XNAS:KRNY Kearny Financial Corporation Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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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, 2012
 
     
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 has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  [X]  No [  ]
 
      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [  ]
Accelerated filer [X]
Non-accelerated filer [  ]
Smaller reporting company [  ]
 
      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 7, 2012.
     
$0.10 par value common stock - 66,971,840 shares outstanding

 
 

 

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

INDEX

   
Page
   
Number
PART I - FINANCIAL INFORMATION
   
     
  Item 1:
Financial Statements
   
     
 
Consolidated Statements of Financial Condition
   
 
at March 31, 2012 and June 30, 2011 (Unaudited)
 
1
     
 
Consolidated Statements of Income for the Three and Nine Months
   
 
Ended March 31, 2012 and March 31, 2011 (Unaudited)
 
2-3
     
 
Consolidated Statements of Changes in Stockholders’ Equity for the
   
 
Nine Months Ended March 31, 2012 and March 31, 2011
 
4-5
 
(Unaudited)
   
     
 
Consolidated Statements of Cash Flows for the Nine Months
 
6-7
 
Ended March 31, 2012 and March 31, 2011 (Unaudited)
   
     
 
Notes to Consolidated Financial Statements (Unaudited)
 
8-58
     
  Item 2:
Management’s Discussion and Analysis of
   
 
Financial Condition and Results of Operations
 
59-85
     
  Item 3:
Quantitative and Qualitative Disclosure About Market Risk
 
86-93
     
  Item 4:
Controls and Procedures
 
94
     
     
PART II - OTHER INFORMATION
 
95-97
     
     
SIGNATURES
 
98
     


 
 

 
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands, Except Share and Per Share Data, Unaudited)
    
March 31,
   
June 30,
 
   
2012
   
2011
 
Assets
           
             
Cash and amounts due from depository institutions
  $ 40,139     $ 47,332  
Interest-bearing deposits in other banks
    71,993       175,248  
                 
        Cash and Cash Equivalents
    112,132       222,580  
                 
Securities available for sale (amortized cost $14,819 and $46,145)
    12,923       44,673  
Securities held to maturity (estimated fair value $34,999 and $107,052)
    34,725       106,467  
Loans receivable, including unamortized yield adjustments of $(1,433) and $(1,021)
    1,260,600       1,268,351  
  Less allowance for loan losses
    (9,100 )     (11,767 )
                 
  Net Loans Receivable
    1,251,500       1,256,584  
                 
Mortgage-backed securities available for sale (amortized cost $1,254,120 and $1,032,407)
     1,288,876        1,060,247  
Mortgage-backed securities held to maturity (estimated fair value $1,227 and $1,416)
    1,161       1,345  
Premises and equipment
    39,056       39,556  
Federal Home Loan Bank of New York (“FHLB”) stock
    13,558       13,560  
Interest receivable
    8,774       9,740  
Goodwill
    108,591       108,591  
Bank owned life insurance
    25,030       24,470  
Other assets
    13,746       16,323  
 
               
        Total Assets
  $ 2,910,072     $ 2,904,136  
                 
Liabilities and Stockholders’ Equity
               
                 
Liabilities
               
                 
Deposits:
               
  Non-interest-bearing
  $ 152,468     $ 143,087  
  Interest-bearing
    2,001,949       2,006,266  
                 
        Total Deposits
    2,154,417       2,149,353  
                 
Borrowings
    247,648       247,642  
Advance payments by borrowers for taxes
    5,561       5,794  
Deferred income tax liabilities, net
    4,940       1,669  
Other liabilities
    11,309       11,804  
                 
        Total Liabilities
    2,423,875       2,416,262  
                 
Stockholders’ Equity
               
                 
Preferred stock $0.10 par value, 25,000,000 shares authorized; none issued
               
  and outstanding
    -       -  
Common stock $0.10 par value, 75,000,000 shares authorized; 72,737,500 shares
               
  issued; 66,971,840 and 67,851,077 shares outstanding, respectively
    7,274       7,274  
Paid-in capital
    215,466       215,258  
Retained earnings
    318,463       317,354  
Unearned Employee Stock Ownership Plan shares; 715,247 shares
               
  and 824,352 shares, respectively
    (7,152 )     (8,244 )
Treasury stock, at cost; 5,765,660 shares and 4,886,423 shares, respectively
    (67,330 )     (59,200 )
Accumulated other comprehensive income
    19,476       15,432  
                 
        Total Stockholders’ Equity
    486,197       487,874  
                 
        Total Liabilities and Stockholders’ Equity
  $ 2,910,072     $ 2,904,136  
See notes to consolidated financial statements.
 
- 1 -

 

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

   
Three Months Ended
   
Nine Months Ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Interest Income
                       
    Loans
  $ 15,809     $ 17,416     $ 48,493     $ 46,095  
    Mortgage-backed securities
    8,242       7,114       24,157       21,809  
    Securities:
                               
      Taxable
    270       1,230       1,096       4,017  
      Tax-exempt
    8       392       63       787  
    Other interest-earning assets
    205       275       582       695  
        Total Interest Income
    24,534       26,427       74,391       73,403  
                                 
Interest Expense
                               
    Deposits
    4,853       5,882       15,668       18,220  
    Borrowings
    2,011       2,056       6,088       6,277  
        Total Interest Expense
    6,864       7,938       21,756       24,497  
                                 
        Net Interest Income
    17,670       18,489       52,635       48,906  
                                 
Provision for Loan Losses
    1,257       1,391       3,645       3,518  
                                 
        Net Interest Income after Provision
                               
           for Loan Losses
    16,413       17,098       48,990       45,388  
                                 
Non-Interest Income
                               
    Fees and service charges
    594       613       1,859       1,382  
    Loss on sale of securities
    -       (28 )     (5 )     (28 )
    Gain on sale of loans
    217       35       526       47  
    Income from bank owned life
      insurance
     186        191        560        528  
    Electronic banking fees and charges
    224       208       695       489  
    Loss from REO operations
    (1,357 )     (5 )     (3,560 )     (55 )
    Miscellaneous
    339       43       416       99  
        Total Non-Interest Income
    203       1,057       491       2,462  
                                 
Non-Interest Expenses
                               
    Salaries and employee benefits
    8,538       8,082       25,082       22,432  
    Net occupancy expense of
                               
      premises
    1,685       1,836       4,866       4,037  
    Equipment and systems
    1,686       1,693       5,429       4,255  
    Advertising and marketing
    220       252       842       768  
    Federal deposit insurance
                               
      premium
    569       861       1,551       1,825  
    Directors’ compensation
    168       174       491       982  
    Merger-related expenses
    -       225       -       3,415  
    Miscellaneous
    1,716       1,346       5,225       3,801  
        Total Non-Interest Expenses
  $ 14,582     $ 14,469     $ 43,486     $ 41,515  

 
- 2 -

 

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

   
Three Months Ended
   
Nine Months Ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
                         
      Income Before Income Taxes
  $ 2,034     $ 3,686     $ 5,995     $ 6,335  
                                 
Income Taxes
    642       998       2,115       2,317  
                                 
      Net Income
  $ 1,392     $ 2,688     $ 3,880     $ 4,018  
                                 
Net Income per Common
                               
  Share (EPS):
                               
    Basic and Diluted
  $ 0.02     $ 0.04     $ 0.06     $ 0.06  
                                 
Weighted Average Number of
                               
  Common Shares Outstanding:
                               
    Basic and Diluted
    66,243       67,054       66,571       67,105  
                                 
Dividends Declared Per Common
                               
   Share
  $ 0.05     $ 0.05     $ 0.15     $ 0.15  

See notes to consolidated financial statements.



 
- 3 -

 

KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Nine Months Ended March 31, 2011
(In Thousands, Except Per Share Data, Unaudited)


 
                                  Accumulated        
                           
Unearned
         
Other
       
   
Common Stock
   
Paid-In
   
Retained
   
ESOP
   
Treasury
   
Comprehensive
       
   
Shares
   
Amount
   
Capital
   
Earnings
   
Shares
   
Stock
   
Income
   
Total
 
                                                 
Balance - June 30, 2010
    68,344     $ 7,274     $ 213,529     $ 312,844     $ (9,698 )   $ (54,738 )   $ 16,715     $ 485,926  
                                                                 
Comprehensive loss:
                                                               
  Net income
    -       -       -       4,018       -       -       -       4,018  
                                                                 
  Unrealized loss on securities available
                                                               
    for sale, net of deferred income tax
                                                               
    benefit of $5,211
    -       -       -       -       -       -       (7,579 )     (7,579 )
                                                                 
  Benefit plans, net of deferred income
                                                               
    tax expense of $4
    -       -       -       -       -       -       5       5  
                                                                 
   Total comprehensive loss
                                                            (3,556 )
                                                                 
ESOP shares committed to be released
                                                               
  (108 shares)
    -       -       (108 )     -       1,091       -       -       983  
                                                                 
Dividends contributed for payment of
                                                               
    ESOP loan
    -       -       104       -       -       -       -       104  
                                                                 
Stock option expense
    -       -       708       -       -       -       -       708  
                                                                 
Treasury stock purchases
    (369 )     -       -       -       -       (3,316 )     -       (3,316 )
                                                                 
Restricted stock plan shares earned
                                                               
  (111 shares)
    -       -       1,198       -       -       -       -       1,198  
                                                                 
Tax effect from stock based
                                                               
  compensation
    -       -       (240 )     (124 )     -       -       -       (364 )
                                                                 
Cash dividends declared ($0.15/ public share)
    -       -       -       (2,416 )     -       -       -       (2,416 )
                                                                 
Balance - March 31, 2011
    67,975     $ 7,274     $ 215,191     $ 314,322     $ (8,607 )   $ (58,054 )   $ 9,141     $ 479,267  
                                                                 
 
See notes to consolidated financial statements.
 
 
- 4 -

 
 
KEARNY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Nine Months Ended March 31, 2012
(In Thousands, Except Per Share Data, Unaudited)

                                       
Accumulated
       
                           
Unearned
         
Other
       
   
Common Stock
   
Paid-In
   
Retained
   
ESOP
   
Treasury
   
Comprehensive
       
   
Shares
   
Amount
   
Capital
   
Earnings
   
Shares
   
Stock
   
Income
   
Total
 
                                                 
Balance - June 30, 2011
    67,851     $ 7,274     $ 215,258     $ 317,354     $ (8,244 )   $ (59,200 )   $ 15,432     $ 487,874  
                                                                 
Comprehensive income:
                                                               
  Net income
    -       -       -       3,880       -       -       -       3,880  
                                                                 
  Unrealized gain on securities available
                                                               
    for sale, net of deferred income tax
                                                               
    expense of $2,631
    -       -       -       -       -       -       3,859       3,859  
                                                                 
  Benefit plans, net of deferred income
                                                               
    tax expense of $128
    -       -       -       -       -       -       185       185  
                                                                 
   Total Comprehensive income
                                                            7,924  
                                                                 
ESOP shares committed to be released
                                                               
  (108 shares)
    -       -       (67 )     -       1,092       -       -       1,025  
                                                                 
Dividends contributed for payment of
                                                               
    ESOP loan
    -       -       118       -       -       -       -       118  
                                                                 
Stock option expense
    -       -       31       -       -       -       -       31  
                                                                 
Treasury stock purchases
    (879 )     -       -       -       -       (8,130 )     -       (8,130 )
                                                                 
Restricted stock plan shares earned
                                                               
  (12 shares)
    -       -       126       -       -       -       -       126  
                                                                 
                                                                 
Cash dividends declared ($0.15/ public share)
    -       -       -       (2,321 )     -       -       -       (2,321 )
                                                                 
Cash dividend to Kearny MHC     -       -       -       (450     -       -       -       (450
                                                                 
Balance - March 31, 2012
    66,972     $ 7,274     $ 215,466     $ 318,463     $ (7,152 )   $ (67,330 )   $ 19,476     $ 486,197  
                                                                 
 
See notes to consolidated financial statements.
 
- 5 -

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

   
Nine Months Ended
 
   
March 31,
 
   
2012
   
2011
 
             
Cash Flows from Operating Activities:
           
    Net income
  $ 3,880     $ 4,018  
    Adjustments to reconcile net income to net cash provided by operating
               
      activities:
               
   Depreciation and amortization of premises and equipment
    1,993       1,577  
   Net amortization of premiums, discounts and loan fees and costs
    6,447       2,606  
   Deferred income taxes
    511       80  
   Amortization of intangible assets
    118       -  
   Amortization of benefit plans’ unrecognized net loss
    30       51  
   Provision for loan losses
    3,645       3,518  
   Loss on write-down and sales of real estate owned
    3,271       13  
   Realized gain on sale of loans
    (526 )     (47 )
   Proceeds from sale of loans
    5,872       1,967  
   Realized loss on sale of mortgage-backed securities held to maturity
    5       28  
   Realized gain on disposition of premises and equipment
    (1 )     -  
   Increase in cash surrender value of bank owned life insurance
    (560 )     (528 )
   ESOP, stock option plan and restricted stock plan expenses
    1,182       2,889  
   Decrease in interest receivable
    966       695  
   Decrease in other assets
    718       68  
   Decrease in interest payable
    (32 )     (200 )
   Decrease in other liabilities
    (446 )     (240 )
                 
            Net Cash Provided by Operating Activities
    27,073       16,495  
                 
Cash Flows from Investing Activities:
               
    Proceeds from calls and maturities of securities available for sale
    30,598       25,610  
    Proceeds from repayments of securities available for sale
    650       921  
    Purchase of securities held to maturity
    (1,775 )     (68,733 )
    Proceeds from calls and maturities of securities held to maturity
    72,760       197,170  
    Proceeds from repayments of securities held to maturity
    717       480  
    Purchase of loans
    (54,460 )     (1,437 )
    Net decrease in loans receivable
    49,454       69,384  
    Proceeds from sale of real estate owned
    224       531  
    Purchases of mortgage-backed securities available for sale
    (455,370 )     (379,306 )
    Principal repayments on mortgage-backed securities available for sale
    225,944       164,688  
    Principal repayments on mortgage-backed securities held to maturity
    159       259  
    Proceeds from sale of mortgage-backed securities held to maturity
    27       34  
    Purchase of FHLB stock
    (1,800 )     (2,250 )
    Redemption of FHLB stock
    1,802       2,701  
    Cash paid in merger, net of cash acquired
    -       (24,529 )
    Proceeds from cash settlement of premises and equipment
    3       -  
    Proceeds from insurance claim on REO
    -       82  
    Additions to premises and equipment
    (1,495 )     (936 )
                 
            Net Cash Used in Investing Activities
  $ (132,562 )   $ (15,331 )

 
- 6 -

 

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

   
Nine Months Ended
 
   
March 31,
 
   
2012
   
2011
 
             
Cash Flows from Financing Activities:
           
    Net increase in deposits
  $ 5,525     $ 41,143  
    Repayment of long-term FHLB advances
    (59 )     (10,026 )
    Increase in other short-term borrowings
    177       775  
    Decrease in advance payments by borrowers for taxes
    (233 )     (221 )
    Dividends paid to stockholders of Kearny Financial Corp.
    (2,357 )     (2,425 )
    Purchase of common stock of Kearny Financial Corp. for treasury
    (8,130 )     (3,316 )
    Dividends contributed for payment of ESOP loan
    118       104  
    Tax effect from stock based compensation
    -       (364 )
                 
            Net Cash (Used in) Provided by Financing Activities
    (4,959 )     25,670  
                 
            Net (Decrease) Increase in Cash and Cash Equivalents
    (110,448 )     26,834  
                 
Cash and Cash Equivalents – Beginning
    222,580       181,422  
                 
Cash and Cash Equivalents – Ending
  $ 112,132     $ 208,256  
                 
Supplemental Disclosures of Cash Flows Information:
               
    Cash paid during the year for:
               
   Income taxes, net of refunds
  $ 1,836     $ 3,603  
                 
   Interest
  $ 21,788     $ 24,697  
                 
    Non-cash investing and financing activities:
               
   Acquisition of  real estate owned in settlement of loans
  $ 1,157     $ 871  
                 
   Fair value of assets acquired, net of cash and cash equivalents acquired
  $ -     $ 559,113  
                 
   Fair value of liabilities assumed
  $ -     $ 534,584  

See notes to consolidated financial statements.
 
- 7 -

 

KEARNY FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


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., KFS Investment Corp. and CJB Investment Corp. and its wholly owned subsidiary, Central Delaware Investment Corp.  Kearny Financial Securities, Inc. and Central Delaware Investment Corp. were each dissolved during the quarter ended September 30, 2011.  The Company conducts its business principally through the Bank.  Management prepared the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, including the elimination of all significant inter-company accounts and transactions during consolidation.

2.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, income, changes in stockholders’ equity and cash flows in conformity with generally accepted accounting principles (“GAAP”).  However, in the opinion of management, all adjustments (consisting of normal recurring 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, 2012, are not necessarily indicative of the results that may be expected for the entire fiscal year or any other period.

The data in the consolidated statements of financial condition for June 30, 2011 was derived from the Company’s annual report on Form 10-K.  That data, along with the interim financial information presented in the consolidated statements of financial condition, operations, changes in stockholders’ equity and cash flows should be read in conjunction with the 2011 consolidated financial statements, including the notes thereto included in the Company’s annual report on Form 10-K.

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

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

The Financial Accounting Standards Board (“FASB”) has issued guidance on determining whether instruments granted in share-based payment transactions are participating securities.  This guidance clarifies that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders.  Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied.
 
 
- 8 -

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

 
Three Months Ended
   
Nine Months Ended
 
 
March 31, 2012
   
March 31, 2012
 
 
Income
 
Shares
 
Per Share
   
Income
 
Shares
 
Per Share
 
 
(Numerator)
 
(Denominator)
 
Amount
   
(Numerator)
 
(Denominator)
 
Amount
 
 
(In Thousands, Except Per Share Data)
   
(In Thousands, Except Per Share Data)
 
                                     
Net income
  $ 1,392                 $ 3,880              
Basic earnings per share,
                                       
     income available to
                                       
     common stockholders
  $ 1,392       66,243     $ 0.02     $ 3,880       66,571     $ 0.06  
Effect of dilutive securities:
                                               
     Stock options
    -       -               -       -          
                                                 
    $ 1,392       66,243     $ 0.02     $ 3,880       66,571     $ 0.06  


 
Three Months Ended
   
Nine Months Ended
 
 
March 31, 2011
   
March 31, 2011
 
 
Income
 
Shares
 
Per Share
   
Income
 
Shares
 
Per Share
 
 
(Numerator)
 
(Denominator)
 
Amount
   
(Numerator)
 
(Denominator)
 
Amount
 
 
(In Thousands, Except Per Share Data)
   
(In Thousands, Except Per Share Data)
 
                                     
Net income
  $ 2,688                 $ 4,018              
Basic earnings per share,
                                       
     income available to
                                       
     common stockholders
  $ 2,688       67,054     $ 0.04     $ 4,018       67,105     $ 0.06  
Effect of dilutive securities:
                                               
     Stock options
    -       -               -       -          
                                                 
    $ 2,688       67,054     $ 0.04     $ 4,018       67,105     $ 0.06  

During the three and nine months ended March 31, 2012, the average number of options which were considered anti-dilutive totaled approximately 3,233,000 and 3,233,000, respectively.  During the three and nine months ended March 31, 2011, the average number of options which were considered anti-dilutive totaled approximately 3,168,000 and 3,191,000, respectively.

4.  SUBSEQUENT EVENTS
 
The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of March 31, 2012, for items that should potentially be recognized or disclosed in these consolidated financial statements.  The evaluation was conducted through the date this document was filed.

 
- 9 -

 

5.  RECENT ACCOUNTING PRONOUNCEMENTS

In April 2011, the FASB issued Accounting Standards Update 2011-03 which clarifies the accounting principles applied to repurchase agreements, as set forth by FASB ASC Topic 860, Transfers and Servicing. This ASU, entitled Reconsideration of Effective Control for Repurchase Agreements, amends one of three criteria used to determine whether or not a transfer of assets may be treated as a sale by the transferor. Under Topic 860, the transferor may not maintain effective control over the transferred assets in order to qualify as a sale. This ASU eliminates the criteria under which the transferor must retain collateral sufficient to repurchase or redeem the collateral on substantially agreed upon terms as a method of maintaining effective control. This ASU is effective for interim and annual reporting periods beginning on or after December 31, 2011, and requires prospective application to transactions or modifications of transactions which occur on or after the effective date. Early adoption is not permitted.  The implementation of the new pronouncement did not have a material impact on the Company’s consolidated financial position or results of operations.
 
 
In June 2011, the FASB issued Accounting Standards Update 2011-05 which amends FASB ASC Topic 220, Comprehensive Income, to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The ASU prohibits the presentation of the components of comprehensive income in the statement of stockholder’s equity. Reporting entities are allowed to present either: a statement of comprehensive income, which reports both net income and other comprehensive income; or separate, but consecutive, statements of net income and other comprehensive income. Under previous GAAP, all 3 presentations were acceptable. Regardless of the presentation selected, the Reporting Entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements. The provisions of this ASU are effective for fiscal years, and interim periods within those years, beginning after December 31, 2011 for public entities. As the two remaining options for presentation existed prior to the issuance of this ASU, early adoption is permitted.  The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In September, 2011, the FASB issued Accounting Standards Update 2011-08, Testing Goodwill for Impairment. The purpose of this ASU is to simplify how entities test goodwill for impairment by adding a new first step to the preexisting goodwill impairment test under ASC Topic 350, Intangibles – Goodwill and Other.  This amendment gives the entity the option to first assess a variety of qualitative factors such as economic conditions, cash flows, and competition to determine whether it was more likely than not that the fair value of goodwill has fallen below its carrying value. If the entity determines that it is not likely that the fair value has fallen below its carrying value, then the entity will not have to complete the original two-step test under Topic 350. The amendments in this ASU are effective for impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In September, 2011, the FASB issued Accounting Standards Update 2011-09, Disclosures about an Employer’s Participation in a Multiemployer Plan. This update creates additional disclosures for employers participating in multiemployer pension plans to provide clarity with regard to the employer’s involvement in the plan, as well as the financial health of the plan itself. Participating employers will now be required to disclose plan names, contribution amounts, funded status, minimum contribution requirements, and other relevant plan information for all years presented on the statement of income. The ASU does not amend the accounting requirements for such contributions and liabilities, and as such will only impact the level of disclosure made with regard to the plan. For public companies, the amendments of this ASU are effective for annual periods for fiscal years ending after December 15, 2011. Early
 
 
- 10 -

 
 
adoption by both public and nonpublic entities is permitted.  The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In December, 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05. In response to stakeholder concerns regarding the operational ramifications of the presentation of these reclassifications for current and previous years, the FASB has deferred the implementation date of this provision to allow time for further consideration. The requirement in ASU 2011-05, Presentation of Comprehensive Income, for the presentation of a combined statement of comprehensive income or separate, but consecutive, statements of net income and other comprehensive income is still effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 for public companies.  The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

6.  STOCK REPURCHASE PLANS
 
On March 23, 2012, the Company announced the completion of its stock repurchase plan originally announced on August 17, 2011 through which it repurchased a total of 845,031 shares at a total cost of $7.8 million and at an average cost per share of $9.24.  On that same day, the Company announced that the Board of Directors authorized a new stock repurchase plan to acquire up to 802,780 shares, or 5% of the Company’s outstanding stock held by persons other than Kearny MHC.  All shares under this latest plan remain available for repurchase at March 31, 2012.
 
7.  DIVIDEND WAIVER

During the nine months ended March 31, 2012, Kearny MHC, the federally chartered mutual holding company of the Company waived its right, in accordance with the non-objection previously granted by the Federal Reserve Bank (“FRB”), to receive cash dividends of approximately $7.2 million declared on the 50,916,250 shares of Company common stock it owns.  The MHC elected to receive $450,000 of dividends during the quarter ended March 31, 2012.


 
- 11 -

 

8.  SECURITIES AVAILABLE FOR SALE

The amortized cost, gross unrealized gains and losses and estimated fair values of securities at March 31, 2012 and June 30, 2011 and stratification by contractual maturity of securities at March 31, 2012 are presented below:
 
   
At March 31, 2012
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Carrying
Value
 
   
(In Thousands)
 
Debt securities:
                       
    Trust preferred securities
  $ 8,869     $ -     $ 1,959     $ 6,910  
    U.S. agency securities
    5,950       64       1       6,013  
                                 
          Total debt securities
    14,819       64       1,960       12,923  
                                 
Mortgage-backed securities:
                               
  Collateralized mortgage obligations:
                               
    Federal National Mortgage Association
    2,724       26       -       2,750  
                                 
          Total collateralized mortgage
                               
            obligations
    2,724       26       -       2,750  
                                 
  Mortgage pass-through securities:
                               
    Government National Mortgage Association
    11,211       915       19       12,107  
    Federal Home Loan Mortgage Corporation
    469,284       11,479       380       480,383  
    Federal National Mortgage Association
    770,901       22,935       200       793,636  
                                 
         Total mortgage pass-through securities
     1,251,396        35,329        599        1,286,126  
                                 
         Total mortgage-backed securities
     1,254,120        35,355        599        1,288,876  
 
Total securities available for sale
  $ 1,268,939     $ 35,419     $ 2,559     $ 1,301,799  
 
    
At March 31, 2012
 
   
Amortized
Cost
   
Carrying
Value
 
   
(In Thousands)
 
Debt securities:
           
    Due in one year or less