This report, updated on October 27, 2025, presents a comprehensive five-angle analysis of Kearny Financial Corp. (KRNY), examining its business moat, financial statements, past performance, future growth, and fair value. The company is benchmarked against seven competitors, including Provident Financial Services, Inc. (PFS), Valley National Bancorp (VLY), and Customers Bancorp, Inc. (CUBI), with key takeaways mapped to the investment styles of Warren Buffett and Charlie Munger.
Negative.
Kearny Financial is a traditional community bank facing significant operational and financial challenges.
Its profitability has collapsed, leading to a net loss of -$86.67 million in the last fiscal year.
The bank operates inefficiently and carries a high-risk balance sheet with a loan-to-deposit ratio over 100%.
While the stock appears cheap with a high dividend yield of 6.63%, this reflects its fundamental weaknesses.
The high dividend is at risk due to recent losses and an unsustainable payout ratio.
This is a high-risk investment; investors should avoid the stock until profitability and efficiency improve.
US: NASDAQ
Kearny Financial Corp., operating through its subsidiary Kearny Bank, is a quintessential community bank with a business model rooted in traditional lending and deposit-gathering. The bank's core operation is straightforward: it collects deposits from local individuals and businesses and uses that money primarily to fund real estate loans within its geographic footprint of northern and central New Jersey, as well as Brooklyn and Staten Island, New York. Its main revenue source is net interest income, which is the difference between the interest it earns on loans and the interest it pays on deposits. The bank's strategy is not one of broad diversification but of deep concentration. Its main product lines are multi-family real estate lending, commercial real estate (CRE) lending, and, to a lesser extent, residential mortgages and business loans. This focus on real estate in one of the country's most densely populated and competitive markets defines its identity, competitive positioning, and risk profile.
Kearny's most significant product is multi-family and commercial real estate (CRE) lending, which collectively accounts for over 75% of its total loan portfolio. This includes loans for apartment buildings (multi-family), office buildings, retail spaces, and industrial properties. This segment is the engine of the bank's profitability, contributing the vast majority of its interest income. The total market for CRE and multi-family lending in the NY/NJ metropolitan area is immense, valued in the hundreds of billions, but it is also intensely competitive and cyclical. While the long-term growth (CAGR) of this market is tied to regional economic health, it faces current headwinds from higher interest rates and changing post-pandemic work patterns, especially in the office sector. Profit margins are dependent on the bank's ability to price risk correctly and maintain a lower cost of funding than competitors. Kearny competes with a wide array of lenders, from local peers like Valley National Bancorp and Provident Financial Services to large national players like JPMorgan Chase and specialty real estate lenders. The primary customers for these loans are sophisticated local real estate investors and developers. These are relationship-driven clients who often manage multiple properties and require a banking partner with deep local market knowledge and the ability to make timely, informed credit decisions. The stickiness of these relationships can be high, as switching banks for a large real estate portfolio is complex. Kearny's competitive moat here is its specialized expertise and long-standing presence in the market. Its loan officers possess granular knowledge of specific neighborhoods and property types, allowing them to underwrite loans that larger, more bureaucratic banks might overlook or misprice. This local intelligence is its key advantage, but it's a narrow moat, highly vulnerable to a downturn in this specific geographic and asset class concentration.
The second pillar of Kearny's business is its deposit-gathering operation, which funds its lending activities. The bank offers a standard suite of deposit products, including checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs) to retail and business customers through its branch network. Deposits represent the primary liability on the bank's balance sheet and their cost is a critical determinant of overall profitability. The market for deposits in the NY/NJ area is fiercely competitive, with consumers having countless options ranging from global banks to online-only banks offering high-yield savings accounts. Kearny competes against everyone, from Bank of America to Ally Bank. Its main customers are local residents and small businesses who value the convenience of a physical branch. However, customer stickiness for deposits is generally low in the modern banking landscape. Customers can easily move money to chase higher yields, and the loyalty that once came with a local branch has diminished. Kearny's competitive position in deposit gathering is weak. It lacks the scale and marketing budget of larger competitors and has not established a strong niche for attracting low-cost core deposits. As a result, its deposit base has a relatively low proportion of noninterest-bearing checking accounts (under 20% of total deposits) and a high reliance on more expensive, rate-sensitive CDs. This creates a funding disadvantage and makes its net interest margin more volatile.
Finally, Kearny generates a small amount of revenue from fee-based products and services, categorized as non-interest income. This segment is a minor contributor to its overall business, consistently making up less than 10% of total revenue. The income is primarily derived from standard banking services like fees for overdrafts, wire transfers, and account maintenance, along with income from bank-owned life insurance (BOLI). The market for these services is commoditized, with little room for differentiation. Unlike many peers who have successfully diversified into more lucrative fee-generating businesses like wealth management, trust services, or robust mortgage banking operations, Kearny has not developed a meaningful presence in these areas. The customers are its existing deposit account holders. The lack of a strong fee income stream is a significant structural weakness in its business model. It leaves the bank almost entirely dependent on its lending margins, which are subject to the pressures of interest rate cycles and competitive dynamics. This lack of revenue diversification means Kearny has fewer levers to pull to maintain profitability when lending conditions are unfavorable, making its earnings stream less resilient over time compared to more balanced institutions. In conclusion, Kearny's business model is a high-stakes bet on its specialized knowledge of a single asset class in a specific region. While its niche in real estate lending provides a defensible moat built on expertise, the foundation supporting this moat is shaky due to a high-cost funding base and a near-total absence of diversified revenue streams. This makes the bank a less resilient enterprise, highly exposed to the cyclical nature of real estate and the fluctuations of interest rates.
An analysis of Kearny Financial's recent performance reveals a company grappling with significant operational and balance sheet challenges, even as top-line numbers improve. In its most recent quarter, the bank reported an 18% increase in revenue and a 16.2% rise in net interest income, suggesting a positive adaptation to the current interest rate environment. However, this growth does not translate into strong profitability. The bank's return on assets (ROA) of 0.49% and return on equity (ROE) of 5.07% are substantially below the typical industry benchmarks of 1% and 10% respectively, indicating that the bank is not generating adequate profits from its asset base and shareholder capital.
The balance sheet exhibits several points of concern for investors. The loan-to-deposit ratio recently stood at 101.6%, meaning the bank has loaned out more money than it holds in deposits. This forces a reliance on more expensive, wholesale funding and signals a potential liquidity weakness. Furthermore, the bank's tangible common equity is significantly impacted by -$86.2 million in accumulated other comprehensive income (AOCI), representing unrealized losses on its securities portfolio. While its tangible capital to assets ratio of 8.3% is adequate, this large AOCI figure highlights a vulnerability to interest rate fluctuations that could further erode its capital base.
Operational inefficiency is another major red flag. Kearny's efficiency ratio was 72.7% in the last quarter, a figure that is significantly higher than the industry standard where a ratio below 60% is considered efficient. This indicates that the bank's overhead and operating costs are too high relative to the income it generates, directly pressuring its profitability. This high cost structure, combined with a payout ratio of 93.6%, means the bank is returning almost all of its earnings to shareholders as dividends, leaving a very thin margin for reinvestment or to absorb unexpected losses. In conclusion, while recent income growth is a positive development, Kearny Financial's financial foundation appears risky due to poor cost controls, a stretched balance sheet, and sensitivity to interest rate changes.
An analysis of Kearny Financial's performance over the last five fiscal years (FY 2021-2025) reveals a story of initial stability followed by a sharp deterioration. The period began with respectable net income of $63.23 million in FY2021 and peaked at $67.55 million in FY2022. However, the bank's fortunes reversed dramatically, with net income falling to $40.81 million in FY2023 and then plunging to a significant net loss of -$86.67 million in FY2024, driven by severe pressure on its core lending margins and losses on its investment portfolio.
The bank's profitability and growth metrics highlight these struggles. Revenue has been on a downward trend, falling from a high of $218.06 million in FY2022 to $134.38 million in FY2024. More importantly, Net Interest Income, the core driver of earnings for a community bank, declined from $196.6 million in FY2022 to just $134.94 million by FY2025. This compression led to a collapse in profitability, with Return on Equity (ROE) falling from 6.98% in FY2022 to a deeply negative -10.68% in FY2024. These returns are substantially weaker than competitors like Valley National or OceanFirst, which consistently generate ROEs in the high single or low double digits.
From a shareholder return perspective, the record is mixed but ultimately concerning. Management aggressively repurchased shares between FY2022 and FY2023, reducing the share count from 82 million to 65 million, which helped support earnings per share temporarily. The bank has also maintained its dividend per share at $0.44. However, with the earnings collapse, this dividend is no longer sustainable from current profits, as evidenced by a payout ratio exceeding 100% in fiscal 2025. While cash from operations has remained positive, it has steadily declined, raising questions about the company's ability to fund these returns without damaging its capital base. The historical record does not support confidence in the company's execution or its resilience to economic cycles, showing a clear pattern of underperformance relative to peers.
The regional banking industry is navigating a period of significant change and challenge, with the next 3-5 years expected to be defined by margin pressure, heightened regulatory scrutiny, and a flight to quality by depositors. The primary driver of this shift is the higher interest rate environment, which has dramatically increased funding costs for banks. This trend is expected to persist, forcing banks to compete fiercely for deposits by offering higher rates, thereby compressing net interest margins (NIMs), the core source of profitability for most. We anticipate the industry's overall loan growth to be sluggish, likely in the low single digits around 2-3% annually, as economic uncertainty and high borrowing costs dampen demand from businesses and consumers. A key catalyst for any potential upside would be a pivot by the Federal Reserve to lower interest rates, but the timing and extent of such a move remain uncertain. Competition is intensifying not just from other banks but from non-bank lenders and fintechs, especially in consumer and business lending. The regulatory environment is also becoming tougher, particularly for banks with significant CRE exposure like Kearny. This increased oversight could limit lending capacity and raise compliance costs, making it harder for smaller banks to compete and likely driving further industry consolidation.
For Kearny Financial, this industry backdrop presents a formidable challenge. Its future is almost entirely tied to the performance of its two core functions: CRE/multi-family lending and local deposit gathering. These are not separate businesses but two sides of the same coin, and both face significant headwinds. The bank's growth model, which worked well in a low-rate environment, is now exposed. Without a third pillar of growth, such as wealth management or treasury services, the bank has very few options to offset the pressures on its core lending business. The strategic focus for the next few years will likely be defensive—protecting its loan book, managing its funding costs, and maintaining capital levels—rather than pursuing aggressive growth. This positions Kearny as a potential laggard in an already challenged sector, as peers with more diversified business models are better equipped to find pockets of growth and generate fee income to supplement shrinking interest margins. The path forward for Kearny appears to be one of preservation rather than expansion.
Kearny's primary product, multi-family and commercial real estate lending, accounts for over 75% of its loan portfolio. Currently, this segment is constrained by high interest rates, which have slowed property transactions and new development projects to a crawl. The bank's growth is limited by this market slowdown and its own capital base. Looking ahead 3-5 years, a bifurcation is likely. Demand for multi-family housing loans may remain resilient due to persistent housing shortages in its core markets. However, the commercial real estate segment, particularly office and some retail properties, faces a structural decline due to remote work trends, potentially leading to lower loan demand and higher credit losses. Growth will likely shift from originating new loans for acquisitions and construction to refinancing existing debt for established clients. The key catalyst for a rebound would be a significant drop in interest rates, but this is not guaranteed. The NY/NJ CRE market is enormous, but its growth is projected to be nearly flat for the next couple of years. Competitors range from local banks like Valley National Bancorp to large money-center banks. Customers choose based on relationship, execution certainty, and terms. Kearny can outperform on its deep local knowledge for complex deals, but it will likely lose share to larger banks that can offer a wider suite of products and more competitive pricing, especially for high-quality borrowers.
On the funding side, Kearny's deposit gathering operation is a structural weakness that will limit future growth. Currently, the bank's deposit mix is heavily skewed towards high-cost certificates of deposit (CDs), which represent over 40% of its base, while low-cost noninterest-bearing checking accounts are under 20%. This mix is constrained by intense competition from online banks offering high-yield savings accounts and larger banks with superior digital platforms and brand recognition. Over the next 3-5 years, this pressure is unlikely to abate. The bank will have to continue paying up for deposits to prevent outflows, keeping its cost of funds elevated and its net interest margin compressed. There is little prospect for a significant increase in low-cost core deposits, and the portion of rate-sensitive CDs may even grow. The most significant risk to Kearny's future is this funding pressure. A persistent inability to gather low-cost deposits will cripple its ability to profitably grow its loan book. While a full-blown deposit run is a low-probability event, the steady bleed of deposits to higher-yielding alternatives is a high-probability risk that will force Kearny onto a treadmill of constantly replacing expensive funding with more expensive funding, leaving little room for earnings growth.
Looking beyond its core lending, Kearny's most significant hurdle for future growth is its near-total lack of revenue diversification. Non-interest income consistently makes up less than 5% of total revenue, a stark contrast to the 15-25% common among its regional bank peers. This fee income is derived from basic services like account fees, not from sustainable, scalable businesses like wealth management, insurance, or treasury management. This deficiency means the company's entire earnings stream is exposed to the volatility of interest rate cycles. When lending margins are squeezed, as they are now, Kearny has no other engine to power earnings. The company has not announced any significant strategic plans to build out these fee-generating businesses, which would require substantial investment in talent and technology. This lack of action suggests that this dependency will persist for the foreseeable future. This structural flaw severely caps the company's growth potential and makes it a less resilient institution compared to competitors who have successfully built more balanced business models. Without developing these new revenue streams, Kearny's growth will be, at best, tethered to the cyclical and currently challenged real estate market it serves.
As of October 24, 2025, Kearny Financial Corp. (KRNY) closed at $6.64. A comprehensive valuation analysis suggests the stock is trading near its fair value, with both attractive and concerning elements for potential investors. A triangulated valuation places Kearny Financial's fair value in the $6.50 to $7.50 range. The P/TBV and dividend discount model (DDM) methods are most heavily weighted, as they anchor the valuation in the company's tangible assets and its direct cash returns to shareholders.
Kearny's TTM P/E ratio of 14.13x is elevated compared to the regional bank industry average, but its forward P/E of 8.1x suggests expectations of strong earnings growth. The most compelling multiple is the Price-to-Tangible-Book (P/TBV) ratio of 0.65x, based on a tangible book value per share of $10.17. This significant discount is largely justified by the bank's low Return on Equity (5.07% in the latest quarter). Applying a conservative P/TBV multiple of 0.70x to 0.75x implies a fair value range of $7.12 to $7.63.
The dividend is central to KRNY's investment case. A DDM, assuming the current $0.44 annual dividend, a 2% growth rate, and an 8.5% cost of equity, implies a fair value of approximately $6.77. This suggests the current market price is reasonable, but it is highly sensitive to the dividend's sustainability, which is questionable given a payout ratio over 90%. From an asset perspective, trading at 65 cents on the dollar ($6.64 price vs. $10.17 TBVPS) offers a substantial asset-based margin of safety, assuming the assets are fairly valued.
Bill Ackman would view Kearny Financial Corp. not as a high-quality compounder but as a potential activist target suffering from chronic underperformance. He would immediately notice its low Return on Equity of approximately 4-5% and high efficiency ratio near 70%, which significantly lag behind well-run peers like Valley National and WSFS Financial. Ackman's thesis would be that the bank is fundamentally sub-scale and mismanaged, making it worth more sold to a larger, more efficient competitor than as a standalone entity, especially given its trading price below tangible book value. The primary risk is that the bank remains a 'value trap,' unable to close the performance gap or attract a buyer, leading to continued value erosion. Ackman would likely avoid investing directly, considering the bank too small to warrant a full-fledged activist campaign for his fund. If forced to choose top-tier regional banks, Ackman would favor WSFS Financial (WSFS) for its best-in-class ROE of 12-15% and diversified model, Valley National (VLY) for its scale and M&A prowess generating a 10-12% ROE, and Customers Bancorp (CUBI) for its high-growth, tech-forward niche delivering a 15%+ ROE. A clear signal from Kearny's board that they are exploring a sale could, however, change his decision and make it an attractive event-driven investment.
Warren Buffett's investment thesis for banks is straightforward: he seeks simple, understandable franchises with durable moats, demonstrated by cheap, sticky deposits and consistently high returns on equity. While Kearny Financial's valuation below tangible book value, at around 0.85x, might initially seem appealing, Buffett would quickly be deterred by its fundamental weaknesses. The bank's chronically low Return on Equity of ~4-5% is a significant red flag, falling far short of the 10%+ threshold typical of a high-quality lender and indicating that the business is destroying shareholder value. Furthermore, its high efficiency ratio near 70% signals poor cost controls compared to more efficient competitors. Management primarily uses cash for dividends and some share buybacks, which is a rational choice given the depressed stock price, but these capital returns cannot mask the core business's inability to generate adequate profits. Ultimately, Buffett would classify KRNY as a classic 'value trap' and would avoid the investment, as the cheap price is a direct reflection of a poor-quality business with no clear path to improvement. If forced to choose the best banks in this sub-industry, Buffett would likely select superior operators like WSFS Financial (ROE ~12-15%), Valley National Bancorp (ROE ~10-12%), or Dime Community Bancshares (ROE ~10-12%), as their high profitability demonstrates true economic moats. A change in Buffett's view on Kearny would require a complete management overhaul followed by several years of proven execution in raising its Return on Equity to levels competitive with industry leaders.
Charlie Munger, applying his mental models in 2025, would likely view Kearny Financial Corp. as a textbook example of a low-quality business masquerading as a value stock. Munger’s thesis for investing in banks is to find institutions with a low-cost deposit franchise, disciplined underwriting, and efficient operations that generate returns on equity well above their cost of capital. Kearny fails on this front, with a return on equity (ROE) hovering around a paltry 4-5%, which is likely below its cost of equity, meaning it destroys shareholder value with every dollar it retains. Its high efficiency ratio of nearly 70% indicates operational bloat and a lack of a competitive moat against larger, more efficient peers like Valley National or WSFS. While the stock's discount to tangible book value might attract superficial analysis, Munger would see it as a clear warning sign of a 'value trap'—a business whose intrinsic value is stagnant or declining. For retail investors, the takeaway is that a cheap price cannot fix a bad business, and Munger would avoid KRNY entirely. If forced to choose top banks, Munger would gravitate towards WSFS Financial (WSFS) for its best-in-class ROE of 12-15%, Valley National (VLY) for its proven M&A-driven growth, and Customers Bancorp (CUBI) for its high-return niche model, as these demonstrate the superior compounding ability he seeks. A complete change in management with a credible and executed plan to dramatically improve ROE to over 10% would be the only thing that could make him reconsider.
Kearny Financial Corp. operates as a community-focused bank primarily serving northern and central New Jersey and the New York City boroughs of Brooklyn and Staten Island. Its business model is traditional, centered on gathering deposits from local communities and individuals to fund loans, primarily for commercial real estate and multi-family properties. This geographical concentration is both a strength and a weakness. It allows Kearny to build deep local relationships and expertise, but it also exposes the bank to the economic fortunes of a single metropolitan area, lacking the diversification of larger, more geographically dispersed regional banks.
When measured against its competition, Kearny's performance reveals significant challenges, particularly in profitability and operational efficiency. Key metrics like Net Interest Margin (NIM), which measures the profitability of its core lending activities, and Return on Assets (ROA), which shows how effectively it uses its assets, have often been subdued. Furthermore, its efficiency ratio, a measure of non-interest expenses as a percentage of revenue, indicates that it costs Kearny more to generate a dollar of income than many of its more streamlined peers. This suggests that the bank struggles with either cost control, revenue generation, or a combination of both.
From an investment perspective, KRNY's stock often trades at a discount to its tangible book value. This can be attractive to value-oriented investors who see potential for the price to revert to its intrinsic worth. However, this discount is largely a reflection of the market's concerns about its lagging profitability and growth outlook. The bank faces stiff competition not only from other community banks but also from large national players with superior scale and technology budgets, as well as non-bank financial technology firms. For Kearny to close the performance gap, it will need to demonstrate a clear path toward improving its margins and controlling costs while navigating the competitive and interest-rate sensitive banking environment.
Provident Financial Services and Kearny Financial are direct competitors in the New Jersey banking market, but Provident generally exhibits stronger financial health and operational execution. Provident's larger scale provides it with a modest advantage in efficiency and market presence. While both banks follow a traditional community banking model focused on lending funded by local deposits, Provident has historically achieved superior profitability metrics, including a higher Return on Assets and a more favorable efficiency ratio. Kearny's primary appeal lies in its valuation, which often trades at a steeper discount to tangible book value, reflecting its weaker performance and offering a potential, albeit riskier, value proposition for investors banking on a turnaround.
In terms of Business & Moat, both banks operate with similar competitive advantages derived from local brand recognition and regulatory barriers to entry. Provident's brand, established in 1839, carries significant weight in New Jersey, arguably more than Kearny's. Switching costs for deposit and loan customers are moderate for both, typical of community banking. Provident's larger scale, with total assets around $14 billion compared to Kearny's $8 billion, gives it an edge in operational leverage and lending capacity. Neither company possesses significant network effects beyond their local branch density. Regulatory barriers are high and equal for both. Overall, Provident wins on Business & Moat due to its superior scale and stronger, more established brand legacy in their shared core market.
Financially, Provident consistently outperforms Kearny. Provident's revenue growth has been more stable over the past few years. Its net interest margin (NIM), a crucial measure of lending profitability, typically sits higher than Kearny's. Provident's Return on Equity (ROE) of around 8-9% is substantially better than Kearny's 4-5%, indicating more effective generation of profit from shareholder capital. Provident also runs a more efficient ship, with an efficiency ratio often in the low 60s% range, while Kearny's is higher, near 70% (a lower ratio is better). On the balance sheet, both maintain solid capital levels, but Provident's stronger profitability provides a better cushion. Provident is the clear winner on Financials due to its superior profitability and efficiency.
Looking at Past Performance, Provident has delivered more consistent results. Over the last five years, Provident's earnings per share (EPS) growth has been more robust than Kearny's, which has seen periods of stagnation. This is reflected in shareholder returns; Provident's five-year Total Shareholder Return (TSR) has generally outpaced KRNY's, which has been more volatile and delivered lower returns over the same period. Kearny's stock has also experienced deeper maximum drawdowns during market downturns, indicating higher perceived risk. In terms of margin trends, Provident has better managed to protect its NIM through interest rate cycles. Provident is the winner on Past Performance, demonstrating superior growth, returns, and stability.
For Future Growth, both banks face similar macroeconomic headwinds, including interest rate sensitivity and intense competition in the New York metropolitan area. However, Provident appears better positioned. Its larger scale allows for more significant investments in technology and digital banking, which are key to attracting and retaining customers. Provident has also been more active in strategic acquisitions, providing an inorganic growth lever that Kearny has not utilized as effectively. Consensus estimates for next-year earnings growth are typically more optimistic for Provident. Provident has the edge in future growth prospects due to its strategic flexibility and scale advantages.
From a Fair Value perspective, Kearny often appears cheaper on the surface. It frequently trades at a more significant discount to its tangible book value (P/TBV), with a ratio often around 0.85x compared to Provident's, which might be closer to 1.0x or 1.1x. Kearny may also offer a slightly higher dividend yield at times. However, this discount is a direct reflection of its inferior financial performance. Provident's premium valuation is justified by its higher profitability (ROE), more efficient operations, and more stable growth track record. For a risk-adjusted return, Provident represents better value, as its quality justifies its price, while Kearny's cheapness is tied to fundamental weaknesses.
Winner: Provident Financial Services, Inc. over Kearny Financial Corp. The verdict is based on Provident's consistent and superior operational performance, financial health, and shareholder returns. Provident's key strengths are its higher profitability, evidenced by an ROE nearly double that of Kearny's (~8.5% vs. ~4.5%), and its greater operational efficiency, shown by a lower efficiency ratio. Kearny's most notable weakness is its struggle to generate adequate returns on its asset base, leading to its persistent valuation discount. The primary risk for Kearny is that it fails to improve its margin and cost structure, causing its stock to remain a 'value trap.' Provident's solid execution makes it a much stronger and more reliable investment choice in the New Jersey banking sector.
Valley National Bancorp is a much larger and more diversified regional bank that operates in many of the same markets as Kearny Financial, including New Jersey and New York. With assets exceeding $60 billion, Valley operates on a completely different scale than Kearny's $8 billion. This size difference is the core of the comparison; Valley leverages its scale to achieve greater efficiencies, offer a wider array of products (including wealth management and insurance), and fund larger commercial loans. While Kearny maintains a local, community-focused appeal, it is fundamentally outmatched by Valley's resources, geographic reach, and financial firepower. Kearny's only potential edge is its simpler structure and potentially deeper ties in its specific micro-markets, but this is a difficult advantage to quantify against Valley's overwhelming scale.
On Business & Moat, Valley has a clear lead. Its brand is widely recognized across New Jersey, New York, Florida, and Alabama, giving it a much broader footprint. Switching costs are moderate for both, but Valley's integrated service offerings may create stickier customer relationships. The scale difference is immense; Valley's $60B+ asset base dwarfs Kearny's $8B, providing significant economies of scale in technology, compliance, and marketing spend. Valley's larger network of branches and digital services creates a more tangible network effect. Regulatory barriers are high for both, but Valley's experience in executing large-scale M&A demonstrates a capacity to navigate complex regulatory hurdles that Kearny has not. Winner: Valley National Bancorp, by a wide margin, due to its overwhelming advantages in scale and diversification.
Analyzing their Financial Statements, Valley's size again translates into advantages, though with some trade-offs. Valley's revenue base is significantly larger and more diverse. Its Return on Assets (ROA) is typically around 1.0%, far superior to Kearny's ~0.5%. Similarly, its Return on Equity (ROE) hovers in the 10-12% range, dwarfing Kearny's ~4-5%. Valley also tends to operate more efficiently, with an efficiency ratio in the 50s%, compared to Kearny's near 70%. On the balance sheet, Valley is more leveraged due to its acquisition strategy, but its capital ratios remain well within regulatory requirements. In terms of liquidity, both have similar loan-to-deposit profiles. Winner: Valley National Bancorp, due to its vastly superior profitability and efficiency metrics.
Examining Past Performance, Valley has a strong track record of growth, largely fueled by strategic acquisitions, most notably the recent merger with Bank Leumi. This has driven its revenue and EPS growth at a much faster rate than Kearny's organic-only, slower-paced expansion. Over a five-year period, Valley's Total Shareholder Return (TSR) has significantly outperformed Kearny's. While M&A adds integration risk, Valley has managed it effectively to create shareholder value. Kearny's performance has been steadier in the sense of being less eventful, but this has resulted in lower growth and returns. Margin trends at Valley have been dynamic due to acquisitions but have generally been managed well. Winner: Valley National Bancorp, for its proven ability to grow and generate superior long-term returns.
For Future Growth, Valley's prospects are substantially brighter. Its multi-state footprint provides exposure to high-growth markets like Florida, offering diversification away from the mature Northeast economy. Its established M&A strategy remains a powerful tool for future expansion, allowing it to acquire scale and new capabilities. Kearny's growth, in contrast, is tethered to the slow-growth economic environment of its New Jersey/New York footprint and its ability to win business organically. Valley has superior pricing power and a far deeper pipeline of commercial and industrial lending opportunities. The edge for virtually every growth driver belongs to Valley. Winner: Valley National Bancorp, due to its geographic diversification and proven M&A growth engine.
Regarding Fair Value, Kearny is undeniably the 'cheaper' stock on paper. It consistently trades at a P/TBV ratio below 1.0x (e.g., 0.85x), whereas Valley typically trades at a premium, often in the 1.3x-1.5x P/TBV range. Kearny's dividend yield might also be higher at times. However, this is a classic case of quality commanding a premium. Valley's higher valuation is fully justified by its superior ROE, stronger growth profile, and more efficient operations. An investor is paying more for a much higher-quality, faster-growing asset. The risk-adjusted value proposition is stronger with Valley, as Kearny's discount is a direct consequence of its anemic performance. Winner: Valley National Bancorp, as its premium valuation is backed by superior fundamentals.
Winner: Valley National Bancorp over Kearny Financial Corp. Valley is the decisive winner due to its commanding advantages in scale, profitability, growth, and diversification. Its key strengths include a robust ROE of over 10%, a highly efficient operating model, and a proven M&A strategy that fuels growth beyond what Kearny can achieve organically. Kearny's primary weakness is its inability to generate competitive returns from its small, geographically concentrated asset base. The main risk for Kearny is being perpetually outcompeted by larger, more efficient rivals like Valley, leading to continued underperformance. For investors seeking exposure to regional banking, Valley represents a far superior combination of quality and growth.
Customers Bancorp (CUBI) presents a fascinating contrast to Kearny Financial. While both are regional banks of a somewhat comparable asset size, their business models diverge significantly. CUBI has carved out a niche as a high-tech, commercial-focused bank, known for its digital banking-as-a-service (BaaS) platform and specialty lending, including its innovative, now-discontinued, crypto-friendly Customers Bank Instant Token (CBIT). This positions CUBI as a growth-oriented, tech-forward institution. In contrast, Kearny is a traditional thrift-style lender focused heavily on real estate. This makes CUBI a higher-growth, higher-risk, and more volatile entity compared to Kearny's slow-and-steady, but currently underperforming, model.
Regarding Business & Moat, CUBI's moat is built on technological specialization and niche expertise, while Kearny's is built on local community relationships. CUBI's brand is strong within its target commercial and fintech partnership niches but lacks the broad community recognition of Kearny. Switching costs for CUBI's BaaS clients can be high due to deep integration. Scale is comparable, with both banks having assets in the $8B (Kearny) to $20B (CUBI) range, but CUBI's 'branch-lite' model gives it a different kind of operational scale. CUBI benefits from network effects within its digital payment ecosystem. Kearny has none. Regulatory barriers are high for both, but CUBI's focus on novel areas like fintech partnerships invites greater scrutiny. Winner: Customers Bancorp, for building a unique, tech-driven moat in a crowded industry.
From a Financial Statement perspective, CUBI has demonstrated a capacity for explosive growth and high profitability, but also volatility. In strong years, CUBI's revenue growth has been in the high double-digits, far outpacing Kearny. Its ROA (>1.5%) and ROE (>15%) during peak periods have been exceptional, showcasing the profitability of its model. However, its earnings can be more volatile due to its commercial focus and past exposure to digital assets. Kearny's financials are more predictable but consistently weaker, with an ROE around 4-5%. CUBI's efficiency ratio is also often superior, falling below 50% at times. CUBI's balance sheet is more complex and carries different risks than Kearny's real-estate-heavy loan book. Winner: Customers Bancorp, for its demonstrated ability to generate far superior returns, despite the higher volatility.
In terms of Past Performance, CUBI's track record is one of high highs and low lows. Its five-year Total Shareholder Return has seen massive swings, but has ultimately been far superior to Kearny's mostly flat-to-down performance. CUBI's EPS growth has been meteoric at times, followed by periods of normalization, whereas Kearny's has been largely stagnant. CUBI's stock is significantly more volatile, with a higher beta and larger drawdowns, reflecting its higher-risk business model. Kearny is less volatile but has failed to generate meaningful capital appreciation. For returns, CUBI wins on growth and TSR. For risk, Kearny is ostensibly 'safer' but has destroyed value slowly. Winner: Customers Bancorp, as the high returns have more than compensated for the elevated risk.
Looking at Future Growth, CUBI's prospects are tied to its ability to continue innovating and expanding its niche commercial lending and digital banking platforms. Its growth drivers are far more dynamic than Kearny's, which are limited to the GDP growth of its local markets and its ability to take market share. CUBI's TAM is national in scope for its specialty businesses, while Kearny's is strictly regional. Consensus estimates for CUBI often project higher, albeit more uncertain, growth. The primary risk for CUBI is execution and potential regulatory headwinds in its innovative sectors. Kearny's risk is stagnation. Winner: Customers Bancorp, due to its much larger addressable market and multiple avenues for high growth.
In Fair Value analysis, the comparison is stark. CUBI typically trades at a higher P/E and P/TBV multiple than Kearny, but its valuation can fluctuate wildly with sentiment around its specialty businesses. For example, CUBI might trade at 1.2x P/TBV while KRNY is at 0.85x. However, when you factor in the growth and profitability differential, CUBI often looks cheaper on a price/earnings-to-growth (PEG) basis. Kearny's low valuation is a function of its low returns and weak outlook. CUBI's valuation reflects a high-performance engine that is sometimes discounted due to perceived risk. For investors willing to accept volatility, CUBI presents a better value proposition. Winner: Customers Bancorp, as its valuation is more likely to be rerated upwards based on its superior growth and ROE.
Winner: Customers Bancorp, Inc. over Kearny Financial Corp. CUBI wins due to its innovative business model, which has translated into vastly superior growth and profitability. CUBI's key strengths are its exceptional ROE, often exceeding 15%, and its ability to scale niche, tech-forward banking services nationally. Its notable weakness is the inherent volatility in its earnings and stock price. Kearny's primary weakness is its chronic under-profitability and lack of a clear growth catalyst, making its low valuation feel more like a trap than an opportunity. The key risk for CUBI is managing the complexities of its innovative model, while the risk for Kearny is fading into irrelevance. CUBI is the clear choice for growth-oriented investors.
OceanFirst Financial Corp. is another significant regional competitor to Kearny Financial, with a strong presence in central and southern New Jersey, as well as expansion into the greater Philadelphia and New York City markets. With assets around $13 billion, OceanFirst is larger and has pursued a more aggressive growth-by-acquisition strategy than Kearny. This has given OceanFirst a more diversified geographic footprint and loan portfolio. While both operate as community-focused banks, OceanFirst has demonstrated a greater ambition and a more successful track record of executing on growth initiatives, which is reflected in its generally stronger financial metrics compared to Kearny.
Regarding Business & Moat, OceanFirst has a slight edge. Its brand is dominant in its home turf of Ocean County, NJ, and has been successfully extended through acquisitions. Switching costs are moderate and comparable for both banks. OceanFirst's larger scale ($13B in assets vs. KRNY's $8B) provides advantages in efficiency and product breadth. OceanFirst's broader geographic reach across three states provides better diversification than Kearny's more concentrated North Jersey/NYC focus. Neither has strong network effects. Regulatory hurdles are a constant for both. Winner: OceanFirst, due to its larger scale and superior geographic diversification.
In a Financial Statement comparison, OceanFirst typically comes out ahead. Its revenue growth has been more robust, driven by both organic lending and acquisitions. OceanFirst consistently reports a higher Net Interest Margin (NIM) and a superior Return on Assets (ROA), often near 0.9% compared to Kearny's 0.5%. This translates into a healthier Return on Equity (ROE), usually in the 9-10% range versus Kearny's 4-5%. OceanFirst also operates more efficiently, with its efficiency ratio regularly staying below 65%, while Kearny's often creeps toward 70%. Both maintain strong capital positions, but OceanFirst's higher profitability allows it to build capital more quickly. Winner: OceanFirst, for its clear superiority across nearly all key profitability and efficiency metrics.
Looking at Past Performance, OceanFirst has been the better performer. Its strategic acquisitions over the last five to ten years have fueled faster growth in assets, loans, and earnings per share compared to Kearny's more static trajectory. This superior operational performance has translated into better shareholder returns; OceanFirst's five-year Total Shareholder Return (TSR) has generally been stronger than Kearny's. While Kearny may offer a perception of stability, its stock has underperformed, suggesting that stability without growth is not rewarding for investors. OceanFirst's management has proven more adept at creating value. Winner: OceanFirst, for its stronger growth and better long-term shareholder returns.
For Future Growth, OceanFirst appears better positioned. Its successful M&A track record provides a clear path for continued expansion and entry into new, attractive markets. Management has explicitly stated its appetite for further deals. In contrast, Kearny's growth strategy appears more limited and reliant on the challenging organic growth environment in its existing markets. OceanFirst's broader commercial lending capabilities and larger balance sheet allow it to pursue larger, more profitable client relationships. The edge goes to OceanFirst for having a more defined and potent growth strategy. Winner: OceanFirst, due to its proven M&A capabilities and more dynamic outlook.
From a Fair Value standpoint, the stocks are often valued similarly, though OceanFirst sometimes commands a slight premium. Both frequently trade near or slightly below tangible book value, with P/TBV ratios in the 0.9x-1.1x range, reflecting general market sentiment towards regional banks. Both also offer attractive dividend yields. However, given OceanFirst's superior profitability (higher ROE), better efficiency, and clearer growth path, its valuation represents a much better deal for investors. Paying a similar price for a higher-quality and better-managed bank makes OceanFirst the more compelling value. Kearny is cheap for a reason; OceanFirst is simply undervalued relative to its performance. Winner: OceanFirst, as it offers superior quality for a similar price.
Winner: OceanFirst Financial Corp. over Kearny Financial Corp. OceanFirst is the clear winner, distinguished by its superior management execution, which has resulted in stronger growth, profitability, and shareholder returns. Its key strengths are a successful M&A strategy that has built a larger, more diversified franchise, and consistently better profitability metrics, including an ROE that is roughly double that of Kearny's. Kearny's primary weakness is its strategic inertia and resulting financial underperformance, leaving it overly exposed to its concentrated and competitive home market. The risk for Kearny investors is continued value erosion, while the risk for OceanFirst is centered on future M&A integration. OceanFirst is demonstrably the higher-quality institution.
WSFS Financial Corporation is a powerhouse regional bank and a far superior institution compared to Kearny Financial. Based in Delaware, WSFS is the largest and oldest locally-managed bank and trust company in the Greater Philadelphia and Delaware region, with assets exceeding $20 billion. It has successfully executed several large, transformative acquisitions, most notably Beneficial Bank, to become a dominant force in its market. WSFS offers a diversified business model that includes not just traditional banking but also a significant wealth management division (Bryn Mawr Trust) and a cash connect business. This diversified, high-fee-income model is vastly different from Kearny's monoline, interest-rate-dependent banking operation.
In Business & Moat, WSFS is in a different league. Its brand is dominant in its core Delaware Valley market, with a history stretching back to 1832. Switching costs are elevated by its integrated model; it is much harder for a wealthy client to move their banking, trust, and investment accounts than it is for a simple deposit customer. Its scale ($20B+ assets) provides massive advantages over Kearny's $8B. Most importantly, its diversified business lines—especially wealth management, which generates stable, high-margin fee income—create a powerful moat that traditional banks like Kearny lack. Regulatory barriers are high for both. Winner: WSFS Financial Corporation, due to its dominant market position and highly defensible, diversified business model.
Reviewing their Financial Statements, WSFS's superiority is stark. Its diversified revenue stream makes its top-line growth more stable and less sensitive to interest rate fluctuations compared to Kearny. WSFS consistently produces a Return on Assets (ROA) well over 1.0% and a Return on Equity (ROE) in the 12-15% range, placing it in the top tier of regional banks and dwarfing Kearny's metrics. Its efficiency ratio is also excellent, often in the low 60s% or better, reflecting the benefits of scale and high-margin fee businesses. Kearny cannot compete on any of these fronts. WSFS's balance sheet is robust, and its ability to generate strong internal capital supports its growth. Winner: WSFS Financial Corporation, by a landslide, due to its elite levels of profitability and diversified revenue.
In Past Performance, WSFS has an exemplary track record of value creation. Its history of successful M&A has driven industry-leading growth in EPS and tangible book value per share over the past decade. This has resulted in a Total Shareholder Return (TSR) that has massively outperformed the broader banking index and Kearny's stock. WSFS management has proven to be among the best capital allocators in the regional banking space. Kearny's performance history is one of stability at best, and stagnation at worst, with significantly lower returns for shareholders. Winner: WSFS Financial Corporation, for its long history of exceptional growth and shareholder wealth creation.
Regarding Future Growth, WSFS is far better positioned. Its dominant market share in the economically stable Delaware Valley provides a solid foundation for organic growth. Its wealth management and fee-based businesses are significant growth engines that are less cyclical than lending. The company also remains a potential consolidator, with the management expertise and balance sheet to pursue further strategic acquisitions. Kearny's growth is tied to the much more competitive North Jersey market and lacks the diversified drivers that WSFS enjoys. Winner: WSFS Financial Corporation, due to its multiple, high-quality avenues for future growth.
In Fair Value analysis, WSFS commands and deserves a premium valuation. It typically trades at a high P/TBV multiple, often in the 1.6x-2.0x range, which is significantly higher than Kearny's sub-1.0x multiple. It also has a lower dividend yield. However, this premium is entirely justified by its best-in-class ROE, diversified business model, and superb growth record. WSFS is a clear example of 'you get what you pay for.' Kearny is cheap because its performance is poor. WSFS is a high-quality compounder, and its stock price reflects that. Risk-adjusted, WSFS is a far better value for a long-term investor. Winner: WSFS Financial Corporation, as its premium price is a fair reflection of its superior quality.
Winner: WSFS Financial Corporation over Kearny Financial Corp. WSFS is the unequivocal winner and represents a gold standard for regional banking that Kearny cannot match. WSFS's key strengths are its diversified business model, which generates significant high-margin fee income, and its exceptional profitability, with an ROE that is often three times higher than Kearny's. This financial strength is the result of a superb management team with a proven track record of smart capital allocation. Kearny's primary weakness is its simple, low-returning business model and its inability to differentiate itself in a competitive market. The verdict is not close; WSFS is one of the best-run regional banks in the country, while Kearny is a struggling peer.
Berkshire Hills Bancorp offers a more balanced comparison to Kearny Financial, as both banks have faced operational challenges and are working through strategic repositioning efforts. Berkshire, with operations centered in New England and assets around $12 billion, is slightly larger than Kearny. It has been executing a multi-year transformation plan to improve profitability by exiting certain national lending businesses and refocusing on its core regional franchise. This makes the comparison one between two banks striving to improve, rather than a top performer versus a laggard, though Berkshire has arguably made more strategic progress.
On Business & Moat, the two are fairly evenly matched. Berkshire's brand is well-established in its New England markets (Massachusetts, Connecticut, Vermont, New York), giving it a solid local footing. Kearny has a similar standing in its North Jersey territory. Switching costs are moderate for both. Berkshire's slightly larger scale ($12B assets vs. $8B) provides a minor advantage. Neither bank has significant network effects or unique regulatory moats beyond the industry standard. Berkshire's recent strategic pivot to focus on its core markets could strengthen its regional moat over time. It's a close call, but Berkshire's slightly larger scale and clearer strategic focus give it a narrow win. Winner: Berkshire Hills Bancorp (by a slight margin).
Financially, Berkshire has shown more positive momentum recently due to its restructuring. While its historical profitability has been challenged, its recent Return on Assets (ROA) of ~0.8% and Return on Equity (ROE) of ~8-9% are now notably better than Kearny's ROA of ~0.5% and ROE of ~4-5%. Berkshire's management has also made strides in improving its efficiency ratio, bringing it down into the mid-60s%, which is now superior to Kearny's ~70%. Revenue growth has been choppy for both, but Berkshire's strategic plan provides a clearer path to improving its net interest margin and overall profitability. Winner: Berkshire Hills Bancorp, as its turnaround efforts are bearing fruit and its key metrics now surpass Kearny's.
Analyzing Past Performance, both banks have delivered underwhelming long-term results for shareholders. Both have seen their stock prices lag the broader banking sector over the last five years. Berkshire's Total Shareholder Return has been volatile due to its strategic overhaul, including periods of significant underperformance followed by recovery. Kearny's performance has been more consistently stagnant. In terms of earnings growth, both have struggled. However, Berkshire's margin trend has been improving recently as it sheds lower-yielding assets, while Kearny's has not shown a similar positive inflection. Given the recent positive momentum, Berkshire gets the nod. Winner: Berkshire Hills Bancorp, for demonstrating a more successful and proactive approach to fixing its performance issues.
For Future Growth, Berkshire's prospects seem slightly more promising. Its BEST (Berkshire's Exciting Strategic Transformation) plan provides a clear roadmap for improving returns. By focusing on its core markets and improving its product mix, management has laid out a credible path to becoming a higher-performing bank. Kearny, in contrast, lacks a similarly visible strategic catalyst. Its growth is more passively tied to the economic health of its region. Berkshire's proactive stance gives it more control over its destiny. The risk for Berkshire is execution on its plan, while the risk for Kearny is continued stagnation. Winner: Berkshire Hills Bancorp, due to its well-defined strategic turnaround plan.
In Fair Value terms, both stocks often trade at a discount to tangible book value, reflecting their past struggles. Both can typically be found with P/TBV ratios in the 0.8x-1.0x range and offer attractive dividend yields. However, Berkshire's improving profitability (higher ROE) and clearer strategic direction suggest its discount is more likely to narrow over time. It is a 'cheaper' stock for a better and improving asset. Kearny's discount appears more structural, linked to its persistent low returns. Therefore, Berkshire arguably offers a better risk/reward proposition for value investors. Winner: Berkshire Hills Bancorp, as its valuation does not fully reflect the progress made in its operational turnaround.
Winner: Berkshire Hills Bancorp, Inc. over Kearny Financial Corp. Berkshire Hills wins this matchup of two underperforming banks because it has a clear and actively managed strategy to improve, and the results are beginning to show in its financial metrics. Its key strengths are its improving profitability, with ROE now double that of Kearny's, and a management team that is proactively addressing its weaknesses. Its notable weakness is its history of underperformance, which it is still working to overcome. Kearny's primary weakness is its lack of a clear catalyst for improvement, leaving it vulnerable to continued margin pressure and competitive threats. While both are turnaround stories, Berkshire's story is more advanced and credible.
Based on industry classification and performance score:
Kearny Financial operates a traditional, highly focused community banking model centered on real estate lending in the competitive New York/New Jersey metropolitan area. Its primary strength and moat come from deep, localized expertise in multi-family and commercial real estate loans, which form the vast majority of its business. However, this strength is offset by significant weaknesses, including a heavy reliance on interest income, a high-cost deposit base with few low-cost checking accounts, and an inefficient branch network. For investors, the takeaway is mixed to negative; while the bank possesses a defensible niche, its concentrated business model and lack of diversification in funding and revenue create considerable risks, especially in the current economic environment.
The bank's almost complete dependence on net interest income is a major structural weakness, as its fee-based revenue is exceptionally low and provides no meaningful diversification.
Kearny Financial's business model is overwhelmingly reliant on its lending spread. Noninterest income consistently accounts for less than 5% of its total revenue, a figure that is starkly BELOW the sub-industry average, which typically ranges from 15% to 25%. The bank's fee income is primarily composed of basic service charges on deposit accounts, with no significant contribution from more durable and profitable areas like wealth management, trust services, or mortgage banking. This lack of diversification is a critical vulnerability. It means Kearny's earnings are highly sensitive to fluctuations in interest rates and loan demand, with few other revenue sources to provide a buffer during periods of net interest margin compression. This failure to develop other lines of business represents a significant competitive disadvantage compared to more balanced peers.
The bank's reliance on brokered deposits to supplement its funding is a key risk, indicating a weakness in its organic deposit-gathering capabilities from a diversified customer base.
While Kearny serves a mix of local retail and small business customers, its funding sources show signs of concentration and a dependency on less stable wholesale funds. The bank periodically utilizes brokered deposits, which at times have exceeded 10% of total deposits. Brokered deposits are sourced through intermediaries and are known to be less loyal and more costly than core customer deposits, posing a higher risk of outflow if the bank faces challenges or better rates are offered elsewhere. This reliance is ABOVE the average for many community banks and suggests that its branch network and direct marketing efforts are insufficient to meet its funding needs organically. A high-quality deposit franchise is built on a diverse and granular base of local customers, and Kearny's use of wholesale funding points to a weakness in this area.
Kearny has successfully carved out a deep and defensible niche in multi-family and commercial real estate lending within its local market, which serves as its primary competitive advantage despite the associated concentration risk.
Kearny's clearest strength lies in its specialized lending focus. The bank has a dominant concentration in multi-family real estate loans, which comprise over 50% of its total loan portfolio, supplemented by a significant allocation to other commercial real estate. This is not a diversified approach; it is a dedicated niche. The bank's moat is built on decades of experience, deep relationships with local property developers, and a granular understanding of the real estate dynamics in Northern New Jersey and the NYC boroughs. This expertise allows it to compete effectively and underwrite risk in a way that larger, less specialized banks cannot. While this strategy creates significant concentration risk—exposing the bank heavily to the health of a single asset class in one geographic area—it is also the core of its franchise and what differentiates it from competitors. This proven, specialized expertise in a profitable lending category qualifies as a strong niche franchise.
The bank's funding base is weak, characterized by a low proportion of noninterest-bearing deposits and a heavy reliance on higher-cost time deposits, making its cost of funds sensitive to interest rate changes.
A bank's strength is often measured by its access to low-cost, stable funding. On this measure, Kearny Financial falls short. Its proportion of noninterest-bearing deposits—essentially free money for the bank—hovers around 17% of total deposits, which is significantly BELOW the community bank average of 20-25%. Consequently, the bank relies heavily on more expensive funding sources, particularly time deposits (CDs), which have grown to represent over 40% of its deposit base in the rising rate environment. This composition has pushed its cost of total deposits higher, pressuring its net interest margin. While the bank has managed its level of uninsured deposits to a reasonable level (around 30%), the overall deposit mix indicates a less loyal customer base that is more transactional and rate-sensitive. This lack of a sticky, low-cost core deposit franchise is a critical competitive disadvantage.
The bank's geographically focused branch network provides local scale, but its efficiency in gathering deposits per branch is average and does not represent a distinct competitive advantage over more productive peers.
Kearny Financial operates a network of approximately 41 branches concentrated in Northern and Central New Jersey. This dense local presence supports its community-focused, relationship-banking model. With roughly $6.3 billion in deposits, the bank's deposits per branch stand at approximately $154 million. This figure is respectable but not exceptional when compared to the sub-industry. For instance, it lags behind more efficient regional peers like OceanFirst Financial, which reports a significantly higher deposits-per-branch figure. While Kearny has engaged in some branch optimization, its network efficiency is merely average, limiting its ability to generate superior operating leverage from its physical footprint. The lack of standout productivity from its core deposit-gathering infrastructure is a weakness that forces reliance on other, often more expensive, funding sources.
Kearny Financial's recent financial statements present a mixed picture with significant risks. While the latest quarter showed strong growth in revenue (up 18%) and net interest income (up 16.2%), these improvements are overshadowed by fundamental weaknesses. The bank operates with poor efficiency (efficiency ratio of 72.7%), its loan-to-deposit ratio is high at 101.6%, and its tangible book value is weighed down by -$86.2 million in unrealized securities losses. For investors, the takeaway is negative, as operational inefficiencies and balance sheet pressures create a risky profile despite recent income growth.
The bank's capital appears adequate but not strong, while its liquidity position is weak due to a high loan-to-deposit ratio that exceeds `100%`.
Kearny's capital and liquidity buffers present a mixed but ultimately concerning picture. On the capital side, its Tangible Common Equity to Total Assets ratio is 8.3%, which is in line with the minimum regulatory expectations but offers little room for comfort. Stronger regional banks typically operate with higher capital cushions. Key regulatory metrics like the CET1 ratio were not provided, making a full assessment of its loss-absorbing capacity difficult.
The more significant issue is liquidity. The bank's loan-to-deposit ratio is 101.6% ($5.72 billion in loans vs. $5.63 billion in deposits). A ratio above 100% is a clear weakness and is well above the industry benchmark, which is typically below 95%. This indicates that the bank is funding its loan growth with sources other than stable customer deposits, such as Federal Home Loan Bank borrowings, which can be more expensive and less reliable in times of stress. Without data on uninsured deposits, it is hard to gauge its full liquidity risk, but the high loan-to-deposit ratio is a significant red flag.
The bank's reserves for potential loan losses appear thin compared to its loan portfolio, suggesting it may not be sufficiently prepared for a potential economic downturn.
Assessing Kearny's credit quality is challenging due to the lack of data on nonperforming loans (NPLs) and net charge-offs. However, the available information on its reserves raises concerns. The bank's allowance for credit losses (ACL) stands at $45.06 million, which is only 0.78% of its gross loans of $5.77 billion. This ACL-to-loans ratio is weak and appears to be well below the industry average for regional banks, which is often 1.25% or higher. A lower ratio suggests the bank has set aside less money to cover potential future loan defaults.
Furthermore, in its most recent quarter, the bank reported a negative provision for loan losses (-$0.08 million), meaning it released reserves rather than building them. Releasing reserves can boost short-term earnings but may be imprudent if there are underlying credit concerns or an uncertain economic outlook. Without clear data showing exceptionally strong credit quality (like very low NPLs), this low level of reserves suggests the bank could be under-reserved, posing a risk to future earnings and book value if credit conditions worsen.
The bank's balance sheet shows significant vulnerability to interest rate changes, with large unrealized losses on its investment portfolio directly reducing its tangible equity.
Kearny Financial's sensitivity to interest rates is a major concern. The bank's tangible equity is being suppressed by a large negative accumulated other comprehensive income (AOCI) balance of -$86.22 million. This figure, which represents unrealized losses on its securities portfolio, is equivalent to a significant 13.5% of the bank's tangible common equity ($638.36 million). A high negative AOCI-to-equity ratio like this is a strong indicator that rising interest rates have negatively impacted the value of its bond holdings, weakening its capital position. This is a considerable weakness compared to healthier banks that have better-managed securities portfolios.
While specific data on the duration of its securities or the mix of variable-rate loans is not provided, the sheer size of the AOCI loss implies a mismatch between its assets and liabilities. This makes the bank's earnings and capital more volatile as interest rates fluctuate. For investors, this means the bank's book value could be at further risk if rates continue to rise, and its financial flexibility may be constrained. The significant negative impact on tangible equity is a clear red flag regarding the bank's interest rate risk management.
The bank's core earnings from lending are showing strong recent growth, though its overall profit margin on loans and investments appears to be below average.
Kearny Financial's net interest income (NII), the profit made from the spread between loan interest earned and deposit interest paid, has shown a strong positive trend recently. In the latest quarter, NII grew 16.2% year-over-year to $37.7 million, a significant acceleration from the 7.7% growth seen in the prior quarter. This suggests the bank is successfully repricing its loans and managing its funding costs in the current rate environment, which is a key strength.
However, the bank's overall net interest margin (NIM)—its core profitability rate—appears to be narrow. While NIM is not directly reported, a rough estimation places it below 2.0%, which would be significantly weaker than the typical regional bank benchmark of 3.0% or higher. The negative NII growth for the full prior fiscal year (-5.37%) also indicates that the bank struggled with margin compression before the recent recovery. Therefore, while the recent growth in NII is a positive signal of a turnaround, the underlying profitability spread remains a watch item. The strong recent momentum justifies a passing grade, but investors should monitor if this translates to a healthier, industry-average NIM over time.
The bank is highly inefficient, with operating costs that are far too high relative to its revenue, which significantly drags down its overall profitability.
Kearny Financial demonstrates poor cost control, as evidenced by its high efficiency ratio. In the most recent quarter, this ratio was 72.7%, calculated from $31.67 million in noninterest expenses against $43.55 million in total revenue. For comparison, a strong efficiency ratio for a bank is typically below 60%. Kearny's ratio is significantly above this benchmark, indicating that it costs the bank nearly 73 cents to generate each dollar of revenue. This level of inefficiency is a substantial drag on its ability to generate profits.
This is not an isolated issue, as the ratio was 75.6% in the prior quarter and 78.3% for the full fiscal year. The primary driver of these costs is Salaries and Employee Benefits, which make up 59% of noninterest expenses. While some improvement was seen in the latest quarter, the bank's cost structure remains a core weakness that limits its profitability and competitiveness compared to leaner peers.
Kearny Financial's past performance has been poor and inconsistent, marked by significant volatility and a steep decline in profitability. While the bank grew earnings until fiscal 2022, performance has since collapsed, culminating in a net loss of -$86.67 million in fiscal 2024. Key metrics like Return on Equity have fallen dramatically, from 6.98% to -10.68% in two years. The bank has consistently underperformed peers on growth, profitability, and efficiency. The investor takeaway is negative, as the historical record reveals a struggling institution with a deteriorating financial trajectory.
The bank's loan and deposit growth has been inconsistent, highlighted by a significant deposit outflow in fiscal 2024 that signaled balance sheet stress.
A healthy community bank should demonstrate steady growth in its core loans and deposits. Kearny's record here is choppy. Net loans grew from $4.8 billion in fiscal 2021 to $5.8 billion in 2023 before stagnating. More concerning is the deposit trend. Total deposits grew to a peak of $5.86 billion in fiscal 2022 but then declined, dropping sharply by nearly $500 million to $5.16 billion in fiscal 2024. This deposit outflow forced the bank's loan-to-deposit ratio to a high level of approximately 110%, indicating it was lending out more than its core deposit base, a riskier funding profile.
While deposits recovered in fiscal 2025 to $5.68 billion, the volatility points to potential weakness in its customer relationships and competitiveness. This inconsistent performance contrasts with healthier regional banks that have managed more stable balance sheet growth through recent interest rate cycles. The lack of steady, reliable growth in core funding is a significant historical weakness.
The bank's core profitability has eroded due to a consistent decline in net interest income and a persistently high efficiency ratio, indicating weak cost controls.
A bank's health is often measured by its Net Interest Margin (NIM) and efficiency. On both counts, Kearny's historical performance is weak. Net Interest Income (NII), the profit from lending, has steadily declined from a peak of $196.6 million in fiscal 2022 to $134.94 million in fiscal 2025. This shows the bank has struggled to manage its loan and deposit pricing effectively in the current rate environment.
Simultaneously, the bank's cost structure is bloated. The efficiency ratio, which measures non-interest expenses as a percentage of revenue, is a key indicator of operational effectiveness (lower is better). As noted by competitor comparisons, Kearny's ratio is high, around 70% and spiking to over 80% in fiscal 2024. This compares poorly to more efficient peers who operate in the 50s or low 60s. This combination of falling core revenue and high fixed costs is a recipe for poor profitability and has been a central feature of Kearny's past performance.
Kearny's earnings per share have been extremely volatile and have collapsed in recent years, demonstrating a clear inability to generate consistent profits.
The company's earnings per share (EPS) track record is poor and shows significant deterioration. After growing from $0.77 in fiscal 2021 to a strong $0.95 in fiscal 2022, EPS fell by over 30% to $0.63 in fiscal 2023. Performance then completely collapsed in fiscal 2024 with a loss of -$1.39 per share. This is a clear negative trend that showcases the bank's vulnerability to the changing interest rate environment and its operational inefficiencies. The average Return on Equity (ROE) for the last three full fiscal years (FY22-FY24) was a mere 0.3%, far below the level required to create shareholder value and significantly underperforming peers.
The projected recovery to an EPS of $0.42 in fiscal 2025 is still less than half the peak level and is insufficient to comfortably cover the current dividend of $0.44. This history of unstable and now negative earnings makes it difficult for investors to have confidence in management's ability to execute consistently.
Based on available data, the bank has not demonstrated significant credit quality issues, as its provisions for loan losses have remained low and manageable.
Historically, Kearny's credit metrics do not appear to be the primary cause of its poor financial performance. The provision for loan losses, which is money set aside to cover potential bad loans, has been very low over the past five years. In fiscal 2021 and 2022, the bank even had negative provisions (-$1.12 million and -$7.52 million, respectively), meaning it released reserves back into income. In subsequent years, provisions remained modest, peaking at only $6.23 million in fiscal 2024 on a loan portfolio of over $5.6 billion.
This suggests that the bank's underwriting discipline has been sound and that loan defaults have not been a major problem. The massive net loss in 2024 was primarily driven by margin compression and investment portfolio losses, not bad loans. While the allowance for loan losses has decreased as a percentage of total loans, the low level of provisions indicates management has not seen a major threat on the horizon. This factor passes because there is no historical evidence of significant credit problems.
While Kearny has consistently paid dividends and bought back shares, its capital return program appears unsustainable as recent earnings do not cover the dividend payments.
Over the past five years, Kearny has returned capital to shareholders through both dividends and share buybacks. The annual dividend per share increased from $0.35 in fiscal 2021 to $0.44 by fiscal 2023, where it has remained. However, the company's sharp decline in profitability has made this dividend a liability. In fiscal 2025, the dividend payout ratio was 105.98%, meaning the company paid more to shareholders than it earned, which is not a sustainable practice and puts the dividend at risk of a cut.
Share repurchases were significant in fiscal 2022 ($130.5 million) and 2023 ($28.0 million), which successfully reduced the total shares outstanding by over 20% since 2021. However, buyback activity has slowed to a trickle, with only $0.36 million spent in fiscal 2025, reflecting the company's diminished financial capacity. While past buybacks were a positive, the current inability to fund the dividend from earnings is a major red flag.
Kearny Financial's future growth appears heavily constrained over the next 3-5 years. The bank's deep concentration in New Jersey and New York commercial real estate (CRE), once a strength, is now a significant headwind amid high interest rates and market uncertainty. Lacking meaningful fee income streams or a low-cost deposit base, Kearny is entirely dependent on lending margins which are currently under severe pressure. Compared to more diversified regional peers, Kearny has fewer paths to growth and is more vulnerable to a downturn in its niche market. The investor takeaway is negative, as the bank's business model is poorly positioned for the current economic environment, suggesting a future of stagnant earnings and limited expansion.
The bank's heavy concentration in the slowing commercial real estate market and the high interest rate environment points to a weak outlook for loan growth, with no clear catalysts for acceleration.
Kearny Financial's prospects for loan growth are dim over the near to medium term. The bank has not provided explicit loan growth guidance, but the macroeconomic environment for its core products—multi-family and commercial real estate loans—is challenging. High interest rates have significantly slowed transaction and development activity, which are the primary drivers of new loan originations. Any growth is likely to come from refinancing existing clients rather than new business. Given the increased regulatory scrutiny on CRE concentrations, it is unlikely that Kearny will be able to pursue aggressive growth. Without a diversified loan portfolio that includes more robust segments like C&I or consumer lending, the bank's growth is tethered to a single, currently struggling asset class.
While Kearny engages in share buybacks, it lacks a clear strategic direction for M&A, and its concentrated business model makes it more of a potential target than a consolidator.
Kearny's capital deployment strategy appears limited in scope. The company has a share repurchase program in place, which provides some support to earnings per share. However, there is no indication of a proactive M&A strategy to drive growth. Given the bank's high concentration in CRE and its weak funding profile, its ability to act as an acquirer and successfully integrate another institution is questionable. It is more likely that Kearny could become an acquisition target itself, particularly for a larger bank looking to gain scale in the New Jersey market. While its capital ratios like CET1 are adequate for regulatory purposes, they do not position the bank for aggressive expansion or strategic acquisitions that could meaningfully alter its growth trajectory. The absence of a compelling M&A or capital deployment narrative for future growth justifies a failing grade.
The bank has no clear or aggressive strategy for branch or digital optimization, leaving its physical network as an average performer without driving meaningful efficiency gains or future growth.
Kearny Financial's strategy regarding its physical and digital footprint appears to be one of maintenance rather than forward-looking optimization. While the bank has engaged in some minor branch consolidation, its deposits per branch of around $154 million are merely average and do not indicate a highly productive network. More importantly, the company has not articulated a clear vision or announced significant cost-saving targets tied to streamlining operations or investing in a superior digital customer experience. In an era where customers increasingly demand robust digital tools and competitors are leveraging technology to lower costs, Kearny's lack of a stated growth plan in this area is a significant weakness. Without a proactive strategy, the bank risks falling behind competitors that are more effectively rationalizing their branch costs and capturing digitally-savvy customers.
Pressured by a high-cost deposit base and intense funding competition, the bank's net interest margin (NIM) faces a challenging outlook with a high likelihood of further compression.
Kearny's outlook for its net interest margin, the key driver of its profitability, is negative. The bank's funding base is heavily reliant on expensive, rate-sensitive CDs, and it lacks a substantial base of low-cost core deposits. As deposit competition remains fierce, Kearny's cost of funds is expected to continue rising, putting downward pressure on its NIM. While some assets will reprice higher, this is unlikely to fully offset the rapid increase in funding costs. Management has not provided explicit NIM guidance, but the underlying trends in its balance sheet composition strongly suggest a period of margin compression. Compared to peers with superior deposit franchises, Kearny is poorly positioned to protect its margin in the current rate environment.
The bank has an exceptionally low level of fee income and has not presented any credible plans to develop these crucial, diversified revenue streams, representing a major structural barrier to future growth.
This is a critical failure in Kearny's future growth outlook. Non-interest income consistently represents less than 5% of the bank's total revenue, a figure dramatically below the industry average. The company has no meaningful presence in wealth management, trust services, treasury management, or robust mortgage banking operations. Furthermore, management has not announced any strategic initiatives, growth targets, or investments aimed at building these businesses. This leaves Kearny almost entirely dependent on its net interest margin, which is currently under intense pressure. This lack of diversification is a severe competitive disadvantage and makes the bank's earnings highly vulnerable to interest rate cycles, leaving it with no alternative growth levers to pull.
Based on its valuation as of October 24, 2025, Kearny Financial Corp. (KRNY) appears to be fairly valued with some characteristics of an undervalued stock. Priced at $6.64, the stock trades at a significant discount to its tangible book value with a Price-to-Tangible Book (P/TBV) ratio of 0.65x, coupled with a very high dividend yield of 6.63%. However, this is weighed against a trailing P/E ratio of 14.13x, which is not particularly cheap, and a low Return on Equity. The takeaway for investors is neutral to slightly positive; the stock offers a compelling income stream and a margin of safety based on its assets, but its profitability and high dividend payout ratio warrant caution.
The stock trades at a very low Price-to-Tangible-Book ratio of 0.65x, but this discount is a direct reflection of its low profitability and does not signal a clear mispricing.
Price-to-Tangible Book Value (P/TBV) is a primary valuation tool for banks. KRNY's P/TBV of 0.65x ($6.64 price vs. $10.17 TBVPS) is low and appears attractive on the surface, suggesting an investor can buy the bank's core assets for just 65 cents on the dollar. However, this valuation must be assessed in the context of profitability. The company's Return on Equity (ROE) was 3.48% for the last fiscal year and 5.07% in the most recent quarter. Banks that earn low returns on their equity typically trade at a discount to their book value. Because KRNY's profitability is low, the market is assigning it a low multiple. While this provides a margin of safety, it does not represent a clear undervaluation unless there is a strong case for significant and sustainable improvement in its ROE.
The company's low Price-to-Book multiple of 0.55x is appropriately aligned with its low Return on Equity of around 5%, indicating no obvious mispricing in this relationship.
A fundamental principle of bank valuation is that a bank's Price-to-Book (P/B) ratio should reflect its Return on Equity (ROE). A bank that earns an ROE close to its cost of equity (often estimated around 8-10%) should trade around its book value. KRNY's ROE in the most recent quarter was 5.07%. This return is only slightly above the current 10-Year Treasury yield of approximately 4.02%. Since the bank is not generating a significant premium over the risk-free rate, the market is correctly valuing its equity at a discount. The P/B ratio of 0.55x is therefore a logical consequence of its low profitability, not a sign that the market is undervaluing its earnings power.
The trailing P/E ratio of 14.13x is not low for a regional bank, and the valuation relies heavily on optimistic forward earnings estimates that may not materialize.
Kearny's TTM P/E ratio of 14.13x is higher than the regional bank industry average of approximately 11.7x. While the most recent quarter showed impressive year-over-year EPS growth of 53.62%, this appears to be an outlier rather than a trend. The key justification for the current valuation from an earnings perspective is the forward P/E of 8.1x, which implies that analysts expect earnings per share to rise significantly in the next fiscal year. While this is positive if achieved, it introduces risk. A valuation that leans heavily on future growth rather than proven trailing earnings is more speculative. Given the bank's historically modest profitability, the high TTM P/E and reliance on future growth do not signal clear undervaluation.
The stock's high dividend yield of 6.63% is attractive but appears unsustainable due to a very high payout ratio and a lack of shareholder-friendly buybacks.
Kearny Financial offers a compelling dividend yield of 6.63%, which is significantly higher than the average for regional banks. However, this high yield comes with considerable risk. The dividend payout ratio is 93.61% of TTM earnings, which means almost every dollar of profit is being returned to shareholders as dividends. This leaves very little capital for reinvesting in the business, growing the loan book, or absorbing potential loan losses. Furthermore, instead of repurchasing shares to increase shareholder value, the company's shares outstanding have increased by 0.85% over the past year, indicating slight dilution. A healthy capital return program should ideally be supported by a more moderate payout ratio (typically below 60% for a bank) and, when appropriate, share buybacks. The current strategy is too aggressive and may not be sustainable if earnings falter.
Compared to its peers, the stock offers a significantly lower valuation based on tangible book value and a much higher dividend yield, suggesting it is relatively inexpensive.
On a relative basis, KRNY presents a compelling case. Its P/TBV ratio of 0.65x is substantially lower than the industry median, which often trends closer to or above 1.0x. Furthermore, its dividend yield of 6.63% is well above the typical yield for regional banks, which is often in the 3-4% range. While its trailing P/E of 14.13x is higher than the peer average of ~11.7x, the stark discount on its asset value and its superior income stream make it stand out. For investors prioritizing asset value and income, KRNY appears cheap compared to many of its competitors, even after accounting for its lower profitability.
The primary risk facing Kearny Financial is the challenging macroeconomic environment, specifically the 'higher for longer' interest rate scenario. This directly impacts the bank's core profitability metric, the Net Interest Margin (NIM), which is the difference between the interest it earns on loans and pays on deposits. As interest rates remain elevated, the bank is forced to pay more to retain customer deposits, while a significant portion of its loan portfolio may be locked in at lower, older rates. This margin compression can lead to stagnant or declining earnings. A broader economic downturn would compound this issue by increasing credit risk, forcing the bank to set aside more capital for potential loan losses and reducing overall demand for new loans.
Within the banking industry, Kearny's most significant vulnerability is its substantial exposure to Commercial Real Estate (CRE). Like many regional banks, a large portion of its loan book is tied to commercial properties, including office, retail, and multi-family housing. The office and retail sectors face long-term structural challenges from remote work and e-commerce, increasing the risk of defaults. While its multi-family portfolio has been more resilient, any downturn in rental markets or property valuations in its core New Jersey/New York operating area would directly impact asset quality. Following the regional banking turmoil of 2023, regulators are applying greater scrutiny to banks with high CRE concentrations, which could result in stricter capital requirements and increased compliance costs for KRNY.
On a company-specific level, Kearny faces intense competition that further complicates its path to growth. It must compete with national banking giants, which are often perceived as safer by depositors, and with agile fintech companies offering more attractive rates and digital services. This fierce competition for deposits puts constant upward pressure on funding costs. The bank's balance sheet also holds unrealized losses on its investment securities portfolio, a common issue for banks that bought bonds when rates were low. While not a direct loss unless the securities are sold, these paper losses reduce the bank's tangible book value and limit its financial flexibility should it need to raise capital quickly. This combination of competitive pressure and balance sheet constraints makes it difficult to grow the loan portfolio profitably in the current environment.
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