Kearny Financial Corp. Reports First Quarter 2010 Operating Results

FAIRFIELD, NJ, Oct 29 (MARKET WIRE) --
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 September 30, 2009 of $1,095,000, or $0.02
per diluted share. The results represent a decrease of $18,000 compared
to net income of $1,113,000, or $0.02 per diluted share, for the quarter
ended June 30, 2009 and a decrease of $641,000 compared to net income of
$1,736,000, or $0.03 per diluted share, for the quarter ended September
30, 2008.

The Company attributes the decrease in net income between linked quarters
to two primary factors including an increase in the provision for loan
loss and, to a lesser extent, a decrease in net interest income. Partially
offsetting these factors were a decrease in noninterest expense and an
increase in noninterest income that resulted, in part, from a reduction in
losses on investment securities. In total, these factors resulted in an
overall decrease in pre-tax income and the provision for income taxes.

The decrease in net income between the quarters ended September 30, 2009
and 2008 resulted primarily from increases in the provision for loan loss
and noninterest expense which were partly offset by an increase in
noninterest income and, to a lesser extent, an increase in net interest
income. The net increase in noninterest income reflected a reduction in
losses on investment securities partly offset by a reduction in other
noninterest income. In total, these factors resulted in an overall
decrease in pre-tax income and the provision for income taxes.

Kearny Federal Savings Bank operates from its administrative headquarters
in Fairfield, New Jersey, and 26 retail branch offices located in Bergen,
Hudson, Passaic, Morris, Middlesex, Essex, Union and Ocean Counties, New
Jersey. At September 30, 2009, Kearny Financial Corp. had total assets of
$2.16 billion which included net loans receivable of $1.05 billion and
total investment securities, including mortgage-backed and
non-mortgage-backed securities, of $832.6 million. As of that same date,
deposits and borrowings totaled $1.46 billion and $210.0 million,
respectively, while stockholders' equity totaled $482.0 million.

The following is an overview of the Company's financial results for the
quarter ended September 30, 2009:

Net Interest Income

Net interest income during the quarter ended September 30, 2009 was $13.25
million, a decrease of $67,000 compared to net interest income of $13.32
million during the quarter ended June 30, 2009 and an increase of $10,000
compared to net interest income of $13.24 million during the quarter ended
September 30, 2008. The Company's net interest margin during the quarter
ended September 30, 2009 was 2.74%, compared to 2.76% during both
comparative quarters ended June 30, 2009 and September 30, 2008.

The decline in net interest income and net interest margin between linked
quarters resulted from a decrease in interest income that outpaced the
concurrent decrease in interest expense. Interest expense during the more
recent linked quarter reflected a continued decline in the cost of
deposits resulting primarily from the downward repricing of certificates
of deposit. However, the beneficial impact to earnings from the decline
in the Company's cost of deposits was more than offset by the decline in
interest income arising from an increase in the average balance of lower
yielding cash and cash equivalents in relation to other interest earning
assets.

By contrast, the increase in net interest income for the comparative
quarters ended September 30, 2009 and 2008 resulted from a decrease in
interest expense that outpaced the concurrent decrease in interest income.
The decreases in interest expense and interest income were generally
attributable to the same factors noted in the linked period comparison.
However, the overall increase in the average balances of the Company's
interest-earning assets and interest-costing liabilities contributed to
the increase in net interest income despite the reported decrease in the
net interest margin between these comparative periods.

More specifically, interest income decreased $427,000 to $23.2 million
during the quarter ended September 30, 2009 compared to $23.6 million
during the quarter ended June 30, 2009 and decreased $2.0 million compared
to $25.2 million during the quarter ended September 30, 2008. Interest
expense decreased $360,000 to $9.9 million during the quarter ended
September 30, 2009 compared to $10.3 million during the quarter ended June
30, 2009 and decreased $2.0 million compared to $11.9 million during the
quarter ended September 30, 2008.

Interest income from loans increased $94,000 to $14.9 million during the
quarter ended September 30, 2009 compared to $14.8 million during the
quarter ended June 30, 2009. By contrast, however, interest income on
loans decreased $223,000 during the quarter ended September 30, 2009
compared to $15.1 million during the quarter ended September 30, 2008. The
increase in interest income on loans between linked quarters resulted from
increases in both the average balance and average yield of the related
assets. By contrast, the average balance of loans receivable was
substantially unchanged between the quarters ended September 30, 2009 and
2008. Consequently, the reported decrease in interest income on loans
between those periods was largely attributable to a decline in their
average yield. During the quarter ended September 30, 2009, average loans
receivable were $1.05 billion with an average yield of 5.67%. By
comparison, during the quarters ended June 30, 2009 and September 30,
2008, average loans receivable were $1.05 billion and $1.05 billion,
respectively; with average yields of 5.65% and 5.75%, respectively.

The Bank continued to experience a reduction in average residential first
mortgages, home equity loans and home equity lines of credit, whose
average outstanding balances declined $2.9 million in aggregate to $814.7
million between the quarters ended June 30, 2009 and September 30, 2009
due primarily to continuing depressed residential loan demand. By
contrast, average commercial loans, including non-residential mortgages,
multi-family mortgages and commercial business loans increased $7.4
million in aggregate to $217.5 million over the same period reflecting
the Company's long-term expanded strategic emphasis in commercial lending
coupled with a continuing favorable pricing environment for these loans.

Interest income from mortgage-backed securities decreased $489,000 to $7.8
million during the quarter ended September 30, 2009 from $8.3 million
during the quarter ended June 30, 2009 and decreased $1.3 million compared
to $9.1 million during the quarter ended September 30, 2008. The decline
in interest income between both sets of comparative quarters resulted from
decreases in both the average balance and average yield of mortgage-backed
securities. During the quarter ended September 30, 2009, average
mortgage-backed securities were $655.8 million with an average yield of
4.78%. By comparison, during the quarters ended June 30, 2009 and
September 30, 2008, the average balance of mortgage-backed securities was
$684.2 million and $718.9 million, respectively; with average yields of
4.86% and 5.08%, respectively. Average yield has been decreasing due to
the repayment of higher coupon loans within the underlying mortgage
portfolios.

Interest income from non-mortgage-backed securities and other
interest-earning assets, primarily cash and cash equivalents, decreased
$32,000 to $448,000 during the quarter ended September 30, 2009 compared
to $480,000 during the quarter ended June 30, 2009 and decreased $486,000
from $934,000 during the quarter ended September 30, 2008. The decline in
interest income between both sets of comparative quarters resulted from
decreases in the average yield of non-mortgage-backed securities and cash
and cash equivalents which were partially offset by comparative increases
in their respective aggregate average balances. During the reporting
period, deposit growth and accumulated repayments received on the
mortgage-backed securities portfolio contributed to a net increase in cash
and cash equivalents whose average yields continue to reflect the low
prevailing interest rate environment. During the quarter ended September
30, 2009, average non-mortgage-backed securities and other
interest-earning assets totaled $229.0 million with an average yield of
0.78%. By comparison, during the quarters ended June 30, 2009 and
September 30, 2008, the average balance of non-mortgage-backed securities
and other interest-earning assets totaled $202.4 million and $149.6
million, respectively, with average yields of 0.95% and 2.50%,
respectively.

Interest expense attributed to deposits decreased $383,000 to $7.8 million
during the quarter ended September 30, 2009 from $8.2 million during the
quarter ended June 30, 2009 and decreased $1.9 million compared to $9.7
million during the quarter ended September 30, 2008. The decline in
interest expense between both sets of comparative quarters resulted from a
decrease in the average cost of interest-bearing deposits, partially
offset by a comparative increase in their average balances. Management
continued to adhere to a disciplined deposit pricing policy during the
reporting period. Nevertheless, the Bank continued to experience deposit
inflows between the linked quarters. During the quarter ended September
30, 2009, average interest-bearing deposits were $1.39 billion with an
average cost of 2.25%. By comparison, during the quarters ended June 30,
2009 and September 30, 2008, average interest-bearing deposits were $1.36
billion and $1.31 billion, respectively, with average costs of 2.41% and
2.97%, respectively. The decrease in the cost of deposits over the
comparative quarters was attributed primarily to decreases in the average
cost of certificates of deposit, which decreased to 2.86% during the
current quarter compared to 3.11% during the linked quarter and 3.90%
during the same quarter one year earlier.

Interest expense attributed to Federal Home Loan Bank ("FHLB") advances
was little changed at $2.1 million during the quarters ended September
30, 2009 and June 30, 2009 and decreased $112,000 compared to $2.2
million during the quarter ended September 30, 2008. During the quarter
ended September 30, 2009, the average balance of FHLB advances were
$210.0 million with an average cost of 3.95%. By comparison, during the
quarters ended June 30, 2009 and September 30, 2008, average advances
were $210.0 million and $218.0 million, respectively, with average costs
of 3.91% and 4.01%, respectively.

Provision for Loan Losses

The provision for loan losses totaled $858,000 during the quarter ended
September 30, 2009 compared to provisions of $-0- for both the linked
quarter ended June 30, 2009 and the prior year quarter ended September
30, 2008. The provision in the current period reflected required net
increases to the allowance for loan losses attributable primarily to
estimated specific losses on several impaired mortgage loans on
residential properties located in New Jersey. The provision also
reflected changes to balances of general valuation allowances
attributable to the application of historical and environmental loss
factors to the remaining non-impaired portion of the loan portfolio in
accordance with the Company's allowance for loan loss calculation
methodology. Further discussion of the allowance for loan losses is
presented in the Loans and Credit Quality section below.

Noninterest Income

Noninterest income attributed to fees, service charges and miscellaneous
income increased $17,000 to $618,000 during the quarter ended September
30, 2009 from $601,000 during the quarter ended June 30, 2009, but
decreased $105,000 from $723,000 during the quarter ended June 30, 2008.
The increase in noninterest income between the linked periods was
primarily attributable to a net increase in deposit and branch-related
fees and charges augmented by a net increase in loan-related fees and
charges. The decline in noninterest income between the quarters ended
September 30, 2009 and 2008 was attributable to comparative reductions in
those same categories which were exacerbated by declines in income from
bank owned life insurance and income from the Bank's official check
clearing agent. The clearing agent is no longer able to compensate its
clients at a meaningful level for use of the float on official checks due
to significant losses in its mortgage-backed securities portfolio.

Net losses on investment securities recorded against noninterest income
during the quarter ended September 30, 2009 totaled $98,000 and were
attributable to a non-cash, pre-tax charge to earnings resulting from
additional other-than-temporary impairment in the value of certain
non-agency collateralized mortgage obligations in the Bank's held to
maturity securities portfolio. These securities were originally acquired
upon the in-kind redemption of the Bank's interest in the AMF Ultra Short
Mortgage Fund ("AMF Fund") during the quarter ended September 30, 2008.
The Company recorded losses on the sale of the AMF Fund totaling $415,000
during that prior comparative quarter. During the prior linked quarter
ended June 30, 2009, the Company recorded losses attributable to
additional other-than-temporary impairments of value totaling $144,000
attributable to these same securities.

Noninterest Expense

Noninterest expense decreased $780,000 to $11.0 million during the quarter
ended September 30, 2009 from $11.8 million during the quarter ended June
30, 2009 and increased $399,000 compared to $10.6 million during the
quarter ended September 30, 2008. The decline in non-interest expense
between linked quarters was primarily the result of a decrease in federal
deposit insurance premium expense which was partially offset by increases
in compensation, occupancy and advertising expense. By contrast, the
significant components of the increase in noninterest expense between the
quarters ended September 30, 2009 and 2008 primarily included increases in
federal deposit insurance premium expense and compensation expense with
other lesser variances within noninterest expense substantially offsetting
one another.

Federal deposit insurance premium expense decreased $1.2 million to
$157,000 during the quarter ended September 30, 2009 from $1.3 million
during the quarter ended June 30, 2009. The primary contributing factor to
the absence in the current quarter of the Federal Deposit Insurance
Corporation ("the FDIC") Special Assessment totaling $872,000 that was
recorded during the earlier comparative quarter ended June 30, 2009. The
comparative reduction in FDIC insurance premium expense between the linked
periods also reflects adjustments to the related expense accrual during
the current period to reflect the recently revised premium assessment
calculation methodology.

By contrast, Federal deposit insurance premium expense increased by
approximately $103,000 between the quarters ended September 30, 2009 and
2008. The increase was primarily attributable to the comparative increase
in both the regular quarterly assessment rate and the underlying deposit
balances, the impact of which was diminished by the expense accrual
adjustments noted above.

Employee compensation-related expenses increased approximately $282,000
between the linked quarters due, in part, to an increase in pension plan
and other benefits-related expenses coupled with the expenses associated
with staff augmentation attributable, in part, to branch expansion. Such
expansion also contributed to increases in premises occupancy expense and
advertising expense which increased by $43,000 and $52,000, respectively,
between the linked periods.

Employee compensation-related expenses increased by approximately $268,000
between the quarters ended September 30, 2009 and 2008. In addition to the
factors noted in the linked period comparison, the increase in expense
reflects the increase in compensation-related costs attributable to annual
increases in wages and salaries of existing staff and overall increases to
benefits costs including employee health care benefits.

Provision for Income Taxes

The provision for income taxes during the quarter ended September 30, 2009
was $803,000 compared to $867,000 during the quarter ended June 30, 2009
and $1.2 million during the quarter ended September 30, 2008. The decrease
in income taxes between both sets of comparative quarters was primarily
attributable to a decrease in pre-tax income. The Company's effective tax
rates during the quarters ended September 30, 2009, June 30, 2009 and
September 30, 2008 were 42.3%, 43.8%, and 40.8%, respectively.

Cash and Cash Equivalents

Cash and cash equivalents, which consist primarily of interest-earning
deposits in other banks, decreased $89.9 million to $121.6 million at
September 30, 2009 from $211.5 million at June 30, 2009. The reported
reduction in short term, liquid assets reflects, in part, the reinvestment
of a portion of the Company's excess liquidity into investment securities
during the most recent quarter as discussed in greater detail below. Cash
and cash equivalents had increased during recent quarters due to deposit
inflows and depressed loan demand. Consequently, the Company's net
interest margin had come under pressure during recent quarters as the
growing balance of interest-earning deposits produced a declining average
yield of 0.11% during the quarter ended September 30, 2009 compared to
0.19% during the quarter ended June 30, 2009 and 1.81% during the year-ago
quarter ended September 30, 2008.

Loans and Credit Quality

Loans receivable, net of deferred fees and costs and the allowance for
loan losses, increased $13.4 million to $1.05 billion at September 30,
2009 from $1.04 billion at June 30, 2009. During the reporting period,
management continued to adhere to its disciplined pricing policy.
Nevertheless, loan originations increased but loan purchases were lower,
totaling $59.2 million and $20.7 million, respectively, compared to $37.9
million and $37.6 million, respectively, during the quarter ended June
30, 2009. Residential first mortgages, home equity loans and home equity
lines of credit increased $1.8 million in aggregate between September 30,
2009 and June 30, 2009. For those same comparative periods, nonresidential
mortgages, multi-family mortgages and commercial business loans increased
$11.5 million in aggregate while all other loan categories increased
$972,000 in aggregate.

At September 30, 2009, non-performing assets totaled $20.5 million
comprising 56 nonperforming loans totaling $19.9 million, or 1.88% of
total loans, plus four real estate owned ("REO") properties totaling
$652,000. By comparison, at June 30, 2009 non-performing assets totaled
$13.3 million comprising 33 nonperforming loans totaling $13.2 million,
or 1.26% of total loans, plus one REO property totaling $109,000. The
increase in nonperforming loans was primarily attributable to the
addition of several impaired mortgage loans on residential properties
located in New Jersey. Charge-offs against the allowance for loan loss
during the quarter ended September 30, 2009 totaled $482,000 including
$384,000 in charge offs to write down the value of two loans to the fair
value of the associated real estate collateral at foreclosure and $98,000
in charge offs associated with two troubled debt restructurings. Charge
offs for the prior quarter ended June 30, 2009 totaled $1,000
attributable to the charge off of an uncollectible consumer loan. There
were no recoveries during either of the linked quarters. The allowance
for loan losses as a percentage of total loans outstanding was 0.64% at
September 30, 2009 compared with 0.62% at June 30, 2009 reflecting total
allowances of $6.8 million and $6.4 million, respectively, at the close
of each quarter.

Securities and Mortgage-backed Securities

Mortgage-backed securities available for sale, all of which are government
agency pass-through certificates, increased $65.4 million to $749.2
million at September 30, 2009 from $683.8 million at June 30, 2009. The
net increase resulted from the purchase of approximately $105.1 million of
fixed rate, agency mortgage-backed securities that was partially offset by
principal repayments and maturities during the quarter ended September 30,
2009 as compared to $18.7 million at June 30, 2009. The purchase of the
mortgage-backed securities during the quarter deployed a portion of the
Company's excess liquidity that had accumulated for the reasons noted
earlier. The net unrealized gain for this portfolio was $24.3 million as
of September 30, 2009. Based on its evaluation, management has concluded
that no other-than-temporary impairment is present within this segment of
the investment portfolio at September 30, 2009. The reported purchase of
the mortgage-backed securities during the quarter ended September 30, 2009
included approximately $4.6 million of issues eligible to meet the
Community Reinvestment Act investment test during the reporting period.

Mortgage-backed securities held to maturity decreased $510,000 to $3.8
million at September 30, 2009 from $4.3 million at June 30, due primarily
to principal repayments and the recognition of an additional $295,000 of
other-than-temporary impairment in the value of certain non-agency
collateralized mortgage obligations in the portfolio. At September 30,
2009, an analysis of the non-agency collateralized mortgage obligations
resulted in the conclusion that securities having an aggregate amortized
cost, adjusted for prior impairment charges, of $754,000 were
other-than-temporarily impaired by an additional $295,000. Of this
impairment, $98,000 was determined to be credit-related, and therefore
recognized through earnings, while $197,000 was determined to be
noncredit-related and therefore recognized through other comprehensive
income. At September 30, 2009, the Company's non-agency collateralized
mortgage obligations have a total book value, net of other-than-temporary
impairment charges, of $2.1 million and fair value of $1.9 million with
the difference attributed to temporary impairments of value. The
remainder of the held to maturity mortgage-backed securities portfolio
comprises government agency mortgage pass-through securities and
collateralized mortgage obligations that were not other-than-temporarily
impaired based upon management's evaluation at September 30, 2009.

Non-mortgage-backed securities classified as available for sale increased
by $1.6 million to $29.6 million at September 30, 2009 from $28.0 million
at June 30, 2009. The increase in the portfolio was attributable to an
increase in the fair value of the portfolio partially offset by principal
repayments. The net unrealized loss for this portfolio was reduced from
$3.6 million as of June 30, 2009 to $1.9 million at September 30, 2009.
Based on its evaluation, management has concluded that no
other-than-temporary impairment is present within this segment of the
investment portfolio at September 30, 2009.

Finally, the Company purchased $50.0 million of held to maturity agency
debentures during the quarter ending September 30, 2009. As above, the
purchase of these securities during the quarter deployed a portion of the
Company's excess liquidity that had accumulated for the reasons noted
earlier.

Deposits

Deposits increased $34.8 million to $1.46 billion at September 30, 2009
from $1.42 billion at June 30, 2009. Management continued to maintain
disciplined pricing during the reporting period. Nevertheless, growth was
reported across all categories of deposits. For the quarter ended
September 30, 2009, interest-bearing demand deposits increased $10.8
million to $174.4 million, savings deposits increased $3.2 million to
$304.8 million, certificates of deposit increased $16.4 million to $921.1
million and non-interest-bearing demand deposits increased $4.4 million to
$55.7 million. In general, depositors have been lengthening the maturities
of their certificates of deposit, particularly by transferring maturing
accounts to 24-month and 36-month certificates of deposit in order to
improve the yield.

Federal Home Loan Bank Advances

FHLB advances were unchanged at $210.0 million between June 30, 2009 and
September 30, 2009. As a result of the Bank's strong liquidity position,
there were no additional borrowings during the reporting period.

Stockholders' Equity and Capital Management

During the quarter ended September 30, 2009, stockholders' equity
increased $5.3 million to $482.0 million from $476.7 million at June 30,
2009. The increase was primarily attributable to a $4.2 million increase
in accumulated other comprehensive income due to the aggregate favorable
mark-to-market adjustment to the available for sale securities portfolios
and benefit plan related adjustments to equity and net income during the
quarter of $1.1 million. Also contributing to the increase was $402,000 of
Employee Stock Ownership Plan shares earned, $771,000 of restricted stock
plan shares earned and an adjustment to equity of $476,000 for expensing
stock options. Partially offsetting these increases to stockholders'
equity was a $968,000 increase in treasury stock due to the purchase of
87,000 shares of the Company's common stock as well as an $852,000 cash
dividend declared for payment to minority shareholders.

The Bank's ratio of tangible equity to tangible assets was 17.70% at
September 30, 2009. The Bank's Total Capital and Tier 1 Capital to
risk-weighted assets were 37.96% and 37.50%, respectively, far in excess
of the 10.0% and 6.0% levels, respectively, required by the Office of
Thrift Supervision 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
(In Thousands, Except Per Share Data, Unaudited)

At
September 30, At June 30,
2009 2009
----------- -----------
Selected Balance Sheet Data:
Assets $ 2,164,649 $ 2,124,921
Cash and cash equivalents 121,605 211,525
Securities available for sale 29,633 28,027
Securities held to maturity 50,000 0
Net loans receivable 1,052,859 1,039,413
Mortgage-backed securities available
for sale 749,166 683,785
Mortgage-backed securities held to
maturity 3,811 4,321
Goodwill 82,263 82,263
Deposits 1,456,005 1,421,201
Federal Home Loan Bank advances 210,000 210,000
Total stockholders' equity 481,957 476,720

For the Three Months Ended
-------------------------------------
September 30, June 30, September 30,
2009 2009 2008
----------- ----------- -----------
Summary of Operations:
Interest income $ 23,156 $ 23,583 $ 25,160
Interest expense 9,903 10,263 11,917
----------- ----------- -----------
Net interest income 13,253 13,320 13,243
Provision for loan losses 858 0 0
----------- ----------- -----------
Net interest income after provision
for loan losses 12,395 13,320 13,243
Non-interest income, excluding loss
on securities 618 601 723
Loss on securities (98) (144) (415)
Non-interest expense 11,017 11,797 10,618
----------- ----------- -----------
Income before taxes 1,898 1,980 2,933
Provision for income taxes 803 867 1,197
----------- ----------- -----------
Net income $ 1,095 $ 1,113 $ 1,736
=========== =========== ===========

Per Share Data:
Net income per share - basic $ 0.02 $ 0.02 $ 0.03
Net income per share - diluted $ 0.02 $ 0.02 $ 0.03
Weighted average number of common
shares outstanding - basic 68,074 68,310 69,205
Weighted average number of common
shares outstanding - diluted 68,074 68,310 69,236

Per Share Data:
Cash dividends per share (1) $ 0.05 $ 0.05 $ 0.05
Dividend payout ratio (2) 77.81% 76.82% 52.30%

(1) Represents dividends declared per common share.
(2) Represents dividends paid per minority share divided by net income.

At the Three Months Ended
----------------------------------
September 30, June 30, September 30,
2009 2009 2008
---------- ---------- ----------
Per Share Data:
Closing price as reported by NASDAQ $ 10.42 $ 11.44 $ 12.24
Book Value $ 6.97 $ 6.88 $ 6.74
Tangible Book Value $ 5.78 $ 5.70 $ 5.57

For the Three Months Ended
----------------------------------
September 30, June 30, September 30,
2009 2009 2008
---------- ---------- ----------
Performance Ratios:
Return on average assets 0.20% 0.21% 0.34%
Return on average equity 0.92% 0.93% 1.48%
Net interest rate spread (1) 2.32% 2.27% 2.12%
Net interest margin (2) 2.74% 2.76% 2.76%
Average interest-earning assets to
average interest-bearing liabilities 120.75% 123.15% 125.55%
Efficiency ratio 79.99% 85.63% 78.36%
Non-interest expense to average assets 2.05% 2.23% 2.05%

(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.

At or for the Three Months Ended
----------------------------------
September 30, June 30, September 30,
2009 2009 2008
---------- ---------- ----------
Asset Quality Ratios:(1)
Non-performing loans to total loans 1.88% 1.26% 0.22%
Non-performing assets to total assets 0.95% 0.62% 0.12%
Net charge-offs to average loans
outstanding (annualized) 0.18% 0.00% 0.00%
Allowance for loan losses to total
loans 0.64% 0.62% 0.57%
Allowance for loan losses to
non-performing loans 34.29% 48.92% 261.40%

(1) Asset quality ratios are period end ratios unless otherwise noted.

At or for the Three Months Ended
----------------------------------
September 30, June 30, September 30,
2009 2009 2008
---------- ---------- ----------
Consolidated Capital Ratios:
Average equity to average assets 22.10% 22.52% 22.73%
Equity to assets at period end 22.26% 22.43% 23.06%
Tangible equity to tangible assets at
period end 18.78% 18.98% 19.86%

For the Three Months Ended
-------------------------------------
September 30, June 30, September 30,
2009 2009 2008
----------- ----------- -----------
Average Balances:
Loans receivable $ 1,050,538 $ 1,047,017 $ 1,050,759
Mortgage-backed securities available
for sale 650,538 678,728 718,487
Mortgage-backed securities held to
maturity 5,223 5,465 447
Securities available for sale and
held to maturity 32,163 31,826 39,645
Other interest-earning assets 196,865 170,592 109,965
----------- ----------- -----------
Total interest earning assets 1,935,327 1,933,628 1,919,303
Non-interest-earning assets 217,270 184,847 151,205
----------- ----------- -----------
Total assets $ 2,152,597 $ 2,118,475 $ 2,070,508
=========== =========== ===========

Interest-bearing deposits $ 1,392,717 $ 1,360,118 $ 1,310,677
Federal Home Loan Bank advances 210,000 210,000 218,000
----------- ----------- -----------
Total interest-bearing
liabilities 1,602,717 1,570,118 1,528,677
Non-interest-bearing liabilities 74,215 71,217 71,121
Stockholders' equity 475,665 477,140 470,710
----------- ----------- -----------
Total liabilities and
stockholders' equity $ 2,152,597 $ 2,118,475 $ 2,070,508
=========== =========== ===========

For the Three Months Ended
-------------------------------------
September 30, June 30, September 30,
2009 2009 2008
----------- ----------- -----------
Spread and Margin Analysis:
Yield on average:
Loans receivable 5.67% 5.65% 5.75%
Mortgage-backed securities
available for sale and held to
maturity 4.78% 4.86% 5.08%
Securities available for sale and
held to maturity 2.71% 2.84% 2.88%
Other interest-earning assets 0.47% 0.60% 2.36%
Interest-earning assets 4.79% 4.88% 5.24%
Cost of average:
Interest-bearing deposits 2.25% 2.41% 2.97%
Federal Home Loan Bank advances 3.95% 3.91% 4.01%
Interest-bearing liabilities 2.47% 2.61% 3.12%
Net interest rate spread 2.32% 2.27% 2.12%
Net interest margin 2.74% 2.76% 2.76%
Average interest-earning assets to
average interest-bearing liabilities 120.75% 123.15% 125.55%

For further information contact:
Craig Montanaro
Senior Vice President,
Director of Strategic Planning
Kearny Financial Corp.
(973) 244-4510

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