Equibles

10-Q

Kearny Financial Corp. (KRNY)

10-Q 2022-02-08 For: 2021-12-31
View Original
Added on April 06, 2026

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 December 31, 2021

OR

☐ 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<br>incorporation or organization) (I.R.S. Employer<br>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: February 2, 2022.

$0.01 par value common stock — 72,753,040 shares outstanding

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

INDEX

Page<br><br>Number
PART I—FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statements of Financial Condition at December 31, 2021 (Unaudited) and June 30, 2021 1
Consolidated Statements of Income for the Quarter and Six Months ended December 31, 2021 and December 31, 2020 (Unaudited) 2
Consolidated Statements of Comprehensive Income for the Quarter and Six Months ended December 31, 2021 and December 31, 2020 (Unaudited) 4
Consolidated Statements of Changes in Stockholders’ Equity for the Quarter and Six Months Ended December 31, 2021 and December 31, 2020 (Unaudited) 5
Consolidated Statements of Cash Flows for the Six Months ended December 31, 2021 and December 31, 2020 (Unaudited) 7
Notes to Consolidated Financial Statements (Unaudited) 9
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 42
Item 3: Quantitative and Qualitative Disclosure About Market Risk 55
Item 4: Controls and Procedures 57
PART II—OTHER INFORMATION
Item 1: Legal Proceedings 58
Item 1A: Risk Factors 58
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 58
Item 3: Defaults Upon Senior Securities 58
Item 4: Mine Safety Disclosures 58
Item 5: Other Information 58
Item 6: Exhibits 59
SIGNATURES 60

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In Thousands, Except Share and Per Share Data)

June 30,
2021
Assets
Cash and amounts due from depository institutions 19,909 $ 21,463
Interest-bearing deposits in other banks 40,543 46,392
Cash and cash equivalents 60,452 67,855
Investment securities available for sale (amortized cost 1,595,802 and 1,666,853, respectively), net of allowance for credit losses of 0 at December 31, 2021 and June 30, 2021 1,591,066 1,676,864
Investment securities held to maturity (fair value 54,056 and 39,610, respectively), net of allowance for credit losses of 0 at December 31, 2021 and June 30, 2021 53,142 38,138
Loans held-for-sale 12,549 16,492
Loans receivable 4,826,404 4,851,394
Less: allowance for credit losses on loans (48,216 ) (58,165 )
Net loans receivable 4,778,188 4,793,229
Premises and equipment 54,067 56,338
Federal Home Loan Bank ("FHLB") of New York stock 36,622 36,615
Accrued interest receivable 18,495 19,362
Goodwill 210,895 210,895
Core deposit intangibles 3,344 3,705
Bank owned life insurance 286,433 283,310
Deferred income tax assets, net 25,709 29,323
Other real estate owned 658 178
Other assets 54,603 51,431
Total Assets 7,186,223 $ 7,283,735
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest-bearing 604,805 $ 593,718
Interest-bearing 4,849,220 4,891,588
Total deposits 5,454,025 5,485,306
Borrowings 686,105 685,876
Advance payments by borrowers for taxes 16,772 15,752
Other liabilities 33,851 53,857
Total Liabilities 6,190,753 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;  73,453,230 shares and 78,964,859 shares issued and outstanding, respectively 735 790
Paid-in capital 587,392 654,396
Retained earnings 431,549 408,367
Unearned employee stock ownership plan shares;  2,659,244 shares and 2,759,594 shares, respectively (25,780 ) (26,753 )
Accumulated other comprehensive income 1,574 6,144
Total Stockholders' Equity 995,470 1,042,944
Total Liabilities and Stockholders' Equity 7,186,223 $ 7,283,735

All values are in US Dollars.

See notes to unaudited consolidated financial statements.

  • 1 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

(Unaudited)

Quarter Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
Interest Income
Loans $ 47,575 $ 50,806 $ 95,805 $ 103,617
Taxable investment securities 7,595 7,707 15,807 15,043
Tax-exempt investment securities 327 433 660 887
Other interest-earning assets 415 787 846 1,701
Total Interest Income 55,912 59,733 113,118 121,248
Interest Expense
Deposits 3,663 8,647 7,728 19,709
Borrowings 3,562 5,193 7,113 10,853
Total Interest Expense 7,225 13,840 14,841 30,562
Net Interest Income 48,687 45,893 98,277 90,686
(Reversal of) provision for credit losses (2,420 ) (1,365 ) (7,820 ) 2,694
Net Interest Income after (Reversal of)<br> Provision for Credit Losses 51,107 47,258 106,097 87,992
Non-Interest Income
Fees and service charges 698 556 1,305 1,001
Gain on sale and call of securities - 813 1 436
Gain on sale of loans 970 2,378 1,976 4,268
Income from bank owned life insurance 1,562 1,596 3,123 3,192
Electronic banking fees and charges 421 404 828 809
Bargain purchase gain - - - 3,053
Other income 482 67 700 157
Total Non-Interest Income 4,133 5,814 7,933 12,916
Non-Interest Expense
Salaries and employee benefits 18,096 17,081 36,713 34,058
Net occupancy expense of premises 3,156 3,120 7,703 6,242
Equipment and systems 3,723 3,902 7,548 7,472
Advertising and marketing 448 513 840 1,013
Federal deposit insurance premium 721 490 1,213 962
Directors' compensation 649 748 1,452 1,496
Merger-related expenses - - - 4,349
Debt extinguishment expenses - 796 - 796
Other expense 2,877 3,860 6,004 7,695
Total Non-Interest Expense 29,670 30,510 61,473 64,083
Income before Income Taxes 25,570 22,562 52,557 36,825
Income tax expense 6,801 5,614 14,073 8,498
Net Income $ 18,769 $ 16,948 $ 38,484 $ 28,327

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)

Quarter Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
Net Income per Common Share (EPS)
Basic $ 0.26 $ 0.20 $ 0.53 $ 0.33
Diluted $ 0.26 $ 0.20 $ 0.53 $ 0.33
Weighted Average Number of Common Shares<br> Outstanding
Basic 72,011 85,120 73,274 85,564
Diluted 72,037 85,123 73,297 85,566

See notes to unaudited consolidated financial statements.

  • 3 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Unaudited)

Quarter Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
Net Income $ 18,769 $ 16,948 $ 38,484 $ 28,327
Other Comprehensive (Loss) Income, net of tax:
Net unrealized (loss) gain on securities available for sale (5,451 ) 504 (10,432 ) 1,292
Net realized gain on sale and call of securities available for sale - (571 ) (1 ) (306 )
Fair value adjustments on derivatives 4,675 2,531 5,840 4,176
Benefit plan adjustments 14 15 23 34
Total Other Comprehensive (Loss) Income (762 ) 2,479 (4,570 ) 5,196
Total Comprehensive Income $ 18,007 $ 19,427 $ 33,914 $ 33,523

See notes to unaudited consolidated financial statements.

  • 4 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Per Share Data, Unaudited)

Paid-In Retained Unearned<br>ESOP Accumulated<br>Other<br>Comprehensive
Amount Capital Earnings Shares Income Total
Balance - September 30, 2020 89,510 $ 895 $ 769,269 $ 378,134 $ (28,212 ) $ 3,974 $ 1,124,060
Net income - - - 16,948 - - 16,948
Other comprehensive income, net  of income tax - - - - - 2,479 2,479
ESOP shares committed to be  released (50 shares) - - (12 ) - 486 - 474
Stock option expense - - 455 - - - 455
Share repurchases (4,509 ) (45 ) (45,659 ) - - - (45,704 )
Restricted stock plan shares  earned (69 shares) - - 975 - - - 975
Cancellation of shares issued for  restricted stock awards (63 ) (1 ) (639 ) - - - (640 )
Cash dividends declared  (0.08 per common share) - - - (6,706 ) - - (6,706 )
Balance - December 31, 2020 84,938 $ 849 $ 724,389 $ 388,376 $ (27,726 ) $ 6,453 $ 1,092,341

All values are in US Dollars.

Paid-In Retained Unearned<br>ESOP Accumulated<br>Other<br>Comprehensive
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 - - - 28,327 - - 28,327
Other comprehensive income, net  of income tax - - - - - 5,196 5,196
ESOP shares committed to be  released (100 shares) - - (112 ) - 973 - 861
Stock option expense - - 911 - - - 911
Stock repurchases (4,509 ) (45 ) (45,659 ) - - - (45,704 )
Restricted stock plan shares  earned (138 shares) - - 1,991 - - - 1,991
Cancellation of shares issued for  restricted stock awards (70 ) (1 ) (688 ) - - - (689 )
Shares issued in conjunction with the acquisition of MSB Financial Corp. 5,854 58 45,075 - - - 45,133
Cash dividends declared  (0.16 per common share) - - - (13,623 ) - - (13,623 )
Balance - December 31, 2020 84,938 $ 849 $ 724,389 $ 388,376 $ (27,726 ) $ 6,453 $ 1,092,341

All values are in US Dollars.

See notes to unaudited consolidated financial statements.

  • 5 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Per Share Data, Unaudited)

Paid-In Retained Unearned<br>ESOP Accumulated<br>Other<br>Comprehensive
Amount Capital Earnings Shares Income Total
Balance - September 30, 2021 75,800 $ 758 $ 616,894 $ 420,701 $ (26,266 ) $ 2,336 $ 1,014,423
Net income - - - 18,769 - - 18,769
Other comprehensive loss, net  of income tax - - - - - (762 ) (762 )
ESOP shares committed to be  released (50 shares) - - 173 - 486 - 659
Stock option expense - - 316 - - - 316
Stock repurchases (2,290 ) (22 ) (29,980 ) - - - (30,002 )
Restricted stock plan shares  earned (53 shares) - - 707 - - - 707
Cancellation of shares issued for  restricted stock awards (57 ) (1 ) (718 ) - - - (719 )
Cash dividends declared  (0.11 per common share) - - - (7,921 ) - - (7,921 )
Balance - December 31, 2021 73,453 $ 735 $ 587,392 $ 431,549 $ (25,780 ) $ 1,574 $ 995,470

All values are in US Dollars.

Paid-In Retained Unearned<br>ESOP Accumulated<br>Other<br>Comprehensive
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 - - - 38,484 - - 38,484
Other comprehensive loss, net  of income tax - - - - - (4,570 ) (4,570 )
ESOP shares committed to be  released (100 shares) - - 306 - 973 - 1,279
Stock option expense - - 772 - - - 772
Stock repurchases (5,448 ) (54 ) (68,944 ) - - - (68,998 )
Restricted stock plan shares  earned (125 shares) - - 1,669 - - - 1,669
Cancellation of shares issued for  restricted stock awards (64 ) (1 ) (807 ) - - - (808 )
Cash dividends declared  (0.21 per common share) - - - (15,302 ) - - (15,302 )
Balance - December 31, 2021 73,453 $ 735 $ 587,392 $ 431,549 $ (25,780 ) $ 1,574 $ 995,470

All values are in US Dollars.

See notes to unaudited consolidated financial statements.

  • 6 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Unaudited)

Six Months Ended
December 31,
2021 2020
Cash Flows from Operating Activities:
Net income $ 38,484 $ 28,327
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment 2,999 2,883
Net accretion of premiums, discounts and loan fees and costs (3,108 ) (7,620 )
Deferred income taxes and valuation allowance 5,484 2,262
Bargain purchase gain - (3,053 )
Amortization of intangible assets 361 534
Amortization of benefit plans’ unrecognized net gain 39 42
(Reversal of) provision for credit losses (7,820 ) 2,694
Loans originated for sale (127,458 ) (212,037 )
Proceeds from sale of mortgage loans held-for-sale 133,285 224,141
Gain on sale of mortgage loans held-for-sale, net (1,884 ) (3,916 )
Realized gain on sale/call of investment securities available for sale (1 ) (436 )
Realized loss on debt extinguishment - 796
Realized gain on sale of loans receivable (92 ) (352 )
Realized (gain) loss on disposition of premises and equipment (356 ) 26
Increase in cash surrender value of bank owned life insurance (3,123 ) (3,192 )
ESOP, stock option plan and restricted stock plan expenses 3,720 3,763
Decrease (increase) in interest receivable 867 (752 )
Decrease (increase) in other assets 4,391 (3,225 )
Increase (decrease) in interest payable 50 (237 )
(Decrease) increase in other liabilities (19,319 ) 172
Net Cash Provided by Operating Activities 26,519 30,820
Cash Flows from Investing Activities:
Purchases of:
Investment securities available for sale (140,550 ) (604,971 )
Investment securities held to maturity (16,162 ) -
Proceeds from:
Repayments/calls/maturities of investment securities available for sale 209,742 253,802
Repayments/calls/maturities of investment securities held to maturity 1,086 2,930
Sales of investment securities available for sale - 44,842
Purchase of loans (72,345 ) (23,508 )
Net decrease in loans receivable 98,554 192,081
Proceeds from sale of loans receivable 1,126 43,931
Additions to premises and equipment (728 ) (2,224 )
Proceeds from cash settlement of premises and equipment 599 -
(Purchase) redemption of FHLB stock (7 ) 16,421
Net cash acquired in acquisition - 4,296
Net Cash Provided by (Used in) Investing Activities $ 81,315 $ (72,400 )

See notes to unaudited consolidated financial statements.

  • 7 -

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Thousands, Unaudited)

Six Months Ended
December 31,
2021 2020
Cash Flows from Financing Activities:
Net (decrease) increase in deposits $ (30,866 ) $ 423,187
Repayment of term FHLB advances (780,000 ) (1,667,796 )
Proceeds from term FHLB advances 780,000 1,365,000
Net decrease in other short-term borrowings - (68,635 )
Net increase (decrease) in advance payments by borrowers for taxes 1,020 (1,263 )
Repurchase and cancellation of common stock of Kearny Financial Corp. (68,998 ) (45,704 )
Cancellation of shares repurchased on vesting to pay taxes (808 ) (689 )
Dividends paid (15,585 ) (13,793 )
Net Cash Used in Financing Activities (115,237 ) (9,693 )
Net Decrease in Cash and Cash Equivalents (7,403 ) (51,273 )
Cash and Cash Equivalents - Beginning 67,855 180,967
Cash and Cash Equivalents - Ending $ 60,452 $ 129,694
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Income taxes, net of refunds $ 9,631 $ 9,189
Interest $ 14,791 $ 30,798
Non-cash investing and financing activities:
Acquisition of other real estate owned in settlement of loans $ 480 $ -
Transfers from loans receivable to loans receivable held-for-sale $ - $ 43,579
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.

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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 and six months ended December 31, 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 factor 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.

  • 9 -

2. SUBSEQUENT EVENTS

The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of December 31, 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 consolidated financial statements.

  • 10 -

4. SECURITIES

At December 31, 2021, there was no allowance for credit losses on available for sale and held to maturity 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:

December 31, 2021
Amortized<br>Cost Gross<br>Unrealized<br>Gains Gross<br>Unrealized<br>Losses Allowance for Credit Losses Fair<br>Value
(In Thousands)
Available for sale:
Debt securities:
Obligations of state and political subdivisions $ 32,594 $ 580 $ - $ - $ 33,174
Asset-backed securities 224,825 1,979 90 - 226,714
Collateralized loan obligations 290,589 64 173 - 290,480
Corporate bonds 157,973 2,476 205 - 160,244
Total debt securities 705,981 5,099 468 - 710,612
Mortgage-backed securities:
Collateralized mortgage obligations (1) 9,608 93 - - 9,701
Residential pass-through securities (1) 646,188 4,003 11,643 - 638,548
Commercial pass-through securities (1) 234,025 2,651 4,471 - 232,205
Total mortgage-backed securities 889,821 6,747 16,114 - 880,454
Total securities available for sale $ 1,595,802 $ 11,846 $ 16,582 $ - $ 1,591,066

(1) Government-sponsored enterprises.

June 30, 2021
Amortized<br>Cost Gross<br>Unrealized<br>Gains Gross<br>Unrealized<br>Losses Allowance for Credit Losses Fair<br>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.

  • 11 -
December 31, 2021
Amortized<br>Cost Gross<br>Unrecognized<br>Gains Gross<br>Unrecognized<br>Losses Allowance for Credit Losses Fair<br>Value
(In Thousands)
Held to maturity:
Debt securities:
Obligations of state and political subdivisions $ 24,698 $ 983 $ - $ - $ 25,681
Total debt securities 24,698 983 - - 25,681
Mortgage-backed securities:
Residential pass-through securities (1) 16,146 - 74 - 16,072
Commercial pass-through securities (1) 12,298 5 - - 12,303
Total mortgage-backed securities 28,444 5 74 - 28,375
Total securities held to maturity $ 53,142 $ 988 $ 74 $ - $ 54,056

(1) Government-sponsored enterprises.

June 30, 2021
Amortized<br>Cost Gross<br>Unrecognized<br>Gains Gross<br>Unrecognized<br>Losses Allowance for Credit Losses Fair<br>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 December 31, 2021:

December 31, 2021
Amortized<br>Cost Fair<br>Value
(In Thousands)
Debt securities:
Due in one year or less $ 7,273 $ 7,317
Due after one year through five years 38,529 39,570
Due after five years through ten years 358,834 361,685
Due after ten years 326,043 327,721
Total $ 730,679 $ 736,293
  • 12 -

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

Quarter Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
(In Thousands)
Available for sale securities sold:
Proceeds from sales of securities $ - $ 25,242 $ - $ 44,842
Gross realized gains $ - $ 800 $ - $ 800
Gross realized losses - - - (385 )
Net gain on sales of securities $ - $ 800 $ - $ 415

Calls of securities available for sale during quarter ended December 31, 2021 resulted in no gain or loss. Calls of securities available for sale during the quarter ended December 31, 2020 resulted in gross gains of $13,000. Calls of securities available for sale during the six months ended December 31, 2021 and 2020 resulted in gross gains of $1,000 and $21,000, respectively. During the quarter and six months ended December 31, 2021 and 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:

December 31, June 30,
2021 2021
(In Thousands)
Securities pledged:
Pledged for borrowings at the FHLB of New York $ 154,731 $ 170,120
Pledged to secure public funds on deposit 250,943 137,778
Pledged for potential borrowings at the Federal Reserve Bank of New York 371,112 274,076
Total carrying value of securities pledged $ 776,786 $ 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 December 31, 2021 and June 30, 2021:

December 31, 2021
Less than 12 Months 12 Months or More Total
Fair<br>Value Unrealized<br>Losses Fair<br>Value Unrealized<br>Losses Number of Securities Fair<br>Value Unrealized<br>Losses
(Dollars in Thousands)
Securities Available for Sale:
Asset-backed securities $ 25,833 $ 85 $ 5,531 $ 5 5 $ 31,364 $ 90
Collateralized loan obligations 133,703 90 53,697 83 15 187,400 173
Corporate bonds 36,186 205 - - 8 36,186 205
Commercial pass-through securities 48,569 1,656 80,731 2,815 8 129,300 4,471
Residential pass-through securities 247,436 3,923 247,750 7,720 12 495,186 11,643
Total $ 491,727 $ 5,959 $ 387,709 $ 10,623 48 $ 879,436 $ 16,582
  • 13 -
June 30, 2021
Less than 12 Months 12 Months or More Total
Fair<br>Value Unrealized<br>Losses Fair<br>Value Unrealized<br>Losses Number of Securities Fair<br>Value Unrealized<br>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
December 31, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Less than 12 Months 12 Months or More Total
Fair<br>Value Unrecognized<br>Losses Fair<br>Value Unrecognized<br>Losses Number of Securities Fair<br>Value Unrecognized<br>Losses
(Dollars in Thousands)
Securities Held to Maturity:
Residential pass-through securities $ 16,072 $ 74 $ - $ - 2 $ 16,072 $ 74
Total $ 16,072 $ 74 $ - $ - 2 $ 16,072 $ 74

At 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 December 31, 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 December 31, 2021.

At December 31, 2021, the held to maturity securities portfolio consists of agency mortgage-backed securities and obligations of state and political subdivisions. The mortgage-backed securities are issued by U.S. government agencies and are 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. 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.

  • 14 -

5. LOANS RECEIVABLE

The following table sets forth the composition of the Company’s loan portfolio at December 31, 2021 and June 30, 2021:

December 31, June 30,
2021 2021
(In Thousands)
Commercial loans:
Multi-family mortgage $ 2,007,431 $ 2,039,260
Nonresidential mortgage 1,026,447 1,079,444
Commercial business 180,429 168,951
Construction 110,703 93,804
Total commercial loans 3,325,010 3,381,459
One- to four-family residential mortgage 1,477,267 1,447,721
Consumer loans:
Home equity loans 43,934 47,871
Other consumer 3,040 3,259
Total consumer loans 46,974 51,130
Total loans 4,849,251 4,880,310
Unaccreted yield adjustments (22,847 ) (28,916 )
Total loans receivable, net of yield adjustments $ 4,826,404 $ 4,851,394
  • 15 -

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 December 31, 2021 and June 30, 2021, by loan segment:

December 31, 2021
Multi-<br>Family<br>Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
Current $ 1,979,128 $ 1,000,240 $ 180,075 $ 109,712 $ 1,471,842 $ 43,742 $ 3,040 $ 4,787,779
Past due:
30-59 days - - 72 991 1,544 - - 2,607
60-89 days 10,285 - 48 - 309 59 - 10,701
90 days and over 18,018 26,207 234 - 3,572 133 - 48,164
Total past due 28,303 26,207 354 991 5,425 192 - 61,472
Total loans $ 2,007,431 $ 1,026,447 $ 180,429 $ 110,703 $ 1,477,267 $ 43,934 $ 3,040 $ 4,849,251
June 30, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Multi-<br>Family<br>Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>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 quarter and six months ended December 31, 2021 and 2020.

  • 16 -

The following tables present information relating to the Company’s nonperforming loans as of December 31, 2021 and June 30, 2021:

December 31, 2021
Multi-<br>Family<br>Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
Performing $ 1,976,220 $ 996,970 $ 179,994 $ 108,774 $ 1,469,806 $ 42,309 $ 3,040 $ 4,777,113
Nonperforming:
90 days and over past due accruing - - - - - - - -
Nonaccrual loans with allowance for credit losses 18,415 818 - - 2,827 324 - 22,384
Nonaccrual loans with no allowance for credit losses 12,796 28,659 435 1,929 4,634 1,301 - 49,754
Total nonperforming 31,211 29,477 435 1,929 7,461 1,625 - 72,138
Total loans $ 2,007,431 $ 1,026,447 $ 180,429 $ 110,703 $ 1,477,267 $ 43,934 $ 3,040 $ 4,849,251
June 30, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Multi-<br>Family<br>Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>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
  • 17 -

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 $19.2 million and $17.8 million as of December 31, 2021 and June 30, 2021, respectively. The allowance for credit losses associated with the TDRs presented in the tables below totaled $711,000 and $256,000 as of December 31, 2021 and June 30, 2021, respectively. As of December 31, 2021, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured in a TDR.

The following tables present total TDR loans at December 31, 2021 and June 30, 2021:

December 31, 2021
Accrual Non-accrual Total
# of Loans Amount # of Loans Amount # of Loans Amount
(Dollars In Thousands)
Commercial loans:
Multi-family mortgage loans - $ - 2 $ 5,699 2 $ 5,699
Nonresidential mortgage 3 248 4 2,000 7 2,248
Commercial business 4 3,735 4 329 8 4,064
Construction - - 1 1,929 1 1,929
Total commercial loans 7 3,983 11 9,957 18 13,940
One- to four-family residential<br> mortgage 32 4,527 4 595 36 5,122
Consumer loans:
Home equity loans 5 175 - - 5 175
Total 44 $ 8,685 15 $ 10,552 59 $ 19,237
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
Construction - - 1 2,228 1 2,228
Total commercial loans 4 3,860 14 8,092 18 11,952
One- to four-family residential<br> 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
  • 18 -

The following tables present information regarding troubled debt restructurings that occurred during quarter and six months ended December 31, 2021 and 2020:

Quarter Ended December 31, 2021 Six Months Ended December 31, 2021
# of Loans Pre-modification<br>Recorded<br>Investment Post-modification<br>Recorded<br>Investment # of Loans Pre-modification<br>Recorded<br>Investment Post-modification<br>Recorded<br>Investment
(Dollars In Thousands) (Dollars In Thousands)
Multi-family mortgage loans - $ - $ - 1 $ 2,987 $ 2,972
One- to four-family residential<br> mortgage 2 261 261 2 261 261
Total 2 $ 261 $ 261 3 $ 3,248 $ 3,233
Quarter Ended December 31, 2020 Six Months Ended December 31, 2020
--- --- --- --- --- --- --- --- --- --- --- --- ---
# of Loans Pre-modification<br>Recorded<br>Investment Post-modification<br>Recorded<br>Investment # of Loans Pre-modification<br>Recorded<br>Investment Post-modification<br>Recorded<br>Investment
(Dollars In Thousands) (Dollars In Thousands)
One- to four-family residential<br> mortgage - $ - $ - 1 $ 309 $ 308
Total - $ - $ - 1 $ 309 $ 308

During the quarter and six months ended December 31, 2021 and 2020, there were no charge-offs related to TDRs. During quarter and six months ended December 31, 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 and six months ended December 31, 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 Coronavirus Aid, Relief, and Economic Security Act (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. The legislation that extended this relief was terminated on January 1, 2022. As of December 31, 2021, the Company had five non-TDR loan modifications granted under the CARES Act totaling approximately $2.6 million.

  • 19 -

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 December 31, 2021, the carrying value of individually analyzed loans totaled $72.1 million, of which $65.0 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:

December 31, 2021
Carrying Value Related Allowance
(In Thousands)
Commercial loans:
Multi-family mortgage $ 31,211 $ 2,691
Nonresidential mortgage (1) 26,207 429
Commercial business (2) 176 -
Construction 1,929 -
Total commercial loans 59,523 3,120
One- to four-family residential<br> mortgage (3) 5,359 220
Consumer loans:
Home equity loans (3) 161 -
Total $ 65,043 $ 3,340
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<br> 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.

  • 20 -

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 are considered uncollectible or of so little value that their continuance as assets is not warranted.

  • 21 -

The following table presents the risk category of loans as of December 31, 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 $ 257,520 $ 276,031 $ 243,081 $ 273,672 $ 284,322 $ 606,354 $ - $ 1,940,980
Special Mention - - - 16,461 5,023 4,788 - 26,272
Substandard - - - 10,286 2,790 27,103 - 40,179
Doubtful - - - - - - - -
Total multi-family mortgage 257,520 276,031 243,081 300,419 292,135 638,245 - 2,007,431
Non-residential mortgage:
Pass 97,596 97,060 61,367 52,144 49,719 594,931 6,112 958,929
Special Mention - - - 23,458 4,089 9,312 - 36,859
Substandard - 727 - - - 29,932 - 30,659
Doubtful - - - - - - - -
Total non-residential mortgage 97,596 97,787 61,367 75,602 53,808 634,175 6,112 1,026,447
Commercial business:
Pass 31,192 40,381 10,942 4,330 9,569 8,215 70,059 174,688
Special Mention - - 68 - 2,240 916 457 3,681
Substandard - 40 139 - 1,447 286 - 1,912
Doubtful - - - - - 145 3 148
Total commercial business 31,192 40,421 11,149 4,330 13,256 9,562 70,519 180,429
Construction loans:
Pass 4,320 70,251 8,353 2,818 14,419 2,878 5,735 108,774
Special Mention - - - - - - - -
Substandard - - - - - 1,929 - 1,929
Doubtful - - - - - - - -
Total construction loans 4,320 70,251 8,353 2,818 14,419 4,807 5,735 110,703
Residential mortgage:
Pass 209,786 539,163 94,541 55,958 61,352 497,899 375 1,459,074
Special Mention - - - 1,219 - 893 - 2,112
Substandard - - 1,718 658 - 13,705 - 16,081
Doubtful - - - - - - - -
Total residential mortgage 209,786 539,163 96,259 57,835 61,352 512,497 375 1,477,267
Home equity loans:
Pass 1,212 738 1,856 3,357 2,370 8,140 24,006 41,679
Special Mention - - - - - 271 - 271
Substandard - - - 129 - 1,855 - 1,984
Doubtful - - - - - - - -
Total home equity loans 1,212 738 1,856 3,486 2,370 10,266 24,006 43,934
Other consumer loans
Pass 311 344 493 469 250 1,042 44 2,953
Special Mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - 87 87
Other consumer loans 311 344 493 469 250 1,042 131 3,040
Total loans $ 601,937 $ 1,024,735 $ 422,558 $ 444,959 $ 437,590 $ 1,810,594 $ 106,878 $ 4,849,251
  • 22 -

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 December 31, 2021, we held two single-family properties in other real estate owned with an aggregate carrying value of $658,000 that were acquired through foreclosure on residential mortgage loans. 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.

New Jersey's moratorium on evictions ended on December 31, 2021. Under New Jersey's new eviction protections for people under certain income levels, 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, for certain moderate income families, or March 1, 2020 through December 31, 2021 for certain low income families. The moratorium on home foreclosures ended on November 15, 2021, for all income levels. This included landlords facing foreclosure who currently have tenants. New York's moratorium on evictions for tenants who have endured COVID-related hardships and on foreclosures ended on January 15, 2022. As a result, the Company has resumed residential property foreclosure sales and evictions. Eviction laws may be subject to legal challenges and could change based on the results of court proceedings.

  • 23 -

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 December 31, 2021 and June 30, 2021. For the quarter and six months ended December 31, 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
December 31, 2021
Multi-Family Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
Balance of allowance for<br>credit losses:
Loans acquired with deteriorated credit quality individually analyzed $ - $ 429 $ - $ - $ - $ 22 $ - $ 451
Loans acquired with deteriorated credit quality collectively analyzed - 637 2 4 288 - - 931
Loans individually <br>evaluated 2,690 - - - 252 - - 2,942
Loans collectively <br>evaluated 23,105 9,012 1,901 1,437 8,061 286 90 43,892
Total allowance for credit losses $ 25,795 $ 10,078 $ 1,903 $ 1,441 $ 8,601 $ 308 $ 90 $ 48,216
Balance of Loans Receivable
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
December 31, 2021
Multi-Family Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
Balance of loans<br>receivable:
Loans acquired with deteriorated credit quality individually evaluated $ - $ 818 $ 176 $ - $ 752 $ 355 $ - $ 2,101
Loans acquired with deteriorated credit quality collectively evaluated - 23,564 1,424 5,735 7,180 61 - 37,964
Loans individually <br>evaluated 31,211 28,659 259 1,929 6,709 1,270 - 70,037
Loans collectively <br>evaluated 1,976,220 973,406 178,570 103,039 1,462,626 42,248 3,040 4,739,149
Total loans $ 2,007,431 $ 1,026,447 $ 180,429 $ 110,703 $ 1,477,267 $ 43,934 $ 3,040 $ 4,849,251
Unaccreted yield adjustments (22,847 )
Loans receivable, net of yield adjustments $ 4,826,404
  • 24 -
Allowance for Credit Losses
June 30, 2021
Multi-Family Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
Balance of allowance for<br>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 <br>evaluated 1,368 2,025 33 - 447 1 - 3,874
Loans collectively <br>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-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
Balance of loans<br>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 <br>evaluated 18,526 30,668 729 2,228 15,553 1,364 - 69,068
Loans collectively <br>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
  • 25 -

The following tables present the activity in the allowance for credit losses on loans for the quarter and six months ended December 31, 2021 and 2020.

Quarter Ended December 31, 2021
Multi-Family Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
At September 30, 2021: $ 24,982 $ 13,845 $ 1,994 $ 1,430 $ 9,129 $ 318 $ 87 $ 51,785
Charge offs - (1,284 ) (15 ) - - - - (1,299 )
Recoveries - - 4 - 145 1 - 150
Provision for (reversal of) credit losses 813 (2,483 ) (80 ) 11 (673 ) (11 ) 3 (2,420 )
At December 31, 2021: $ 25,795 $ 10,078 $ 1,903 $ 1,441 $ 8,601 $ 308 $ 90 $ 48,216
Six Months Ended December 31, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Multi-Family Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>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 ) (2,097 ) (175 ) - - - (2 ) (2,378 )
Recoveries - - 101 - 147 1 - 249
(Reversal of) provision for credit losses (2,551 ) (4,068 ) (109 ) 271 (1,293 ) (126 ) 56 (7,820 )
At December 31, 2021: $ 25,795 $ 10,078 $ 1,903 $ 1,441 $ 8,601 $ 308 $ 90 $ 48,216
Quarter Ended December 31, 2020
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Multi-Family Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
At September 30, 2020: $ 28,566 $ 15,094 $ 4,355 $ 1,105 $ 14,835 $ 858 $ 47 $ 64,860
Charge offs - (66 ) - - (13 ) (32 ) (4 ) (115 )
Recoveries - - 3 - - - 3 6
Provision for (Reversal of) credit losses 934 905 (1,010 ) 100 (2,197 ) (101 ) 4 (1,365 )
At December 31, 2020: $ 29,500 $ 15,933 $ 3,348 $ 1,205 $ 12,625 $ 725 $ 50 $ 63,386
Six Months Ended December 31, 2020
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Multi-Family Mortgage Non-<br>Residential<br>Mortgage Commercial<br>Business Construction Residential<br>Mortgage Home<br>Equity<br>Loans Other<br>Consumer Total
(In Thousands)
At June 30, 2020 (prior to<br>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 - (66 ) (64 ) - (13 ) (32 ) (13 ) (188 )
Recoveries - - 5 - - - 7 12
Initial allowance on PCD loans 250 1,720 1,007 99 720 105 - 3,901
(Reversal of) provision for credit losses (74 ) 3,126 895 790 (2,048 ) (8 ) 13 2,694
At December 31, 2020: $ 29,500 $ 15,933 $ 3,348 $ 1,205 $ 12,625 $ 725 $ 50 $ 63,386
  • 26 -

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 and six months ended December 31, 2021 and 2020:

Quarter Ended
December 31, 2021
(In Thousands)
At September 30, 2021: $ 1,584
Provision reversal recorded in other non-interest expense (436 )
At December 31, 2021: $ 1,148
Six Months Ended
--- --- --- ---
December 31, 2021
(In Thousands)
At June 30, 2021: $ 1,708
Provision reversal recorded in other non-interest expense (560 )
At December 31, 2021: $ 1,148
Quarter Ended
--- --- ---
December 31, 2020
(In Thousands)
At September 30, 2020: $ 1,004
Provision recorded in other non-interest expense 54
At December 31, 2020: $ 1,058
Six Months Ended
--- --- ---
December 31, 2020
(In Thousands)
At June 30, 2020 $ -
Impact of adopting Topic 326 (1) 536
Provision recorded in other non-interest expense 522
At December 31, 2020: $ 1,058

(1) Adoption of CECL accounting standard effective July 1, 2020.

  • 27 -

7. DEPOSITS

Deposits are summarized as follows:

December 31, June 30,
2021 2021
(In Thousands)
Non-interest-bearing demand $ 604,805 $ 593,718
Interest-bearing demand 2,106,693 1,902,478
Savings 1,087,740 1,111,364
Certificates of deposits 1,654,787 1,877,746
Total deposits $ 5,454,025 $ 5,485,306

8. BORROWINGS

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

December 31, 2021 June 30, 2021
Balance Weighted<br>Average<br>Interest Rate Balance Weighted<br>Average<br>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 103,500 2.65 22,500 2.63
Three to four years 29,000 2.77 103,500 2.68
Four to five years - - 6,500 2.82
Greater than five years - - - -
Total advances 667,500 1.40 % 667,500 1.38 %
Unamortized fair value adjustments (1,395 ) (1,624 )
Total advances, net of fair value adjustments $ 666,105 $ 665,876

At December 31, 2021, FHLB advances were collateralized by the FHLB capital stock owned by the Bank and mortgage loans and securities with carrying values totaling approximately $3.41 billion and $154.7 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 both December 31, 2021 and June 30, 2021 included overnight borrowings totaling $20.0 million.

  • 28 -

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 December 31, 2021 and June 30, 2021:

December 31, 2021
Asset Derivatives Liability Derivatives
Location Fair Value Location Fair Value
(In Thousands)
Derivatives designated as hedging<br>  instruments:
Interest rate contracts Other assets $ 9,622 Other liabilities $ 210
Total $ 9,622 $ 210
June 30, 2021
--- --- --- --- --- --- ---
Asset Derivatives Liability Derivatives
Location Fair Value Location Fair Value
(In Thousands)
Derivatives designated as hedging<br>  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 December 31, 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 and six months ended December 31, 2021 the Company had $1.5 million and $3.0 million, respectively, of reclassifications to interest expense. During the next twelve months, the Company estimates that $2.7 million will be reclassified as an increase in interest expense.

  • 29 -

The tables below present the pre-tax effects of the Company’s derivative instruments on the Consolidated Statements of Income for the quarter and six months ended December 31, 2021 and 2020:

Quarter Ended December 31, 2021
Amount of Gain <br>(Loss) Recognized <br>in OCI on<br>Derivatives Location of Gain <br>(Loss) Reclassified<br>from Accumulated <br>OCI into Income Amount of Gain<br>(Loss) Reclassified<br>from Accumulated <br>OCI into Income
(In Thousands)
Derivatives in cash flow<br> hedging relationships:
Interest rate contracts $ 5,110 Interest expense $ (1,506 )
Total $ 5,110 $ (1,506 )
Six Months Ended December 31, 2021
--- --- --- --- --- --- ---
Amount of Gain <br>(Loss) Recognized <br>in OCI on<br>Derivatives Location of Gain <br>(Loss) Reclassified<br>from Accumulated <br>OCI into Income Amount of Gain<br>(Loss) Reclassified<br>from Accumulated <br>OCI into Income
(In Thousands)
Derivatives in cash flow<br> hedging relationships:
Interest rate contracts $ 5,264 Interest expense $ (3,003 )
Total $ 5,264 $ (3,003 )
Quarter Ended December 31, 2020
--- --- --- --- --- --- ---
Amount of Gain <br>(Loss) Recognized <br>in OCI on<br>Derivatives Location of Gain <br>(Loss) Reclassified<br>from Accumulated <br>OCI into Income Amount of Gain<br>(Loss) Reclassified<br>from Accumulated <br>OCI into Income
(In Thousands)
Derivatives in cash flow<br> hedging relationships:
Interest rate contracts $ 1,389 Interest expense $ (2,217 )
Total $ 1,389 $ (2,217 )
Six Months Ended December 31, 2020
--- --- --- --- --- --- ---
Amount of Gain <br>(Loss) Recognized <br>in OCI on<br>Derivatives Location of Gain <br>(Loss) Reclassified<br>from Accumulated <br>OCI into Income Amount of Gain<br>(Loss) Reclassified<br>from Accumulated <br>OCI into Income
(In Thousands)
Derivatives in cash flow<br> hedging relationships:
Interest rate contracts $ 1,278 Interest expense $ (4,589 )
Total $ 1,278 $ (4,589 )
  • 30 -

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 December 31, 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.

December 31, 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 $ 11,754 $ (2,132 ) $ 9,622 $ - $ - $ 9,622
Total $ 11,754 $ (2,132 ) $ 9,622 $ - $ - $ 9,622
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 $ 2,342 $ (2,132 ) $ 210 $ - $ (210 ) $ -
Total $ 2,342 $ (2,132 ) $ 210 $ - $ (210 ) $ -
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 ) $ -
  • 31 -

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 December 31, 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 $217,000.

As required under the enforceable master netting arrangement with its derivatives counterparties, at December 31, 2021, the Company posted financial collateral of $220,000 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 December 31, 2021 and June 30, 2021, included $19.6 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:

Quarter Ended Six Months Ended Affected Line Item in the Consolidated
December 31, December 31, Statements of Income
2021 2020 2021 2020
(In Thousands) (In Thousands)
Service cost $ 29 $ 27 $ 58 $ 53 Salaries and employee benefits
Interest cost 69 65 138 131 Miscellaneous non-interest expense
Amortization of unrecognized loss 20 21 40 42 Miscellaneous non-interest expense
Expected return on assets (28 ) (29 ) (56 ) (57 ) Miscellaneous non-interest expense
Net periodic benefit cost $ 90 $ 84 $ 180 $ 169
  • 32 -

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 and six months ended December 31, 2021 and 2020:

Quarter Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
(Dollars in Thousands) (Dollars in Thousands)
Income before income taxes $ 25,570 $ 22,562 $ 52,557 $ 36,825
Statutory federal tax rate 21 % 21 % 21 % 21 %
Federal income tax expense at statutory rate $ 5,370 $ 4,738 $ 11,037 $ 7,733
(Reduction) increase in income taxes resulting from:
Tax exempt interest (68 ) (91 ) (138 ) (185 )
State tax, net of federal tax effect 1,990 1,456 4,118 2,240
Incentive stock option compensation expense 16 20 39 40
Income from bank-owned life insurance (328 ) (338 ) (656 ) (665 )
Non-deductible merger-related expenses - - - 49
Bargain purchase gain - - - (641 )
Other items, net (179 ) 352 (327 ) 450
$ 6,801 $ 6,137 $ 14,073 $ 9,021
Reversal of valuation allowance - (523 ) - (523 )
Total income tax expense $ 6,801 $ 5,614 $ 14,073 $ 8,498
Effective income tax rate 26.60 % 24.88 % 26.78 % 23.08 %

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.
  • 33 -

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 December 31, 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:

December 31, 2021
Quoted<br>Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>(Level 1) Significant<br>Other<br>Observable<br>Inputs<br>(Level 2) Significant<br>Unobservable<br>Inputs<br>(Level 3) Total
(In Thousands)
Assets:
Debt securities available for sale:
Obligations of state and political subdivisions - 33,174 - 33,174
Asset-backed securities - 226,714 - 226,714
Collateralized loan obligations - 290,480 - 290,480
Corporate bonds - 160,244 - 160,244
Total debt securities - 710,612 - 710,612
Mortgage-backed securities available for sale:
Collateralized mortgage obligations - 9,701 - 9,701
Residential pass-through securities - 638,548 - 638,548
Commercial pass-through securities - 232,205 - 232,205
Total mortgage-backed securities - 880,454 - 880,454
Total securities available for sale $ - $ 1,591,066 $ - $ 1,591,066
Interest rate contracts - 9,622 - 9,622
Total assets $ - $ 1,600,688 $ - $ 1,600,688
Liabilities:
Interest rate contracts $ - $ 210 $ - $ 210
Total liabilities $ - $ 210 $ - $ 210
  • 34 -
June 30, 2021
Quoted Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>(Level 1) Significant<br>Other<br>Observable<br>Inputs<br>(Level 2) Significant<br>Unobservable<br>Inputs<br>(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 December 31, 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.

  • 35 -

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:

December 31, 2021
Quoted Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>(Level 1) Significant<br>Other<br>Observable<br>Inputs<br>(Level 2) Significant<br>Unobservable<br>Inputs<br>(Level 3) Total
(In Thousands)
Collateral dependent loans:
Residential mortgage $ - $ - $ 2,257 $ 2,257
Multi-family mortgage - - 15,725 15,725
Non-residential mortgage - - 5,942 5,942
Total $ - $ - $ 23,924 $ 23,924
Other real estate owned, net:
Residential $ - $ 658 $ 658
Total $ - $ - $ 658 $ 658
June 30, 2021
--- --- --- --- --- --- --- --- ---
Quoted Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>(Level 1) Significant<br>Other<br>Observable<br>Inputs<br>(Level 2) Significant<br>Unobservable<br>Inputs<br>(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
  • 36 -

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:

December 31, 2021
Fair<br>Value Valuation<br>Techniques Unobservable<br>Input Range Weighted<br>Average
(Dollars in Thousands)
Collateral dependent loans:
Residential mortgage $ 2,257 Market valuation of underlying collateral (1) Adjustments to reflect current conditions/selling costs (2) 7% - 14% 10.26 %
Multi-family mortgage 15,725 Market valuation of underlying collateral (1) Adjustments to reflect current conditions/selling costs (2) 10% - 13% 12.05 %
Non-residential mortgage 5,942 Market valuation of underlying collateral (1) Adjustments to reflect current conditions/selling costs (2) 9% - 16% 13.12 %
Total $ 23,924
Other real estate owned, net:
Residential $ 658 Market valuation of underlying collateral (3) Adjustments to reflect current conditions/selling costs (2) 6.00% 6.00 %
Total $ 658
June 30, 2021
--- --- --- --- --- --- --- --- --- --- ---
Fair<br>Value Valuation<br>Techniques Unobservable<br>Input Range Weighted<br>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.

  • 37 -

At December 31, 2021, collateral dependent loans valued using Level 3 inputs comprised loans with principal balances totaling $27.3 million and valuation allowances of $3.3 million reflecting fair values of $23.9 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 December 31, 2021 and June 30, 2021, the Company held other real estate owned totaling $658,000 and $178,000, respectively, at December 31, 2021 and June 30, 2021, 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 December 31, 2021 and June 30, 2021:

December 31, 2021
Carrying<br>Amount Fair<br>Value Quoted<br>Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>(Level 1) Significant<br>Other<br>Observable<br>Inputs<br>(Level 2) Significant<br>Unobservable<br>Inputs<br>(Level 3)
(In Thousands)
Financial assets:
Cash and cash equivalents $ 60,452 $ 60,452 $ 60,452 $ - $ -
Investment securities available for sale 1,591,066 1,591,066 - 1,591,066 -
Investment securities held to maturity 53,142 54,056 - 54,056 -
Loans held-for-sale 12,549 12,732 - 12,732 -
Net loans receivable 4,778,188 4,785,409 - - 4,785,409
FHLB Stock 36,622 - - - -
Interest receivable 18,495 18,495 - 4,331 14,164
Interest rate contracts 9,622 9,622 - 9,622 -
Financial liabilities:
Deposits 5,454,025 5,453,304 3,799,238 - 1,654,066
Borrowings 686,105 687,555 - - 687,555
Interest payable on deposits 152 152 89 - 63
Interest payable on borrowings 1,379 1,379 - - 1,379
Interest rate contracts 210 210 - 210 -
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June 30, 2021
Carrying<br>Amount Fair<br>Value Quoted<br>Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>(Level 1) Significant<br>Other<br>Observable<br>Inputs<br>(Level 2) Significant<br>Unobservable<br>Inputs<br>(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 December 31, 2021 and June 30, 2021 are as follows:

December 31, June 30,
2021 2021
(In Thousands)
Net unrealized (loss) gain on securities available for sale $ (4,736 ) $ 10,011
Tax effect 1,432 (2,882 )
Net of tax amount (3,304 ) 7,129
Fair value adjustments on derivatives 7,955 (312 )
Tax effect (2,333 ) 94
Net of tax amount 5,622 (218 )
Benefit plan adjustments (1,053 ) (1,093 )
Tax effect 309 326
Net of tax amount (744 ) (767 )
Total accumulated other comprehensive income $ 1,574 $ 6,144

Other comprehensive (loss) income and related tax effects for the quarter and six months ended December 31, 2021 and 2020 are presented in the following table:

Quarter Ended Six Months Ended
December 31, December 31,
2021 2020 2021 2020
(In Thousands)
Net unrealized holding (loss) gain on securities<br>  available for sale $ (7,700 ) $ 730 $ (14,746 ) $ 1,912
Net realized gain on sale and call of securities<br>  available for sale (1) - (813 ) (1 ) (436 )
Fair value adjustments on derivatives 6,616 3,606 8,267 5,867
Benefit plans:
Amortization of actuarial loss 20 21 40 42
Net actuarial gain (2) - - - -
Net change in benefit plan accrued expense 20 21 40 42
Other comprehensive (loss) income before taxes (1,064 ) 3,544 (6,440 ) 7,385
Tax effect 302 (1,065 ) 1,870 (2,189 )
Total other comprehensive (loss) income $ (762 ) $ 2,479 $ (4,570 ) $ 5,196

(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:

Quarter Ended December 31, Six Months Ended December 31,
2021 2020 2021 2020
(In Thousands, Except Per Share Data)
Net income $ 18,769 $ 16,948 $ 38,484 $ 28,327
Weighted average number of common shares<br> outstanding - basic 72,011 85,120 73,274 85,564
Effect of dilutive securities 26 3 23 2
Weighted average number of common shares<br> outstanding - diluted 72,037 85,123 73,297 85,566
Basic earnings per share $ 0.26 $ 0.20 $ 0.53 $ 0.33
Diluted earnings per share $ 0.26 $ 0.20 $ 0.53 $ 0.33

Stock options for 3,115,000 and 3,280,648 shares of common stock were not considered in computing diluted earnings per share at December 31, 2021 and December 31, 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. 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 worsens, 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; and our cyber security risks are increased as the result of an increase in the number of employees working remotely. 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 December 31, 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 December 31, 2021 and June 30, 2021

Executive Summary. Total assets decreased $97.5 million to $7.19 billion at December 31, 2021 from $7.28 billion at June 30, 2021. The decrease primarily reflected decreases in investment securities and net loans receivable.

Investment Securities. Investment securities available for sale decreased $85.8 million, to $1.59 billion at December 31, 2021, from $1.68 billion at June 30, 2021. This decrease was largely the result of principal repayments of $209.7 million, partially offset by security purchases of $140.6 million. Investment securities held to maturity increased $15.0 million to $53.1 million at December 31, 2021 from $38.1 million at June 30, 2021. This increase was largely the result of security purchases of $16.2 million, partially offset by principal repayments of $1.1 million.

Additional information regarding investment securities at December 31, 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 $12.5 million at December 31, 2021 as compared to $16.5 million at June 30, 2021 and are reported separately from the balance of net loans receivable. During the six months ended December 31, 2021, $131.4 million of residential mortgage loans were sold, resulting in a gain on sale of $1.9 million.

Net Loans Receivable. Net loans receivable decreased $15.0 million, or 0.3%, to $4.78 billion at December 31, 2021 from $4.79 billion at June 30, 2021. Detail regarding the change in the loan portfolio, by loan segment, is presented below:

December 31, June 30, Increase/
2021 2021 (Decrease)
(In Thousands)
Commercial loans:
Multi-family mortgage $ 2,007,431 $ 2,039,260 $ (31,829 )
Nonresidential mortgage 1,026,447 1,079,444 (52,997 )
Commercial business 180,429 168,951 11,478
Construction 110,703 93,804 16,899
Total commercial loans 3,325,010 3,381,459 (56,449 )
One- to four-family residential mortgage 1,477,267 1,447,721 29,546
Consumer loans:
Home equity loans 43,934 47,871 (3,937 )
Other consumer 3,040 3,259 (219 )
Total consumer 46,974 51,130 (4,156 )
Total loans 4,849,251 4,880,310 (31,059 )
Unaccreted yield adjustments (22,847 ) (28,916 ) 6,069
Allowance for credit losses (48,216 ) (58,165 ) 9,949
Net loans receivable $ 4,778,188 $ 4,793,229 $ (15,041 )

Commercial loan origination volume for the six months ended December 31, 2021 totaled $432.7 million, comprised of $307.0 million of commercial mortgage loan originations, $84.3 million of commercial business loan originations and construction loan disbursements of $41.4 million. Commercial loan origination volume was augmented with the funding of purchased commercial mortgage loans totaling $48.4 million.

One- to four-family residential mortgage loan origination volume for the six months ended December 31, 2021, excluding loans held-for-sale, totaled $190.8 million and was augmented with the funding of purchased loans totaling $23.9 million. Home equity loan and line of credit origination volume for the same period totaled $8.9 million.

  • 43 -

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 December 31, 2021 and June 30, 2021:

December 31, 2021 June 30, 2021
Balance LTV Balance LTV
(In Thousands)
Commercial mortgage loans:
Multi-family mortgage loans $ 2,007,431 64 % $ 2,039,260 64 %
Nonresidential mortgage loans 1,026,447 54 % 1,079,444 54 %
Construction loans 110,703 59 % 93,804 61 %
Total commercial mortgage loans 3,144,581 61 % 3,212,508 61 %
One- to four-family residential mortgage 1,477,267 60 % 1,447,721 59 %
Consumer loans:
Home equity loans 43,934 47 % 47,871 47 %
Total mortgage loans $ 4,665,782 60 % $ 4,708,100 60 %

Additional information about the Company’s loans at December 31, 2021 and June 30, 2021 is presented in Note 5 to the unaudited consolidated financial statements.

Nonperforming Assets and TDRs. Nonperforming assets decreased by $7.1 million to $72.8 million, or 1.01% of total assets at December 31, 2021, from $79.9 million, or 1.10% of total assets at June 30, 2021. At December 31, 2021, the Company had accruing TDRs totaling $8.7 million, an increase of $2.5 million from $6.2 million at June 30, 2021. At December 31, 2021, the Company had non-accrual TDRs totaling $10.6 million, a decrease of $1.0 million 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 $2.6 million and $5.6 million, respectively, as of December 31, 2021 and June 30, 2021.

Additional information about the Company’s nonperforming loans and TDRs at December 31, 2021 and June 30, 2021 is presented in Note 5 to the unaudited consolidated financial statements.

Allowance for Credit Losses. At December 31, 2021, the ACL totaled $48.2 million, or 0.99% of total loans, reflecting a decrease of $9.9 million from $58.2 million, or 1.19% of total loans, at June 30, 2021. The decrease during the six months ended December 31, 2021 was largely attributable to a provision for credit loss reversal of $7.8 million, primarily resulting from continued improvement in the Company's credit risk outlook, a reduction in the expected life of various segments of the loan portfolio and a net reduction in reserves on loans individually evaluated for impairment. Also contributing to this decrease were net charge-offs of $2.1 million, all of which had been individually reserved for within the ACL at June 30, 2021.

Additional information about the ACL at December 31, 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 $331,000 to $690.8 million at December 31, 2021 from $691.2 million at June 30, 2021. The decrease in the balance of these other assets during the six months ended December 31, 2021 generally reflected normal operating fluctuations in their respective balances.

  • 44 -

Deposits. Total deposits decreased $31.3 million, or 0.6%, to $5.45 billion at December 31, 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, for the periods indicated:

December 31, June 30, Increase/
2021 2021 (Decrease)
(In Thousands)
Non-interest-bearing deposits $ 604,805 $ 593,718 $ 11,087
Interest-bearing deposits:
Interest-bearing demand 2,106,693 1,902,478 204,215
Savings 1,087,740 1,111,364 (23,624 )
Certificates of deposit 1,654,787 1,877,746 (222,959 )
Interest-bearing deposits 4,849,220 4,891,588 (42,368 )
Total deposits $ 5,454,025 $ 5,485,306 $ (31,281 )

Additional information about the Company’s deposits at December 31, 2021 and June 30, 2021 is presented in Note 7 to the unaudited consolidated financial statements.

Borrowings. The balance of borrowings increased by $229,000, to $686.1 million at December 31, 2021 from $685.9 million at June 30, 2021.

Additional information about the Company’s borrowings at December 31, 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 $19.0 million to $50.6 million at December 31, 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 $47.5 million to $995.5 million at December 31, 2021 from $1.04 billion at June 30, 2021. The decrease in stockholders’ equity during the six months ended December 31, 2021 largely reflected share repurchases totaling $69.0 million and cash dividends totaling $15.3 million, partially offset by net income of $38.5 million.

Book value per share increased by $0.34 to $13.55 at December 31, 2021 while tangible book value per share increased by $0.15 to $10.64 at December 31, 2021.

On September 22, 2021, the Company announced the authorization of a new stock repurchase plan, which authorized the repurchase of up to 7,602,021 shares, or 10% of the shares then outstanding. During the quarter ended December 31, 2021, the Company repurchased 2,289,537 shares of common stock at a cost of $30.0 million, or $13.10 per share. Through December 31, 2021, the Company repurchased a total of 2,502,676 shares, or 32.9% of the shares authorized for repurchase under the current repurchase program, at a total cost of $32.6 million or $13.05 per share.

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Comparison of Operating Results for the Quarter ended December 31, 2021 and December 31, 2020

Net Income. Net income for the quarter ended December 31, 2021 was $18.8 million, or $0.26 per diluted share, compared to $16.9 million, or $0.20 per diluted share for the quarter ended December 31, 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 $2.8 million to $48.7 million for the quarter ended December 31, 2021 compared to $45.9 million for the quarter ended December 31, 2020. The increase between the comparative periods resulted from a decrease of $6.6 million in interest expense, partially offset by a decrease of $3.8 million in interest income. Included in net interest income for the quarters ended December 31, 2021 and December 31, 2020, respectively, was purchase accounting accretion of $2.6 million and $3.7 million and loan prepayment penalty income of $1.5 million and $1.3 million.

Net interest margin increased 24 basis points to 2.96% for the quarter ended December 31, 2021, from 2.72% for the quarter ended December 31, 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.

  • 46 -
For the Quarter Ended December 31,
2021 2020
Average<br>Balance Interest Average<br>Yield/<br>Cost Average<br>Balance Interest Average<br>Yield/<br>Cost
(Dollars in Thousands)
Interest-earning assets:
Loans receivable (1) $ 4,822,959 $ 47,575 3.95 % $ 4,871,268 $ 50,806 4.17 %
Taxable investment securities (2) 1,610,395 7,595 1.89 1,544,095 7,707 2.00
Tax-exempt securities (2) 57,686 327 2.26 79,044 433 2.19
Other interest-earning assets (3) 77,811 415 2.13 266,114 787 1.18
Total interest-earning assets 6,568,851 55,912 3.40 6,760,521 59,733 3.53
Non-interest-earning assets 611,390 632,084
Total assets $ 7,180,241 $ 7,392,605
Interest-bearing liabilities:
Interest-bearing demand $ 2,027,021 $ 1,134 0.22 $ 1,683,222 $ 1,987 0.47
Savings 1,086,903 288 0.11 1,058,675 872 0.33
Certificates of deposit 1,693,423 2,241 0.53 1,899,406 5,788 1.22
Total interest-bearing deposits 4,807,347 3,663 0.30 4,641,303 8,647 0.75
Borrowings 692,062 3,562 2.06 1,057,958 5,193 1.96
Total interest-bearing liabilities 5,499,409 7,225 0.53 5,699,261 13,840 0.97
Non-interest-bearing liabilities (4) 675,070 576,162
Total liabilities 6,174,479 6,275,423
Stockholders' equity 1,005,762 1,117,182
Total liabilities and stockholders'<br>  equity $ 7,180,241 $ 7,392,605
Net interest income $ 48,687 $ 45,893
Interest rate spread (5) 2.87 % 2.56 %
Net interest margin (6) 2.96 % 2.72 %
Ratio of interest-earning assets<br>  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 $624,200,000 and $502,480,000, for the quarter ended December 31, 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 $1.1 million to a provision for credit losses reversal of $2.4 million for the quarter ended December 31, 2021, compared to a provision for credit losses reversal of $1.4 million for the quarter ended December 31, 2020. The provision reversal for the quarter ended December 31, 2021 was largely attributable to a net reduction in reserves on individually evaluated loans and a reduction in the expected life of various segments of the loan portfolio. By comparison, the provision reversal for the quarter ended December 31, 2020, was largely attributable to an improved economic forecast and credit risk outlook resulting in a release of reserves within multiple loan segments.

Additional information regarding the ACL and the associated provisions recognized during the quarters ended December 31, 2021 and 2020 is presented in Note 6 to the unaudited consolidated financial statements as well as the Comparison of Financial Condition at December 31, 2021 and June 30, 2021.

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Non-Interest Income. Non-interest income decreased $1.7 million to $4.1 million for the quarter ended December 31, 2021, primarily due to a $1.4 million decrease in gain on sale of loans.

Fees and service charges increased $142,000 to $698,000 for the quarter ended December 31, 2021. The increase primarily reflected increases in various loan-related and deposit-related fees and charges.

Gain on sale and call of securities reflected a net gain of $813,000 during the quarter ended December 31, 2020 for which no such gains were recorded during the current period.

Gain on sale of loans decreased $1.4 million to $970,000 for the quarter ended December 31, 2021. The decrease in loan sale gains largely reflected a decrease in the volume of loans originated and sold between comparative periods coupled with a decrease in the average net price at which such loans were sold.

Other non-interest income increased $415,000 to $482,000 for the quarter ended December 31, 2021. The increase in other non-interest income primarily reflected $356,000 of non-recurring gains on asset disposals.

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 $840,000 to $29.7 million for the quarter ended December 31, 2021.

Salaries and employee benefits increased $1.0 million to $18.1 million for quarter ended December 31, 2021. This increase was largely due to the impact of staff additions, annual merit increases and increases in benefit plan expense, including employee medical benefit, post-retirement plan and ESOP expense.

Net occupancy expense of premises increased $36,000 to $3.2 million for the quarter ended December 31, 2021. The increase was largely attributable to non-recurring expenses of $187,000 associated with the closure of a leased office facility acquired in conjunction with the MSB acquisition. This increase was partially offset by a decrease in building maintenance expense.

Equipment and systems expense decreased $179,000 to $3.7 million for the quarter ended December 31, 2021, largely attributable to cost savings related to the Company's core system contract.

Advertising and marketing expense decreased $65,000 to $448,000 for the quarter ended December 31, 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.

Debt extinguishment expenses totaled $796,000 for the quarter ended December 31, 2020 for which no such costs were recorded in the current period.

FDIC insurance premiums increased $231,000 to $721,000 for the quarter ended December 31, 2021. The increase was largely attributable to an updated assessment rate from the FDIC based on changes to underlying bank capital ratios.

Director compensation decreased $99,000 to $649,000 for the quarter end December 31, 2021. The decrease in expense primarily reflected a decrease in director stock-based compensation.

Other non-interest expense decreased $983,000 to $2.9 million for the quarter ended December 31, 2021. The decrease in other expense during the quarter was primarily attributable to the reversal of provision for credit losses on off-balance sheet credit exposures and decreases in loan expenses. This decrease was also attributable to non-recurring asset impairment charges of $347,000, recognized during the prior comparative quarter, related to branch consolidation activity.

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Provision for Income Taxes. Provision for income taxes increased $1.2 million to $6.8 million for the quarter ended December 31, 2021, from $5.6 million for the quarter ended December 31, 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 change in income tax expense also reflected the reversal of a valuation allowance totaling $523,000 which was associated with the realization of a capital loss carryforward recorded in the prior comparative period for which no such amount was recorded in the current period.

Effective tax rates for the quarter ended December 31, 2021 and 2020 were 26.6% and 24.9%, respectively. The effective tax rate for the prior comparative period reflected the reversal of a valuation allowance, as noted above.

Comparison of Operating Results for the Six Months ended December 31, 2021 and December 31, 2020

Net Income. Net income for the six months ended December 31, 2021 was $38.5 million, or $0.53 per diluted share, compared to $28.3 million, or $0.33 per diluted share for the quarter ended December 31, 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. As noted above, 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 $7.6 million to $98.3 million for the six months ended December 31, 2021 compared to $90.7 million for the six months ended December 31, 2021. The increase between the comparative periods resulted from a decrease of $15.7 million in interest expense, partially offset by a decrease of $8.1 million in interest income. Included in net interest income, for the six months ended December 31, 2021 and 2020, respectively, was purchase accounting accretion of $5.5 million and $8.7 million and loan prepayment penalty income of $3.2 million and $2.0 million.

Net interest margin increased 27 basis points to 2.98% for the six months ended December 31, 2021, from 2.71% for six months ended December 31, 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.

  • 49 -
For the Six Months Ended December 31,
2021 2020
Average<br>Balance Interest Average<br>Yield/<br>Cost Average<br>Balance Interest Average<br>Yield/<br>Cost
(Dollars in Thousands)
Interest-earning assets:
Loans receivable (1) $ 4,829,318 $ 95,805 3.97 % $ 4,914,780 $ 103,617 4.22 %
Taxable investment securities (2) 1,630,174 15,807 1.94 1,447,303 15,043 2.08
Tax-exempt securities (2) 58,400 660 2.26 80,824 887 2.19
Other interest-earning assets (3) 81,780 846 2.07 256,828 1,701 1.32
Total interest-earning assets 6,599,672 113,118 3.43 6,699,735 121,248 3.62
Non-interest-earning assets 614,062 628,168
Total assets $ 7,213,734 $ 7,327,903
Interest-bearing liabilities:
Interest-bearing demand $ 1,990,646 $ 2,280 0.23 $ 1,573,730 $ 4,169 0.53
Savings 1,094,884 622 0.11 1,032,375 2,317 0.45
Certificates of deposit 1,745,948 4,826 0.55 1,944,047 13,223 1.36
Total interest-bearing deposits 4,831,478 7,728 0.32 4,550,152 19,709 0.87
Borrowings 693,255 7,113 2.05 1,096,181 10,853 1.98
Total interest-bearing liabilities 5,524,733 14,841 0.54 5,646,333 30,562 1.08
Non-interest-bearing liabilities (4) 671,116 567,462
Total liabilities 6,195,849 6,213,795
Stockholders' equity 1,017,885 1,114,108
Total liabilities and stockholders'<br>  equity $ 7,213,734 $ 7,327,903
Net interest income $ 98,277 $ 90,686
Interest rate spread (5) 2.89 % 2.54 %
Net interest margin (6) 2.98 % 2.71 %
Ratio of interest-earning assets<br>  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 $617,235,000 and $490,810,000, for the six months ended December 31, 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 $10.5 million to a provision for credit losses reversal of $7.8 million for the six months ended December 31, 2021, compared to a provision for credit losses of $2.7 million for the six months ended December 31, 2020. The provision reversal for the six months ended December 31, 2021 was largely attributable to a release of reserves, reflecting a continued improvement in the Company’s credit risk outlook and a reduction in the expected life of various segments of the loan portfolio. By comparison, the provision for the six months ended December 31, 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 six months ended December 31, 2021 and 2020 is presented in Note 6 to the unaudited consolidated financial statements as well as the Comparison of Financial Condition at December 31, 2021 and June 30, 2021.

  • 50 -

Non-Interest Income. Non-interest income decreased $5.0 million to $7.9 million for the six months ended December 31, 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 and a $2.3 million decrease in gain on sale of loans.

Fees and service charges increased $304,000 to $1.3 million for the six months ended December 31, 2021. The increase primarily reflected increases in loan-related and deposit-related fees and charges.

Gain on sale and call of securities reflected a net gain of $1,000 during the six months ended December 31, 2021 compared to a net gain of $436,000, recorded during the earlier comparative period.

Gain on sale of loans decreased $2.3 million to $2.0 million for the six months ended December 31, 2021. The decrease in loan sale gains largely reflected a decrease in the volume of loans originated and sold between comparative periods coupled with a decrease in the average net price at which such loans were sold.

Other non-interest income increased $543,000 to $700,000 for the six months ended December 31, 2021. The increase primarily reflected $44,000 of referral fees related to PPP loans, $88,000 of broker fees related to residential mortgage loans and $356,000 of non-recurring gains on asset disposals.

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 $2.6 million to $61.5 million for the six months ended December 31, 2021.

Salaries and employee benefits increased $2.7 million to $36.7 million for the six months ended December 31, 2021. This increase was largely due to the impact of staff additions, annual merit increases and increases in benefit plan expense, including employee medical, post-retirement plan and ESOP expense.

Net occupancy expense of premises increased $1.5 million to $7.7 million for the six months ended December 31, 2021. This increase was primarily due to non-recurring expenses of $1.3 million related to the consolidation of three retail branch locations, $250,000 related to facility repairs made in connection with damage incurred during Tropical Storm Ida and $187,000 related to the closure of a leased office facility acquired in conjunction with the MSB acquisition.

Equipment and systems expense increased $76,000 to $7.5 million for the six months ended December 31, 2021, largely attributable to increases in technology expense associated with the Company's ongoing digital banking initiatives, partially offset by cost savings related to the Company's core system contract.

Advertising and marketing expense decreased $173,000 to $840,000 for the six months ended December 31, 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.

FDIC insurance premiums increased $251,000 to $1.2 million for the six months ended December 31, 2021. The increase was largely attributable to an updated assessment rate from the FDIC based on changes to underlying bank capital ratios.

Merger-related expenses, associated with the Company’s acquisition of MSB, totaled $4.3 million for the six months ended December 31, 2020 for which no such costs were recorded in the current period.

Debt extinguishment expenses totaled $796,000 for the six months ended December 31, 2020 for which no such costs were recorded in the current period.

Other non-interest expense decreased $1.7 million to $6.0 million for the six months ended December 31, 2021. The decrease in other expense during the period was primarily attributable to the reversal of provision for credit losses on off-balance sheet credit exposures and decreases in loan expenses.

Provision for Income Taxes. Provision for income taxes increased $5.6 million to $14.1 million for the six months ended December 31, 2021, from $8.5 million for the six months ended December 31, 2020.

  • 51 -

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. The change in income tax expense also reflected the reversal of a valuation allowance totaling $523,000 which was associated with the realization of a capital loss carryforward recorded in the prior comparative period for which no such amount was recorded in the current period.

Effective tax rates for the six months ended December 31, 2021 and 2020 were 26.8% and 23.1%, 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 and reversal of a valuation allowance, as noted above.

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 December 31, 2021, liquidity included $60.5 million of short-term cash and equivalents supplemented by $1.59 billion of investment securities classified as available for sale. In addition, as of December 31, 2021, the Company had the capacity to borrow additional funds totaling $2.24 billion and $301.2 million from the FHLB of New York and FRB, respectively, without pledging additional collateral. As of that same date, the Company also had access to unsecured overnight borrowings with other financial institutions totaling $890.0 million of which $20.0 million was outstanding.

At December 31, 2021, the Company had outstanding commitments to originate and purchase loans totaling approximately $177.1 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 $19.6 million and $48.4 million, respectively, 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 $98.5 million and $154.5 million, respectively, at December 31, 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 $180,000 and $739,000, at December 31, 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.

  • 52 -

The following table sets forth the Bank’s capital position at December 31, 2021 and June 30, 2021, as compared to the minimum regulatory capital requirements that were in effect as of those dates:

At December 31, 2021
Actual For Capital<br>Adequacy Purposes To Be Well Capitalized<br>Under Prompt<br>Corrective Action<br>Provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in Thousands)
Total capital (to risk-weighted assets) $ 667,328 14.88 % $ 358,891 8.00 % $ 448,614 10.00 %
Tier 1 capital (to risk-weighted assets) 637,487 14.21 % 269,168 6.00 % 358,891 8.00 %
Common equity tier 1 capital (to risk-weighted assets) 637,487 14.21 % 201,876 4.50 % 291,599 6.50 %
Tier 1 capital (to adjusted total assets) 637,487 9.15 % 278,563 4.00 % 348,204 5.00 %
At June 30, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Actual For Capital<br>Adequacy Purposes To Be Well Capitalized<br> Under Prompt<br> Corrective Action<br>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 December 31, 2021 and June 30, 2021, as compared to the minimum regulatory capital requirements that were in effect as of those dates:

At December 31, 2021
Actual For Capital<br>Adequacy Purposes
Amount Ratio Amount Ratio
(Dollars in Thousands)
Total capital (to risk-weighted assets) $ 822,216 18.32 % $ 358,967 8.00 %
Tier 1 capital (to risk-weighted assets) 792,375 17.66 % 269,225 6.00 %
Common equity tier 1 capital (to risk-weighted assets) 792,375 17.66 % 201,919 4.50 %
Tier 1 capital (to adjusted total assets) 792,375 11.35 % 279,156 4.00 %
At June 30, 2021
--- --- --- --- --- --- --- --- --- --- ---
Actual For Capital<br>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 %
  • 53 -

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 provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss method, followed by a three-year transition period established in the previous rule (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 December 31, 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.

  • 54 -

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 December 31, 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 December 31, 2021 and June 30, 2021, respectively:

December 31, 2021
Economic Value ofEquity ("EVE") EVE as a % of<br>Present Value of Assets
Change in<br>Interest Rates Amountof EVE Changein EVE % Change<br>in EVE EVE Ratio Change in<br>EVE Ratio
(Dollars in Thousands)
+300 bps ) (7.29 ) % 17.20 % 4 bps
+200 bps ) (4.07 ) % 17.33 % 17 bps
+100 bps ) (0.28 ) % 17.51 % 35 bps
0 bps - - 17.16 % -
-100 bps ) (8.04 ) % 15.52 % (164 ) bps

All values are in US Dollars.

June 30, 2021
Economic Value ofEquity ("EVE") EVE as a % of<br>Present Value of Assets
Change in<br>Interest Rates Amountof EVE Changein EVE % Change<br>in EVE EVE Ratio Change in<br>EVE Ratio
(Dollars in Thousands)
+300 bps ) (8.82 ) % 16.45 % (20 ) bps
+200 bps ) (4.69 ) % 16.72 % 7 bps
+100 bps ) (0.99 ) % 16.89 % 24 bps
0 bps - - 16.65 % -
-100 bps ) (9.86 ) % 14.84 % (181 ) bps

All values are in US Dollars.

  • 55 -

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 December 31, 2021 and June 30, 2021, respectively:

December 31, 2021
Net InterestIncome ("NII")
Change in<br>Interest Rates Balance Sheet<br>Composition Measurement<br>Period Amountof NII Changein NII % Change<br>in NII
(Dollars In Thousands)
+300 bps Static One Year ) (7.54 ) %
+200 bps Static One Year ) (4.33 )
+100 bps Static One Year ) (1.40 )
0 bps Static One Year -
-100 bps Static One Year ) (5.56 )

All values are in US Dollars.

June 30, 2021
Net InterestIncome ("NII")
Change in<br>Interest Rates Balance Sheet<br>Composition Measurement<br>Period Amountof NII Changein NII % Change<br>in NII
(Dollars In Thousands)
+300 bps Static One Year ) (8.38 ) %
+200 bps Static One Year ) (5.12 )
+100 bps Static One Year ) (2.06 )
0 bps Static One Year -
-100 bps Static One Year ) (5.35 )

All values are in US Dollars.

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.

  • 56 -

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 December 31, 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.

  • 57 -

ITEM 1. Legal Proceedings

At December 31, 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 December 31, 2021:

Period Total Number<br>of Shares<br>Purchased Average Price<br>Paid per Share Total Number<br>of Shares<br>Purchased as<br>Part of Publicly<br>Announced Plans<br>or Programs Maximum<br>Number of Shares<br>that May Yet Be<br>Purchased Under<br>the Plans or<br>Programs
October 1-31, 2021 690,000 $ 13.02 690,000 6,698,882
November 1-30, 2021 640,000 $ 13.48 640,000 6,058,882
December 1-31, 2021 959,537 $ 12.91 959,537 5,099,345
Total 2,289,537 $ 13.10 2,289,537 5,099,345

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.

  • 58 -

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 December 31, 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)
  • 59 -

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: February 8, 2022 By: /s/ Craig L. Montanaro
Craig L. Montanaro
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 8, 2022 By: /s/ Keith Suchodolski
Keith Suchodolski
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

  • 60 -

    EX-31.1

Exhibit 31.1

CERTIFICATION

I, Craig L. Montanaro, certify that:

1. I have reviewed this Form 10-Q of Kearny Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 8, 2022 /s/ Craig L. Montanaro
Craig L. Montanaro
President and Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Keith Suchodolski, certify that:

1. I have reviewed this Form 10-Q of Kearny Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 8, 2022 /s/ Keith Suchodolski
Keith Suchodolski
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kearny Financial Corp. (the “Company”) on Form 10-Q for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig L. Montanaro, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 8, 2022 /s/ Craig L. Montanaro
Craig L. Montanaro
President and Chief Executive Officer
(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kearny Financial Corp. (the “Company”) on Form 10-Q for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keith Suchodolski, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 8, 2022 /s/ Keith Suchodolski
Keith Suchodolski
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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