SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q
(Mark One)

---------
   X         QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---------    EXCHANGE ACT OF 1934

   For the quarterly period ended                    March 31, 2007
                                         ---------------------------------------

                                       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: May 1, 2007.

          $0.10 par value common stock - 71,602,437 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 March 31, 2007 and June 30, 2006 (Unaudited)                                    1

               Consolidated Statements of Income for the Three Months and Nine Months
               Ended March 31, 2007 and 2006 (Unaudited)                                        2-3

               Consolidated Statements of Changes in Stockholders' Equity for the Nine
               Months Ended March 31, 2007 and 2006 (Unaudited)                                 4-7

               Consolidated Statements of Cash Flows for the Nine
               Months Ended March 31, 2007 and 2006 (Unaudited)                                 8-9

               Notes to Consolidated Financial Statements                                     10-17

      Item 2:  Management's Discussion and Analysis of
               Financial Condition and Results of Operations                                  18-31

      Item 3:  Quantitative and Qualitative Disclosure About Market Risk                      32-33

      Item 4:  Controls and Procedures                                                           34


PART II - OTHER INFORMATION                                                                   35-37


SIGNATURES                                                                                       38

</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                 March 31,      June 30,
                                                                                   2007           2006
                                                                                              (As restated)
                                                                                -----------    -----------
<S>                                                                            <C>            <C>
Assets
------

Cash and amounts due from depository institutions                               $    17,231    $    22,563
Interest-bearing deposits in other banks                                            260,254        207,716
                                                                                -----------    -----------
        Cash and Cash Equivalents                                                   277,485        230,279

Securities available for sale (amortized cost $91,281 and $227,598)                  90,882        222,793
Loans receivable, including net deferred loan costs of $1,529 and $1,087            823,554        709,064
  Less allowance for loan losses                                                     (5,856)        (5,451)
                                                                                -----------    -----------
  Net Loans Receivable                                                              817,698        703,613

Mortgage-backed securities available for sale (amortized cost $668,630
  and $689,962)                                                                     663,487        670,329
Premises and equipment                                                               35,650         35,941
Federal Home Loan Bank of New York ("FHLB") stock                                     5,161          5,406
Interest receivable                                                                   7,817          8,836
Goodwill                                                                             82,263         82,263
Bank owned life insurance                                                            15,020         14,628
Other assets                                                                         12,276         17,685
                                                                                -----------    -----------

        Total Assets                                                            $ 2,007,739    $ 1,991,773
                                                                                ===========    ===========

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

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

Deposits:
  Non-interest bearing                                                          $    57,521    $    61,080
  Interest-bearing                                                                1,409,185      1,382,658
                                                                                -----------    -----------
        Total Deposits                                                            1,466,706      1,443,738

Advances from FHLB                                                                   55,646         61,105
Advance payments by borrowers for taxes                                               5,198          5,232
Other liabilities                                                                     6,602          6,564
                                                                                -----------    -----------

        Total Liabilities                                                         1,534,152      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 shares
  issued;  71,602,437 and 72,737,500 shares, respectively, outstanding                7,274          7,274
Paid-in capital                                                                     196,699        192,534
Retained earnings                                                                   305,675        306,728
Unearned Employee Stock Ownership Plan shares; 1,442,627 shares
  and 1,551,732 shares                                                              (14,426)       (15,517)
Treasury stock, at cost; 1,135,063 shares and 0 shares                              (18,034)             -
Accumulated other comprehensive (loss)                                               (3,601)       (15,885)
                                                                                -----------    -----------
        Total Stockholders' Equity                                                  473,587        475,134
                                                                                -----------    -----------

        Total Liabilities and Stockholders' Equity                              $ 2,007,739    $ 1,991,773
                                                                                ===========    ===========
</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     Nine Months Ended
                                            March 31,               March 31,
                                        --------------------   -------------------
                                          2007        2006       2007       2006
                                        --------    --------   --------   --------
<S>                                   <C>         <C>        <C>        <C>
Interest Income:
    Loans                               $ 11,658    $  9,108   $ 33,044   $ 25,773
    Mortgage-backed securities             8,095       8,253     24,193     25,239
    Securities:
      Taxable                                351       1,328      1,141      6,183
      Tax-exempt                             825       1,901      4,086      5,737
    Other interest-earning assets          3,229       1,866      9,065      3,490
                                        --------    --------   --------   --------

        Total Interest Income             24,158      22,456     71,529     66,422
                                        --------    --------   --------   --------
Interest Expense:
    Deposits                              12,150       8,759     34,991     25,696
    Borrowings                               754       1,005      2,412      2,733
                                        --------    --------   --------   --------

        Total Interest Expense            12,904       9,764     37,403     28,429
                                        --------    --------   --------   --------

Net Interest Income                       11,254      12,692     34,126     37,993

Provision for Loan Losses                    101         106        378        245
                                        --------    --------   --------   --------

Net Interest Income after Provision
  for Loan Losses                         11,153      12,586     33,748     37,748
                                        --------    --------   --------   --------

Non-Interest Income:
    Fees and service charges                 188         225        692        791
    (Loss) Gain on sale of securities        (97)        937         55      1,023
    Miscellaneous                            392         367      1,076        925
                                        --------    --------   --------   --------

        Total Non-Interest Income            483       1,529      1,823      2,739
                                        --------    --------   --------   --------

Non-interest expenses:
    Salaries and employee benefits         7,070       6,964     20,623     18,310
    Net occupancy expense of
      premises                               895         836      2,594      2,521
    Equipment                              1,098       1,174      3,274      3,306
    Advertising                              362         353      1,164      1,063
    Federal insurance premium                144         140        428        410
    Amortization of intangible assets        159         159        477        477
    Directors' compensation                  544         631      1,762      1,443
    Miscellaneous                          1,030       1,162      3,277      3,405
                                        --------    --------   --------   --------

        Total Non-Interest Expenses       11,302      11,419     33,599     30,935
                                        --------    --------   --------   --------

Income before Income Taxes                   334       2,696      1,972      9,552
Income Taxes                                  92         250        257      1,816
                                        --------    --------   --------   --------

Net Income                              $    242    $  2,446   $  1,715   $  7,736
                                        ========    ========   ========   ========
</TABLE>

                                       2

<PAGE>

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

                                   Three Months Ended         Nine Months Ended
                                       March 31,                  March 31,
                                   --------------------      -------------------
                                    2007         2006         2007        2006
                                   -------      -------      -------     -------

Net Income per Common Share:
    Basic                          $  0.00      $  0.03      $  0.02     $  0.11
    Diluted                           0.00         0.03         0.02        0.11

Weighted Average Number of
  Common Shares Outstanding:
    Basic                           69,012       70,918       69,343      71,006
    Diluted                         69,293       71,034       69,664      71,051

Dividends Declared Per Common
   Share                           $  0.05      $  0.05      $  0.15     $  0.19

See notes to consolidated financial statements.

                                       3

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           ----------------------------------------------------------
                        Nine Months Ended March 31, 2006
                (In Thousands, Except Per Share Data, Unaudited)
<TABLE>
<CAPTION>
                                                                                                             Accumulated
                                            Common Stock                                Unearned                Other
                                          -----------------   Paid-In        Retained     ESOP     Treasury  Comprehensive
                                           Shares   Amount    Capital        Earnings    Shares     Stock    Income (Loss)   Total
                                          -------- --------  ---------    ------------ ---------   ---------  ------------- --------
<S>                                       <C>      <C>      <C>             <C>       <C>         <C>          <C>        <C>
Balance - June 30, 2005                    72,738   $7,274   $207,838        $301,857  $(16,972)   $      -     $  5,485   $505,482
                                                                                                                           --------

Comprehensive income:
  Net income                                    -        -          -           7,736         -           -            -      7,736

  Realized gain on securities available
    for sale, net of income tax of $358         -        -          -               -         -           -         (665)      (665)

  Unrealized loss on securities available
    for sale, net of deferred income tax
    benefit of $8,617                           -        -          -               -         -           -      (16,003)   (16,003)
                                                                                                                           --------

 Total Comprehensive income                                                                                                  (8,932)
                                                                                                                           --------

Refund of common stock offering
  expense                                       -        -          3               -         -           -            -          3

ESOP shares committed to be released
  (108 shares)                                  -        -        271               -     1,091           -            -      1,362

Stock option transactions                       -        -        713               -         -           -            -        713

Treasury stock purchases                     (178)       -          -               -         -      (2,268)           -     (2,268)

Treasury stock reissued to restricted
  stock plan                                  178        -     (2,268)              -         -       2,268            -          0

Restricted stock plan shares purchased
  (135 shares)                                  -        -     (1,815)              -         -           -            -     (1,815)

Restricted stock plan shares earned
  (97 shares)                                   -        -      1,186               -         -           -            -      1,186
</TABLE>


                                       4

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           ----------------------------------------------------------
                        Nine Months Ended March 31, 2006
                (In Thousands, Except Per Share Data, Unaudited)
<TABLE>
<CAPTION>
                                                                                                             Accumulated
                                            Common Stock                                Unearned                Other
                                          -----------------   Paid-In        Retained     ESOP     Treasury  Comprehensive
                                           Shares   Amount    Capital        Earnings    Shares     Stock    Income (Loss)   Total
                                          -------- --------  ---------    ------------ ---------   ---------  ------------- --------
<S>                                       <C>      <C>       <C>            <C>         <C>       <C>           <C>       <C>
Cash dividends declared ($0.19/share)           -        -          -          (3,795)         -          -             -    (3,795)
                                          -------   ------    --------       --------    --------  --------      --------  --------

Balance - December 31, 2005                72,738   $7,274    $205,928       $305,798    $(15,881) $      0      $(11,183) $491,936
                                          =======   ======    ========       ========    ========  ========      ========  ========
</TABLE>

                                       5

<PAGE>

                             KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                   ----------------------------------------------------------
                                Nine Months Ended March 31, 2007
                        (In Thousands, Except Per Share Data, Unaudited)
<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                            Common Stock                            Unearned                Other
                                          -----------------   Paid-In    Retained     ESOP     Treasury  Comprehensive
                                           Shares   Amount    Capital    Earnings    Shares     Stock    Income (Loss)    Total
                                           ------   ------    -------    --------    ------     -----    -------------    -----
<S>                                       <C>      <C>       <C>        <C>         <C>       <C>           <C>       <C>
Balance - June 30, 2006 (As restated)      72,737    $7,274   $192,534   $306,728   $(15,517)   $      -     $(15,885)   $475,134
                                                                                                                         --------
Comprehensive income:
  Net income                                    -         -          -      1,715          -           -            -       1,715

  Realized gain on securities available
    for sale, net of income tax of $19          -         -          -          -          -           -          (36)        (36)

  Unrealized gain on securities available
    for sale, net of deferred income tax
    cost of $6,633                              -         -          -          -          -           -       12,320      12,320
                                                                                                                         --------
 Total Comprehensive income                                                                                                13,999
                                                                                                                         --------
ESOP shares committed to be released
  (108 shares)                                  -         -        576          -      1,091           -            -       1,667

Stock option transactions                       -         -      1,494          -          -           -            -       1,494

Treasury stock purchases                   (1,144)        -          -          -          -     (18,169)           -     (18,169)

Treasury stock reissued                         9         -        (27)         -          -         135            -         108

Restricted stock plan shares
  purchased (54 shares)                         -         -       (789)         -          -           -            -        (789)

Restricted stock plan shares earned
  (201 shares)                                  -         -      2,477          -          -           -            -       2,477

Tax benefit related to vesting of
  restricted stock                              -         -        434          -          -           -            -         434
</TABLE>

                                       6
<PAGE>


                             KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  ----------------------------------------------------------
                                Nine Months Ended March 31, 2007
                        (In Thousands, Except Per Share Data, Unaudited)
                                           Accumulated
<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                            Common Stock                            Unearned                Other
                                          -----------------   Paid-In    Retained     ESOP     Treasury  Comprehensive
                                           Shares   Amount    Capital    Earnings    Shares     Stock    Income (Loss)     Total
                                           ------   ------    -------    --------    ------     -----    -------------     -----
<S>                                     <C>       <C>       <C>        <C>       <C>         <C>         <C>            <C>
Cash dividends declared ($0.15/share)          -         -           -     (2,768)        -           -           -         (2,768)
                                          ------    ------    --------   --------  --------    --------    --------       --------

Balance - March 31, 2007                  71,602    $7,274    $196,699   $305,675  $(14,426)   $(18,034)   $ (3,601)      $473,587
                                          ======    ======    ========   ========  ========    ========    ========       ========
</TABLE>

See notes to consolidated financial statements.

                                       7
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                                          March 31,
                                                                                   ----------------------
                                                                                      2007         2006
                                                                                   ---------    ---------
<S>                                                                              <C>          <C>
Cash Flows from Operating Activities:
    Net income                                                                     $   1,715    $   7,736
    Adjustments to reconcile net income to net cash provided by operating
      activities:
        Depreciation and amortization of premises and equipment                        1,462        1,411
        Net amortization of premiums, discounts and loan fees and costs                  678          602
        Deferred income taxes                                                          1,031        1,480
        Amortization of intangible assets                                                477          477
        Provision for loan losses                                                        378          245
        Realized gains on sale of securities available for sale                          (55)      (1,023)
        Increase in cash surrender value of bank owned life insurance                   (392)        (311)
        ESOP, stock option plan and restricted stock plan expenses                     5,638        3,261
        Realized loss on sale of real estate owned                                         -           35
        Realized gain on disposition of premises and equipment                            (3)           -
        Decrease in interest receivable                                                1,019        2,239
        Increase in other assets                                                      (2,714)      (3,459)
        (Decrease) increase in interest payable                                           (3)          52
        Increase (decrease) in other liabilities                                          60       (1,012)
                                                                                   ---------    ---------
            Net Cash Provided by Operating Activities                                  9,291       11,733
                                                                                   ---------    ---------

Cash Flows from Investing Activities:
    Purchases of securities available for sale                                          (286)        (215)
    Proceeds from sale of securities available for sale                              131,383      256,956
    Purchases of securities held to maturity                                               -       (4,000)
    Proceeds from calls and maturities of securities available for sale                3,894        1,210
    Proceeds from calls and maturities of securities held to maturity                      -        9,989
    Proceeds from repayments of securities available for sale                          1,395          729
    Proceeds from repayments of securities held to maturity                                -        2,337
    Purchase of loans                                                                (71,377)     (14,640)
    Net increase in loans receivable                                                 (43,287)     (90,208)
    Proceeds from sale of real estate owned                                                -           65
    Purchases of mortgage-backed securities available for sale                       (81,703)     (27,699)
    Purchases of mortgage-backed securities held to maturity                               -      (64,765)
    Principal repayments on mortgage-backed securities available for sale            102,545       36,039
    Principal repayments on mortgage-backed securities held to maturity                    -      104,429
    Additions to premises and equipment                                               (1,189)      (2,559)
    Proceeds from cash settlement on premises and equipment                               21            -
    Purchase of FHLB stock                                                                 -       (3,083)
    Redemption of FHLB stock                                                             245        9,270
    Purchase of bank owned life insurance                                                  -      (10,208)
                                                                                   ---------    ---------

            Net Cash Provided by Investing Activities                              $  41,641    $ 203,647
                                                                                   ---------    ---------
</TABLE>

                                       8

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                   Nine Months Ended
                                                                                        March 31,
                                                                              --------------------------
                                                                                  2007           2006
                                                                              -----------    -----------
<S>                                                                          <C>            <C>
Cash Flows from Financing Activities:
    Net increase (decrease) in deposits                                       $    22,933    $   (69,993)
    Repayment of FHLB advances                                                     (5,459)          (433)
    (Decrease) increase in advance payments by borrowers for taxes                    (34)           424
    Refund of common stock offering expense                                             -              3
    Dividends paid to minority stockholders of Kearny Financial Corp.              (2,750)        (2,802)
    Increase in treasury stock due to purchase of Kearny Financial Corp.
      common stock                                                                (18,169)        (2,268)
    Treasury stock reissued                                                           108              -
    Purchase of common stock of Kearny Financial Corp. for restricted
      stock plan                                                                     (789)        (1,815)
    Tax benefit related to vesting of restricted stock                                434              -
                                                                              -----------    -----------

            Net Cash (Used in) Financing Activities                           $    (3,726)   $   (76,884)
                                                                              -----------    -----------

            Net Increase in Cash and Cash Equivalents                         $    47,206    $   138,496

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

Cash and Cash Equivalents - Ending                                            $   277,485    $   278,361
                                                                              ===========    ===========
Supplemental Disclosures of Cash Flows Information:
    Cash paid during the year for:
        Income taxes, net of refunds                                          $     1,313    $     4,528
                                                                              ===========    ===========

        Interest                                                              $    37,406    $    28,377
                                                                              ===========    ===========
Supplemental Disclosure of Non-Cash Transactions:
    Cash dividend declared                                                    $       960    $       993
                                                                              ===========    ===========

    Reclassification of securities and mortgage-backed securities from
      held to maturity to available for sale at estimated fair value (As of
      quarter ended March 31, 2006)                                           $         -    $ 1,163,875
                                                                              ===========    ===========
</TABLE>

See notes to consolidated financial statements.

                                       9

<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 and nine month periods  ended March 31, 2007,  are not
necessarily indicative of the results that may be expected for the entire fiscal
year or any other period.

The data in the consolidated statements of financial condition for June 30, 2006
was derived from the Company's annual report on Form 10-K. That data, along with
the interim financial  information  presented in the consolidated  statements of
financial  condition,  income,  changes in  stockholders'  equity and cash flows
should be read in conjunction with the 2006  consolidated  financial  statement,
including  the notes  thereto  included in the  Company's  annual report on Form
10-K.

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

Basic  earnings  per share  ("EPS") is based on the weighted  average  number of
common shares  actually  outstanding  adjusted for Employee Stock Ownership Plan
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.

                                       10

<PAGE>

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

<TABLE>
<CAPTION>
                                           Three Months Ended                           Nine Months Ended
                                             March 31, 2007                              March 31, 2007
                                  --------------------------------------    ------------------------------------------
                                                                Per                                            Per
                                    Income         Shares      Share            Income           Shares       Share
                                  (Numerator)  (Denominator)   Amount         (Numerator)     (Denominator)   Amount
                                  -----------  -------------   ------         -----------     -------------   ------
                                  (In Thousands, Except Per Share Data)        (In Thousands, Except Per Share Data)
<S>                                     <C>        <C>         <C>              <C>              <C>           <C>
Net income                               $242                                    $1,715
                                         ====                                    ======
Basic earnings per share,
     income available to
     common stockholders                 $242       69,012      $0.00            $1,715           69,343        $0.02
                                                                =====                                           =====
Effect of dilutive securities:
     Stock options                          -          115                            -              101
     Restricted stock awards                -          166                            -              220
                                         ----       ------                       ------           ------

                                         $242       69,293      $0.00            $1,715           69,664        $0.02
                                         ====       ======      =====            ======           ======        =====
</TABLE>

<TABLE>
<CAPTION>
                                           Three Months Ended                           Nine Months Ended
                                             March 31, 2006                              March 31, 2006
                                  --------------------------------------    ------------------------------------------
                                                                Per                                            Per
                                    Income         Shares      Share            Income           Shares       Share
                                  (Numerator)  (Denominator)   Amount         (Numerator)     (Denominator)   Amount
                                  -----------  -------------   ------         -----------     -------------   ------
                                  (In Thousands, Except Per Share Data)        (In Thousands, Except Per Share Data)
<S>                                  <C>        <C>         <C>              <C>              <C>           <C>
Net income                             $2,446                                    $7,736
                                       ======                                    ======
Basic earnings per share,
     income available to
     common stockholders               $2,446       70,918      $0.03            $7,736           71,006        $0.11
                                                                =====                                           =====

Effect of dilutive securities:
     Stock options                          -            -                            -                -
     Restricted stock awards                -          116                            -               45
                                         ----       ------                       ------           ------

                                       $2,446       71,034      $0.03            $7,736           71,051        $0.11
                                       ======       ======      =====            ======           ======        =====
</TABLE>


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

During the quarter ended March 31, 2007, the federally  chartered mutual holding
company of the Company ("Kearny MHC"),  waived its right, in accordance with the
non-objection previously granted by the Office of Thrift Supervision ("OTS"), to
receive  cash  dividends  of  approximately  $2.5  million  declared  during the
quarter, on the shares of Company common stock it owns. Furthermore, in December
2006,  the OTS advised  Kearny MHC that it would not object to dividend  waivers
for the quarters  ending June 30, 2007 and September 30, 2007,  provided the OTS
does not subsequently determine that the proposed waivers are detrimental to the
safe and sound operation of the Bank.

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

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,

                                       11

<PAGE>

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 the Bank  received in  aggregate  2,305,000  options  and 910,000  shares of
restricted stock. The Company adopted SFAS No. 123(R) 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.  123(R) 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  $434,000  for the nine months ended March 31,
2007). 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 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.

Management used the following assumptions to estimate the fair values of options
granted:

<TABLE>
<CAPTION>
                                                                Three Months Ended                Nine Months Ended
                                                                    March 31,                         March 31,
                                                           -----------------------------     -----------------------------
                                                              2007             2006             2007             2006
                                                           ------------     ------------     ------------     ------------
<S>                                                       <S>               <C>              <C>             <C>
Weighted average risk-free interest rate                        -                -                -                 4.53%
Expected dividend yield                                         -                -                -                 1.62%
Weighted average volatility factor of the expected
      market price of the Company's common stock                -                -                -                18.00%
Weighted average expected life of the options                   -                -                -            6.50 years
</TABLE>

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.  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 March 31, 2007, the Company  recorded stock option
expense of $498,000 and  restricted  stock expense of $825,000.  During the nine
months ended March 31, 2007,  the Company  recorded stock option expense of $1.5
million and restricted stock expense of $2.5 million.  The Company

                                       12

<PAGE>

estimates it will record in aggregate an additional $1.3 million of stock option
and restricted stock expenses during the remainder of fiscal 2007.

The  following  is a summary of the status of the  Company's  outstanding  stock
options as of March 31, 2007 and stock option  activity and related  information
during the nine months ended March 31, 2007:

<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                                                (9)          $12.71                              $14
     Forfeited                                                 -                -
                                                           -----
Outstanding at March 31, 2007                              3,365           $12.34      8.6 years            $6,861
                                                           =====

Exercisable at March 31, 2007                                666           $12.34      8.6 years            $1,361
</TABLE>

The following is a summary of the status of the Company's  unexercisable options
as of March 31, 2007 and changes during the nine months ended March 31, 2007:

<TABLE>
<CAPTION>
                                                                                                        Weighted
                                                                                                         Average
                                                                                        Options        Grant Date
                                                                                        (000's)        Fair Value
                                                                                      ------------     ------------
<S>                                                                                    <C>              <C>
Unexercisable at June 30, 2006                                                           3,374            $2.95
     Granted                                                                                 -                -
     Vested                                                                               (675)           $2.95
     Forfeited                                                                               -                -
                                                                                         -----            -----
Unexercisable at March 31, 2007                                                          2,699            $2.95
                                                                                         =====            =====
</TABLE>

As of March 31, 2007, expected future compensation expense attributed to the 2.7
million unexercisable options outstanding is $7.3 million over 3.6 years.

Upon exercise of options,  management  expects to draw on treasury  stock as the
source of the shares.

The following is a summary of the status of the Company's outstanding restricted
share awards as of March 31, 2007 and changes during the nine months ended March
31, 2007:

<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                                                                                 -                -
     Vested                                                                               (268)          $12.34
     Forfeited                                                                               -                -
                                                                                         -----           ------
Non-vested at March 31, 2007                                                             1,070           $12.34
                                                                                         =====           ======
</TABLE>

As of March 31, 2007, expected future compensation expense attributed to the 1.1
million  non-vested  restricted shares outstanding at that date is $12.0 million
over 3.6 years.

                                       13

<PAGE>

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

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 awards under the Company's 2005 Stock  Compensation  and
Incentive  Plan.  During  the nine  months  ended  March  31,  2007,  a total of
1,091,063  shares were purchased  under the plan at a cost of $17.4 million,  or
approximately $15.95 per share.

On  January  18,  2007,  the  Company  announced  that the  Board  of  Directors
authorized  an  additional  stock  repurchase  plan to acquire  up to  1,036,634
shares,  or 5% of the  Company's  outstanding  stock held by persons  other than
Kearny MHC. Such  purchases will be made from time to time in the open market or
in privately negotiated stock purchases, based on stock availability,  price and
the Company's  financial  performance.  It is anticipated that purchases will be
made during the next twelve  months,  although no  assurance  can be given as to
when they will be made or to the total number of shares that will be  purchased.
During the three  months  ended March 31,  2007,  the Company  purchased  52,500
shares at a cost of $771,000, or approximately $14.68 per share.


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

Benefit Equalization Plan net periodic pension expense was as follows:

                                            Three Months        Nine Months
                                           Ended March 31,     Ended March 31,
                                           ---------------     ---------------
                                            2007     2006      2007      2006
                                            ----     ----      ----      ----
                                            (In Thousands)      (In Thousands)

Service cost                                 $  15    $  15    $  45    $  45
Interest cost                                   44       44      132      132
Amortization of unrecognized past service
   costs                                        (3)      (3)      (9)      (9)
Amortization of unrecognized net actuarial
   loss                                         46       46      138      138
                                             -----    -----    -----    -----

Net periodic pension expense                 $ 102    $ 102    $ 306    $ 306
                                             =====    =====    =====    =====

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

                                            Three Months        Nine Months
                                           Ended March 31,     Ended March 31,
                                           ---------------     ---------------
                                            2007     2006      2007      2006
                                            ----     ----      ----      ----
                                            (In Thousands)      (In Thousands)

Service cost                                $ 8       $ 6       $24       $18
Interest cost                                 7         6        21        18
Amortization of unrecognized past service
   liability                                  2         3         6         9
                                            ---       ---       ---       ---

Net periodic postretirement benefit cost    $17       $15       $51       $45
                                            ===       ===       ===       ===

                                       14

<PAGE>

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

                                            Three Months        Nine Months
                                           Ended March 31,     Ended March 31,
                                           ---------------     ---------------
                                            2007     2006      2007      2006
                                            ----     ----      ----      ----
                                            (In Thousands)      (In Thousands)

Service cost                                $ 34     $ 32     $102      $ 96
Interest cost                                 34       29      102        87
Amortization of unrecognized transition
   obligation                                 11       11       33        33
Amortization of unrecognized past service
   liability                                  15       15       45        45
                                            ----     ----     ----      ----

Net periodic postretirement benefit cost    $ 94     $ 87     $282      $261
                                            ====     ====     ====      ====

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

In July 2006,  the  Financial  Accounting  Standards  Board  (FASB)  issued FASB
Interpretation   No.  48,   "Accounting  for  Uncertainty  in  Income  Taxes--an
interpretation  of FASB  Statement  No.  109"  (FIN  48),  which  clarifies  the
accounting for uncertainty in tax positions.  This Interpretation  requires that
companies recognize in their financial  statements the impact of a tax position,
if that position is more likely than not of being  sustained on audit,  based on
the technical merits of the position. The provisions of FIN 48 are effective for
fiscal years beginning  after December 15, 2006,  with the cumulative  effect of
the change in accounting principle recorded as an adjustment to opening retained
earnings.  We are  currently  evaluating  the impact of  adopting  FIN 48 on our
financial statements.

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 over  funded or under  funded  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.

In September  2006,  the FASB's  Emerging  Issues Task Force (EITF)  issued EITF
Issue No. 06-4, "Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split Dollar Life Insurance  Arrangements" ("EITF 06-4").
EITF 06-4 requires the recognition of a liability related to

                                       15

<PAGE>

the  postretirement  benefits  covered  by  an  endorsement   split-dollar  life
insurance  arrangement.  The consensus highlights that the employer (who is also
the  policyholder)  has a  liability  for the  benefit  it is  providing  to its
employee.  As such,  if the  policyholder  has agreed to maintain the  insurance
policy in force for the employee's  benefit during his or her  retirement,  then
the liability  recognized  during the employee's active service period should be
based on the future  cost of  insurance  to be  incurred  during the  employee's
retirement.  Alternatively,  if the  policyholder  has  agreed  to  provide  the
employee with a death  benefit,  then the liability for the future death benefit
should be  recognized  by following  the guidance in SFAS No. 106 or  Accounting
Principals Board (APB) Opinion No. 12, as appropriate. For transition, an entity
can choose to apply the guidance using either of the following approaches: (a) a
change in accounting principle through retrospective  application to all periods
presented or (b) a change in accounting  principle  through a  cumulative-effect
adjustment  to the balance in retained  earnings at the beginning of the year of
adoption.  The disclosures are required in fiscal years beginning after December
15, 2007, with early adoption  permitted.  The Company does not believe that the
implementation  of this  guidance  will have a material  impact on the Company's
consolidated financial statements.

On September  7, 2006,  the Task Force  reached a  conclusion  on EITF Issue No.
06-5,  "Accounting for Purchases of Life Insurance - Determining the Amount That
Could  Be  Realized  in  Accordance  with  FASB  Technical  Bulletin  No.  85-4,
Accounting for Purchases of Life  Insurance"  ("EITF  06-5").  The scope of EITF
06-5 consists of six separate  issues  relating to accounting for life insurance
policies purchased by entities protecting against the loss of "key persons." The
six issues are  clarifications  of previously  issued guidance on FASB Technical
Bulletin No.  85-4.  EITF 06-5 is effective  for fiscal  years  beginning  after
December 15, 2006.  The Company does not expect it to have a material  impact on
the Company's consolidated financial statements.

In March 2007,  the FASB  ratified  Emerging  Issues Task Force Issue No.  06-10
"Accounting for Collateral  Assignment  Split-Dollar Life Insurance  Agreements"
(EITF 06-10).  EITF 06-10 provides  guidance for determining a liability for the
postretirement  benefit obligation as well as recognition and measurement of the
associated  asset  on the  basis  of the  terms  of  the  collateral  assignment
agreement. EITF 06-10 is effective for fiscal years beginning after December 15,
2007.  The  Company  is  currently  assessing  the  impact of EITF  06-10 on its
consolidated financial position and results of operations.

In March 2007,  the FASB ratified EITF Issue No. 06-11,  "Accounting  for Income
Tax Benefits of Dividends on  Share-Based  Payment  Awards." EITF 06-11 requires
companies  to  recognize  the income tax  benefit  realized  from  dividends  or
dividend equivalents that are charged to retained earnings and paid to employees
for  non-vested  equity-classified  employee  share-based  payment  awards as an
increase to additional paid-in capital. EITF 06-11 is effective for fiscal years
beginning  after September 15, 2007. The Company does not expect EITF 06-11 will
have a material impact on its financial position,  results of operations or cash
flows.

In  February  2007,  the FASB issued  SFAS No.  159,  The Fair Value  Option for
Financial  Assets  and  Financial  Liabilities-Including  an  Amendment  of FASB
Statement  No.  115.  SFAS No. 159 permits  entities  to choose to measure  many
financial  instruments and certain other items at fair value.  Unrealized  gains
and losses on items for which the fair value  option  has been  elected  will be
recognized  in  earnings  at each  subsequent  reporting  date.  SFAS No. 159 is
effective  for our Company July 1, 2008.  The Company is  evaluating  the impact
that the  adoption  of SFAS  No.  159 will  have on our  consolidated  financial
statements.

                                       16

<PAGE>

9.  RESTATEMENT
---------------

As  previously  reported,  the  Company  intends to file  restated  Consolidated
Statement  of  Financial  Condition  for the fiscal year ended June 30, 2006 and
quarterly  periods ended March 31, 2006 and  September  30, 2006.  The effect of
this  change  is that the  securities  and  mortgage-backed  securities  are now
reported at fair value instead of at amortized  cost,  which results in a change
in the value of these assets previously reported on the Consolidated  Statements
of Financial  Condition at March 31, 2006, June 30, 2006 and September 30, 2006.
Carrying  these  securities  at fair value will  impact  the  accumulated  other
comprehensive income (loss),  which is a component of stockholders'  equity. The
adjustments to be made to the financial statements are non-cash in nature and do
not result in changes to the income statements or previously  reported total net
income for any period.

The following table presents changes to the Consolidated  Statement of Financial
Condition at June 30, 2006 resulting from the restatement:


                                                      June 30,        June 30,
                                                        2006           2006
                                                   (As previously  (As restated)
                                                      reported)
                                                   -----------------------------
                                                          (In Thousands)

Securities available for sale                         18,346           222,793

Securities held to maturity                          209,048                 -

Mortgage-backed securities available for sale              -           670,329

Mortgage-backed securities held to maturity          689,962                 -

Other assets                                           9,203            17,685

Total Assets                                       2,007,525         1,991,773

Accumulated other comprehensive (loss)                  (133)          (15,885)

Total Stockholders' Equity                           490,886           475,134

Total Liabilities and Stockholders' Equity         2,007,525         1,991,773


10.  SUBSEQUENT EVENT
---------------------

On April 30, 2007,  the bank entered  into a severance  agreement  with a senior
officer of the Bank.  The officer will receive a severance  payment of $264,000,
payable  over the next 14 months.  Management  will record a charge to income of
$264,000 during the quarter ending June 30, 2007.

                                       17

<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,  cost of funds,  demand for loan  products,  demand for financial
services,  competition,  changes  in the  quality  or  composition  of loan  and
investment portfolios of Kearny Federal Savings Bank, the Company's wholly-owned
subsidiary,  (the "Bank"). Other factors that could cause future results to vary
from current management  expectations include changes in accounting  principles,
policies  or  guidelines,  and other  economic,  competitive,  governmental  and
technological  factors affecting the Company's  operations,  markets,  products,
services and prices.  Further  description of the risks and uncertainties to the
business are included in the  Company's  other filings with the  Securities  and
Exchange Commission.

Comparison of Financial Condition at March 31, 2007 and June 30, 2006

Total assets  increased  $15.9  million or 0.8%,  to $2.01  billion at March 31,
2007,  from $1.99 billion at June 30, 2006,  due  primarily to a $114.1  million
increase in net loans  receivable and a $47.2 million  increase in cash and cash
equivalents and to a lesser degree,  a $19.0 million  increase in the fair value
of  the  securities  and  mortgage-backed   securities   portfolios.   Partially
offsetting  these  increases  were  decreases  totaling  $157.7  million  in the
amortized cost of the securities and mortgage-backed  securities  portfolios due
to calls and maturities, repayments and sales of securities.

Cash and cash equivalents increased $47.2 million or 20.5%, to $277.5 million at
March 31, 2007 from $230.3  million at June 30,  2006.  The increase in cash and
cash  equivalents  resulted  primarily  from the sale of  securities  as well as
principal  and  interest   payments  and  maturities  from  the  securities  and
mortgage-backed  securities  portfolios  and to a lesser  degree an  increase in
deposits at the Bank, particularly in tiered money market accounts, as discussed
below.  To  the  extent  that  the  Bank  does  not  need  the  funds  for  loan
originations,  management  expects to maintain liquidity at an elevated level as
long as the  Treasury  yield  curve  remains  inverted  or flat in order to take
advantage of the high short term interest rates resulting from the current yield
curve.

The amortized cost of securities  decreased by $136.3 million or 59.9%, to $91.3
million at March 31, 2007,  compared to $227.6 million at June 30, 2006. Between
June 30, 2006 and March 31,  2007,  the fair value of the  securities  portfolio
increased  by $4.4 million and was $90.9  million at March 31, 2007.  During the
quarter ended March 31, 2007,  management  continued to sell securities from the
municipal  bond  portfolio  selling  bonds  with a par  value of $25.7  million,
recording a loss of $97,000.  Since the sale of the bonds began in October 2006,
a total of $131.7  million of bonds have been sold as of March 31,  2007,  for a
gain of $55,000.  A decline in pre-tax  income  reduces the advantage of holding
tax-exempt  instruments and the portfolio's  yield continues to be substantially
below market.  The municipal bond portfolio was $195.7 million at June 30, 2006,
with a weighted  average yield of 3.78%. At March 31, 2007, the Bank's remaining
municipal  bond  portfolio  was $67.2  million with a weighted  average yield of
3.72%.  During the nine months ended March 31, 2007,  there was also a call of a
$2.0 million  trust

                                       18

<PAGE>

preferred  security.  Management utilized cash flows from principal and interest
payments to fund loan originations during the nine month period.

Loans  receivable,  net of deferred  fees and costs and the  allowance  for loan
losses,  increased $114.1 million or 16.2%, to $817.7 million at March 31, 2007,
compared  to  $703.6  million  at June 30,  2006.  The  increase  resulted  from
management's  focus on increasing the Bank's loan  portfolio  while reducing its
dependence on securities to generate  interest income.  Total loans  constituted
40.9% of  assets at March  31,  2007,  compared  to 35.5% at June 30,  2006.  By
comparison, the securities and mortgage-backed securities portfolios constituted
37.6% of assets at March 31, 2007, compared to 44.8% at June 30, 2006.

One-to-four family residential first mortgage loans, the Bank's largest category
increased by $64.1 million to $529.9  million at March 31, 2007.  Nonresidential
mortgages  increased  by $37.1  million  to $133.1  million  at March 31,  2007.
Multi-family  mortgages  increased by $6.5 million to $17.5 million at March 31,
2007.  Home equity loans  increased by $15.0 million to $108.6  million at March
31, 2007. Commercial loans decreased by $1.6 million and totaled $1.6 million at
March 31, 2007.  There was a nominal  decrease in home equity lines of credit of
$472,000 to $12.5 million at March 31, 2007.  Construction loans outstanding and
gross  construction  loans  decreased  $6.5  million to $15.6  million and $10.6
million to $22.9 million,  respectively at March 31, 2007.  Virtually the entire
decrease in gross construction loans occurred in the nonresidential category. To
supplement the Bank's in-house loan originations,  the Bank purchases  mortgages
from  several  mortgage  companies,  with $71.4  million of  one-to-four  family
residential  mortgage  loans  purchased  during the nine months  ended March 31,
2007. The Bank has not originated or purchased any interest only mortgages,  pay
option adjustable rate mortgages or sub-prime mortgages.

The amortized  cost of  mortgage-backed  securities  decreased  $21.4 million or
3.1%, to $668.6 million at March 31, 2007, from $690.0 million at June 30, 2006.
Between June 30, 2006 and March 31, 2007, the fair value of the  mortgage-backed
securities  portfolio increased by $14.6 million and was $663.5 million at March
31, 2007. Management  reinvested  approximately $81.7 million of cash flows from
the mortgage-backed  securities portfolio during the nine months ended March 31,
2007, purchasing $22.7 million in fixed rate Community  Reinvestment Act ("CRA")
eligible  issues and $59.0 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 conversion to a one-year  adjustable  product
may be less than three or five years  away.  Management's  redeployment  of cash
flows from principal and interest payments to fund loan originations contributed
to the decrease in the size of the mortgage-backed securities portfolio.

Premises and  equipment  was  virtually  unchanged at $35.7 million at March 31,
2007  compared to $35.9  million at June 30,  2006,  as  depreciation  nominally
exceeded the cost of additions to fixed assets. The most significant addition to
premises and equipment  during the period was  completion of  renovations at the
Bank's  retail  branch in Old  Tappan,  New  Jersey  at a cost of  approximately
$371,000.

Bank owned life insurance  increased $392,000 or 2.7%, to $15.0 million at March
31, 2007 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  $23.0  million or 1.6%, to $1.47 billion at March 31, 2007,
compared to $1.44  billion at June 30, 2006.  During the nine months ended March
31,  2007,   certificates  of  deposit  and  interest-bearing  demand  deposits,
particularly tiered money market deposit accounts, increased approximately $53.0
million and $26.2 million,  to $936.1 million and $148.3 million,  respectively;
while savings deposits decreased  approximately  $52.7 million to $324.7 million
and  non-interest-bearing deposits

                                       19

<PAGE>

decreased  $3.6  million to $57.5  million.  The threat of loss of  deposits  to
competitors,  both core deposits and  certificates of deposit,  necessitated the
continuance of  promotional  interest rates during most of the nine month period
ended  March  31,  2007 to  counteract  promotions  offered  by other  financial
institutions  in the Bank's market area,  however,  mid-way  through the quarter
ended December 31, 2006,  management began to back away from this strategy in an
attempt to mitigate  margin  compression  resulting  from the increased  cost of
deposits from promotional  interest rates.  Beginning in the quarter ending June
30,  2007,  certificates  of deposit  with the highest  interest  rates begin to
mature.  Management  anticipates  that deposit pricing in the  marketplace  will
become less  competitive  and  expects  that this will help the Bank to retain a
significant  percentage of the maturing  accounts.  However,  the Bank's current
substantial  liquidity  position  should help  management  deal with any deposit
attrition.

Federal Home Loan Bank advances decreased $5.5 million or 9.0%, to $55.6 million
at March 31, 2007,  compared to $61.1 million at June 30, 2006. The reduction in
borrowings  resulted  from  the  maturity  of a $5.0  million  advance,  with an
interest rate of 5.90%, and scheduled principal payments on amortizing advances.

During the nine months ended March 31, 2007, stockholders' equity decreased $1.5
million or 0.3%, to $473.6  million at March 31, 2007 compared to $475.1 million
at June 30,  2006.  The  decrease  was  primarily  the result of the purchase of
Company  common  stock  partially  offset by an  increase in  accumulated  other
comprehensive  income. The Company purchased 54,314 shares at a cost of $789,000
for the restricted stock plan and purchased  1,143,563 shares at a cost of $18.2
million as treasury shares.  Accumulated other  comprehensive  loss decreased by
$12.3  million as a result of an  increase in the fair value of  securities  and
mortgage-backed  securities  available  for sale between June 30, 2006 and March
31, 2007.  Cash  dividends of $0.15 per share totaling $2.8 million in aggregate
also contributed to the decrease in stockholders'  equity. The Company's current
regular quarterly dividend is $0.05 per share. Partially offsetting the decrease
in  stockholders'  equity was net  income of $1.7  million  recorded  during the
period, the release of $1.7 million of Employee Stock Ownership Plan shares, the
release  of $2.5  million  of  restricted  stock  plan  shares,  a $1.5  million
adjustment  to equity for  expensing  stock  options,  a tax benefit of $434,000
recorded due to vesting of restricted  stock and $108,000 due to treasury  stock
reissued.

Comparison  of  Operating  Results for the Three Months Ended March 31, 2007 and
2006

General.  Net income for the quarter  ended March 31, 2007 was  $242,000 or less
than $0.01 per share, a decrease of $2.2 million or 91.7%,  from $2.4 million or
$0.03 per share for the quarter ended March 31, 2006. The decrease in net income
resulted primarily from decreases in net interest income and non-interest income
partially offset by a nominal decrease in non-interest expense.

Net Interest  Income.  Net interest  income for the three months ended March 31,
2007 was $11.3 million,  a decrease of $1.4 million or 11.0%,  compared to $12.7
million for the three months ended March 31, 2006.  The decrease in net interest
income was due to a significant increase in interest expense partially offset by
an increase in interest income.

The Bank's net interest  rate spread  decreased 41 basis points to 1.70% for the
quarter  ended March 31, 2007,  from 2.11% for the quarter ended March 31, 2006.
As of  December  31,  2006,  the most  recent  date for which the Bank has data,
re-pricing  interest-bearing  liabilities  are  expected  to  exceed  re-pricing
interest-earning   assets   expressed  as  a  percentage   of  total  assets  by
approximately 16% over the next twelve months.  Management does not believe that
there has been a material change in the Bank's interest rate sensitivity  during
the three  months  ended March 31,  2007.  The Bank  continued  to be  liability
sensitive  during the quarter  ended March 31,  2007 due  primarily  to maturing
certificates  of  deposit.  The  cost of  average  interest-bearing  liabilities
increased 89 basis points, from 2.63% for the three months

                                       20

<PAGE>

ended March 31, 2006,  to 3.52% for the three  months  ended March 31, 2007.  By
comparison,  the yield on average  interest-earning  assets  increased  47 basis
points,  from 4.75% for the three months ended March 31, 2006,  to 5.22% for the
three months ended March 31, 2007.

The Bank's net interest margin  decreased 25 basis points to 2.43% for the three
months  ended March 31,  2007,  compared  with 2.68% for the three  months ended
March 31, 2006. Average  interest-earning  assets during the quarter ended March
31, 2007 were $1.85 billion or $39.5 million less than average  interest-earning
assets of $1.89 billion  during the quarter  ended March 31, 2006.  The decrease
resulted  in part from use of cash to reduce  borrowings  as well as fund  stock
repurchases. Average interest-bearing liabilities during the quarter ended March
31, 2007 were $1.47 billion or $15.9 million less than average  interest-bearing
liabilities  of $1.48 billion during the quarter ended March 31, 2006. The ratio
of average interest-earning assets to average  interest-bearing  liabilities was
126.2% for the quarter ended March 31, 2007,  compared to 127.5% for the quarter
ended March 31, 2006.

Interest Income.  Total interest income increased $1.7 million or 7.6%, to $24.2
million for the three months ended March 31,  2007,  from $22.5  million for the
three months ended March 31, 2006.  Year-over-year,  interest  income from loans
and other interest-earning  assets increased while interest from mortgage-backed
securities and securities decreased as a result of a shift in assets into loans.

Interest income from loans receivable  increased $2.6 million or 28.6%, to $11.7
million for the three  months  ended March 31,  2007,  from $9.1 million for the
three months  ended March 31, 2006 due to growth in the  portfolio as well as an
improvement in yield. The average balance of loans  receivable  increased $156.4
million to $811.4 million  during the quarter ended March 31, 2007,  from $655.0
million during the quarter ended March 31, 2006.  Management  continued to focus
on  increasing  the Bank's loan  portfolio  while  reducing  its  dependence  on
securities to generate  interest income.  Loans receivable  represented 43.8% of
average  interest-earning  assets  for the  quarter  ended  March 31,  2007,  as
compared to 34.6% for the same  quarter a year ago. By  comparison,  the average
securities  and  mortgage-backed  securities  portfolios  constituted  42.3%  of
average  interest-earning  assets  for the  quarter  ended  March 31,  2007,  as
compared to 56.3% for the quarter  ended  March 31,  2006.  The yield on average
loans receivable  increased 19 basis points to 5.75% for the quarter ended March
31,  2007,  compared  to  5.56%  for the  quarter  ended  March  31,  2006.  The
improvement  in  yield   year-over-year  was  due  in  part  to  growth  in  the
nonresidential mortgage category.

Interest income from  mortgage-backed  securities decreased $158,000 or 1.9%, to
$8.1 million for the three months ended March 31, 2007, compared to $8.3 million
for the three months  ended March 31, 2006 due to a reduction  in the  portfolio
partially   offset  by  an  improvement  in  yield.   The  average   balance  of
mortgage-backed  securities  decreased  $43.6 million to $670.0  million for the
quarter  ended March 31, 2007,  from $713.6  million for the quarter ended March
31, 2006.  The yield on average  mortgage-backed  securities  increased 20 basis
points to 4.83% for the three months  ended March 31,  2007,  from 4.63% for the
three  months  ended March 31,  2006.  The  decrease  in the average  balance of
mortgage-backed  securities,   year-over-year,   resulted  from  utilization  of
principal and interest payments to fund loan originations. The increase in yield
resulted  from  rate   adjustments  on  pass-through   certificates   containing
adjustable rate mortgages.  Excluding fixed rate CRA eligible issues, management
purchases only 3/1 and 5/1 adjustable rate pass-through certificates, preferably
seasoned such that the conversion to a one-year  adjustable  product may be less
than three or five years away.

Interest income from securities decreased $2.0 million or 62.5%, to $1.2 million
for the quarter  ended March 31, 2007,  from $3.2 million for the quarter  ended
March 31, 2006 due to a significant  reduction in the portfolio partially offset
by an improvement in yield.  The average balance of securities  decreased $239.1
million to $112.8  million for the quarter  ended  March 31,  2007,  compared to
$351.9 million for the quarter ended March 31, 2006. The decrease in the average
balance  was  due  primarily  to the  sale of

                                       21

<PAGE>

the Bank's entire  portfolio of  government  agency notes and Freddie Mac common
stock in February 2006. Those sales were followed by the sale of municipal bonds
totaling  $131.7 million  between  October 2006 and March 2007,  including $25.7
million in the  current  quarter.  The yield on average  securities  improved 50
basis points from 3.67% for the three months ended March 31, 2006,  to 4.17% for
the three  months  ended  March 31,  2007.  The higher  yield on the  securities
portfolio  resulted from the sale of the  government  agency notes and municipal
bonds.  The yield on the notes was 3.22% at the time of their sale. The yield on
the  bonds  was  3.78%  at June 30,  2006,  with the  remaining  balance  of the
portfolio yielding 3.72% at March 31, 2007.

Interest  income from other  interest-earning  assets  increased $1.3 million or
68.4%,  to $3.2 million for the quarter ended March 31, 2007,  from $1.9 million
for the  quarter  ended  March  31,  2006.  This was a result  of a  significant
increase in the average balance of other  interest-earning  assets as well as an
improvement in yield. There was an $86.9 million increase in the average balance
of other  interest-earning  assets to $258.4  million for the three months ended
March 31, 2007,  from $171.5  million for the three months ended March 31, 2006.
There  was  a  65  basis  point   increase   in  the  yield  on  average   other
interest-earning  assets to 5.00% for the  quarter  ended March 31,  2007,  from
4.35% for the quarter  ended March 31,  2006,  due to  increases  in  short-term
interest rates year-over-year, particularly the rate paid on overnight deposits.
The increase  can also be  attributed  to an increase in the  dividend  yield on
Federal Home Loan Bank ("FHLB") of New York capital stock.  The average  balance
of   other   interest-earning   assets   increased   due  to  an   increase   in
interest-earning  deposits in other banks, partially offset by a decrease in the
average  balance of FHLB capital  stock as a result of the lower balance of FHLB
advances.  Year-over-year,  the  average  balance of  interest-earning  deposits
increased  $87.6  million to $253.2  million  while the average  balance of FHLB
capital stock decreased $679,000 to $5.2 million.  To the extent not required to
fund loan originations, management reinvested cash flows from the securities and
mortgage-backed securities portfolios into cash equivalents pending redeployment
into other interest-earning assets.

Interest  Expense.  Total interest  expense  increased $3.1 million or 31.6%, to
$12.9  million for the three months ended March 31, 2007,  from $9.8 million for
the three months ended March 31, 2006.  Year-over-year,  there was a significant
increase in interest  expense  attributed to deposits and a nominal  decrease in
interest expense from borrowings.

Interest expense from deposits increased $3.4 million or 38.6%, to $12.2 million
for the three  months  ended  March 31,  2007,  from $8.8  million for the three
months ended March 31, 2006. The increase resulted primarily from an increase in
the cost of average  interest-bearing  deposits  plus a nominal  increase in the
average   balance   of   interest-bearing   deposits.   The   cost  of   average
interest-bearing  deposits  increased  95 basis  points to 3.44% for the quarter
ended March 31,  2007,  from 2.49% for the  quarter  ended  March 31,  2006.  An
accelerating  increase  in the Bank's cost of  deposits  year-over-year,  slowed
during the  quarter  ended  December  31,  2006 and the  current  quarter as the
intense competition on the pricing of certificates of deposit eased. The average
balance of interest-bearing deposits increased $4.5 million, virtually unchanged
at $1.41  billion for the three months ended March 31, 2007 and the three months
ended March 31, 2006.

Interest expense from FHLB advances decreased $251,000 or 25.0%, to $754,000 for
the quarter ended March 31, 2007,  from $1.0 million for the quarter ended March
31, 2006 due to a decrease in average borrowings partially offset by an increase
in cost.  Average  borrowings  decreased  $20.4 million to $55.7 million for the
three months ended March 31, 2007, from $76.1 million for the three months ended
March 31, 2006.  The decrease in the average  balance  resulted  from  scheduled
principal  payments on  amortizing  advances,  the  maturity  of a $5.0  million
advance in November  2006 and the absence of  overnight  borrowings.  There were
overnight  borrowings  on the  Bank's  books  during the first two months of the
comparative quarter. The cost of average borrowings increased 13 basis points to
5.41% for the quarter  ended  March 31,  2007 from 5.28% for the  quarter  ended
March  31,  2006,  due  to  the  inexpensive

                                       22

<PAGE>

overnight  borrowings during the comparative  quarter,  relative to the interest
rates on the long-term advances on the Bank's books during both quarters.

Provision for Loan Losses.  The provision  for loan losses  decreased  $5,000 to
$101,000 for the quarter  ended March 31, 2007,  as compared to $106,000  during
the quarter ended March 31, 2006. The provisions  during both quarters  resulted
primarily  from growth in the loan  portfolio.  Total loans  increased to $822.0
million at March 31,  2007 from  $798.1  million at  December  31,  2006.  Asset
quality  continued  to be strong as  non-performing  loans were $1.1  million or
0.13% of total loans at March 31,  2007;  though not as good as the  $639,000 or
0.08% of total loans  reported at December  31,  2006.  The  allowance  for loan
losses as a percentage  of total loans  outstanding  was 0.71% at March 31, 2007
and 0.72% at December 31, 2006,  reflecting  allowance  balances of $5.9 million
and $5.8 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 March 31, 2007 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.

Non-Interest Income. Non-interest income attributed to fees, service charges and
miscellaneous  income  decreased  $12,000 or 2.0%,  to $580,000  for the quarter
ended March 31, 2007 from  $592,000 for the quarter  ended March 31, 2006.  Fees
and service  charges from  operations  and the Bank's retail branch network were
lower by $37,000 but miscellaneous income increased $25,000 compared to the year
earlier quarter.  Management plans to introduce an overdraft  privilege  program
for the Bank's retail customers in May 2007 as a way of increasing fee income.

There was a loss on the sale of  securities  during the quarter  ended March 31,
2007 of  $97,000  due to the sale of  municipal  bonds with a par value of $25.7
million. There was a $937,000 net gain on the sale of securities attributed to a
restructuring  of the  securities  portfolio  during the quarter ended March 31,
2006.

Non-Interest Expense.  Total non-interest expense decreased $117,000 or 1.0%, to
$11.3 million for the three months ended March 31, 2007,  from $11.4 million for
the three months ended March 31, 2006.  The  decrease  resulted  primarily  from
decreases  in  equipment  expense,  directors'  compensation  and  miscellaneous
expense  partially  offset by increases in salaries and employee  benefits,  net
occupancy expense of premises and a nominal increase in advertising expense.

Salaries and employee benefits  increased  $106,000 or 1.5%, to $7.1 million for
the quarter ended March 31, 2007, compared to $7.0 million for the quarter ended
March 31,  2006.  Compensation  expense  increased  $45,000 to $3.5  million and
pension plan expense  increased  $15,000 to $663,000,  both due to normal salary
increases. The current quarter included Employee Stock Ownership Plan expense of
$562,000,  an increase of $65,000  due to an increase in the  Company's  average
stock price,  year-over-year.  Stock compensation plans expense was unchanged at
$933,000 and payroll taxes were virtually unchanged at $324,000.  Other benefits
expense decreased $23,000 to $1.0 million.

In a Form 8-K filed  April 19,  2007,  the  Company  reported  that the Board of
Directors of the Bank approved,  effective  July 1, 2007,  "freezing" all future
benefit  accruals  under  the  Kearny  Federal  Savings  Bank  Pension  Plan,  a
non-contributory  defined  benefit  pension  plan.  This  action  also  includes
"freezing" the benefit accruals under the Benefits  Equalization Plan related to
the defined  benefit  pension

                                       23

<PAGE>

plan.  These  actions  are  intended  to provide  the  Company  with  additional
flexibility in managing the costs  associated with the benefit plans while still
preserving  all  retirement  plan  participants'  earned  and  vested  benefits.
Management   estimates  that  these  actions  will  result  in  pre-tax  expense
reductions of  approximately  $1.3 million and $226,000 for the defined  benefit
pension  plan and  benefits  equalization  plan,  respectively,  during the year
ending June 30, 2008.

Net occupancy expense of premises increased $59,000 or 7.1%, to $895,000 for the
quarter ended March 31, 2007 from $836,000 for the quarter ended March 31, 2006.
The increase  resulted  principally  from a $51,000  increase in property  taxes
expense attributed to the Bank's facilities.

Equipment  expense  decreased $76,000 or 6.5%, to $1.1 million from $1.2 million
during the comparative  quarter.  Maintenance expense and service bureau expense
decreased $36,000 and $37,000,  respectively, due to management's negotiation of
cost savings from the Bank's  electronic  data processing  service  providers as
well as the Bank's core processor.  The tentative  settlement of a long-standing
dispute with an electronic  data processing  service  provider will result in an
expense of  approximately  $88,000 in the quarter ending June 30, 2007 for which
the vendor agrees to perform certain services.

Directors'  compensation  decreased  $87,000 or 13.8%,  to  $544,000  during the
quarter  ended March 31, 2007,  compared to $631,000 in the quarter  ended March
31, 2006. The decrease was due primarily to the Board of Directors'  decision to
freeze its incentive compensation plan in December 2006.

Miscellaneous  expense  decreased  $132,000  or 11.4%,  to $1.0  million for the
quarter ended March 31, 2007,  from $1.2 million for the quarter ended March 31,
2006. The most  significant  decreases  were  attributed to audit and accounting
services  expense,  printing  and office  supplies  expense  and annual  meeting
expense, which decreased $49,000, $39,000 and $30,000,  respectively.  Audit and
accounting  services  expense  declined  due  to  lower  costs  associated  with
Sarbanes-Oxley  Act  compliance.  Reduced  printing  expense and annual  meeting
expense  resulted  from the use of lower  cost  service  providers  for the 2006
annual meeting compared to the 2005 meeting. Several other miscellaneous expense
categories  decreased a total of $56,000,  including  officers',  directors' and
employee  expense which decreased  $23,000 due primarily to lower costs incurred
by the dining facility located in the Company's  administrative  building. These
decreases were partially offset by increases of $43,000 in other categories, the
largest being a $22,000  increase in loan expense.  The increase in loan expense
was due  primarily  to an  increase  in  servicing  fees  resulting  from  loans
purchased and serviced by others.

Provision for Income Taxes. The provision for income taxes decreased $158,000 or
63.2%,  to $92,000 for the quarter  ended March 31, 2007,  from $250,000 for the
quarter ended March 31, 2006.  The  effective  income tax rate was 27.5% for the
three  months  ended March 31,  2007,  as compared to 9.3% for the three  months
ended March 31, 2006.  The  effective  tax rate  increased  due a decline in the
ratio of interest from tax-exempt instruments to pre-tax income, year-over-year.
Tax-exempt   interest   reduced  the  Company's   federal   income   expense  by
approximately  $251,000  during the quarter ended March 31, 2007,  compared to a
reduction  of  approximately  $598,000  in the  quarter  ended  March 31,  2006.
Management  continued to  liquidate  the  municipal  bond  portfolio  due to the
decline in pre-tax  income which  reduces the  advantage  of holding  tax-exempt
instruments as well as the portfolio's low yield.

Comparison  of  Operating  Results for the Nine Months  Ended March 31, 2007 and
2006

General. Net income for the nine months ended March 31, 2007 was $1.7 million or
$0.02 per share, a decrease of $6.0 million or 77.9%, from $7.7 million or $0.11
per share for the nine months ended March 31,  2006.  The decrease in net income
resulted primarily from decreases in net interest income and non-interest income
and an increase in  non-interest  expense,  particularly  salaries  and employee
benefits  and  directors'  compensation  due to the cost of  stock  compensation
plans.

                                       24

<PAGE>

Net Interest  Income.  Net  interest  income for the nine months ended March 31,
2007 was $34.1 million,  a decrease of $3.9 million or 10.3%,  compared to $38.0
million for the nine months ended March 31,  2006.  The decrease in net interest
income was due to a significant increase in interest expense partially offset by
an increase in interest income.

The Bank's net interest  rate spread  decreased 37 basis points to 1.73% for the
nine months ended March 31, 2007, from 2.10% for the nine months ended March 31,
2006.  The  cost of  average  interest-bearing  liabilities  increased  88 basis
points,  from 2.52% for the nine months ended March 31,  2006,  to 3.40% for the
nine months ended March 31,  2007.  During the nine months ended March 31, 2007,
the yield on average  interest-earning assets increased 51 basis points to 5.13%
for the nine months ended March 31,  2007,  from 4.62% for the nine months ended
March 31, 2006.  Interest-bearing  liabilities continued to re-price faster than
interest-earning assets during the nine months ended March 31, 2007. As of March
31,  2006,  re-pricing  interest-bearing  liabilities  were  expected  to exceed
re-pricing  interest-earning assets expressed as a percentage of total assets by
approximately  19%  over  the  next  twelve  months.   This  ratio  improved  to
approximately  16% as of December 31,  2006,  the most recent date for which the
Bank  has  data,  due to the  redeployment  of funds  realized  from the sale of
securities  into cash and cash  equivalents.  Management  does not believe  that
there has been a material change in the Bank's interest rate sensitivity  during
the three  months  ended March 31,  2007.  The Bank  continued  to be  liability
sensitive  during the nine months ended March 31, 2007 due primarily to maturing
certificates  of deposit.  Promotional  interest  rates  utilized to attract new
deposits,  also affected the rollover rates on existing certificates of deposit,
generally  pushing  non-promotional  interest  rates  higher  in order to remain
competitive in the market place.

The Bank's net interest  margin  decreased 19 basis points to 2.45% for the nine
months ended March 31, 2007, compared with 2.64% for the nine months ended March
31, 2006. Average interest-earning assets during the nine months ended March 31,
2007 were $1.86  billion or $55.2  million  less than  average  interest-earning
assets of $1.92  billion  during  the nine  months  ended  March 31,  2006.  The
decrease  resulted in part from use of cash to fund deposit  outflows and reduce
borrowings  as  well  as  fund  stock  repurchases.   Average   interest-bearing
liabilities  during the nine months  ended March 31, 2007 were $1.47  billion or
$35.5 million less than average  interest-bearing  liabilities  of $1.50 billion
during  the  nine   months   ended  March  31,   2006.   The  ratio  of  average
interest-earning assets to average  interest-bearing  liabilities was 126.9% for
the nine  months  ended March 31,  2007,  compared to 127.6% for the nine months
ended March 31, 2006.

Interest Income.  Total interest income increased $5.1 million or 7.7%, to $71.5
million for the nine months  ended March 31,  2007,  from $66.4  million for the
nine months ended March 31, 2006. Year-over-year, interest income from loans and
other  interest-earning  assets  increased  while interest from  mortgage-backed
securities and securities decreased as a result of a shift in assets into loans.

Interest income from loans receivable  increased $7.2 million or 27.9%, to $33.0
million for the nine months  ended March 31,  2007,  from $25.8  million for the
nine months  ended March 31, 2006 due  primarily  to growth in the  portfolio as
well as an  improvement  in  yield.  The  average  balance  of loans  receivable
increased  $152.3  million to $770.0  million during the nine months ended March
31,  2007,  from $617.7  million  during the nine months  ended March 31,  2006.
Management  continued  to  implement  the Bank's  business  plan which calls for
increasing the Bank's loan portfolio while reducing its dependence on securities
to generate  interest  income.  Average loans  receivable  constituted  41.4% of
average  interest-earning  assets for the nine months ended March 31,  2007,  as
compared  to  32.2%  for the  same  period  a year  ago.  By  contrast,  average
securities  and   mortgage-backed   securities   represented  45.6%  of  average
interest-earning assets for the nine months ended March 31, 2007, as compared to
61.6% for the nine months  ended March 31,  2006.  During the nine months  ended
March 31, 2007,  the Bank  purchased  approximately  $71.4 million in loans from
mortgage  companies  compared to

                                       25

<PAGE>

approximately  $14.6  million  during the same period a year  earlier due to the
slowing  real restate  market,  which  affected the Bank's  ability to originate
loans  internally.  The yield on average  loans  receivable  increased  16 basis
points to 5.72% for the nine months ended March 31, 2007,  compared to 5.56% for
the nine months ended March 31, 2006. The  improvement  in yield  year-over-year
was due in part to growth in the nonresidential mortgage category.

Interest income from mortgage-backed  securities decreased $1.0 million or 4.0%,
to $24.2  million for the nine months  ended March 31,  2007,  compared to $25.2
million  for the nine months  ended  March 31,  2006 due to a  reduction  in the
portfolio  partially  offset by an improvement in yield.  The average balance of
mortgage-backed  securities  decreased  $60.6 million to $676.4  million for the
nine months ended March 31, 2007,  from $737.0 million for the nine months ended
March 31, 2006.  The yield on average  mortgage-backed  securities  increased 20
basis points to 4.77% for the nine months  ended March 31, 2007,  from 4.57% for
the nine months  ended March 31,  2006.  To the extent not required to fund loan
originations,  management  reinvested  cash flows from  principal  and  interest
payments  from   mortgage-backed   securities  into  cash  equivalents   pending
redeployment  into  other  interest-earning  assets,  which  contributed  to the
decrease in the average balance  year-over-year.  The increase in yield resulted
from rate adjustments on pass-through  certificates  containing  adjustable rate
mortgages.  Excluding  CRA  eligible  securities  which  are  fixed  rate,  when
redeploying cash flows from the portfolio back into mortgage-backed  securities,
management routinely reinvested in adjustable rate product,  preferably seasoned
3/1 and 5/1  adjustable  rate mortgages such that the first rate change date and
conversion to a one-year adjustable product may be less than three or five years
away. By sacrificing  higher yields on fixed rate  securities in the short-term,
the Bank gained some interest rate risk protection in the future.

Interest income from securities decreased $6.7 million or 56.3%, to $5.2 million
during the nine months ended March 31, 2007,  from $11.9 million during the nine
months  ended March 31, 2006 due to a  significant  reduction  in the  portfolio
partially  offset by an improvement in yield.  The average balance of securities
decreased  $271.5  million to $171.4 million for the nine months ended March 31,
2007,  compared to $442.9  million for the nine months ended March 31, 2006. The
decrease in the  average  balance  was due  primarily  to the sale of the Bank's
entire  portfolio of government  agency notes,  with an amortized cost of $249.0
million,  and Freddie  Mac common  stock with a fair value of $8.9  million,  in
February 2006. Those sales were followed by sales of municipal  bonds,  totaling
$131.7  million  during the nine months ended March 31, 2007.  To the extent not
required to fund loan originations,  management reinvested the proceeds from the
sales into cash equivalents  pending  redeployment  into other  interest-earning
assets.  During the comparative  period,  management was still  reinvesting cash
flows  from  maturing  securities  back  into the  portfolio,  primarily  in the
municipal bond category,  due to nominally  higher coupons as well as higher tax
equivalent  yields.  However,  the advantage of holding  tax-exempt  instruments
gradually  disappeared  with  declining  pre-tax  income.  The yield on  average
securities  improved 48 basis  points from 3.59% for the nine months ended March
31, 2006, to 4.07% for the nine months ended March 31, 2007. The higher yield on
the securities  portfolio  resulted from the sale of the government agency notes
and municipal bonds. The yield on the notes was 3.22% at the time of their sale.
The yield on the bonds was 3.78% at June 30, 2006, with the remaining balance of
the portfolio yielding 3.72% at March 31, 2007.

Interest  income from other  interest-earning  assets  increased $5.6 million or
160.0%,  to $9.1  million for the nine months  ended March 31,  2007,  from $3.5
million  for the nine  months  ended  March  31,  2006.  This was a result  of a
significant increase in the average balance of other interest-earning  assets as
well as an  improvement  in yield.  There was a $124.5  million  increase in the
average balance of other interest-earning  assets to $242.4 million for the nine
months ended March 31, 2007, from $117.9 million for the nine months ended March
31,  2006.  There was a 104 basis point  increase in the yield on average  other
interest-earning  assets to 4.99% for the nine months ended March 31, 2007, from
3.95% for the nine months ended March 31, 2006,  due to increases in  short-term
interest rates year-over-year,  particularly

                                       26

<PAGE>

the rate paid on  overnight  deposits as well as the  dividend  yield on Federal
Home Loan Bank ("FHLB") of New York capital stock.  The average balance of other
interest-earning  assets  increased  due  to  an  increase  in  interest-earning
deposits of $128.2  million to $237.2  million,  the primary  component of other
interest-earning assets, partially offset by a decrease in FHLB capital stock of
$3.5  million to $5.3  million due to a  repurchase  by FHLB to meet  regulatory
requirements.  To the extent not required to fund loan originations,  management
reinvested   the  proceeds  from  the  sales  into  cash   equivalents   pending
redeployment into other interest-earning assets.

Interest  Expense.  Total interest  expense  increased $9.0 million or 31.7%, to
$37.4  million for the nine months ended March 31, 2007,  from $28.4 million for
the nine months ended March 31, 2006.  Year-over-year,  there was a  significant
increase in interest  expense  attributed to deposits and a nominal  decrease in
interest expense from borrowings.

Interest expense from deposits increased $9.3 million or 36.2%, to $35.0 million
for the nine months ended March 31, 2007, from $25.7 million for the nine months
ended March 31, 2006.  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 92 basis points to 3.31% for the nine months
ended March 31, 2007,  from 2.39% for the nine months ended March 31, 2006.  The
average balance of  interest-bearing  deposits  decreased $27.1 million to $1.41
billion for the nine months  ended March 31,  2007,  from $1.43  billion for the
nine  months  ended  March  31,  2006.  During  the  year,   management  offered
promotional  interest rates on selected  certificates of deposit  maturities and
tiered money market deposit accounts in an effort to retain and attract deposits
in the midst of intense  competition  in the  marketplace.  This  strategy had a
significant  effect on the Bank's cost of funds  year-over-year.  Midway through
the quarter ended December 31, 2006,  management  began to abandon this strategy
in an attempt to mitigate margin compression.  With respect to the same period a
year ago, management reacted to competitive pressures in the marketplace earlier
in 2005 by offering a premium interest rate on 13 month certificates of deposit,
which  attracted new money but then ceased offering  promotional  interest rates
due to the rising  cost of funds until the June  quarter,  when loss of deposits
again became a concern.

Interest  expense  from Federal Home Loan Bank  advances  decreased  $321,000 or
11.7%,  to $2.4  million for the nine months  ended  March 31,  2007,  from $2.7
million for the nine months ended March 31, 2006. Average  borrowings  decreased
$8.4 million to $58.3  million for the nine months  ended March 31,  2007,  from
$66.7  million for the nine months  ended  March 31,  2006.  The cost of average
borrowings  increased five basis points to 5.51% for the nine months ended March
31, 2007 from 5.46% for the nine months  ended March 31,  2006.  The decrease in
the average  balance  resulted from scheduled  principal  payments on amortizing
advances,  the maturity of a $5.0 million advance in November 2006 and overnight
borrowings  on the Bank's books during  January and February  2006.  The cost of
average borrowings increased due to the inexpensive  overnight borrowings from a
year ago, relative to the interest rates on the long-term advances on the Bank's
books during both periods.

Provision for Loan Losses. The provision for loan losses increased $133,000,  to
$378,000  for the nine months ended March 31,  2007,  from a $245,000  provision
recorded during the nine months ended March 31, 2006.  Management attributes the
increase  principally to growth in the loan portfolio.  Total loans increased to
$822.0  million at March 31, 2007 from $708.0  million at June 30,  2006.  Asset
quality  continued  to be strong as  non-performing  loans were $1.1  million or
0.13% of total loans at March 31, 2007,  as compared to $1.0 million or 0.14% of
total loans at June 30, 2006.  The  allowance for loan losses as a percentage of
total loans  outstanding was 0.71% at March 31, 2007 and 0.77% at June 30, 2006,
reflecting  allowance  balances of $5.9 million and $5.5 million,  respectively.
The  increase in the  allowance  balance  during the nine months ended March 31,
2007  included a recovery of $27,000 and no

                                       27

<PAGE>

charge-offs  compared  to a recovery  and  charge-offs  of $5,000  and  $17,000,
respectively, during the nine months ended March 31, 2006.

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 March 31, 2007 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.

Non-Interest Income. Non-interest income attributed to fees, service charges and
miscellaneous  income increased $52,000 or 3.0%, to $1.8 million during the nine
months  ended March 31, 2007  compared  to $1.7  million  during the nine months
ended March 31, 2006.  Fees and service  charges from  operations and the Bank's
retail branch network  decreased by $99,000;  during the nine months ended March
31, 2006, fees and service charges included  non-recurring  loan prepayment fees
of  $85,000  compared  to $1,000 in the  current  period.  Miscellaneous  income
increased  $151,000 compared to the year earlier period.  Income from bank owned
life  insurance  increased  $62,000 due to the purchase of additional  insurance
during  the  comparative  period.  There was also a loss on sale of real  estate
owned of $35,000  recorded  during the nine months ended March 31, 2006, with no
such loss in the current period.

There was a gain on sale of  securities  during the nine months  ended March 31,
2007 of $55,000  compared to $1.0 million during the nine months ended March 31,
2006.

Non-Interest Expense. Total non-interest expense increased $2.7 million or 8.7%,
to $33.6  million for the nine months ended March 31, 2007,  from $30.9  million
for the nine months ended March 31, 2006. The increase  resulted  primarily from
increases in salaries and employee benefits and directors' compensation and to a
lesser degree,  increases in net occupancy  expense of premises and  advertising
expense  partially  offset by decreases in equipment  expense and  miscellaneous
expense.

Salaries and employee benefits increased $2.3 million or 12.6%, to $20.6 million
for the nine months ended March 31, 2007, compared to $18.3 million for the nine
months ended March 31, 2006. Management attributes the increase primarily to the
2005 Stock  Compensation  and Incentive  Plan  approved at the Company's  annual
stockholders' meeting held in October 2005, which resulted in an expense of $2.8
million  during the nine months ended March 31,  2007;  a $1.6 million  increase
compared to $1.2 million  recorded in the nine months ended March 31, 2006.  The
current nine months included Employee Stock Ownership Plan compensation  expense
of $1.7  million,  an increase of $287,000  compared to $1.4 million  during the
nine months ended March 31, 2006 due to an increase in the average  price of the
Company's  stock,  year-over-year.  Other  components  of salaries  and employee
benefits increased $438,000 compared to the prior year,  including  increases of
$125,000 and $52,000 in compensation expense and pension expense,  respectively,
both due to normal salary  increases,  an increase in other benefits  expense of
$217,000 due principally to employee health  insurance and a $44,000 increase in
payroll taxes expense due primarily to vesting of restricted stock.

Net occupancy expense of premises increased $73,000 or 2.9%, to $2.6 million for
the nine months ended March 31, 2007 from $2.5 million for the nine months ended
March 31, 2006.  Rental income from surplus  retail  branch space  resulted in a
$30,000  decrease in rent  expense,  net,  and repairs and  maintenance  expense
decreased  $69,000.  They were offset by  increases in property  taxes  expense,
depreciation  expense and  utilities  expense of $73,000,  $58,000 and  $42,000,
respectively.  The Bank

                                       28

<PAGE>

leases surplus space in retail branch facilities in Springfield,  River Vale and
the Pleasantdale office in West Orange.

Equipment expense decreased $32,000 or 1.0%, virtually unchanged at $3.3 million
year-over-year. A decrease in maintenance expense of $90,000 due to management's
negotiation of cost savings from the Bank's  electronic data processing  service
providers was partially offset by higher depreciation expense and service bureau
expense,  which  increased  $5,000 and  $52,000,  respectively.  The increase in
service  bureau  expense was due primarily to higher costs  associated  with the
Bank's core processor.

Advertising  expense  increased  $101,000 or 9.5%, to $1.2 million,  compared to
$1.1  million  during the same  period in the prior  year,  due to an  extensive
advertising campaign to publicize promotional interest rates for certificates of
deposit,  tiered  money  market  deposit  accounts  and  StarBanking,  a bundled
services package. There were also extensive advertising campaigns focused on the
Bank's loan products.

Directors'  compensation increased $319,000 or 22.1%, to $1.8 million during the
nine months  ended March 31,  2007,  compared  to $1.4  million  during the nine
months ended March 31, 2006. Stock compensation plans expense increased $486,000
due to the 2005 Stock  Compensation and Incentive Plan approved at the Company's
annual  stockholders'  meeting held in October 2005. This increase was partially
offset by decreases in  directors'  fees and other  directors'  compensation  of
$109,000 and $58,000,  respectively.  The  Company's  obligation to pay advisory
board fees in  connection  with its  acquisition  of West Essex Bancorp ended in
June 2006, which contributed to the decline in directors' fees. Other directors'
compensation decreased due primarily to the freezing of the directors' incentive
compensation plan during the quarter ended December 31, 2006.

Miscellaneous  expense  decreased  $128,000 or 3.8%,  to $3.3  million from $3.4
million,  year-over-year.  The two  categories  with the largest  increases were
legal expense and loan expense,  $77,000 and $56,000,  respectively.  Management
attributes   the   increase  in  legal   expense  to  ongoing   evaluation   and
implementation of growth and diversification  strategies related to execution of
the  Company's  business  plan while the increase in loan expense  resulted from
origination costs associated with growing the loan portfolio. The two categories
with the largest  decreases  were printing and office  supplies  expense,  which
decreased   $85,000  due  to  the  use  of  lower  cost  service  providers  and
miscellaneous expense, which decreased $73,000. Miscellaneous expense during the
nine months ended March 31, 2006 included a settlement  for $51,000 with the New
Jersey Division of Taxation resulting from a use tax audit covering the previous
five years.

Provision  for Income  Taxes.  The  provision  for income taxes  decreased  $1.6
million or 88.9%,  to $257,000 for the nine months  ended March 31,  2007,  from
$1.8 million for the nine months ended March 31, 2006.  The  effective  tax rate
was 13.0% for the nine months ended March 31, 2007, as compared to 19.0% for the
nine  months  ended March 31,  2006.  The  effective  tax rate  declined  due to
interest from tax exempt instruments becoming a greater percentage of net income
as net income declined. Tax-exempt interest reduced the Company's federal income
expense by  approximately  $1.2  million  during the nine months ended March 31,
2007,  compared to a reduction of  approximately  $1.8  million  during the nine
months  ended March 31, 2006.  Management  is  liquidating  the  municipal  bond
portfolio  due to the decline in pre-tax  income which  reduces the advantage of
holding tax-exempt instruments as well as the portfolio's low yield.

                                       29

<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 overnight  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,  to the extent
that the Bank does not need the funds for loan originations,  management expects
to maintain  liquidity at an elevated  level as long as the Treasury yield curve
remains inverted or flat.

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 March 31, 2007, the
Bank  had   outstanding   commitments  to  originate  loans  of  $57.2  million,
commitments  to fund the  purchase  of loans on a flow  basis of $74.0  million,
construction  loans in process  of $7.2  million  and unused  lines of credit of
$26.4 million.

During  the  quarter  ended June 30,  2006,  management  introduced  promotional
interest  rates for terms of five,  nine and 13 months to retain and attract new
certificates of deposit.  The Bank continued to offer the  promotional  interest
rates for  certificates  of deposit  with those terms  during the quarter  ended
September  30, 2006 as well as a  promotional  interest  rate for a tiered money
market deposit account.  The program  continued until midway through the quarter
ended December 31, 2006 when the Bank ceased to offer promotional interest rates
on  certificates  of deposit.  Management  reduced the interest rate tied to the
highest tier on the tiered money market deposit account several times during the
quarter ended March 31, 2007.

Certificates of deposit  increased $53.0 million from $883.1 million at June 30,
2006 to $936.1  million  at March 31,  2007 while  interest-bearing  transaction
accounts  increased $26.2 million from $122.1 million at June 30, 2006 to $148.3
million at March 31, 2007, with most of the increase  attributed to tiered money
market deposit accounts. Certificates of deposit scheduled to mature in one year
or less at March 31, 2007 totaled $810.9  million  compared to $658.2 million at
June 30, 2006.  Beginning in the quarter ending June 30, 2007,  certificates  of
deposit with the highest  promotional  interest rates begin to mature.  Based on
historical  experience and expectation of more realistic  deposit pricing in the
marketplace, management believes that a significant portion of maturing deposits
will remain with the Bank. However, given management's more conservative pricing
strategy  implemented  in late  October  2006,  the Bank could face  significant
deposit outflows during the next two quarters.  The Bank's substantial liquidity
position,  which includes  $277.5 million in cash and cash  equivalents at March
31, 2007, provides a cushion for deposit attrition, if it occurs.

Borrowings from the Federal Home Loan Bank ("FHLB") of New York are available to
supplement  the  Bank's  liquidity  position  and to the  extent  that  maturing
deposits do not remain with us, they may need to

                                       30

<PAGE>

be replaced with borrowings.  At March 31, 2007, advances from the FHLB amounted
to $55.6 million.  The Bank has the capacity to borrow additional funds from the
FHLB,  through  an  overnight  line of  credit of  $200.0  million  or by taking
additional short-term or long-term advances.

Consistent  with  its  goals  to  operate  a  sound  and  profitable   financial
organization,   the  Bank   actively   seeks  to   maintain   its  status  as  a
well-capitalized  institution in accordance  with  regulatory  standards.  As of
March 31, 2007, 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 March 31, 2007, as
compared to the minimum regulatory capital requirements:

<TABLE>
<CAPTION>
                                                                  March 31, 2007 (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)              $  365,090       44.51%     $  65,612        8.00%    $  82,015        10.00%

Tier 1 Capital
  (to risk-weighted assets)              $  359,234       43.80%             -           -     $  49,209         6.00%

Core (Tier 1) Capital
  (to adjusted total assets)             $  359,234       18.83%     $  57,223        3.00%    $  95,372         5.00%

Tangible Capital
  (to adjusted total assets)             $  359,234       18.83%     $  28,612        1.50%            -            -
</TABLE>


In  December  2006,  the Bank  received  approval  from  the  Office  of  Thrift
Supervision  for a $15.0 million capital  distribution to the Company.  The cash
dividend was paid in January 2007.

                                       31

<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.

                                       32

<PAGE>

The following  table sets forth the Bank's NPV as of December 31, 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 March 31, 2007.

<TABLE>
<CAPTION>
                                           At December 31, 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           318,583     -106,269               -25%         17.11%        -431 bp
       +200 bp           356,021      -68,831               -16%         18.69%        -272 bp
       +100 bp           390,887      -33,965                -8%         20.10%        -131 bp
          0 bp           424,852            -                 -          21.42%           -
       -100 bp           449,564      +24,712                +6%         22.32%         +90 bp
       -200 bp           466,448      +41,595               +10%         22.89%        +148 bp
</TABLE>

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

This  analysis  also  indicated  that as of December 31, 2006 an  immediate  and
permanent  2.00% increase in interest rates would cause an  approximately  9.38%
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.

                                       33

<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.

                                       34

<PAGE>

                                     PART II


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

                    At March 31,  2007,  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 has 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 March 31, 2007.

--------------------------------------------------------------------------------
                                               Total Number of      Maximum
                                                    Shares          Number of
                                                 Purchased as      Shares that
                         Total                 Part of Publicly    May Yet Be
                       Number of    Average        Announced     Purchased Under
                        Shares     Price Paid      Plans or        the Plans or
      Period           Purchased    per Share      Programs        Programs (1)
--------------------------------------------------------------------------------
 January 1-31, 2007          0             -              0          1,036,634
--------------------------------------------------------------------------------
 February 1-28, 2007    21,000        $14.70         21,000          1,015,634
--------------------------------------------------------------------------------
 March 1-31, 2007       31,500        $14.68         31,500            984,134
--------------------------------------------------------------------------------
 Total                  52,500        $14.68         52,500                  -
--------------------------------------------------------------------------------

(1)  On January 18, 2007, the Company  announced a five percent stock repurchase
     plan (approximately  1,036,634 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.

                                       35

<PAGE>

     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 Albert E. Gossweiler (1)
                    10.3   Employment Agreement between Kearny Federal Savings Bank and Sharon Jones (1)
                    10.4   Employment Agreement between Kearny Federal Savings Bank and William C. Ledgerwood (1)
                    10.5   Employment Agreement between Kearny Federal Savings Bank and Erika K. Parisi (1)
                    10.6   Employment Agreement between Kearny Federal Savings Bank and Patrick M. Joyce (1)
                    10.7   Employment Agreement between Kearny Federal Savings Bank and Craig L. Montanaro (2)
                    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  Stock Option Plan (3)
                    10.12  Restricted Stock Plan (3)
                    10.13  Kearny Federal Savings Bank Director Life Insurance Agreement (4)
                    10.14  Kearny Federal Savings Bank Executive Life Insurance Agreement (4)
                    11.0   Statements re: computation of per share earnings (Filed herewith).
                    31.0   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                    32.0   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

                                       36


<PAGE>

---------------------
     (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 exhibit to the Registrant's  Form 8-K
          filed on July 21, 2005. (File No. 000-51093).
     (3)  Incorporated  by  reference  to  the  Registrant's   definitive  proxy
          statement filed September 30, 2005 (File No. 000-51093).
     (4)  Incorporated by reference to the exhibits to the Registrant's Form 8-K
          filed on August 18, 2005. (File No. 000-51093).

                                       37

<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.

Date:      May 10, 2007         By:  /s/ John N. Hopkins
           -------------------       -------------------------------------------
                                     John N. Hopkins
                                     President and Chief Executive Officer
                                     (Duly  authorized  officer  and  principal
                                     executive officer)

Date:      May 10, 2007         By:  /s/ William C. Ledgerwood
           -------------------       -------------------------------------------
                                     William C. Ledgerwood
                                     Senior Vice President and
                                     Chief Financial Officer
                                     (Principal financial officer)

                                       38