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, 2008

 

 

 

OR

 

 

 

 

 

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

 

 

EXCHANGE ACT OF 1934

 

 

 

For the transition period from

 

to

 

 

 

 

Commission File Number 000-51093

 

 

 

KEARNY FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

UNITED STATES

 

22-3803741

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

 

 

120 Passaic Ave., Fairfield, New Jersey

 

07004-3510

(Address of principal executive offices)

 

(Zip Code)

 

 

 

Registrant’s telephone number, including area code

973-244-4500

 

 

 

 

 

 

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

 

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

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o

 

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

 

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

 

 

 

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

 

 


KEARNY FINANCIAL CORP. AND SUBSIDIARIES

 

INDEX

 

 

 

 

Page

 

 

Number

PART I - FINANCIAL INFORMATION

 

 

 

 

 

Item 1:

Financial Statements

 

 

 

 

 

 

Consolidated Statements of Financial Condition

 

 

 

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

 

1

 

 

 

 

Consolidated Statements of Income for the Three Months and Nine Months

 

 

 

Ended March 31, 2008 and 2007 (Unaudited)

 

2-3

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Nine

 

 

 

Months Ended March 31, 2008 and 2007 (Unaudited)

 

4-5

 

 

 

 

Consolidated Statements of Cash Flows for the Nine

 

 

 

Months Ended March 31, 2008 and 2007 (Unaudited)

 

6-7

 

 

 

 

Notes to Consolidated Financial Statements

 

8-12

 

 

 

Item 2:

Management’s Discussion and Analysis of

 

 

 

Financial Condition and Results of Operations

 

13-28

 

 

 

Item 3:

Quantitative and Qualitative Disclosure About Market Risk

 

29-30

 

 

 

Item 4:

Controls and Procedures

 

31

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

32-34

 

 

 

 

 

 

SIGNATURES

 

35

 

 

 

 

 

 


KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In Thousands, Except Share Data, Unaudited)

 

 

 

March 31,

 

June 30,

 

 

 

2008

 

2007

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and amounts due from depository institutions

 

$

17,888

 

$

18,999

 

Interest-bearing deposits in other banks

 

 

131,926

 

 

144,342

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

 

149,814

 

 

163,341

 

 

 

 

 

 

 

 

 

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

 

 

39,384

 

 

88,869

 

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

 

 

953,355

 

 

866,542

 

Less allowance for loan losses

 

 

(6,135

)

 

(6,049

)

 

 

 

 

 

 

 

 

Net Loans Receivable

 

 

947,220

 

 

860,493

 

 

 

 

 

 

 

 

 

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

 

 

762,026

 

 

643,779

 

Premises and equipment

 

 

35,041

 

 

35,369

 

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

 

 

12,690

 

 

4,162

 

Interest receivable

 

 

8,712

 

 

8,028

 

Goodwill

 

 

82,263

 

 

82,263

 

Bank owned life insurance

 

 

15,568

 

 

15,154

 

Other assets

 

 

7,321

 

 

15,795

 

 

 

 

 

 

 

 

 

Total Assets

 

$

2,060,039

 

$

1,917,253

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Non-interest bearing

 

$

53,705

 

$

56,339

 

Interest-bearing

 

 

1,296,969

 

 

1,355,374

 

 

 

 

 

 

 

 

 

Total Deposits

 

 

1,350,674

 

 

1,411,713

 

 

 

 

 

 

 

 

 

Advances from FHLB

 

 

218,000

 

 

28,488

 

Advance payments by borrowers for taxes

 

 

5,366

 

 

5,460

 

Other liabilities

 

 

8,714

 

 

9,000

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

1,582,754

 

 

1,454,661

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

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

 

 

7,274

 

 

7,274

 

Paid-in capital

 

 

201,966

 

 

197,976

 

Retained earnings

 

 

307,273

 

 

304,970

 

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

 

 

 

 

 

 

 

and 1,406,258 shares, respectively

 

 

(12,972

)

 

(14,063

)

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

 

 

(30,479

)

 

(24,361

)

Accumulated other comprehensive income (loss)

 

 

4,223

 

 

(9,204

)

 

 

 

 

 

 

 

 

Total Stockholders’ Equity

 

 

477,285

 

 

462,592

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

 

$

2,060,039

 

$

1,917,253

 

 

See notes to consolidated financial statements.

 

1

 


KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data, Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

13,906

 

$

11,658

 

$

41,014

 

$

33,044

 

Mortgage-backed securities

 

 

8,665

 

 

8,095

 

 

25,451

 

 

24,193

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

279

 

 

351

 

 

966

 

 

1,141

 

Tax-exempt

 

 

161

 

 

825

 

 

914

 

 

4,086

 

Other interest-earning assets

 

 

1,543

 

 

3,229

 

 

4,233

 

 

9,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Interest Income

 

 

24,554

 

 

24,158

 

 

72,578

 

 

71,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

10,650

 

 

12,150

 

 

32,874

 

 

34,991

 

Borrowings

 

 

2,293

 

 

754

 

 

5,058

 

 

2,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Interest Expense

 

 

12,943

 

 

12,904

 

 

37,932

 

 

37,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

 

11,611

 

 

11,254

 

 

34,646

 

 

34,126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Loan Losses

 

 

 

 

101

 

 

94

 

 

378

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income after Provision

 

 

 

 

 

 

 

 

 

 

 

 

 

for Loan Losses

 

 

11,611

 

 

11,153

 

 

34,552

 

 

33,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Interest Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

 

334

 

 

188

 

 

996

 

 

692

 

Gain (loss) on sale of securities
available for sale

 

 

(5

)

 

(97

)

 

0

 

 

55

 

Miscellaneous

 

 

341

 

 

392

 

 

1,055

 

 

1,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Non-Interest Income

 

 

670

 

 

483

 

 

2,051

 

 

1,823

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

6,035

 

 

7,070

 

 

18,360

 

 

20,623

 

Net occupancy expense of
premises

 

 

1,001

 

 

895

 

 

2,793

 

 

2,594

 

Equipment

 

 

1,067

 

 

1,098

 

 

3,190

 

 

3,274

 

Advertising

 

 

186

 

 

362

 

 

592

 

 

1,164

 

Federal insurance premium

 

 

138

 

 

144

 

 

419

 

 

428

 

Amortization of intangible assets

 

 

11

 

 

159

 

 

230

 

 

477

 

Directors’ compensation

 

 

576

 

 

544

 

 

1,686

 

 

1,762

 

Miscellaneous

 

 

1,056

 

 

1,030

 

 

3,260

 

 

3,277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Non-Interest Expenses

 

 

10,070

 

 

11,302

 

 

30,530

 

 

33,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

2,211

 

 

334

 

 

6,073

 

 

1,972

 

Income Taxes

 

 

(462

)

 

92

 

 

994

 

 

257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

2,673

 

$

242

 

$

5,079

 

$

1,715

 

 

 

2

 


KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Continued)

(In Thousands, Except Per Share Data, Unaudited)

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

Net Income per Common
Share (EPS):

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

$

0.00

 

$

0.07

 

$

0.02

 

Diluted

 

 

0.04

 

 

0.00

 

 

0.07

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of
Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

68,625

 

 

69,012

 

 

68,718

 

 

69,343

 

Diluted

 

 

68,646

 

 

69,293

 

 

68,841

 

 

69,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends Declared Per Common
Share

 

$

0.05

 

$

0.05

 

$

0.15

 

$

0.15

 

 

See notes to consolidated financial statements.

 

 

3

 


KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended March 31, 2007

(In Thousands, Except Share Data, Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Unearned

 

 

 

Other

 

 

 

Common Stock

 

Paid-In

 

Retained

 

ESOP

 

Treasury

 

Comprehensive

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Shares

 

Stock

 

(Loss)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - June 30, 2006

72,737

$

7,274

$

192,534

$

306,728

$

(15,517)

$

-

$

(15,885)

$

475,134

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

-

 

-

 

-

 

1,715

 

-

 

-

 

-

 

1,715

Realized gain on securities available

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for sale, net of income tax of $19

-

 

-

 

-

 

-

 

-

 

-

 

(36)

 

(36)

Unrealized gain on securities available

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for sale, net of deferred income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of $6,633

-

 

-

 

-

 

-

 

-

 

-

 

12,320

 

12,320

Total Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108 shares)

-

 

-

 

576

 

-

 

1,091

 

-

 

-

 

1,667

Stock option expense

-

 

-

 

1,494

 

-

 

-

 

-

 

-

 

1,494

Treasury stock purchases

(1,144)

 

-

 

-

 

-

 

-

 

(18,169)

 

-

 

(18,169)

Treasury stock reissued

9

 

-

 

(27)

 

-

 

-

 

135

 

-

 

108

Restricted stock plan shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

purchased (54 shares)

-

 

-

 

(789)

 

-

 

-

 

-

 

-

 

(789)

Restricted stock plan shares earned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(201 shares)

-

 

-

 

2,477

 

-

 

-

 

-

 

-

 

2,477

Tax effect from stock based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

compensation

-

 

-

 

434

 

-

 

-

 

-

 

-

 

434

Cash dividends declared ($0.15/share)

-

 

-

 

-

 

(2,768)

 

-

 

-

 

-

 

(2,768)

Balance - March 31, 2007

71,602

$

7,274

$

196,699

$

305,675

$

(14,426)

$

(18,034)

$

(3,601)

$

473,587

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

4

 


KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended March 31, 2008

(In Thousands, Except Share Data, Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Unearned

 

 

 

Other

 

 

 

Common Stock

 

Paid-In

 

Retained

 

ESOP

 

Treasury

 

Comprehensive

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Shares

 

Stock

 

Income (Loss)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - June 30, 2007

71,143

$

7,274

$

197,976

$

304,970

$

(14,063)

$

(24,361)

$

(9,204)

$

462,592

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

-

 

-

 

-

 

5,079

 

-

 

-

 

-

 

5,079

Unrealized gain on securities available

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for sale, net of deferred income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of $8,015

-

 

-

 

-

 

-

 

-

 

-

 

12,954

 

12,954

Benefit plans, net of deferred income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

tax of $315

-

 

-

 

-

 

-

 

-

 

-

 

473

 

473

Total Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,506

ESOP shares committed to be released

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108 shares)

-

 

-

 

238

 

-

 

1,091

 

-

 

-

 

1,329

Dividends contributed for payment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP loan

-

 

-

 

36

 

-

 

-

 

-

 

-

 

36

Stock option expense

-

 

-

 

1,431

 

-

 

-

 

-

 

-

 

1,431

Treasury stock purchases

(520)

 

-

 

-

 

-

 

-

 

(6,194)

 

-

 

(6,194)

Treasury stock reissued

5

 

-

 

(13)

 

-

 

-

 

76

 

-

 

63

Restricted stock plan shares earned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(189 shares)

-

 

-

 

2,313

 

-

 

-

 

-

 

-

 

2,313

Tax effect from stock based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation

-

 

-

 

(15)

 

-

 

-

 

-

 

-

 

(15)

Cash dividends declared ($0.15/share)

-

 

-

 

-

 

(2,776)

 

-

 

-

 

-

 

(2,776)

Balance - March 31, 2008

70,628

$

7,274

$

201,966

$

307,273

$

(12,972)

$

(30,479)

$

4,223

$

477,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

5

 


KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Unaudited)

 

 

Nine Months Ended

 

 

March 31,

 

 

2008

 

 

2007

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net income

$

5,079

 

 

$

1,715

 

Adjustments to reconcile net income to net cash provided by operating

 

 

 

 

 

 

 

activities:

 

 

 

 

 

 

 

Depreciation and amortization of premises and equipment

 

1,394

 

 

 

1,462

 

Net amortization of premiums, discounts and loan fees and costs

 

575

 

 

 

678

 

Deferred income taxes

 

(1,423

)

 

 

1,031

 

Amortization of intangible assets

 

231

 

 

 

477

 

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

 

 

 

 

 

 

 

from curtailment and tax effects

 

96

 

 

 

 

Provision for loan losses

 

94

 

 

 

378

 

Realized gains on sales of securities available for sale

 

 

 

 

(55

)

Increase in cash surrender value of bank owned life insurance

 

(414

)

 

 

(392

)

ESOP, stock option plan and restricted stock plan expenses

 

5,073

 

 

 

5,638

 

Realized gain on disposition of premises and equipment

 

 

 

 

(3

)

(Increase) decrease in interest receivable

 

(684

)

 

 

1,019

 

Decrease (increase) in other assets

 

1,401

 

 

 

(2,714

)

Increase (decrease) in interest payable

 

893

 

 

 

(3

)

(Decrease) increase in other liabilities

 

(551

)

 

 

60

 

 

 

 

 

 

 

 

 

Net Cash Provided by Operating Activities

 

11,764

 

 

 

9,291

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Purchases of securities available for sale

 

(299

)

 

 

(286

)

Proceeds from sale of securities available for sale

 

48,476

 

 

 

131,383

 

Proceeds from calls and maturities of securities available for sale

 

656

 

 

 

3,894

 

Proceeds from repayments of securities available for sale

 

708

 

 

 

1,395

 

Purchase of loans

 

(50,343

)

 

 

(71,377

)

Net increase in loans receivable

 

(36,655

)

 

 

(43,287

)

Purchases of mortgage-backed securities available for sale

 

(202,815

)

 

 

(81,703

)

Principal repayments on mortgage-backed securities available for sale

 

105,082

 

 

 

102,545

 

Additions to premises and equipment

 

(1,066

)

 

 

(1,189

)

Proceeds from cash settlement on premises and equipment

 

 

 

 

21

 

Purchase of FHLB stock

 

(9,000

)

 

 

 

Redemption of FHLB stock

 

472

 

 

 

245

 

 

 

 

 

 

 

 

 

Net Cash (Used In) Provided by Investing Activities

$

(144,784

)

 

$

41,641

 

 

 

 

 

 

 

 

 

 

 

6

 


KEARNY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Thousands, Unaudited)

 

 

 

Nine Months Ended

 

 

 

March 31,

 

 

 

2008

 

 

2007

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Net (decrease) increase in deposits

 

$

(61,021

)

 

$

22,933

 

Repayment of long-term FHLB advances

 

 

(10,488

)

 

 

(5,459

)

Long-term FHLB advances

 

 

200,000

 

 

 

 

Decrease in advance payments by borrowers for taxes

 

 

(94

)

 

 

(34

)

Dividends paid to minority stockholders of Kearny Financial Corp.

 

 

(2,794

)

 

 

(2,750

)

Purchase of common stock of Kearny Financial Corp. for treasury

 

 

(6,194

)

 

 

(18,169

)

Treasury stock reissued

 

 

63

 

 

 

108

 

Purchase of common stock of Kearny Financial Corp. for restricted

 

 

 

 

 

 

 

 

stock plan

 

 

 

 

 

(789

)

Dividends contributed for payment of ESOP loan

 

 

36

 

 

 

 

Tax (expense) benefit from stock based compensation

 

 

(15

)

 

 

434

 

 

 

 

 

 

 

 

 

 

Net Cash Provided by (Used in) Financing Activities

 

 

119,493

 

 

 

(3,726

)

 

 

 

 

 

 

 

 

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

 

(13,527

)

 

 

47,206

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents – Beginning

 

 

163,341

 

 

 

230,279

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents – Ending

 

$

149,814

 

 

$

277,485

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flows Information:

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Income taxes, net of refunds

 

$

1,424

 

 

$

1,313

 

 

 

 

 

 

 

 

 

 

Interest

 

$

37,039

 

 

$

37,406

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

7

 


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 subsidiaries, Kearny Federal Savings Bank (the “Bank”) and Kearny Financial Securities, Inc., and the Bank’s wholly-owned subsidiaries, KFS Financial Services, Inc. and Kearny Federal Investment Corp. The Company conducts its business principally through the Bank. Management prepared the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, including the elimination of 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 (“GAAP”). 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-month and nine-month periods ended March 31, 2008, are not necessarily indicative of the results that may be expected for the entire fiscal year or any other period.

 

The data in the consolidated statements of financial condition for June 30, 2007 was derived from the Company’s annual report on Form 10-K. That data, along with the interim financial information presented in the consolidated statements of financial condition, income, changes in stockholders’ equity and cash flows should be read in conjunction with the 2007 consolidated financial statements, including the notes thereto included in the Company’s annual report on Form 10-K.

 

3. NET INCOME PER COMMON SHARE (“EPS”)

 

Basic EPS is based on the weighted average number of common shares actually outstanding adjusted for Employee Stock Ownership Plan (“ESOP”) shares not yet committed to be released and unvested restricted stock awards. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as unvested restricted stock awards and outstanding stock options, were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Diluted EPS is calculated by 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. Shares issued and reacquired during any period are weighted for the portion of the period they were outstanding.

 

 

 

 

 

8

 


The following is a reconciliation of the numerator and denominators of the basic and diluted earnings per share computations:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

March 31, 2008

 

March 31, 2008

 

 

 

 

 

 

 

 

Per

 

 

 

 

 

 

Per

 

 

 

Income

 

Shares

 

Share

 

Income

 

Shares

 

Shae

 

 

 

(Numerator)

 

(Denominator)

 

Amount

 

(Numerator)

 

(Denominator)

 

Amount

 

 

 

(In Thousands, Except Per Share Data)

 

(In Thousands, Except Per Share Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

2,673

 

 

 

 

 

 

$

5,079

 

 

 

 

 

 

Basic earnings per share,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income available to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

common stockholders

 

$

2,673

 

68,625

 

$

0.04

 

$

5,079

 

68,718

 

$

0.07

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards

 

 

 

21

 

 

 

 

 

 

123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,673

 

68,646

 

$

0.04

 

$

5,079

 

68,841

 

$

0.07

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

March 31, 2007

 

March 31, 2007

 

 

 

 

 

 

 

 

Per

 

 

 

 

 

 

Per

 

 

 

Income

 

Shares

 

Share

 

Income

 

Shares

 

Shae

 

 

 

(Numerator)

 

(Denominator)

 

Amount

 

(Numerator)

 

(Denominator)

 

Amount

 

 

 

(In Thousands, Except Per Share Data)

 

(In Thousands, Except Per Share Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

242

 

 

 

 

 

 

$

1,715

 

 

 

 

 

 

Basic earnings per share,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income available to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

common stockholders

 

$

242

 

69,012

 

$

0.00

 

$

1,715

 

69,343

 

$

0.02

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

115

 

 

 

 

 

 

101

 

 

 

 

Restricted stock awards

 

 

 

166

 

 

 

 

 

 

220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

242

 

69,293

 

$

0.00

 

$

1,715

 

69,664

 

$

0.02

 

 

4. DIVIDEND WAIVER

 

During the quarter and nine months ended March 31, 2008, Kearny MHC, the federally chartered mutual holding company of the Company waived its right, in accordance with the non-objection previously granted by the Office of Thrift Supervision, to receive cash dividends of approximately $2.5 million and $7.6 million, respectively, declared on the shares of Company common stock it owns.

 

5. STOCK REPURCHASE PLANS

 

On January 18, 2007, the Company announced that the Board of Directors authorized an additional stock repurchase plan to acquire up to 1,036,634 shares, or 5% of the Company’s outstanding stock held by persons other than Kearny MHC. Such purchases will be made from time to time in the open market or in privately negotiated stock purchases, based on stock availability, price and the Company’s financial performance. During the quarter ended March 31, 2008, the Company purchased 278,234 shares at a cost

 

9

 


of $3.2 million, or approximately $11.52 per share. The total purchased under this plan through March 31, 2008 was 1,036,634 shares at a cost of $13.4 million, or approximately $12.90 per share.

 

On April 23, 2008 the Company announced that the Board of Directors authorized a third stock repurchase plan to acquire up to 985,603 shares or 5% of the Company’s currently outstanding common stock held by persons other than Kearny MHC.

 

6. BENEFIT PLANS – COMPONENTS OF NET PERIODIC EXPENSE  

 

The following table sets forth the aggregate net periodic benefit expense for the Bank’s Benefit Equalization Plan, Postretirement Welfare Plan and Directors’ Consultation and Retirement Plan:

 

 

 

Three Months

 

Nine Months

 

 

 

Ended March 31,

 

Ended March 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

(In Thousands)

 

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

40

 

$

57

 

$

119

 

$

171

 

Interest cost

 

 

81

 

 

85

 

 

244

 

 

255

 

Curtailment (Gain)

 

 

 

 

 

 

(35

)

 

 

Amortization of unrecognized transition

 

 

 

 

 

 

 

 

 

 

 

 

 

obligation

 

 

11

 

 

11

 

 

33

 

 

33

 

Amortization of unrecognized past service

 

 

 

 

 

 

 

 

 

 

 

 

 

liability

 

 

18

 

 

14

 

 

53

 

 

42

 

Amortization of unrecognized net actuarial

 

 

 

 

 

 

 

 

 

 

 

 

 

loss

 

 

36

 

 

46

 

 

109

 

 

138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic benefit expense

 

$

186

 

$<