SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 10-Q
(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, 2005
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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
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KEARNY FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
UNITED STATES 22-3803741
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
120 Passaic Ave., Fairfield, New Jersey 07004-3510
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code 973-244-4500
-----------------------------------------
Indicate by check mark whether 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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: May 5, 2005.
$0.10 par value common stock - 72,737,500 shares outstanding
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statements of Financial Condition
at March 31, 2005 (Unaudited) and June 30, 2004 (Audited) 1
Consolidated Statements of Income for the Three Months and
Nine Months Ended March 31, 2005 and 2004 (Unaudited) 2-3
Consolidated Statements of Comprehensive Income for the Three
Months and Nine Months Ended March 31, 2005 and 2004 (Unaudited) 4
Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 2005 and 2004 (Unaudited) 5-6
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-16
Item 3: Quantitative and Qualitative Disclosure About Market Risk 17-18
Item 4: Controls and Procedures 19
PART II - OTHER INFORMATION 20
SIGNATURES 21
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(In Thousands, Except Share and Per Share Data)
March 31, June 30,
Assets 2005 2004
------ ---------------- -----------------
(Unaudited) (Audited)
Cash and amounts due from depository institutions $ 16,757 $ 21,008
Interest-bearing deposits in other banks 147,835 18,480
---------------- -----------------
Cash and cash equivalents 164,592 39,488
Securities available for sale 40,680 41,564
Investment securities held to maturity 450,270 435,870
Loans receivable, including net deferred loan costs of $779 and $758 521,463 510,938
Less: Allowance for loan losses (5,354) (5,144)
---------------- -----------------
Net loans receivable 516,109 505,794
---------------- -----------------
Mortgage-backed securities held to maturity 727,628 771,353
Premises and equipment 34,414 26,649
Federal Home Loan Bank of New York stock ("FHLB") 11,392 11,392
Interest receivable 8,899 9,861
Goodwill 82,263 82,263
Other assets 9,748 12,284
---------------- -----------------
Total assets $ 2,045,995 $ 1,936,518
================ =================
Liabilities and stockholders' equity
Liabilities
Deposits:
Non-interest bearing $ 55,770 $ 55,377
Interest bearing 1,395,254 1,482,133
---------------- -----------------
Total deposits 1,451,024 1,537,510
Advances from FHLB 81,826 94,234
Advance payments by borrowers for taxes 4,331 4,224
Other liabilities 7,348 7,045
---------------- -----------------
Total liabilities 1,544,529 1,643,013
---------------- -----------------
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 and 10,000 issued and outstanding, respectively 7,274 1
Paid in capital 207,820 499
Retained earnings - substantially restricted 293,773 282,959
Unearned Employee Stock Ownership Plan ("ESOP") shares (17,457) -
Accumulated other comprehensive income 10,056 10,046
---------------- -----------------
Total stockholders' equity 501,466 293,505
---------------- -----------------
Total liabilities and stockholders' equity $ 2,045,995 $ 1,936,518
================ =================
See notes to consolidated financial statements.
-1-
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In Thousands, Except Share and Per Share Data, Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Interest income:
Loans $ 7,188 $ 7,211 $ 21,641 $ 22,101
Mortgage-backed securities 8,342 8,718 25,289 25,152
Investment and available for sale
securities 4,123 3,811 12,217 10,663
Other interest earning assets 1,425 40 1,670 1,184
-------- -------- -------- --------
Total interest income 21,078 19,780 60,817 59,100
-------- -------- -------- --------
Interest expense:
Deposits 6,739 6,622 19,037 21,864
Borrowings 1,025 975 3,004 3,089
-------- -------- -------- --------
Total interest expense 7,764 7,597 22,041 24,953
-------- -------- -------- --------
Net interest income 13,314 12,183 38,776 34,147
Provision for loan losses (110) -- 7 --
-------- -------- -------- --------
Net interest income after provision
for loan losses 13,424 12,183 38,769 34,147
-------- -------- -------- --------
Non-interest income:
Fees and service charges 190 185 538 541
Miscellaneous 302 218 858 655
-------- -------- -------- --------
Total non-interest income 492 403 1,396 1,196
-------- -------- -------- --------
Non-interest expense:
Salaries and employee benefits 5,165 4,241 15,159 12,430
Net occupancy expense of
premises 928 718 2,298 1,920
Equipment 1,047 878 2,865 2,569
Advertising 244 178 820 542
Federal insurance premium 137 143 416 442
Amortization of intangible assets 159 159 477 477
Directors' fees 223 208 670 619
Merger related expenses -- -- -- 592
Miscellaneous 908 785 2,662 2,555
-------- -------- -------- --------
Total non-interest expense 8,811 7,310 25,367 22,146
-------- -------- -------- --------
Income before income taxes 5,105 5,276 14,798 13,197
Income taxes 1,279 1,583 3,984 3,959
-------- -------- -------- --------
Net income $ 3,826 $ 3,693 $ 10,814 $ 9,238
======== ======== ======== ========
Net income per common share:
Basic $ 0.05 $ 369.30 $ 0.15 $ 923.80
Diluted 0.05 369.30 0.15 923.80
See notes to consolidated financial statements.
-2-
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Cont'd)
(In Thousands, Except Share and Per Share Data, Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Weighted average number of
Common shares outstanding:
Basic 70,991,800 10,000 70,991,800 10,000
Diluted 70,991,800 10,000 70,991,800 10,000
See notes to consolidated financial statements.
-3-
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
(In Thousands, Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- --------------------
2005 2004 2005 2004
-------- -------- -------- --------
Net income $ 3,826 $ 3,693 $ 10,814 $ 9,238
-------- -------- -------- --------
Other comprehensive income (loss),
net of income taxes:
Gross unrealized holdings gain
(loss) on securities available
for sale (2,668) 549 14 2,039
Deferred income tax benefit
(expense) 934 (192) (4) (713)
-------- -------- -------- --------
Other comprehensive income (loss) (1,734) 357 10 1,326
-------- -------- -------- --------
Comprehensive income $ 2,092 $ 4,050 $ 10,824 $ 10,564
======== ======== ======== ========
See notes to consolidated financial statements.
-4-
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In Thousands, Unaudited)
Nine Months Ended
March 31,
----------------- --- ----------------
2005 2004
----------------- ----------------
Cash flows from operating activities:
Net income $ 10,814 $ 9,238
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of premises and equipment 1,080 1,055
Net amortization of premiums, discounts and loan fees and costs 762 1,562
Deferred income taxes (1,532) (921)
Amortization of intangible assets 477 477
Provision for loan losses 7 -
Realized gain on sale of securities available for sale (71) -
Decrease (increase) in interest receivable 962 (338)
Decrease (increase) in other assets 2,058 425
Increase (decrease) in interest payable (19) (342)
Increase (decrease) in other liabilities 1,849 (319)
----------------- ----------------
Net cash provided by operating activities 16,387 10,837
----------------- ----------------
Cash flows from investing activities:
Purchases of securities available for sale (143) (113)
Proceeds from sale of securities available for sale 1,115 -
Purchases of investment securities held to maturity (33,202) (240,290)
Proceeds from calls and maturities of investment securities held to
maturity 15,386 103,758
Proceeds from repayments of investment securities held to maturity 3,420 2,756
Purchase of loans - (14,262)
Net (increase) decrease in loans receivable (10,406) 21,629
Purchases of mortgage-backed securities held to maturity (88,138) (345,122)
Principal repayments on mortgage-backed securities held to maturity 131,174 269,567
Proceeds from sale of premises and equipment 3 -
Additions to premises and equipment (8,845) (6,365)
Redemption (purchase) of FHLB Stock - 2,987
----------------- ----------------
Net cash provided by (used in) investing activities 10,364 (205,455)
----------------- ----------------
Cash flows from financing activities:
Net (decrease) increase in deposits (46,072) (55,966)
Repayment of FHLB advances (407) (1,383)
Net change in short-term borrowings from FHLB (12,000) (5,000)
Increase (decrease) in advance payments by borrowers for taxes 107 (55)
Proceeds from the issuance of common stock 156,725 -
----------------- ----------------
Net cash (used in) provided by financing activities 98,353 (62,404)
----------------- ----------------
Net (decrease) increase in cash and cash equivalents 125,104 (257,022)
Cash and cash equivalents - beginning 39,488 325,657
----------------- ----------------
Cash and cash equivalents - ending $ 164,592 $ 68,635
================= ================
See notes to consolidated financial statements.
-5-
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)
----------------------------------------------
(In Thousands, Unaudited)
Nine Months Ended
March 31,
--------------------------------------
2005 2004
----------------- ----------------
Supplemental disclosures of cash flows information:
Cash paid during the year for:
Income taxes, net of refunds $ 1,688 $ 2,945
================= ================
Interest $ 22,060 $ 25,295
================= ================
Supplemental disclosure of non-cash transactions:
Purchase of minority shares of West Essex $ - $ 17,336
================= ================
Goodwill - West Essex acquisition $ - $ 50,517
================= ================
Deposit for acquisition of West Essex Bancorp, Inc. $ - $ (67,853)
================= ================
See notes to consolidated financial statements.
-6-
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. PRINCIPLES OF CONSOLIDATION
-------------------------------
The consolidated financial statements include the accounts of Kearny Financial
Corp. (the "Company"), its wholly owned subsidiary, Kearny Federal Savings Bank
(the "Bank"), and the Bank's wholly owned subsidiaries, KFS Financial Services,
Inc., West Essex Insurance Agency and Kearny Federal Investment Corp. The
Company conducts its business principally through the Bank. Management
eliminated all significant inter-company accounts and transactions during
consolidation.
2. BASIS OF PRESENTATION
-------------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and Regulation S-X and do not include
information or footnotes necessary for a complete presentation of financial
condition, results of operations and cash flows in conformity with generally
accepted accounting principles. However, in the opinion of management, all
adjustments (consisting of normal adjustments) necessary for a fair presentation
of the consolidated financial statements have been included. The results of
operations for the three and nine month periods ended March 31, 2005, are not
necessarily indicative of the results that may be expected for the entire fiscal
year.
3. NET INCOME PER COMMON SHARE
-------------------------------
Weighted average number of common shares actually outstanding provides the basis
for calculation of basic net income per common share. Adjusting the weighted
average number of shares of common stock outstanding to include the effect of
contracts or securities exercisable or which could be converted into common
stock, if dilutive, using the treasury stock method, provides the basis for
calculating diluted net income per share. Though the effective date of the
Company's initial public offering was February 23, 2005, the presentation of
basic and diluted net income per share assumes the effective date of the
transaction was July 1, 2004. The calculation of basic and diluted net income
per share includes the 30% of the outstanding shares sold to the public as well
as the 70% of the outstanding shares held by Kearny MHC and excludes Kearny
Federal Savings Bank Employee Stock Ownership Plan (the "ESOP") shares that have
not been previously allocated to participants or have not been committed to be
released for allocation to participants.
-7-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORWARD-LOOKING STATEMENTS
This Form 10-Q may include certain forward-looking statements based on current
management expectations. The actual results of Kearny Financial Corp. (the
"Company") could differ materially from those management expectations. Factors
that could cause future results to vary from current management expectations
include, but are not limited to, general economic conditions, legislative and
regulatory changes, monetary and fiscal policies of the federal government,
changes in tax policies, rates and regulations of federal, state and local tax
authorities. Additional potential factors include changes in interest rates,
deposit flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of loan and
investment portfolios of Kearny Federal Savings Bank, the Company's wholly-owned
subsidiary, (the "Bank"). Other factors that could cause future results to vary
from current management expectations include changes in accounting principles,
policies or guidelines, and other economic, competitive, governmental and
technological factors affecting the Company's operations, markets, products,
services and prices. Further description of the risks and uncertainties to the
business are included in the Company's other filings with the Securities and
Exchange Commission.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2005 AND JUNE 30, 2004
Total assets increased by $109.5 million, or 5.6%, to $2.05 billion at March 31,
2005 from $1.94 billion at June 30, 2004, due primarily to a $125.1 million
increase in cash and cash equivalents. Between June 30, 2004 and March 31, 2005,
investment securities held to maturity, loans receivable, and premises and
equipment increased $14.4 million, $10.3 million and $7.8 million, respectively,
while mortgage-backed securities held to maturity decreased $43.8 million.
During the nine-month period, there was an $86.5 million net outflow of deposits
and $12.4 million reduction in Federal Home Loan Bank advances.
Cash and cash equivalents increased $125.1 million, or 316.7%, to $164.6 million
at March 31, 2005 from $39.5 million at June 30, 2004. Management attributes the
increase to the Company's initial public offering completed on February 23,
2005. Net of offering expenses, subscriptions funded from deposit withdrawals
and funding the purchase of Kearny Federal Savings Bank's Employee Stock
Ownership Plan (the "ESOP") shares, cash received was $156.7 million.
Investment securities held to maturity increased $14.4 million, or 3.3%, to
$450.3 million at March 31, 2005 from $435.9 million at June 30, 2004. The
increase came primarily in the tax-exempt category, reflecting the purchase of
bank-qualified municipal bonds during the nine-month period.
Loans receivable, net of deferred fees and the allowance for loan losses,
increased $10.3 million, or 2.0%, to $516.1 million at March 31, 2005, from
$505.8 million at June 30, 2004. The increase came primarily in one-to-four
family mortgage loans, particularly first mortgages and home equity loans. There
was also an increase in non-residential mortgage loans. Decreases in home equity
lines of credit, commercial business loans and construction loans partially
offset the aforementioned increases.
Mortgage-backed securities decreased by $43.8 million, or 5.7%, to $727.6
million at March 31, 2005, from $771.4 million at June 30, 2004. The decrease
resulted from monthly principal repayments. We used this cash flow to help fund
deposit outflow and reduce Federal Home Loan Bank advances.
Premises and equipment increased $7.8 million, or 29.3%, to $34.4 million at
March 31, 2005, from $26.6 million at June 30, 2004. Management attributes the
increase primarily to the cost of completing the Bank's administrative
headquarters building in Fairfield, New Jersey.
-8-
Deposits, which decreased $86.5 million, or 5.6%, to $1.45 billion at March
31, 2005 from $1.54 billion at June 30, 2004 were the most significant cause of
the decrease in total liabilities. Initial stock offering subscriptions funded
from deposit withdrawals were $40.4 million. Other factors contributing to the
decrease was the runoff of certificates of deposit due to lower interest rates
paid, as well as a movement by customers to alternative investment opportunities
in the marketplace.
Federal Home Loan Bank (the "FHLB") advances decreased $12.4 million, or 13.2%,
to $81.8 million at March 31, 2005 from $94.2 million at June 30, 2004 primarily
resulting from maturing advances that were not renewed.
Stockholders' equity increased $208.0 million, or 70.9%, to $501.5 million at
March 31, 2005 from $293.5 million at June 30, 2004. The increase resulted from
the addition of $214.6 million in capital from the recent initial public
offering and net income of $10.8 million for the nine months ended March 31,
2005, partially offset by unearned ESOP shares of $17.5 million.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND
2004
GENERAL. Net income for the three months ended March 31, 2005 was $3.8 million,
an increase of $133,000, or 3.6%, from $3.7 million for the three months ended
March 31, 2004. The increase in net income resulted from an increase in net
interest income, which was sufficient to offset an increase in salaries and
employee benefits and an increase in the cost of office occupancy and equipment.
NET INTEREST INCOME. Net interest income increased by $1.1 million, or 9.0%, to
$13.3 million for the three months ended March 31, 2005 from $12.2 million for
the three months ended March 31, 2004. Despite decreases in net interest rate
spread and margin and the ratio of average interest-earning assets to average
interest-bearing liabilities remaining flat, year-over-year, the substantial
increase in cash during the initial public offering subscription period this
quarter contributed to the improvement of net interest income, for the 2005
period as compared to the 2004 period.
The net interest rate spread decreased three basis points to 2.50% for the three
months ended March 31, 2005 from 2.53% for the three months ended March 31,
2004. The net interest rate margin decreased five basis points to 2.69% compared
with 2.74%.
The net interest rate spread decreased due to a 19 basis point decrease in the
yield on average interest-earning assets to 4.26% for the three months ending
March 31, 2005, from 4.45% for the three months ending March 31, 2004. During
the same period, the cost of interest-bearing liabilities decreased 16 basis
points to 1.76% for the three months ending March 31, 2005, from 1.92% for the
three months ending March 31, 2004, not enough to offset the declining yield on
average interest-earning assets.
The ratio of average interest-earning assets to average interest-bearing
liabilities remained virtually unchanged, year-over-year, contributing to the
decline in the net interest rate margin. The ratio of average interest-earning
assets to average interest-bearing liabilities decreased to 112.3% for the three
months ended March 31, 2005, from 112.4% for the three months ended March 31,
2004.
INTEREST INCOME. Total interest income increased $1.3 million, or 6.6%, to $21.1
million for the three months ended March 31, 2005, from $19.8 million for the
three months ended March 31, 2004. Average interest-earning assets increased
$202.1 million, or 11.3%, to $1.98 billion for the three months ended March 31,
2005, from $1.78 billion for the three months ended March 31, 2004. The increase
in average interest-earning assets more than offset the aforementioned 19 basis
points decrease in yield, resulting in an increase in interest income.
Management attributes the increase in interest income mainly to the income from
the investment of stock subscriptions received during the quarter in short-term
assets.
-9-
Interest income on loans receivable was flat, decreasing only $23,000,
year-over-year. Interest income on loans was $7.2 million for both periods. The
average balance of loans receivable increased $10.3 million, or 2.1%, to $510.9
million for the three months ended March 31, 2005, from $500.6 million for the
three months ended March 31, 2004. However, a decrease in the average yield on
loans receivable to 5.63% for the three months ended March 31, 2005, from 5.76%
for the three months ended March 31, 2004, offset the increase in the average
balance of loans outstanding. A continuing marketing effort contributed to the
increase in average loans receivable. The lower yield reflects generally lower
interest rates on originations and downward rate adjustments on adjustable rate
and floating rate loans.
Interest income on mortgage-backed securities held to maturity decreased
$376,000, or 4.3%, to $8.3 million for the three months ended March 31, 2005
from $8.7 million for the three months ended March 31, 2004. There was a $13.9
million, or 1.9%, decrease in the average balance of mortgage-backed securities
held to maturity to $724.6 million for the three months ended March 31, 2005
from $738.5 million for the three months ended March 31, 2004. In addition, the
average yield on mortgage-backed securities held to maturity decreased to 4.60%
for the three months ended March 31, 2005 from 4.72% for the three months ended
March 31, 2004. The decrease in the average balance of mortgage-backed
securities held to maturity resulted from a partial redeployment of principal
and interest payments into cash and cash equivalents to meet liquidity needs.
The decrease in yield resulted from principal repayments received on older
higher yielding securities while new purchases occurred in a lower interest rate
environment.
Interest income on investment securities increased $312,000, or 8.2%, to $4.1
million for the three months ended March 31, 2005 from $3.8 million for the
three months ended March 31, 2004. The increase resulted from an increase of
$48.7 million, or 11.1%, in the average balance of investment securities to
$488.3 million for the three months ended March 31, 2005 from $439.6 million for
the three months ended March 31, 2004, partially offset by a decrease in the
average yield on investment securities, to 3.38% from 3.47%. The increased
average balance reflects the redeployment of cash and cash equivalents, which
increased because of repayments on mortgage-backed securities held to maturity.
The lower yield resulted from principal repayments on older higher yielding
securities while new purchases occurred in a lower interest rate environment.
Interest income on other interest-earning assets increased to $1.4 million for
the three months ended March 31, 2005 from $40,000 for the three months ended
March 31, 2004. This was a result of a $156.9 million, or 159.3% increase in the
average balance of other interest-earning assets to $255.4 million for the three
months ended March 31, 2005 from $98.5 million for the three months ended March
31, 2004. The average balance of interest-earning deposits, the primary
component of other interest-earning assets, increased $211.3 million to $244.0
million for the three months ended March 31, 2005 from $32.7 million for the
three months ended March 31, 2004 primarily due to stock subscriptions received
during the initial public offering subscription period this quarter. There was a
207 basis point increase in the average yield on other interest-earning assets
to 2.23% for the three months ended March 31, 2005, from 0.16% for the three
months ended March 31, 2004, due to rising short-term interest rates.
Interest Expense. Total interest expense increased $167,000, or 2.2%, to $7.8
million for the three months ended March 31, 2005 from $7.6 million for the
three months ended March 31, 2004. The increase resulted primarily from an
increase in the average balance of interest-bearing liabilities, which more than
offset a decrease in the cost of interest-bearing liabilities. The average
balance of interest-bearing liabilities increased $181.2 million, or 11.5%, to
$1.76 billion for the three months ended March 31, 2005 from $1.58 billion for
the three months ended March 31, 2004. There was a 16 basis point decrease in
the average cost of interest-bearing liabilities to 1.76% for the three months
ended March 31, 2005 from 1.92% for the three months ended March 31, 2004.
-10-
Interest expense on deposits increased $117,000, or 1.8%, to $6.7 million for
the three months ended March 31, 2005 from $6.6 million for the three months
ended March 31, 2004. The increase resulted primarily from an increase in the
average balance of interest-bearing deposits, which more than offset a decrease
in the average cost. The average balance of interest-bearing deposits increased
$163.4 million, or 10.8%, to $1.67 billion from $1.51 billion. Included in the
three months ended March 31, 2005 is interest expense attributed to subscription
funds received during the initial public offering subscription period. The
average cost of interest-bearing deposits decreased 14 basis points to 1.61% for
the three months ended March 31, 2005 from 1.75% for the three months ended
March 31, 2004.
Interest expense on Federal Home Loan Bank advances increased $50,000, or 5.1%,
to $1.0 million for the three months ended March 31, 2005 from $975,000 for the
three months ended March 31, 2004. The average balance increased $17.8 million,
or 25.2%, to $88.5 million for the three months ended March 31, 2005 from $70.7
million for the three months ended March 31, 2004. A decrease in the average
cost to 4.63% for the three months ended March 31, 2005 from 5.52% for the three
months ended March 31, 2004 was not enough to offset the increase in the average
balance. The increase in the average balance resulted from additional
borrowings, but at a lower cost due to their relatively short remaining term to
maturity.
PROVISION FOR LOAN LOSSES. There was an $110,000 reduction in the provision for
loan losses during the three months ended March 31, 2005. During the quarter,
the Bank received a $213,000 recovery for a previously charged-off loan. Total
loans increased to $520.7 million at March 31, 2005 from $510.2 million at June
30, 2004. Non-performing loans were $2.4 million, or 0.47%, of total loans at
March 31, 2005, as compared to $2.3 million, or 0.46%, of total loans at June
30, 2004. The allowance for loan losses as a percentage of gross loans
outstanding was 1.04% at March 31, 2005 and 1.01% at June 30, 2004, reflecting
balances of $5.4 million and $5.1 million, respectively.
Management assesses the allowance for loan losses monthly. Management uses
available information to recognize losses on loans, however, additional loan
loss provisions may be necessary in the future, based on changes in economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the allowance for loan losses and may
require us to recognize additional provisions based on their judgment of
information available to them at the time of their examination. We maintained
the allowance for loan losses as of March 31, 2005 at a level that represented
management's best estimate of losses in the loan portfolio to the extent they
were both probable and reasonably estimable.
NON-INTEREST INCOME. Total non-interest income increased $89,000, or 22.1%, to
$492,000 for the three months ended March 31, 2005, compared to $403,000 for the
three months ended March 31, 2004. The increase was primarily the result of
increased fee income from the Bank's retail branch network.
NON-INTEREST EXPENSE. Total non-interest expense increased $1.5 million, or
20.5%, to $8.8 million for the three months ended March 31, 2005 from $7.3
million for the three months ended March 31, 2004. The increase consisted
primarily of an increase in salaries and employee benefits and an increase in
the cost of office occupancy and equipment.
Salaries and employee benefits increased $924,000, or 22.0%, to $5.2 million for
the three months ended March 31, 2005, compared to $4.2 million for the three
months ended March 31, 2004. The increase was the result of normal salary
increases, increased benefit costs and hiring of additional staff. The pension
plan expense for the three months ended March 31, 2005 was $635,000, as compared
to $394,000 for the three months ended March 31, 2004. The increase is due to
lower than expected investment returns on plan assets and higher required
contributions resulting from the incremental effect of normal salary increases.
-11-
Net occupancy expense of premises and equipment expense increased $379,000, or
23.7%, to $2.0 million for the three months ended March 31, 2005 from $1.6
million for the three months ended March 31, 2004. This increase primarily
reflects normal increases in the cost of office occupancy and equipment,
including operating expenses associated with our new 53,000 square foot
administrative headquarters building in Fairfield, New Jersey.
All other elements of non-interest expense totaled $1.7 million for the three
months ended March 31, 2005; an increase of $198,000, or 13.2%, from $1.5
million for the three months ended March 31, 2004.
PROVISION FOR INCOME TAXES. The provision for income taxes decreased $304,000,
or 19.0%, to $1.3 million for the three months ended March 31, 2005 from $1.6
million for the three months ended March 31, 2004. The effective income tax
rates were 25.1% for the three months ended March 31, 2005 as compared to 30.0%
for the three months ended March 31, 2004. Management attributes the decrease in
income tax expense to tax management strategies, including investing in
bank-qualified tax-exempt municipal bonds and transferring investment securities
held to maturity and mortgage-backed securities held to maturity to a New Jersey
investment company, Kearny Federal Investment Corp., a wholly owned subsidiary
of the Bank, which commenced operations in July 2004.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 2005 AND
2004
GENERAL. Net income for the nine months ended March 31, 2005 was $10.8 million,
an increase of $1.6 million, or 17.4%, from $9.2 million for the nine months
ended March 31, 2004. The increase in net income resulted from an increase in
net interest income, which was sufficient to offset an increase in salaries and
employee benefits and an increase in the cost of occupancy and equipment.
Net Interest Income. Net interest income increased by $4.7 million, or 13.8%, to
$38.8 million for the nine months ended March 31, 2005 from $34.1 million for
the nine months ended March 31, 2004. The net interest rate spread increased to
2.60% for the nine months ended March 31, 2005 from 2.30% for the nine months
ended March 31, 2004. The net interest rate margin increased 29 basis points to
2.82% compared with 2.53%.
The net interest rate spread improved primarily due to a 26 basis point decrease
in the cost of average interest-bearing liabilities to 1.82% for the nine months
ending March 31, 2005, from 2.08% for the nine months ending March 31, 2004. The
net interest rate spread also improved due to a four basis point increase in the
yield on average interest-earning assets to 4.42% from 4.38%.
The increase in the net interest margin is largely reflective of the increase in
the ratio of average interest-earning assets to average interest-bearing
liabilities to 113.6% for the nine months ended March 31, 2005, from 112.2% for
the nine months ended March 31, 2004.
INTEREST INCOME. Total interest income increased $1.7 million, or 2.9%, to $60.8
million for the nine months ended March 31, 2005, from $59.1 million for the
nine months ended March 31, 2004. Average interest-earning assets increased
$37.8 million, or 2.1%, to $1.84 billion from $1.80 billion. Management
attributes the increase in interest income primarily to the reinvestment of cash
and cash equivalents in higher yielding loans receivable, investment securities
held to maturity and mortgage-backed securities held to maturity. In addition,
the substantial increase in cash during the initial public offering subscription
period contributed to the improvement of net interest income, due to higher
short-term rates during the three months ended March 31, 2005.
-12-
Interest income on loans receivable decreased $460,000, or 2.1%, to $21.6
million for the nine months ended March 31, 2005, from $22.1 million for the
nine months ended March 31, 2004. The average balance of loans receivable
increased $13.0 million, or 2.6%, to $511.2 million from $498.2 million.
However, a decrease in the average yield on loans receivable to 5.64% from 5.92%
offset the increase in the average balance of loans outstanding. A continuing
marketing effort contributed to the increase in average loans receivable. The
lower yield reflects generally lower interest rates on originations and downward
rate adjustments on adjustable rate and floating rate loans.
Interest income on mortgage-backed securities held to maturity increased
$137,000, or 0.5%, to $25.3 million for the nine months ended March 31, 2005
from $25.2 million for the nine months ended March 31, 2004. This was a result
of a $33.9 million, or 4.9%, increase in the average balance of mortgage-backed
securities held to maturity to $732.8 million from $698.9 million. The increase
in the average balance more than offset the decrease in the average yield to
4.60% from 4.80%. The increase in the average balance resulted from the
redeployment of cash and cash equivalents. The decrease in yield resulted from
principal repayments received on older higher yielding securities while new
purchases occurred in a lower interest rate environment.
Interest income on investment securities increased $1.5 million, or 14.0%, to
$12.2 million for the nine months ended March 31, 2005 from $10.7 million for
the nine months ended March 31, 2004. The increase resulted from an increase of
$75.5 million, or 18.4%, in the average balance of investment securities to
$486.1 million from $410.6 million. However, a decrease in the average yield on
investment securities to 3.35% from 3.46% partially offset the increase in the
average balance of investment securities. The increased average balance reflects
the redeployment of cash and cash equivalents. The lower yield resulted from
principal repayments on older higher yielding securities while new purchases
occurred in a lower interest rate environment.
Interest income on other interest-earning assets increased $486,000, or 41.0%,
to $1.7 million for the nine months ended March 31, 2005 from $1.2 million for
the nine months ended March 31, 2004. There was a 127 basis point increase in
the average yield on other interest-earning assets to 2.10% from 0.83%. An $84.8
million, or 44.4% decrease in the average balance of other interest-earning
assets to $106.2 million from $191.0 million partially offset the increase in
average yield. The decrease in the average balance was due to the use of assets
in these categories to invest in higher yielding securities, partially offset by
the substantial increase in cash during the initial public offering subscription
period. The increase in average yield was due to higher short-term rates.
INTEREST EXPENSE. Total interest expense decreased $3.0 million, or 12.0%, to
$22.0 million for the nine months ended March 31, 2005 from $25.0 million for
the nine months ended March 31, 2004. The decrease resulted primarily from a
decrease in the average cost of interest-bearing liabilities to 1.82% from
2.08%. The average balance of interest-bearing liabilities increased to $1.62
billion for the nine months ended March 31, 2005 as compared to $1.60 billion.
Average cost decreased due to lower market interest rates prevailing during most
of the period.
Interest expense on deposits decreased $2.9 million, or 13.2%, to $19.0 million
for the nine months ended March 31, 2005 from $21.9 million for the nine months
ended March 31, 2004. Interest expense on deposits declined due to a decrease in
the average cost of interest-bearing deposits to 1.66% from 1.91%. The average
balance of interest-bearing deposits remained unchanged at $1.53 billion for the
nine months ended March 31, 2005 and $1.53 billion for the nine months ended
March 31, 2004. Included in the nine months ended March 31, 2005 is interest
expense attributed to subscription funds received during the public offering
subscription period, which also contributed to the average balance of
interest-bearing deposits remaining flat, year-over-year.
-13-
Interest expense on Federal Home Loan Bank advances decreased $85,000, or 2.7%,
to $3.0 million for the nine months ended March 31, 2005 from $3.1 million for
the nine months ended March 31, 2004. The average balance increased $12.5
million, or 17.0%, to $85.9 million from $73.4 million. However, a decrease in
the average cost to 4.67% from 5.61% offset the increase in the average balance.
The increase in the average balance resulted from additional borrowings, but at
a lower cost due to their relatively short remaining term to maturity.
PROVISION FOR LOAN LOSSES. There was a $7,000 provision for loan losses made
during the nine months ended March 31, 2005 as compared to no provision during
the nine months ended March 31, 2004. Total loans increased to $520.7 million at
March 31, 2005 from $510.2 million at June 30, 2004. Non-performing loans were
$2.4 million, or 0.47%, of total loans at March 31, 2005, as compared to $2.3
million, or 0.46%, of total loans at June 30, 2004. The allowance for loan
losses as a percentage of gross loans outstanding was 1.04% at March 31, 2005
and 1.01% at June 30, 2004, reflecting balances of $5.4 million and $5.1
million, respectively.
Management assesses the allowance for loan losses monthly. Management uses
available information to recognize losses on loans, however, additional loan
loss provisions may be necessary in the future based on changes in economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the allowance for loan losses and may
require us to recognize additional provisions based on their judgment of
information available to them at the time of their examination. We maintained
the allowance for loan losses as of March 31, 2005 at a level that represented
management's best estimate of losses in the loan portfolio to the extent they
were both probable and reasonably estimable.
NON-INTEREST INCOME. Non-interest income increased $200,000, or 16.7%, to $1.4
million for the nine months ended March 31, 2005 compared to $1.2 million for
the nine months ended March 31, 2004. The increase was primarily the result of a
$71,000 gain from the sale of a trust-preferred security and increased fee
income from the Bank's retail branch network. There was no such gain recorded in
the nine months ended March 31, 2004.
NON-INTEREST EXPENSE. Excluding merger related expenses, total non-interest
expense increased $3.8 million, or 17.6%, to $25.4 million for the nine months
ended March 31, 2005, from $21.6 million for the nine months ended March 31,
2004. The increase consisted primarily of an increase in salaries and employee
benefits and an increase in the cost of office occupancy and equipment.
The merger related expenses of $592,000 recorded during the nine months ended
March 31, 2004 consisted primarily of fees due to attorneys and financial
advisors.
Salaries and employee benefits increased $2.7 million, or 21.8%, to $15.2
million for the nine months ended March 31, 2005, compared to $12.4 million for
the nine months ended March 31, 2004. The increase was the result of normal
salary increases, increased benefit costs and hiring of additional staff,
including business development personnel. The pension plan expense for the nine
months ended March 31, 2005 was $2.2 million, as compared to $1.2 million for
the nine months ended March 31, 2004. The increase is due to lower than expected
investment returns on plan assets and higher required contributions resulting
from the incremental effect of normal salary increases.
Net occupancy expense of premises and equipment expense increased $674,000, or
15.0%, to $5.2 million for the nine months ended March 31, 2005 from $4.5
million for the nine months ended March 31, 2004. This increase primarily
reflects normal increases in the cost of office occupancy and equipment,
including operating expenses associated with our new 53,000 square foot
administrative headquarters building in Fairfield, New Jersey.
-14-
All other elements of non-interest expenses totaled $5.0 million for the nine
months ended March 31, 2005; an increase of $410,000, or 8.9%, from $4.6 million
for the nine months ended March 31, 2004.
PROVISION FOR INCOME TAXES. The provision for income taxes remained virtually
unchanged, increasing only $25,000, at $4.0 million for the nine months ended
March 31, 2005 and $4.0 million for the nine months ended March 31, 2004. The
effective income tax rates were 26.9% for the nine months ended March 31, 2005
as compared to 30.0% for the nine months ended March 31, 2004. Management
attributes the decrease in income tax expense to tax management strategies,
including investing in bank-qualified tax-exempt municipal bonds and
transferring investment securities held to maturity and mortgage-backed
securities held to maturity to a New Jersey investment company, Kearny Federal
Investment Corp., a wholly owned subsidiary of the Bank, which commenced
operations in July 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required to have enough investments that qualify as liquid assets in
order to maintain sufficient liquidity to ensure a safe operation. Liquidity may
increase or decrease depending upon the availability of funds and comparative
yields on investments in relation to the return on loans. Historically, the Bank
has maintained liquid assets above levels believed to be adequate to meet the
requirements of normal operations, including potential deposit outflows. The
Bank reviews cash flow projections regularly and updates them to assure
maintenance of adequate liquidity.
The Bank's liquidity, represented by cash and cash equivalents, is a product of
its operating, investing and financing activities.
The Bank's primary sources of funds are deposits, amortization, prepayments and
maturities of mortgage-backed securities and outstanding loans, maturities of
investment securities and other short-term investments and funds provided from
operations. While scheduled payments from the amortization of loans and
mortgage-backed securities and maturing investment securities and short-term
investments are relatively predictable sources of funds, general interest rates,
economic conditions and competition greatly influence deposit flows, loan and
mortgage-backed securities prepayments. In addition, the Bank invests excess
funds in short-term interest-earning assets, which provide liquidity to meet
lending requirements. The Bank also generates cash through borrowings.
Liquidity management is both a daily and long-term function of business
management. Management generally invests excess liquidity in short-term
investments such as overnight deposits or U.S. agency securities. The Bank uses
its sources of funds primarily to meet ongoing commitments, to pay maturing
certificates of deposit and savings withdrawals, to fund loan commitments and to
maintain its portfolio of mortgage-backed securities and investment securities.
If the Bank requires funds beyond its ability to generate them internally,
borrowing agreements exist with the Federal Home Loan Bank of New York (the
"FHLB") which provides an additional source of funds. At March 31, 2005,
advances from the FHLB amounted to $81.8 million.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At March 31, 2005, the Bank has outstanding
commitments to originate loans of $51.4 million. Certificates of deposit
scheduled to mature in one year or less at March 31, 2005, totaled $598.1
million. Management's policy is to maintain deposit rates at levels that are
competitive with other local financial institutions. Based on the competitive
rates and on historical experience, management believes that a significant
portion of maturing deposits will remain with the Bank.
Consistent with its goals to operate a sound and profitable financial
organization, the Bank actively seeks to maintain its status as a
well-capitalized institution in accordance with regulatory standards. As of
March 31, 2005, Kearny Federal Savings Bank exceeded all capital requirements of
the Office of Thrift Supervision (the "OTS").
-15-
The following table sets forth the Bank's capital position at March 31, 2005, as
compared to the minimum regulatory capital requirements:
March 31, 2005 (Unaudited)
-------------------------------------------------------------------------------
To Be Well
Capitalized Under
Minimum Capital Prompt Corrective
Actual Requirements Action Provisions
------------------------- ----------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
-------------------------------------------------------------------------------
(In Thousands)
Total Capital
(to risk-weighted assets) 419,443 61.17% $ 54,856 8.00% $ 68,571 10.00%
Tier 1 Capital
(to risk-weighted assets) 407,425 59.42% - - 41,142 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 407,425 20.93% 58,396 3.00% 97,327 5.00%
Tangible Capital
(to adjusted total assets) 407,425 20.93% 29,198 1.50% - -
-16-
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
---------------------------------------------------------
QUALITATIVE ANALYSIS. The ability to maximize net interest income is largely
dependent upon the achievement of a positive interest rate spread sustainable
during fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities, which either re-price or mature within a given
period. The difference, or the interest rate re-pricing "gap", provides an
indication of the extent changes in interest rates may affect an institution's
interest rate spread. A positive gap exists when the amount of interest-rate
sensitive assets exceeds the amount of interest-rate sensitive liabilities, and
a negative gap exists when the amount of interest rate sensitive liabilities
exceeds the amount of interest-rate sensitive assets. Generally, during a period
of rising interest rates, a negative gap within shorter maturities would
adversely affect net interest income, while a positive gap within shorter
maturities would result in an increase in net interest income. During a period
of falling interest rates, a negative gap within shorter maturities would result
in an increase in net interest income while a positive gap within shorter
maturities would result in a decrease in net interest income.
Because the Bank's interest-bearing liabilities, which mature or re-price within
short periods exceed its interest-earning assets with similar characteristics,
material and prolonged increases in interest rates generally would adversely
affect net interest income, while material and prolonged decreases in interest
rates generally would have a positive effect on net interest income.
The Bank's Board of Directors established an Interest Rate Risk Management
Committee comprised of members of the board and management. The committee meets
quarterly to address management of the Bank's assets and liabilities, including
review of its short term liquidity position; loan and deposit pricing and
production volumes and alternative funding sources; current investments; average
lives, durations and re-pricing frequencies of loans and securities; and a
variety of other asset and liability management topics. The committee reports
the results of its quarterly review to the full board, which adjusts interest
rate risk policy and strategies, as it considers necessary and appropriate.
QUANTITATIVE ANALYSIS. Management using the OTS model, which estimates the
change in the Bank's net portfolio value (the "NPV") over a range of interest
rate scenarios, monitors the Bank's interest rate sensitivity. NPV is the
present value of expected cash flows from assets, liabilities, and off-balance
sheet contracts. OTS defines the NPV ratio, under any interest rate scenario, as
the NPV in that scenario divided by the market value of assets in the same
scenario. The OTS produces its analysis based upon data submitted on the Bank's
quarterly Thrift Financial Reports. The following table sets forth the Bank's
NPV as of December 31, 2004, the most recent date for which the Bank has
received the Bank's NPV as calculated by the OTS. Management does not believe
that there has been a material adverse change in the Bank's interest rate risk
during the three months ended March 31, 2005.
At December 31, 2004
------------------------------------------------------------------------------------------
Net Portfolio Value
Net Portfolio Value as % of Present Value of Assets
--------------------------------- ----------------------------------------------------
Net Portfolio Basis Point
Changes in Rates $ Amount $ Change % Change Value Ratio Change
----------------------- -------------- -------------- -------------- -------------- --------------
(In Thousands)
+300 bp 175,801 -134,325 -43% 10.11% -626 bp
+200 bp 221,039 - 89,087 -29% 12.34% -403 bp
+100 bp 265,519 - 44,607 -14% 14.41% -196 bp
0 bp 310,126 - - 16.37% -
-100 bp 335,193 + 25,067 +8% 17.38% +102 bp
-17-
Certain shortcomings are inherent in the methodology used in the above interest
rate risk measurements. Modeling changes in NPV require the making of certain
assumptions, which may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the NPV model
presented assumes that the composition of the Bank's interest sensitive assets
and liabilities existing at the beginning of a period remains constant over the
measurement period. The model also assumes that a particular change in interest
rates reflects uniformly across the yield curve regardless of the duration to
maturity or re-pricing of specific assets and liabilities. Accordingly, although
the NPV measurements and net interest income models provide an indication of the
Bank's interest rate risk exposure at a particular point in time, such
measurements are not intended to and do not provide a precise forecast of the
effect of changes in market interest rates on the Bank's net interest income and
will differ from actual results.
-18-
ITEM 4.
CONTROLS AND PROCEDURES
-----------------------
As of the end of the period covered by this report, based on an evaluation of
the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Securities and Exchange Act of 1934), each of the Chief Executive
Officer and the Chief Financial Officer of the Company concluded that the
Company's disclosure controls and procedures ensure effective recording,
processing, summarization and reporting of information requiring disclosure by
the Company in its Exchange Act reports, within the applicable timeframes
specified by the SEC's rules and forms.
During the quarter under report, there was no change in the Company's internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Securities and Exchange Act of 1934) that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
-19-
PART II
ITEM 1. Legal Proceedings
-----------------
At March 31, 2005, neither the Company nor the Bank were involved
in any pending legal proceedings other than routine legal
proceedings occurring in the ordinary course of business, which
involve amounts in the aggregate believed by management to be
immaterial to the financial condition of the Company and the
Bank.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
-----------------------------------------------------------
Not applicable.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
ITEM 5. Other Information
-----------------
None.
ITEM 6. Exhibits
--------
The following Exhibits are filed as part of this report:
3.1 Charter of Kearny Financial Corp. (1)
3.2 By-laws of Kearny Financial Corp. (1)
4.0 Specimen Common Stock Certificate of Kearny Financial Corp. (1)
10.1 Employment Agreement between Kearny Federal Savings Bank and John N. Hopkins (1)
10.2 Employment Agreement between Kearny Federal Savings Bank and Allan Beardslee (1)
10.3 Employment Agreement between Kearny Federal Savings Bank and Albert E.Gossweiler (1)
10.4 Employment Agreement between Kearny Federal Savings Bank and Sharon Jones (1)
10.5 Employment Agreement between Kearny Federal Savings Bank and William C. Ledgerwood (1)
10.6 Employment Agreement between Kearny Federal Savings Bank and Erika Sacher (1)
10.7 Employment Agreement between Kearny Federal Savings Bank and Patrick M. Joyce (1)
10.8 Directors Consultation and Retirement Plan (1)
10.9 Benefit Equalization Plan (1)
10.10 Benefit Equalization Plan for Employee Stock Ownership Plan (1)
11.0 Statements re: computation of per share earnings (Filed herewith).
31.0 Rule 13a-14(a)/15d-14(a) Certifications (Filed herewith).
32.0 Section 1350 Certifications (Filed herewith).
----------------------------------------------------------------
(1) Incorporated by reference to the identically numbered
exhibit to the Registrant's Registration Statement on Form
S-1 (File No. 333-118815).
-20-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it behalf by the
undersigned thereunto duly authorized.
KEARNY FINANCIAL CORP.
Date: May 10, 2005 By: /s/ John N. Hopkins
------------ ------------------------------------------
John N. Hopkins
President and Chief Executive Officer
(Duly authorized officer and principal
executive officer)
Date: May 10, 2005 By: /s/ Albert E. Gossweiler
------------ ------------------------------------------
Albert E. Gossweiler
Senior Vice President and Chief Financial
Officer
(Principal financial officer)
-21-