Good morning, and welcome to the annual meeting of stockholders of Kearny Financial. Please note that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Craig Montanaro, Director, President, and Chief Executive Officer of Kearny Financial Corp. Mr. Montanaro, the floor is yours.
Thank you, Chris. The annual meeting will please come to order. Welcome to the annual meeting of stockholders of Kearny Financial Corp. My name is Craig Montanaro, President and CEO of Kearny Financial Corp. and Kearny Bank, and I will act as chairperson of today's meeting. On behalf of the directors and the officers of the company, I would like to welcome you and express my appreciation to you for participating in this virtual meeting today. We hope those joining us today are doing well. Each member of the board of directors, as well as our executive team, are in attendance at today's meeting. First, I'd like to name our board of directors. John J. Mazur, Chairman, Theodore J. Aanensen, Raymond E. Chandonnet, John N. Hopkins, Catherine A. Lawton, Dr. Joseph P. Mazza, John F. McGovern, Leopold W. Montanaro, Christopher Petermann, Charles J. Pivirotto, and John F. Regan.
I'd also like to acknowledge our executive teams whose names and titles are included in this presentation. As you can see from the top left, Eric B. Heyer, Senior Executive Vice President and Chief Operating Officer. Keith Suchodolski, Executive Vice President, Chief Financial Officer. Patrick M. Joyce, Executive Vice President, Chief Lending Officer. Anthony V. Bilotta Jr., Executive Vice President and Chief Banking Officer. Thomas D. DeMedici, Executive Vice President and Chief Credit Officer. John V. Dunne, Executive Vice President and Chief Risk Officer. Erika K. Parisi, Executive Vice President and Chief Administrative Officer. Tim A. Swansson, Executive Vice President and Chief Technology and Innovation Officer. In order to conduct an orderly meeting, please follow the rules of conduct, a copy of which is available on this portal.
During the meeting, you may submit written questions by clicking the Q&A icon in your upper right-hand portion of the meeting center screen. We will address all questions that relate to business matters conducted at this meeting immediately following our presentation of the proposals. The board of directors has previously appointed Amilja Regan from Computershare to act as the inspector of election at this meeting and any adjournments. The inspector has taken an oath to fairly and impartially perform her duties. The oath of the inspector will be attached to the minutes of this meeting. The records of the company show that there were 76,744,887 shares of common stock outstanding on the record date of August 30th, 2021, and entitled to vote at this annual meeting.
We have previously received an affidavit from the secretary that a notice of Internet availability of proxy materials stating the place, day, and hour of the annual meeting and the purposes for which it has been called was mailed on or about September 17th, 2021 to each stockholder of record on the close of business on August 30th, 2021. A copy of the affidavit will be attached to the minutes of this meeting. The company has delivered to the inspector a list of stockholders and all proxies that have been received. Our records indicate that more than a majority of shares of common stock outstanding entitled to vote at the meeting are present in person or by proxy.
The inspector is making an exact count and will submit a formal report on the number of shares present and represented during the course of the meeting. Based on preliminary count, a quorum is declared present, subject to the confirmation of that fact by the inspector's report. The business to be acted upon at the annual meeting, as stated in the proxy statement's notice of annual meeting, is to consider and act upon five proposals as outlined in the proxy statement. Since no stockholder proposals were properly filed with the company secretary in advance of this meeting, as provided by the bylaws, the business of this meeting is limited to the foregoing five matters in accordance with the bylaws.
At the conclusion of the discussion of the five items, we'll take a vote on all items. I will then make a presentation on the operation of the company and will provide an opportunity to address questions following my presentation. We will consider the proposals in the order presented in the notice of annual meeting. The first item of business to be voted upon is the election of John N. Hopkins, Catherine A. Lawton, Craig L. Montanaro, Leopold W. Montanaro as directors of the company, each for a three-year term. The second item of business to be voted upon is the proposal to approve the Kearny Financial Corp. 2021 Equity Incentive Plan.
The third item of business to be voted upon is the proposal to ratify and appointment of Crowe LLP as the independent auditor for the company for the fiscal year ending June 30th, 2022. The fourth proposal to be considered is a non-binding advisory vote to approve the compensation paid to our executive officers as described in the proxy statement. Information about our executive compensation is contained in the proxy statement. The final proposal to be considered is a non-binding advisory vote to approve the frequency that stockholders will vote on our executive compensation. I'm gonna pause a second, see if there's any questions about the proposals. All right. Nothing? No. Okay. This concludes the discussion on all business matters.
Any stockholders who wish to vote or recast their vote at this time may do so by clicking on the link provided online. If you have already voted, there is no need for you to recast your vote. All right. Give them a few seconds to vote. Online voting is now closed. While the ballot is being finalized and confirmed, I will provide an update on company matters. The presentation we are about to make contains both forward-looking statements about the company as well as non-GAAP financial measures. We refer you to the forward-looking statement and non-GAAP financial measure statement on page 7 of our presentation. The presentation is posted on our website. There's our forward-looking statement. Look to page 10. Start with this slide, the company overview. You can see Kearny Financial Corp. trades on the Nasdaq with a ticker symbol of KRNY.
As of October 18th, our market cap was $981 million. The bank was founded in 1884. We are one of the top 10 financial institutions by asset size housed in New Jersey. We have 48 full-service branches in 12 counties, northern and central New Jersey, as well as New York City. We've been an active acquirer since 1999, 7 whole bank acquisitions. Let's take a high-level look at our financial highlights. Let's start with the balance sheet. As of June 30, our footings were the following, $7.3 billion in assets, $4.8 billion in loans, $5.5 billion in total deposits, and $1 billion in total equity.
If we drill down a little further and look at the P&L for June 30th, 2021, this fiscal year, net income increased 41% to $63 million, or $0.77 per share. Our margin expanded 27 basis points to 2.8%. We completed the MSB Financial Corp. acquisition, and they had assets of roughly $581 million. We grew core non-maturity deposits $712 million or 27.5%. We increased the gain on sale of our residential lending mortgage banking business by $2.4 million or 74%. Let's talk a little bit about capital, a big subject at Kearny. As you can see from the slide presentation, we still have robust capital levels.
You can see we have roughly leveraged capital of 11%. We have a sizable float, strong liquidity. We're index membership in the ABA, the Nasdaq, and Russell. If we look a little more at the Tier 1 leverage ratio, you can see you know, this five-year trend really goes back to 2017, where we had 20% Tier 1 leverage ratio. If folks on the line remember, when we got to our second step, we probably had 25% Tier 1 leverage. We've done a yeoman's job of leveraging down the capital to around 11.8%. As you can see from our peers, many of them are more mature than ours, so their capital levels are probably a lot lower.
As you can see, they hover around 9%-10%, and I think generally that's our goal, is to get it down to those levels. If we take a look at the chart on the right, you can see our total risk-based capital ratio. Again, the story's the same. We probably had 35% risk-based capital back in 2015 after our second step. We've been able to kind of whittle it down, you know, through capital management strategies and some acquisitions to 19.7%. As you can see, the peers are hovering in the high 13% range, and I think that's a pretty good target for us. I think we think about that a lot in terms of where we want to get to over the years. Go to the next page, Tim.
Talk a little bit more about capital. This is a great slide. You know, as you can see from the top in the gray bar, you can see, over the last five years, we've returned over $714 billion in capital to our stockholders via dividends and repurchases. Just in this fiscal year, we purchased over 10.6 million shares at an average cost of $11.26 per share. That's 107% of tangible book value, and tangible book value is roughly $10.49. So it was an extraordinary year for buybacks, and it really did a great job on capital management. If you look at the graph below, you can see, capital return to shareholders.
You know, it doesn't show from, you know, day one when we did the second step. You can see overall, other than in 2020 when we had the pandemic really hit and where we basically, you know, we stopped buying back shares like most financial companies just because there was so much unknown with the pandemic. We've really returned a lot of capital to shareholders. This year, $147 million in total, $28 million in dividends, $119 million in share buybacks, and this has really been a big focus of ours. You know, we've always been good stewards of capital. I think this will continue, although I think what you're seeing now is our capital levels are getting more manageable.
You know, at one point, we'll get down to a point where buybacks will be more difficult to do. You know, going forward, you know, we're in a current buyback now that we announced in September. We still have a little more to go on the buyback side. Next. Let's talk a little bit more about earnings performance. You know, we hit it on the first couple slides at a high level. I think these two slides really are very telling. We really had some pretty good core net income trajectory, EPS and return on assets trajectory over the last five years. If we take a look at the EPS chart on the left, you can see if we start in 2017, roughly $0.22 a share, our GAAP EPS.
Over the last 5 years, you've seen our, you know, our EPS grow very nicely. GAAP EPS CAGR for 4 years is 36.8%. And if you kind of go across the page, you can see GAAP EPS is now at $0.77 for this fiscal 2021, which is excellent. Core EPS is almost $0.81. So a vast improvement. Obviously, it's nice to see. We've been working hard at it. If we take a look at the next chart on the right, net income and return on average assets. We'll look at the bars at the bottom. You can see, you know, $0.22 equates to about $18.6 million in net income.
Now, if you scan across the page, you can see we get to 2021, the trend lines are really good, $63 million in net income, $66 million in core ROAA. If you look at ROA, those are the blue boxes. You can see we had roughly 40 ROA back in 2017. For this fiscal year, we're at 86 ROAA. Now, if you look at core ROA, which is the diamonds, you can see a little more in terms of core ROA for 2017 at 41 basis points. Now on a core basis, we're up to 91 basis points in terms of core ROAA, which is really a significant improvement. You know, it's very positive. The trends are excellent.
I will tell you that there's more room to go. We, as a management and board, feel that there's more opportunity and, you know, we continue to want to get to that 1% ROA and that 10% ROE. That's really our goal. Some more work to be done there, but some really good results this fiscal year. Take a look at deposits. If you'll take a look at the gray bar, there's a little kind of synopsis there. You can see we've continued to do what the industry is doing. We've consolidated 15 branches over the last 2-year period. And really our focus in the last 2 or 3 years has been a focus on moving our deposit mix. You know, prior to that, we were really focused on the left side of the balance sheet and the asset mix.
We've really moved the asset mix a lot. Now we've really focused on the deposit mix and really to core deposits and really to relationships, and that's really the goal on the deposit side. You could also see that we're gonna be consolidating 3 more branches in 2022. I think branch rationalization is something that we're gonna continue to do. We run a branch profitability model, and we'll be doing that, you know, on a quarterly basis and an annual basis look at, you know, if there are branches that are not profitable and what we should be doing with them. Let's take a quick look at the deposit composition. On the left-hand side, you can see the pie chart. In the middle, there's a quarter-to-date cost of deposits, roughly 37 basis points, which is really good.
If we start on the top right-hand quarter, you can see our non-interest bearing DDAs are up to almost 11%, which is excellent. Interest-bearing DDAs are at 34%. Savings is at 20%, and CDs is at 34.2%. Overall, really good numbers. I think one of the things we should really chat about here is deposit growth. We've seen some good trajectory here. I think, you know, we'd love to see more non-interest bearing DDA. I mean, that's always the goal that makes the bank even more profitable. Something to mention here is the interest-bearing DDA, which has grown to 34%, and back two or three years ago was in the 20% range. That shift is really important. That's a really good shift.
The other thing that's really interesting to see, and if you look at the 2019 bar, and actually the 2018 bar, we had more CDs back in those two years than we have now. Our CD percentage has dropped from the 50s to roughly 34%, which is a really, really great move. Relationship banking and really moving that business into something more correlated has really helped our performance just on a value perspective as well as on a profitability perspective. Some really great trends on the deposit mix. Go to the next one, Tim. Mortgage banking, another one of our businesses. If you go back to our IPO or our second step in 2015, very early on, we would work pretty hard to get it really rolling.
If you take a look at this chart, it really has come a long way. If you take a look at 2020 and 2021, you can see, we sold over $285 million loans, residential loans into the secondary market, which is phenomenal. We made a gain on sale of roughly $5.1 million. That's a $2.4 million increase year-over-year. That business has really helped us. I think there's a lot of opportunity there. I know the management team would like to continue to see that business grow. It's scalable. It's very we can make it very profitable, and it also helps grow our loan portfolio, the other piece to it. It, it's really positive. Going forward, we like to see that continue into the next couple of fiscal years.
Talk a little bit about the loan portfolio. As I mentioned before, you know, we've really focused on deposits and continued to focus on the loan mix. You know, the last, I would say 5 or 6 years, we've really changed the loan mix from being mostly residential to a little more commercial and multi. If you look at the gray bar on the top, you can see one of the other strategies we're really talking about is remixing a little bit more of the balance sheet on the loan side, particularly in the area of C&I and construction lending, probably some SBA.
There's a really great opportunity to improve our profitability, and we're actually seeing it now in the loan pipeline, that if we continue to remix it, that we could improve our, you know, spread and margin over time. Let's take a look at the chart on the left. You can see, quarter to date, our yield on loans was roughly a little over 4%. If you look at the largest category, you can see multifamily is roughly 41% of the portfolio. Residential lending is roughly 30%. Commercial real estate is 22%, and then the other small pieces are commercial, which is that C&I piece at 3.5%, and that construction at 1.9%, and then home equity about 1%.
really the focus is really going to be to continue to do more of our real estate lending, but try to push in more construction and more C&I, some more SBA. If you look at the loan-to-value ratios on our real estate, if you look at the bottom line, we've got roughly $4.7 billion in loans. Average LTV is 60%. That's pretty low, and we've always been very careful on the credit piece. You know, we really look for solid borrowers with superior financial metrics so we can do lending with the right people. Not a lot of leverage on these loans that we're doing. If you look across the whole spectrum of them, you can see, you know, home equity at 47% LTV, which is extremely low. You know, multifamily 64% is nice.
CRE at 54% is very, very low. All in all, you know, we're very careful. We've got a really strong credit culture and, you know, we're going to continue to do what we've done in the past. You know, certainly there were challenges during the deferment, but, you know, all in all, I think we've come out of that pretty well, and I think the future is very bright on the lending side. Last piece is our geographic distribution. You could see the top two pieces, 55% New Jersey and 38% in New York. That's kind of the geographic there. Take a look at asset quality. As you can see at the top, I know COVID is always a hot topic.
You can see from our numbers as of June, about $5.6 million or 0.1% of our total loans are in deferment. Most of those loans are residential loans. Because of the moratoriums in the state and what our governor has asked us to do, we're trying to help people that haven't gotten back to work with the COVID, giving them some more room on the deferment side. We are not giving deferments to commercial customers at this point. We've stopped doing that. Talk a little bit more about charge-offs. Net charge-offs to average loans. You can see we've never really had a lot of charge-offs. That chart, the diamonds kind of fluctuate from, you know, one basis point to three basis points. Overall, we don't expect to have a lot of charge-offs. We really...
Our model is very, you know, our metrics in terms of credit metrics, what we underwrite to hasn't really changed, and that's kept the charge-offs down. If you take a look at our non-performing loans, that's the box below. You could say roughly $79.8 million in NPLs, and we break it out for you in terms of categories. $37.3, which is non-residential, which is more CRE, which is not a surprise given, you know, the retail, and the challenges in office space. So that's not a surprise to anybody, nor is it to us. The other larger piece is resi, and that's really a function of the moratoriums in the state and us really trying to help residential people. You know, that's just a function of people being out of work.
The final larger piece is $18.5 million multifamily. So if you translate that into a percentage, and you look at the chart on the right-hand side at the top, you can see that, you know, from 2017 to roughly, you know, I would say, 2019, you know, the trends were pretty flat. Then when the pandemic hit, you saw it trend up to 55. Now it's up to about 110 basis points. I will tell you that, we do feel that this is stabilized, and we're really comfortable with where our, you know, credits are on the non-performing loan side. We have specific reserves on most of these, loans that need them. So we're, you know, we should see this number start to trend downward in this next fiscal year.
Allowance for credit losses, ACL, as you can see, the graph looks very similar to the upward graph. As you can see, you know, with CECL and all the things changing and how we do loan loss reserve, you can see 2020, it started to edge up because of the NPLs or NPAs. Then it, you know, continued to climb at 119. I think you're going to see that trend downward over the next couple of quarters as the economy's gotten better and, you know, we're starting to see the real estate market improve and valuations improve. You know, we'll probably have a smaller ACL because of that. A little discussion about M&A. As you know, I mentioned we finished this year, we finished the Millington acquisition. I think it went very well.
As you look at our numbers from a P&L perspective, I think it really added some value this year. That was the seventh whole bank acquisition we've done in 25 years, Millington Bank. As you can see, some of the other acquisitions we've done. We're pretty opportunistic. We look in the market. We look for low premium deals. We like similar or complementary business models. If there's a model that we don't have that we think would help us, I mean, that's a very big consideration. We like to grow internally as well as in contiguous markets. Most of all, there's got to be a cultural fit. M&A doesn't work if there's not a cultural fit. It's very hard to be successful at M&A.
The other piece that we talk about a lot is dilution and earn back and getting EPS accretion. We're really cautious on this. We find that it's important to have short earn back and minimize the dilution as best we can within a range so that the market feels and deems it acceptable. So we're very cautious with that piece. Let's take a look at technology. A very hot topic in our industry these days. As you hear about the financial service industry, you hear a lot about fintech partnerships and technology, and the pandemic has really pushed most financial institutions into that direction, us included. We're fortunate that we've been working on technology behind the scenes actually before the pandemic, which was really kind of exciting.
Our approach is, as you can see, an omni-channel sales and service model. Basically, our goal is to give our customers all the online products via mobile or online that they can go into a branch and get. It's kind of like, as I said this at last year's annual meeting or the year before, kind of have it your way, the old Burger King adage. We think people want to have options, and we want to provide those options. As you can see, we've partnered with a bunch of fintechs, Glia, Neocova, and ICE Mortgage is, I don't know if that would be considered a fintech, but it's a technology company, and ZSuite. You know, we're really focused on, you know, the digital solution.
Glia is an exciting client service solution that is really bringing our website and our call center to almost a virtual Zoom type of situation, where we can help a customer real-time live, and really do a lot of things for them if they can't find it on the website or they can't get ahold of anybody. That's coming, and that you'll probably experience as a customer over the next couple years. The other piece that we're working on is, we're gonna be selecting a best in breed, a digital mobile solution for our front end and an online account opening solution over the next 6-8 months that will kind of distance ourselves from the Fiserv legacy models.
They're okay, but we need to provide a better solution in order to grow this business. Excuse me. The other piece to it is, you know, technology is a great thing because, you know, it helps us improve the client experience, creates operational efficiencies, and just makes the client happier with banking with us. As you can see in the corner, you see that ICE Mortgage Technology. That's something we call Encompass. That and something called, I forget the name of it, Blue, is really helping us on the mortgage side of business, pricing our mortgages and selling the secondary market, as well as making connections to our mortgage applicants, doing it online, uploading documents, applications. Anything they need can be uploaded. We can communicate with them online.
We'll be launching something in the future that has a text function which is really, really advanced in that the customer can text us, and we can communicate to via text where their loan is in the lending process, which is kind of state-of-the-art. We're really excited about that. A lot of customers love to text, so it's really kind of that, you know, omni-channel focus that we're really looking at. The other thing we're working very hard on is data analytics using machine learning, artificial intelligence, and, you know, kind of help us grow and retain our wallet share. I know over the last year or so, we've really started to dig into understanding what our customers do and their behaviors.
Prior to that, not having analytics, it was like most banks, they struggle to really know what the customer is doing. Now with analytics, we really can figure that out. One of the final pieces is bank-wide cloud migration, and that is an exciting thing, and that's what we're gonna be doing with all of our technologies, migrating it to the cloud. You see it a lot. You hear about it a lot. It's just easier to upgrade. It's more scalable. It's just a great way to go, and you'll see us move a lot of that to the cloud. The last piece is, we've talked about fintech partnerships.
ZSuite in particular is one I want to highlight, because we've really done a lot of work with them, partnering with them, helping them develop new products, and we've had a lot of success with them. We've also partnered with Neocova on their data analytics platform, which is really exciting. That will help us on the analytics side. Then of course, Glia, which is another piece that, you know, if you're a customer, you'll start to experience it over the coming quarters. We'll continue to look for that. We really look for value from our fintech partners and find products that don't exist from the big core data processors, but we need to, you know, grow our business. That's really our fintech focus. All right, another great topic, ESG, environmental social governance.
As you may have seen, we launched our inaugural ESG report in September and discussed some of the things we're doing on an ESG standpoint. Obviously, environmental sustainability, carbon footprint reductions, focused on trying to do that. That's a challenging thing, but we're doing more and more of that. Cybersecurity, and then community reinvestment, affordable housing, really focused on cyber right now, but also community reinvestment, affordable housing. We've launched a bunch of affordable housing programs. We have a fair lending officer that is really doing a great job helping us from a community reinvestment and affordable housing initiative. She's doing a fantastic job, and that'll really grow. Human capital initiatives, diversity, equity, and inclusion. What can I say more than, you know, that's a big focus. Diversity is a hot topic, and we are working hard at it.
You know, hopefully over time, we'll be able to report and measure our efforts in that area. Finally, always an important, corporate governance and compliance. I think going forward, you should be able to go to our website over the next probably year or so and see our progress, and we're gonna try to be able to monitor and give you reports on an annual basis in the progression of these elements of ESG. All right, let's get to the questions.
All right, do you want me to do that quick one?
Yeah. Oh, okay. You know what? Let's do one thing. Keith Suchodolski is going to do the first quarter results. Why don't you take it away, Keith?
All right. Thank you, Craig, and good morning, everyone. So just to give you a quick update on the quarter, we released earnings last night. We're very pleased to report record earnings for our first quarter of fiscal 2022, totaling $19.7 million or $0.26 per share. For the quarter, net interest margin expanded 7 basis points and core deposit growth was very strong. Non-interest-bearing deposits in particular were up a noteworthy amount, 6% from fiscal year-end. On the capital front, Craig had discussed it earlier, we continue to be an active buyer of our stock. We're purchasing 3.2 million shares during the quarter and further demonstrating our commitment to returning capital to you, our stockholders. We announced a 10% share repurchase plan in September, and last night a 10% increase in our quarterly cash dividends.
Moving ahead to a snapshot of the balance sheet. You can see that our deposit composition continues to improve, with retail CDs now representing 23% of deposits. That's down from approximately 45% of deposits two years ago. Along with that mix shift, we saw continued improvement in our quarter-to-date cost of deposits, which was down an additional 8 basis points from June 30. As it relates to the loan portfolio, Craig had mentioned LTVs earlier. Our average LTV at September 30th was 60%, so stable from June 30th. Very healthy number. Our quarter-to-date yield on loans decreased 3 basis points to 3.99%. As we announced in our earnings release, the loan pipeline stands at an all-time high, which is an encouraging sign for future loan growth. Thank you for your time, and I'll hand it back to you, Craig.
All right, Eric, any questions?
No, we've received no questions that are at least relevant to the business of this meeting.
All right, Amilja, can we have the report of the inspector?
Yes. Good morning. The report confirms that a quorum is and has been in attendance at the annual meeting for all purposes. The report also shows that each director received more than a plurality of the votes cast at the annual meeting. The proposal to approve the Kearny Financial Corp. 2021 Equity Incentive Plan received the affirmative vote of at least a majority of the shares cast at the annual meeting. The proposal to ratify the appointment of Crowe LLP as the independent registered public accounting firm for the company for the year ending June 30th, 2022 received the affirmative vote of at least a majority of the votes of the shares cast at the annual meeting.
The advisory non-binding proposal to approve our executive compensation, as described in the proxy statement, received the affirmative vote of at least a majority of the shares cast at the annual meeting. In regard to the advisory non-binding proposal with respect to the frequency that shareholders will vote on our executive compensation, one year received at least a plurality of the shares cast at the annual meeting. Accordingly, each of the four directors have been elected. The Kearny Financial Corp. 2021 executive incentive plan has been approved. The proposal to ratify the appointment of Crowe LLP has been approved. The company has received advisory approval of its executive compensation as described in the proxy statement, and the company has received advisory approval to set the frequency that shareholders will vote on the executive compensation to every year.
Thanks, Amilja.
You're welcome.
The certificate and report of inspector of election has been accepted and approved and will be attached to the minutes of the annual meeting. Again, on behalf of the directors and officers of Kearny Financial Corp., I would like to thank all of you for participating in today's meeting and for your interest you have shown in the affairs of the company. This meeting is adjourned. Thank you.
This concludes the meeting. You may now disconnect and have a pleasant day.