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                 September 30, 2006
                                         ---------------------------------------

                                       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 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 a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer" and "large accelerated filer" in Rule 12b-2 of the Exchange
Act (Check one):
  Large accelerated filer      Accelerated filer  X    Non-accelerated filer
                          ---                    ---                        ---

     Indicate  by check mark  whether  the  registrant  is a shell  company  (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: November 2, 2006.

          $0.10 par value common stock - 72,284,200 shares outstanding

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                    Number
                                                                                    ------
<S>                                                                               <C>
PART I - FINANCIAL INFORMATION

      Item 1:  Financial Statements

               Consolidated Statements of Financial Condition
               at September 30, 2006 and June 30, 2006 (Unaudited)                       1

               Consolidated Statements of Income for the Three Months
               Ended September 30, 2006 and 2005 (Unaudited)                           2-3

               Consolidated Statements of Comprehensive Income for the Three
               Months Ended September 30, 2006 and 2005 (Unaudited)                      4

               Consolidated Statements of Cash Flows for the Three Months
               Ended September 30, 2006 and 2005 (Unaudited)                           5-6

               Notes to Consolidated Financial Statements                             7-12

      Item 2:  Management's Discussion and Analysis of
               Financial Condition and Results of Operations                         13-21

      Item 3:  Quantitative and Qualitative Disclosure About Market Risk             22-23

      Item 4:  Controls and Procedures                                                  24


PART II - OTHER INFORMATION                                                          25-26


SIGNATURES                                                                              27

</TABLE>

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 ----------------------------------------------
                  (In Thousands, Except Share Data, Unaudited)

<TABLE>
<CAPTION>
                                                                       September 30,   June 30,
                                                                           2006          2006
                                                                        ---------    -----------
<S>                                                                 <C>            <C>
Assets
------

Cash and amounts due from depository institutions                     $    19,987    $    22,563
Interest-bearing deposits in other banks                                  209,768        207,716
                                                                      -----------    -----------
        Cash and Cash Equivalents                                         229,755        230,279

Securities available for sale (amortized cost $18,643 and $18,550)         18,509         18,346
Securities held to maturity (estimated fair value $207,713
  and $204,447)                                                           206,732        209,048
Loans receivable, including net deferred loan costs of $991
  and $1,087                                                              748,945        709,064
  Less allowance for loan losses                                           (5,609)        (5,451)
                                                                      -----------    -----------
  Net Loans Receivable                                                    743,336        703,613
                                                                      -----------    -----------
Mortgage-backed securities held to maturity (estimated fair value
  $663,849 and $670,329)                                                  673,219        689,962
Premises and equipment                                                     35,729         35,941
Federal Home Loan Bank of New York ("FHLB") stock                           5,400          5,406
Interest receivable                                                         8,709          8,836
Goodwill                                                                   82,263         82,263
Bank owned life insurance                                                  14,759         14,628
Other assets                                                                9,286          9,203
                                                                      -----------    -----------

        Total Assets                                                  $ 2,027,697    $ 2,007,525
                                                                      ===========    ===========

Liabilities and Stockholders' Equity
------------------------------------

Liabilities
-----------

Deposits:
  Non-interest bearing                                                $    58,518    $    61,080
  Interest-bearing                                                      1,407,771      1,382,658
                                                                      -----------    -----------
        Total Deposits                                                  1,466,289      1,443,738

Advances from FHLB                                                         60,954         61,105
Advance payments by borrowers for taxes                                     4,964          5,232
Other liabilities                                                           7,733          6,564
                                                                      -----------    -----------

        Total Liabilities                                               1,539,940      1,516,639
                                                                      -----------    -----------

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 issued and 72,454,700 outstanding and
  72,737,500 issued and outstanding                                         7,274          7,274
Paid-in capital                                                           193,241        192,534
Retained earnings                                                         306,734        306,728
Unearned Employee Stock Ownership Plan shares; 1,515,365 shares
  and  1,551,733 shares                                                   (15,154)       (15,517)
Treasury stock, at cost; 282,800 shares and 0 shares                       (4,251)          --
Accumulated other comprehensive (loss)                                        (87)          (133)
                                                                      -----------    -----------
        Total Stockholders' Equity                                        487,757        409,886

                                                                      -----------    -----------

        Total Liabilities and Stockholders' Equity                    $ 2,027,697    $ 2,007,525
                                                                      ===========    ===========
</TABLE>

See notes to consolidated financial statements

                                       -1-

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------
                (In Thousands, Except Per Share Data, Unaudited)

<TABLE>
<CAPTION>
                                                    Three Months Ended
                                                       September 30,
                                                -------------------------
                                                  2006              2005
                                                -------           -------
<S>                                            <C>               <C>
Interest Income:
    Loans                                       $10,311           $ 8,121
    Mortgage-backed securities                    8,021             8,568
    Securities:
      Taxable                                       400             2,438
      Tax-exempt                                  1,885             1,925
    Other interest-earning assets                 2,667               919
                                                -------           -------

        Total Interest Income                    23,284            21,971
                                                -------           -------

Interest Expense:
    Deposits                                     10,745             8,287
    Borrowings                                      851               871
                                                -------           -------

        Total Interest Expense                   11,596             9,158
                                                -------           -------

Net Interest Income                              11,688            12,813

Provision for Loan Losses                           158                75
                                                -------           -------

Net Interest Income after Provision
  for Loan Losses                                11,530            12,738
                                                -------           -------

Non-Interest Income:
    Fees and service charges                        228               277
    Gain on sale of securities                     --                  86
    Miscellaneous                                   340               230
                                                -------           -------

        Total Non-Interest Income                   568               593
                                                -------           -------

Non-interest expenses:
    Salaries and employee benefits                6,814             5,603
    Net occupancy expense of
      premises                                      858               896
    Equipment                                     1,076             1,052
    Advertising                                     393               325
    Federal insurance premium                       142               134
    Amortization of intangible assets               159               159
    Directors' compensation                         657               230
    Miscellaneous                                   997               979
                                                -------           -------

        Total Non-Interest Expenses              11,096             9,378
                                                -------           -------

Income before Income Taxes                        1,002             3,953
Income Taxes                                         76               989
                                                -------           -------

Net Income                                      $   926           $ 2,964
                                                =======           =======
</TABLE>

See notes to consolidated financial statements.

                                       -2-

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF INCOME (Continued)
                  ---------------------------------------------
                (In Thousands, Except Per Share Data, Unaudited)

                                                    Three Months Ended
                                                       September 30,
                                            -----------------------------------
                                                 2006                2005
                                            ---------------     ---------------

Net Income per Common Share:
    Basic                                      $   0.01            $   0.04
    Diluted                                        0.01                0.04

Weighted Average Number of
  Common Shares Outstanding:
    Basic                                        69,751              71,053
    Diluted                                      70,465              71,053

Dividends Declared Per Common
   Share                                       $   0.05            $   0.09



See notes to consolidated financial statements.

                                       -3-

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                 -----------------------------------------------
                            (In Thousands, Unaudited)

                                                          Three Months Ended
                                                             September 30,
                                                          ------------------
                                                            2006       2005
                                                          -------    -------

Net Income                                                $   926    $ 2,964
                                                          -------    -------

Other comprehensive income (loss), net of income taxes:
    Gross realized holdings (gain) on
      securities available for sale                             -        (86)
    Income tax expense                                          -         30
    Gross unrealized holdings gain
      (loss) on securities available
      for sale                                                 70     (1,261)
    Deferred income tax benefit
      (expense)                                               (24)       441
                                                          -------    -------

Other Comprehensive Income
  (Loss)                                                       46       (876)
                                                          -------    -------

Comprehensive Income                                      $   972    $ 2,088
                                                          =======    =======


See notes to consolidated financial statements.

                                       -4-

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                            (In Thousands, Unaudited)

<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                       September 30,
                                                                                   --------------------
                                                                                     2006        2005
                                                                                   --------    --------
<S>                                                                               <C>         <C>
Cash Flows from Operating Activities:
    Net income                                                                     $    926    $  2,964
    Adjustments  to  reconcile  net  income to net cash  provided  by  operating
      activities:
        Depreciation and amortization of premises and equipment                         489         452
        Net amortization of premiums, discounts and loan fees and costs                 243         202
        Deferred income taxes                                                          (151)       (214)
        Amortization of intangible assets                                               159         159
        Provision for loan losses                                                       158          75
        Realized gains on sale of securities available for sale                           -         (86)
        (Increase) in cash surrender value of bank owned life insurance                (131)        (73)
        ESOP, stock option plan and restricted stock plan expenses                    1,859         437
        Realized loss on sale of real estate owned                                        -          35
        Decrease in interest receivable                                                 127         813
       (Increase) in other assets                                                      (116)     (1,239)
        Increase (decrease) in interest payable                                          (1)         12
        Increase (decrease) in other liabilities                                      1,180         (87)
                                                                                   --------    --------

            Net Cash Provided by Operating Activities                                 4,742       3,450
                                                                                   --------    --------
Cash Flows from Investing Activities:
    Purchases of securities available for sale                                          (92)        (67)
    Proceeds from sale of securities available for sale                                   -       6,864
    Purchases of securities held to maturity                                              -      (4,000)
    Proceeds from calls and maturities of securities held to maturity                 1,305       9,204
    Proceeds from repayments of securities held to maturity                           1,011       1,348
    Purchase of loans                                                               (13,528)     (3,187)
    Net (increase) in loans receivable                                              (26,414)    (36,326)
    Proceeds from sale of real estate owned                                               -          65
    Purchases of mortgage-backed securities held to maturity                        (19,419)    (41,900)
    Principal repayments on mortgage-backed securities held to maturity              35,979      53,576
    Additions to premises and equipment                                                (277)       (954)
    Redemption of FHLB stock                                                              7           -
    Purchase of bank owned life insurance                                                 -      (9,625)
                                                                                   --------    --------

            Net Cash (Used in) Investing Activities                                $(21,428)   $(25,002)
                                                                                   --------    --------
</TABLE>

See notes to consolidated financial statements.

                                       -5-

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                -------------------------------------------------
                            (In Thousands, Unaudited)

<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                            September 30,
                                                                        ----------------------
                                                                           2006         2005
                                                                        ---------    ---------
<S>                                                                   <C>          <C>
Cash Flows from Financing Activities:
    Net increase (decrease) in deposits                                 $  22,555    $ (32,047)
    Repayment of FHLB advances                                               (151)        (143)
    Increase (decrease) in advance payments by borrowers for taxes           (268)          35
    Refund of common stock offering expense                                     -            3
    Return of dividends paid in prior periods                                   8            -
    Dividends paid to minority stockholders of Kearny Financial Corp.        (942)        (873)
    Purchase of common stock of Kearny Financial Corp. for treasury        (4,251)           -
    Purchase of common stock of Kearny Financial Corp. for restricted
     stock plan                                                              (789)           -
                                                                        ---------    ---------

            Net Cash Provided by (Used in) Financing Activities         $  16,162    $ (33,025)
                                                                        ---------    ---------

            Net (Decrease) in Cash and Cash Equivalents                 $    (524)   $ (54,577)

Cash and Cash Equivalents - Beginning                                     230,279      139,865
                                                                        ---------    ---------

Cash and Cash Equivalents - Ending                                      $ 229,755    $  85,288
                                                                        =========    =========

Supplemental Disclosures of Cash Flows Information:
    Cash paid during the year for:
        Income taxes, net of refunds                                    $     500    $   4,076
                                                                        =========    =========

        Interest                                                        $  11,597    $   9,146
                                                                        =========    =========

Supplemental Disclosure of Non-Cash Transactions:
    Cash dividend declared                                              $     928    $   1,004
                                                                        =========    =========
</TABLE>

See notes to consolidated financial statements.

                                       -6-

<PAGE>

                     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.  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  period  ended  September  30,  2006,  are not
necessarily indicative of the results that may be expected for the entire fiscal
year or any other period.

3.  NET INCOME PER COMMON SHARE
-------------------------------

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.

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

                                               Three Months Ended
                                               September 30, 2006
                                  -----------------------------------------
                                        Income        Shares       Per Share
                                     (Numerator)  (Denominator)     Amount
                                     -----------  -------------     ------
                                     (In Thousands, Except Per Share Data)

Net income                                $926
                                      ========
Basic earnings per share,
     income available to
     common stockholders                  $926        69,751         $0.01
                                                                  ========
Effect of dilutive securities:
     Stock options                           -           514
     Restricted stock awards                 -           200
                                      --------      --------

                                          $926        70,465         $0.01
                                      ========      ========      ========

                                       -7-

<PAGE>

                                               Three Months Ended
                                               September 30, 2005
                                  -----------------------------------------
                                        Income        Shares       Per Share
                                     (Numerator)  (Denominator)     Amount
                                     -----------  -------------     ------
                                     (In Thousands, Except Per Share Data)

Net income                              $2,964
                                      ========
Basic earnings per share,
     income available to
     common stockholders                $2,964        71,053         $0.04
                                                                  ========
Effect of dilutive securities:
     Stock options                           -             -
     Restricted stock awards                 -             -
                                      --------      --------

                                        $2,964        71,053         $0.04
                                      ========      ========      ========

4.  DIVIDEND WAIVER
-------------------

During the quarter ended  September 30, 2006,  the  federally  chartered  mutual
holding  company  of  the  Company  ("Kearny  MHC"),   waived  its  right,  upon
non-objection from the Office of Thrift  Supervision,  to receive cash dividends
of  approximately  $2,546,000  declared  during  the  quarter,  on the shares of
Company common stock it owns.

5.  STOCK COMPENSATION PLANS
----------------------------

The  Company  has  two  stock-related  compensation  plans:  stock  options  and
restricted  stock  awards.  At the  annual  meeting  held on October  24,  2005,
stockholders  of the Company  approved  the Kearny  Financial  Corp.  2005 Stock
Compensation  and  Incentive  Plan.  The  plan  authorizes  the  award  of up to
3,564,137  shares as stock  options and  1,425,655  shares as  restricted  stock
awards.  On October 24,  2005,  non-employee  directors  received  in  aggregate
1,069,240  options and 427,696 shares of restricted  stock. On December 5, 2005,
certain officers of the Company and Bank received in aggregate 2,305,000 options
and 910,000 shares of restricted  stock.  The Company adopted SFAS No. 123R upon
approval of the Plan,  and began to expense  the fair value of all options  over
their  vesting  periods and began to expense  the fair value of all  share-based
compensation granted over the requisite service periods.

SFAS No. 123R also  requires  the  Company to realize as a  financing  cash flow
rather than an operating  cash flow,  as  previously  required,  the benefits of
realized  tax  deductions  in excess of  previously  recognized  tax benefits on
compensation  expense  (which was $0 for the three  months ended  September  30,
2006). In accordance with Staff Accounting Bulletin ("SAB") No. 107, the Company
classified  share-based  compensation for employees within salaries and employee
benefits to correspond with the same line item as the cash  compensation paid to
employees.  The Company  classified  share-based  compensation  for non-employee
directors within  directors'  compensation to correspond with the same line item
as the cash compensation paid to non-employee directors.

Employee  options  and  non-employee  director  options  generally  vest  over a
five-year service period.  Management  recognizes  compensation  expense for all
option grants over the awards' respective requisite service periods.  Management
estimated the fair values relating to all of the fiscal 2006 option grants using
the Black-Sholes  option-pricing model. Since there is no historical information
on the volatility of the Company's stock,  management based  expectations  about
future  volatility  on the  average  volatilities  of  similar  entities  for an
appropriate period following their initial public offering.  Thus,  calculations
to determine the stock  volatility of mutual holding  companies  converted since
1995,  and a subset  of the first  group,  all  mutual  holding  companies  that
converted  after  2000,  were used to  derive  the one and  three-year  Beta for
purposes of identifying a reasonable volatility factor. Management estimated the
expected life of

                                       -8-

<PAGE>

the options  assuming  that they must be no less than the vesting  period,  five
years,  and no greater than their  contractual  life, ten years,  in conjunction
with an  evaluation of the  grantees'  ages and lengths of service.  The 10-year
Treasury  yield in effect at the time of the grant  provides the risk-free  rate
for periods within the  contractual  life of the option.  Management  recognizes
compensation  expense  for the fair  values of these  awards,  which have graded
vesting,  on a  straight-line  basis over the  requisite  service  period of the
awards.

Restricted  shares  generally vest in full after five years.  The product of the
number of shares granted and the grant date market price of the Company's common
stock  determine  the fair  value  of  restricted  shares  under  the  Company's
restricted stock plans.  Management recognizes compensation expense for the fair
value of restricted  shares on a straight-line  basis over the requisite service
period of five years.

During the three months ended  September  30, 2006,  the Company  recorded  $1.3
million of share-based  compensation expense,  comprised of stock option expense
of $498,000 and restricted stock expense of $825,000.  The Company  estimates it
will record an  additional  $4.0  million of  share-based  compensation  expense
during the remainder of fiscal 2007.

The  following is a summary of the Company's  stock option  activity and related
information for its option plans for the three months ended September 30, 2006:

<TABLE>
<CAPTION>
                                                                                        Weighted
                                                                        Weighted        Average         Aggregate
                                                                        Average        Remaining        Intrinsic
                                                       Options          Exercise      Contractual         Value
                                                       (000's)          Price            Term            (000's)
                                                     -----------      -----------     -----------      -----------
<S>                                                    <C>             <C>          <C>                 <C>
Outstanding at June 30, 2006                               3,374           $12.34
     Granted                                                   -                -
     Exercised                                                 -                -
     Forfeited                                                 -                -
                                                     -----------
Outstanding at September 30, 2006                          3,374           $12.34       9.1 years           $9,575
                                                     ===========

Exercisable at September 30, 2006                         -                -              N/A              N/A
</TABLE>

The following is a summary of the status of the Company's  non-vested options as
of September  30, 2006 and changes  during the three months ended  September 30,
2006:

<TABLE>
<CAPTION>
                                                                                                        Weighted
                                                                                                         Average
                                                                                        Options        Grant Date
                                                                                        (000's)        Fair Value
                                                                                      -----------      -----------
<S>                                                                                     <C>              <C>
Non-vested at June 30, 2006                                                                 3,374            $2.95
     Granted                                                                                    -                -
     Exercised                                                                                  -                -
     Forfeited                                                                                  -                -
                                                                                      -----------      -----------
Non-vested at September 30, 2006                                                            3,374            $2.95
                                                                                      ===========      ===========
</TABLE>

Expected  future  compensation  expense  relating to the 3.4 million  non-vested
options  outstanding  as of  September  30, 2006 is $8.3 million over a weighted
average period of 4.1 years.

Upon exercise of vested options, management expects to draw on treasury stock as
the source of the shares. In July 2006, the Company announced a stock repurchase
plan to acquire up to 1,091,063 shares during the next twelve months for general
corporate purposes.

                                       -9-

<PAGE>

The following is a summary of the status of the Company's  restricted  shares as
of September  30, 2006 and changes  during the three months ended  September 30,
2006:

<TABLE>
<CAPTION>
                                                                                                        Weighted
                                                                                      Restricted         Average
                                                                                        Shares         Grant Date
                                                                                        (000's)        Fair Value
                                                                                      -----------      -----------
<S>                                                                                     <C>             <C>
Non-vested at June 30, 2006                                                                 1,338           $12.34
     Granted                                                                                    -                -
     Exercised                                                                                  -                -
     Forfeited                                                                                  -                -
                                                                                      -----------      -----------
Non-vested at September 30, 2006                                                            1,338           $12.34
                                                                                      ===========      ===========
</TABLE>

Expected  future  compensation  expense  relating to the 1.3 million  restricted
shares at September 30, 2006 is $13.7 million over a weighted  average period of
4.1 years.

6.  STOCK REPURCHASE PLANS
--------------------------

On November 9, 2005, the Company announced that it received  regulatory approval
to begin the  purchase  of up to  1,425,655  shares or  approximately  2% of the
outstanding  shares of its common stock in open market  transactions  for use in
funding the Company's  2005 Stock  Compensation  and Incentive  Plan  previously
approved  by  stockholders.  During the year ended June 30,  2006,  the  Company
purchased  1,371,341  shares at a total cost of  $18,941,000,  or  approximately
$13.81 per share.  During the quarter  ended  September  30,  2006,  the Company
purchased an additional  54,314 shares at a cost of $789,000,  or  approximately
$14.52  per  share  to  complete  the  funding  of  the  Company's   2005  Stock
Compensation and Incentive Plan.

On July 18, 2006, the Company announced that the Board of Directors authorized a
stock repurchase plan to acquire up to 1,091,063  shares, or 5% of the Company's
outstanding  common  stock held by persons  other than  Kearny  MHC.  This stock
repurchase plan commenced after the Company  completed its purchase of shares in
the open market to fund the  Company's  2005 Stock  Compensation  and  Incentive
Plan. During the quarter ended September 30, 2006, the Company purchased 282,800
shares at a cost of $4,251,000, or approximately $15.03 per share.

7. BENEFIT PLANS - COMPONENTS OF NET PERIODIC COST
--------------------------------------------------

Benefit Equalization Plan net periodic pension expense was as follows:

                                                             Three Months
                                                          Ended September 30,
                                                     ---------------------------
                                                        2006             2005
                                                     ----------       ----------
                                                           (In Thousands)

Service cost                                             $ 15            $  15
Interest cost                                              44               44
Amortization of unrecognized past service
   costs                                                   (3)              (3)
Amortization of unrecognized net actuarial
   loss                                                    46               46
                                                        -----            -----

Net periodic pension expense                            $ 102            $ 102
                                                        =====            =====


                                      -10-

<PAGE>

Postretirement  Welfare  Plan net  periodic  postretirement  benefit cost was as
follows:

                                                             Three Months
                                                          Ended September 30,
                                                     ---------------------------
                                                        2006             2005
                                                     ----------       ----------
                                                           (In Thousands)

Service cost                                           $  8              $  6
Interest cost                                             7                 6
Amortization of unrecognized past service
   liability                                              2                 3
                                                      -----             -----

Net periodic postretirement benefit cost              $  17             $  15
                                                      =====             =====

Directors'  Consultation  and  Retirement  Plan net  periodic  plan  cost was as
follows:

                                                             Three Months
                                                          Ended September 30,
                                                     ---------------------------
                                                        2006             2005
                                                     ----------       ----------
                                                           (In Thousands)

Service cost                                          $  34            $  32
Interest cost                                            34               29
Amortization of unrecognized transition
   obligation                                            11               11
Amortization of unrecognized past service
   liability                                             15               15
                                                      -----            -----

Net periodic postretirement benefit cost              $  94            $  87
                                                      =====            =====

8.  NEW ACCOUNTING PRONOUNCEMENTS
---------------------------------

In  September  2006,  the  FASB  issued  FASB  Statement  No.  157,  Fair  Value
Measurements,  which  defines fair value,  establishes a framework for measuring
fair value under GAAP, and expands  disclosures  about fair value  measurements.
FASB Statement No. 157 applies to other accounting  pronouncements  that require
or permit fair value  measurements.  The new guidance is effective for financial
statements  issued for fiscal years  beginning  after November 15, 2007, and for
interim  periods  within those fiscal  years.  We are currently  evaluating  the
potential  impact,  if any,  of the  adoption of FASB  Statement  No. 157 on our
consolidated financial condition, results of operations and cash flows.

On September 29, 2006, the Financial  Accounting  Standards  Board "FASB" issued
SFAS No.  158,  Employers'  Accounting  for  Defined  Benefit  Pension and Other
Postretirement  Plans ("SFAS 158"), which amends SFAS 87 and SFAS 106 to require
recognition  of the  overfunded  or  underfunded  status  of  pension  and other
postretirement  benefit plans on the balance  sheet.  Under SFAS 158,  gains and
losses,  prior service costs and credits,  and any remaining  transition amounts
under  SFAS 87 and SFAS  106 that  have  not yet  been  recognized  through  net
periodic  benefit cost will be recognized  in  accumulated  other  comprehensive
income,  net of tax  effects,  until they are  amortized  as a component  of net
periodic cost. The measurement date -- the date at which the benefit  obligation
and plan assets are measured -- is required to be the company's fiscal year end.
SFAS 158 is effective for publicly-held  companies for fiscal years ending after
December  15,  2006,  except  for the  measurement  date  provisions,  which are
effective  for fiscal  years ending after  December 15, 2008.  We are  currently
evaluating the potential  impact,  if any, of the adoption of FASB Statement No.
158 on our consolidated financial condition and results of operations.

                                      -11-

<PAGE>

On September 13, 2006, the Securities and Exchange Commission "SEC" issued Staff
Accounting Bulleting No. 108 ("SAB 108"). SAB 108 provides interpretive guidance
on how the effects of the  carryover  or  reversal  of prior year  misstatements
should be considered in quantifying a potential current year misstatement. Prior
to SAB 108,  Companies  might evaluate the  materiality  of  financial-statement
misstatements using either the income statement or balance sheet approach,  with
the income statement approach focusing on new misstatements added in the current
year,  and the  balance  sheet  approach  focusing on the  cumulative  amount of
misstatement  present in a company's balance sheet.  Misstatements that would be
material  under  one  approach  could be  viewed  as  immaterial  under  another
approach,  and not be  corrected.  SAB  108 now  requires  that  companies  view
financial statement  misstatements as material if they are material according to
either the income statement or balance sheet approach.  The Company has analyzed
SAB 108 and determined that upon adoption it will have no impact on the reported
results of operations or financial condition.

                                      -12-

<PAGE>

                                     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 September 30, 2006 and June 30, 2006

Total assets increased $20.2 million, or 1.0%, to $2.03 billion at September 30,
2006,  from $2.01 billion at June 30, 2006,  due primarily to an increase in net
loans  receivable  offset  by  decreases  in  securities  held to  maturity  and
mortgage-backed  securities  held to  maturity.  Generally,  cash flows from the
securities portfolio partially funded loan originations during the quarter ended
September 30, 2006.

Cash and cash equivalents remained virtually unchanged between June 30, 2006 and
September 30, 2006 at approximately $230 million. Generally, cash flows from the
securities portfolio and an increase in deposits funded loan originations during
the three  months  ended  September  30,  2006.  Management  expects to maintain
liquidity  at an elevated  level as long as the  Treasury  yield  curve  remains
inverted  or flat,  to the extent that the Bank does not need the funds for loan
originations.

Securities  available for sale  increased  $163,000 or 0.9%, to $18.5 million at
September 30, 2006 compared to $18.3 million at June 30, 2006.  The increase was
due  to   reinvestment   of  dividends   earned  on  mutual  fund  holdings  and
mark-to-market  adjustments  reflecting  an  easing  of  interest  rates  at the
mid-to-long  end of the Treasury yield curve during the quarter ended  September
30, 2006.

Securities held to maturity  decreased $2.3 million,  or 1.1%, to $206.7 million
at September 30, 2006,  from $209.0  million at June 30, 2006.  The decrease was
due primarily to  maturities  in the  tax-exempt  municipal  bond  portfolio and
principal  amortization  from  pass-through  certificates  consisting  of  Small
Business   Administration  loans.  Cash  flows  from  the  securities  portfolio
partially funded loan  originations  during the three months ended September 30,
2006.  During  the  quarter  ending  December  31,  2006,  management  plans  to
reclassify  its  portfolio of  securities  held to  maturity,  for the most part
municipal bonds, to available for sale for the purpose of executing sales of the
bonds at opportune times. The carrying value of the municipal bond portfolio was
$199.0 million at September 30, 2006, with a weighted  average yield of 3.77%. A
decline  in  pre-tax  income   reduces  the  advantage  of  holding   tax-exempt
instruments  and their yield is  substantially  below  market.  In October 2006,
management sold $27.4 million of the bonds recording a nominal gain.

                                      -13-

<PAGE>

Loans  receivable,  net of deferred  fees and costs and the  allowance  for loan
losses,  increased  $39.7  million,  or 5.6%, to $743.3 million at September 30,
2006  compared  to $703.6  million at June 30,  2006.  Management  continues  to
emphasize  growth in the loan  portfolio  while in turn reducing the size of the
securities   portfolio.   One-to-four   family   residential   mortgage   loans,
particularly  first  mortgages  and home equity  loans,  registered  most of the
growth,  increasing  approximately  $19.1  million and $7.4  million,  to $484.9
million and $101.1 million at September 30, 2006,  respectively.  There was also
an increase in nonresidential and multi-family  mortgages of approximately $18.0
million,  which totaled $125.1 million at September 30, 2006.  Commercial  loans
remained  virtually  unchanged  and totaled $3.1 million at September  30, 2006,
while  there  was a nominal  decrease  in home  equity  lines of credit to $12.3
million at the close of the current  quarter.  Construction  loans were the only
category  to  see a  substantial  decrease  during  the  quarter  with  balances
outstanding  decreasing  $3.6 million to $18.5  million and gross  constructions
loans  decreasing  $6.6  million  to $26.9  million  between  June 30,  2006 and
September 30, 2006. With the housing market slowing,  management  believes it is
prudent to reduce its exposure in this category,  notwithstanding  its policy of
generally not making  construction  loans to builders on a speculative basis. To
supplement the Bank's own loan originations,  management relies on agreements to
purchase mortgages from several mortgage companies, with $13.5 million purchased
during the quarter  ended  September  30, 2006.  The Bank has not  originated or
purchased any interest only mortgages or pay option adjustable rate mortgages.

Mortgage-backed securities held to maturity decreased $16.8 million, or 2.4%, to
$673.2 million at September 30, 2006, from $690.0 million at June 30, 2006. Cash
flows from  monthly  principal  and  interest  payments  partially  funded  loan
originations during the quarter ended September 30, 2006.  Management reinvested
approximately  $19.4  million in  mortgage-backed  securities,  purchasing  $5.2
million in fixed rate Community  Reinvestment  Act ("CRA")  eligible  issues and
$14.2 million in issues in which the underlying  loans are 3/1 or 5/1 adjustable
rate mortgages.  Excluding the CRA eligible issues,  which the Bank purchases to
meet its CRA  investments  requirement,  it has  been  management's  policy  for
several years to purchase only adjustable rate issues,  preferably seasoned such
that the first rate change date and conversion to a one-year  adjustable product
may be less than three or five years away.

Premises  and  equipment  decreased  $212,000,  or  0.6%,  to $35.7  million  at
September 30, 2006  compared to $35.9  million at June 30, 2006 as  depreciation
exceeded  the cost of  additions  to fixed  assets.  Bank owned  life  insurance
increased $131,000,  or 0.9%, to $14.8 million at September 30, 2006 compared to
$14.6 million at June 30, 2006, due to an increase in the cash  surrender  value
of the underlying insurance policies.

Deposits  increased  $22.6  million,  or 1.6%, to $1.47 billion at September 30,
2106  compared  to $1.44  billion at June 30,  2006.  During the  quarter  ended
September 30, 2006, certificates of deposit and interest-bearing demand deposits
increased  approximately  $52.3 million and $4.9 million,  to $935.3 million and
$127.0 million,  respectively;  while savings deposits  decreased  approximately
$32.1 million to $345.4 million and non-interest-bearing deposits decreased $2.6
million to $58.5 million. The ongoing threat of loss of deposits to competitors,
both core deposits and certificates of deposit,  necessitated the continuance of
promotional  interest rates to counteract  promotions offered by other financial
institutions  in the Bank's market area. The challenge for management  continued
to be balancing the potential rate of attrition  against a significant  increase
in the cost of deposits. The most popular products were certificates of deposits
with five,  nine and 13 month terms and a tiered  money  market  account,  which
management  expects will  re-price  lower if the Federal  Reserve Bank begins to
ease short-term interest rates as anticipated during the first half of 2007.

Federal  Home  Loan  Bank  advances  decreased  $151,000,  to $61.0  million  at
September  30, 2006  compared to $61.1 million at June 30, 2006 due to scheduled
principal  payments on amortizing  advances.  Management expects to repay a $5.0
million  advance,  with an interest rate of 5.90%,  when this advance matures in
November 2006.

                                      -14-

<PAGE>

Stockholders'  equity decreased $3.1 million, to $487.8 million at September 30,
2006,  from $490.9  million at June 30, 2006.  The decrease  was  primarily  the
result  of the  purchase  of  stock to fund the  restricted  stock  plan and for
treasury purposes. The Company purchased 54,314 shares at a cost of $789,000 for
the restricted stock plan and 282,800 shares at a cost of $4,251,000 as treasury
shares.  A common stock dividend of $0.05 per share totaling  $928,000  declared
for  payment in the  subsequent  quarter  also  contributed  to the  decrease in
stockholders'  equity.  Partially  offsetting  the  decrease  was net  income of
$926,000  recorded  during the  quarter,  the  release of  $535,000  of unearned
employee  stock  ownership  plan  shares,  the  vesting of  $826,000 of unearned
restricted  stock plan shares and a $498,000  adjustment to equity for expensing
stock options.

Comparison  of Operating  Results for the Three Months Ended  September 30, 2006
and 2005

General.  Net income for the quarter  ended  September  30, 2006 was $926,000 or
$0.01 per share,  a decrease of $2.0  million,  or 66.7%,  from $3.0  million or
$0.04 per share for the quarter ended  September  30, 2005.  The decrease in net
income resulted primarily from an increase in non-interest expense, particularly
salaries  and  employee  benefits  and  directors'  compensation  due  to  stock
compensation  plans, and a decrease in net interest  income.  An increase in the
provision for loan losses also contributed to the decrease in net income.

Net Interest  Income.  Net interest  income for the three months ended September
30, 2006 was $11.7  million,  a decrease of $1.1 million,  or 8.6%,  compared to
$12.8 million for the three months ended September 30, 2005. The decrease in net
interest income was due almost exclusively to a substantial increase in interest
expense partially offset by an increase in interest income, rather than a change
in volume of interest-earnings assets versus interest-bearing  liabilities.  The
ratio of average interest-earning assets to average interest-earning liabilities
remained virtually unchanged at September 30, 2006 compared to a year earlier.

The net interest rate spread  decreased 27 basis points to 1.84% for the quarter
ended  September 30, 2006,  from 2.11% for the quarter ended September 30, 2005.
During the  quarter  ended  September  30,  2006,  interest-bearing  liabilities
continued to re-price faster than interest-earning  assets, due primarily to the
promotional  interest  rates  introduced  to  attract  new  deposits  which also
affected the rollover  rates on maturing  certificates  of deposit.  The cost of
average  interest-bearing  liabilities increased 80 basis points, from 2.40% for
the three months ended  September  30, 2005, to 3.20% for the three months ended
September 30, 2006.  During the quarter ended  September 30, 2006,  the yield on
average  interest-earning  assets  increased 53 basis  points,  to 5.04% for the
quarter ended September 30, 2006, from 4.51% for the quarter ended September 30,
2005.

The net interest margin decreased ten basis points to 2.53% for the three months
ended  September  30,  2006,  compared  with  2.63% for the three  months  ended
September  30, 2005.  The decrease in the net interest  margin  resulted  from a
decrease  in net  interest  income  partially  offset by a  decrease  in average
interest-earning  assets.  Average  interest-earning  assets  during the quarter
ended  September 30, 2006 were $1.85 billion or $100.6 million less than average
interest-earning  assets of $1.95 billion during the quarter ended September 30,
2005. The decrease  resulted  primarily from cash flows utilized to fund deposit
outflows.   Average  interest-bearing   liabilities  during  the  quarter  ended
September  30,  2006 were  $1.45  billion  or $75.0  million  less than  average
interest-bearing liabilities of $1.52 billion during the quarter ended September
30,   2005.   The  ratio  of   average   interest-earning   assets  to   average
interest-bearing  liabilities  was 127.4% for the quarter  ended  September  30,
2006, virtually unchanged from 127.7% for the quarter ended September 30, 2005.

                                      -15-

<PAGE>

Interest Income. Total interest income increased $1.3 million, or 5.9%, to $23.3
million for the three months ended  September  30, 2006,  from $22.0 million for
the three months ended September 30, 2005. Year-over-year,  interest income from
loans  and  other   interest-earning   assets   increased  while  interest  from
mortgage-backed securities and securities decreased.

Interest income from loans receivable increased $2.2 million, or 27.2%, to $10.3
million for the three months ended September 30, 2006, from $8.1 million for the
three months ended  September 30, 2005 due to growth in the portfolio as well as
an improvement in yield. The average balance of net loans  receivable  increased
$145.0 million,  or 25.1%, to $721.8 million for the quarter ended September 30,
2006,  from $576.8 million for the quarter ended  September 30, 2005. The Bank's
business  plan seeks to  continue  increasing  the Bank's loan  portfolio  while
reducing its reliance on securities to generate  interest  income.  The yield on
average  net loans  receivable  increased  eight  basis  points to 5.71% for the
quarter  ended  September  30,  2006,  compared to 5.63% for the  quarter  ended
September 30, 2005. The improvement in yield  year-over-year  was due in part to
growth in the nonresidential and multi-family mortgage category.

Interest  income from  mortgage-backed  securities  held to  maturity  decreased
$547,000,  or 6.4%,  to $8.0 million for the three months  ended  September  30,
2006,  compared to $8.6 million for the three months ended  September  30, 2005.
The average balance of mortgage-backed  securities  decreased $73.8 million,  or
9.7%, to $683.7  million for the quarter ended  September 30, 2006,  from $757.5
million  for the  quarter  ended  September  30,  2005.  The  yield  on  average
mortgage-backed  securities  increased  17 basis  points  to 4.69% for the three
months ended September 30, 2006, from 4.52% for the three months ended September
30, 2005.  The decrease in the average  balance of  mortgage-backed  securities,
year-over-year,  resulted from the redeployment of principal  payments into loan
originations as well as funding deposit outflows. The increase in yield resulted
from rate adjustments in pass-through  certificates  containing  adjustable rate
mortgages as management's  plan to invest  primarily in adjustable rate products
began to produce positive results.

Interest  income  from  securities  available  for  sale  and  held to  maturity
decreased  $2.1  million,  or  47.7%,  to $2.3  million  for the  quarter  ended
September 30, 2006,  from $4.4 million for the quarter ended September 30, 2005.
The average balance of securities  decreased $275.3 million, or 54.9%, to $226.4
million for the quarter ended September 30, 2006, compared to $501.7 million for
the quarter ended  September 30, 2005.  The decrease in the average  balance was
due  primarily to the sale of the Bank's entire  portfolio of government  agency
notes,  with a carrying  value of $249.0  million,  and Freddie Mac common stock
with a carrying  value of $8.9 million,  in February 2006.  Management  utilized
cash  flows from  maturing  securities  to fund loan  originations  and  deposit
outflows.  The yield on average  securities  improved 56 basis points from 3.48%
for the three months  ended  September  30, 2005,  to 4.04% for the three months
ended  September  30, 2006.  The higher yield on  securities  resulted  from the
February 2006 sale of the  government  agency notes,  which  provided a yield of
3.22%.  During  the  quarter  ending  December  31,  2006,  management  plans to
reclassify  its  portfolio of  securities  held to  maturity,  for the most part
municipal  bonds,  to available for sale for purposes of executing  sales of the
bonds.  With a weighted  average yield of 3.77% as of September 30, 2006, a sale
of the municipal bond portfolio and subsequent reinvestment of the proceeds into
cash  equivalents  and ultimately  loans should have a positive effect on future
results.

Interest  income from other  interest-earning  assets  increased $1.7 million to
$2.7 million for the quarter  ended  September  30, 2006,  from $919,000 for the
quarter ended September 30, 2005. This was a result of a significant increase in
the yield as well as the average balance of other interest-earning assets. There
was a 166 basis point  increase in the yield on average  other  interest-earning
assets to 4.96% for the quarter  ended  September  30, 2006,  from 3.30% for the
quarter ended  September 30, 2005, due to rising  short-term  interest rates and
particularly  the rate paid on overnight  deposits.  There was a $103.6  million
increase  in the  average  balance  of other  interest-earning  assets to $215.0
million for the three months

                                      -16-

<PAGE>

ended  September  30,  2006,  from  $111.4  million for the three  months  ended
September  30,  2005.  The  average  balance  of other  interest-earning  assets
increased due to an increase in interest-earning deposits, the primary component
of other interest-earning assets, partially offset by a decrease in Federal Home
Loan Bank of New York capital  stock.  Management  placed the proceeds  from the
restructuring  of the securities  portfolio in February 2006 in cash equivalents
pending redeployment into other earning assets.

Interest Expense.  Total interest expense  increased $2.4 million,  or 26.1%, to
$11.6 million for the three months ended  September 30, 2006,  from $9.2 million
for the three  months ended  September  30,  2005.  Year-over-year,  there was a
significant  increase in interest  expense  attributed  to deposits and a slight
decrease in interest expense from borrowings.

Interest  expense from  deposits  increased  $2.4  million,  or 28.9%,  to $10.7
million for the three months ended September 30, 2006, from $8.3 million for the
three months ended September 30, 2005. The increase  resulted  primarily from an
increase  in the cost of  average  interest-bearing  deposits,  which  more than
offset a decrease in the average balance of interest-bearing  deposits. The cost
of average interest-bearing  deposits increased 82 basis points to 3.09% for the
quarter ended September 30, 2006, from 2.27% for the quarter ended September 30,
2005.  In  an  effort  to  retain  and  attract  deposits,   management  offered
promotional  rates on selected  certificates  of deposit  maturities  and tiered
money market deposit accounts, and this strategy had a significant effect on the
Bank's cost of funds during the current quarter.
The average balance of  interest-bearing  deposits  decreased $73.1 million,  or
5.0%, to $1.39 billion for the three months ended September 30, 2006, from $1.46
billion for the three  months  ended  September  30,  2005.  The decrease in the
average  balance speaks to the attrition  caused by promotions  offered by other
financial institutions in the Bank's market area.

Interest  expense from Federal Home Loan Bank  advances  decreased  $20,000,  or
2.3%,  to $851,000 for the quarter ended  September 30, 2006,  from $871,000 for
the quarter ended September 30, 2005. Average borrowings decreased $1.8 million,
or 2.9%,  to $61.0 million for the three months ended  September 30, 2006,  from
$62.8  million for the three months ended  September  30, 2005.  The decrease in
average  borrowings  was more than  enough to offset an  increase in the cost of
average  borrowings,  which  increased  three basis  points to 5.58% from 5.55%,
year-over-year.  The decrease in the average  balance  resulted  from  scheduled
principal  payments  on  amortizing   advances  leaving  generally  higher  rate
long-term  advances on the Bank's books,  which  contributed  to the increase in
cost.

Provision for Loan Losses. The provision for loan losses increased  $83,000,  to
$158,000 for the quarter  ended  September  30, 2006,  from a $75,000  provision
recorded for the quarter ended  September 30, 2005.  Management  attributes  the
increase  primarily to growth in the loan  portfolio.  Total loans  increased to
$748.0 million at September 30, 2006 from $708.0 million at June 30, 2006. Asset
quality  continued to be strong as  non-performing  loans were $1.0 million,  or
0.14% of total loans at September 30, 2006, as compared to $942,000, or 0.13% of
total loans at June 30, 2006.  The  allowance for loan losses as a percentage of
total loans  outstanding  was 0.75% at September  30, 2006 and 0.77% at June 30,
2006,   reflecting   allowance  balances  of  $5.6  million  and  $5.5  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.  The allowance
for loan  losses  as of  September  30,  2006  was  maintained  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.

                                      -17-

<PAGE>

Non-Interest Income. Non-interest income attributed to fees, service charges and
miscellaneous  income  increased  $61,000,  or 12.0%,  to $568,000 for the three
months ended September 30, 2006, compared to $507,000 for the three months ended
September 30, 2005.  The increase was due primarily to an increase of $58,000 in
income  from bank  owned  life  insurance  partially  offset by lower  fees from
operations  and the Bank's  retail branch  network of $21,000 and  non-recurring
loan fees of $11,000.  There was a loss on sale of real estate  owned of $35,000
in the  quarter  ended  September  30,  2005 with no such loss  recorded  in the
quarter  ended  September  30,  2006.  Management  is  considering  offering  an
overdraft  privilege  program  to  the  Bank's  retail  customers  as a  way  of
increasing fee income.

There was no gain on sale of securities  during the quarter ended  September 30,
2006 compared to a gain on sale of securities of $86,000 recorded in the quarter
ended September 30, 2005.

Non-Interest  Expense.  Total  non-interest  expense increased $1.7 million,  or
18.1%, to $11.1 million for the three months ended September 30, 2006, from $9.4
million for the three months ended  September  30, 2005.  The increase  resulted
primarily  from  increases  in salaries and  employee  benefits  and  directors'
compensation,  nominal  increases in equipment,  advertising  and  miscellaneous
expenses, partially offset by lower net occupancy expense of premises.

Salaries and employee benefits increased $1.2 million, or 21.4%, to $6.8 million
for the quarter  ended  September  30,  2006,  compared to $5.6  million for the
quarter ended September 30, 2005.  Management  attributes the increase primarily
to stock compensation plans approved at the Company's first annual stockholders'
meeting held in October 2005,  which  resulted in an expense of $933,000  during
the quarter  ended  September  30, 2006,  with no such  expense  recorded in the
quarter ended  September 30 2005. The current  quarter  included  employee stock
ownership plan compensation expense of $548,000, an increase of $89,000 compared
to $459,000 during the quarter ended September 30, 2005.  Year-over-year,  there
were increases totaling  approximately  $189,000 in other components of salaries
and employee benefits,  including  compensation expense,  pension expense, other
benefits expense and payroll taxes expense.

Year-over-year,  net occupancy expense of premises decreased $38,000 to $858,000
from $896,000.  The decrease  resulted from a commensurate  decrease in net rent
expense  due to  management's  ongoing  efforts to lease  surplus  space in Bank
facilities  to  other  businesses.  The  rental  income  partially  offsets  the
occupancy expense of such premises.

Equipment  expense  increased  $24,000,  with the  expense in both  quarters  of
approximately  $1.1 million.  The increase  resulted  from nominal  increases in
maintenance expense, depreciation expense and data processing costs.

Advertising  expense increased $68,000 to $393,000,  compared to $325,000 during
the same period in the prior year, due to an extensive  advertising  campaign to
promote  deposit and loan  products.  The campaign  included  programs to market
special  certificate of deposit rates, a tiered money market deposit account and
Star Banking, a relationship based retail-banking product designed to build core
deposits.

Directors' compensation increased $427,000, to $657,000 during the quarter ended
September 30, 2006,  from $230,000 in the quarter ended  September 30, 2005. The
increase resulted primarily from stock compensation  plans, which resulted in an
expense of $390,000  during the quarter ended  September 30, 2006,  with no such
expense recorded in the quarter ended September 30, 2005. Year-over-year,  there
were increases totaling  approximately $37,000 in other components of directors'
compensation, including fees and an incentive bonus plan.

                                      -18-

<PAGE>

Miscellaneous  expenses  increased  $18,000,  to $997,000 for the quarter  ended
September  30, 2006,  compared to $979,000 for the quarter  ended  September 30,
2005. The most  significant  increases  included  audit and accounting  services
expense and loan expense, which increased $15,000 and $35,000, respectively. The
largest decreases  included legal expense,  printing and office supplies expense
and  miscellaneous  expense,  which  decreased  $15,000,  $21,000  and  $27,000,
respectively.  Expense attributed to the Company's annual meeting was $38,000 in
the current quarter with no such expense  recorded during the same quarter prior
year. All other elements of non-interest expense decreased approximately $8,000,
year-over-year.

Provision for Income Taxes. The provision for income taxes decreased $913,000 to
$76,000 for the quarter ended  September 30, 2006, from $989,000 for the quarter
ended  September 30, 2005. The effective  income tax rate was 7.6% for the three
months ended September 30, 2006, as compared to 25.0% for the three months ended
September 30, 2005.  Management  attributes the lower effective  income tax rate
primarily to a decrease in pre-tax  income,  $1.0 million for the quarter  ended
September 30, 2006 compared to $4.0 million for the quarter ended  September 30,
2005.  Also a factor,  due to the Bank's  significant  investment  in tax-exempt
municipal  bonds,  tax-exempt  interest  reduced the  Company's  federal  income
expense by  approximately  $593,000 during the quarter ended September 30, 2006,
compared to a reduction of approximately $621,000 in the quarter ended September
30, 2005.

                                      -19-

<PAGE>

Liquidity and Capital Resources

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, principal amortization, principal prepayments and maturities
of mortgage-backed securities and loans receivable; maturities of securities and
funds provided from  operations.  In addition,  the Bank invests excess funds in
short-term  interest-earning  assets such as over-night deposits,  which provide
liquidity  to meet  lending  requirements.  While  scheduled  payments  from the
amortization of loans and mortgage-backed securities and maturing securities and
short-term  investments  are relatively  predictable  sources of funds,  general
interest rates,  economic  conditions and competition  greatly influence deposit
flows and prepayments on loans and mortgage-backed securities.

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.  The Bank attempts to
maintain adequate but not excessive liquidity,  and liquidity management is both
a daily and  long-term  function of  business  management.  However,  management
expects to maintain liquidity at an elevated level as long as the Treasury yield
curve remains  inverted or flat, to the extent that the Bank does need the funds
for loan originations.

The Bank reviews cash flow  projections  regularly  and updates them in order to
maintain  liquid assets at levels  believed to meet the  requirements  of normal
operations,  including  loan  commitments  and potential  deposit  outflows from
maturing certificates of deposit and savings withdrawals. At September 30, 2006,
the  Bank had  outstanding  commitments  to  originate  loans of $40.1  million,
commitments  to fund the  purchase  of loans on a flow  basis of $56.2  million,
construction  loans in process  of $8.4  million  and unused  lines of credit of
$28.1 million.

During the quarter ended June 30, 2006, management introduced  promotional rates
for terms of five, nine and 13 months to retain and attract new  certificates of
deposit.  The Bank continued to offer the  promotional  rates during the quarter
ended  September  30, 2006.  Certificates  of deposit  increased  $52.3  million
between  the linked  quarters,  from  $883.1  million at June 30, 2006 to $935.4
million at September 30, 2006.  Certificates  of deposit  scheduled to mature in
one year or less at September 30, 2006 totaled $758.9 million compared to $658.2
million at June 30, 2006. Based on historical  experience,  management  believes
that a  significant  portion of  maturing  deposits  will  remain with the Bank.
However,  if the cost of deposits  continues to increase at the rate experienced
during the quarter  ended  September 30, 2006,  management  may introduce a more
conservative pricing strategy, which could lead to significant deposit outflows.
Taking into consideration the Bank's substantial liquidity position,  management
implemented such a policy change in late October 2006.

While deposits are the Bank's  primary source of funds,  the Bank also generates
cash  through  borrowings  from the  Federal  Home  Loan  Bank of New York  (the
"FHLB").  At  September  30,  2006,  advances  from the FHLB  amounted  to $61.0
million.  The Bank has the  capacity to borrow  additional  funds from the FHLB,
through  an  overnight  line of  credit  or by taking  additional  long-term  or
short-term advances.

                                      -20-

<PAGE>

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
September  30,  2006,   Kearny   Federal   Savings  Bank  exceeded  all  capital
requirements of the Office of Thrift Supervision (the "OTS").

The  following  table sets forth the Bank's  capital  position at September  30,
2006, as compared to the minimum regulatory capital requirements:

<TABLE>
<CAPTION>
                                                                September 30, 2006 (Unaudited)
                                        -------------------------------------------------------------------------------
                                                                                                      To Be Well
                                                                                                  Capitalized Under
                                                                        Minimum Capital           Prompt Corrective
                                                 Actual                   Requirements            Action Provisions
                                        -------------------------    -----------------------    -----------------------
                                          Amount         Ratio        Amount        Ratio        Amount        Ratio
                                        ------------    ---------    ----------   ----------    ---------    ----------
                                                                    (Dollars in Thousands)
<S>                                   <C>               <C>     <C>                 <C>    <C>                <C>

Total Capital
  (to risk-weighted assets)              $  376,453       47.49%     $  63,412        8.00%    $  79,266        10.00%

Tier 1 Capital
  (to risk-weighted assets)              $  370,844       46.78%             -           -     $  47,559         6.00%

Core (Tier 1) Capital
  (to adjusted total assets)             $  370,844       19.26%     $  57,759        3.00%    $  96,266         5.00%

Tangible Capital
  (to adjusted total assets)             $  370,844       19.26%     $  28,880        1.50%            -            -

</TABLE>

                                      -21-

<PAGE>

                                     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 June 30,  2006,  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 September 30, 2006.

<TABLE>
<CAPTION>
                                                                At June 30, 2006
                            ------------------------------------------------------------------------------------------
                                                                                  Net Portfolio Value
                                  Net Portfolio Value                       as % of Present Value of Assets
                            ---------------------------------     ----------------------------------------------------
                                                                                     Net Portfolio       Basis Point
 Changes in Rates (1)         $ Amount           $ Change           % Change          Value Ratio          Change
-----------------------     --------------     --------------     --------------     --------------     --------------
                                                                 (In Thousands)
<S>   <C>                    <C>                <C>                    <C>             <C>                <C>
       +300 bp                 274,160           -135,558               -33%             15.39%            -581 bp
       +200 bp                 318,540            -91,178               -22%             17.40%            -380 bp
       +100 bp                 364,082            -45,637               -11%             19.35%            -185 bp
          0 bp                 409,718                  -                 -              21.20%               -
       -100 bp                 451,685            +41,966               +10%             22.80%            +160 bp
       -200 bp                 482,117            +72,398               +18%             23.88%            +268 bp
</TABLE>

(1) The -300 bp scenario is not shown due to the low  prevailing  interest  rate
environment.

                                      -22-

<PAGE>

This analysis also indicated that as of June 30, 2006 an immediate and permanent
2.00% increase in interest rates would cause an approximately  6.41% decrease in
our net interest income.

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.

                                      -23-

<PAGE>

                                     ITEM 4.
                             CONTROLS AND PROCEDURES
                             -----------------------


Based on their  evaluation of the Company's  disclosure  controls and procedures
(as defined in Rules  13a-15(e)  under the Securities  Exchange Act of 1934 (the
"Exchange Act"),  the Company's  principal  executive  officer and the principal
financial  officer have  concluded  that as of the end of the period  covered by
this Quarterly  Report on Form 10-Q such disclosure  controls and procedures are
effective to ensure that information  required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded,  processed,
summarized  and reported  within the time periods  specified in  Securities  and
Exchange  Commission  rules and forms and is accumulated and communicated to the
Company's  management,  including the principal  executive officer and principal
financial officer,  as appropriate to allow timely decisions  regarding required
disclosures.

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.

                                      -24-

<PAGE>

                                     PART II


ITEM 1.        Legal Proceedings
               -----------------

               At September 30, 2006, 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 1A.       Risk Factors
               ------------

               Management  of the Company does not believe  there have been
               any  material  changes  with  regard  to  the  Risk  Factors
               previously  disclosed  under Item 1A. of the Company's  Form
               10-K for the year ended June 30, 2006, previously filed with
               the Securities and Exchange Commission.

ITEM 2.        Unregistered Sales of Equity Securities and Use of Proceeds
               -----------------------------------------------------------


                 ISSUER PURCHASES OF EQUITY SECURITIES

               The   following   table   reports   information    regarding
               repurchases of the Company's common stock during the quarter
               ended September 30, 2006.

--------------------------------------------------------------------------------
                                                Total Number of    Maximum
                                                     Shares       Number of
                                                  Purchased by    Shares that
                        Total                   Part of Publicly  May Yet Be
                       Number of     Average       Announced    Purchased Under
                        Shares      Price Paid     Plans or       the Plans or
Period                 Purchsed     per Share      Programs       Programs(1)
--------------------------------------------------------------------------------
July 1-31, 2006               -             -             -               -
--------------------------------------------------------------------------------
August 1-31, 2006        53,200        $14.72        53,200       1,037,863
--------------------------------------------------------------------------------
September 1-30, 2006    229,600        $15.11       282,800         808,263
--------------------------------------------------------------------------------
Total                   282,800        $15.03       282,800               -
--------------------------------------------------------------------------------

(1)  On July 18, 2006,  the Company  announced a five percent  stock  repurchase
     plan (approximately  1,091,063 shares).  Such purchases are to be made from
     time to time in the open market, based on stock availability, price and the
     Company's financial performance. This program has no expiration date.

ITEM 3.        Defaults Upon Senior Securities
               -------------------------------

               Not applicable.

ITEM 4.        Submission of Matters to a Vote of Security Holders
               ---------------------------------------------------

               Not applicable.

ITEM 5.        Other Information
               -----------------

               None.

ITEM 6.        Exhibits
               --------

               The following Exhibits are filed as part of this report:
<TABLE>
<CAPTION>
<S>                <C>
               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 K. Parisi (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)
               10.11  2005 Stock Compensation and Incentive Plan (2)
               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).
</TABLE>

-----------------

               (1)  Incorporated  by  reference  to  the  identically   numbered
                    exhibit to the Registrant's  Registration  Statement on Form
                    S-1 (File No. 333-118815).
               (2)  Incorporated  by  reference to the  Registrant's  definitive
                    proxy   statement   filed   September  30,  2005  (File  No.
                    000-51093).

                                      -25-

<PAGE>

                                   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.

<TABLE>
<CAPTION>

<S>                                     <C>
Date:      November 8, 2006               By:      /s/ John N. Hopkins
           ----------------                        -------------------------------------------
                                                   John N. Hopkins
                                                   President and Chief Executive Officer
                                                   (Duly  authorized  officer  and  principal
                                                   executive officer)

Date:      November 8, 2006               By:      /s/ Albert E. Gossweiler
           ----------------                        -------------------------------------------
                                                   Albert E. Gossweiler
                                                   Senior Vice President and Chief  Financial
                                                   Officer
                                                   (Principal financial officer)

</TABLE>

                                      -26-