SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _______)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ]Confidential, for use of the Commission
Only (as permitted by Rule 14a 6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(C) or ss. 240.14a-12
KEARNY FINANCIAL CORP.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Kearny Financial Corp.
September 29, 2006
Dear Fellow Shareholder:
You are cordially invited to attend Kearny Financial Corp.'s Annual Meeting
of Shareholders to be held at our corporate headquarters located at 120 Passaic
Avenue in Fairfield, New Jersey on October 23, 2006 at 10:00 a.m. The attached
notice and proxy statement describe the formal business to be transacted at the
meeting.
Whether or not you plan to attend the meeting, please sign and date the
enclosed proxy card and return it in the accompanying postage-paid return
envelope as quickly as possible. This will not prevent you from voting at the
meeting in person, but will assure that your vote is counted if you are unable
to attend.
On behalf of the Board of Directors and the officers and employees of
Kearny Federal Savings Bank, I would like to take this opportunity to thank our
shareholders for their continued support of Kearny Financial Corp. We look
forward to seeing you at the meeting.
Sincerely,
/s/ John N. Hopkins
John N. Hopkins
President and Chief Executive Officer
KEARNY FINANCIAL CORP.
120 PASSAIC AVENUE
FAIRFIELD, NEW JERSEY 07004
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Meeting")
of Kearny Financial Corp. (the "Company") will be held at the Company's offices
located at 120 Passaic Avenue, Fairfield, New Jersey on October 23, 2006 at
10:00 a.m. The Meeting is for the purpose of considering and acting upon the
following matters:
1. The election of three directors of Kearny Financial Corp.; and
2. The ratification of the appointment of Beard Miller Company LLP as the
Company's independent auditor for the fiscal year ending June 30,
2007.
Such other business as may properly come before the Meeting or any
adjournments thereof may also be acted upon. The Board of Directors is not aware
of any other business to come before the Meeting.
The Board of Directors of the Company has determined that the matters to be
considered at the Meeting, described in the accompanying Notice of Annual
Meeting and Proxy Statement, are in the best interest of the Company and its
shareholders. For the reasons set forth in the Proxy Statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
Action may be taken on any one of the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Pursuant to the Company's Bylaws, the
Board of Directors has fixed the close of business on September 15, 2006 as the
record date for determination of the shareholders entitled to vote at the
Meeting and any adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY
REVOKE YOUR PROXY BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN
REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE. IF YOU ARE PRESENT AT
THE MEETING YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT
BEFORE THE MEETING. HOWEVER, IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT
REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR
RECORD HOLDER TO VOTE IN PERSON AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Sharon Jones
Sharon Jones
Corporate Secretary
Fairfield, New Jersey
September 29, 2006
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
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Kearny Financial Corp.
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Kearny Financial Corp. (the "Company") to
be used at the Annual Meeting of Shareholders of the Company which will be held
at the Company's offices located at 120 Passaic Avenue, Fairfield, New Jersey on
October 23, 2006 at 10:00 a.m. (the "Meeting"). The accompanying Notice of
Annual Meeting of Shareholders and this Proxy Statement are being mailed to
shareholders on or about September 29, 2006.
At the Meeting, shareholders will consider and vote upon (i) the election
of three directors of the Company and (ii) the ratification of the appointment
of Beard Miller Company LLP as the Company's independent auditor for the fiscal
year ending June 30, 2007.
The Company is the parent company of Kearny Federal Savings Bank (the
"Bank"). The Company is the majority-owned subsidiary of Kearny MHC, a
federally-chartered mutual holding company. Since Kearny MHC owns approximately
70% of the Company's outstanding common stock, the votes cast by Kearny MHC will
be determinative in the election of directors of the Company and the
ratification of auditors.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Meeting. Execution of a proxy, however,
confers on the designated proxyholder the discretionary authority to vote the
shares represented by such proxy in accordance with their best judgment on such
other business, if any, that may properly come before the Meeting or any
adjournment thereof.
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VOTING AND REVOCABILITY OF PROXIES
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Shareholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Company at the address above or by the filing of
a later dated proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a shareholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors will be voted as
specified thereon. IF NO SPECIFICATION IS MADE, SIGNED PROXIES WILL BE VOTED
"FOR" THE NOMINEES FOR DIRECTORS AS SET FORTH HEREIN, AND "FOR" THE RATIFICATION
OF BEARD MILLER COMPANY LLP AS THE COMPANY'S INDEPENDENT AUDITOR FOR THE FISCAL
YEAR ENDING JUNE 30, 2007. The proxy confers discretionary authority on the
persons named thereon to vote with respect to the election of any person as a
director where the nominee is unable to serve, or for good cause will not serve,
and with respect to matters incident to the conduct of the Meeting.
-1-
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Shareholders of record of the Company's common stock, par value $0.10 per
share, as of the close of business on September 15, 2006 (the "Record Date") are
entitled to one vote for each share then held. As of the Record Date, the
Company had 72,624,900 shares of common stock outstanding.
As provided in the Company's Charter, for a period of five years from
February 23, 2005, the date of completion of the Company's initial public stock
offering, no person, except Kearny MHC, is permitted to beneficially own in
excess of 10% of the Company's outstanding common stock (the "Limit"), and any
shares of common stock acquired in excess of the Limit are not entitled to vote.
A person or entity is deemed to beneficially own shares owned by an affiliate
of, as well as persons acting in concert with, such person or entity.
The presence in person or by proxy of at least a majority of the
outstanding shares of common stock entitled to vote is necessary to constitute a
quorum at the Meeting. With respect to any matter, broker non- votes (i.e.,
shares for which a broker indicates on the proxy that it does not have
discretionary authority to vote on such matter) will be considered present for
purposes of determining whether a quorum is present. In the event there are not
sufficient votes for a quorum or to approve any proposals at the time of the
Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.
As to the election of directors (Proposal I), the proxy provided by the
Board of Directors allows a shareholder to vote for the election of the nominees
proposed by the Board of Directors, or to withhold authority to vote for those
nominees. Under the Company's bylaws, directors are elected by a plurality of
votes cast, without regard to either broker non-votes or proxies as to which
authority to vote for the nominees being proposed is withheld.
Concerning all other matters that may properly come before the Meeting,
including the ratification of the independent auditors (Proposal II), a
shareholder may: (i) vote "FOR" the item, (ii) vote "AGAINST" the item, or (iii)
"ABSTAIN" with respect to the item. Unless otherwise required by law, all such
matters shall be determined by a majority of shares voted affirmatively or
negatively without regard to broker non-votes or proxies marked "ABSTAIN" as to
that matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the Record Date, the ownership of any
person or group known by the Company to own 5% or more of the outstanding shares
of common stock at the Record Date.
NUMBER PERCENT
NAME AND ADDRESS OF SHARES OF CLASS
---------------- --------- --------
Kearny MHC 50,916,250 70%
120 Passaic Avenue
Fairfield, New Jersey 07004
-2-
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, the beneficial
ownership of the Company's common stock by directors and certain executive
officers of the Company and the Bank.
NUMBER PERCENT
OF SHARES OF CLASS
--------- --------
All directors and executive officers 669,699(1) 0.9%
as a group (16 persons)
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(1) This amount includes shares for which the individuals are deemed to have
indirect beneficial ownership, such as shares held by spouses or minor
children and shares held in trusts. As of the Record Date, no options held
by the directors and executive officers had yet become exercisable.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of the common stock, to file reports of ownership and changes in
ownership of the common stock with the Securities and Exchange Commission and to
provide copies of those reports to the Company. The Company is not aware of any
beneficial owner, as defined under Section 16(a), of more than ten percent of
the outstanding common stock other than Kearny MHC. To the best of the Company's
knowledge, all Section 16(a) filing requirements applicable to its officers and
directors were complied with during the 2006 fiscal year.
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PROPOSAL I - ELECTION OF DIRECTORS
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The Company's Charter requires that the Board of Directors be divided into
three classes, as nearly equal in number as possible, each class to serve for a
three-year period, with approximately one-third of the directors elected each
year. The Board of Directors currently consists of nine members. Three directors
will be elected at the Meeting to serve for a three-year term and until their
successors have been elected and qualified.
Leopold W. Montanaro, John N. Hopkins and Henry S. Parow have been
nominated by the Board of Directors for election to a three-year term to expire
in 2009. It is intended that proxies solicited by the Board of Directors will,
unless otherwise specified, be voted for the election of Mr. Montanaro, Mr.
Hopkins and Mr. Parow. If any of the nominees are unable to serve, the shares
represented by all valid proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why any of the nominees might be unavailable to
serve.
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INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
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The following table sets forth for each nominee, continuing director and
executive officer of the Company and the Bank: name, age, year of election or
appointment, expiration of current term if a director, and beneficial ownership
of the Company's common stock as of the Record Date.
-3-
YEAR FIRST CURRENT NUMBER
AGE AS OF ELECTED OR TERM TO OF SHARES
NAME JUNE 30, 2006 APPOINTED(1) EXPIRE OWNED(2)
---- --------------- -------------- --------- -----------
BOARD NOMINEES FOR TERM TO EXPIRE IN 2009
Leopold W. Montanaro 66 2003 2006 75,001
John N. Hopkins 59 1994 2006 67,569
Henry S. Parow 83 1976 2006 75,001
DIRECTORS CONTINUING IN OFFICE
John J. Mazur, Jr. 52 1996 2007 71,095
Matthew T. McClane 69 1994 2007 20,001
John F. McGovern 45 1999 2007 50,539
Theodore J. Aanensen 61 1986 2008 32,849
Joseph P. Mazza 62 1993 2008 50,001
John F. Regan 61 1999 2008 54,877
CERTAIN EXECUTIVE OFFICERS OF THE COMPANY AND THE BANK
Albert E. Gossweiler 58 1999 N/A 54,203
William C. Ledgerwood 53 2002 N/A 22,843
Sharon Jones 52 1997 N/A 12,318
Patrick M. Joyce 41 2002 N/A 7,323
Allan Beardslee 54 1982 N/A 6,359
Erika Parisi 41 2002 N/A 14,570
Craig L. Montanaro 40 2003 N/A 55,149
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(1) Refers to the year the individual first became a director or officer of the
Bank. Upon formation of the Company in 2001, each then-existing director of
the Bank became a director of the Company.
(2) Beneficial ownership includes shares of common stock held directly as well
as shares held by spouses or minor children, in trust, and other indirect
beneficial ownership. As of the Record Date, there no options held by the
directors and executive officers that were yet exercisable. The directors
and executive officers as a group currently own less than 1% of the
outstanding common stock.
The business experience of the directors and executive officers of the
Company and the Bank is set forth below. Except as otherwise indicated, each has
held his or her present position for at least the past five years.
JOHN J. MAZUR, JR. is the sole owner and president/chief executive officer
of Elegant Desserts, a wholesale bakery located in Lyndhurst, New Jersey, that
sells gourmet cakes nationally and on QVC. He opened this business in 1994. From
1976 to 2003, he was also a partner and general manager of Mazur's Bakery, a
retail bakery in Lyndhurst, New Jersey, that operated from 1936 until it was
sold in 2003. He became chairman of the Board of Directors of Kearny in January
2004.
JOHN N. HOPKINS became president and chief executive officer of Kearny MHC,
Kearny Financial Corp. and Kearny Federal Savings Bank in 2002 and served the
Bank previously as executive vice president from 1994 to 2002 and as chief
financial officer from 1994 to 1999. He has been employed by Kearny Federal
Savings Bank since 1975. He is a graduate of Fairleigh Dickinson University.
Active in professional and charitable organizations, he serves on the board of
directors and several committees of the New Jersey League of Community Bankers;
the board of directors of the Thrift Institutions Community Investment Corp. of
NJ (TICIC), the board of trustees of Clara Maass Medical Center, the board of
trustees of the Saint Barnabas Health Care System and the Rutherford Senior
Citizens Center (55 Kip Center).
-4-
THEODORE J. AANENSEN is an owner and president of Aanensen's, a luxury home
remodeling and custom cabinetry company established in Kearny in 1951. A
graduate of Upsala College in 1966, he has been president of Aanensen's since
1982.
JOSEPH P. MAZZA is a graduate of Seton Hall University and the University
of Pennsylvania. He is a self-employed dentist practicing in Rutherford, New
Jersey, since 1971. He also serves on the Board of the Rutherford Senior
Citizens Center.
MATTHEW T. MCCLANE retired in 2002. He was appointed as president and chief
executive officer of Kearny Federal Savings Bank in 1994 and president and chief
executive officer of Kearny MHC and Kearny Financial Corp. in 2001. He was
employed by Kearny Federal Savings Bank from 1967 to 2002.
JOHN F. MCGOVERN has worked as a self-employed Certified Public Accountant
and Certified Financial Planner since 1984 and holds the designation of Personal
Financial Specialist from the American Institute of Certified Public
Accountants. Since 2001, he has been a federally registered investment advisor.
Mr. McGovern is also the owner of McGovern Monuments, Inc. a monument sales and
lettering company located in North Arlington, New Jersey that has been in
business since 1924.
LEOPOLD W. MONTANARO is retired and was the chairman, president and chief
executive officer of West Essex Bancorp, Inc. and West Essex Bank, located in
Caldwell, New Jersey, until such bank was acquired by Kearny Financial Corp. on
July 1, 2003. He was employed by West Essex Bank from 1972 until the completion
of the merger with Kearny Federal Savings Bank. He serves as a director of
Kearny Federal Savings Bank, Kearny Financial Corp. and Kearny MHC. He is the
father of Craig L. Montanaro, Senior Vice President and Director of Strategic
Planning for Kearny Federal Savings Bank and Kearny Financial Corp.
HENRY S. PAROW is a graduate of Seton Hall University. He is a licensed
funeral director in the state of New Jersey since 1950. He is the original
owner, director and manager of the Parow Funeral Home, North Arlington, New
Jersey, since 1957. He currently is on the Board of Directors of Kearny Federal
Savings Bank, Kearny MHC and Kearny Financial Corp.
JOHN F. REGAN has been the majority stockholder and president of two
automobile sales and service companies, DeMassi Pontiac, Buick and GMC, located
in Riverdale, New Jersey and Regan Pontiac, Buick and GMC, located in Long
Island City, New York since 1995.
ALBERT E. GOSSWEILER became senior vice president and chief financial
officer of Kearny Federal Savings Bank in 1999 and of Kearny Financial Corp.
upon its formation in 2001. He was previously employed by South Bergen Savings
Bank and joined Kearny when such bank was acquired by Kearny Federal Savings
Bank in 1999. He was employed by South Bergen Savings Bank from 1981 until the
completion of the merger with Kearny Federal Savings Bank.
WILLIAM C. LEDGERWOOD became the senior vice president, treasurer and chief
accounting officer of Kearny Federal Savings Bank and Kearny Financial Corp. in
2002 and has been employed by Kearny Federal Savings Bank since 1998. He was
previously the chief financial officer for The Jersey Bank for Savings, which
opened as a de novo stock bank in 1989 and was acquired by Interchange Bank in
1998.
SHARON JONES is the corporate secretary of Kearny MHC, Kearny Financial
Corp. and Kearny Federal Savings Bank. She was appointed to the office of
corporate secretary in 1997 and became a senior vice president in 2002. She has
been employed by Kearny Federal Savings Bank since 1972.
-5-
PATRICK M. JOYCE became the senior vice president and chief lending officer
of Kearny Federal Savings Bank in 2002 and was previously vice president of loan
originations from 1999 to 2002. He was formerly employed by South Bergen Savings
Bank as an assistant corporate secretary and as a loan originator starting in
1989. He joined Kearny when South Bergen Savings Bank was acquired by Kearny
Federal Savings Bank in 1999 and was employed by such bank from 1985 until the
completion of the merger with Kearny Federal Savings Bank.
ALLAN BEARDSLEE became senior vice president of information technology for
Kearny Federal Savings Bank in 2002 and is responsible for electronic data
processing; prior to that, he was senior vice president of operations beginning
in 1982. He has been employed by Kearny Federal Savings Bank since 1975.
ERIKA PARISI has been the senior vice president and branch administrator of
Kearny Federal Savings Bank since 2002 and was previously a vice president and
branch administrator from 1999 to 2002. She was formerly employed by South
Bergen Savings Bank as a vice president and branch administrator and joined
Kearny when such bank was acquired by Kearny Federal Savings Bank in 1999. She
was employed by South Bergen Savings Bank from 1991 until the completion of the
merger with Kearny Federal Savings Bank.
CRAIG MONTANARO became Senior Vice President and Director of Strategic
Planning for Kearny Federal Savings Bank and Kearny Financial Corp. in 2005 and
was previously a vice president and regional branch administrator from 2003 to
2004. He was formerly employed by West Essex Bank as senior vice president and
chief operating officer and joined Kearny when such bank was acquired by Kearny
Federal Savings Bank in 2003. He was employed by West Essex Bank from 1988 until
the completion of the merger with Kearny Federal Savings Bank.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No directors, officers or their immediate family members were engaged in
transactions with the Company or any subsidiary involving more than $60,000
(other than through loans with the Bank) during the years ended June 30, 2006
and 2005.
The Bank makes loans to its officers, directors and employees in the
ordinary course of business. Such loans are on substantially the same terms and
conditions as those of comparable transactions prevailing at the time with other
persons. Such loans do not include more than the normal risk of collectability
or present other unfavorable features.
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OPERATION OF THE BOARD OF DIRECTORS
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During the fiscal year ended June 30, 2006, Kearny MHC, Kearny Financial
Corp. and Kearny Federal Savings Bank's boards of directors held three meetings,
nine meetings, and fourteen meetings, respectively. No director attended fewer
than 75% of the total meetings of the Board of Directors and committees on which
he served during the year ended June 30, 2006. The Board maintains an Audit &
Compliance Committee, a Budget Committee, an Executive Committee, an Interest
Rate Risk Management Committee, an Asset Quality Committee, a Nominating
Committee and a Compensation Committee, as well as a Building & Grounds
Committee, a Governance Committee, a Planning & Marketing Committee, an
Electronic Data Processing Committee and a Benefits Equalization Plan
Administrative Committee.
-6-
COMPENSATION COMMITTEE. This committee consists of Directors Aanensen
(Chair), Mazur, Mazza and Parow, each of whom is an independent director. This
committee meets as needed. The responsibilities of this committee include
appraisal of the performance of officers, administration of management incentive
compensation plans and review of directors' compensation. This committee reviews
industry compensation surveys and reviews the recommendations of management on
employee compensation matters. This committee met five times during the year
ended June 30, 2006.
AUDIT & COMPLIANCE COMMITTEE. This committee consists of Directors McGovern
(Chair), Mazur, Mazza and Regan. Each member of the Audit Committee is
independent in accordance with the listing standards of the NASDAQ Stock Market.
The Board of Directors has determined that John F. McGovern is an audit
committee financial expert within the meaning of the rules of the Securities and
Exchange Commission. This committee meets monthly and also periodically with the
internal auditor, the compliance officer and the external auditors. This
committee met twelve times during the year ended June 30, 2006. This committee's
responsibilities include oversight of the internal audit and regulatory
compliance activities and monitoring management and employee compliance with the
Board's audit policies and applicable laws and regulations. This committee is
directly responsible for the appointment, compensation, retention and oversight
of the work of the external auditors. The Board of Directors has adopted a
written charter for the Audit Committee, which governs its composition,
responsibilities and operation.
For the fiscal year ended June 30, 2006, the Audit Committee: (i) reviewed
and discussed the Company's audited financial statements with management, (ii)
discussed with the Company's independent auditor, Beard Miller Company LLP
("Beard Miller"), all matters required to be discussed under Statement on
Auditing Standards No. 61, and (iii) received from Beard Miller disclosures
regarding the independence of Beard Miller as required by Independence Standards
Board Standard No. 1 and discussed with Beard Miller its independence. Based on
the foregoing review and discussions, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2006.
Audit Committee: John F. McGovern (Chair),
John J. Mazur, Jr., Joseph P. Mazza, John F. Regan
NOMINATING COMMITTEE. This committee consists of Directors Mazza, Aanensen
and Regan and is responsible for the annual selection of management's nominees
for election as directors. The committee met one time during the year ended June
30, 2006. Each member of the Nominating Committee is independent in accordance
with the listing standards of the NASDAQ Stock Market. This committee operates
under a written charter, which governs its composition, responsibilities and
operations.
The Company does not pay fees to any third party to identify or evaluate or
assist in identifying or evaluating potential nominees. The process for
identifying and evaluating potential nominees of the Board includes soliciting
recommendations from directors and officers of the Company and the Bank.
Additionally, the Board may consider persons recommended by shareholders of the
Company in selecting nominees of the Board for election as directors. The manner
of evaluation for all potential nominees is the same.
The charter states that the Committee will seek nominees with excellent
decision-making ability, business experience, personal integrity and a favorable
reputation, who are knowledgeable about the business activities and market areas
in which the Company and its subsidiaries engage.
-7-
The Committee's process for identifying and evaluating potential nominees
will include soliciting recommendations from directors and officers of the
Company and the Bank. Additionally, the Committee will consider persons
recommended by shareholders of the Company in selecting the individuals the
Committee recommends to the Board for selection as the Board's nominees. The
Committee will evaluate persons recommended by directors or officers of the
Company or the Bank and persons recommended by shareholders in the same manner.
To be considered in the Committee's selection of individuals the Committee
recommends to the Board for selection as the Board's nominees, recommendations
from shareholders must be received by the Company in writing by at least 120
days prior to the date the proxy statement for the previous year's annual
meeting was first distributed to shareholders. Recommendations should identify
the submitting shareholder, the person recommended for consideration and the
reasons the submitting shareholder believes such person should be considered.
The Company's bylaws provide that any shareholder wanting to make a
nomination for the election of directors or a proposal for new business at a
meeting of shareholders must send written notice to the Secretary of the Company
at least five days before the date of the annual meeting. The bylaws further
provide that if a shareholder wanting to make a nomination or a proposal for new
business does not follow the prescribed procedures, the proposal will not be
considered until an adjourned, special, or annual meeting of the shareholders
taking place thirty days or more thereafter. Management believes that it is in
the best interests of the Company and its shareholders to provide enough time
for management to disclose to shareholders information about a dissident slate
of nominations for directors. This advance notice requirement may also give
management time to solicit its own proxies in an attempt to defeat any dissident
slate of nominations if management thinks it is in the best interest of
shareholders generally. Similarly, adequate advance notice of shareholder
proposals will give management time to study such proposals and to determine
whether to recommend to the shareholders that such proposals be adopted.
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STOCK PERFORMANCE GRAPH
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Set forth below is a stock performance graph comparing the cumulative total
shareholder return on the Company's common stock with (a) the cumulative total
shareholder return on stocks included in the NASDAQ U.S. Market Index, (b) the
cumulative total shareholder return on stocks included in the SNL Thrift $1B -
$5B Index and (C) the cumulative total shareholder return on stocks included in
the SNL MHC Index, in each case assuming an investment of $100 as of February
24, 2005 (the date the Company's common stock began trading on the NASDAQ Stock
Market following the closing of the Company's initial public stock offering).
The cumulative total returns for the indices and the Company are computed
assuming the reinvestment of dividends that were paid during the period. It is
assumed that the investment in the Company's common stock was made at the
initial public offering price of $10.00 per share.
-8-
[GRAPHIC OMITTED]
================================================================================
2/24/05 6/30/05 6/30/06
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NASDAQ U.S. Market Index $100 $101 $107
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SNL Thrift $1B - $5 B Index 100 103 112
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SNL MHC Index 100 104 121
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Kearny Financial Corp. 100 104 132
================================================================================
The NASDAQ U.S. Market Index was prepared by the Center for Research in
Security Prices (CRSP) at the University of Chicago, and the SNL indices were
prepared by SNL Securities, LC, Charlottesville, Virginia. The SNL Thrift $1B -
$5B Index includes all thrift institutions with total assets between $1.0
billion and $5.0 billion. The SNL MHC Index includes all publicly traded mutual
holding companies.
There can be no assurance that the Company's future stock performance will
be the same or similar to the historical stock performance shown in the graph
above. The Company neither makes nor endorses any predictions as to stock
performance.
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BOARD OF DIRECTORS AND EXECUTIVE OFFICER COMPENSATION
--------------------------------------------------------------------------------
COMPENSATION OF DIRECTORS
BOARD FEES. Directors are currently paid a fee of $1,250 per Kearny Federal
Savings Bank board meeting attended, $600 per Kearny Financial Corp. meeting
attended and $600 per Kearny MHC meeting attended. The chairman receives a
higher fee of $1,500, $720 and $720, for bank, holding company and mutual
holding company meetings, respectively.
Members of the Kearny Federal Savings Bank Executive Committee are
currently paid $1,200 per committee meeting attended; the chairman receives a
higher fee of $1,440 for Executive Committee meetings. Each member of the Kearny
Federal Savings Bank Board of Directors is also a member of the Executive
Committee. Members of the Audit & Compliance Committee and the chairman of this
committee are paid $250 and $350, respectively, for each meeting attended.
Members of the Compensation Committee and the chairman of this committee are
paid $250 and $300, respectively, for each meeting attended. The Branch
Renovation & Construction Committee is an ad hoc committee; members of this
committee are paid $250 for each meeting attended.
-9-
Directors also receive an annual retainer as follows: $32,000 for service
on Kearny Federal Savings Bank's board, $9,000 for service on Kearny Financial
Corp.'s board and $9,000 for service on Kearny MHC's board. Directors who also
serve as employees do not receive compensation as directors.
DIRECTORS CONSULTATION AND RETIREMENT PLAN. Kearny Financial Corp.
maintains a Directors Consultation and Retirement Plan (the "DCRP"). The DCRP
provides retirement benefits to the directors of Kearny Financial Corp., Kearny
MHC and Kearny Federal Savings Bank based upon the number of years of service as
a director. To be eligible to receive benefits under the DCRP, a director
generally must have completed at least 5 years of service and must not retire
from the board prior to reaching 60 years of age. If a director agrees to become
a consulting director upon retirement, he will receive a monthly payment equal
to 2.5% of the total retainer plus fees paid for attendance at regular and
special meetings and meetings of the executive committee paid to him by Kearny
Financial Corp., Kearny MHC and Kearny Federal Savings Bank during the 12-month
period prior to the date of retirement multiplied by the number of years of
service as a director, not to exceed 80% of board compensation. Benefits under
the DCRP begin upon a director's retirement and are paid for life; provided,
however, that in the event of a director's death prior to the receipt of 120
monthly payments, payments shall continue to the director's surviving spouse or
estate until 120 payments have been made. In the event there is a change in
control (as defined in the DCRP), all directors will be presumed to be eligible
to receive benefits under the DCRP and each director will receive a lump sum
payment equal to the present value of future benefits payable. Benefits under
the DCRP are unvested and forfeitable until retirement at or after age 60 with
at least 5 years of service, termination of service following a change in
control, disability following at least 5 years of service or death. For the year
ended June 30, 2006, payments made under the DCRP totaled $89,315.
OTHER COMPENSATION DURING THE YEAR ENDED JUNE 30, 2006. Other compensation
received by directors during the last fiscal year consisted of an award to each
non-employee director of 53,462 shares of restricted stock and 133,655 stock
options under the 2005 Stock Compensation and Incentive Plan. From the date of
grant, the restricted stock awards and the stock option grants vest over a
six-year period. Dividends on restricted shares are held in arrears until the
shares are earned and non-forfeitable. In addition, the Company maintains life
insurance arrangements for each of the directors providing for a death benefit
of $500,000 to each director.
EXECUTIVE COMPENSATION
GENERAL. The following table sets forth the cash and non-cash compensation
awarded to or earned by the chief executive officer and certain other executive
officers of the Company or the Bank for the fiscal years ended June 30, 2006 and
2005. All compensation was paid by the Bank.
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION AWARDS
--------------- -------------------
RESTRICTED
FISCAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(2) OPTIONS COMPENSATION(3)
--------------------------- ------ ------ ----- -------- ------- ---------------
JOHN N. HOPKINS, PRESIDENT AND 2006 $580,385 $110,000 $3,813,000 600,000 $94,525
CHIEF EXECUTIVE OFFICER 2005 488,861 112,500 - - 8,573
ALBERT E. GOSSWEILER, SENIOR VICE 2006 $208,750 $39,000 1,080,000 140,000 $38,767
PRESIDENT AND CHIEF FINANCIAL OFFICER 2005 186,976 45,750 - - 6,049
PATRICK M. JOYCE, SENIOR VICE PRESIDENT 2006 $208,750 $39,000 1,080,000 140,000 $36,458
AND CHIEF LENDING OFFICER 2005 177,807 41,250 - - 3,858
-10-
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION AWARDS
--------------- -------------------
RESTRICTED
FISCAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(2) OPTIONS COMPENSATION(3)
--------------------------- ------ ------ ----- -------- ------- ---------------
WILLIAM C. LEDGERWOOD, SENIOR VICE 2006 $208,750 $39,000 1,080,000 140,000 $37,501
PRESIDENT, TREASURER AND CHIEF 2005 180,354 51,000 - - 5,056
ACCOUNTING OFFICER
ERIKA PARISI, SENIOR VICE PRESIDENT 2006 $208,750 $39,000 1,080,000 140,000 $38,546
AND BRANCH ADMINISTRATOR 2005 180,354 51,000 - - 5,511
-----------------
(1) Compensation information for the fiscal year ended June 30, 2004 is omitted
because the company was not a reporting company under section 13(a) or
15(d) of the Securities Exchange Act of 1934 during that year. Certain
executive officers are provided with non-cash benefits and perquisites,
such as use of company owned and leased vehicles. The aggregate value of
such non-cash benefits for the year ending June 30, 2006 did not exceed the
lesser of $50,000 or 10% of the aggregate salary and bonus for any officer.
(2) Mr. Hopkins was awarded 300,000 shares of restricted stock under the 2005
Stock Compensation and Incentive Plan. The other named executive officers
were each awarded 140,000 shares of restricted stock. These awards vest
over a five- year period with the first vesting occurring on the first
anniversary of the date of grant. Dividends on restricted shares are held
in arrears until the shares are earned and non-forfeitable. As of June 30,
2006, the value of Mr. Hopkins' 300,000 restricted shares, based on the
closing price on that date, was $4,440,000, and the value of each other
named executive officer's 85,000 restricted shares was $1,258,000.
(3) For 2006, all other compensation includes the following:
401(K) PLAN GROUP
EMPLOYER TERM LIFE ALLOCATION OF SHARES UNDER
CONTRIBUTION INSURANCE THE EMPLOYEE STOCK OWNERSHIP PLAN
------------ --------- ---------------------------------
MR. HOPKINS $6,579 $2,322 $85,624*
MR. GOSSWEILER 5,138 1,754 31,875
MR. JOYCE 4,175 408 31,875
MR. LEDGERWOOD 4,688 938 31,875
MS. PARISI 6,263 408 31,875
* For Mr. Hopkins, includes regular Employee Stock Ownership Plan
compensation of $34,327 and compensation under the related Benefits
Equalization Plan of $51,297.
STOCK OPTIONS. The following table sets forth information regarding options
granted to the named executive officers during the fiscal year ended June 30,
2006.
-11-
OPTION GRANTS IN LAST FISCAL YEAR POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
------------------------------------------------------------- --------------------------
# OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ---------- ----------- ------ ---- ---------- -----------
John N. Hopkins 600,000 26% $12.71 12/5/15 $4,795,947 $12,153,877
Albert E. Gossweiler 140,000 6% $12.71 12/5/15 $1,119,054 $ 2,835,905
Patrick M. Joyce 140,000 6% $12.71 12/5/15 $1,119,054 $ 2,835,905
William C. Ledgerwood 140,000 6% $12.71 12/5/15 $1,119,054 $ 2,835,905
Erika Parisi 140,000 6% $12.71 12/5/15 $1,119,054 $ 2,835,905
-------------------
(1) The dollar values under these columns result from calculations required by
rules of the Securities and Exchange Commission and are not intended to
forecast future price appreciation of the common stock. Actual gains, if
any, on stock options occur only if the stock price rises above the
exercise price during the ten year term.
The following table sets forth information regarding option exercises
during the year ended June 30, 2006 and the value of "in-the-money" options held
by the named executive officers as of June 30, 2006. The exercise price is equal
to the closing price of the Company's common stock on the date of the grant.
Options are "in-the-money" as of a particular date if the trading price of the
Company's common stock on that date is higher than the exercise price. The
values presented below are based on an exercise price of $12.71, closing price
on December 5, 2005 when the options were granted, and a closing price of $14.80
as of June 30, 2006.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF DOLLAR UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
NAME EXERCISED REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------- -------- ------------------------- -------------------------
John N. Hopkins 0 $0 0/600,000 $0/$1,254,000
Albert E. Gossweiler 0 $0 0/140,000 $0/$292,600
Patrick M. Joyce 0 $0 0/140,000 $0/$292,600
William C. Ledgerwood 0 $0 0/140,000 $0/$292,600
Erika Parisi 0 $0 0/140,000 $0/$292,600
PENSION PLAN. The Bank is a participating employer in a multiple-employer
pension plan sponsored by the Financial Institutions Retirement Fund (the
"Pension Plan"). All full-time employees of the Bank are eligible to participate
after one year of service and attainment of age 21. A qualifying employee
becomes fully vested in the Pension Plan upon the earlier of completion of five
years service or attainment of the normal retirement age of 65. The Pension Plan
is intended to comply with the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). The Pension Plan provides for monthly payments to each
participating employee at normal retirement age. A participant who is vested in
the Pension Plan may take an early retirement and elect to receive a reduced
monthly benefit beginning as early as age 45. The Pension Plan also provides for
payments in the event of disability or death. The annual benefit amount upon
-12-
retirement at age 65 equals 2% times years of service times a participant's
highest five year average salary. Benefits are payable in the form of a monthly
retirement benefit and a death benefit or an alternative form that is
actuarially equivalent. At June 30, 2006, Officers Hopkins, Gossweiler, Joyce,
Ledgerwood and Parisi had 30 years, 7 years, 7 years, 8 years and 7 years,
respectively, of credited service under the Pension Plan and had a current
highest five year average salary of $394,650, $177,852, $145,500, $153,502 and
$151,501, respectively.
BENEFIT EQUALIZATION PLAN. The Bank has adopted a Benefit Equalization Plan
(the "BEP"). The purpose of the BEP is to provide a pension benefit based upon
the actual earnings of senior officers of the Bank (President, Executive Vice
Presidents, Vice Presidents and Corporate Secretaries) in the event that their
average annual earnings exceeds the permissible pensionable earnings level under
the Pension Plan as required by the limitations of Sections 401(a)(17) and 415
of the Internal Revenue Code. The supplemental pension for President and Chief
Executive Officer John N. Hopkins and other senior officers whose highest five
year annual earnings prior to retirement will include years in which such
earnings exceed the limits of Sections 401(a)(17) and 415 of the Internal
Revenue Code will receive a supplemental benefit based upon the difference
between their average earnings taking into effect this maximum pensionable
earnings limitation and their average earnings without regard to such
limitation, multiplied by 2% times their years of service at retirement. The
benefits payment under the BEP will be in the form of an annual benefit payable
for life and a death benefit, unless the committee administering the BEP
authorizes an alternative form of benefit. During the year ended June 30, 2006,
there was approximately $60,428 of benefits paid to retired participants under
the BEP. For the year ended June 30, 2006, financial reporting expense accrued
under the BEP totaled $408,000.
The following table sets forth the estimated annual benefits payable under
(i) the Pension Plan and (ii) the Benefit Equalization Plan, described above,
upon retirement at age 65 as of June 30, 2006, expressed in the form of a life
annuity, for the average annual earnings described above and years of service
specified. Such amounts are in addition to any benefits payable under Social
Security.
CREDITABLE YEARS OF SERVICE AT AGE 65
-------------------------------------
AVERAGE
ANNUAL WAGES 15 20 25 30 35
============ ===========================================================================================
$25,000 $7,500 $10,000 $12,500 $15,000 $17,500
$50,000 $15,000 $20,000 $25,000 $30,000 $35,000
$75,000 $22,500 $30,000 $37,500 $45,000 $52,500
$100,000 $30,000 $40,000 $50,000 $60,000 $70,000
$150,000 $50,000 $60,000 $75,000 $90,000 $105,000
$200,000 $60,000 $80,000 $100,000 $120,000 $140,000
$300,000 $90,000 $120,000 $150,000 $180,000 $210,000
$400,000 $120,000 $160,000 $200,000 $240,000 $280,000
$550,000 $165,000 $220,000 $275,000 $330,000 $385,000
$600,000 $180,000 $240,000 $300,000 $360,000 $420,000
BENEFITS EQUALIZATION PLAN FOR EMPLOYEE STOCK OWNERSHIP PLAN. The Bank has
implemented for its senior officers a benefits equalization plan related to the
employee stock ownership plan. The participants under this plan are the same as
the participants under the benefits equalization plan related to the Bank's
Pension Plan. This plan provides participating executives with benefits
otherwise limited under the employee stock ownership plan by Sections 401(a)(17)
and 415 of the Internal Revenue Code. For example, this plan provides
participants with a benefit for any compensation that they may earn in excess of
$220,000 (as indexed) comparable to the benefits earned by all participants
under the employee stock ownership plan
-13-
for compensation earned below that level. The Bank may utilize a grantor trust
in connection with this plan in order to set aside funds that ultimately may be
used to pay benefits under the plan. The assets of the grantor trust will remain
subject to the claims of the Bank's general creditors in the event of
insolvency, until paid to a participant following termination of employment
according to the terms of the plan. Benefits under the plan will be paid in a
lump sum in the form of shares of common stock of the Company to the extent
permissible under applicable regulations, or in the alternative, benefits will
be paid in cash based upon the value of such shares at the time that such
benefit payments are made. The actual value of benefits under this plan and the
annual financial reporting expense associated with this plan are calculated
annually based upon a variety of factors, including the actual value of benefits
for participants determined under the employee stock ownership plan each year,
the applicable limitations under the Internal Revenue Code that are subject to
adjustment annually and the compensation of each participant at such time.
Generally, benefits under the plan are taxable to each participant at the time
of receipt of such payment, and the Bank will recognize a tax-deductible
compensation expense at such time.
EMPLOYMENT AGREEMENTS. The Bank has entered into an employment agreement
with Mr. Hopkins, pursuant to which his minimum base salary is $600,000. Mr.
Hopkins' employment agreement has a term of three years, and was last renewed as
of July 1, 2006, and may be extended on or before each anniversary of the
effective date upon determination of the Board of Directors of the Bank that his
performance has met the requirements and standards of the Board. Pursuant to the
terms of Mr. Hopkins' employment agreement, he is generally entitled to
participate in all discretionary bonuses, pension and other retirement benefit
plans, welfare benefit plans and other equity, incentive and benefit plans and
perquisites applicable to senior management of the Bank. Upon his termination of
employment at any time on or after attainment of age 62 and until he becomes
eligible for Medicare coverage, Mr. Hopkins is permitted to continue to
participate, at the Bank's expense, in the group medical plan sponsored by the
Bank.
If the Bank terminates Mr. Hopkins without "cause" as defined in the
agreement, he will be entitled to (i) a continuation of his salary from the date
of termination through the remaining term of the agreement, and (ii) during the
same period, the cost of obtaining health, life, disability and other benefits
at levels substantially equal to those provided on the date of termination of
employment. If Mr. Hopkins' employment is terminated involuntarily during the
term of the agreement following a "change in control" of the Company or the
Bank, as defined in the agreement, or without cause within twenty-four months
following a change in control, he will be paid an amount equal to 2.999 times
his five-year average annual taxable cash compensation in a lump sum and be
entitled to continued medical and dental coverage for the remainder of the term.
Mr. Hopkins will also be entitled to the foregoing change in control severance
payment and benefits if he voluntarily terminates his employment within 120 days
following certain events during the term of the agreement following a change in
control of the Company or the Bank. All amounts payable as severance in respect
of a change in control will be reduced to the extent necessary such that neither
the payments under the employment agreement, nor any other payments, constitute
"excess parachute payments" under Section 280G of the Internal Revenue Code. If
a change in control payment had been made under Mr. Hopkins agreement as of June
30, 2006, the payment would have equaled approximately $1,305,000.
The Bank has also entered into employment agreements with Senior Vice
Presidents Gossweiler, Joyce, Ledgerwood and Parisi, the named executive
officers whose compensation is presented in the table above, providing for a
minimum base salary of $215,000, $215,000, $215,000 and $215,000, respectively.
These agreements each have a term of two years and were last renewed as of July
1, 2006, and each provides for extension of the term on or before each
anniversary of the effective date upon determination of the Board of Directors
of the Bank that the officer's performance has met its requirements and
standards. Pursuant to the terms of the employment agreements, each officer is
generally entitled to participate in all discretionary bonuses, pension and
other retirement benefit plans, welfare benefit plans and other equity,
incentive and benefit plans and perquisites applicable to senior management of
the Bank. Upon termination of employment
-14-
at any time on or after attainment of age 62 and until eligibility for Medicare
coverage, each of the officers is also permitted to continue to participate, at
the Bank's expense, in the group medical plan sponsored by the Bank.
If terminated without cause, each of these officers will be entitled to (i)
a continuation of his or her salary through the remaining term of the agreement,
and (ii) during the same period, the cost of obtaining health, life, disability
and other benefits at levels substantially equal to those provided on the date
of termination of employment. If terminated involuntarily during the term of the
agreement following a "change in control" of the Company or the Bank, as defined
in the agreement, or without cause within twenty-four months following a change
in control, each of these officers will be paid an amount equal to 2.0 times his
or her most recent total annual compensation (including the value of deferred
compensation and retirement plans) in a lump sum and be entitled to continued
medical and dental coverage for the remainder of the term. Each of the officers
will also be entitled to the foregoing change in control severance payment and
benefits upon a voluntary termination of employment within 120 days following
certain events during the term of the agreement following a change in control of
the Company or the Bank. All amounts payable to any of the officers as severance
in respect of a change in control will be reduced to the extent necessary such
that neither the payments under the employment agreement, nor any other
payments, constitute "excess parachute payments" under Section 280G of the
Internal Revenue Code. If change in control payments had been made under these
agreements as of June 30, 2006, each of these officers would have received a
payment of approximately $468,000. The Bank has also entered into employment
agreements with the three other senior vice presidents. If change in control
payments had been made under these agreements as of June 30, 2006, the aggregate
payment would have equaled approximately $1,185,000.
--------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
The following summarizes the Compensation Committee's involvement in the
compensation decisions and policies adopted by the Bank and the Company for
executive officers generally, and for the President and CEO, John N. Hopkins, in
particular, during the fiscal year ended June 30, 2006. The Committee is
responsible for conducting periodic reviews of the executive compensation of
senior executives, including President and Chief Executive Officer John N.
Hopkins. The Committee determines salary levels for senior executives and other
officers and amounts of cash bonuses to be distributed to those individuals, if
and as appropriate. Awards to senior management and key employees under the
Company's 2005 Stock Compensation and Incentive Plan are determined by the
Compensation Committee.
GENERAL POLICY. The executive compensation practices of the Company and the
Bank are designed to reward and provide an incentive for executives, based on
the achievement of corporate and individual goals. Compensation levels for
executives are established after considering measures that include, but are not
limited to, the financial performance of the Company and competitive labor
market conditions. Furthermore, qualitative factors such as overall job
performance, leadership, teamwork, and community involvement are considered in
compensation deliberations. The Committee utilizes publicly available
information to gather information related to compensation practices for
executive officers of financial services companies with assets of between $1.5
billion and $4.0 billion located in New Jersey and in the surrounding states of
New York and Pennsylvania within approximately 75 miles of Kearny, New Jersey.
The Committee has complete access to all necessary Company personnel records,
financial reports, and other data.
COMPONENTS OF COMPENSATION. In evaluating executive compensation, the
Compensation Committee concentrates on several fundamental components: salary,
incentive bonus compensation, retirement income opportunity and equity based
incentive compensation.
-15-
Salary levels for senior executives and other officers are reviewed by the
Compensation Committee on an annual basis. Salary levels reflect an individual's
job responsibilities, experience and performance and the Compensation
Committee's analysis of competitive marketplace conditions.
In the past, incentive bonuses have been used to provide cash distributions
to executives, depending upon a variety of factors relating to Company and Bank
performance and individual performance. Although the Compensation Committee's
decisions are discretionary and no specific individual goals were set, the
general factors that were used to determine bonuses were the individual's
contribution to the Company's and the Bank's success since the executive's last
evaluation and the demonstrated capacity to adapt to meet the future needs of
each. No particular weightings of these factors were used to calculate bonuses.
In addition, since 2002, a portion of such bonus pay has been determined based
upon the growth of the business of the Company and the Bank. The level of such
incentive compensation is determined by the Board of Directors based upon
various factors, including the size and complexity of the transaction, the
projected financial and strategic benefits of the transaction to the future
financial and business operations of the Bank, the projected benefits of the
transaction as revised after the completion of the transaction compared with the
projected benefits of the transaction presented at the time of initial
evaluation of the transaction by management and the Board, and individual
contribution to the successful completion and integration of the transaction
into the ongoing business of the Company. The Plan is designated to maximize the
achievement of the Company's and the Bank's objectives by providing incentive
compensation to those individuals who play an instrumental role in defining and
then achieving or exceeding specific previously determined organizational
business objectives of the Company.
Another component of the executive compensation strategy of the Company and
the Bank is the retirement income opportunity. Presently, such retirement income
opportunity involves the Bank's defined benefit pension plan, the Benefits
Equalization Plan related to the defined benefit plan, the Bank's 401K plan and
the Bank's Employee Stock Ownership Plan ("ESOP") and related ESOP Benefits
Equalization Plan.
In October of 2005, the Company's shareholders approved the Company's Stock
Compensation and Incentive Plan. Through this plan, executives may be awarded
stock options and restricted stock awards that will offer them the possibility
of future compensation opportunity depending on the executive's continued
employment with the Company and the Bank and the long-term price appreciation of
the Company's common stock. During the fiscal year ended June 30, 2006, awards
were made to the Company's chief executive officer and other named executive
officers. A determination related to such awards of stock options and stock
awards was made by the Committee after reviewing the Company's other
compensation programs for its senior officers and the stock compensation awards
made by other financial institutions having completed a stock offering of at
least $50 million within the prior three years.
COMMITTEE REVIEW OF EXECUTIVE COMPENSATION. In making its recommendations
regarding executive compensation at calendar year-end 2005, the Compensation
Committee was influenced by several positive factors. Primary among these were
the exceptional financial performance of the Company and the significant role of
the Company's executive officers in bringing it about. Additional
accomplishments, less measurable in quantitative form but of equal importance to
the Company and the Bank, included advances in strategic direction, strengthened
internal controls, and regulatory compliance.
Based upon these performance factors, the Company's executive officers were
awarded salary increases to be effective as of January 1, 2006, and bonuses paid
in December 2005.
-16-
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. In assessing appropriate types
and amounts of compensation for the CEO, the Board evaluates both corporate and
individual performance. Corporate factors included in such evaluation are:
return on average assets, the level of the efficiency ratio, and the market
performance of the common stock. Individual factors include the CEO's initiation
and implementation of successful business strategies; maintenance of an
effective management team; and various personal qualities, including leadership,
commitment, and professional and community standing.
After reviewing the Company's calendar year 2005 results, as well as his
individual contributions, the Compensation Committee concluded that the CEO,
John N. Hopkins, performed with exceptional skill and diligence in 2005. The
Company generated earnings and business growth in accordance with the Company's
budget and operating plans, and Mr. Hopkins deserves a large measure of the
credit for this leadership role in the Company's accomplishments. He assumed
personal responsibility for an array of ambitious operating strategies,
including efforts to raise additional capital through the sale of Company stock
to the public, operating strategies to deploy the capital raised through such
stock offering and continuation of the Company's efforts and strategy to grow
its retail franchise in the New Jersey counties it serves. Finally, the
Compensation Committee believes that Mr. Hopkins has made significant
contributions to the ongoing success of the Company and the Bank, and continues
to set the stage for their continued success.
Accordingly, Mr. Hopkins' salary was increased from $540,000 to $600,000,
effective January 1, 2006, and he was awarded a bonus of $110,000 in December
2005.
The above report on Executive Compensation was provided by the Compensation
Committee, comprised of:
Theodore J. Aanensen (Chair),
John J. Mazur, Jr.,
Joseph P. Mazza, and
Henry S. Parow.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. None of the
members of the Compensation Committee are or were previously officers or
employees of the Company or any of its subsidiaries. During the year ended June
30, 2006, there were no "interlocking" relationships in which (i) an executive
officer of the Company served as a member of the compensation committee of
another entity, one of whose executive officers served on the compensation
committee of the Company; (ii) an executive officer of the Company served as a
director of another entity, one of whose executive officers served on the
compensation committee of the Company; or (iii) an executive officer of the
Company served as a member of the compensation committee of another entity, one
of whose executive officers served as a director of the Company.
--------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
--------------------------------------------------------------------------------
The Audit Committee of Board of Directors of the Company has appointed
Beard Miller Company LLP as the Company's independent auditor for the fiscal
year ending June 30, 2007. This appointment is being submitted to the Company's
shareholders for ratification. Beard Miller was the Company's independent
auditor for the fiscal year ended June 30, 2006. A representative of Beard
Miller is expected to be present at the Meeting, will have the opportunity to
make a statement if he or she so desires, and is expected to be available to
respond to appropriate questions.
-17-
Ratification of the appointment of the independent auditor requires the
affirmative vote of a majority of the votes cast, in person or by proxy, by the
shareholders of the Company at the Meeting. The Board of Directors recommends
that shareholders vote "FOR" the ratification of the appointment of Beard Miller
Company LLP as the Company's independent auditor for the 2007 fiscal year.
--------------------------------------------------------------------------------
INFORMATION REGARDING INDEPENDENT AUDITOR
--------------------------------------------------------------------------------
CHANGE IN INDEPENDENT AUDITOR. On April 1, 2005, the Company's former
independent auditor, Radics & Co., LLC ("Radics"), merged with Beard Miller
Company LLP ("Beard Miller") to become the Pine Brook, New Jersey office of
Beard Miller. As a result of the merger, on April 1, 2005, Radics resigned as
independent auditors of the Company and the Company engaged Beard Miller as its
successor independent audit firm. The Company's engagement of Beard Miller was
approved by the Company's Audit Committee. The reports of Radics on the
consolidated financial statements of the Company as of and for the fiscal years
ended June 30, 2004 and 2003, did not contain an adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles. During the Company's fiscal years ended June 30, 2004 and
2003, and in connection with the audit of the Company's consolidated financial
statements for such periods, and for the period from July 1, 2004 to April 1,
2005, there were no disagreements between the Company and Radics on any matter
of accounting principles or practices, consolidated financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of Radics, would have caused Radics to make reference to such
matter in connection with its audit reports on the Company's consolidated
financial statements.
PRINCIPAL ACCOUNTING FEES AND SERVICES. Effective July 30, 2002, the
Securities and Exchange Act of 1934 was amended by the Sarbanes-Oxley Act of
2002 to require all auditing services and non-audit services provided by an
issuer's independent auditor to be approved by the issuer's audit committee
prior to such services being rendered or to be approved pursuant to pre-approval
policies and procedures established by the issuer's audit committee. The
Company's Audit Committee approves each service prior to the engagement of the
auditor for all audit and non-audit services. All of the services listed below
were approved by the Audit Committee prior to the service being rendered. There
were no services that were not recognized to be non-audit services at the time
of engagement that were approved after the fact.
AUDIT FEES. Audit fees consist of fees for professional services rendered
for the audit of the Company's annual consolidated financial statements and for
the review of the quarterly consolidated financial statements. The aggregate
audit fees billed by Beard Miller for the year ended June 30, 2006 and 2005 were
$253,000 and $178,000, respectively.
AUDIT RELATED FEES. Audit related fees consist principally of assurance and
related services normally provided by the independent auditor in connection with
statutory and regulatory filings. The aggregate audit related fees billed by
Beard Miller for the year ended June 30, 2006 and 2005 were $14,000 and $13,000,
respectively.
TAX FEES. The aggregate fees billed by Beard Miller for professional
services rendered for tax compliance, tax advice and tax planning totaled
$29,000 and $29,000 for the years ended June 30, 2006 and 2005, respectively.
Such tax-related services consisted of tax return preparation and consultation.
ALL OTHER FEES. The aggregate fees billed by Beard Miller for professional
services rendered for services or products other than those listed under the
captions "Audit Fees," "Audit-Related Fees," and "Tax Fees" totaled $0 for the
year ended June 30, 2006 and $192,500 for the year ended June 30, 2005 and
consisted of expenses related to the Company's minority stock offering completed
in February 2005.
-18-
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SHAREHOLDER COMMUNICATIONS TO THE BOARD
AND SHAREHOLDER PROPOSALS
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The Board of Directors does not have a formal process for shareholders to
send communications to the Board. In view of the infrequency of shareholder
communications to the Board of Directors, the Board does not believe that a
formal process is necessary. Written communications received by the Company from
shareholders are shared with the full Board no later than the next regularly
scheduled Board meeting.
In order to be considered for inclusion in the Company's proxy materials
for the annual meeting of shareholders for the fiscal year ending June 30, 2007,
all shareholder proposals must be received at the Company's executive office at
120 Passaic Avenue, Fairfield, New Jersey, 07004 no later than June 30, 2007.
Under the Company's bylaws, any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the Company
at least five days before the date of the annual meeting, and all business so
stated, proposed and filed shall be considered at the annual meeting; but no
other proposal shall be acted upon at the annual meeting.
Unless unable to attend due to illness or other unforeseen circumstances,
each member of the Board of Directors is present at annul meetings. At the 2005
annual meeting, no directors were absent.
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OTHER MATTERS
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The Board of Directors is not aware of any other matters to come before the
Meeting. However, if any other matters should properly come before the Meeting
or any adjournments, it is intended that proxies in the accompanying form will
be voted in respect thereof in accordance with the judgment of the persons named
in the accompanying proxy.
-19-
[FORM OF PROXY CARD]
ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints the Board of Directors of Kearny Financial
Corp. (the "Company"), or its designee, with full powers of substitution, to act
as attorneys and proxies for the undersigned, to vote all shares of common stock
of the Company, which the undersigned is entitled to vote at the Annual Meeting
of Shareholders (the "Meeting"), to be held at the offices of Kearny Financial
Corp., 120 Passaic Avenue, Fairfield, New Jersey on October 23, 2006, at 10:00
a.m and at any and all adjournments thereof, in the following manner:
FOR WITHHELD
1. The election as directors of the nominees
listed with a term to expire as indicated
(except as marked to the contrary below): |_| |_|
Leopold W. Montanaro
John N. Hopkins
Henry S. Parow
INSTRUCTIONS: To withhold your vote for any nominee, write the nominee's name on
the line provided below.
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FOR AGAINST ABSTAIN
2. Ratification of the appointment
of Beard Miller Company LLP as the
Company's independent auditor for the
fiscal year ending June 30, 2007 |_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE LISTED NOMINEES
AND PROPOSAL.
THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR THE NOMINEES LISTED AND THE
PROPOSAL STATED. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS SIGNED
PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED
AT THE MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, or at
any adjournments thereof, and after notification to the Secretary of the Company
at the Meeting of the shareholder's decision to terminate this Proxy, the power
of said attorneys and proxies shall be deemed terminated and of no further force
and effect. The undersigned may also revoke this Proxy by filing a subsequently
dated Proxy or by written notification to the Secretary of the Company of his or
her decision to terminate this Proxy.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Shareholders, a Proxy
Statement, and the 2006 Annual Report.
|_| Check Box if You Plan
Dated: to Attend the Annual Meeting.
---------------------------
--------------------------------- -------------------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
--------------------------------- -------------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on this Proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.