gHiqoo:) ^ ^ K E A R NY F I N A N C I AL C O R P. 2 0 08 ANNUAL REPORT A year of challenges mum tr^\. 2 0 0 8 A year of achievements Rlings Services OCT 02 2008 SNL Financial, LC 1-800-969-4121 L E T T ER TO S H A R E H O L D E RS Dear Fellow Shareholders, 1 am pleased to present you with the 2008 Annual Report for Kearny Financial Corp. and our subsidiary, Kearny Federal Savings Bank, representing our fourth fiscal year as a public company. In 2008, the economic landscape proved to be even more challenging as the U.S. housing market continued to deteriorate as a result of the "sub-prime" mortgage crisis. WhUe the Bank was not totally immune to some of the collateral damage the credit crisis has caused, I am pleased to report that we did see the beginning of a more positive earnings trend during the year. Earnings in fact increased $4.0 million to $5.9 million or $0.09 per share. In 2008, as a part of our long-term strategic plan, we continued to focus on changing the mix of our earning assets by growing our loan portfolio and reducing the size of our securities portfolio. Atjune 30,2008, the Bank's net loans receivable had increased by $l6l.2 million to $1.02 billion, an 18.7% improvement over the level at year-end 2007 and now comprise 49.0% of assets compared to 44.9% a year ago. While the growth in the portfolio was significant, our conservative underwriting standards have helped us maintain a low level of nonperforming assets and loan charge-offs. In addition, our capital position continues to be a strength of the organization, as the Bank's regulatory capital ratios exceed the "well capitalized" guidelines established by our regulatory agency. At June 30, 2008, the Bank's regulatory capital ratios were as follows: core capital 17.76%, Tier I risked-based capital 37.89%, and total risked-based capital 38.43%. The regulatory capital requirements to be considered well capitalized are 5.0%, 6.0%, and 10.0%, respectively. During the past year, management instituted a number of efficiency measures to help improve profitability and better control expenses. The first was a freeze on all future benefits accruals under our non-contributory defined benefit pension plan and related benefit equalization plan. The second was a comprehensive profitability analysis of our retail branch network, which will result in the consolidation of two branch locations and the sale of another in flscal 2009. We believe that these types of initiatives are the key to improving the Bank's overall performance. In 2008, we also broadened our franchise footprint in the Ocean County market with the opening of two fuU service retaU branch locations in Brick and Lakewood Townships. During 2008, we continued to see the competition for deposits intensify and as a result, our marketing efforts have become increasingly targeted to appeal to a more diverse customer base. StarBanking, our consumer relationship-banking program, enjoyed steady growth in 2008 with expanded service utilization, and most importantly improved customer loyalty. In keeping with our effort to provide added value, we wiU soon introduce Generations Gold - a new "lifestyle" checking program. Customers wiU earn discounts on retail purchases, travel and much more through this innovative program. We increase core look for Generations Gold to further deposits while also providing another means of generating fee income for the Bank. Our Commercial Banking Division also continues to grow nicely with increased emphasis on the needs of smaU to medium sized businesses. Our "Personal Approach to Business Banking" has successfiUly helped local firms within our service area expand and prosper whUe adding important income to the Bank. Our commercial group will soon relocate to newly outfitted office space within our Administrative Building located in Fairfield, to better accommodate the division's growth. Community involvement and our cause marketing effort remain an important focus of the Kearny Financial family. 1 thank everyone for their efforts associated with the March of Dimes New Jersey chapter. The Food Bank of New Jersey, Habitat for Humanity and a host of other regional and local causes. It is always gratifying to know that a vibrant spirit of volunteerism is alive within our organization. As the year ahead promises to be complete with chaUenges and opportunities, we intend to remain true to our principles and focused on our mission of providing the fmest in banking products, personal service and community involvement. We are grateful for the trust our valued shareholders and customers have placed in us and intend to reward your confidence with our best efforts. Working together, I look forward to a future of even greater achievement! Sincerely, John N. Hopkins President and Chief Executive Offlcer Board of Directors J o hn N. Hopkins President & CEO J o hn J. Mazur, Jr. Chairman Theodore J. Aanensen Director Dr. J o s e ph P. Mazza Director Matthew T. McClane Director J o hn F. McGovern Director Leopold W. Montanaro Director Henry S. Paro^v Director J o hn F. Regan Director Corporate Officers J o hn N. Hopkins President & CEO Albert E. Gossw^eiler Sr.Vice President/CIO & Treasurer Sharon J o n es Sr.Vice President Corporate Secretary William C. Ledgerwood SrVice President/CFO Craig L. Montanaro Sr.Vice President Director of Strategic Planning Kearny Federal Savings Bank Officers J o hn N. Hopkins President & CEO Albert E. Gossw^eiler Sr.Vice President/CIO & Treasurer Sharon J o n es SrVice President Corporate Secretary Patrick M. Joyce Sr.Vice President CLO & CRA Offlcer WUliam C. Ledgerwood Sr.Vice President/CFO Craig L. Montanaro SrVice President/Director of Strategic Planning Erika K. Parisi Sr.Vice President Branch Administrator Grace Cruz-Beyer 1st Vice President/ControUer Cheryl L. Lyons 1 st Vice President Loan Operations J a m es E. Estler Vice President Branch Administration Maryann Haberthur Vice President Kimberly T. Manfredo 1st Vice President Director of Human Resources Branch Administration Tracy Tripucka 1st Vice President/Director of Commercial Lending Maria Coppinger-Peters Vice President Compliance Offlcer Eric L. Kesselman Vice President Director of Marketing J o h a n na Maggiore Vice President Mortgage Origination Frank L. Coronato Vice President/IT Allan R. Cronheim Vice President Security & BSA Offlcer Carmine J. DiSonuna Vice President Director of Internal Auditing Patrick PaoleUa Vice President Branch Administration D o n na Porcaro Vice President Commercial Loans Jay A. Ruisi Vice President Consumer Loan Manager Theresa Ruvo Vice President Training Offlcer Michael Sferrazza Vice President/Accounting Marlene Sirianni Vice President/IRA Mary E. Webb Vice President/Accounting Steven Wharton Vice President FaciUties Manager Susan D. Zuidema Vice President Branch Administration Shareholder Information Annual Meeting The annual meeting is scheduled for Monday, October 27, 2008 at 10 a.m. on the second floor of the Kearny Federal Savings Bank Corporate Headquarters located at 120 Passaic Avenue, Fairfield, NJ 07004-3510. Stock Listing The common stock is traded over-the-counter on the NASDAQ Global Select Market under the ticker symbol KRNY. Stock quotations can be found in the WaU Street Journal and local daily newspapers. As of September 5, 2008, the closing price of the common stock was $13.36 bid and $13.38 ask. Auditor Beard MiUer Company LLP 100 Walnut Avenue, Suite 200 Clark, NJ 07061 Legal Counsel Malizia Spidi & Fisch, PC. Transfer Agent Registrar and Transfer Company 10 Commerce Drive Cranford NJ 07016-3572 1-800-368-5948 Inquiries Craig L. Montanaro, Senior Vice President Director of Strategic Planning 120 Passaic Avenue Fairfield, NJ 07004-3510 (973) 244-4510 cmontanaro@kearnyfederalsavings.net Number of Shares Outstanding At September 5, 2008 Kearny Financial Corp. had 70,450,703 shares of common stock outstanding, owned by 4,387 registered holders plus approximately 3,241 beneficial (streetname) owners. ^ ^ K E A R NY F I N A N C I AL C O R P. 120 Passaic Avenue • Fairfield, NJ 07004 NASDAQ - KRNY