Service jobs represent the largest employment sector in the New York metropolitan area followed by wholesale/retail trade. Unemployment rates in New Jersey, as of June 2004, ranged from a low of 3.4% to a high of 6.8% compared to the New Jersey statewide average of 4.7%. Essex, Hudson, Passaic and Union counties had unemployment rates above the statewide measure and Bergen, Middlesex, Morris and Ocean counties had unemployment rates below the statewide measure. Morris, Bergen, Middlesex and Union counties had median household incomes of approximately $87,000, $74,000, $68,000 and $62,000, respectively, compared to the New Jersey median of $61,000, while Essex, Hudson, Ocean and Passaic counties had median household incomes ranging from $44,000 to $54,000.

A downturn in the local economy could reduce the amount of funds available for deposit and the ability of borrowers to repay

their loans.

The Company’s primary lending activity consists of the origination of one- to four-family first mortgage loans, nearly all of which are secured by property located in New Jersey.

The Company will originate a one- to four-family mortgage loan on an owner occupied property with principal amounts up to 95% of the lesser of the appraised value or the purchase price of the property, with private mortgage insurance required for loans with a loan to value ratio exceeding 80%. The loan to value limit on a non-owner occupied property is 75%. Loans in excess of $750,000 are handled on a case by case basis and are subject to lower loan to value limits, generally no more than 50%.

The Company’s fixed rate and adjustable rate residential mortgage loans on owner occupied properties have terms of ten to thirty years. Residential mortgage loans on non-owner occupied properties have terms up to fifteen years for fixed rate loans and terms up to twenty years for adjustable rate loans. The Company also offers ten-year balloon mortgages with a thirty year amortization schedule on owner occupied properties and a twenty year amortization schedule on non-owner occupied properties.

The Company’s adjustable rate loan products provide for an interest rate that is tied to the one-year Constant Maturity U.S. Treasury index and have terms of up to thirty years with initial fixed rate periods of one, three, five, seven, or ten years according to the terms of the loan and annual rate adjustment thereafter. The Company also offers an adjustable rate loan with a term up to thirty years with a rate that adjusts every five years to the five-year Constant Maturity U.S. Treasury index. There is a 200 basis point limit on the rate adjustment in any adjustment period, and the rate adjustment limit over the life of the loan is 600 basis points. The Company emphasizes the origination of adjustable rate loans, however, as a result of the low interest rate environment of the last several years, customer demand has recently been primarily for fixed rate loans.

The Company offers a first time home buyer program for persons who have not previously owned real estate and are purchasing a one- to four-family property in Bergen, Passaic, Morris, Essex, Hudson, Middlesex, Monmouth, Ocean and Union Counties, New Jersey for use as a primary residence. This program is also available outside these areas only to persons who are existing deposit or loan customers of Kearny Federal Savings Bank and/or members of their immediate families. The financial incentives offered under this program are a one-quarter of one percent rate reduction on all first mortgage loan types and the refund of the application fee at closing.

Net interest income decreased by 10.0%, to $46.6 million for the year ended June 30, 2004 from $51.8 million for the year ended June 30, 2003.

Net income for the year ended June 30, 2004 was $12.9 million, an increase of $8.8 million, or 218.1%, from $4.1 million for 2003.

During the three months ended September 30, 2004, net income was $3.8 million, as compared to $2.2 million during the three months ended September 30, 2003.