Kearny Financial Corp.
For the period ended Jun 30, 2026. Filed Aug 21, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Aug 21, 2026
KRNY$9.26+2.8%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2025-06-30; filed 2025-08-21.
0001617242-25-000056
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2026-06-30; filed 2026-08-21.
0001617242-26-000020
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 93 previous paragraphs and 90 current paragraphs.
56 unchanged; 16 reworded; 17 added; 21 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Changes in market interest rates and the interest rate environment may adversely affect our business, financial condition and results of operations.
Current report
In particular, if funding costs increase more rapidly than asset yields, or if asset yields decline more rapidly than funding costs, our net interest margin and net interest income could be adversely affected. Changes in interest rates may also affect the economic value of our assets, liabilities and stockholders’ equity, which could adversely impact our financial condition and results of operations.
Current report
We are unable to predict changes in market interest rates, which are affected by many factors beyond our control, including inflation, unemployment, money supply, governmental policy, monetary policy actions of the Federal Open Market Committee ("FOMC"), the imposition of tariffs, domestic and international events and changes in the United States and other financial markets.
Current report
Loan repricing and refinancing risk may adversely affect borrower performance.
Current report
Financial institutions have been, and continue to be, targets of terrorist threats and other malicious activities designed to disrupt operations, compromise information systems and impair communications. In addition, the metropolitan New York area and northern New Jersey remain central targets for acts of terrorism and other disruptive events. Severe weather events, natural disasters, public health emergencies, military conflicts, geopolitical tensions and other external events may disrupt our operations, damage our facilities, impair access to critical infrastructure and technology systems, and adversely affect the communities and local economies in which we operate.
Current report
These events may also impair the ability of our borrowers to repay their loans, increase loan delinquencies, nonperforming assets and foreclosures, reduce demand for our products and services, and decrease the value of collateral securing our loans, particularly real estate collateral. Such events may also result in increased expenses, operational disruptions, reductions in revenue and adverse impacts on our capital and liquidity levels.
Current report
While we maintain business continuity and disaster recovery plans and regularly test our recovery procedures, there can be no assurance that such measures will be sufficient to prevent or mitigate the effects of these events. The occurrence of any such event, including a sudden or prolonged downturn in domestic or global markets resulting from these factors, could have a material adverse effect on our business, financial condition and results of operations.
Current report
Cybersecurity threats, technology failures and information security risks could result in operational disruptions, financial losses and reputational harm.
Current report
Information technology systems are critical to our business and support key functions, including client relationship management, financial reporting, securities investments, deposit processing, loan servicing and other operational activities. Despite the controls, policies and procedures we maintain to monitor and mitigate technology, operational and information security risks, our systems, as well as those of our third-party service providers, remain vulnerable to cybersecurity incidents, system failures, service interruptions, processing errors and other performance disruptions. The financial services industry has experienced an increase in the frequency and sophistication of cyber-attacks, including attempts to gain unauthorized access to systems, misappropriate assets or confidential information, corrupt data, disrupt operations and facilitate fraud.
Current report
We rely on third-party service providers, including core processors, cloud service providers, payment, clearing and settlement networks, and other technology partners, many of which are beyond our direct control. We also rely on senior management, information security personnel and external consultants to support the identification, assessment, monitoring and management of cybersecurity and information security risks, and our Board of Directors' oversight of such risks depends in part on information, analysis and recommendations provided by these individuals.
Current report
Failures, disruptions, security breaches or unauthorized disclosures involving our systems, those of our third-party service providers, or deficiencies in the oversight, assessment or management of cybersecurity risks could impair our operations, disrupt client access to products and services, compromise sensitive information and expose us to fraud losses. In addition, our clients are increasingly targeted by cyber-attacks, identity theft and other fraudulent activity, which could result in account compromise, financial loss and reputational harm to us, regardless of whether the underlying event originates within our systems or those of third parties. Any such event could result in operational disruption, loss of customers, reputational damage, litigation, regulatory scrutiny, remediation costs and other liabilities, any of which could have a material adverse effect on our business, financial condition and results of operations.
Current report
Our use of artificial intelligence, robotic process automation, and other emerging technologies may increase operational, compliance, cybersecurity, and third-party risks.
Current report
We have made and expect to continue to make investments to integrate artificial intelligence (“AI”), including generative artificial intelligence, machine learning technologies, robotic process automation (“RPA”), and other emerging technologies into our solutions to enhance operational efficiency, scalability, customer service, and decision making. We also rely on third-party vendors, service providers, and business partners that use or support these technologies in delivering services to us. The use of AI and RPA introduces operational, compliance, cybersecurity, model risk, and third-party risks. These technologies may generate inaccurate, incomplete, biased, or unreliable outputs, experience design or programming errors, fail to operate as intended, or be improperly implemented, monitored, or governed. Such failures could result in processing errors, data inaccuracies, ineffective internal controls, customer service disruptions, regulatory compliance issues, reporting errors, or adverse customer outcomes. In addition, the use of AI and automation may increase risks related to data privacy, information security, fraud, and unauthorized access to confidential information.
Current report
Our dependence on third-party technology providers exposes us to risks associated with vendor performance, operational resiliency, cybersecurity practices, service disruptions, and the availability of specialized technology providers. Furthermore, the legal and regulatory framework governing AI and other emerging technologies continues to evolve, and new laws, regulations, or supervisory expectations could increase compliance costs, restrict the use of certain technologies, or require changes to our governance and risk management practices. Failure to effectively manage these risks, whether by us or our third-party providers, could result in financial loss, regulatory scrutiny, litigation, reputational harm, or other adverse effects on our business and results of operations.
Current report
Multifamily loans generally involve risks associated with legislation and government regulations involving rent control, rent stabilization and tenant protection measures, which are outside of our control and could impair the value of the collateral securing such loans or the future cash flows of such properties. In particular, certain of our multifamily loans are secured by properties located in New York City, where rent-regulation laws and related housing policies may limit a property owner's ability to increase rents, recover rising operating costs or otherwise enhance property cash flow.
Current report
In addition, future legislative, regulatory or policy changes affecting rent-regulated housing, including expanded tenant protections or additional limitations on rent increases, could adversely affect the operating performance and value of multifamily properties. As a result, rental income may not increase sufficiently to offset rising expenses, including taxes, insurance, utilities and maintenance costs. Any reduction in borrower cash flows or collateral values could impair a borrower's ability to repay its loan obligations and adversely affect our business, financial condition and results of operations.
Current report
We may be required to recognize goodwill impairment charges in future periods.
Removed paragraphs (21)
Previous report
Our business and financial performance are impacted by market interest rates and movements in those rates.
Previous report
Beginning in March 2022, in response to rising inflation, the Federal Open Market Committee (the “Committee”) initiated a series of systematic rate hikes, raising the target federal funds rate from 0.00%–0.25% to a peak of 5.25%–5.50% by July 2023. In the second half of 2024, the Committee began easing rates, bringing the target range down to 4.25%–4.50%, where it has remained through June 2025. As of June 30, 2025, the yield curve had flattened, although it remained inverted at certain maturities, with short-term rates at or above long-term rates. These interest rate dynamics have pressured our net interest spread and net interest margin, both of which have been, and may continue to be, adversely affected by significant or unexpected shifts in market rates.
Previous report
Changes in interest rates can affect the average life of loans and securities. For example, a reduction in interest rates generally results in increased prepayments of loans and mortgage-backed securities, as borrowers refinance their debt in order to reduce their borrowing cost. In addition, interest rates also affect how much money we lend. For example, when interest rates rise, the cost of borrowing increases and loan originations tend to decrease.
Previous report
A significant portion of our loan portfolio has interest rates that will reset over the next 24 months. In addition, a significant portion of our portfolio will mature over the next 24 months. Applicable increases in interest rates could harm our borrowers’ abilities to repay their loans.
Previous report
Weather-related events can disrupt our operations, result in damage to our properties, reduce or destroy the value of the collateral for our loans and negatively affect the local economies in which we operate, which could have a material adverse effect on our results of operations and financial condition. The occurrence of a natural disaster could result in one or more of the following: (i) an increase in loan delinquencies; (ii) an increase in problem assets and foreclosures; (iii) a decrease in the demand for our products and services; or (iv) a decrease in the value of the collateral for loans, especially real estate, in turn reducing clients’ borrowing power, the value of assets associated with problem loans and collateral coverage.
Previous report
Financial institutions have been, and continue to be, targets of terrorist threats aimed at compromising operating and communication systems. Additionally, the metropolitan New York area and northern New Jersey remain central targets for potential acts of terrorism. Such events could cause significant damage, impact the stability of our facilities and result in additional expenses, impair the ability of our borrowers to repay their loans, reduce the value of collateral securing repayment of our loans, and result in the loss of revenue. While we have established and regularly test disaster recovery procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial condition.
Previous report
Additionally, global markets may be adversely affected by the emergence of widespread health emergencies or pandemics, cyber attacks or campaigns, military conflicts, terrorism or other geopolitical events. Also, any sudden or prolonged market downturn in the U.S. or abroad as a result of the above factors or otherwise could result in a decline in revenues and adversely affect our results of operations and financial condition, including capital and liquidity levels.
Previous report
Risks associated with system failures, service interruptions or other performance exceptions could negatively affect our earnings.
Previous report
Information technology systems are critical to our business. We use various technology systems to manage our client relationships, general ledger, securities investments, deposits, and loans. We have established policies and procedures to prevent or limit the effect of system failures, service interruptions or other performance exceptions, but such events may still occur or may not be adequately addressed if they do occur. In addition, performance failures or other exceptions of our client-facing technologies could deter clients from using our products and services.
Previous report
We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations. These third party vendors are sources of operational and informational security risk to us, including risks associated with operational errors, information system interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information. If these vendors encounter any of these issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
Previous report
Risks associated with cyber-security could negatively affect our earnings.
Previous report
The financial services industry has experienced an increase in both the number and severity of reported cyber-attacks aimed at gaining unauthorized access to bank systems as a way to misappropriate assets and sensitive information, corrupt and destroy data, or cause operational disruptions. We have established policies and procedures to prevent or limit the impact of security breaches, but such events may still occur or may not be adequately addressed if they do occur. Although we rely on security safeguards to secure our data, these safeguards may not fully protect our systems from compromises or breaches. We also rely on the integrity and security of a variety of third party processors, payment, clearing and settlement systems, as well as the various participants involved in these systems, many of which have no direct relationship with us. Failure by these participants or their systems to protect our clients' transaction data may put us at risk for possible losses due to fraud or operational disruption.
Previous report
Our clients are also the target of cyber-attacks, identity theft, and fraud. Large scale identity theft could result in clients' accounts being compromised and fraudulent activities being performed in their name. We have implemented certain safeguards against these types of activities but they may not fully protect us from fraudulent financial losses. The occurrence of a breach of security involving our clients' information, regardless of its origin, could damage our reputation and result in a loss of clients and business and subject us to additional regulatory scrutiny, and could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.
Previous report
While our Board of Directors takes an active role in cybersecurity risk tolerance, we rely to a large degree on management and outside consultants in overseeing cybersecurity risk management.
Previous report
Our Board of Directors, including the Information Security Committee, takes an active role in the cybersecurity risk tolerance of the Company and all members receive cybersecurity training annually. The Board reviews the annual information security effectiveness report, risk assessments and approves information security and technology policies. Furthermore, our Audit Committee is responsible for reviewing all audit findings related to information technology general controls, internal and external vulnerability, and penetration testing. We also engage outside consultants to support our cybersecurity efforts. However, our directors do not have significant experience in cybersecurity risk management outside of the Company and therefore, its ability to fulfill its oversight function remains dependent on the input it receives from management and outside consultants.
Previous report
Our adoption of artificial intelligence tools and adoption by our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment or fraudulent behavior by our employees, clients, or counterparties, or other third parties.
Previous report
We have made and expect to continue to make investments to integrate artificial intelligence tools into our solutions, including generative artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyze or generate data or other contents (collectively, “AI”), and we expect to continue to adopt such tools responsibly and as appropriate. While these technologies enhance efficiency and scalability, their use can lead to concerns around safety and soundness, fair access to financial services, fair treatment to customers, inaccuracy of results broadly known as "hallucinations" and compliance with applicable laws and regulations. AI systems may produce inaccurate, biased, or otherwise flawed outputs due to limitations in training data, model design, or system integration. Errors in AI-driven processes could lead to operational disruptions, regulatory scrutiny, reputational damage, or financial loss.
Previous report
Our reliance on third-party AI vendors introduces additional risks, including potential deficiencies in vendor oversight, data governance, and cybersecurity practices. Furthermore, the regulatory landscape governing AI technologies is rapidly evolving. Legislative and regulatory developments may impose new compliance obligations or restrict certain uses of AI. Failure to comply with applicable laws or to adapt to regulatory changes in a timely manner could result in enforcement actions, litigation, or reputational harm.
Previous report
Multi-family loans generally involve risk of legislation and government regulations involving rent control and rent stabilization, which are outside the control of the borrower or the Company, and could impair the value of the collateral for the loan or the future cash flows of such properties. As a result of these restrictions, it is possible that rental income on certain rent-regulated properties might not rise sufficiently over time to satisfy increases in the loan rate at repricing or increases in overhead expenses (e.g., utilities, taxes, etc.).
Reworded paragraphs (16)
Previous wording
We derive our income mainly from the difference or spread between the interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the larger the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income. In addition, it takes longer for our assets to reprice to adjust to a new rate environment because fixed rate loans do not fluctuate with interest rate changes and adjustable rate loans often have a specified initial fixed rate period before reset. As of June 30, 2025, 75.5% of our loan portfolio was comprised of fixed rate loans. A flattening or an inversion of the yield curve is likely to have a negative impact on our net interest income.
Current wording
We derive our income mainly from the difference or spread between the interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities. As such, our earnings are highly sensitive to changes in market interest rates, which directly influence the relationship between the yields on our interest-earning assets and the costs of our interest-bearing liabilities. Because the repricing characteristics of our interest-earning assets and interest-bearing liabilities are not perfectly matched, changes in market interest rates may alter the spread between asset yields and funding costs, resulting in fluctuations in net interest margin.
Previous wording
Our net interest margin is lower than it would have been if a higher proportion of our interest-earning assets consisted of loans. Additionally, at June 30, 2025, $1.01 billion, or 89.4% of our investment securities, are classified as available for sale and reported at fair value with unrealized gains or losses excluded from earnings and reported in other comprehensive income, which affects our reported equity. Accordingly, given the significant size of the investment securities portfolio classified as available for sale and due to possible mark-to-market adjustments of that portion of the portfolio resulting from market conditions, we may experience greater volatility in the value of reported equity. Moreover, given that we actively manage our investment securities portfolio classified as available for sale, we may sell securities which could result in a realized loss, thereby reducing our net income.
Current wording
Our net interest margin is lower than it would have been if a higher proportion of our interest-earning assets consisted of loans. Additionally, at June 30, 2026, $964.4 million, or 90.0% of our investment securities, are classified as available for sale and reported at fair value with unrealized gains or losses excluded from earnings and reported in other comprehensive income, which affects our reported equity. Accordingly, given the significant size of the investment securities portfolio classified as available for sale and due to possible mark-to-market adjustments of that portion of the portfolio resulting from market conditions, we may experience greater volatility in the value of reported equity. Moreover, given that we actively manage our investment securities portfolio classified as available for sale, we may sell securities which could result in a realized loss, thereby reducing our net income.
Previous wording
As of June 30, 2025, a significant portion of our loan portfolio is scheduled to reset or mature during fiscal 2026 and 2027. Many of these loans were originated in calendar 2021 and 2022 at interest rates below current market levels. As a result, borrowers may face higher interest rates upon reset or refinancing, which could increase their debt service obligations. For maturing loans, borrowers will need to refinance, either with us or another lender, or repay the loans using other sources of funds. These higher borrowing costs may impact borrowers’ ability to meet their obligations, potentially leading to increased delinquencies or defaults. Any such deterioration in borrower performance could negatively affect our asset quality and operating results.
Current wording
As of June 30, 2026, a significant portion of our loan portfolio is scheduled to reset or mature during fiscal 2027. Many of these loans were originated in calendar 2021 and 2022 at interest rates below current market levels. As these loans reprice, mature, or require refinancing, borrowers may face higher borrowing costs and increased debt service obligations. Higher interest rates and tighter credit conditions may adversely affect borrowers' cash flows, financial condition, and ability to obtain replacement financing on acceptable terms. As a result, some borrowers may experience difficulty meeting their repayment obligations, which could lead to increased delinquencies or defaults. Any such deterioration in borrower performance could adversely affect our asset quality and operating results.
Previous wording
Our commercial lending exposes us to additional risk.
Current wording
Our commercial real estate lending exposes us to additional risk.
Previous wording
Our commercial lending exposes us to greater risks than one- to four-family residential lending. Unlike single-family, owner-occupied residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from employment and other income sources, and are secured by real property whose value tends to be more easily ascertainable and realizable, the repayment of commercial loans typically is dependent on the successful operation and income stream of the borrower, which can be significantly affected by economic conditions, and are secured, if at all, by collateral that is more difficult to value or sell or by collateral which may depreciate in value. In addition, commercial loans generally carry larger balances to single borrowers or related groups of borrowers than one- to four-family mortgage loans, which increases the financial impact of a borrower’s default.
Current wording
Our commercial real estate (“CRE”) lending exposes us to greater risks than one- to four-family residential lending. Unlike single-family, owner-occupied residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from employment and other income sources, and are secured by real property whose value tends to be more easily ascertainable and realizable, the repayment of commercial real estate loans typically is dependent on the successful operation, occupancy levels, rental income and cash flows generated by the underlying property, all of which can be significantly affected by economic conditions.
Previous wording
The risk exposure from our increased commercial lending is also a function of the markets in which we operate. Our commercial lending activity is generally focused on borrowers domiciled, and real estate located, within the states of New Jersey and New York. Regional risk factors and changes to local laws and regulations, including changes to rent regulations or foreclosure laws, may present greater risk than a more geographically diversified portfolio.
Current wording
The risk exposure from our increased commercial real estate lending is also a function of the markets in which we operate. Our commercial real estate lending activity is generally focused on borrowers domiciled, and real estate located, within the states of New Jersey and New York. Regional risk factors and changes to local laws and regulations, including changes to rent regulations or foreclosure laws, may present greater risk than a more geographically diversified portfolio.
Previous wording
Our increased commercial business and construction loan originations exposes us to increased credit risk.
Current wording
Our increased commercial and industrial and construction loan originations exposes us to increased credit risk.
Previous wording
We have increased our originations of commercial business and construction loans, which generally have more risk than both one- to four-family residential and commercial mortgage loans. Since repayment of commercial business and construction loans may depend on the successful operation of the borrower’s business or the successful completion of a construction project, repayment of such loans can be affected by adverse conditions in the real estate market or the local economy. If we continue to increase our originations of these loans, it may be necessary to increase the level of our allowance for credit losses because of the increased risk characteristics associated with these types of loans. Any such increase to our allowance for credit losses would adversely affect our earnings.
Current wording
We have increased our originations of commercial and industrial and construction loans, which generally have more risk than both one- to four-family residential and commercial mortgage loans. Since repayment of commercial and industrial and construction loans may depend on the successful operation of the borrower’s business or the successful completion of a construction project, repayment of such loans can be affected by adverse conditions in the real estate market or the local economy. If we continue to increase our originations of these loans, it may be necessary to increase the level of our allowance for credit losses because of the increased risk characteristics associated with these types of loans. Any such increase to our allowance for credit losses would adversely affect our earnings.
Previous wording
In 2006, the FDIC, the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “Guidance”). The Guidance provides that a bank’s commercial real estate lending exposure may receive increased supervisory scrutiny when total non-owner occupied commercial real estate loans, including loans secured by multi-family property, non-owner occupied commercial real estate and construction loans, represent 300% or more of an institution’s total risk- based capital and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months. Our level of non-owner occupied commercial real estate equaled 535% of Bank total risk-based capital at June 30, 2025, however our commercial real estate loan portfolio increased by only 7% during the preceding 36 months.
Current wording
In 2006, the FDIC, the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “Guidance”). The Guidance provides that a bank’s commercial real estate lending exposure may receive increased supervisory scrutiny when total non-owner occupied commercial real estate loans, including loans secured by multi-family property, and construction loans, represent 300% or more of an institution’s total risk-based capital and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months. Our level of non-owner occupied commercial real estate equaled 515% of Bank total risk-based capital at June 30, 2026, however our commercial real estate loan portfolio has decreased during the preceding 36 months.
Previous wording
At June 30, 2025, we had investment securities with fair values of approximately $1.12 billion. The valuation and liquidity of our securities could be adversely impacted by reduced market liquidity, increased normal bid-asked spreads and increased uncertainty of market participants, which could reduce the market value of our securities, including those with no apparent credit exposure. The valuation of our securities requires judgment and as market conditions change security values may also change. Significant negative changes to valuations could result in impairments in the value of our securities portfolio, which could have an adverse effect on our financial condition or results of operations.
Current wording
At June 30, 2026, we had investment securities with fair values of approximately $1.06 billion. The valuation and liquidity of our securities could be adversely impacted by reduced market liquidity, increased normal bid-asked spreads and increased uncertainty of market participants, which could reduce the market value of our securities, including those with no apparent credit exposure. The valuation of our securities requires judgment and as market conditions change security values may also change. Significant negative changes to valuations could result in impairments in the value of our securities portfolio, which could have an adverse effect on our financial condition or results of operations.
Previous wording
Among other sources of funds, we rely on wholesale funding, including short- and long-term borrowings and brokered deposits, to provide funds with which to make loans, purchase investment securities and provide for other liquidity needs. On June 30, 2025, wholesale funding totaled $2.0 billion, or approximately 26.0% of total assets.
Current wording
Among other sources of funds, we rely on wholesale funding, including short- and long-term borrowings and brokered deposits, to provide funds with which to make loans, purchase investment securities and provide for other liquidity needs. On June 30, 2026, wholesale funding totaled $1.9 billion, or approximately 24.8% of total assets.
Previous wording
Liquidity is essential to our business. We rely on our ability to gather deposits, make investments and effectively manage the repayment and maturity schedules of loans to ensure that there is adequate liquidity to fund our operations and pay our obligations. An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity. Our most important source of funds is deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff, which are strongly influenced by external factors such as changes in interest rates, local and national economic conditions, the availability and attractiveness of alternative investments, and perceptions of the stability of the financial services industry generally and of our institution specifically. Further, the demand for deposits may be reduced due to a variety of factors such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, the monetary policy of the FRB, or regulatory actions that decrease customer access to particular products. If customers move money out of bank deposits and into other investments such as money market funds, we would lose a relatively low-cost source of funds, which would increase our funding costs and reduce net interest income. Any changes made to the rates offered on deposits to remain competitive with other financial institutions may also adversely affect profitability and liquidity.
Current wording
Liquidity is essential to our business. We rely on our ability to gather deposits, make investments and effectively manage the repayment and maturity schedules of loans to ensure that there is adequate liquidity to fund our operations and pay our obligations. An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity. Our most important source of funds is deposits. Deposit balances can decrease when customers perceive alternative investments, cash management solutions or payment technologies as providing a more attractive risk/return, convenience or utility proposition. Such preferences may be influenced by changes in interest rates, local and national economic conditions, the availability and attractiveness of competing products, including U.S. dollar-denominated stablecoins and other digital asset-based alternatives, and perceptions regarding the stability of the financial services industry generally and our institution specifically. Further, the demand for deposits may be reduced due to a variety of factors such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, the monetary policy of the FRB, regulatory actions that decrease customer access to particular products, or the emergence and increased adoption of alternative payment, savings and transaction platforms. In particular, the growing acceptance of U.S. dollar-denominated stablecoins and other digital asset-based payment technologies may provide consumers and businesses with alternatives to traditional bank deposits for storing value and conducting transactions. To the extent customers shift funds from bank deposits to stablecoins, money market funds or other competing cash management products, we could experience deposit outflows, increased funding competition and higher funding costs. Such developments could reduce a relatively low-cost source of funding, negatively affect net interest income, liquidity and profitability, and require us to offer more competitive deposit rates or seek alternative funding sources.
Previous wording
Public funds deposits are a notable source of funds for our lending and investment activities. At June 30, 2025, $539.1 million, or 9.5% of our total deposits, consisted of public funds deposits from local government entities in the state of New Jersey, such as townships, counties, school districts and charter schools. These deposits are collateralized by letters of credit from the FHLB or through the pledge of eligible investment securities. Given our reliance on these typically high-average balance public funds deposits as a source of funds, our inability to retain such funds could adversely affect our liquidity. Further, our public funds deposits are primarily floating rate interest-bearing demand deposit accounts and therefore their pricing is more sensitive to changes in interest rates. If we are forced to pay higher rates on our public funds accounts to retain those funds, or if we are unable to retain such funds and we are forced to rely on other sources of funds for our lending and investment activities, such as borrowings from the FHLB, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our public funds deposits, which would adversely affect our net interest income.
Current wording
Public funds deposits are a notable source of funds for our lending and investment activities. At June 30, 2026, $638.8 million, or 11.2% of our total deposits, consisted of public funds deposits from local government entities in the state of New Jersey, such as townships, counties, school districts and charter schools. These deposits are collateralized by letters of credit from the FHLB or through the pledge of eligible investment securities. Given our reliance on these typically high-average balance public funds deposits as a source of funds, our inability to retain such funds could adversely affect our liquidity. Further, our public funds deposits are primarily floating rate interest-bearing demand deposit accounts and therefore their pricing is more sensitive to changes in interest rates. If we are forced to pay higher rates on our public funds accounts to retain those funds, or if we are unable to retain such funds and we are forced to rely on other sources of funds for our lending and investment activities, such as borrowings from the FHLB, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our public funds deposits, which would adversely affect our net interest income.
Previous wording
Inflation rose sharply at the end of 2021 and remained elevated through the first half of calendar 2024, before beginning to moderate in the latter half of 2024 and into calendar 2025. However, inflation levels continue to exceed the Federal Reserve’s long-term target of 2.0%. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which has and could continue to adversely affect our results of operations and financial condition.
Current wording
Although inflation has decreased significantly from the elevated levels experienced at the end of 2021 and through the first half of calendar 2024, inflation levels continue to exceed the Federal Reserve’s long-term target of 2.0%. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which has and could continue to adversely affect our results of operations and financial condition.
Previous wording
Acts of terrorism, public health issues, and geopolitical and other external events could impact our ability to conduct business.
Current wording
Acts of terrorism, severe weather, public health issues, geopolitical events and other external factors could impact our ability to conduct business.
Previous wording
As AI technologies continue to develop, we may be required to invest in enhanced governance, monitoring, and compliance frameworks to manage these risks effectively.
Current wording
As AI technologies continue to evolve, we may be required to invest in enhanced governance, monitoring, and compliance frameworks to manage these risks effectively.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
In addition, commercial real estate loans generally carry larger balances to single borrowers or related groups of borrowers than one- to four-family mortgage loans, which increases the financial impact of a borrower’s default.