Kearny Financial Corp. (KRNY) stock intrinsic value fair value estimate & owner earnings analysis

Kearny Financial is the holding company for Kearny Bank, a roughly $8 billion-asset savings bank with branches across New Jersey and in Brooklyn and Staten Island, New York. It takes deposits, funds part of its balance sheet with Federal Home Loan Bank borrowings, and earns the spread by lending, mostly on multifamily, commercial and residential mortgages. Its edge is a low-cost local deposit base; its weakness is a thin spread. Net interest margin was 2.18% in the year to June 2026, up from 1.88% a year earlier and still low for a bank. How we measure earnings. We use the cash the business actually generates after adding back non-cash items, then subtract stock compensation (a real cost), normal capital spending and swings in working balances. Owner earnings per share by fiscal year (June year-end): 2017 $0.33, 2018 $0.30, 2019 $0.23, 2020 $0.33, 2021 $0.61, 2022 $1.01, 2023 $1.01, 2024 $0.67, 2025 $0.29, 2026 $0.47. The $97 million goodwill write-down in fiscal 2024 is non-cash and is not counted as a cost. Fiscal 2024 also carried an $18 million loss from selling securities in a balance-sheet repositioning, and 2021-2023 reflect a different rate environment and a larger share count effect (shares fell from 82 million to about 63 million through buybacks). We therefore anchor on fiscal 2025-2026, the business as it exists after the repositioning: median about $0.38 per share. Growth check. Owner earnings per share rose about 62% in fiscal 2026 (from $0.29 to $0.47); the base case assumes zero growth in year one, below that trailing rate, because the fourth quarter of fiscal 2026 net income (about $7.2 million) was well below the third quarter ($10.1 million), so the improvement is not yet steady enough to lift the level. Base case, about $6.30 per share: earnings stay at roughly $0.38 per share, discounted at 6% with no further growth. We credit no growth: margin recovery, loan growth and buybacks depend on interest rates and management choices, not on anything locked in. Dividends of about $27.8 million a year already absorb nearly all owner earnings, which leaves no room for retained-earnings growth or buybacks. Bear case, about $4.00 per share: earnings fall back to about $0.25 per share, near the 2019-2020 trough of $0.23-$0.33, and stay there. Named risks: a very thin margin funded heavily by short-term Federal Home Loan Bank borrowings that must be continuously rolled over (about $3.6 billion repaid and $3.5 billion re-borrowed in fiscal 2026), and a loan book concentrated in New Jersey and New York real estate. Bull case, about $10.50 per share: earnings hold the fiscal 2026 level of $0.47 and grow about 4% a year for ten years as the higher margin already visible in fiscal 2026 continues to build through repricing of existing loans, then stay flat. Even this case does not assume a return to fiscal 2022-2023 profits. What would make this wrong: a sustained margin above 2.5% would push value toward the bull case; credit losses on multifamily or commercial real estate, or a squeeze on funding costs, would push toward the bear case. Goodwill of $113.5 million remains on the balance sheet, and another write-down would not affect cash earnings but would signal weaker franchise value. The margin-of-safety price is about $4.00 per share, roughly 37% below the base case and equal to the bear case, reflecting a bank with thin margins, sensitivity to interest rates and a dividend that consumes almost all owner earnings. This is a first analysis, so there is no prior view to compare against.