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Kearny Financial Corp. Reports Fourth Quarter 2011 Operating Results


August 12, 2011 - Fairfield, NJ

Kearny Financial Corp. (NASDAQ: KRNY) (the "Company"), the holding company of Kearny Federal Savings Bank (the "Bank"), today reported net income for the quarter ended June 30, 2011 of $3,889,000, or $0.06 per diluted share.

The results represent an increase of $1,201,000 compared to net income of $2,688,000, or $0.04 per diluted share, for the quarter ended March 31, 2011. The increase in net income between linked quarters reflected increases in net interest income and noninterest income coupled with a decline in the provision for loan losses. The effects of these changes were partially offset by an increase in noninterest expense. In total, these factors resulted in an overall increase in pre-tax income and the provision for income taxes.

For the fiscal year ended June 30, 2011, the Company reported net income of $7,907,000 or $0.12 per diluted share representing an increase of $1,095,000 compared to net income of $6,812,000 or $0.10 per diluted share for the fiscal year ended June 30, 2010. The increase in net income reflected increases in net interest income and noninterest income that were partially offset by increases in the provision for loan losses and noninterest expense. In total, these factors resulted in an overall increase in pre-tax income that was partially offset by a decline in the provision for income taxes.

The increases in net income between comparative periods reflected the Company's acquisition of Central Jersey Bancorp ("Central Jersey") and its wholly owned subsidiary, Central Jersey Bank, National Association ("Central Jersey Bank") which was completed on November 30, 2010. The Company is operating the offices acquired from Central Jersey under the name "Central Jersey Bank, a Division of Kearny Federal Savings Bank" ("CJB Division").

The Company accounted for the transaction using applicable accounting guidance regarding business combinations resulting in the recognition of pre-tax merger-related expenses totaling $3.5 million during the year ended June 30, 2011. Total merger-related expenses adversely impacted net income for the year ended June 30, 2011 by approximately $2.2 million or $0.03 per diluted share.

Kearny Federal Savings Bank operates from its administrative headquarters in Fairfield, New Jersey, and 40 retail branch offices located in Bergen, Hudson, Passaic, Morris, Middlesex, Essex, Union, Monmouth and Ocean Counties, New Jersey. At June 30, 2011, Kearny Financial Corp. had total assets of $2.90 billion which included net loans receivable of $1.26 billion and total investment securities, including mortgage-backed and non-mortgage-backed securities, of $1.21 billion. As of that same date, deposits and borrowings totaled $2.15 billion and $247.6 million, respectively, while stockholders' equity totaled $487.9 million or 16.8% of total assets.

The following is a discussion of the Company's financial results for the quarter ended June 30, 2011 in comparison to those for the prior linked quarter ended March 31, 2011. Comparative statement of condition information for June 30, 2010 and statement of operations information for the three months and year ended June 30, 2010 are presented in tabular form in the Financial Highlights section at the end of this discussion.

Net Interest Income

Net interest income during the quarter ended June 30, 2011 was $19.3 million, an increase of $765,000 compared to net interest income of $18.5 million during the quarter ended March 31, 2011. For those same comparative periods, the Company's net interest margin increased by 11 basis points to 2.92% from 2.81%.

The increase in net interest income between linked quarters resulted from an increase in interest income coupled with a concurrent decrease in interest expense. The increase in interest income between linked periods was primarily attributable to a $13.5 million increase in the average balance of interest-earning assets to $2.65 billion for the quarter ended June 30, 2011 from $2.63 billion for the quarter ended March 31, 2011. Average balance increases were reflected in mortgage-backed securities and other interest-earning assets that were partially offset by declines in the average balance of loans and non-mortgage-backed securities.

The impact on interest income from the increase in the average balance of interest-earning assets was augmented by a six basis point increase in their average yield which increased to 4.07% for the quarter ended June 30, 2011 from 4.01% for the quarter ended March 31, 2011. The net increase in average yield reflected increases in the average yield of loans and non-mortgage-backed securities that were partially offset by declines in the average yield of mortgage-backed securities and other interest-earning assets.

As noted, the increase in net interest income attributable to the increase in interest income between linked quarters was augmented by a decrease in interest expense between the same comparative periods. The decrease in interest expense between linked quarters was primarily attributable to a decline in the average cost of interest-bearing liabilities which decreased five basis points to 1.36% for the quarter ended June 30, 2011 from 1.41% for the quarter ended March 31, 2011. The reduction in average cost reflected a decline in the cost of interest-bearing deposits of four basis points to 1.13% from 1.17% between those same comparative periods. The reduction in cost was reflected across all categories of interest-bearing deposits including interest-bearing checking, savings accounts and certificates of deposit. For those same comparative periods, the cost of Federal Home Loan Bank ("FHLB") borrowings increased by three basis points to 3.70% from 3.67% while the cost of other borrowings, comprised primarily of depositor sweep accounts, declined 28 basis points to 0.76% from 1.04%.

The impact on interest expense from the decline in the cost of interest-bearing liabilities was partially offset by an increase in their average balance between linked quarters. The average balance of interest-bearing liabilities increased by $10.7 million to $2.27 billion for the quarter ended June 30, 2011 from $2.26 billion for the quarter ended March 31, 2011. The net increase in average balance was primarily attributable to an increase in the average balance of savings accounts that was partially offset by declines in the average balance of interest-bearing checking accounts, certificates of deposit, FHLB borrowings and depositor sweep accounts.

Provision for Loan Losses

The provision for loan losses totaled $1.1 million during the quarter ended June 30, 2011 compared to a provision of $1.4 million for the linked quarter ended March 31, 2011. A portion of the provision in the current period reflected increases in the level of valuation allowances attributable to impairment losses identified on specific nonperforming loans. The provision for loan losses also reflected increases to a number of environmental loss factors used within the Company's allowance for loan loss calculation methodology to estimate losses on loans collectively evaluated for impairment.

Non-interest Income

Non-interest income attributed to fees, service charges and other non-interest income increased by $1.2 million to $2.3 million for the quarter ended June 30, 2011 from $1.1 million during the quarter ended March 31, 2011. The increase in non-interest income between linked quarters was largely attributable to increases in income associated with the sale of loans and investment securities. Loan sale gains increased by $457,000 to $492,000 for the quarter ended June 30, 2011 from $35,000 for the quarter ended March 31, 2011 largely reflecting comparatively greater gains on sale of SBA loans during the more recent quarter. For those same comparative periods, gain on sale of investment securities increased $804,000 reflecting a $776,000 gain on sale of available for sale municipal obligations for the quarter ended June 30, 2011 compared to a $28,000 loss during the prior quarter attributable to the sale of a small portion of non-agency collateralized mortgage obligations whose credit ratings had deteriorated below investment grade.

Non-interest Expense

Non-interest expense increased by $94,000 to $14.6 million for the quarter ended June 30, 2011 from $14.5 million for the quarter ended March 31, 2011. The increase in non-interest expense reflected additional salary and employee benefit costs totaling $591,000 related, in part, to severance charges arising from the Central Jersey acquisition as well as supplemental compensation-related costs resulting from the conversion and integration of Central Jersey's core processing systems which was completed during June 2011. The increase in compensation expense also reflected additional expenses associated with a limited number of restricted stock and stock option benefits granted during the quarter ended June 30, 2011.

The noted increase in non-interest expense also reflected increases in equipment and systems expenses and miscellaneous expenses of $105,000 and $296,000, respectively, which were largely attributable to the core processing conversion and integration which occurred during the current quarter. Such expenses included increased technology service provider and telecommunication charges as well as printing and postage costs associated with customer communications.

Partially offsetting these increases in non-interest expense were comparative declines in office occupancy expenses, arising primarily from seasonal fluctuations in facilities maintenance costs, coupled with comparatively lower deposit insurance costs attributable to changes in the FDIC's deposit insurance calculation methodology that went into effect during the quarter ended June 30, 2011. The net change in non-interest expense also reflected $59,000 in merger-related expenses during the quarter ended June 30, 2011 which declined $166,000 from $225,000 for prior linked quarter ended March 31, 2011.

Provision for Income Taxes

The provision for income taxes increased by $1.0 million to $2.0 million for the quarter ended June 30, 2011 compared to $998,000 for the quarter ended March 31, 2011. The variance in income taxes between comparative quarters was attributable, in part, to the underlying differences in the taxable portion of pre-tax income. However, income tax expense for the quarter ended June 30, 2011 also reflected the recognition of tax benefit on certain merger-related costs that had not been considered deductible prior to the most recent quarter.

Cash and Cash Equivalents

Cash and cash equivalents, which consist primarily of interest-earning deposits in other banks, increased by $14.3 million to $222.6 million at June 30, 2011 from $208.3 million at March 31, 2011. The change in the balance of short term, liquid assets largely reflects the cash flows resulting from the net declines in the outstanding balance of loans receivable and non-mortgage-backed securities coupled with an increase in the overall balance of deposits. These incoming sources of cash were partially deployed through the net increase in the outstanding balance of mortgage-backed securities and a decline in other borrowings.

In accordance with the overall goals of its strategic business plan, the Company may, at times, defer the reinvestment of excess liquidity into the investment portfolio in favor of retaining comparatively higher average balances of short term, liquid assets as a funding source for future loan originations. Toward that end, the Bank's pipeline of "in process" loans has generally increased compared to one year earlier due largely to the acquisition of Central Jersey and the continued expansion of the Bank's commercial loan origination staff separate from that acquisition.

Management will continue to monitor the opportunity cost to near term earnings resulting from the accumulation of short term, liquid assets in relation to the expected need for such liquidity to fund the Company's strategic initiatives including the expected increase in loan origination volume resulting from the ongoing operation of the CJB Division. The Company may continue to redeploy a portion of its liquidity into higher yielding investments based upon the timing and relative success of those initiatives.

Loans Receivable

The outstanding balance of loans receivable at June 30, 2011, excluding deferred fees and costs and the allowance for loan losses, declined by $21.3 million to $1.27 billion compared to $1.29 billion at March 31, 2011. The overall decrease in the loan portfolio during the current quarter included a net decline in the balance of one-to-four family mortgage loans, comprising residential first mortgages, home equity loans and home equity lines of credit, of $9.5 million and a net decrease in the balance of construction loans of $5.6 million. In addition, the combined balances of commercial loans, including non-residential mortgages, multi-family mortgages and commercial business loans, and land loans decreased $6.0 million while consumer loans decreased $96,000.

In general, the aggregate decline in the loan portfolio for the quarter ended June 30, 2011 reflects the continuing diminished level of loan demand resulting from a weak economy and declining real estate values exacerbated by aggressive pricing for certain loan products that are available in the marketplace to a reduced number of qualified borrowers.

At June 30, 2011, the Company's non-performing assets totaled $42.5 million or 1.46% of total assets and comprised 113 nonperforming loans totaling $35.0 million, or 2.76% of total loans, plus eight REO properties totaling $7.5 million. By comparison, at March 31, 2011 non-performing assets totaled $43.0 million or 1.49% of total assets and comprised 105 nonperforming loans totaling $41.5 million, or 3.22% of total loans, plus five REO properties totaling $1.5 million.

Mortgage-backed and Non-mortgage-backed Securities

The aggregate balance of mortgage-backed securities, which are predominantly government agency pass-through certificates and collateralized mortgage obligations, increased by $124.0 million to $1.06 billion at June 30, 2011 from $937.6 million at March 31, 2011. The net increase reflected security purchases totaling $159.8 million that were partially offset by principal repayments, net of premium and discount amortization and accretion, totaling approximately $46.9 million and an increase in the unrealized gain within the available for sale portion of the portfolio of approximately $11.0 million to $27.8 million at June 30, 2011 from $16.8 million at March 31, 2011.

The aggregate balance of non-mortgage backed securities decreased by $107.1 million to $151.1 million at June 30, 2011 from $258.2 million at March 31, 2011. The net decrease reflected the sale of municipal obligations totaling $25.7 million coupled with principal repayments and maturities totaling $80.9 million for the quarter ended June 30, 2011. The net decrease also reflected a net increase in the unrealized loss of the available for sale non-mortgage-backed securities of $446,000 to $1.5 million at June 30, 2011 from $1.0 million at March 31, 2011. The increase in the net unrealized loss was primarily attributable to the recognition of previously unrealized gains on municipal obligations during the quarter ended June 30, 2011 that had previously offset a portion of the unrealized losses within the other components of non-mortgage-backed securities.

Other Assets

The aggregate balance of other assets, including premises and equipment, Federal Home Loan Bank stock, interest receivable, goodwill, bank owned life insurance, deferred income taxes and other miscellaneous assets, increased by $727,000 to $212.0 million at June 30, 2011 from $211.2 million at March 31, 2011. The net change in other assets reflected a $5.9 million net increase in the balance of real estate owned, include in other miscellaneous assets, coupled with an increase of $582,000 in goodwill resulting from additional adjustments attributable to the acquisition of Central Jersey Bank. These increases were partially offset by a $4.6 million decline in the balance of deferred income taxes. The balances of the remaining categories of other assets declined during the quarter reflecting the normal fluctuations in the balances of such assets.

Deposits

Deposits increased $8.4 million to $2.15 billion at June 30, 2011 from $2.14 billion at March 31, 2011 reflecting an increase in non-interest bearing deposits of $10.0 million that was partially offset by a decline in the balance of interest-bearing deposits of $1.6 million. The net decrease in interest-bearing deposits reflected a $10.6 million decline in the balance of certificates of deposit that was largely offset by increases in the balance of interest-bearing checking and savings accounts totaling $5.9 million and $3.1 million, respectively.

Borrowings

The Company reported a net decrease in borrowings of $7.3 million to $247.6 million at June 30, 2011 from $254.9 million at March 31, 2011. The reported decrease primarily reflected a $7.2 million decline in the balance of outstanding overnight "sweep account" balances linked to customer demand deposits coupled with the scheduled principal repayment of an amortizing advance from the Federal Home Loan Bank of New York.

Stockholders' Equity and Capital Management

During the quarter ended June 30, 2011, stockholders' equity increased $8.6 million to $487.9 million from $479.3 million at March 31, 2011. The increase was partly attributable to net income of $3.9 million for the current quarter that was partially offset by the payment of an $801,000 cash dividend to minority shareholders. The increase in stockholders' equity also reflected an increase in accumulated other comprehensive income resulting primarily from increases in the unrealized gain on the available for sale securities portfolios as well as a reduction of unearned ESOP shares for plan shares earned during the period. Offsetting these increases in stockholders' equity was an increase in Treasury stock of $1.1 million reflecting the Company's repurchase of 124,400 shares of its common stock during the quarter ended June 30, 2011.

At June 30, 2011, the Company's total equity to asset ratio was 16.8% while the equity to assets ratio of the Bank was 15.8%. As of that same date, the Bank's ratio of tangible equity to tangible assets was 12.1% while its Tier 1 (Core) Capital and Total (Risk-based) Capital to risk-weighted assets ratios were 24.9% and 25.3%, respectively, far in excess of the 6.0% and 10.0% levels, respectively, required by federal banking regulators to be classified "well-capitalized" under regulatory guidelines.

Statements contained in this news release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to factors discussed in documents filed by Kearny Financial Corp. with the Securities and Exchange Commission from time to time. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.




KEARNY FINANCIAL CORP.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Data, Unaudited)

At
-------------------------------------
June 30, March 31, June 30,
2011 2011 2010
----------- ----------- -----------
Selected Balance Sheet Data:
Cash and cash equivalents $ 222,580 $ 208,256 $ 181,422

Securities available for sale 44,673 100,457 29,497
Securities held to maturity 106,467 157,733 255,000
----------- ----------- -----------
Non-mortgage-backed securities 151,140 258,190 284,497

Loans receivable 1,268,351 1,289,277 1,013,713
Allowance for loan losses (11,767) (10,661) (8,561)
----------- ----------- -----------
Net loans receivable 1,256,584 1,278,616 1,005,152

Mortgage-backed securities available
for sale 1,060,247 936,228 703,455
Mortgage-backed securities held to
maturity 1,345 1,398 1,700
----------- ----------- -----------
Mortgage-backed securities 1,061,592 937,626 705,155

Premises & equipment 39,556 39,499 34,989
Federal Home Loan Bank stock 13,560 13,611 12,867
Goodwill 109,125 108,543 82,263
Bank owned life insurance 24,470 24,290 19,833
Other assets 25,256 25,297 13,635
----------- ----------- -----------
Total assets $ 2,903,863 $ 2,893,928 $ 2,339,813
=========== =========== ===========

Non-interest bearing deposits $ 143,087 $ 133,106 $ 53,709
Interest-bearing deposits 2,006,266 2,007,822 1,569,853
----------- ----------- -----------
Deposits 2,149,353 2,140,928 1,623,562

Federal Home Loan Bank advances 211,461 211,518 210,000
Other borrowings 36,181 43,412 0
----------- ----------- -----------
Borrowings 247,642 254,930 210,000

Other liabilities 18,938 18,803 20,325
----------- ----------- -----------
Total liabilities 2,415,933 2,414,661 1,853,887

Stockholders' equity 487,930 479,267 485,926
----------- ----------- -----------
Total liabilities & stockholders'
equity $ 2,903,863 $ 2,893,928 $ 2,339,813
=========== =========== ===========

Consolidated Capital Ratios:
Equity to assets at period end 16.80% 16.56% 20.77%
Tangible equity to tangible assets at
period end (1) 13.13% 13.03% 17.36%

Share Data:
Outstanding shares (in thousands) 67,851 67,975 68,344
Closing price as reported by NASDAQ $ 9.11 $ 10.03 $ 9.16
Equity per share $ 7.19 $ 7.05 $ 7.11
Tangible equity per share (1) $ 5.36 $ 5.32 $ 5.66

Asset Quality Ratios:
Non-performing loans to total loans 2.76% 3.22% 2.13%
Non-performing assets to total assets 1.46% 1.49% 0.93%
Allowance for loan losses to total
loans 0.93% 0.83% 0.84%
Allowance for loan losses to non-
performing loans 33.65% 25.71% 39.70%
-------------------------------------
(1) Tangible equity equals total stockholders' equity reduced by goodwill,
core deposit intangible assets and accumulated other comprehensive income.



 (Dollars in Thousands, Except Per Share Data, Unaudited) For the Three Months Ended For the Year Ended ----------------------------- ------------------ June March June June June 30, 31, 30, 30, 30, 2011 2011 2010 2011 2010 -------- --------- -------- -------- --------Summary of Operations:Interest income on: Loans receivable $ 17,458 $ 17,416 $ 14,061 $ 63,553 $ 58,129 Mortgage-backed securities 8,163 7,114 7,057 29,972 30,450 Non-mortgage-backed securities 1,138 1,622 1,728 5,942 3,701 Other interest-earning assets 214 275 167 909 828 -------- --------- -------- -------- -------- Total interest- earning assets 26,973 26,427 23,013 100,376 93,108Interest expense on: Interest-bearing checking 899 959 741 3,432 2,324 Savings and clubs 450 472 840 2,161 3,246 Certificates of deposit 4,344 4,451 5,004 18,320 22,519 -------- --------- -------- -------- -------- Total interest- bearing deposits 5,693 5,882 6,585 23,913 28,089 Federal Home Loan Bank advances 1,958 1,954 2,052 8,097 8,232 Other borrowings 68 102 0 206 0 -------- --------- -------- -------- -------- Total borrowings 2,026 2,056 2,052 8,303 8,232 -------- --------- -------- -------- -------- Total interest- bearing liabilities 7,719 7,938 8,637 32,216 36,321 -------- --------- -------- -------- -------- Net interest income 19,254 18,489 14,376 68,160 56,787 Provision for loan losses 1,110 1,391 262 4,628 2,616 -------- --------- -------- -------- -------- Net interest income after loan loss provision 18,144 17,098 14,114 63,532 54,171 Fees & service charges 645 613 349 2,027 1,422 Gain/(loss) on securities, including other-than-temporary impairment 776 (28) 509 748 303Other non-interest income 896 472 295 2,004 973 -------- --------- -------- -------- -------- Total non-interest income 2,317 1,057 1,153 4,779 2,698 Salaries and employee benefits 8,673 8,082 6,815 31,105 26,936Net occupancy expense of premises 1,490 1,836 1,002 5,527 4,172Equipment and systems 1,798 1,693 1,146 6,053 4,429Advertising and marketing 248 252 256 1,016 907Federal deposit insurance premium 482 861 390 2,307 1,307Directors' compensation 171 174 558 1,153 2,213Merger-related expenses 59 225 373 3,474 373Miscellaneous expense 1,642 1,346 1,169 5,443 4,757 -------- --------- -------- -------- -------- Total non-interest expense 14,563 14,469 11,709 56,078 45,094 -------- --------- -------- -------- -------- Income before taxes 5,898 3,686 3,558 12,233 11,775Provision for income taxes 2,009 998 1,546 4,326 4,963 -------- --------- -------- -------- --------Net income $ 3,889 $ 2,688 $ 2,012 $ 7,907 $ 6,812 ======== ========= ======== ======== ========Per Share Data:Net income per share - basic $ 0.06 $ 0.04 $ 0.03 $ 0.12 $ 0.10Net income per share - diluted $ 0.06 $ 0.04 $ 0.03 $ 0.12 $ 0.10Weighted average number of common shares outstanding - basic (in thousands) 67,107 67,054 67,711 67,118 67,920Weighted average number of common shares outstanding - diluted (in thousands) 67,107 67,054 67,711 67,118 67,920Cash dividends per share (1) $ 0.05 $ 0.05 $ 0.05 $ 0.20 $ 0.20Dividend payout ratio (2) 20.6% 30.0% 40.6% 40.7% 53.7%-------------------------(1) Represents dividends declared per common share.(2) Represents dividends declared, excluding dividends waived by Kearny MHC, divided by net income.



 (Dollars in Thousands, Except Per Share Data, Unaudited) For the Three Months Ended For the Year Ended ---------------------------------- ---------------------- June 30, March 31, June 30, June 30, June 30, 2011 2011 2010 2011 2010 ---------- ---------- ---------- ---------- ----------Average Balances: Loans receivable $1,277,478 $1,304,071 $1,007,957 $1,172,576 $1,030,287 Mortgage-backed securities 977,141 846,869 659,094 853,350 677,496 Non-mortgage- backed securities 228,778 336,817 288,207 286,022 137,471 Other interest- earning assets 164,283 146,410 133,407 127,900 161,376 ---------- ---------- ---------- ---------- ---------- Total interest- earning assets 2,647,680 2,634,167 2,088,665 2,439,848 2,006,630 Non-interest- earning assets 246,019 252,684 210,500 239,331 207,239 ---------- ---------- ---------- ---------- ---------- Total assets $2,893,699 $2,886,851 $2,299,165 $2,679,179 $2,213,869 ========== ========== ========== ========== ========== Interest- bearing checking $ 445,276 $ 449,132 $ 237,401 $ 377,978 $ 198,623 Savings and clubs 416,068 394,413 329,606 375,767 315,715 Certificates of deposit 1,157,456 1,160,086 963,825 1,086,544 935,684 ---------- ---------- ---------- --------- ---------- Total interest- bearing deposits 2,018,800 2,003,631 1,530,832 1,840,289 1,450,022 Federal Home Loan Bank advances 211,492 212,772 210,000 217,108 210,000 Other borrowings 35,990 39,188 0 22,116 0 ---------- ---------- ---------- ---------- ---------- Total borrowings 247,482 251,960 210,000 239,224 210,000 ---------- ---------- ---------- ---------- ---------- Total interest- bearing liabilities 2,266,282 2,255,591 1,740,832 2,079,513 1,660,022 Non-interest- bearing liabilities 148,585 154,469 77,525 118,909 74,423 ---------- ---------- ---------- ---------- ---------- Total liabilities 2,414,867 2,410,060 1,818,357 2,198,422 1,734,445 Stockholders' equity 478,832 476,791 480,808 480,757 479,424 ---------- ---------- ---------- ---------- ---------- Total liabilities and stockholders' equity $2,893,699 $2,886,851 $2,299,165 $2,679,179 $2,213,869 ========== ========== ========== ========== ========== Average interest- earning assets to average interest- bearing liabilities 116.83% 116.78% 119.98% 117.33% 120.88%



 For the Three Months For the Year Ended Ended ------------------------- ---------------- June March June June June 30, 31, 30, 30, 30, 2011 2011 2010 2011 2010 ------- ------- ------- ------- -------Performance ratios: Yield on average: Loans receivable 5.47% 5.34% 5.58% 5.42% 5.64% Mortgage-backed securities 3.34% 3.36% 4.28% 3.51% 4.49% Non-mortgage-backed securities 1.99% 1.93% 2.40% 2.08% 2.69% Other interest-earning assets 0.52% 0.75% 0.50% 0.71% 0.51% ------- ------- ------- ------- ------- Total interest-earning assets 4.07% 4.01% 4.41% 4.11% 4.64% Cost of average: Interest-bearing checking 0.81% 0.85% 1.25% 0.91% 1.17% Savings and clubs 0.43% 0.48% 1.02% 0.58% 1.03% Certificates of deposit 1.50% 1.53% 2.08% 1.69% 2.41% ------- ------- ------- ------- ------- Interest-bearing deposits 1.13% 1.17% 1.72% 1.30% 1.94% Federal Home Loan Bank advances 3.70% 3.67% 3.91% 3.73% 3.92% Other borrowings 0.76% 1.04% 0.00% 0.93% 0.00% ------- ------- ------- ------- ------- Total borrowings 3.28% 3.26% 3.91% 3.47% 3.92% ------- ------- ------- ------- ------- Total interest-bearing liabilities 1.36% 1.41% 1.98% 1.55% 2.19% Net interest rate spread (1) 2.71% 2.60% 2.43% 2.56% 2.45% Net interest margin (2) 2.92% 2.81% 2.75% 2.80% 2.83% Non-interest income to average assets 0.32% 0.15% 0.20% 0.18% 0.12% Non-interest expense to average assets 2.01% 2.00% 2.04% 2.09% 2.04% Efficiency ratio 67.51% 74.03% 75.40% 76.88% 75.81% Return on average assets 0.54% 0.37% 0.35% 0.30% 0.31% Return on average equity 3.25% 2.26% 1.67% 1.64% 1.42%-------------------------------(1) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.(2) Net interest income divided by average interest-earning assets.


For further information contact:
Eric B. Heyer
Senior Vice President and Chief Financial Officer
Kearny Financial Corp.
(973) 244-4024

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