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, 2006
                                    --------------------------------------------

                                       OR

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


    For the transition period from             to
                                    ---------     ---------


                        Commission File Number 000-51093
                                               ---------

                             KEARNY FINANCIAL CORP.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


              UNITED STATES                                22-3803741
--------------------------------------------------------------------------------
     (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                 Identification Number)

    120 Passaic Ave., Fairfield, New Jersey               07004-3510
--------------------------------------------------------------------------------
   (Address of principal executive offices)               (Zip Code)

Registrant's telephone number,
including area code                                      973-244-4500
                                       -----------------------------------------


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

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

         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 15, 2006.

          $0.10 par value common stock - 72,737,500 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, 2006 and June 30, 2005 (Unaudited)                               1

               Consolidated Statements of Income for the Three Months and Nine
               Months Ended March 31, 2006 and 2005 (Unaudited)                            2-3

               Consolidated Statements of Comprehensive Income for the Three
               Months and Nine Months Ended March 31, 2006 and 2005 (Unaudited)              4

               Consolidated Statements of Cash Flows for the Nine Months
               Ended March 31, 2006 and 2005 (Unaudited)                                   5-6

               Notes to Consolidated Financial Statements                                 7-10

      Item 2:  Management's Discussion and Analysis of
               Financial Condition and Results of Operations                             11-23

      Item 3:  Quantitative and Qualitative Disclosure About Market Risk                 24-25

      Item 4:  Controls and Procedures                                                      26


PART II - OTHER INFORMATION                                                              27-28


SIGNATURES                                                                                  29

</TABLE>


<PAGE>

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

<TABLE>
<CAPTION>
                                                                         March 31,      June 30,
                                                                           2006           2005
                                                                       -----------    -----------
<S>                                                                  <C>            <C>
Assets
------

Cash and amounts due from depository institutions                      $    19,531    $    16,683
Interest-bearing deposits in other banks                                   258,830        123,182
                                                                       -----------    -----------

        Cash and cash equivalents                                          278,361        139,865

Securities available for sale                                               18,279         33,591
Investment securities held to maturity                                     210,818        470,098
Loans receivable, including net deferred loan costs of $997 and $815       668,382        563,434
  Less: Allowance for loan losses                                           (5,649)        (5,416)
                                                                       -----------    -----------
  Loans receivable, net                                                    662,733        558,018
                                                                       -----------    -----------
Mortgage-backed securities held to maturity                                709,388        758,121
Premises and equipment                                                      36,125         34,977
Federal Home Loan Bank of New York stock ("FHLB")                            5,174         11,361
Interest receivable                                                          8,191         10,430
Goodwill                                                                    82,263         82,263
Bank Owned Life Insurance                                                   14,500          3,981
Other assets                                                                 8,361          4,300
                                                                       -----------    -----------

        Total assets                                                   $ 2,034,193    $ 2,107,005
                                                                       ===========    ===========

Liabilities and stockholders' equity
------------------------------------

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

Deposits:
  Non-interest bearing                                                 $    57,336    $    56,142
  Interest bearing                                                       1,401,499      1,472,635
                                                                       -----------    -----------

        Total deposits                                                   1,458,835      1,528,777

Advances from FHLB                                                          61,254         61,687
Advance payments by borrowers for taxes                                      5,051          4,627
Other liabilities                                                            6,055          6,432
                                                                       -----------    -----------

        Total liabilities                                                1,531,195      1,601,523
                                                                       -----------    -----------

Stockholders' equity

Preferred stock $0.10 par value, 25,000,000 shares authorized; none
  issued and outstanding                                                         -              -
Common stock $0.10 par value, 75,000,000 shares authorized;
  72,737,500 and 72,737,500 issued and outstanding                           7,274          7,274
Paid in capital                                                            208,747        207,838
Retained earnings - substantially restricted                               305,798        301,857
Unearned Employee Stock Ownership Plan shares                              (15,881)       (16,972)
Unearned Incentive Plan stock                                               (2,819)             -
Accumulated other comprehensive income                                        (121)         5,485
                                                                       -----------    -----------

        Total stockholders' equity                                         502,998        505,482
                                                                       -----------    -----------

        Total liabilities and stockholders' equity                     $ 2,034,193    $ 2,107,005
                                                                       ===========    ===========
</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,
                                        -------------------     ------------------
                                          2006       2005        2006       2005
                                        --------   --------    --------   --------
<S>                                    <C>        <C>         <C>        <C>
Interest income:
    Loans                               $  9,109   $  7,188    $ 25,774   $ 21,641
    Mortgage-backed securities             8,253      8,342      25,239     25,289
    Investment and available for sale
      securities                           3,228      4,122      11,919     12,217
    Other interest earning assets          1,866      1,424       3,490      1,670
                                        --------   --------    --------   --------

        Total interest income             22,456     21,076      66,422     60,817
                                        --------   --------    --------   --------
Interest expense:
    Deposits                               8,759      6,739      25,696     19,037
    Borrowings                             1,005      1,025       2,733      3,004
                                        --------   --------    --------   --------

        Total interest expense             9,764      7,764      28,429     22,041
                                        --------   --------    --------   --------

Net interest income                       12,692     13,312      37,993     38,776
Provision for loan losses                    106       (110)        245          7
                                        --------   --------    --------   --------

Net interest income after provision
  for loan losses                         12,586     13,422      37,748     38,769
                                        --------   --------    --------   --------

Non-interest income:
    Fees and service charges                 225        246         791        702
    Gain on the sale of available for
      sale securities                        938          -       1,024         71
    Miscellaneous                            366        244         924        623
                                        --------   --------    --------   --------

        Total non-interest income          1,529        490       2,739      1,396
                                        --------   --------    --------   --------

Non-interest expense:
    Salaries and employee benefits         6,975      5,165      18,338     15,159
    Net occupancy expense of
      premises                               836        924       2,521      2,298
    Equipment                              1,174      1,051       3,306      2,880
    Advertising                              353        244       1,063        820
    Federal insurance premium                140        138         410        416
    Amortization of intangible assets        159        159         477        477
    Directors' compensation                  631        223       1,443        670
    Miscellaneous                          1,151        906       3,377      2,647
                                        --------   --------    --------   --------

        Total non-interest expense        11,419      8,810      30,935     25,367
                                        --------   --------    --------   --------

Income before income taxes                 2,696      5,102       9,552     14,798
Income taxes                                 250      1,276       1,816      3,984
                                        --------   --------    --------   --------
Net income                              $  2,446   $  3,826    $  7,736   $ 10,814
                                        ========   ========    ========   ========
</TABLE>

See notes to consolidated financial statements.

                                       -2-

<PAGE>

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

<TABLE>
<CAPTION>
                                                               Three Months Ended       Nine Months Ended
                                                                   March 31,                March 31,
                                                              -------------------      --------------------
                                                                2006        2005         2006         2005
                                                              -------     -------      -------      -------
<S>                                                         <C>         <C>          <C>          <C>
Net income per common share:
    Basic                                                     $  0.03     $  0.06      $  0.11      $  0.20
    Diluted                                                      0.03        0.06         0.11         0.20

Weighted average number of common shares outstanding:
    Basic                                                      71,004      59,170       71,034       53,627
    Diluted                                                    71,326      59,170       71,147       53,627

</TABLE>
See notes to consolidated financial statements.

                                      -3-



<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                 -----------------------------------------------
                            (In Thousands, Unaudited)
<TABLE>
<CAPTION>
                                                           Three Months Ended       Nine Months Ended
                                                                March 31,              December 31,
                                                          --------------------    --------------------
                                                            2006        2005        2006        2005
                                                          --------    --------    --------    --------
<S>                                                      <C>         <C>         <C>         <C>
Net income                                                $  2,446    $  3,826    $  7,736    $ 10,814
                                                          --------    --------    --------    --------

Other comprehensive income (loss), net of income taxes:
    Gross realized holdings (gain) on
      securities available for sale                         (8,438)          -      (8,524)        (71)
    Income tax expense                                       2,953           -       2,983          25
    Gross unrealized holdings gain
      (loss) on securities available
      for sale                                                  28      (2,668)        (99)         84
    Deferred income tax benefit
      (expense)                                                (10)        934          34         (29)
                                                          --------    --------    --------    --------

Other comprehensive income (loss)                           (5,467)     (1,734)     (5,606)          9
                                                          --------    --------    --------    --------

Comprehensive income                                      $ (3,021)   $  2,092    $  2,130    $ 10,823
                                                          ========    ========    ========    ========

</TABLE>

See notes to consolidated financial statements.

                                       -4-


<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                                          March 31,
                                                                                   ----------------------
                                                                                     2006         2005
                                                                                   ---------    ---------
<S>                                                                              <C>          <C>
Cash flows from operating activities:
    Net income                                                                     $   7,736    $  10,814
    Adjustments  to  reconcile  net  income to net cash  provided  by  operating
      activities:
        Depreciation and amortization of premises and equipment                        1,411        1,080
        Net amortization of premiums, discounts and loan fees and costs                  602          565
        Deferred income taxes                                                          1,480       (1,553)
        Amortization of intangible assets                                                477          477
        Provision for loan losses                                                        245            7
        Realized gain on sale of securities available for sale                        (8,844)         (71)
        Realized loss on sale of securities held to maturity                           7,821            -
        Decrease in interest receivable                                                2,239          962
        Decrease (increase) in other assets                                           (3,459)       2,387
        Realized loss on sale of real estate owned                                        35            -
        Increase (decrease) in interest payable                                           52          (19)
        Increase (decrease) in other liabilities                                        (759)       1,653
        Increase in cash surrender value of bank owned life insurance                   (311)        (113)
        ESOP, stock option plan and incentive plan expenses                            3,261            -
                                                                                   ---------    ---------

            Net cash provided by operating activities                                 11,986       16,189
                                                                                   ---------    ---------

Cash flows from investing activities:
    Purchases of securities available for sale                                          (215)        (143)
    Proceeds from sale of securities available for sale                               15,750        1,115
    Proceeds from sale of securities held to maturity                                241,206            -
    Purchases of investment securities held to maturity                               (4,000)     (33,189)
    Proceeds from calls and maturities of investment securities held to
      maturity                                                                        11,199       15,386
    Proceeds from repayments of investment securities held to maturity                 3,066        3,421
    Purchase of loans                                                                (13,178)           -
    Net increase in loans receivable                                                 (91,670)     (10,211)
    Proceeds from sale of real estate owned                                               65            -
    Purchases of mortgage-backed securities held to maturity                         (92,464)     (88,081)
    Principal repayments on mortgage-backed securities held to maturity              140,468      131,110
    Additions to premises and equipment                                               (2,559)      (8,845)
    Purchase of FHLB stock                                                            (3,083)           -
    Redemption of FHLB stock                                                           9,270            -
    Purchase of bank owned life insurance                                            (10,208)           -
                                                                                   ---------    ---------

            Net cash provided by (used in) investing activities                    $ 203,647    $  10,563
                                                                                   ---------    ---------
</TABLE>

See notes to consolidated financial statements.

                                       -5-

<PAGE>

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

<TABLE>
<CAPTION>
                                                                           Nine Months Ended
                                                                               March 31,
                                                                        -----------------------
                                                                           2006         2005
                                                                        ---------    ---------
<S>                                                                   <C>          <C>
Cash flows from financing activities:
    Net decrease in deposits                                            $ (69,993)   $ (86,485)
    Repayment of FHLB advances                                               (433)        (408)
    Net change in short-term borrowings from FHLB                               -      (12,000)
    Increase in advance payments by borrowers for taxes                       424          107
    Proceeds from the issuance of common stock                                  -      197,138
    Refund of common stock offering expenses                                    3            -
    Purchase of common stock of Kearny Financial Corp. for treasury        (2,268)           -
    Purchase of common stock of Kearny Financial Corp. for Incentive
      Plan                                                                 (1,815)           -
    Dividends paid to minority stockholders of Kearny Financial Corp.      (3,055)           -
                                                                        ---------    ---------

            Net cash (used in) provided by financing activities         $ (77,137)   $  98,352
                                                                        ---------    ---------

Net increase in cash and cash equivalents                               $ 138,496    $ 125,104
Cash and cash equivalents - beginning                                     139,865       39,488
                                                                        ---------    ---------

Cash and cash equivalents - ending                                      $ 278,361    $ 164,592
                                                                        =========    =========

Supplemental  disclosures of cash flows  information:
  Cash paid during the year for:
        Income taxes, net of refunds                                    $   4,528    $   1,688
                                                                        =========    =========

        Interest                                                        $  28,377    $  22,060
                                                                        =========    =========

Supplemental disclosure of non-cash transactions:
    Cash dividend declared                                              $     993    $       -
                                                                        =========    =========
</TABLE>
See notes to consolidated financial statements.

                                       -6-

<PAGE>

                     KEARNY FINANCIAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------


1. PRINCIPLES OF CONSOLIDATION
   ---------------------------

The consolidated  financial  statements include the accounts of Kearny Financial
Corp. (the  "Company"),  its wholly owned  subsidiaries,  Kearny Federal Savings
Bank (the "Bank") and Kearny Financial  Securities,  Inc., and the Bank's wholly
owned subsidiaries,  KFS Financial Services,  Inc. and Kearny Federal Investment
Corp. The Company conducts its business principally through the Bank. Management
eliminated  all  significant  inter-company  accounts  and  transactions  during
consolidation.

2. BASIS OF PRESENTATION
   ---------------------

The accompanying  unaudited  consolidated  financial statements were prepared in
accordance with instructions for Form 10-Q and Regulation S-X and do not include
information  or footnotes  necessary  for a complete  presentation  of financial
condition,  results of operations  and cash flows in conformity  with  generally
accepted  accounting  principles.  However,  in the opinion of  management,  all
adjustments (consisting of normal adjustments) necessary for a fair presentation
of the  consolidated  financial  statements  have been included.  The results of
operations  for the three and nine month periods  ended March 31, 2006,  are not
necessarily indicative of the results that may be expected for the entire fiscal
year or any other period.

In March 2004,  the EITF reached a consensus on Issue No. 03-1,  "The Meaning of
Other-Than-Temporary  Impairment and Its  Application  to Certain  Investments."
EITF 03-1  provides  guidance  on  other-than-temporary  impairment  models  for
marketable  debt  and  equity  securities  accounted  for  under  SFAS  115  and
non-marketable  equity securities  accounted for under the cost method. The EITF
developed  a basic  three-step  model  to  evaluate  whether  an  investment  is
other-than-temporarily  impaired.  In  November  2005,  the  FASB  approved  the
issuance of FASB Staff  Position  FAS No.  115-1 and FAS 124-1,  "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments." The
FSP addresses when an investment is considered impaired,  whether the impairment
is other-than-temporary  and the measurement of an impairment loss. The FSP also
includes  accounting   considerations   subsequent  to  the  recognition  of  an
other-than-temporary   impairment  and  requires   certain   disclosures   about
unrealized losses that have not been recognized as other-than-temporary. The FSP
is  effective  for  reporting  periods  beginning  after  December 15, 2005 with
earlier application  permitted.  For the Company, the effective date was January
1, 2006.  The adoption of this  accounting  principle did not have a significant
impact on our  financial  position  or  results  of  operations  as the  Company
determined that there were no marketable debt or equity  securities  impacted by
other-than-temporary impairment during the three months ended March 31, 2006.

3. EARNINGS PER SHARE
   ------------------

Basic  earnings  per  share  or  EPS  equals  net  income  available  to  common
stockholders   divided  by  the   weighted-average   number  of  common   shares
outstanding.  If potentially  dilutive contracts exist such as stock options, or
their  equivalent,  diluted EPS is also included,  calculated using the treasury
stock method. Using this approach,  assume there was an exercise of an option at
the beginning of the period,  or date of grant,  if later.  Furthermore,  assume
that the proceeds  received from the exercise of the option provide funds to buy
treasury stock at the average market price for the period.  Finally, assume that
the  exercise  will only occur if the  average  market  price of the  underlying
shares during the period is greater than the exercise  price of the option.  The
weighted average number of common shares  outstanding is increased by the number
of shares assumed issued owing to the exercise of options,  or their equivalent,
reduced by the assumed treasury shares purchased.

                                       -7-

<PAGE>

The calculation of basic and diluted net income per common share excludes Kearny
Federal Savings Bank Employee Stock Ownership Plan (the "ESOP") shares that have
not been  previously  allocated to participants or have not been committed to be
released for allocation to participants.  The 10,000 shares issued to Kearny MHC
in connection  with the Company's  reorganization  in 2001 were  "replaced" with
50,916,250  shares,  or 70% of the shares issued in the Company's initial public
offering.  This  transaction is analogous to a stock split or significant  stock
dividend,  therefore,  net income per common  share for those  shares  have been
retroactively restated for all periods presented.

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

During the quarter ended March 31, 2006, the federally  chartered mutual holding
company of the Company ("Kearny MHC"), waived its right, upon non-objection from
the  Office  of  Thrift  Supervision  ("OTS"),  to  receive  cash  dividends  of
$2,546,000  paid during the quarter and cash  dividends of  $2,546,000  declared
during the quarter, on the shares of Company common stock it owns.  Furthermore,
OTS  advised  Kearny MHC that it would not object to  dividend  waivers  for the
quarters ending March 31, 2006,  June 30, 2006 and September 30, 2006,  provided
OTS does not subsequently determine that the proposed waivers are detrimental to
the safe and sound operation of the Bank.

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

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

SFAS No. 123R also  requires  the  Company to realize as a  financing  cash flow
rather than an operating  cash flow,  as  previously  required,  the benefits of
realized  tax  deductions  in excess of  previously  recognized  tax benefits on
compensation expense (which was $0 for the nine months ended March 31, 2006). In
accordance  with  Staff  Accounting   Bulletin  ("SAB")  No.  107,  the  Company
classified  share-based  compensation for employees within salaries and employee
benefits to correspond with the same line item as the cash  compensation paid to
employees.  The Company  classified  share-based  compensation  for non-employee
directors within  directors'  compensation to correspond with the same line item
as the cash compensation paid to non-employee directors.

Employee  options  and  non-employee  director  options  generally  vest  over a
five-year service period.  Management  recognizes  compensation  expense for all
option grants over the awards' respective requisite service periods.  Management
estimated the fair values relating to all of fiscal 2006 option grants using the
Black-Sholes  option-pricing model. Since there is no historical  information on
the  volatility  of  our  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.

                                       -8-

<PAGE>

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

<TABLE>
<CAPTION>
                                                              Three Months Ended            Nine Months Ended
                                                                March 31, 2006                March 31, 2006
                                                            -----------------------       -----------------------
<S>                                                            <C>                           <C>
Weighted average risk-free interest rate                              4.53%                         4.53%
Expected dividend yield                                               1.62%                         1.62%
Weighted average volatility factor of the expected
      market price of the Company's common stock                     18.00%                        18.00%
Weighted average expected life of the options                    6.50 years                    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  under  the  Company's
restricted stock plans.  Management recognizes compensation expense for the fair
value of restricted  shares on a straight-line  basis over the requisite service
period of five years.

During the three months ended March 31, 2006, the Company  recorded $1.3 million
of  share-based  compensation  expense,  comprised  of stock  option  expense of
$498,000 and restricted stock expense of $825,000.  During the nine months ended
March 31, 2006, the Company  recorded $1.9 million of  share-based  compensation
expense,  comprised of stock option  expense of $713,000  and  restricted  stock
expense of $1.2  million.  The  Company  estimates  it will  record  share-based
compensation expense of approximately $3.2 million in fiscal 2006.

The  following is a summary of the Company's  stock option  activity and related
information for its option plans for the nine months ended March 31, 2006:

<TABLE>
<CAPTION>
                                                                                       Weighted
                                                                       Weighted         Average         Aggregate
                                                                        Average        Remaining        Intrinsic
                                                       Options         Exercise       Contractual         Value
                                                       (000's)           Price           Term            (000's)
                                                     ------------     ------------    ------------     ------------
<S>                                                <C>             <C>             <C>              <C>
Outstanding at June 30, 2005                              -                -
     Granted                                          3,374              $12
     Exercised                                            -                -
     Forfeited                                            -                -
                                                     ------
Outstanding at March 31, 2006                         3,374              $12           9.6 years          $4,682
                                                     ======

Exercisable at March 31, 2006                             -                -                 N/A             N/A
</TABLE>

The weighted  average fair value of stock options granted during the nine months
ended March 31, 2006 was $2.95.

The following is a summary of the status of the Company's  non-vested options as
of March 31, 2006 and changes during the nine months ended March 31, 2006:

<TABLE>
<CAPTION>
                                                                                                        Weighted
                                                                                                         Average
                                                                                        Options        Grant Date
                                                                                        (000's)        Fair Value
                                                                                      ---------        ----------
<S>                                                                                       <C>             <C>
Non-vested at June 30, 2005                                                                  -                -
     Granted                                                                             3,374              $12
     Exercised                                                                               -                -
     Forfeited                                                                               -                -
                                                                                        ------
Non-vested at March 31, 2006                                                             3,374              $12
                                                                                        ======
</TABLE>

Expected  future  compensation  expense  relating to the 3.4 million  non-vested
options outstanding as of March 31, 2006 is $9.3 million over a weighted average
period of 4.6 years.

                                       -9-

<PAGE>

The following is a summary of the status of the Company's  restricted  shares as
of March 31, 2006 and changes during the nine months ended March 31, 2006:

<TABLE>
<CAPTION>
                                                                                                        Weighted
                                                                                      Restricted         Average
                                                                                        Shares         Grant Date
                                                                                        (000's)        Fair Value
                                                                                      ----------       ----------
<S>                                                                                    <C>                <C>
Non-vested at June 30, 2005                                                                  -                -
     Granted                                                                             1,338              $12
     Exercised                                                                               -                -
     Forfeited                                                                               -                -
                                                                                        ------
Non-vested at March 31, 2006                                                             1,338              $12
                                                                                        ======
</TABLE>

Expected  future  compensation  expense  relating to the 1.3 million  restricted
shares at March 31, 2006 is $15.3 million over a weighted  average period of 4.6
years.

6. STOCK REPURCHASE PLAN
   ---------------------

On November 9, 2005, the Company announced that it received  regulatory approval
to begin the  purchase  of up to  1,425,655  shares or  approximately  2% of the
outstanding  shares of its common stock in open market  transactions  for use in
funding the Company's  2005 Stock  Compensation  and Incentive  Plan  previously
approved by stockholders. In December 2005, the Company purchased 177,664 shares
at a total cost of $2,268,000,  or approximately $12.76 per share.  Temporarily,
the repurchased shares appeared as treasury stock in the Consolidated  Statement
of Financial  Condition as of December 31, 2005,  pending  completion of a trust
arrangement to administer  restricted  stock awards granted under the 2005 Stock
Compensation and Incentive Plan.

In  March  2006,  the  Company  delivered  to the  trustee  for the  2005  Stock
Compensation  and Incentive Plan,  177,664 reissued  treasury  shares.  In March
2006, the Company  purchased  134,800  shares at a total cost of $1,815,000,  or
approximately  $13.46 per share.  Upon  settlement,  the Company  delivered  the
shares to the trustee for the 2005 Stock Compensation and Incentive Plan.

                                      -10-
<PAGE>
                                     ITEM 2.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------


Forward-Looking Statements

This Form 10-Q may include certain  forward-looking  statements based on current
management  expectations.  The actual  results of Kearny  Financial  Corp.  (the
"Company") could differ materially from those management  expectations.  Factors
that could cause  future  results to vary from current  management  expectations
include,  but are not limited to, general economic  conditions,  legislative and
regulatory  changes,  monetary  and fiscal  policies of the federal  government,
changes in tax policies,  rates and regulations of federal,  state and local tax
authorities.  Additional  potential  factors  include changes in interest rates,
deposit flows, the cost of funds, demand for loan products, demand for financial
services,  competition,  changes  in the  quality  or  composition  of loan  and
investment portfolios of Kearny Federal Savings Bank, the Company's wholly-owned
subsidiary,  (the "Bank"). Other factors that could cause future results to vary
from current management  expectations include changes in accounting  principles,
policies  or  guidelines,  and other  economic,  competitive,  governmental  and
technological  factors affecting the Company's  operations,  markets,  products,
services and prices.  Further  description of the risks and uncertainties to the
business are included in the  Company's  other filings with the  Securities  and
Exchange Commission.

Comparison of Financial Condition at March 31, 2006 and June 30, 2005

Total assets decreased by $72.8 million,  or 3.5%, to $2.03 billion at March 31,
2006,  from $2.11  billion at June 30,  2005,  due  primarily  to  decreases  in
investment   securities   available   for  sale  and   held  to   maturity   and
mortgage-backed  securities held to maturity  partially offset by an increase in
cash and cash equivalents, loans receivable, net, and bank owned life insurance.
Generally,  cash  and  cash  equivalents  and cash  flows  from  the  securities
portfolio  funded loan  originations and deposit outflows during the nine months
ended March 31, 2006.

Cash and cash  equivalents  increased  $138.5 million to $278.4 million at March
31, 2006, from $139.9 million at June 30, 2005. The Company  continued to deploy
the  proceeds  from its initial  public  offering  completed  in February  2005,
primarily   reinvesting  cash  and  cash  equivalents  in  the  loan  portfolio,
purchasing  additional bank owned life insurance and funding deposit outflows. A
restructuring of the securities portfolio in late February 2006 generated $250.0
million, with excess liquidity invested in cash equivalents to take advantage of
current short-term  interest rates. During the nine months ended March 31, 2006,
the  Company  paid  quarterly  cash  dividends  for the  first  time.  The three
quarterly dividends totaled $3.1 million. Kearny MHC waived receipt of dividends
on the 50,916,250 shares of Company stock it holds.

The carrying value of securities  available for sale decreased $15.3 million, or
45.5%,  to $18.3 million at March 31, 2006, from $33.6 million at June 30, 2005.
The  decrease  was due to the  sale of a $6.9  million  government  income  fund
acquired  during an earlier merger and the sale of 131,088 shares of Freddie Mac
common  stock.   The  sales   produced   gains  of  $71,000  and  $8.8  million,
respectively,  with the  latter  being the first  step in  restructuring  of the
securities  portfolio executed in February 2006.  Mark-to-market  adjustments to
other  investments  in the available for sale  portfolio  during the nine months
ended March 31, 2006 resulted in a nominal  improvement to their carrying value,
compared to the value of the portfolio as of June 30, 2005.

                                      -11-
<PAGE>

Investment  securities held to maturity  decreased $259.3 million,  or 55.2%, to
$210.8 million at March 31, 2006, from $470.1 million at June 30, 2005. Prior to
February 2006, management reinvested cash from maturing securities back into the
portfolio,  primarily in the tax-exempt  municipal  bond  category.  Most of the
decrease  between June 30, 2005 and March 31, 2006 resulted from the sale of the
Bank's entire  portfolio of  government  agency notes at a loss of $7.8 million.
This portfolio had an average yield of 3.20% and the sale was the second step in
the  restructuring  of the  securities  portfolio.  The  sale of this  portfolio
together  with the  proceeds  from the sale of the  Freddie  Mac  common  stock,
generated $250.0 million for reinvestment at current  short-term  interest rates
and funding of future loan originations.

Loans  receivable,  net of deferred  fees and costs and the  allowance  for loan
losses, increased $104.7 million, or 18.8%, to $662.7 million at March 31, 2006,
from $558.0 million at June 30, 2005. The ratio of loans to deposits improved to
45.4% at March 31,  2006,  from 36.5% at June 30,  2005.  The  increase  came in
one-to-four family mortgage loans,  particularly first mortgages and home equity
loans.  There was  substantial  growth in all three  categories of  construction
loans:  one-to-four  family,  multi-family and  non-residential.  There was also
substantial growth in commercial real estate mortgage loans. Commercial business
loans  remained  unchanged  while home equity  lines of credit  showed a nominal
decrease, the only lending category to do so, during the nine months ended March
31, 2006.

Mortgage-backed securities held to maturity decreased $48.7 million, or 6.4%, to
$709.4  million at March 31, 2006,  from $758.1  million at June 30, 2005.  Cash
flows from monthly  principal and interest payments funded loan originations and
deposit  outflows  during  the nine  months  ended  March 31,  2006.  Though the
mortgage-backed  securities portfolio decreased overall, there were purchases of
new  positions  totaling  $92.5  million  during the nine months ended March 31,
2006. The purchases were for the most part adjustable rate,  sacrificing  higher
yields on fixed  rate  securities  in the  short-term,  for  interest  rate risk
protection in the future.

Bank owned life insurance  ("BOLI")  increased $10.5 million to $14.5 million at
March 31, 2006,  from $4.0 million at June 30, 2005. The increase  resulted from
the purchase of $10.2 million in additional  policies and a $311,000 increase in
the cash surrender value of the insurance during the nine months ended March 31,
2006.

Deposits  decreased $70.0 million,  or 4.6%, to $1.46 billion at March 31, 2006,
from $1.53 billion at June 30, 2005. The competitive market for deposits made it
difficult for management to resist the pressure to increase the rates it paid on
deposits.  During the quarter  ended June 30, 2005,  the Bank reacted to deposit
outflows by offering a premium  short-term  interest rate,  which  attracted new
money in the form of certificates of deposit.  However,  the Bank retreated from
that  strategy  during the quarters  ended  September  30, 2005 and December 31,
2005, due to the negative effect on the Bank's cost of funds.  Management's goal
to slow the  increase in the cost of funds  caused by a rise in market  interest
rates was not  sustainable due to the continuing loss of certificates of deposit
as well as core  deposits.  In the  quarter  ended  March  31,  2006,  the  Bank
introduced  several deposit products designed to build core deposits,  including
Star  Banking and a high rate  tiered  money  market  account.  Management  also
adjusted  interest rates on  certificates  of deposit to stabilize their rate of
attrition.

Federal Home Loan Bank advances  decreased  $433,000,  to $61.3 million at March
31, 2006,  from $61.7  million at June 30,  2005.  The  decrease  resulted  from
scheduled monthly principal  payments on amortizing  advances.  Twice during the
nine months ended March 31,  2006,  the Bank  activated  its  overnight  line of
credit  with the  Federal  Home Loan Bank of New York to meet  liquidity  needs.
Management used proceeds from the Company's initial public offering and from the
February 2006  restructuring  of the securities  portfolio to repay the borrowed
money.


                                      -12-
<PAGE>

Stockholders'  equity  decreased  $2.5 million,  to $503.0  million at March 31,
2006,  from $505.5  million at June 30, 2005.  The decrease  was  primarily  the
result of a reduction in accumulated other  comprehensive  income, net of income
taxes,  due to the  sale of the  Freddie  Mac  common  stock  in the  securities
available for sale portfolio.  The purchase of Company stock  contributed to the
incentive  plan trust and common  stock cash  dividends  of $0.05 per share paid
during the quarters ended September 30, 2005 and December 31, 2005 and $0.05 per
share cash  dividend  declared  during the  quarter  ended  March 31,  2006 also
contributed to the decrease.  Partially offsetting the decrease in stockholders'
equity was net income  recorded during the nine months ended March 31, 2006, the
release of unearned ESOP shares and transactions resulting from the stock option
plan  approved at the  Company's  annual  meeting held in October  2005.  In the
quarter ended March 31, 2006, the Company  reissued to the incentive plan trust,
shares of treasury stock purchased during the quarter ended December 31, 2005.

Comparison  of  Operating  Results for the Three Months Ended March 31, 2006 and
2005

General.  Net income for the quarter  ended March 31, 2006 was $2.4  million,  a
decrease of $1.4  million,  or 36.8%,  from $3.8  million for the quarter  ended
March 31, 2005. The decrease in net income  resulted  primarily from an increase
in non-interest expense, particularly salaries and employee benefits, directors'
compensation and miscellaneous  expenses.  A decrease in net interest income and
an increase in the provision for loan losses also contributed to the decrease in
net income.

Net Interest  Income.  Net interest  income for the three months ended March 31,
2006 was $12.7  million,  a decrease  of  $620,000,  or 4.7%,  compared to $13.3
million for the three months  ended March 31, 2005. A large  decrease in the net
interest rate spread was partially offset by a substantial increase in the ratio
of  average  interest-earning  assets to average  interest-bearing  liabilities,
which   helped   to  keep  the  net   interest   margin   virtually   unchanged,
year-over-year.  The effect of the Bank's recent restructuring of the securities
portfolio was significant  enough to relieve pressure on the Bank's net interest
margin, which was narrowing due to interest-bearing  liabilities re-pricing at a
rate faster than interest-earning assets during the last twelve months.

The net interest rate spread  decreased 38 basis points to 2.12% for the quarter
ended March 31, 2006,  from 2.50% for the quarter  ended March 31, 2005.  During
the quarter  ended March 31,  2006,  interest-bearing  liabilities  continued to
re-price   faster   than   interest-earning   assets.   The   cost  of   average
interest-bearing liabilities increased 87 basis points, from 1.76% for the three
months ended March 31, 2005, to 2.63% for the three months ended March 31, 2006.
With respect to the two components of interest-bearing  liabilities, the cost of
deposits increased faster than the cost of borrowings, year-over-year, reversing
the trend from the quarter  ended  December 31, 2005.  During the quarter  ended
March 31, 2006, the yield on average  interest-earning assets increased 49 basis
points,  to 4.75% for the  quarter  ended  March 31,  2006,  from  4.26% for the
quarter  ended  March 31,  2005.  The sale of the  Bank's  entire  portfolio  of
government agency notes,  which had an average yield of 3.20% and the subsequent
reinvestment  of the proceeds,  played an important role in stabilizing  the net
interest margin.  The net interest margin decreased one basis point to 2.68% for
the three months ended March 31, 2006,  compared with 2.69% for the three months
ended March 31, 2005. The net interest margin for the quarter ended December 31,
2005 was 2.61%.

The  ratio  of  average  interest-earning  assets  to  average  interest-bearing
liabilities  increased  from 112.32% for the quarter  ended March 31,  2005,  to
127.52%  for the  quarter  ended  March 31,  2006.  The  primary  reason for the
increase in the ratio was the  infusion  of cash  resulting  from the  Company's
initial public  offering  completed in February 2005.  Average  interest-bearing
liabilities  for the  quarter  ended  March 31,  2005 also  included  funds from
over-subscriptions  to the Company's initial public offering,  until refunded to
depositors.


                                      -13-
<PAGE>

Interest Income. Total interest income increased $1.4 million, or 6.6%, to $22.5
million for the three months ended March 31,  2006,  from $21.1  million for the
three months ended March 31, 2005.  Average  interest-earning  assets  decreased
$87.6  million,  or 4.4%, to $1.89 billion for the quarter ended March 31, 2006,
from $1.98 billion for the quarter ended March 31, 2005.  Management  attributes
the  increase  in  interest  income,  to an  increase  in the  yield on  average
interest-earning   assets,   partially   offset  by  a   decrease   in   average
interest-earning  assets.  Virtually every category of  interest-earning  assets
recorded   an   improvement   in  yield   compared   to  a  year  ago.   Average
interest-earning assets for the quarter ended March 31, 2005 also included funds
from over-subscriptions to the Company's initial public offering, until refunded
to depositors.

Interest income on loans  receivable  increased $1.9 million,  or 26.4%, to $9.1
million for the three  months  ended March 31,  2006,  from $7.2 million for the
three  months  ended March 31,  2005.  The average  balance of loans  receivable
increased  $138.5  million,  or 27.1%,  to $649.4  million for the quarter ended
March 31, 2006,  from $510.9  million for the quarter ended March 31, 2005.  The
yield on average loans receivable decreased two basis points, from 5.63% for the
quarter ended March 31, 2005, to 5.61% for the quarter ended March 31, 2006. The
weighted  average  interest  rate of recent loan  originations  continued to lag
behind the weighted  average interest rate of recent loans paid in full, but the
gap is narrowing.  Upward rate  adjustments on adjustable rate and floating rate
loans in the Bank's  portfolio are also  contributing to a stabilization  of the
yield on average loans  receivable.  A major  marketing  effort started in 2005,
continued during the quarter ended March 31, 2006,  contributing to the increase
in the average balance of loans receivable.

Interest  income  on  mortgage-backed  securities  held  to  maturity  decreased
$89,000,  virtually  unchanged  at $8.3 million for the three months ended March
31,  2006,  compared to $8.3  million for the three months ended March 31, 2005.
The average balance of mortgage-backed  securities  decreased $11.0 million,  or
1.5%,  to $713.6  million for the  quarter  ended  March 31,  2006,  from $724.6
million  for  the  quarter   ended  March  31,   2005.   The  yield  on  average
mortgage-backed  securities  increased to 4.63% for the three months ended March
31, 2006,  from 4.60% for the three months ended March 31, 2005. The decrease in
the average balance of mortgage-backed securities, year-over-year, resulted from
the  redeployment  of  monthly   principal  and  interest   payments  into  loan
originations and to fund deposit  outflows.  The increase in yield resulted from
upward rate  adjustments on underlying  adjustable  rate loans.  Mortgage-backed
securities  purchased  in recent years were for the most part  adjustable  rate,
sacrificing  higher  yields  on fixed  rate  securities  in the  short-term  for
interest rate risk protection in the future.

Interest income on investment securities available for sale and held to maturity
decreased  $894,000,  or 21.8%,  to $3.2 million for the quarter ended March 31,
2006,  from $4.1  million for the  quarter  ended  March 31,  2005.  The average
balance of investment  securities  decreased $131.1 million, or 26.8%, to $357.2
million for the quarter ended March 31, 2006, compared to $488.3 million for the
quarter  ended March 31,  2005.  The  decrease  in the  average  balance was due
primarily to the sale of the Bank's entire portfolio of government  agency notes
and Freddie Mac common  stock in February  2006.  Prior to the sale,  management
reinvested cash from maturing  securities back into the portfolio,  primarily in
the tax-exempt municipal bond category,  which featured nominally higher coupons
as well as higher tax equivalent yields. The yield improved 24 basis points from
3.38% for the three months  ended March 31, 2005,  to 3.62% for the three months
ended March 31, 2006.  The higher yield on investment  securities  resulted from
the sale of the  government  agency  notes,  which  provided an average yield of
3.20%.

Interest income on other  interest-earning  assets increased $442,000, or 31.6%,
to $1.9 million for the quarter ended March 31, 2006,  from $1.4 million for the
quarter ended March 31, 2005. This was a result of a significant increase in the
average  yield  partially  offset by a decrease in the average  balance of other
interest-earning  assets.  There was a 212 basis point  increase in the yield on
average other  interest-earning  assets to 4.35% for the quarter ended March 31,
2006, from 2.23% for the quarter ended March 31, 2005,


                                      -14-
<PAGE>

due to rising short-term  interest rates. There was an $83.9 million decrease in
the average balance of other  interest-earning  assets to $171.5 million for the
three  months  ended March 31,  2006,  from $255.4  million for the three months
ended March 31,  2005.  The  average  balance of other  interest-earning  assets
decreased due to a decrease in interest-earning  deposits, the primary component
of other  interest-earning  assets,  and a decrease in Federal Home Loan Bank of
New York ("FHLB") capital stock.  Interest-earning deposits in the quarter ended
March 31, 2005 included the proceeds from the initial public offering  completed
in February 2005,  subsequently  deployed into other earning assets,  while FHLB
capital  stock  decreased  due  to a  repurchase  by  FHLB  to  meet  regulatory
requirements.  Management  reinvested the proceeds from the restructuring of the
securities  portfolio in February 2006 in cash  equivalents  pending  deployment
into other earning assets.

Interest Expense.  Total interest expense  increased $2.0 million,  or 25.6%, to
$9.8 million for the three  months  ended March 31, 2006,  from $7.8 million for
the three months ended March 31, 2005. The increase  resulted  primarily from an
increase in the cost of average interest-bearing  liabilities,  partially offset
by a decrease in the average balance of interest-bearing liabilities.  There was
a 87 basis point increase in the cost of average interest-bearing liabilities to
2.63% for the three  months  ended March 31,  2006,  from  1.76%,  for the three
months ended March 31, 2005. The average balance of interest-bearing liabilities
decreased $278.6 million, or 15.8%, to $1.48 billion for the quarter ended March
31, 2006, from $1.76 billion for the quarter ended March 31, 2005.

Interest expense on deposits  increased $2.1 million,  or 31.3%, to $8.8 million
for the three  months  ended  March 31,  2006,  from $6.7  million for the three
months ended March 31, 2005. The increase resulted primarily from an increase in
the cost of average interest-bearing deposits, which more than offset a decrease
in the  average  balance  of  interest-bearing  deposits.  The  cost of  average
interest-bearing  deposits  increased  88 basis  points to 2.49% for the quarter
ended March 31,  2006,  from 1.61% for the quarter  ended  March 31,  2005.  The
average balance of interest-bearing  deposits decreased $266.2 million, to $1.41
billion for the three months ended March 31,  2006,  from $1.67  billion for the
three  months ended March 31, 2005.  Average  interest-bearing  deposits for the
quarter ended March 31, 2005 also included funds from  over-subscriptions to the
Company's initial public offering, until refunded to depositors. The competitive
market for deposits made it difficult  for  management to resist the pressure to
increase the rates it pays on deposits.  During the quarter ended June 30, 2005,
the Bank reacted by offering a premium short-term interest rate, which attracted
new money in the form of  certificates of deposit.  However,  the Bank retreated
from that strategy during the quarters ended September 30, 2005 and December 31,
2005, due to the negative effect on its cost of funds. Management's goal to slow
the increase in the cost of funds caused by a rise in market  interest rates was
not sustainable due to the continuing loss of certificates of deposit as well as
core deposits.  In the quarter ended March 31, 2006, the Bank introduced several
deposit products  designed to build core deposits,  including Star Banking and a
high rate tiered money market account.  Management also adjusted  interest rates
on certificates of deposit to stabilize their rate of attrition.

Interest expense on Federal Home Loan Bank advances decreased  $20,000,  to $1.0
million for the quarter ended March 31, 2006,  from $1.0 million for the quarter
ended March 31, 2005. The average balance decreased $12.4 million,  or 14.0%, to
$76.1 million for the three months ended March 31, 2006,  from $88.5 million for
the three months  ended March 31, 2005,  which was more than enough to offset an
increase  in the cost of  average  borrowings.  The cost of  average  borrowings
increased 65 basis points to 5.28% from 4.63%,  year-over-year.  The decrease in
the average balance resulted from the repayment of short-term  advances obtained
to fund the purchase of securities, subsequently paid off with proceeds from the
initial  public  offering  completed  in  February  2005.  The  cost of  average
borrowings increased due to the repayment of the short-term,  low cost advances,
leaving  mostly higher rate long-term  advances on the Bank's books.  During the
quarter ended March 31, 2006,  the Bank  activated its overnight  line of credit
with the Federal Home Loan Bank of New York to meet liquidity needs.  Management
used proceeds from the  restructuring  of the securities  portfolio to repay the
borrowed money.

                                      -15-
<PAGE>

Provision for Loan Losses. The provision for loan losses increased $216,000,  to
$106,000  for the  quarter  ended  March 31,  2006,  from a  $110,000  reduction
recorded  during the quarter  ended March 31, 2005.  Management  attributes  the
increase  primarily to growth in the loan  portfolio.  Total loans  increased to
$667.4  million at March 31,  2006,  from $632.7  million at December  31, 2005.
Non-performing  loans were $1.4  million,  or 0.21% of total  loans at March 31,
2006, as compared to $1.2 million, or 0.19% of total loans at December 31, 2005.
The  allowance for loan losses as a percentage  of total loans  outstanding  was
0.85% at March  31,  2006 and  1.04% at March  31,  2005,  reflecting  allowance
balances of $5.6 million and $5.4 million, respectively.

Management  assesses the  allowance  for loan losses  monthly.  Management  uses
available  information to recognize  losses on loans,  however,  additional loan
loss  provisions  may be necessary  in the future,  based on changes in economic
conditions.  In  addition,  regulatory  agencies,  as an integral  part of their
examination  process,  periodically review the allowance for loan losses and may
require  us to  recognize  additional  provisions  based  on their  judgment  of
information  available to them at the time of their  examination.  We maintained
the allowance  for loan losses as of March 31, 2006 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 $101,000,  to $591,000 for the three months ended
March 31, 2006,  compared to $490,000 for the three months ended March 31, 2005.
The increase in  non-interest  income  attributed to fees,  service  charges and
miscellaneous  income  was due  primarily  to income of  $93,000  realized  from
additional  bank owned life insurance  purchased  between July and December 2005
and non-recurring loan fees of $12,000 nominally offset by lower fee income from
the Bank's retail branch system.

There  was  non-interest  income  of  $938,000  from a net  gain on the  sale of
securities  attributed to the  restructuring of the securities  portfolio during
the quarter  ended  March 31,  2006.  The sale of 131,088  shares of Freddie Mac
common stock  produced a gain of $8.8 million while the sale of the portfolio of
government agency notes produced a loss of $7.8 million.  There was no such gain
or loss recorded in the quarter ended March 31, 2005.

Non-Interest  Expense.  Total  non-interest  expense increased $2.6 million,  or
29.5%,  to $11.4  million for the three months  ended March 31, 2006,  from $8.8
million  for the three  months  ended March 31,  2005.  The  increase  consisted
primarily  of  increases  in  salaries  and  employee  benefits  and  directors'
compensation, nominal increases in equipment expense and advertising expense and
higher miscellaneous expenses. There was a nominal decrease in the net occupancy
expense of premises.

Salaries and employee benefits increased $1.8 million, or 34.6%, to $7.0 million
for the quarter  ended March 31, 2006,  compared to $5.2 million for the quarter
ended March 31, 2005.  Management  attributes  the  increase  primarily to stock
benefit  plans  approved at the Company's  first annual  meeting held in October
2005,  which  resulted in an expense of $933,000  during the quarter ended March
31, 2006.  The quarter ended March 31, 2006  contained for the first time a full
quarter's  expense  attributed to the restricted stock plan and the stock option
plan. The quarter ended March 31, 2006 included  employee  stock  ownership plan
("ESOP")  compensation  expense of $497,000;  while the quarter  ended March 31,
2005 did not include this expense  category.  The Bank  established  the ESOP in
conjunction  with the  initial  public  offering  completed  in  February  2005,
purchasing 1.7 million shares. Increases totaling $380,000 occurred in all other
components of salaries and employee benefits,  including  compensation  expense,
pension  expense,  other  benefits  expense and payroll taxes expense during the
quarter ended March 31, 2006.

An increase of $123,000,  year-over-year,  in equipment  expense  resulted  from
higher maintenance expense,  depreciation expense and increased costs related to
data  processing.  The Bank  continued  to focus on system risk  assessment  and
intrusion protection for its computer network.

                                      -16-
<PAGE>

Advertising expense increased $109,000, compared to the same period in the prior
year, due to an extensive  advertising campaign associated with the introduction
of the Bank's Star Banking product.  This new relationship based  retail-banking
product, designed to build core deposits,  bundles services and deposit products
together with the Bank's Internet banking and bill-paying tools.

Directors' compensation increased $408,000, to $631,000 during the quarter ended
March 31, 2006,  from $223,000 in the quarter ended March 31, 2005. The increase
resulted  primarily  from stock benefit plans  approved at the Company's  annual
meeting  with the  distribution  of awards to  outside  directors  occurring  in
October 2005. The expense  recorded in the quarter  attributed to the restricted
stock plan and the stock option plan was $390,000.

Miscellaneous  expenses  increased  $245,000,  or 27.0%, to $1.2 million for the
quarter  ended March 31, 2006,  compared to $906,000 for the quarter ended March
31, 2005. Miscellaneous expenses included audit and accounting services expense,
which  increased  $72,000 to $139,000 and expenses of $68,000  attributed to the
Company's  prior and upcoming  annual  meetings.  Audit and accounting  services
expense  includes  expenses  attributed  to  compliance  with Section 404 of the
Sarbanes-Oxley  Act.  These expenses were in large part due to becoming a public
company.  All other elements of non-interest  expense  totaled  $944,000 for the
three  months  ended March 31, 2006;  an increase of  $105,000,  or 12.5%,  from
$839,000 for the three months ended March 31, 2005.

Provision  for Income  Taxes.  The  provision  for income taxes  decreased  $1.0
million to $250,000 for the quarter ended March 31, 2006,  from $1.3 million for
the quarter ended March 31, 2005. The effective income tax rate was 9.3% for the
three  months  ended March 31,  2006,  as compared to 25.0% for the three months
ended March 31, 2005.  Management attributes the lower effective income tax rate
primarily  to a  significant  decrease in pre-tax  income,  $2.7 million for the
quarter  ended March 31, 2006  compared  to $5.1  million for the quarter  ended
March 31, 2005.

Comparison  of  Operating  Results for the Nine Months  Ended March 31, 2006 and
2005

General. Net income for the nine months ended March 31, 2006 was $7.7 million, a
decrease of $3.1 million, or 28.7%, from $10.8 million for the nine months ended
March 31,  2005.  The  decrease  in net  income  resulted  from an  increase  in
non-interest expense, particularly salaries and employee benefits and directors'
compensation,  and to a  lesser  degree,  net  occupancy  expense  of  premises,
equipment expense,  advertising  expense and miscellaneous  expenses.  A nominal
decrease in net interest income and an increase in the provision for loan losses
also contributed to the decrease in net income.

Net Interest  Income.  Net  interest  income for the nine months ended March 31,
2006 was $38.0  million,  a decrease  of  $783,000,  or 2.0%,  compared to $38.8
million for the nine months  ended  March 31,  2005.  Despite an increase in the
ratio of average interest-earning assets to interest-bearing liabilities, it was
not enough to offset a decrease in the net interest rate spread and net interest
margin.  A flat yield curve during the twelve months  between March 31, 2005 and
March 31,  2006  hindered  the  Bank's  efforts  to offset  increasing  interest
expense.  As  a  result,  interest  income  lost  ground  to  interest  expense,
year-over-year.  The Bank's recent  restructuring  of the  securities  portfolio
occurred  too close to the end of the 2006  period to  significantly  affect the
results  for the nine months  ended  March 31, 2006  compared to the nine months
ended March 31, 2005.

The net  interest  rate spread  decreased  50 basis points to 2.10% for the nine
months  ended March 31,  2006,  from 2.60% for the nine  months  ended March 31,
2005.  Interest  rate  sensitivity  during the nine months ended March 31, 2006,
compared to the nine  months  ending  March 31,  2005,  reflected a  substantial
negative  gap,  with   interest-bearing   liabilities   re-pricing  faster  than
interest-earning  assets.  However,  the  narrowing of the spread slowed from 56
basis points at the six- month interval, year-over-

                                      -17-
<PAGE>

year, to 50 basis points at the nine-month interval,  year-over-year.  The yield
on average  interest-earning  assets increased 20 basis points, to 4.62% for the
nine months ended March 31, 2006, from 4.42% for the nine months ended March 31,
2005.  At the  same  time,  the  cost of  average  interest-bearing  liabilities
increased 70 basis points,  from 1.82% for the nine months ended March 31, 2005,
to 2.52% for the nine  months  ended  March 31,  2006.  With  respect to the two
components of  interest-bearing  liabilities,  the cost of borrowings  increased
faster  than the  cost of  deposits,  year-over-year.  The net  interest  margin
decreased  18 basis  points to 2.64% for the nine months  ended March 31,  2006,
compared with 2.82% for the nine months ended March 31, 2005.

The  ratio  of  average  interest-earning  assets  to  average  interest-bearing
liabilities  increased from 113.57% for the nine months ended March 31, 2005, to
127.64% for the nine months  ended March 31,  2006.  The primary  reason for the
increase in the ratio was the infusion of cash  resulting from the Company's IPO
completed in February 2005. Between the comparative periods,  including the nine
months ended March 31, 2006, the Bank focused on deploying the proceeds from the
Company's IPO, primarily in loans receivable.

Interest Income. Total interest income increased $5.6 million, or 9.2%, to $66.4
million for the nine months  ended March 31,  2006,  from $60.8  million for the
nine months  ended March 31, 2005.  Average  interest-earning  assets  increased
$80.4  million,  or 4.4%,  to $1.92  billion for the nine months ended March 31,
2006,  from $1.84  billion for the nine months ended March 31, 2005. An increase
in  average  interest-earning  assets  and an  increase  in the yield on average
interest-earning  assets  provided  the  stimulus  for the  increase in interest
income.  There was  growth,  year-over-year,  in the  average  balances  of most
interest-earning asset categories:  particularly loans receivable, net, and to a
lesser  degree  in  mortgage-backed   securities  held  to  maturity  and  other
interest-earning  assets.  There was some  shrinkage  in the average  balance of
investment  securities held to maturity and available for sale,  year-over-year.
Generally, the growth resulted from the infusion of cash from the Company's IPO.
The average  yields on loans  receivable  and  mortgage-backed  securities  were
lower, but higher for investment securities and other  interest-earning  assets,
year-over-year.

Interest income on loans receivable  increased $4.2 million,  or 19.4%, to $25.8
million for the nine months  ended March 31,  2006,  from $21.6  million for the
nine  months  ended March 31,  2005.  The  average  balance of loans  receivable
increased $101.0 million,  or 19.8%, to $612.2 million for the nine months ended
March 31,  2006,  from $511.2  million for the nine months ended March 31, 2005.
There was a three basis point decrease in the yield on average loans  receivable
to 5.61% for the nine  months  ended  March 31,  2006,  from  5.64% for the nine
months ended March 31, 2005.  Early in 2005, the Bank launched a major marketing
effort  designed to take  advantage of a strong housing  market.  This marketing
program  significantly  boosted  loan  originations,  which  contributed  to the
increase in the average balance of loans  receivable.  The marketing  program is
continuing. The weighted average interest rate of loan originations continued to
lag behind the weighted  average interest rate of recent loans paid in full, but
the gap is narrowing.  Upward rate  adjustments on adjustable  rate and floating
rate loans in the Bank's  portfolio are also  contributing to a stabilization of
the yield on average loans receivable.

Interest  income on  mortgage-backed  securities  held to  maturity  decreased a
nominal $50,000,  virtually unchanged at $25.2 million for the nine months ended
March 31,  2006,  compared to $25.3  million for the nine months ended March 31,
2005. The average balance of mortgage-backed  securities increased $4.2 million,
or 0.6%, to $737.0 million for the nine months ended March 31, 2006, from $732.8
million  for the nine  months  ended  March  31,  2005.  The  yield  on  average
mortgage-backed  securities  decreased  to 4.57% for the nine months ended March
31, 2006,  from 4.60% for the nine months ended March 31, 2005.  The increase in
the average balance of mortgage-backed securities, year-over-year, resulted from
reinvestment of monthly principal and interest payments into new mortgage-backed
securities.  The decrease in yield  resulted  from the  reinvestment  of monthly
principal payments from higher coupon mortgage-backed  securities into new lower
yielding securities, which occurred in a relatively lower

                                      -18-
<PAGE>

interest  rate  environment.  Of the $92.5  million in new  positions  purchased
during the nine months ended March 31, 2006, most were  adjustable  rate, due to
management's  concerns about rising interest rates. By sacrificing higher yields
on fixed rate securities in the  short-term,  the Bank gained some interest rate
risk protection in the portfolio for the future.

Interest income on investment securities available for sale and held to maturity
decreased  $298,000,  or 2.4%,  to $11.9 million for the nine months ended March
31,  2006,  from $12.2  million for the nine months  ended March 31,  2005.  The
average balance of investment  securities  decreased $36.3 million,  or 7.5%, to
$449.8  million for the nine months  ended  March 31,  2006,  compared to $486.1
million during the prior year. The yield improved from 3.35% for the nine months
ended March 31, 2005,  to 3.53% for the nine months  ended March 31,  2006.  The
decrease  in the  average  balance  of  investment  securities,  year-over-year,
resulted from the sale of the Bank's entire portfolio of government agency notes
and Freddie Mac common  stock in February  2006.  Prior to the sale,  management
reinvested cash from maturing  securities back into the portfolio,  primarily in
the  tax-exempt  municipal  bond  category.   The  higher  yield  on  investment
securities resulted from the sale of the government agency notes, which provided
an average yield of 3.20% and reinvestment of earlier maturities into tax-exempt
municipal  bonds  featuring  nominally  higher  coupons  as well as  higher  tax
equivalent yields.

Interest income on other interest-earning  assets increased $1.8 million to $3.5
million for the nine months ended March 31, 2006, from $1.7 million for the nine
months ended March 31, 2005.  This was a result of a 185 basis point increase in
the yield on average other interest-earning  assets to 3.95% for the nine months
ended March 31, 2006,  from 2.10% for the nine months ended March 31, 2005,  due
to rising  short-term  interest rates.  Also contributing to the increase was an
$11.7 million increase in the average balance of other  interest-earning  assets
to $117.9 million for the nine months ended March 31, 2006,  from $106.2 million
for the  nine  months  ended  March  31,  2005.  The  average  balance  of other
interest-earning  assets  increased  due to an  increase  of  $14.2  million  in
interest-earning  deposits from $94.8 million to $109.0 million, which consisted
of cash received from the IPO completed in February  2005.  There was a decrease
of $2.6  million to $8.8 million in the average  balance of FHLB capital  stock,
another  component of  interest-earning  assets,  which decreased due to a stock
repurchase by FHLB to meet regulatory  requirements.  Management  reinvested the
proceeds from the restructuring of the securities  portfolio in February 2006 in
cash equivalents pending deployment into other earning assets.

Interest Expense.  Total interest expense  increased $6.4 million,  or 29.1%, to
$28.4  million for the nine months ended March 31, 2006,  from $22.0 million for
the nine months ended March 31, 2005.  The increase  resulted  primarily from an
increase in the cost of average interest-bearing  liabilities,  partially offset
by a decrease in the average balance of interest-bearing liabilities.  There was
a 70 basis point increase in the cost of average interest-bearing liabilities to
2.52% for the nine months ended March 31,  2006,  from 1.82% for the nine months
ended  March 31,  2005.  The  average  balance of  interest-bearing  liabilities
decreased  $115.2  million,  or 7.1%, to $1.50 billion for the nine months ended
March 31, 2006, from $1.62 billion for the nine months ended March 31, 2005.

Interest expense on deposits increased $6.7 million,  or 35.3%, to $25.7 million
for the nine months ended March 31, 2006, from $19.0 million for the nine months
ended March 31, 2005.  The increase  resulted  primarily from an increase in the
cost of average interest-bearing deposits, partially offset by a decrease in the
average   balance   of   interest-bearing   deposits.   The   cost  of   average
interest-bearing deposits increased 73 basis points to 2.39% for the nine months
ended March 31, 2006,  from 1.66% for the nine months ended March 31, 2005.  The
average balance of  interest-bearing  deposits decreased $96.1 million, or 6.3%,
to $1.44  billion for the nine months ended March 31, 2006,  from $1.53  billion
for the nine months ended March 31, 2005.  The  competitive  market for deposits
made it difficult for management to resist the pressure to increase the rates it
pays on deposits.  During the quarter  ended June 30, 2005,  the Bank reacted by
offering a premium  short-term  interest rate,  which attracted new money in the
form of

                                      -19-
<PAGE>

certificates of deposit.  However,  the Bank retreated from that strategy during
the quarters ended September 30, 2005 and December 31, 2005, due to the negative
effect on its cost of funds.  Management's goal to slow the increase in the cost
of funds caused by a rise in market  interest rates was not  sustainable  due to
the continuing loss of certificates of deposit as well as core deposits.  In the
quarter  ended March 31, 2006,  the Bank  introduced  several  deposit  products
designed to build core  deposits,  including Star Banking and a high rate tiered
money market account. Management also adjusted interest rates on certificates of
deposit to stabilize their rate of attrition.

Interest expense on Federal Home Loan Bank advances decreased $271,000, or 9.0%,
to $2.7 million for the nine months ended March 31, 2006,  from $3.0 million for
the nine  months  ended March 31,  2005.  The average  balance  decreased  $19.2
million,  or 22.4%,  to $66.7  million for the nine months ended March 31, 2006,
from $85.9 million for the nine months ended March 31, 2005, which was more than
enough to offset an  increase  in the cost of  average  borrowings.  The cost of
average   borrowings   increased   79  basis   points  to  5.46%   from   4.67%,
year-over-year.  The decrease in the average balance resulted from the repayment
of short-term advances obtained to fund the purchase of securities, subsequently
paid off with proceeds from the IPO completed in February  2005,  plus scheduled
monthly  principal  payments  on  amortizing  advances.   The  cost  of  average
borrowings increased due to the repayment of the short-term,  low cost advances,
leaving mostly higher rate long-term  advances on the Bank's books. Twice during
the nine months ended March 31, 2006,  the Bank  activated its overnight line of
credit with the Federal Home Loan Bank of New York to meet liquidity needs.

Provision for Loan Losses. The provision for loan losses increased $238,000,  to
$245,000 for the nine months ended March 31, 2006,  from $7,000  recorded during
the nine  months  ended  March 31,  2005.  Management  attributes  the  increase
primarily to growth in the loan portfolio  between the two periods.  Total loans
increased to $667.4  million at March 31, 2006,  from $562.6 million at June 30,
2005.  Non-performing  loans were $1.4 million, or 0.21% of total loans at March
31, 2006, as compared to $1.9 million, or 0.34% of total loans at June 30, 2005.
The  allowance for loan losses as a percentage  of total loans  outstanding  was
0.85% at March  31,  2006 and  0.96%  at June  30,  2005,  reflecting  allowance
balances of $5.6 million and $5.4 million, respectively.

Management  assesses the  allowance  for loan losses  monthly.  Management  uses
available  information to recognize  losses on loans,  however,  additional loan
loss  provisions  may be necessary  in the future,  based on changes in economic
conditions.  In  addition,  regulatory  agencies,  as an integral  part of their
examination  process,  periodically review the allowance for loan losses and may
require  us to  recognize  additional  provisions  based  on their  judgment  of
information  available to them at the time of their  examination.  We maintained
the allowance  for loan losses as of March 31, 2006 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  $390,000,  to $1.7 million for the nine months
ended March 31,  2006,  from $1.3  million  for the nine months  ended March 31,
2005. The increase in non-interest  income  attributed to fees,  service charges
and  miscellaneous  income was due primarily to income of $225,000 realized from
additional bank owned life insurance  purchased  between July and December 2005,
non-recurring loan fees, including prepayment penalties of $86,000 and increased
fee income from the Bank's retail branch system.

There was  non-interest  income  from net gains on the sale  securities  of $1.0
million  during the nine months ended March 31, 2006,  compared to  non-interest
income from gains on the sale of  securities  of $71,000  during the nine months
ended March 31, 2005. In the quarter  ended March 31, 2006,  the sale of 131,088
shares of Freddie Mac common  stock  produced a gain of $8.8  million  while the
sale  of the  portfolio  of  government  agency  notes  produced  a loss of $7.9
million.  There was also an $86,000 gain on the sale of a government income fund
recorded earlier in the year.


                                      -20-
<PAGE>

Non-Interest  Expense.  Total  non-interest  expense increased $5.5 million,  or
21.7%,  to $30.9  million for the nine months ended March 31,  2006,  from $25.4
million  for the nine  months  ended  March 31,  2005.  The  increase  consisted
primarily  of an increase in  salaries  and  employee  benefits,  net  occupancy
expense  of  premises,   equipment  expense,   advertising  expense,  directors'
compensation and miscellaneous expenses.

Salaries  and employee  benefits  increased  $3.1  million,  or 20.4%,  to $18.3
million for the nine months ended March 31, 2006,  compared to $15.2 million for
the nine  months  ended  March 31,  2005.  Management  attributes  the  increase
primarily to stock benefit plans approved at the Company's  first annual meeting
held in October 2005,  which resulted in an expense of $1.2 million recorded for
the nine months ended March 31, 2006. The  distribution of restricted  stock and
stock  option  awards to  officers  occurred in December  2005.  Employee  stock
ownership  plan  ("ESOP")  compensation  expense  was  $1.4  million.  The  Bank
established the ESOP in conjunction  with the initial public offering  completed
in February 2005, purchasing 1.7 million shares. The nine months ended March 31,
2005 did not include these expense  categories.  Compensation  expense increased
$703,000,   year-over-year,  due  to  normal  salary  increases  and  additional
personnel  hired to staff the Bank's 26th retail branch office,  which opened in
Lanoka  Harbor,  New Jersey in October 2005.  Other  employee  benefits  expense
including  employee  health  insurance  and payroll  taxes  increased  $451,000,
year-over-year.  Pension expense decreased  $607,000 from the same period in the
prior year, when the Bank recorded a special charge due to actuarial adjustments
resulting from lower than expected  investment returns on plan assets and higher
required  contributions  resulting from the incremental  effect of normal salary
increases.

Net occupancy expense of premises  increased $223,000 to $2.5 million during the
nine months  ended March 31,  2006 from $2.3  million for the nine months  ended
March 31,  2005.  Management  attributes  most of the  increase  to repairs  and
maintenance  expense and utilities expense  associated with the operation of the
Bank's retail branch system.  An increase in depreciation  expense resulted from
the Company's  headquarters building in Fairfield,  New Jersey, which the Bank's
personnel did not fully occupy until  November  2004. In December 2005, the Bank
began  leasing  space  to  a  tenant,   located  in  the  building  housing  its
Springfield,  New Jersey retail branch office, which will help mitigate the cost
of operating that location. The Bank may lease other surplus space to tenants in
the future.

An increase of $426,000,  year-over-year,  in equipment  expense  resulted  from
higher  depreciation  expense and increased  costs  related to data  processing,
including  system  risk  assessment  and  intrusion  protection  for the  Bank's
computer  network,  ATM  support  and  Internet  banking.  Depreciation  expense
increased due primarily to new furniture,  fixtures and equipment located in the
Company's headquarters building.

Advertising expense increased $243,000, compared to the same period in the prior
year, due to an advertising  campaign  associated  with the grand opening of the
Bank's 26th retail branch office in Lanoka  Harbor,  New Jersey in October 2005.
The  Bank  conducted  an  extensive  marketing  campaign  to  increase  its loan
originations and an advertising campaign associated with the introduction of the
Bank's Star Banking product. This new relationship based retail-banking product,
designed to build core deposits,  bundles services and deposit products together
with the Bank's Internet banking and bill-paying tools.

Directors'  compensation  increased  $773,000,  to $1.4 million  during the nine
months ended March 31, 2006,  from  $670,000 for the nine months ended March 31,
2005. The increase  resulted  primarily from stock benefit plans approved at the
Company's  annual meeting,  with a $685,000 expense recorded for the nine months
ended  March  31,  2006.  Other  fees,  including  an  expense  attributed  to a
directors' incentive  compensation plan,  increased by $145,000.  Advisory board
fees  decreased  $58,000  year-over-year,  due to the  expiration of obligations
resulting from the acquisition of Pulaski Bancorp in October 2002.

Miscellaneous  expenses  increased  $730,000,  or 28.1%, to $3.4 million for the
nine months ended March 31,  2006,  compared to $2.6 million for the nine months
ended  March  31,  2005.   Miscellaneous  expenses  included  professional  fees
consisting of legal expense and audit and accounting services expense, which


                                      -21-
<PAGE>

increased  $88,000  and  $246,000,   respectively,   and  expenses  of  $163,000
attributed to the Company's prior and upcoming annual  meetings.  These expenses
were in large  part due to  becoming  a public  company.  Audit  and  accounting
services expense includes  expenditures to assist the Company in compliance with
Section  404 of the  Sarbanes-Oxley  Act.  All other  elements  of  non-interest
expense  totaled  $2.6  million for the nine months  ended  March 31,  2006;  an
increase of $232,000, or 9.7%, from $2.4 million for the nine months ended March
31, 2005.

Provision  for Income  Taxes.  The  provision  for income taxes  decreased  $2.2
million to $1.8  million for the nine months  ended  March 31,  2006,  from $4.0
million for the nine months ended March 31, 2005. The effective  income tax rate
was 19.0% for the nine months  ended March 31,  2006,  compared to 26.9% for the
nine months  ended March 31, 2005.  Management  attributes  the lower  effective
income tax rate to a significant  decrease in pre-tax  income,  $9.6 million for
the nine  months  ended March 31,  2006  compared to $14.8  million for the nine
months  ended March 31, 2005.  During the nine months ended March 31, 2006,  the
Company recorded  adjustments  attributed to filing its federal and state income
tax returns for the year ended June 30,  2005,  reducing tax expense by $81,000,
which was another factor in the decrease of its effective tax rate.

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

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, 2006, the
Bank  had   outstanding   commitments  to  originate  loans  of  $74.6  million,
construction  loans in process of $14.3  million  and unused  lines of credit of
$27.8 million.

Certificates of deposit increased during the quarter ended June 30, 2005, due to
a  promotional  short-term  rate  offered  by  the  Bank.  Deposits,   primarily
certificates of deposit,  decreased in the quarters ended September 30, 2005 and
December  31, 2005 as the Bank  intentionally  slowed  increases in the rates it
pays  on  deposits  relative  to the  pace  of  rising  market  interest  rates.
Certificates of deposit continued to decrease, as well as core deposits,  during
the quarter ended March 31, 2006.  Management's goal to slow the increase in the
cost of funds was not sustainable. In the quarter ended March 31, 2006, the Bank
introduced several deposit products designed to build core deposits and adjusted
interest rates on  certificates of deposit to stabilize their rate of attrition.
Certificates  of  deposit  scheduled  to mature in one year or less at March 31,
2006, totaled $716.7 million.

                                      -22-
<PAGE>

While deposits are the Bank's  primary source of funds,  the Bank also generates
cash  through  borrowings  from the  Federal  Home  Loan  Bank of New York  (the
"FHLB").  At March 31, 2006,  advances from the FHLB amounted to $61.3  million.
The Bank has the capacity to borrow  additional funds from the FHLB,  through an
overnight  line of  credit  or by  taking  additional  long-term  or  short-term
advances.  Because  of  continued  strong  loan  demand  and  continued  deposit
outflows,  the Bank began utilizing the FHLB overnight line of credit during the
quarter ended March 31, 2006. Management used proceeds from the restructuring of
the securities portfolio in February 2006 to repay the borrowed money.

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

The following table sets forth the Bank's capital position at March 31, 2006, as
compared to the minimum regulatory capital requirements:
<TABLE>
<CAPTION>
                                                                  March 31, 2006 (Unaudited)
                                        -------------------------------------------------------------------------------
                                                                                                      To Be Well
                                                                                                  Capitalized Under
                                                                        Minimum Capital           Prompt Corrective
                                                 Actual                   Requirements            Action Provisions
                                        -------------------------    -----------------------    -----------------------
                                          Amount         Ratio        Amount        Ratio        Amount        Ratio
                                        -------------------------------------------------------------------------------
                                                                        (In Thousands)
<S>                                     <C>           <C>     <C>                 <C>    <C>                <C>
Total Capital
  (to risk-weighted assets)            $ 371,730          49.68%      $ 59,856        8.00%     $ 74,820        10.00%

Tier 1 Capital
  (to risk-weighted assets)              366,081          48.93%             -           -      $ 44,892         6.00%

Core (Tier 1) Capital
  (to adjusted total assets)           $ 366,081          19.14%      $ 57,366        3.00%     $ 95,610         5.00%

Tangible Capital
  (to adjusted total assets)           $ 366,081          19.14%      $ 28,683        1.50%            -            -
</TABLE>



                                      -23-
<PAGE>

                                     ITEM 3.
            QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
            ---------------------------------------------------------


Qualitative  Analysis.  The ability to maximize net  interest  income is largely
dependent upon the  achievement of a positive  interest rate spread  sustainable
during fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure  of the  difference  between  amounts  of  interest-earning  assets  and
interest-bearing  liabilities,  which either  re-price or mature  within a given
period.  The  difference,  or the interest rate  re-pricing  "gap",  provides an
indication of the extent changes in interest  rates may affect an  institution's
interest  rate spread.  A positive  gap exists when the amount of  interest-rate
sensitive assets exceeds the amount of interest-rate sensitive liabilities,  and
a negative  gap exists when the amount of interest  rate  sensitive  liabilities
exceeds the amount of interest-rate sensitive assets. Generally, during a period
of rising  interest  rates,  a negative  gap  within  shorter  maturities  would
adversely  affect  net  interest  income,  while a positive  gap within  shorter
maturities would result in an increase in net interest  income.  During a period
of falling interest rates, a negative gap within shorter maturities would result
in an  increase  in net  interest  income  while a positive  gap within  shorter
maturities would result in a decrease in net interest income.

Because the Bank's interest-bearing liabilities, which mature or re-price within
short periods exceed its interest-earning  assets with similar  characteristics,
material and prolonged  increases in interest rates  generally  would  adversely
affect net interest income,  while material and prolonged  decreases in interest
rates generally would have a positive effect on net interest income.

The Bank's  Board of  Directors  established  an Interest  Rate Risk  Management
Committee comprised of members of the board and management.  The committee meets
quarterly to address management of the Bank's assets and liabilities,  including
review of its short  term  liquidity  position;  loan and  deposit  pricing  and
production volumes and alternative funding sources; current investments; average
lives,  durations and  re-pricing  frequencies  of loans and  securities;  and a
variety of other asset and liability  management  topics.  The committee reports
the results of its quarterly  review to the full board,  which adjusts  interest
rate risk policy and strategies, as it considers necessary and appropriate.

Quantitative  Analysis.  Management  using the OTS model,  which  estimates  the
change in the Bank's net  portfolio  value (the  "NPV") over a range of interest
rate  scenarios,  monitors  the Bank's  interest  rate  sensitivity.  NPV is the
present value of expected cash flows from assets,  liabilities,  and off-balance
sheet contracts. OTS defines the NPV ratio, under any interest rate scenario, as
the NPV in that  scenario  divided  by the  market  value of  assets in the same
scenario.  The OTS produces its analysis based upon data submitted on the Bank's
quarterly  Thrift Financial  Reports.  The following table sets forth the Bank's
NPV as of  December  31,  2005,  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, 2006.
<TABLE>
<CAPTION>
                                                              At December 31, 2005
                            ------------------------------------------------------------------------------------------
                                                                                  Net Portfolio Value
                                  Net Portfolio Value                       as % of Present Value of Assets
                            ---------------------------------     ----------------------------------------------------
                                                                                     Net Portfolio       Basis Point
   Changes in Rates           $ Amount           $ Change           % Change          Value Ratio          Change
-----------------------     --------------     --------------     --------------     --------------     --------------
                                                                 (In Thousands)
<S>     <C>                       <C>                <C>                    <C>             <C>                <C>
       +300 bp                    291,698           -145,551               -33%             15.84%            -599 bp
       +200 bp                    340,194            -97,056               -22%             17.95%            -388 bp
       +100 bp                    389,304            -47,945               -11%             19.97%            -186 bp
          0 bp                    437,250            -                     -                21.83%            -
       -100 bp                    476,615            +39,365                +9%             23.25%            +143 bp
       -200 bp                    501,575            +64,325               +15%             24.09%            +226 bp
</TABLE>

                                      -24-
<PAGE>

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.


                                      -25-
<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.


                                      -26-
<PAGE>

                                     PART II


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

                    At March 31,  2006,  neither  the  Company nor the Bank were
                    involved in any pending legal proceedings other than routine
                    legal  proceedings  occurring  in  the  ordinary  course  of
                    business, which involve amounts in the aggregate believed by
                    management to be  immaterial  to the financial  condition of
                    the Company and the Bank.

     ITEM 1A.       Risk Factors
                    ------------

                    Not  applicable.  Item 1A.  to Part I of the  Form  10-K was
                    effective as of December 1, 2005. The Company's  fiscal year
                    end is June  30;  therefore,  it has not  filed a Form  10-K
                    since  Item  1A.  became  effective.   The  first  time  the
                    Company's  Annual Report on Form 10-K will include "Item 1A.
                    Risk Factors" will be for the year ending June 30, 2006.

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

                    Not applicable.

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

                    Not applicable.

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

                    Not applicable.

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

                    None.

     ITEM 6.        Exhibits
                    --------
<TABLE>
<CAPTION>
                    The following Exhibits are filed as part of this report:

                    <S>     <C>
                        3.1    Charter of Kearny Financial Corp. (1)
                        3.2    By-laws of Kearny Financial Corp. (1)
                        4.0    Specimen Common Stock Certificate of Kearny Financial Corp. (1)
                       10.1    Employment Agreement between Kearny Federal Savings Bank and
                               John N. Hopkins (1)
                       10.2    Employment Agreement between Kearny Federal Savings Bank and
                               Allan Beardslee (1)
                       10.3    Employment Agreement between Kearny Federal Savings Bank and
                               Albert E. Gossweiler (1)
                       10.4    Employment Agreement between Kearny Federal Savings Bank and
                               Sharon Jones (1)
                       10.5    Employment Agreement between Kearny Federal Savings Bank and
                               William C. Ledgerwood (1)
                       10.6    Employment Agreement between Kearny Federal Savings Bank and
                               Erika Sacher Parisi (1)
                       10.7    Employment Agreement between Kearny Federal Savings Bank and
                               Patrick M. Joyce (1)
                       10.8    Directors Consultation and Retirement Plan (1)
                       10.9    Benefit Equalization Plan (1)

                                      -27-
<PAGE>

                      10.10    Benefit Equalization Plan for Employee Stock Ownership Plan (1)
                      10.11    2005 Stock Compensation and Incentive Plan (2)
                      11.0     Statements re: computation of per share earnings (Filed herewith).
                      31.0     Rule 13a-14(a)/15d-14(a) Certifications (Filed herewith).
                      32.0     Section 1350 Certifications (Filed herewith).

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

                     (1)  Incorporated by reference to the  identically  numbered exhibit to the Registrant's
                          Registration  Statement on Form S-1 (File No. 333-118815).

                     (2)  Incorporated by reference to the Registrant's  definitive proxy statement filed
                          September 30, 2005 (File  No. 000-51093).
</TABLE>


                                      -28-
<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 15, 2006         By:  /s/ John N. Hopkins
           ------------              -------------------------------------------
                                     John N. Hopkins
                                     President and Chief Executive Officer
                                     (Duly  authorized  officer  and  principal
                                      executive officer)

Date:      May 15, 2006         By:  /s/ Albert E. Gossweiler
           ------------              -------------------------------------------
                                     Albert E. Gossweiler
                                     Senior Vice President and Chief  Financial
                                     Officer
                                     (Principal financial officer)


                                      -29-