239		936		459		3,706
Substandard		-		41		73		-		1,473		293		23		1,903
Doubtful		-		-		-		-		-		420		9		429
Total commercial business		14,749		41,694		11,069		5,114		15,490		16,518		64,758		169,392
Construction loans:
Pass		2,436		54,946		18,549		11,040		14,454		2,962		5,735		110,122
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		2,104		-		2,104
Doubtful		-		-		-		-		-		-		-		-
Total construction loans		2,436		54,946		18,549		11,040		14,454		5,066		5,735		112,226
Residential mortgage:
Pass		124,524		552,925		110,464		64,802		64,542		546,053		99		1,463,409
Special Mention		-		-		-		1,226		-		706		-		1,932
Substandard		-		-		1,728		663		-		15,374		-		17,765
Doubtful		-		-		-		-		-		-		-		-
Total residential mortgage		124,524		552,925		112,192		66,691		64,542		562,133		99		1,483,106
Home equity loans:
Pass		212		812		2,210		3,828		2,542		8,880		24,009		42,493
Special Mention		-		-		-		-		-		383		-		383
Substandard		-		-		-		102		-		1,934		-		2,036
Doubtful		-		-		-		-		-		-		-		-
Total home equity loans		212		812		2,210		3,930		2,542		11,197		24,009		44,912
Other consumer loans
Pass		166		370		503		520		253		1,083		45		2,940
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		1		1
Doubtful		-		-		-		-		-		-		79		79
Other consumer loans		166		370		503		520		253		1,083		125		3,020
Total loans	$	248,248	$	1,029,511	$	468,689	$	530,583	$	474,301	$	1,962,528	$	100,868	$	4,814,728

- 21 -

The following table presents the risk category of loans as of June 30, 2021 by loan segment and vintage year:


	Term Loans by Origination Year for Fiscal Years ended June 30,
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
	(In Thousands)
Multi-family mortgage:
Pass	$	281,402	$	257,970	$	374,871	$	341,304	$	343,370	$	374,909	$	-	$	1,973,826
Special Mention		-		-		26,974		5,079		4,834		1,054		-		37,941
Substandard		-		-		-		2,896		13,198		11,399		-		27,493
Doubtful		-		-		-		-		-		-		-		-
Total multi-family mortgage		281,402		257,970		401,845		349,279		361,402		387,362		-		2,039,260
Non-residential mortgage:
Pass		99,602		77,146		56,435		64,616		254,940		441,696		6,150		1,000,585
Special Mention		-		-		23,520		4,146		8,801		4,513		-		40,980
Substandard		743		-		-		4,934		20,602		11,600		-		37,879
Doubtful		-		-		-		-		-		-		-		-
Total non-residential mortgage		100,345		77,146		79,955		73,696		284,343		457,809		6,150		1,079,444
Commercial business:
Pass		44,514		18,988		4,701		12,654		3,322		12,892		65,657		162,728
Special Mention		-		-		-		2,304		945		12		461		3,722
Substandard		41		76		160		1,474		132		189		-		2,072
Doubtful		-		-		-		-		-		420		9		429
Total commercial business		44,555		19,064		4,861		16,432		4,399		13,513		66,127		168,951
Construction loans:
Pass		40,332		17,404		11,203		13,860		1,641		1,382		5,735		91,557
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		2,247		-		2,247
Doubtful		-		-		-		-		-		-		-		-
Total construction loans		40,332		17,404		11,203		13,860		1,641		3,629		5,735		93,804
Residential mortgage:
Pass		560,543		124,606		69,917		74,754		119,238		472,587		375		1,422,020
Special Mention		-		-		1,233		-		-		712		-		1,945
Substandard		-		1,040		671		511		1,468		20,066		-		23,756
Doubtful		-		-		-		-		-		-		-		-
Total residential mortgage		560,543		125,646		71,821		75,265		120,706		493,365		375		1,447,721
Home equity loans:
Pass		834		2,508		4,585		2,778		2,241		7,798		24,788		45,532
Special Mention		-		-		-		-		-		393		-		393
Substandard		-		-		-		-		11		1,935		-		1,946
Doubtful		-		-		-		-		-		-		-		-
Total home equity loans		834		2,508		4,585		2,778		2,252		10,126		24,788		47,871
Other consumer loans
Pass		550		517		633		256		127		1,044		44		3,171
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		1		1
Doubtful		-		-		-		-		-		-		87		87
Other consumer loans		550		517		633		256		127		1,044		132		3,259
Total loans	$	1,028,561	$	500,255	$	574,903	$	531,566	$	774,870	$	1,366,848	$	103,307	$	4,880,310

Residential Mortgage Loans in Foreclosure

We may obtain physical possession of one- to four-family real estate collateralizing a residential mortgage loan via foreclosure or through an in-substance repossession. As of September 30, 2021, we held one single-family property in other real estate owned with an aggregate carrying value of $178,000 that was acquired through a foreclosure on a residential mortgage loan. As of that same date, we held 10 residential mortgage loans with aggregate carrying values totaling $1.8 million which were in the process of foreclosure. As of June 30, 2021, we held one single-family property in other real estate owned with an aggregate carrying value of $178,000 that was acquired through a foreclosure on a residential mortgage loan. As of that same date, we held 11 residential mortgage loans with aggregate carrying values totaling $2.1 million which were in the process of foreclosure.

Under New Jersey's new eviction protections, no evictions may occur now or in the future based on rent due during the time period of March 1, 2020 through August 31, 2021. Certain other eviction protections will extend until December 31, 2021, for households under certain income levels. The moratorium on home foreclosures ends on November 15, 2021, for all income levels. This includes landlords facing foreclosure who currently have tenants. The New York law, which places a moratorium on evictions for tenants who have endured COVID-related hardships and on foreclosures, will be in effect until at least January 15, 2022. As a result, since March 28, 2020, the Company has temporarily suspended residential property foreclosure sales and evictions.

These eviction restrictions may be subject to legal challenges and may change or be rescinded completely based on the results of court proceedings.

- 22 -

6. ALLOWANCE FOR CREDIT LOSSES

Adoption of Topic 326

On July 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaces the incurred loss methodology with an expected loss methodology, referred to as the “CECL” methodology.

Allowance for Credit Losses on Loans Receivable

The following tables present the balance of the allowance for credit losses at September 30, 2021 and June 30, 2021. For the quarter ended September 30, 2021 and 2020, the balance of the allowance for credit losses is based on the CECL methodology, as noted above. The tables identify the valuation allowances attributable to specifically identified impairments on individually evaluated loans, including those acquired with deteriorated credit quality, as well as valuation allowances for impairments on loans evaluated collectively. The tables include the underlying balance of loans receivable applicable to each category as of those dates.


Allowance for Credit Losses
September 30, 2021

	Multi-Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Balance of allowance for credit losses:
Loans acquired with deteriorated credit quality individually analyzed	$	-	$	2,946	$	-	$	-	$	-	$	21	$	-	$	2,967
Loans acquired with deteriorated credit quality collectively analyzed		146		658		4		49		288		-		-		1,145
Loans individually evaluated		1,218		1,248		15		-		395		-		-		2,876
Loans collectively evaluated		23,618		8,993		1,975		1,381		8,446		297		87		44,797
Total allowance for credit losses	$	24,982	$	13,845	$	1,994	$	1,430	$	9,129	$	318	$	87	$	51,785


Balance of Loans Receivable
September 30, 2021

	Multi-Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Balance of loans receivable:
Loans acquired with deteriorated credit quality individually evaluated	$	-	$	5,763	$	179	$	-	$	1,122	$	367	$	-	$	7,431
Loans acquired with deteriorated credit quality collectively evaluated		5,569		23,703		2,533		13,534		6,962		63		-		52,364
Loans individually evaluated		20,946		29,986		496		2,086		10,662		1,338		-		65,514
Loans collectively evaluated		1,952,166		963,939		166,184		96,606		1,464,360		43,144		3,020		4,689,419
Total loans	$	1,978,681	$	1,023,391	$	169,392	$	112,226	$	1,483,106	$	44,912	$	3,020	$	4,814,728
Unaccreted yield adjustments																(25,389	)
Loans receivable, net of yield adjustments															$	4,789,339

- 23 -


Allowance for Credit Losses
June 30, 2021

	Multi-Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Balance of allowance for credit losses:
Loans acquired with deteriorated credit quality individually analyzed	$	-	$	2,700	$	-	$	-	$	122	$	21	$	-	$	2,843
Loans acquired with deteriorated credit quality collectively analyzed		155		692		15		49		204		1		-		1,116
Loans individually evaluated		1,368		2,025		33		-		447		1		-		3,874
Loans collectively evaluated		26,927		10,826		2,038		1,121		8,974		410		36		50,332
Total allowance for loan losses	$	28,450	$	16,243	$	2,086	$	1,170	$	9,747	$	433	$	36	$	58,165


Balance of Loans Receivable
June 30, 2021

	Multi-Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Balance of loans receivable:
Loans acquired with deteriorated credit quality individually evaluated	$	-	$	6,519	$	183	$	-	$	3,617	$	380	$	-	$	10,699
Loans acquired with deteriorated credit quality collectively evaluated		5,599		25,844		2,533		12,970		4,785		65		-		51,796
Loans individually evaluated		18,526		30,668		729		2,228		15,553		1,364		-		69,068
Loans collectively evaluated		2,015,135		1,016,413		165,506		78,606		1,423,766		46,062		3,259		4,748,747
Total loans	$	2,039,260	$	1,079,444	$	168,951	$	93,804	$	1,447,721	$	47,871	$	3,259	$	4,880,310
Unaccreted yield adjustments																(28,916	)
Loans receivable, net of yield adjustments															$	4,851,394

The following tables present the activity in the allowance for credit losses on loans for the quarter ended September 30, 2021 and 2020.


	Three Months Ended September 30, 2021
	Multi-Family Mortgage			Non- Residential Mortgage			Commercial Business			Construction		Residential Mortgage			Home Equity Loans			Other Consumer			Total
	(In Thousands)
At June 30, 2021:	$	28,450		$	16,243		$	2,086		$	1,170	$	9,747		$	433		$	36		$	58,165

Charge offs		(104	)		(813	)		(160	)		-		-			-			(2	)		(1,079	)
Recoveries		-			-			97			-		2			-			-			99
(Reversal of) provision for credit losses		(3,364	)		(1,585	)		(29	)		260		(620	)		(115	)		53			(5,400	)

At September 30, 2021:	$	24,982		$	13,845		$	1,994		$	1,430	$	9,129		$	318		$	87		$	51,785

- 24 -


	Three Months Ended September 30, 2020
	Multi-Family Mortgage			Non- Residential Mortgage		Commercial Business			Construction		Residential Mortgage		Home Equity Loans		Other Consumer			Total
	(In Thousands)
At June 30, 2020: (prior to adoption of ASC 326):	$	20,916		$	8,763	$	1,926		$	236	$	4,860	$	568	$	58		$	37,327

Impact of adopting Topic 326		8,408			2,390		(421	)		80		9,106		92		(15	)		19,640
Charge offs		-			-		(63	)		-		-		-		(10	)		(73	)
Recoveries		-			-		2			-		-		-		4			6
Initial allowance on PCD loans		250			1,720		1,007			99		720		105		-			3,901
(Reversal of) provision for credit losses		(1,008	)		2,221		1,904			690		149		93		10			4,059

At September 30, 2020:	$	28,566		$	15,094	$	4,355		$	1,105	$	14,835	$	858	$	47		$	64,860

Allowance for Credit Losses on Off Balance Sheet Commitments

The following tables present the activity in the allowance for credit losses on off balance sheet commitments for the quarter ended September 30, 2021 and 2020:


	Three Months Ended
	September 30, 2021
	(In Thousands)
At June 30, 2021:	$	1,708

Provision reversal recorded in other non-interest expense		(124	)

At September 30, 2021:	$	1,584


	Three Months Ended
	September 30, 2020
	(In Thousands)
At June 30, 2020: (prior to adoption of ASC 326):	$	-

Impact of adopting Topic 326 (1)		536
Provision recorded in other non-interest expense		468

At September 30, 2020:	$	1,004

(1)

Adoption of CECL accounting standard effective July 1, 2020.

- 25 -

7. DEPOSITS

Deposits are summarized as follows:


	September 30,		June 30,
	2021		2021
	(In Thousands)
Non-interest-bearing demand	$	631,344	$	593,718
Interest-bearing demand		1,937,661		1,902,478
Savings		1,089,699		1,111,364
Certificates of deposits		1,736,435		1,877,746
Total deposits	$	5,395,139	$	5,485,306

8. BORROWINGS

Fixed rate advances from the FHLB of New York mature as follows:


	September 30, 2021						June 30, 2021
	Balance			Weighted Average Interest Rate			Balance			Weighted Average Interest Rate
	(Dollars in Thousands)
By remaining period to maturity:
Less than one year	$	390,000			0.36	%	$	390,000			0.33	%
One to two years		145,000			3.04			145,000			3.04
Two to three years		22,500			2.63			22,500			2.63
Three to four years		103,500			2.68			103,500			2.68
Four to five years		6,500			2.82			6,500			2.82
Greater than five years		-			-			-			-
Total advances		667,500			1.40	%		667,500			1.38	%
Unamortized fair value adjustments		(1,510	)					(1,624	)
Total advances, net of fair value adjustments	$	665,990					$	665,876

At September 30, 2021, FHLB advances were collateralized by the FHLB capital stock owned by the Bank and mortgage loans and securities with carrying values totaling approximately $3.34 billion and $152.7 million, respectively. At June 30, 2021, FHLB advances were collateralized by the FHLB capital stock owned by the Bank and mortgage loans and securities with carrying values totaling approximately $3.27 billion and $170.1 million, respectively.

Borrowings at September 30, 2021 also included overnight borrowings totaling $55.0 million. By comparison, overnight borrowings totaled $20.0 million at June 30, 2021.

- 26 -

9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company uses various financial instruments, including derivatives, to manage its exposure to interest rate risk. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to specific wholesale funding positions.

Fair Values of Derivative Instruments on the Statement of Financial Condition

The tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the Statement of Financial Condition as of September 30, 2021 and June 30, 2021:


	September 30, 2021
	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
	(In Thousands)
Derivatives designated as hedging instruments:
Interest rate contracts	Other assets	$	3,255	Other liabilities	$	450
Total		$	3,255		$	450


	June 30, 2021
	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
	(In Thousands)
Derivatives designated as hedging instruments:
Interest rate contracts	Other assets	$	1,832	Other liabilities	$	673
Total		$	1,832		$	673

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using derivatives are primarily to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company has entered into interest rate swaps and caps as part of its interest rate risk management strategy. These interest rate products are designated as cash flow hedges. As of September 30, 2021, the Company had a total of 11 interest rate swaps and caps with a total notional amount of $840.0 million hedging specific wholesale funding positions.

For derivatives designated as cash flow hedges, the gain or loss on the derivative is recorded in other comprehensive income, net of tax, and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable rate wholesale funding positions. During the quarter ended September 30, 2021, the Company had $1.5 million of reclassifications to interest expense. During the next twelve months, the Company estimates that $5.1 million will be reclassified as an increase in interest expense.

- 27 -

The tables below present the pre-tax effects of the Company’s derivative instruments on the Consolidated Statements of Income for the three months ended September 30, 2021 and 2020:


	Three Months Ended September 30, 2021
	Amount of Gain (Loss) Recognized in OCI on Derivatives		Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	(In Thousands)
Derivatives in cash flow hedging relationships:
Interest rate contracts	$	154	Interest expense	$	(1,497	)
Total	$	154		$	(1,497	)


	Three Months Ended September 30, 2020
	Amount of Gain (Loss) Recognized in OCI on Derivatives			Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	(In Thousands)
Derivatives in cash flow hedging relationships:
Interest rate contracts	$	(111	)	Interest expense	$	(2,372	)
Total	$	(111	)		$	(2,372	)

Offsetting Derivatives

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives in the Consolidated Statements of Financial Condition as of September 30, 2021 and June 30, 2021, respectively. The net amounts presented for derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Consolidated Statements of Financial Condition.


	September 30, 2021
								Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset			Net Amounts Presented		Financial Instruments		Cash Collateral Received			Net Amount
	(In Thousands)
Assets:
Interest rate contracts	$	7,386	$	(4,131	)	$	3,255	$	-	$	-		$	3,255
Total	$	7,386	$	(4,131	)	$	3,255	$	-	$	-		$	3,255



								Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset			Net Amounts Presented		Financial Instruments		Cash Collateral Posted			Net Amount
	(In Thousands)
Liabilities:
Interest rate contracts	$	4,581	$	(4,131	)	$	450	$	-	$	(450	)	$	-
Total	$	4,581	$	(4,131	)	$	450	$	-	$	(450	)	$	-

- 28 -


	June 30, 2021
								Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset			Net Amounts Presented		Financial Instruments		Cash Collateral Received			Net Amount
	(In Thousands)
Assets:
Interest rate contracts	$	6,847	$	(5,015	)	$	1,832	$	-	$	-		$	1,832
Total	$	6,847	$	(5,015	)	$	1,832	$	-	$	-		$	1,832

								Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset			Net Amounts Presented		Financial Instruments		Cash Collateral Posted			Net Amount
	(In Thousands)
Liabilities:
Interest rate contracts	$	5,688	$	(5,015	)	$	673	$	-	$	(673	)	$	-
Total	$	5,688	$	(5,015	)	$	673	$	-	$	(673	)	$	-

Credit Risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty. The Company also has agreements with its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well-capitalized institution, then the Company could be required to terminate its derivative positions with the counterparty. As of September 30, 2021, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to those agreements was $455,000.

As required under the enforceable master netting arrangement with its derivatives counterparties, at September 30, 2021, the Company posted financial collateral of $450,000 that was not included as an offsetting amount.

In addition to the derivative instruments noted above, the Company’s pipeline of loans held for sale at September 30, 2021 and June 30, 2021, included $54.7 million and $48.4 million, respectively, of in process loans whose terms included interest rate locks to borrowers, which are considered free-standing derivative instruments whose fair values are not material to our financial condition or results of operations.

10. BENEFIT PLANS

Components of Net Periodic Expense

The following table sets forth the aggregate net periodic benefit expense for the Bank’s Benefit Equalization Plan, Postretirement Welfare Plan, Directors’ Consultation and Retirement Plan and Atlas Bank Retirement Income Plan:


	Three Months Ended						Affected Line Item in the Consolidated
	September 30,						Statements of Income
	2021			2020
	(In Thousands)
Service cost	$	29		$	26		Salaries and employee benefits
Interest cost		69			66		Miscellaneous non-interest expense
Amortization of unrecognized loss		20			21		Miscellaneous non-interest expense
Expected return on assets		(28	)		(28	)	Miscellaneous non-interest expense
Net periodic benefit cost	$	90		$	85

- 29 -

11. INCOME TAXES

The following table presents a reconciliation between the reported income taxes for the periods presented and the income taxes which would be computed by applying the federal income tax rate of 21% to income for the quarter ended September 30, 2021 and 2020:


	Three Months Ended
	September 30,
	2021			2020
	(Dollars in Thousands)
Income before income taxes	$	26,987		$	14,263
Statutory federal tax rate		21	%		21	%
Federal income tax expense at statutory rate	$	5,667		$	2,995
(Reduction) increase in income taxes resulting from:
Tax exempt interest		(70	)		(94	)
State tax, net of federal tax effect		2,128			784
Incentive stock option compensation expense		23			20
Income from bank-owned life insurance		(328	)		(327	)
Non-deductible merger-related expenses		-			49
Bargain purchase gain		-			(641	)
Other items, net		(148	)		98
Total income tax expense	$	7,272		$	2,884
Effective income tax rate		26.95	%		20.22	%

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:


	Level 1:		Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
	Level 2:		Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability or inputs that are derived principally from, or corroborated by, market data by correlation or other means.
	Level 3:		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

- 30 -

Assets Measured on a Recurring Basis:

The following methods and significant assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis at September 30, 2021 and June 30, 2021:

Investment Securities Available for Sale

The Company’s available for sale investment securities are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the securities’ terms and conditions, among other things. From time to time, the Company validates prices supplied by the independent pricing service by comparison to prices obtained from third-party sources or derived using internal models.

Derivatives

The Company has contracted with a third party vendor to provide periodic valuations for its interest rate derivatives to determine the fair value of its interest rate caps and swaps. The vendor utilizes standard valuation methodologies applicable to interest rate derivatives such as discounted cash flow analysis and extensions of the Black-Scholes model. Such valuations are based upon readily observable market data and are therefore considered Level 2 valuations by the Company.

Those assets measured at fair value on a recurring basis are summarized below:


	September 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)
Assets:
Debt securities available for sale:
Obligations of state and political subdivisions		-		33,911		-		33,911
Asset-backed securities		-		235,060		-		235,060
Collateralized loan obligations		-		253,443		-		253,443
Corporate bonds		-		163,521		-		163,521
Total debt securities		-		685,935		-		685,935

Mortgage-backed securities available for sale:
Collateralized mortgage obligations		-		11,526		-		11,526
Residential pass-through securities		-		689,313		-		689,313
Commercial pass-through securities		-		264,382		-		264,382
Total mortgage-backed securities		-		965,221		-		965,221
Total securities available for sale	$	-	$	1,651,156	$	-	$	1,651,156
Interest rate contracts		-		3,255		-		3,255

Total assets	$	-	$	1,654,411	$	-	$	1,654,411

Liabilities:
Interest rate contracts	$	-	$	450	$	-	$	450
Total liabilities	$	-	$	450	$	-	$	450

- 31 -


	June 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)
Assets:
Debt securities available for sale:
Obligations of state and political subdivisions		-		34,603		-		34,603
Asset-backed securities		-		242,989		-		242,989
Collateralized loan obligations		-		189,880		-		189,880
Corporate bonds		-		158,351		-		158,351
Total debt securities		-		625,823		-		625,823

Mortgage-backed securities available for sale:
Collateralized mortgage obligations		-		13,739		-		13,739
Residential pass-through securities		-		744,491		-		744,491
Commercial pass-through securities		-		292,811		-		292,811
Total mortgage-backed securities		-		1,051,041		-		1,051,041
Total securities available for sale		-		1,676,864		-		1,676,864
Interest rate contracts		-		1,832		-		1,832

Total assets	$	-	$	1,678,696	$	-	$	1,678,696

Liabilities:
Interest rate contracts	$	-	$	673	$	-	$	673
Total liabilities	$	-	$	673	$	-	$	673

Assets Measured on a Non-Recurring Basis:

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a non-recurring basis at September 30, 2021 and June 30, 2021:

Collateral Dependent Individually Analyzed Loans:

The fair value of collateral dependent loans that are individually analyzed is determined based upon the appraised fair value of the underlying collateral, less costs to sell. Such collateral primarily consists of real estate and, to a lesser extent, other business assets. Management may also adjust appraised values to reflect estimated changes in market values or apply other adjustments to appraised values resulting from its knowledge of the collateral. Internal valuations may be utilized to determine the fair value of other business assets. For non-collateral-dependent loans, management estimates fair value using discounted cash flows based on inputs that are largely unobservable and instead reflect management’s own estimates of the assumptions as a market participant would in pricing such loans. Collateral dependent individually analyzed loans are considered a Level 3 valuation by the Company.

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Other Real Estate Owned

Other real estate owned is recorded at estimated fair value, less estimated selling costs when acquired, thus establishing a new cost basis. Fair value is generally based on independent appraisals. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for credit losses. If further declines in the estimated fair value of the asset occur, a write-down is recorded through expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions.

Those assets measured at fair value on a non-recurring basis are summarized below:


	September 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)
Collateral dependent loans:
Residential mortgage	$	-	$	-	$	2,443	$	2,443
Multi-family mortgage		-		-		6,932		6,932
Non-residential mortgage		-		-		8,383		8,383
Total	$	-	$	-	$	17,758	$	17,758

Other real estate owned, net:
Residential			$	-	$	178	$	178
Total	$	-	$	-	$	178	$	178


	June 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)
Collateral dependent loans:
Residential mortgage	$	-	$	-	$	3,051	$	3,051
Multi-family mortgage						6,932		6,932
Non-residential mortgage		-		-		8,679		8,679
Total	$	-	$	-	$	18,662	$	18,662

Other real estate owned, net:
Residential		-		-		178		178
Total	$	-	$	-	$	178	$	178

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The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which the Company has utilized adjusted Level 3 inputs to determine fair value:


	September 30, 2021
	Fair Value		Valuation Techniques		Unobservable Input		Range	Weighted Average
	(Dollars in Thousands)
Collateral dependent loans:
Residential mortgage	$	2,443	Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	7% - 14%		10.11	%
Multi-family mortgage		6,932	Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	10% - 11%		10.40	%
Non-residential mortgage		8,383	Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	9% - 24%		16.69	%
Total	$	17,758

Other real estate owned, net:
Residential	$	178	Market valuation of underlying collateral	(3)	Adjustments to reflect current conditions/selling costs	(2)	6.00%		6.00	%
Total	$	178


	June 30, 2021
	Fair Value		Valuation Techniques		Unobservable Input		Range	Weighted Average
	(Dollars in Thousands)
Collateral dependent loans:
Residential mortgage	$	3,051	Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	7% - 13%		9.77	%
Multi-family mortgage		6,932	Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	10% - 11%		10.39	%
Non-residential mortgage		8,679	Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	9% - 16%		14.48	%
Total	$	18,662

Other real estate owned, net:
Residential	$	178	Market valuation of underlying collateral	(3)	Adjustments to reflect current conditions/selling costs	(2)	6.00%		6.00	%
Total	$	178

(1)

The fair value of collateral dependent individually analyzed loans is generally determined based on an independent appraisal of the fair value of a loan’s underlying collateral.

(2)

The fair value basis of collateral dependent individually analyzed loans and other real estate owned is adjusted to reflect management’s estimates of selling costs including, but not necessarily limited to, real estate brokerage commissions and title transfer fees.

(3)

The fair value of other real estate owned is generally determined based upon the lower of an independent appraisal of the property’s fair value or the applicable listing price or contracted sales price.

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At September 30, 2021, collateral dependent loans valued using Level 3 inputs comprised loans with principal balances totaling $23.4 million and valuation allowances of $5.7 million reflecting fair values of $17.8 million. By comparison, at June 30, 2021, collateral dependent loans valued using Level 3 inputs comprised loans with principal balances totaling $25.2 million and valuation allowances of $6.5 million reflecting fair values of $18.7 million.

Once a loan is foreclosed, the fair value of the other real estate owned continues to be evaluated based upon the fair value of the repossessed real estate originally securing the loan. At September 30, 2021 and June 30, 2021, the Company held other real estate owned totaling $178,000, for both comparative periods, whose carrying value was written down utilizing Level 3 inputs.

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2021 and June 30, 2021:


	September 30, 2021
	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	54,070	$	54,070	$	54,070	$	-	$	-
Investment securities available for sale		1,651,156		1,651,156		-		1,651,156		-
Investment securities held to maturity		37,497		38,673		-		38,673		-
Loans held-for-sale		12,884		13,146		-		13,146		-
Net loans receivable		4,737,554		4,761,240		-		-		4,761,240
FHLB Stock		36,615		-		-		-		-
Interest receivable		19,541		19,541		-		4,981		14,560
Interest rate contracts		3,255		3,255		-		3,255		-

Financial liabilities:
Deposits		5,395,139		5,398,708		3,658,704		-		1,740,004
Borrowings		720,990		732,891		-		-		732,891
Interest payable on deposits		838		838		252		-		586
Interest payable on borrowings		516		516		-		-		516
Interest rate contracts		450		450		-		450		-

- 35 -


	June 30, 2021
	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	67,855	$	67,855	$	67,855	$	-	$	-
Investment securities available for sale		1,676,864		1,676,864		-		1,676,864		-
Investment securities held to maturity		38,138		39,610		-		39,610		-
Loans held-for-sale		16,492		16,934		-		16,934		-
Net loans receivable		4,793,229		4,830,136		-		-		4,830,136
FHLB Stock		36,615		-		-		-		-
Interest receivable		19,362		19,362		1		4,238		15,123
Interest rate contracts		1,832		1,832		-		1,832		-

Financial liabilities:
Deposits		5,485,306		5,490,923		3,607,560		-		1,883,363
Borrowings		685,876		701,419		-		-		701,419
Interest payable on deposits		145		145		96		-		49
Interest payable on borrowings		1,335		1,335		-		-		1,335
Interest rate contracts		673		673		-		673		-

Commitments. The fair value of commitments to fund credit lines and originate or participate in loans held in portfolio or loans held for sale is estimated using fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, including those relating to loans held for sale that are considered derivative instruments for financial statement reporting purposes, the fair value also considers the difference between current levels of interest and the committed rates. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, is not considered material for disclosure.

Limitations. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no fair value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to value anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment, and advances from borrowers for taxes and insurance. In addition, the ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

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13. COMPREHENSIVE INCOME

The components of accumulated other comprehensive income included in stockholders’ equity at September 30, 2021 and June 30, 2021 are as follows:


	September 30,			June 30,
	2021			2021
	(In Thousands)
Net unrealized gain on securities available for sale	$	2,964		$	10,011
Tax effect		(817	)		(2,882	)
Net of tax amount		2,147			7,129

Fair value adjustments on derivatives		1,339			(312	)
Tax effect		(393	)		94
Net of tax amount		946			(218	)

Benefit plan adjustments		(1,073	)		(1,093	)
Tax effect		316			326
Net of tax amount		(757	)		(767	)

Total accumulated other comprehensive income	$	2,336		$	6,144

Other comprehensive (loss) income and related tax effects for the three months ended September 30, 2021 and 2020 are presented in the following table:


	Three Months Ended
	September 30,
	2021			2020
	(In Thousands)
Net unrealized holding (loss) gain on securities available for sale	$	(7,046	)	$	1,182

Net realized (gain) loss on sale and call of securities available for sale (1)		(1	)		377

Fair value adjustments on derivatives		1,651			2,261

Benefit plans:
Amortization of actuarial loss		20			21
Net actuarial gain (2)		-			-
Net change in benefit plan accrued expense		20			21

Other comprehensive (loss) income before taxes		(5,376	)		3,841
Tax effect		1,568			(1,124	)
Total other comprehensive (loss) income	$	(3,808	)	$	2,717

(1)

Represents amounts reclassified out of accumulated other comprehensive income and included in gain on sale of securities on the consolidated statements of income.

(2)

Represents amounts reclassified out of accumulated other comprehensive income and included in the computation of net periodic pension expense. See Note 10 – Benefit Plans for additional information.

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14. NET INCOME PER COMMON SHARE (“EPS”)

The following schedule shows the Company’s earnings per share calculations for the periods presented:


	Three Months Ended September 30,
	2021		2020
	(In Thousands, Except Per Share Data)
Net income	$	19,715	$	11,379

Weighted average number of common shares outstanding - basic		74,537		86,008
Effect of dilutive securities		19		1
Weighted average number of common shares outstanding - diluted		74,556		86,009

Basic earnings per share	$	0.26	$	0.13
Diluted earnings per share	$	0.26	$	0.13

Stock options for 3,115,000 and 3,910,398 shares of common stock were not considered in computing diluted earnings per share at September 30, 2021 and September 30, 2020, respectively, because they were considered anti-dilutive.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q may include certain forward-looking statements based on current management expectations. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may”, “will”, “believe”, “expect”, “estimate”, “anticipate”, “continue”, or similar terms or variations on those terms, or the negative of those terms. The actual results of the Company could differ materially from those management expectations. This includes statements regarding general economic conditions, public health crisis such as the governmental, social and economic effects of the novel coronavirus, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities and failure to integrate or profitably operate acquired businesses. Additional potential factors include changes in interest rates, deposit flows, cost of funds, demand for loan products and financial services, competition and changes in the quality or composition of loan and investment portfolios of the Company. Other factors that could cause future results to vary from current management expectations include changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices. Further description of the risks and uncertainties to the business are included in the Company’s other filings with the Securities and Exchange Commission.

In addition, the COVID-19 pandemic has had, and may continue to have, an adverse impact on the Company, its clients and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including whether the coronavirus can continue to be controlled and abated and if the economy is able to remain open. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially remain open, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; due to a decline in our stock price or other factors, goodwill may become impaired and be required to be written down; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and actions taken by governmental authorities in response to the COVID‐19 pandemic, including vaccination mandates, and their potential effects on our workforce, human capital resources and infrastructure. Reference is made to Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021.

Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies

Our accounting policies are integral to understanding the results reported. We consider accounting policies that require management to exercise significant judgment or discretion or to make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. At September 30, 2021, the Company considers the determination of the allowance for credit losses on loans, individually evaluating loans, calculating the allowance of credit losses on acquired loans, accounting for business combinations and the valuation of goodwill and identifiable intangible assets to be our critical accounting policies. Reference is made to Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, for a description of the Company's critical accounting policies.

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Comparison of Financial Condition at September 30, 2021 and June 30, 2021

Executive Summary. Total assets decreased $100.0 million to $7.18 billion at September 30, 2021 from $7.28 billion at June 30, 2021. The decrease primarily reflected decreases in cash and equivalents, investment securities, loans held-for-sale, net loans receivable, and other assets.

Investment Securities. Investment securities available for sale decreased $25.7 million, to $1.65 billion at September 30, 2021, from $1.68 billion at June 30, 2021. This decrease was largely the result of principal repayments of $100.7 million which were partially offset by security purchases of $82.0 million. Investment securities held to maturity decreased $641,000 to $37.5 million at September 30, 2021 from $38.1 million at June 30, 2021.

Additional information regarding investment securities at September 30, 2021 and June 30, 2021 is presented in Note 4 to the unaudited consolidated financial statements.

Loans Held-for-Sale. Loans held-for-sale totaled $12.9 million at September 30, 2021 as compared to $16.5 million at June 30, 2021 and are reported separately from the balance of net loans receivable. During the quarter ended September 30, 2021, $64.2 million of residential mortgage loans were sold, resulting in a gain on sale of $1.0 million.

Net Loans Receivable. Net loans receivable decreased $55.7 million, or 1.2%, to $4.74 billion at September 30, 2021 from $4.79 billion at June 30, 2021. Detail regarding the change in the loan portfolio, by loan segment, is presented below:


	September 30,			June 30,			Increase/
	2021			2021			(Decrease)
	(In Thousands)
Commercial loans:
Multi-family mortgage	$	1,978,681		$	2,039,260		$	(60,579	)
Nonresidential mortgage		1,023,391			1,079,444			(56,053	)
Commercial business		169,392			168,951			441
Construction		112,226			93,804			18,422
Total commercial loans		3,283,690			3,381,459			(97,769	)

One- to four-family residential mortgage		1,483,106			1,447,721			35,385

Consumer loans:
Home equity loans		44,912			47,871			(2,959	)
Other consumer		3,020			3,259			(239	)
Total consumer		47,932			51,130			(3,198	)

Total loans		4,814,728			4,880,310			(65,582	)

Unaccreted yield adjustments		(25,389	)		(28,916	)		3,527
Allowance for credit losses		(51,785	)		(58,165	)		6,380

Net loans receivable	$	4,737,554		$	4,793,229		$	(55,675	)

Commercial loan origination volume for the quarter ended September 30, 2021 totaled $163.5 million, which comprised $106.0 million of commercial mortgage loan originations, $34.0 million of commercial business loan originations and construction loan disbursements of $23.5 million.

One- to four-family residential mortgage loan origination volume for the quarter ended September 30, 2021, excluding loans held-for-sale, totaled $106.9 million and was augmented with the funding of purchased loans totaling $19.6 million. Home equity loan and line of credit origination volume for the same period totaled $3.3 million.

- 40 -

Loan-to-value ("LTV") ratios are based on current period loan balances and original appraised values at the time of origination unless a current appraisal has been obtained as a result of the loan being deemed collateral dependent and individually analyzed. The following table sets forth the composition of our real estate secured loans indicating the LTV, by loan category, at September 30, 2021:


	September 30, 2021
	Balance		LTV
	(In Thousands)
Commercial mortgage loans:
Multi-family mortgage loans	$	1,978,681		64	%
Nonresidential mortgage loans		1,023,391		53	%
Construction loans		112,226		61	%
Total commercial mortgage loans		3,114,298		60	%

One- to four-family residential mortgage		1,483,106		60	%

Consumer loans:
Home equity loans		44,912		46	%

Total mortgage loans	$	4,642,316		60	%

Additional information about the Company’s loans at September 30, 2021 and June 30, 2021 is presented in Note 5 to the unaudited consolidated financial statements.

Nonperforming Loans and TDRs. Nonperforming loans decreased by $6.8 million to $72.9 million, or 1.02% of total assets at September 30, 2021, from $79.8 million, or 1.10% of total assets at June 30, 2021. At September 30, 2021, the Company had accruing TDRs totaling $8.5 million, an increase of $2.3 million from $6.2 million at June 30, 2021. At September 30, 2021, the Company had non-accrual TDRs totaling $11.5 million, a decrease of $39,000 from $11.6 million at June 30, 2021.

Based on Section 4013 of the CARES Act, the 2021 Consolidated Appropriations Act and related regulatory guidance promulgated by federal banking regulators, qualifying loan modifications made in response to the COVID-19 pandemic, including short-term payment deferrals, are not considered to be TDRs. The Company had active payment deferrals, which were not considered TDRs, of $5.6 million as of September 30, 2021 and June 30, 2021.

Additional information about the Company’s nonperforming loans and TDRs at September 30, 2021 and June 30, 2021 is presented in Note 5 to the unaudited consolidated financial statements.

Allowance for Credit Losses. At September 30, 2021, the ACL totaled $51.8 million, or 1.08% of total loans, reflecting a decrease of $6.4 million from $58.2 million, or 1.19% of total loans, at June 30, 2021. The decrease was largely attributable to a provision for credit loss reversal of $5.4 million, primarily resulting from a reduction in the expected life of various segments of the loan portfolio along with continued improvement in the Company's credit risk outlook. Also contributing to this decrease were net charge-offs of $980,000 of which $935,000 had previously been individually reserved for within the ACL.

Additional information about the ACL at September 30, 2021 and June 30, 2021 is presented in Note 6 to the unaudited consolidated financial statements.

Other Assets. The aggregate balance of other assets, including premises and equipment, FHLB stock, interest receivable, goodwill, core deposit intangibles, bank owned life insurance, deferred income taxes, OREO and other assets, decreased $630,000 to $690.5 million at September 30, 2021 from $691.2 million at June 30, 2021. The decrease in the balance of these other assets for the quarter ended September 30, 2021 generally reflected normal operating fluctuations in their respective balances.

- 41 -

Deposits. Total deposits decreased $90.2 million, or 1.6%, to $5.40 billion at September 30, 2021 from $5.49 billion at June 30, 2021. The decrease in deposits largely reflected the controlled run-off of time deposits which was partially offset by growth in core non-maturity deposits. The following table sets forth the distribution of, and changes in, deposits, by type, at the dates indicated:


	September 30,		June 30,
	2021		2021		Increase
	(In Thousands)
Non-interest-bearing deposits	$	631,344	$	593,718	$	37,626

Interest-bearing deposits:
Interest-bearing demand		1,937,661		1,902,478		35,183
Savings		1,089,699		1,111,364		(21,665	)
Certificates of deposit		1,736,435		1,877,746		(141,311	)
Interest-bearing deposits		4,763,795		4,891,588		(127,793	)
Total deposits	$	5,395,139	$	5,485,306	$	(90,167	)

Additional information about the Company’s deposits at September 30, 2021 and June 30, 2021 is presented in Note 7 to the unaudited consolidated financial statements.

Borrowings. The balance of borrowings increased $35.1 million, or 5.1%, to $721.0 million at September 30, 2021 from $685.9 million at June 30, 2021. The increase in borrowings during the quarter ended September 30, 2021 largely reflected an increase in overnight borrowings drawn for liquidity management purposes.

Additional information about the Company’s borrowings at September 30, 2021 and June 30, 2021 is presented in Note 8 to the unaudited consolidated financial statements.

Other Liabilities. The balance of other liabilities, including advance payments by borrowers for taxes and other miscellaneous liabilities, decreased $16.5 million to $53.1 million at September 30, 2021 from $69.6 million at June 30, 2021. The decrease in these other liabilities largely reflected the payment of a $12.5 million loan participation liability which was outstanding at June 30, 2021. The remaining change in the balance of these other liabilities generally reflected normal operating fluctuations during the period.

Stockholders’ Equity. Stockholders’ equity decreased $28.5 million to $1.01 billion at September 30, 2021 from $1.04 billion at June 30, 2021. The decrease in stockholders’ equity during the quarter ended September 30, 2021 largely reflected share repurchases totaling $39.0 million and cash dividends totaling $7.4 million, partially offset by net income of $19.7 million.

Book value per share increased by $0.17 to $13.38 at September 30, 2021 while tangible book value per share increased by $0.06 to $10.55 at September 30, 2021.

On September 20, 2021, the Company announced the completion of its seventh stock repurchase plan which authorized the repurchase of 4,064,649 shares. Such shares were repurchased at a cost of $50.5 million, or an average price of $12.43 per share. On September 22, 2021, the Company announced the authorization of its eighth stock repurchase plan, which authorized the repurchase of up to 7,602,021 shares, or 10% of the shares then outstanding. Through September 30, 2021, the Company repurchased a total of 213,139 shares under this plan, at a total cost of $2.6 million and at an average cost of $12.41 per share.

During the quarter ended September 30, 2021, the Company repurchased a total of 3,157,788 shares of its common stock which were repurchased in conjunction with the Company’s seventh and eighth repurchase plans. Such shares were repurchased at a total cost of $39.0 million and at an average cost of $12.35 per share.

- 42 -

Comparison of Operating Results for the Quarter ended September 30, 2021 and September 30, 2020

Net Income. Net income for the quarter ended September 30, 2021 was $19.7 million, or $0.26 per diluted share, compared to $11.4 million, or $0.13 per diluted share for the quarter ended September 30, 2020. The increase in net income reflected an increase in net interest income, a decrease in the provision for credit losses and a decrease in non-interest expense partially offset by a decrease in non-interest income and an increase in income tax expense.

Net Interest Income. Effective July 1, 2021, loan prepayment penalty income was reclassified to interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Interest income and non-interest income for all periods presented reflect this reclassification.

Net interest income increased by $4.8 million to $49.6 million for the quarter ended September 30, 2021 compared to $44.8 million for the quarter ended September 30, 2020. The increase between the comparative periods resulted from a decrease of $9.1 million in interest expense partially offset by a decrease of $4.3 million in interest income. Included in net interest income, for the quarters ended September 30, 2021 and September 30, 2020, respectively, was purchase accounting accretion of $2.9 million and $4.2 million and loan prepayment penalty income of $1.7 million and $631,000.

Net interest margin increased 29 basis points to 2.99% for the quarter ended September 30, 2021, from 2.70% for quarter ended September 30, 2020 and reflected a decrease in the average cost of interest-bearing liabilities that was partially offset by a decrease in the average yield on interest-earning assets.

Details surrounding the composition of, and changes to, net interest income are presented in the table below which reflects the components of the average balance sheet and of net interest income for the periods indicated. We derived the average yields and costs by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented with daily balances used to derive average balances. No tax equivalent adjustments have been made to yield or costs. Non-accrual loans were included in the calculation of average balances, however interest receivable on these loans has been fully reserved for and therefore not included in interest income. The yields and costs set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

- 43 -


	For the Quarter Ended September 30,
	2021								2020
	Average Balance			Interest		Average Yield/ Cost			Average Balance			Interest		Average Yield/ Cost
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable (1)	$	4,835,676		$	48,230		3.99	%	$	4,958,293		$	52,811		4.26	%
Taxable investment securities (2)		1,649,953			8,212		1.99			1,350,511			7,336		2.17
Tax-exempt securities (2)		59,115			333		2.25			82,603			454		2.20
Other interest-earning assets (3)		85,749			431		2.01			247,543			914		1.48
Total interest-earning assets		6,630,493			57,206		3.45			6,638,950			61,515		3.71
Non-interest-earning assets		616,735								624,252
Total assets	$	7,247,228							$	7,263,202

Interest-bearing liabilities:
Interest-bearing demand	$	1,954,271		$	1,147		0.23		$	1,464,238		$	2,182		0.60
Savings		1,102,865			334		0.12			1,006,075			1,445		0.57
Certificates of deposit		1,798,473			2,584		0.57			1,988,689			7,435		1.50
Total interest-bearing deposits		4,855,609			4,065		0.33			4,459,002			11,062		0.99
Borrowings		694,447			3,551		2.05			1,134,404			5,660		2.00
Total interest-bearing liabilities		5,550,056			7,616		0.55			5,593,406			16,722		1.20
Non-interest-bearing liabilities (4)		667,164								558,761
Total liabilities		6,217,220								6,152,167
Stockholders' equity		1,030,008								1,111,035
Total liabilities and stockholders' equity	$	7,247,228							$	7,263,202

Net interest income				$	49,590							$	44,793
Interest rate spread (5)							2.90	%							2.51	%
Net interest margin (6)							2.99	%							2.70	%
Ratio of interest-earning assets to interest-bearing liabilities		1.19	X							1.19	X

(1)

Loans held-for-sale and non-accruing loans have been included in loans receivable and the effect of such inclusion was not material. Allowance for credit losses has been included in non-interest-earning assets.

(2)

Fair value adjustments have been excluded in the balances of interest-earning assets.

(3)

Includes interest-bearing deposits at other banks and FHLB of New York capital stock.

(4)

Includes average balances of non-interest-bearing deposits of $610,271,000 and $479,141,000, for the quarter ended September 30, 2021, and 2020, respectively.

(5)

Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

(6)

Net interest margin represents net interest income as a percentage of average interest-earning assets.

Provision for Credit Losses. The provision for credit losses decreased $9.5 million to a provision for credit losses reversal of $5.4 million for the quarter ended September 30, 2021, compared to a provision for credit losses of $4.1 million for the quarter ended September 30, 2020. The decrease in the provision between comparative periods was largely attributable to a release of reserves, reflecting a reduction in the expected life of various loan segments and continued improvement in the Company’s credit risk outlook. By comparison, the provision for the quarter ended September 30, 2020, was largely attributable to $5.1 million of provision expense on non-PCD loans acquired in connection with the acquisition of MSB.

Additional information regarding the ACL and the associated provisions recognized during the quarters ended September 30, 2021 and 2020 is presented in Note 6 to the unaudited consolidated financial statements as well as the Comparison of Financial Condition at September 30, 2021 and June 30, 2021.

- 44 -

Non-Interest Income. Non-interest income decreased $3.3 million to $3.8 million for the quarter ended September 30, 2021, primarily due to the $3.1 million bargain purchase gain that was recognized in the prior comparative period in connection with the acquisition of MSB. The remaining increases and decreases in non-interest income reflected the effects of several offsetting factors, as described below.

Fees and service charges increased $162,000 to $607,000 for the quarter ended September 30, 2021. The increase primarily reflected an increase in loan-related fees and charges.

Gain on sale and call of securities reflected a net gain of $1,000 during the quarter ended September 30, 2021 compared to a net loss of $377,000, recorded during the earlier comparative period.

Gain on sale of loans decreased $884,000 to $1.0 million for the quarter ended September 30, 2021. The decrease in loan sale gains largely reflected a decrease in the average net price, between comparative periods, at which such loans were sold, coupled with a decrease in the volume of loans originated and sold.

Other non-interest income increased $128,000 to $218,000 for the quarter ended September 30, 2021. The increase primarily reflected $44,000 of referral fees related to PPP loans and $61,000 of broker fees related to residential mortgage loans.

The remaining changes in the other components of non-interest income between comparative periods generally reflected normal operating fluctuations within those line items.

Non-Interest Expense. Total non-interest expense decreased $1.8 million to $31.8 million for the quarter ended September 30, 2021.

Salaries and employee benefits increased $1.6 million to $18.6 million for the quarter ended September 30, 2021. This increase was largely due to the impact of staff additions, annual merit increases and increases in benefit plan expense, including ESOP expense.

Net occupancy expense of premises increased $1.4 million to $4.5 million for the quarter ended September 30, 2021. This increase was primarily due to non-recurring expense of $1.3 million and $250,000, respectively, related to the consolidation of three retail branch locations and facility repairs made in connection with damage incurred during Tropical Storm Ida.

Equipment and systems expense increased $255,000 to $3.8 million for the quarter ended September 30, 2021, largely attributable to increases in technology expense associated with the Company's ongoing digital banking initiatives.

Advertising and marketing expense decreased $108,000 to $392,000 for the quarter ended September 30, 2021. This decrease largely reflected changes in advertising expense across a variety of advertising formats reflecting normal fluctuations in the timing of certain campaigns supporting our loan and deposit growth initiatives.

Merger-related expenses, associated with the Company’s acquisition of MSB, totaled $4.3 million for the quarter ended September 30, 2020 for which no such costs were recorded in the current period.

Other non-interest expense decreased $708,000 to $3.1 million for the quarter ended September 30, 2021. The decrease in other expense during the quarter was primarily attributable decreases in loan expense, audit and accounting fees and provisions for credit losses on off-balance sheet credit exposures. This decrease was partially offset by a non-recurring asset impairment charge of $420,000, recognized during the current quarter, related to branch consolidation activity.

Provision for Income Taxes. Provision for income taxes increased $4.4 million to $7.3 million for the quarter ended September 30, 2021, from $2.9 million for the quarter ended September 30, 2020.

The increase in income tax expense reflected a higher level of pre-tax net income, as compared to the prior period, resulting in a higher provision for income tax expense. The increase also reflected the effects of various non-recurring items recorded in conjunction with the Company’s acquisition of MSB, recorded in the prior comparative period, including non-deductible merger related expenses, which were partially offset by a non-taxable bargain purchase gain.

Effective tax rates for the quarter ended September 30, 2021 and 2020 were 26.95% and 20.2%, respectively. The effective tax rate for the prior comparative period reflected the effects of various non-recurring items recorded in conjunction with the Company’s acquisition of MSB, as noted above.

- 45 -

Liquidity and Capital Resources

Liquidity, represented by cash and cash equivalents, is a product of operating, investing and financing activities. The Company’s primary sources of funds are deposits, borrowings, cash flows from investment securities and loans receivable and funds provided from operations. While scheduled payments from the amortization and maturity of loans and investment securities are relatively predictable sources of funds, general interest rates, economic conditions and competition greatly influence deposit flows and prepayments on loans and securities.

At September 30, 2021, liquidity included $54.1 million of short-term cash and equivalents supplemented by $1.65 billion of investment securities classified as available for sale. In addition, as of September 30, 2021, the Company had the capacity to borrow additional funds totaling $2.19 billion and $274.5 million, without pledging additional collateral, from the FHLB of New York and FRB, respectively. As of that same date, the Company also had the capacity to borrow $890.0 million of additional funds, on an unsecured basis, via lines of credit established with other financial institutions.

At September 30, 2021, the Company had outstanding commitments to originate and purchase loans totaling approximately $199.6 million while such commitments totaled $192.8 million at June 30, 2021. As of those same dates, the Company’s pipeline of loans held for sale included $54.7 million and $48.4 million of loans in process whose terms included interest rate locks to borrowers that were paired with a non-binding, best-efforts, commitment to sell the loan to a buyer at a fixed price and within a predetermined timeframe after the sale commitment is established.

Construction loans in process and unused lines of credit were $120.0 million and $183.7 million, respectively, at September 30, 2021 compared to $138.3 million and $181.1 million, respectively, at June 30, 2021. The Company is also subject to the contingent liabilities resulting from letters of credit whose outstanding balances totaled $739,000 at September 30, 2021 and June 30, 2021, respectively.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the customer. Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Consistent with its goals to operate a sound and profitable financial organization, the Bank actively seeks to maintain its status as a well-capitalized institution in accordance with regulatory standards.

- 46 -

The following table sets forth the Bank’s capital position at September 30, 2021 and June 30, 2021, as compared to the minimum regulatory capital requirements that were in effect as of those dates:


	At September 30, 2021
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	662,785		15.07	%	$	351,909		8.00	%	$	439,886		10.00	%
Tier 1 capital (to risk-weighted assets)		632,695		14.38	%		263,932		6.00	%		351,909		8.00	%
Common equity tier 1 capital (to risk-weighted assets)		632,695		14.38	%		197,949		4.50	%		285,926		6.50	%
Tier 1 capital (to adjusted total assets)		632,695		9.02	%		280,603		4.00	%		350,753		5.00	%


	At June 30, 2021
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	761,883		17.22	%	$	353,970		8.00	%	$	442,462		10.00	%
Tier 1 capital (to risk-weighted assets)		726,737		16.42	%		265,477		6.00	%		353,970		8.00	%
Common equity tier 1 capital (to risk-weighted assets)		726,737		16.42	%		199,108		4.50	%		287,600		6.50	%
Tier 1 capital (to adjusted total assets)		726,737		10.23	%		284,114		4.00	%		355,142		5.00	%

The following table sets forth the Company’s capital position at September 30, 2021 and June 30, 2021, as compared to the minimum regulatory capital requirements that were in effect as of those dates:


	At September 30, 2021
	Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
	(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	841,548		19.06	%	$	353,163		8.00	%
Tier 1 capital (to risk-weighted assets)		811,458		18.38	%		264,872		6.00	%
Common equity tier 1 capital (to risk-weighted assets)		811,458		18.38	%		198,654		4.50	%
Tier 1 capital (to adjusted total assets)		811,458		11.54	%		281,369		4.00	%


	At June 30, 2021
	Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
	(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	872,823		19.65	%	$	355,274		8.00	%
Tier 1 capital (to risk-weighted assets)		837,677		18.86	%		266,456		6.00	%
Common equity tier 1 capital (to risk-weighted assets)		837,677		18.86	%		199,842		4.50	%
Tier 1 capital (to adjusted total assets)		837,677		11.76	%		284,877		4.00	%

- 47 -

In March 2020, the federal banking agencies announced an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company has adopted the capital transition relief over the permissible five-year period.

Off-Balance Sheet Arrangements

In the normal course of our business of investing in loans and securities we are a party to financial instruments with off-balance-sheet risk. These financial instruments include significant purchase commitments, such as commitments related to capital expenditure plans and commitments to extend credit to meet the financing needs of our customers. We had no significant off-balance sheet commitments for capital expenditures as of September 30, 2021.

Recent Accounting Pronouncements

For a discussion of the expected impact of recently issued accounting pronouncements that have yet to be adopted by the Company, please refer to Note 3 to the unaudited consolidated financial statements.

- 48 -

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The majority of our assets and liabilities are sensitive to changes in interest rates and as such interest rate risk is a significant form of market risk that we must manage. Interest rate risk is generally defined in regulatory nomenclature as the risk to earnings or capital arising from the movement of interest rates and arises from several risk factors including re-pricing risk, basis risk, yield curve risk and option risk. We maintain an Asset/Liability Management (“ALM”) program in order manage our interest rate risk. The program is overseen by the Board of Directors through its Interest Rate Risk Management Committee which has assigned the responsibility for the operational aspects of the ALM program to our Asset/Liability Management Committee (“ALCO”), which is comprised of various members of the senior and executive management team.

The quantitative analysis that we conduct measures interest rate risk from both a capital and earnings perspective. With regard to earnings, movements in interest rates and the shape of the yield curve significantly influence the amount of net interest income (“NII”) that we recognize. Movements in market interest rates, and the effect of such movements on the risk factors noted above, significantly influence the spread between the interest earned on our interest-earning assets and the interest paid on our interest-bearing liabilities. Our internal interest rate risk analysis calculates the sensitivity of our projected NII over a one year period utilizing a static balance sheet assumption through which incoming and outgoing asset and liability cash flows are reinvested into similar instruments. Product pricing and earning asset prepayment speeds are appropriately adjusted for each rate scenario.

With regard to capital, our internal interest rate risk analysis calculates the sensitivity of our Economic Value of Equity (“EVE”) ratio to movements in interest rates. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of off-balance sheet instruments. EVE attempts to quantify our economic value using a discounted cash flow methodology while the EVE ratio reflects that value as a form of capital ratio. The degree to which the EVE ratio changes for any hypothetical interest rate scenario from its base case measurement is a reflection of an institution’s sensitivity to interest rate risk.

For both earnings and capital at risk, our interest rate risk analysis calculates a base case scenario that assumes no change in interest rates. The model then measures changes throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve up and down 100, 200 and 300 basis points with additional scenarios modeled where appropriate. The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates. The relatively low level of interest rates prevalent at September 30, 2021 and June 30, 2021 precluded the modeling of certain falling rate scenarios.

The following tables present the results of our internal EVE analysis as of September 30, 2021 and June 30, 2021, respectively:


	September 30, 2021
	Economic Value of Equity ("EVE")									EVE as a % of Present Value of Assets
Change in Interest Rates	$ Amount of EVE		$ Change in EVE			% Change in EVE				EVE Ratio			Change in EVE Ratio
	(Dollars in Thousands)
+300 bps		1,092,865		(87,838	)		(7.44	)	%		16.83	%		1		bps
+200 bps		1,133,710		(46,993	)		(3.98	)	%		16.99	%		18		bps
+100 bps		1,174,856		(5,847	)		(0.50	)	%		17.13	%		31		bps
0 bps		1,180,703	-			-					16.82	%		-
-100 bps		1,063,978		(116,725	)		(9.89	)	%		14.98	%		(184	)	bps


	June 30, 2021
	Economic Value of Equity ("EVE")									EVE as a % of Present Value of Assets
Change in Interest Rates	$ Amount of EVE		$ Change in EVE			% Change in EVE				EVE Ratio			Change in EVE Ratio
	(Dollars in Thousands)
+300 bps		1,083,847		(104,809	)		(8.82	)	%		16.45	%		(20	)	bps
+200 bps		1,132,915		(55,741	)		(4.69	)	%		16.72	%		7		bps
+100 bps		1,176,890		(11,766	)		(0.99	)	%		16.89	%		24		bps
0 bps		1,188,656	-			-					16.65	%	-
-100 bps		1,071,463		(117,193	)		(9.86	)	%		14.84	%		(181	)	bps

- 49 -

There are numerous internal and external factors that may contribute to changes in our EVE ratio and its sensitivity. Changes in the composition and allocation of our balance sheet, or utilization of off-balance sheet instruments such as derivatives, can significantly alter the exposure to interest rate risk as quantified by the changes in the EVE sensitivity measures. Changes to certain external factors, most notably changes in the level of market interest rates and overall shape of the yield curve, can also alter the projected cash flows of our interest-earning assets and interest-costing liabilities and the associated present values thereof.

The following tables present the results of our internal NII analysis as of September 30, 2021 and June 30, 2021, respectively:


			September 30, 2021
			Net Interest Income ("NII")
Change in Interest Rates	Balance Sheet Composition	Measurement Period	$ Amount of NII		$ Change in NII			% Change in NII
			(Dollars In Thousands)
+300 bps	Static	One Year	$	179,080	$	(12,763	)		(6.65	)	%
+200 bps	Static	One Year		184,428		(7,415	)		(3.87	)
+100 bps	Static	One Year		189,414		(2,429	)		(1.27	)
0 bps	Static	One Year		191,843		-			-
-100 bps	Static	One Year		178,545		(13,298	)		(6.93	)


			June 30, 2021
			Net Interest Income ("NII")
Change in Interest Rates	Balance Sheet Composition	Measurement Period	$ Amount of NII		$ Change in NII			% Change in NII
			(Dollars In Thousands)
+300 bps	Static	One Year	$	175,830	$	(16,078	)		(8.38	)	%
+200 bps	Static	One Year		182,089		(9,819	)		(5.12	)
+100 bps	Static	One Year		187,961		(3,947	)		(2.06	)
0 bps	Static	One Year		191,908		-			-
-100 bps	Static	One Year		181,645		(10,263	)		(5.35	)

Notwithstanding the rate change scenarios presented in the EVE and NII-based analyses above, future interest rates and their effect on net interest income are not predictable. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, prepayments and deposit run-offs and should not be relied upon as indicative of actual results. Certain shortcomings are inherent in this type of computation. Although certain assets and liabilities may have similar maturities or periods of re-pricing, they may react at different times and in different degrees to changes in market interest rates. The interest rate on certain types of assets and liabilities, such as demand deposits and savings accounts, may fluctuate in advance of changes in market interest rates, while rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable-rate mortgages, generally have features which restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayments and early withdrawal levels could deviate significantly from those assumed in the analyses set forth above. Additionally, an increase in credit risk may result as the ability of borrowers to service their debt may decrease in the event of an interest rate increase.

- 50 -

ITEM 4.

CONTROLS AND PROCEDURES

As of the end of the period covered by this Report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended). Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended September 30, 2021, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 51 -

PART II

ITEM 1. Legal Proceedings

At September 30, 2021, neither the Company nor the Bank were involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition of the Company and the Bank.

ITEM 1A. Risk Factors

There have been no material changes to the Risk Factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, previously filed with the Securities and Exchange Commission.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities:

The following table reports information regarding repurchases of the Company’s common stock during the quarter ended September 30, 2021:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1-31, 2021		1,219,988	$	11.77		1,219,988		1,724,661
August 1-31, 2021		1,039,984	$	12.77		1,039,984		684,677
September 1-30, 2021		897,816	$	12.64		897,816		7,388,882

Total		3,157,788	$	12.35		3,157,788		7,388,882

On September 20, 2021, the Company announced the completion of its previously disclosed stock repurchase plan. Such shares were repurchased at a cost of $50.5 million, or $12.43 per share. On September 22, 2021, the Company announced the authorization of a new stock repurchase plan to repurchase up to 7,602,021 shares, or 10% of the shares then outstanding. This current plan has no expiration date.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

- 52 -

ITEM 6. Exhibits

The following Exhibits are filed as part of this report:


3.1		Articles of Incorporation of Kearny Financial Corp. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-198602), originally filed on September 5, 2014)
3.2		Bylaws of Kearny Financial Corp. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-198602), originally filed on September 5, 2014)
4		Form of Common Stock Certificate of Kearny Financial Corp. (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-198602), originally filed on September 5, 2014)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following materials from the Company’s Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.
101.INS		Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

- 53 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	KEARNY FINANCIAL CORP.

Date: November 8, 2021	By:	/s/ Craig L. Montanaro
		Craig L. Montanaro
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: November 8, 2021	By:	/s/ Keith Suchodolski
		Keith Suchodolski
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

- 54 -