Kearny Financial Corp

Previous wording

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, the effects of the recent turmoil in the banking industry (including the failure of three financial institutions), 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, the rate of inflation, 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, a potential government shutdown 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 this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023, under “Item 1A. Risk Factors.”

Current wording

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, the effects of the recent turmoil in the banking industry (including the failure of three financial institutions), 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, the rate of inflation, 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 this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023, under “Item 1A. Risk Factors.”

Previous wording

Executive Summary. Total assets decreased $167.0 million to $7.90 billion at December 31, 2023 from $8.06 billion at June 30, 2023. The decrease primarily reflected decreases in investment securities available for sale, as discussed below, and in net loans receivable.

Current wording

Executive Summary. Total assets decreased $222.8 million to $7.84 billion at March 31, 2024 from $8.06 billion at June 30, 2023. The decrease primarily reflected decreases in investment securities available for sale, as discussed below, and in net loans receivable.

Previous wording

Investment Securities. Investment securities available for sale decreased $83.6 million to $1.14 billion at December 31, 2023, from $1.23 billion at June 30, 2023. This decrease was largely the result of sales of $122.2 million and principal repayments of $57.4 million, partially offset by purchases of $64.0 million and a fair value increase of $31.7 million.

Current wording

Investment Securities. Investment securities available for sale decreased $129.1 million to $1.10 billion at March 31, 2024, from $1.23 billion at June 30, 2023. This decrease was largely the result of sales of $104.1 million and principal repayments of $94.1 million, partially offset by purchases of $64.0 million and a fair value increase of $5.1 million.

Previous wording

Investment securities held to maturity decreased $4.5 million to $142.0 million at December 31, 2023 from $146.5 million at June 30, 2023. This decrease was largely the result of principal repayments of $4.7 million.

Current wording

Investment securities held to maturity decreased $6.8 million to $139.6 million at March 31, 2024 from $146.5 million at June 30, 2023. This decrease was primarily driven by principal repayments of $7.0 million.

Previous wording

Loans Held-for-Sale. Loans held-for-sale totaled $14.0 million at December 31, 2023 as compared to $9.6 million at June 30, 2023 and are reported separately from the balance of net loans receivable. During the six months ended December 31, 2023, we sold $39.1 million of residential mortgage loans, resulting in a gain on sale of $319,000. Additionally, we reclassified three non-performing commercial real estate loans to loans held-for-sale as a result of our intent to sell these assets in the near term. These loans are attributable to one borrower relationship and had a fair value of $9.7 million at December 31, 2023.

Current wording

Loans Held-for-Sale. Loans held-for-sale totaled $4.1 million at March 31, 2024 as compared to $9.6 million at June 30, 2023 and are reported separately from the balance of net loans receivable. During the nine months ended March 31, 2024, we sold $59.5 million of residential mortgage loans, resulting in a gain on sale of $491,000 and $10.8 million of commercial mortgage loans, resulting in a loss on sale of $884,000.

Previous wording

Net Loans Receivable. Net loans receivable decreased $79.9 million, or 1.4%, to $5.70 billion at December 31, 2023 from $5.78 billion at June 30, 2023. Details regarding the change in the loan portfolio, by loan segment, are presented below:

Current wording

Net Loans Receivable. Net loans receivable decreased $67.3 million, or 1.2%, to $5.71 billion at March 31, 2024 from $5.78 billion at June 30, 2023. Details regarding the change in the loan portfolio, by loan segment, are presented below:

Previous wording

Commercial loan origination volume for the six months ended December 31, 2023 totaled $104.7 million, comprised of $17.2 million of commercial mortgage loan originations, $47.1 million of commercial business loan originations and construction loan disbursements of $40.4 million.

Current wording

Commercial loan origination volume for the nine months ended March 31, 2024 totaled $217.5 million, comprised of $75.7 million of commercial mortgage loan originations, $77.3 million of commercial business loan originations and construction loan disbursements of $64.5 million.

Previous wording

One- to four-family residential mortgage loan origination volume, excluding loans held-for-sale, totaled $66.2 million for the six months ended December 31, 2023 and was supplemented with the purchase of loans totaling $49.4 million. Home equity loan and line of credit origination volume for the same period totaled $8.5 million.

Current wording

One- to four-family residential mortgage loan origination volume, excluding loans held-for-sale, totaled $82.6 million for the nine months ended March 31, 2024 and was supplemented with the purchase of loans totaling $59.9 million. Home equity loan and line of credit origination volume for the same period totaled $12.5 million.

Previous wording

Nonperforming Assets. Nonperforming assets decreased by $5.8 million to $49.8 million, or 0.63% of total assets, at December 31, 2023, from $55.6 million, or 0.69% of total assets, at June 30, 2023.

Current wording

Nonperforming Assets. Nonperforming assets decreased by $16.0 million to $39.5 million, or 0.50% of total assets, at March 31, 2024, from $55.6 million, or 0.69% of total assets, at June 30, 2023.

Previous wording

At December 31, 2023, nonperforming assets consisted of $28.1 million of nonperforming loans, $9.7 million of non-accrual commercial loans held for sale and $12.0 million of other real estate owned (“OREO”). At June 30, 2023, nonperforming assets consisted of $42.6 million of nonperforming loans and $13.0 million of OREO.

Current wording

At March 31, 2024, nonperforming assets consisted of $39.5 million of nonperforming loans, compared to nonperforming assets of $55.6 million at June 30, 2023, which consisted of $42.6 million of nonperforming loans and $13.0 million of other real estate owned (“OREO”). The decrease in non performing assets was driven by the January 2024 sale of three related non-performing commercial real estate loans held-for-sale and the Company’s sole OREO asset.

Previous wording

Allowance for Credit Losses (“ACL”). At December 31, 2023, the ACL totaled $44.9 million, or 0.78% of total loans, reflecting a decrease of $3.9 million from $48.7 million, or 0.83% of total loans, at June 30, 2023. The decrease during the six months ended December 31, 2023 was largely attributable to net charge-offs of $6.2 million and a decrease in the balance of loans receivable, partially offset by a provision for credit losses of $2.4 million. The charge-offs recorded were primarily driven by the reclassification of three non-performing loans to held-for-sale status, reflecting the Company’s intent to sell these assets. Of the $6.2 million of net charge-offs recorded during the six months ended December 31, 2023, $2.2 million had previously been individually reserved for within the ACL. The provision for credit losses for the six months ended December 31, 2023 was primarily driven by charge-offs, as discussed above, partially offset by a decrease in the balance of loans receivable.

Current wording

Allowance for Credit Losses (“ACL”). At March 31, 2024, the ACL totaled $44.9 million, or 0.78% of total loans, reflecting a decrease of $3.8 million from $48.7 million, or 0.83% of total loans, at June 30, 2023. The decrease during the nine months ended March 31, 2024 was largely attributable to net charge-offs of $6.5 million and a decrease in the balance of loans receivable, partially offset by a provision for credit losses of $2.7 million. The charge-offs recorded were primarily driven by the sale of three related non-performing loans in January 2024. Of the $6.5 million of net charge-offs recorded during the nine months ended March 31, 2024, $3.3 million had previously been individually reserved for within the ACL. The provision for credit losses for the nine months ended March 31, 2024 was primarily driven by charge-offs, as discussed above, partially offset by a decrease in the balance of loans receivable.

Previous wording

Other Assets. The aggregate balance of other assets, including premises and equipment, FHLB stock, interest receivable, goodwill, core deposit intangibles, bank owned life insurance (“BOLI”), deferred income taxes, OREO and other assets, decreased $6.8 million to $823.0 million at December 31, 2023 from $829.8 million at June 30, 2023. The decrease in the balance of these other assets during the six months ended December 31, 2023 reflected a decrease in BOLI due to the restructuring, as discussed above, and a decrease in the market value of interest rate derivatives, partially offset by an increase in receivables resulting from surrendered BOLI policies that did not settle until January 2024, and an increase in Federal Home Loan Bank of New York (“FHLB”) stock. The remaining change generally reflected normal operating fluctuations within these line items.

Current wording

Other Assets. The aggregate balance of other assets, including premises and equipment, Federal Home Loan Bank (“FHLB”) stock, interest receivable, goodwill, core deposit intangibles, bank owned life insurance (“BOLI”), deferred income taxes, OREO and other assets, decreased $14.7 million to $815.1 million at March 31, 2024 from $829.8 million at June 30, 2023. The decrease in the balance of these other assets during the nine months ended March 31, 2024 reflected the January 2024 sale of our sole OREO asset and a decrease in the market value of interest rate derivatives, partially offset by an increase in Federal Home Loan Bank of New York (“FHLBNY”) stock. The remaining change generally reflected normal operating fluctuations within these line items.

Previous wording

Deposits. Total deposits decreased $309.6 million, or 5.5%, to $5.32 billion at December 31, 2023 from $5.63 billion at June 30, 2023. Included in total deposits are brokered and listing service time deposits of $458.4 million at December 31, 2023 and $640.5 million at June 30, 2023. The following table sets forth the distribution of, and changes in, deposits, by type, for the periods indicated:

Current wording

Deposits. Total deposits decreased $420.1 million, or 7.5%, to $5.21 billion at March 31, 2024 from $5.63 billion at June 30, 2023. Included in total deposits are brokered and listing service time deposits of $408.2 million at March 31, 2024 and $640.5 million at June 30, 2023. The following table sets forth the distribution of, and changes in, deposits, by type, for the periods indicated:

Previous wording

Uninsured deposits totaled $1.81 billion as of December 31, 2023 compared to $1.77 billion as of June 30, 2023. Excluding collateralized deposits of state and local governments, and deposits of the Bank’s wholly-owned subsidiary and holding company, uninsured deposits totaled $695.7 million, or 13.1% of total deposits, at December 31, 2023 compared to $710.4 million, or 12.6% of total deposits, at June 30, 2023.

Current wording

Uninsured deposits totaled $1.76 billion as of March 31, 2024 compared to $1.77 billion as of June 30, 2023. Excluding collateralized deposits of state and local governments, and deposits of the Bank’s wholly-owned subsidiary and holding company, uninsured deposits totaled $718.0 million, or 13.8% of total deposits, at March 31, 2024 compared to $710.4 million, or 12.6% of total deposits, at June 30, 2023.

Previous wording

Borrowings. The balance of borrowings increased by $160.2 million to $1.67 billion at December 31, 2023 from $1.51 billion at June 30, 2023. The growth in borrowings was driven by an increase in advances from the FHLB and resulted from the decline in brokered deposits of $182.1 million.

Current wording

Borrowings. The balance of borrowings increased by $215.4 million to $1.72 billion at March 31, 2024 from $1.51 billion at June 30, 2023. The growth in borrowings was driven by increases in advances from the FHLB and the Federal Reserve Bank of New York (“FRBNY”), and resulted from the decline in brokered deposits of $232.3 million. FRBNY advances consisted of $100.0 million in borrowings under the Bank Term Funding Program (“BTFP”) which included favorable terms and conditions as compared to FHLB advances and brokered deposits.

Previous wording

At December 31, 2023, we maintained available secured borrowing capacity of $1.78 billion, of which $1.38 billion was immediately accessible via in-place collateral and $400.8 million represented the market value of unpledged securities.

Current wording

At March 31, 2024, we maintained available secured borrowing capacity of $1.81 billion, of which $1.47 billion was immediately accessible via in-place collateral and $336.7 million represented the market value of unpledged securities.

Previous wording

Other Liabilities. The balance of other liabilities, including advance payments by borrowers for taxes and other miscellaneous liabilities, increased $3.6 million to $63.2 million at December 31, 2023 from $59.5 million at June 30, 2023. The change in the balance of these other liabilities generally reflected normal operating fluctuations during the period.

Current wording

Other Liabilities. The balance of other liabilities, including advance payments by borrowers for taxes and other miscellaneous liabilities, increased $2.1 million to $61.7 million at March 31, 2024 from $59.5 million at June 30, 2023. The change in the balance of these other liabilities generally reflected normal operating fluctuations during the period.

Previous wording

Stockholders’ Equity. Stockholders’ equity decreased $21.3 million to $848.0 million at December 31, 2023 from $869.3 million at June 30, 2023. The decrease in stockholders’ equity during the six months ended December 31, 2023 largely reflected cash dividends of $13.9 million, share repurchases of $11.2 million and a net loss of $4.0 million. These items were offset by a decrease in other comprehensive loss of $5.6 million, which was driven by an increase in the fair value of our available for sale securities, partially offset by a decrease in the fair value of our derivatives portfolio.

Current wording

Stockholders’ Equity. Stockholders’ equity decreased $20.2 million to $849.1 million at March 31, 2024 from $869.3 million at June 30, 2023. The decrease in stockholders’ equity during the nine months ended March 31, 2024 largely reflected cash dividends of $20.7 million and share repurchases of $11.2 million, partially offset by a decrease in other comprehensive loss of $5.8 million and net income of $3.4 million. The decrease in other comprehensive loss was driven by the reclassification of a net realized loss on the sale of securities available for sale out of accumulated other comprehensive loss due to an investment securities repositioning and an increase in the fair value of our available for sale securities, partially offset by a decrease in the fair value of our derivatives portfolio.

Previous wording

Book value per share decreased by $0.04 to $13.16 at December 31, 2023 while tangible book value per share decreased by $0.11 to $9.85 at December 31, 2023.

Current wording

Book value per share decreased by $0.02 to $13.18 at March 31, 2024 while tangible book value per share decreased by $0.09 to $9.87 at March 31, 2024.

Previous wording

On August 1, 2022, we announced that the Board of Directors had authorized a new stock repurchase plan to repurchase up to 4,000,000 shares, and the completion of our previous stock repurchase plan, which authorized the repurchase of 7,602,021 shares. During the six months ended December 31, 2023, we repurchased 1,504,747 shares of common stock at a cost of $11.2 million, or $7.47 per share. On November 7, 2023, we announced the completion of this stock repurchase plan.

Current wording

On August 1, 2022, we announced that the Board of Directors had authorized a new stock repurchase plan to repurchase up to 4,000,000 shares, and the completion of our previous stock repurchase plan, which authorized the repurchase of 7,602,021 shares. During the nine months ended March 31, 2024, we repurchased 1,504,747 shares of common stock at a cost of $11.2 million, or $7.47 per share. On November 7, 2023, we announced the completion of this stock repurchase plan.

Previous wording

Net (Loss) Income. Net loss for the quarter ended December 31, 2023 was $13.8 million, or $0.22 per diluted share, compared to net income of $2.0 million, or $0.03 per diluted share for the quarter ended December 31, 2022. The decrease in net income reflected a decrease in net interest income, a decrease in non-interest income, an increase in the provision for credit losses and an increase in income tax expense, partially offset by a decrease in non-interest expense. The net loss for the current quarter included a $12.9 million after-tax net loss on the sale of securities that resulted from a previously announced investment securities repositioning and an after-tax net loss of $6.3 million from the BOLI restructure, as discussed above.

Current wording

Net Income. Net income for the quarter ended March 31, 2024 was $7.4 million, or $0.12 per diluted share, compared to $10.3 million, or $0.16 per diluted share for the quarter ended March 31, 2023. The decrease in net income reflected a decrease in net interest income, partially offset by an increase in non-interest income and decreases in non-interest expense, the provision for credit losses and income tax expense.

Previous wording

41 - from an increase of $19.1 million in interest expense, partially offset by an increase of $10.2 million in interest income. Included in net interest income for the quarters ended December 31, 2023 and 2022, respectively, was purchase accounting accretion of $640,000 and $1.9 million, and loan prepayment penalty income of $185,000 and $166,000.

Current wording

Net Interest Income. Net interest income decreased by $8.1 million to $34.3 million for the quarter ended March 31, 2024 compared to $42.4 million for the quarter ended March 31, 2023. The decrease between the comparative periods resulted from an increase of $13.0 million in interest expense, partially offset by an increase of $4.9 million in interest income. Included in net interest income for the quarters ended March 31, 2024 and 2023, respectively, was purchase accounting accretion of $734,000 and $711,000, and loan prepayment penalty income of $61,000 and $103,000.

Previous wording

Net interest margin decreased 44 basis points to 1.94% for the quarter ended December 31, 2023, from 2.38% for the quarter ended December 31, 2022 and reflected an increase in the cost of interest-bearing liabilities and a decrease in the average balance of interest-earning assets, partially offset by an increase in the yield on interest-earning assets and a decrease in the average balance of interest-earning liabilities. The increased cost of interest-bearing liabilities and yield on interest-earning assets is the result of higher market interest rates that were caused by an increase in the federal funds target rate from 0% - 0.25% in March 2022 to 5.25% - 5.50% in July 2023.

Current wording

Net interest margin decreased 31 basis points to 1.89% for the quarter ended March 31, 2024, from 2.20% for the quarter ended March 31, 2023 and reflected an increase in the cost of interest-bearing liabilities, an increase in the average balance of interest-bearing borrowings and a decrease in the average balance of interest-earning assets, partially offset by an increase in the yield on interest-earning assets and a decrease in the average balance of interest-bearing deposits. The increased cost of interest-bearing liabilities and yield on interest-earning assets is the result of higher market interest rates that were caused by an increase in the federal funds target rate from 0% - 0.25% in March 2022 to 5.25% - 5.50% in July 2023.

Previous wording

(4)Includes average balances of non-interest-bearing deposits of $597.3 million and $666.8 million for the quarter ended December 31, 2023 and 2022, respectively.

Current wording

(4)Includes average balances of non-interest-bearing deposits of $581.9 million and $634.3 million for the quarter ended March 31, 2024 and 2023, respectively.

Previous wording

Non-Interest Income. Total non-interest income decreased $7.5 million to a loss of $16.0 million for the quarter ended December 31, 2023.

Current wording

Non-Interest Income. Total non-interest income increased $2.6 million to $4.2 million for the quarter ended March 31, 2024, compared to $1.6 million for the quarter ended March 31, 2023.

Previous wording

Other non-interest income decreased $2.9 million to $811,000 for the quarter ended December 31, 2023. The decrease in other non-interest income was primarily attributable to a $2.9 million gain from the sale of a former branch location during the prior year period.

Current wording

Other non-interest income decreased $316,000 to $755,000 for the quarter ended March 31, 2024. The decrease in other non-interest income was primarily attributable to a reduction in OREO income as a result of the January 2024 sale of our sole OREO asset.

Previous wording

Non-Interest Expense. Total non-interest expense decreased $2.9 million to $29.8 million for the quarter ended December 31, 2023.

Current wording

Non-Interest Expense. Total non-interest expense decreased $1.3 million to $29.1 million for the quarter ended March 31, 2024, compared to $30.4 million for the quarter ended March 31, 2023.

Previous wording

Net occupancy expense of premises decreased $313,000 to $2.7 million for the quarter ended December 31, 2023. This decrease was primarily due to lower depreciation expense, rent expense and maintenance expense associated with two retail branch closures completed in the quarter ended June 30, 2023.

Current wording

Net occupancy expense of premises decreased $234,000 to $2.9 million for the quarter ended March 31, 2024. This decrease was primarily due to lower depreciation expense, rent expense and maintenance expense associated with the consolidation of two retail branch locations completed in the quarter ended June 30, 2023.

Previous wording

Provision for Income Taxes. Provision for income taxes increased $1.7 million to $1.8 million for the quarter ended December 31, 2023 from $33,000 for the quarter ended December 31, 2022.

Current wording

Provision for Income Taxes. Provision for income taxes decreased $1.2 million to $1.7 million for the quarter ended March 31, 2024 from $2.9 million for the quarter ended March 31, 2023.

Previous wording

Comparison of Operating Results for the Six Months Ended December 31, 2023 and December 31, 2022

Current wording

Comparison of Operating Results for the Nine Months Ended March 31, 2024 and March 31, 2023

Previous wording

Net (Loss) Income. Net loss for the six months ended December 31, 2023 was $4.0 million, or $0.06 per diluted share, compared to net income of $18.5 million, or $0.28 per diluted share for the six months ended December 31, 2022. The decrease in net income reflected a decrease in net interest income, a decrease in non-interest income and an increase in the provision for credit losses, partially offset by decreases in non-interest expense and income tax expense. The net loss for the current year period included a $12.9 million after-tax net loss on the sale of securities that resulted from a previously announced investment securities repositioning and an after-tax net loss of $6.3 million from the BOLI restructure, as discussed above.

Current wording

Net Income. Net income for the nine months ended March 31, 2024 was $3.4 million, or $0.06 per diluted share, compared to $28.8 million, or $0.44 per diluted share for the nine months ended March 31, 2023. The decrease in net income reflected a decrease in net interest income and a decrease in non-interest income, partially offset by decreases in non-interest expense, income tax expense and the provision for credit losses. The net income for the current year period included a $12.9 million after-tax net loss on the sale of securities that resulted from an investment securities repositioning and an after-tax net loss of $6.3 million from the previously disclosed BOLI restructure.

Previous wording

Net Interest Income. Net interest income decreased by $18.3 million to $75.0 million for the six months ended December 31, 2023 compared to $93.3 million for the six months ended December 31, 2022. The decrease between the comparative periods resulted from an increase of $45.2 million in interest expense, partially offset by an increase of $26.9 million in interest income. Included in net interest income for the six months ended December 31, 2023 and 2022, respectively, was purchase accounting accretion of $1.3 million and $3.7 million, and loan prepayment penalty income of $452,000 and $607,000.

Current wording

Net Interest Income. Net interest income decreased by $26.4 million to $109.3 million for the nine months ended March 31, 2024 compared to $135.7 million for the nine months ended March 31, 2023. The decrease between the comparative periods resulted from an increase of $58.2 million in interest expense, partially offset by an increase of $31.8 million in interest income. Included in net interest income for the nine months ended March 31, 2024 and 2023, respectively, was purchase accounting accretion of $2.0 million and $4.4 million, and loan prepayment penalty income of $513,000 and $710,000.

Previous wording

Net interest margin decreased 51 basis points to 2.02% for the six months ended December 31, 2023, from 2.53% for the six months ended December 31, 2022 and reflected increases in the cost and average balance of interest-bearing liabilities, partially offset by increases in the average balance of and yield on interest-earning assets. The increased cost of interest-bearing liabilities and yield on interest-earning assets is the result of higher market interest rates that were caused by an increase in the federal funds target rate from 0% - 0.25% in March 2022 to 5.25% - 5.50% in July 2023.

Current wording

Net interest margin decreased 44 basis points to 1.98% for the nine months ended March 31, 2024, from 2.42% for the nine months ended March 31, 2023 and reflected an increase in the cost of interest-bearing liabilities, an increase in the average balance of interest-bearing borrowings and a decrease in the average balance of interest earning assets, partially offset by increases in the yield on interest-earning assets and a decrease in the average balance of interest-bearing deposits. The increased cost of interest-bearing liabilities and yield on interest-earning assets is the result of higher market interest rates that were caused by an increase in the federal funds target rate from 0% - 0.25% in March 2022 to 5.25% - 5.50% in July 2023.

Previous wording

(4)Includes average balances of non-interest-bearing deposits of $604.8 million and $667.2 million for the six months ended December 31, 2023 and 2022, respectively.

Current wording

(4)Includes average balances of non-interest-bearing deposits of $597.2 million and $656.4 million for the nine months ended March 31, 2024 and 2023, respectively.

Previous wording

Provision for Credit Losses. The provision for credit losses increased $434,000 to a provision for credit losses of $2.1 million for the quarter ended December 31, 2023, compared to provision for credit losses of $1.7 million for the quarter ended December 31, 2022. The provision for the quarter ended December 31, 2023 was primarily driven by charge-offs on three commercial real estate loans, as discussed above, partially offset by a decrease in the balance of loans receivable. By comparison, the provision for credit losses for the quarter ended December 31, 2022 was largely attributable to loan growth in the quarter, partially offset by a reduction in the qualitative component of our ACL.

Current wording

Provision for Credit Losses. The provision for credit losses decreased $93,000 to $2.7 million for the nine months ended March 31, 2024, compared to $2.8 million for the nine months ended March 31, 2023. The provision for the nine months ended March 31, 2024 was primarily driven by charge-offs on three related commercial real estate loans. By comparison, the provision for credit losses for the nine months ended March 31, 2023 was largely attributable to loan growth, partially offset by a reduction in the expected life of the loan portfolio and a net reduction in reserves on loans individually analyzed for impairment.

Previous wording

Additional information regarding the ACL and the associated provisions recognized during the six months ended December 31, 2023 and 2022 is presented in Note 6 to the unaudited consolidated financial statements as well as the Comparison of Financial Condition at December 31, 2023 and June 30, 2023.

Current wording

Additional information regarding the ACL and the associated provisions recognized during the nine months ended March 31, 2024 and 2023 is presented in Note 6 to the unaudited consolidated financial statements as well as the Comparison of Financial Condition at March 31, 2024 and June 30, 2023.

Previous wording

Non-Interest Income. Total non-interest income decreased $9.4 million to a loss of $12.0 million for the six months ended December 31, 2023.

Current wording

Non-Interest Income. Total non-interest income decreased $6.9 million to a loss of $7.8 million for the nine months ended March 31, 2024, compared to a loss of $915,000 for the nine months ended March 31, 2023.

Previous wording

Loss on sale and call of securities was $18.1 million during the six months ended December 31, 2023 compared to a loss of $15.2 million recorded during the prior year period. The loss in the current period was due to a previously announced repositioning of our investment securities portfolio that involved the sale of $122.2 million of available for sale debt securities. Proceeds from the sale were utilized to retire higher-cost wholesale funding and to reinvest in loans yielding approximately 7.0%.

Current wording

Loss on sale and call of securities was $18.1 million during the nine months ended March 31, 2024 compared to a loss of $15.2 million recorded during the prior year period. The loss in the current period was due to the repositioning of our investment securities portfolio that involved the sale of $122.2 million of available for sale debt securities in December 2023. Proceeds from the sale were utilized to retire higher-cost wholesale funding and to reinvest in loans yielding approximately 7.0%.

Previous wording

We recognized a non-recurring loss of $974,000 attributable to the write-down of one other real estate owned (“OREO”) property during the quarter ended December 31, 2023, while there were no such losses recorded in the prior period. OREO income for the quarter ended December 31, 2023 was $182,000.

Current wording

We recognized a non-recurring loss of $974,000 attributable to the write-down of one other real estate owned (“OREO”) property during the quarter ended December 31, 2023, while there were no such losses recorded in the prior period. This OREO asset was subsequently sold during the quarter ended March 31, 2024.

Previous wording

Income from bank owned life insurance decreased $2.6 million to $2.8 million for the six months ended December 31, 2023. The decrease was primarily attributable to non-recurring exchange charges related to the BOLI restructure, as discussed above, and the absence of non-recurring payments from life insurance policies reflected in the prior year period.

Current wording

Income from bank owned life insurance decreased $1.2 million to $5.9 million for the nine months ended March 31, 2024. The decrease was primarily due to lower non-recurring payouts on life insurance policies of $1.5 million compared to the prior year period and non-recurring exchange charges of $573,000 in the current year period related to the BOLI restructure, noted above. Excluding these non-recurring items, BOLI income improved $673,000 as a result of the BOLI restructure.