Safe and Sound

Kearny Bank

Kearny, NJ
4
Star Rating
Kearny Bank is an FDIC-insured bank started in 1884 and currently headquartered in Kearny, NJ. The bank holds equity of $852.9 million on assets of $4.82 billion, according to December 31, 2017, regulatory filings.

U.S. bank customers have $3.12 billion on deposit at 43 offices in multiple states run by 459 full-time employees. With that footprint, the bank has amassed loans and leases worth $3.26 billion, including $3.19 billion worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Kearny Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is valuable. It works as a cushion against losses and provides protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the more capital, the better.

Kearny Bank beat out the national average of 13.13 points on our test to measure capital adequacy, achieving a score of 22 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Kearny Bank's Tier 1 capital ratio was 22.89 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Kearny Bank held equity amounting to 17.68 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with a large number of these types of assets may eventually be required to use capital to absorb losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and elevating the chances of a failure in the future.

Kearny Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.50 percent of Kearny Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Kearny Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.

On Bankrate's test of earnings, Kearny Bank scored 4 out of a possible 30, lower than the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. Kearny Bank's most recent annualized quarterly return on equity was 1.76 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $14.7 million on total equity of $852.9 million. The bank experienced an annualized return on average assets, or ROA, of 0.31 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.