Kearny Financial (KRNY)

(Mark One)

X

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended

March 31, 2008

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from

to

Commission File Number 000-51093

KEARNY FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

UNITED STATES

22-3803741

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

120 Passaic Ave., Fairfield, New Jersey

07004-3510

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code

973-244-4500

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: May 1, 2008.

$0.10 par value common stock - 70,628,303 shares outstanding

Page

Number

PART I - FINANCIAL INFORMATION

Item 1:

Financial Statements

Consolidated Statements of Financial Condition

at March 31, 2008 and June 30, 2007 (Unaudited)

1

Consolidated Statements of Income for the Three Months and Nine Months

Ended March 31, 2008 and 2007 (Unaudited)

2-3

Consolidated Statements of Changes in Stockholders’ Equity for the Nine

Months Ended March 31, 2008 and 2007 (Unaudited)

4-5

Consolidated Statements of Cash Flows for the Nine

Months Ended March 31, 2008 and 2007 (Unaudited)

6-7

Notes to Consolidated Financial Statements

8-12

Item 2:

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

13-28

Item 3:

Quantitative and Qualitative Disclosure About Market Risk

29-30

Item 4:

Controls and Procedures

31

PART II - OTHER INFORMATION

32-34

SIGNATURES

35

March 31,

June 30,

2008

2007

Assets

Cash and amounts due from depository institutions

$

17,888

$

18,999

Interest-bearing deposits in other banks

131,926

144,342

Cash and Cash Equivalents

149,814

163,341

Securities available for sale (amortized cost $41,040 and $90,580)

39,384

88,869

Loans receivable, including net deferred loan costs of $1,057 and $1,511

953,355

866,542

Less allowance for loan losses

(6,135

)

(6,049

)

Net Loans Receivable

947,220

860,493

Mortgage-backed securities available for sale (amortized cost $752,457 and $655,123)

762,026

643,779

Premises and equipment

35,041

35,369

Federal Home Loan Bank of New York (“FHLB”) stock

12,690

4,162

Interest receivable

8,712

8,028

Goodwill

82,263

82,263

Bank owned life insurance

15,568

15,154

Other assets

7,321

15,795

Total Assets

$

2,060,039

$

1,917,253

Liabilities and Stockholders’ Equity

Liabilities

Deposits:

Non-interest bearing

$

53,705

$

56,339

Interest-bearing

1,296,969

1,355,374

Total Deposits

1,350,674

1,411,713

Advances from FHLB

218,000

28,488

Advance payments by borrowers for taxes

5,366

5,460

Other liabilities

8,714

9,000

Total Liabilities

1,582,754

1,454,661

Stockholders’ Equity

Preferred stock $0.10 par value, 25,000,000 shares authorized; none issued
and outstanding

—

—

Common stock $0.10 par value, 75,000,000 shares authorized; 72,737,500 shares
issued; 70,628,303 and 71,143,337 shares outstanding, respectively

7,274

7,274

Paid-in capital

201,966

197,976

Retained earnings

307,273

304,970

Unearned Employee Stock Ownership Plan shares; 1,297,152 shares

and 1,406,258 shares, respectively

(12,972

)

(14,063

)

Treasury stock, at cost; 2,109,197 shares and 1,594,163 shares, respectively

(30,479

)

(24,361

)

Accumulated other comprehensive income (loss)

4,223

(9,204

)

Total Stockholders’ Equity

477,285

462,592

Total Liabilities and Stockholders’ Equity

$

2,060,039

$

1,917,253

Three Months Ended

Nine Months Ended

March 31,

March 31,

2008

2007

2008

2007

Interest Income:

Loans

$

13,906

$

11,658

$

41,014

$

33,044

Mortgage-backed securities

8,665

8,095

25,451

24,193

Securities:

Taxable

279

351

966

1,141

Tax-exempt

161

825

914

4,086

Other interest-earning assets

1,543

3,229

4,233

9,065

Total Interest Income

24,554

24,158

72,578

71,529

Interest Expense:

Deposits

10,650

12,150

32,874

34,991

Borrowings

2,293

754

5,058

2,412

Total Interest Expense

12,943

12,904

37,932

37,403

Net Interest Income

11,611

11,254

34,646

34,126

Provision for Loan Losses

—

101

94

378

Net Interest Income after Provision

for Loan Losses

11,611

11,153

34,552

33,748

Non-Interest Income:

Fees and service charges

334

188

996

692

Gain (loss) on sale of securities
available for sale

(5

)

(97

)

0

55

Miscellaneous

341

392

1,055

1,076

Total Non-Interest Income

670

483

2,051

1,823

Non-interest expenses:

Salaries and employee benefits

6,035

7,070

18,360

20,623

Net occupancy expense of
premises

1,001

895

2,793

2,594

Equipment

1,067

1,098

3,190

3,274

Advertising

186

362

592

1,164

Federal insurance premium

138

144

419

428

Amortization of intangible assets

11

159

230

477

Directors’ compensation

576

544

1,686

1,762

Miscellaneous

1,056

1,030

3,260

3,277

Total Non-Interest Expenses

10,070

11,302

30,530

33,599

Income before Income Taxes

2,211

334

6,073

1,972

Income Taxes

(462

)

92

994

257

Net Income

$

2,673

$

242

$

5,079

$

1,715

Three Months Ended

Nine Months Ended

March 31,

March 31,

2008

2007

2008

2007

Net Income per Common
Share (EPS):

Basic

$

0.04

$

0.00

$

0.07

$

0.02

Diluted

0.04

0.00

0.07

0.02

Weighted Average Number of
Common Shares Outstanding:

Basic

68,625

69,012

68,718

69,343

Diluted

68,646

69,293

68,841

69,664

Dividends Declared Per Common
Share

$

0.05

$

0.05

$

0.15

$

0.15

Accumulated

Unearned

Other

Common Stock

Paid-In

Retained

ESOP

Treasury

Comprehensive

Shares

Amount

Capital

Earnings

Shares

Stock

(Loss)

Total

Balance - June 30, 2006

72,737

$

7,274

$

192,534

$

306,728

$

(15,517)

$

-

$

(15,885)

$

475,134

Comprehensive income:

Net income

-

-

-

1,715

-

-

-

1,715

Realized gain on securities available

for sale, net of income tax of $19

-

-

-

-

-

-

(36)

(36)

Unrealized gain on securities available

for sale, net of deferred income tax

of $6,633

-

-

-

-

-

-

12,320

12,320

Total Comprehensive income

13,999

ESOP shares committed to be released

(108 shares)

-

-

576

-

1,091

-

-

1,667

Stock option expense

-

-

1,494

-

-

-

-

1,494

Treasury stock purchases

(1,144)

-

-

-

-

(18,169)

-

(18,169)

Treasury stock reissued

9

-

(27)

-

-

135

-

108

Restricted stock plan shares

purchased (54 shares)

-

-

(789)

-

-

-

-

(789)

Restricted stock plan shares earned

(201 shares)

-

-

2,477

-

-

-

-

2,477

Tax effect from stock based

compensation

-

-

434

-

-

-

-

434

Cash dividends declared ($0.15/share)

-

-

-

(2,768)

-

-

-

(2,768)

Balance - March 31, 2007

71,602

$

7,274

$

196,699

$

305,675

$

(14,426)

$

(18,034)

$

(3,601)

$

473,587

Accumulated

Unearned

Other

Common Stock

Paid-In

Retained

ESOP

Treasury

Comprehensive

Shares

Amount

Capital

Earnings

Shares

Stock

Income (Loss)

Total

Balance - June 30, 2007

71,143

$

7,274

$

197,976

$

304,970

$

(14,063)

$

(24,361)

$

(9,204)

$

462,592

Comprehensive income:

Net income

-

-

-

5,079

-

-

-

5,079

Unrealized gain on securities available

for sale, net of deferred income tax

of $8,015

-

-

-

-

-

-

12,954

12,954

Benefit plans, net of deferred income

tax of $315

-

-

-

-

-

-

473

473

Total Comprehensive income

18,506

ESOP shares committed to be released

(108 shares)

-

-

238

-

1,091

-

-

1,329

Dividends contributed for payment of

ESOP loan

-

-

36

-

-

-

-

36

Stock option expense

-

-

1,431

-

-

-

-

1,431

Treasury stock purchases

(520)

-

-

-

-

(6,194)

-

(6,194)

Treasury stock reissued

5

-

(13)

-

-

76

-

63

Restricted stock plan shares earned

(189 shares)

-

-

2,313

-

-

-

-

2,313

Tax effect from stock based

Compensation

-

-

(15)

-

-

-

-

(15)

Cash dividends declared ($0.15/share)

-

-

-

(2,776)

-

-

-

(2,776)

Balance - March 31, 2008

70,628

$

7,274

$

201,966

$

307,273

$

(12,972)

$

(30,479)

$

4,223

$

477,285

Nine Months Ended

March 31,

2008

2007

Cash Flows from Operating Activities:

Net income

$

5,079

$

1,715

Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization of premises and equipment

1,394

1,462

Net amortization of premiums, discounts and loan fees and costs

575

678

Deferred income taxes

(1,423

)

1,031

Amortization of intangible assets

231

477

Amortization of benefit plans’ unrecognized net loss, net of gain

from curtailment and tax effects

96

—

Provision for loan losses

94

378

Realized gains on sales of securities available for sale

—

(55

)

Increase in cash surrender value of bank owned life insurance

(414

)

(392

)

ESOP, stock option plan and restricted stock plan expenses

5,073

5,638

Realized gain on disposition of premises and equipment

—

(3

)

(Increase) decrease in interest receivable

(684

)

1,019

Decrease (increase) in other assets

1,401

(2,714

)

Increase (decrease) in interest payable

893

(3

)

(Decrease) increase in other liabilities

(551

)

60

Net Cash Provided by Operating Activities

11,764

9,291

Cash Flows from Investing Activities:

Purchases of securities available for sale

(299

)

(286

)

Proceeds from sale of securities available for sale

48,476

131,383

Proceeds from calls and maturities of securities available for sale

656

3,894

Proceeds from repayments of securities available for sale

708

1,395

Purchase of loans

(50,343

)

(71,377

)

Net increase in loans receivable

(36,655

)

(43,287

)

Purchases of mortgage-backed securities available for sale

(202,815

)

(81,703

)

Principal repayments on mortgage-backed securities available for sale

105,082

102,545

Additions to premises and equipment

(1,066

)

(1,189

)

Proceeds from cash settlement on premises and equipment

—

21

Purchase of FHLB stock

(9,000

)

—

Redemption of FHLB stock

472

245

Net Cash (Used In) Provided by Investing Activities

$

(144,784

)

$

41,641

Nine Months Ended

March 31,

2008

2007

Cash Flows from Financing Activities:

Net (decrease) increase in deposits

$

(61,021

)

$

22,933

Repayment of long-term FHLB advances

(10,488

)

(5,459

)

Long-term FHLB advances

200,000

—

Decrease in advance payments by borrowers for taxes

(94

)

(34

)

Dividends paid to minority stockholders of Kearny Financial Corp.

(2,794

)

(2,750

)

Purchase of common stock of Kearny Financial Corp. for treasury

(6,194

)

(18,169

)

Treasury stock reissued

63

108

Purchase of common stock of Kearny Financial Corp. for restricted

stock plan

—

(789

)

Dividends contributed for payment of ESOP loan

36

—

Tax (expense) benefit from stock based compensation

(15

)

434

Net Cash Provided by (Used in) Financing Activities

119,493

(3,726

)

Net (Decrease) Increase in Cash and Cash Equivalents

(13,527

)

47,206

Cash and Cash Equivalents – Beginning

163,341

230,279

Cash and Cash Equivalents – Ending

$

149,814

$

277,485

Supplemental Disclosures of Cash Flows Information:

Cash paid during the year for:

Income taxes, net of refunds

$

1,424

$

1,313

Interest

$

37,039

$

37,406

Three Months Ended

Nine Months Ended

March 31, 2008

March 31, 2008

Per

Per

Income

Shares

Share

Income

Shares

Shae

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

(In Thousands, Except Per Share Data)

(In Thousands, Except Per Share Data)