120 Passaic Avenue ● Fairfield, NJ 07004-3510 ● 973-244-4500
May 24, 2016
Via EDGAR
Mr. Dietrich A. King
Assistant Director, Office of Financial Services
United States Securities and Exchange Commission
Division of Corporate Finance
100 F Street, NE
Washington, D.C. 20549
Re: Kearny Financial Corp.
File No. 001-37399
Dear Mr. King:
Please accept the following responses to the comment letter dated May 9, 2016 resulting from the Commission’s review of the Kearny Financial Corp. Form 10-K for the fiscal year ended June 30, 2015 filed on September 14, 2015 and our Definitive Proxy Statement on Schedule 14A filed on September 18, 2015.
Definitive Proxy Statement on Schedule 14A Filed on September 18, 2015
Compensation Discussion and Analysis
Senior Management Incentive Compensation Plan, page 18
| 1. | Included in the exhibit at the end of this response are the numerical targets that we established for the performance factors that were applicable to each of our named executive officers in conjunction with our Senior Management Incentive Compensation Plan for fiscal year 2015. |
As requested, the exhibit includes the Company’s actual performance compared to each of these targets as well as the “allocations” and “weights” ascribed to each factor that contributed to the “Performance Factor Achievement” values disclosed for each named executive officer.
To the extent we use these or similar quantifiable targets as a basis for incentive compensation payouts for our named executive officers in future periods, we will include the comparison of the targeted and actual values for the applicable performance factors in the Compensation Discussion and Analysis included in our future filings.
Senior Management Incentive Compensation Plan, page 18
| 2. | To the extent we have incentive compensation opportunities under a non-equity incentive plan for our named executive officers in future periods, we will include such information in the Grants of Plan-Based Awards tables in our future filings. |
The Company hereby acknowledges that:
| · | the Company is responsible for the adequacy and accuracy of the disclosure in the filing; |
| · | staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and |
| · | the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
We are pleased to be able to provide the foregoing information. If you require any further information regarding the foregoing matters, please do not hesitate to call Mr. Heyer at (973) 244-4024.
Sincerely,
/s/ Craig L. Montanaro |
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Craig L. Montanaro |
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President and Chief Executive Officer
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/s/ Eric B. Heyer |
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Eric B. Heyer |
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Executive Vice President and Chief Financial Officer |
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2
Incentive Compensation Target | Incentive Compensation as % of Base Salary | Incentive Compensation as % of Target | ||
Craig Montanaro, President & CEO | 25.00% | 22.50% | 90.00% | |
| ||||
Performance Factor | Weight | Performance Factor Target | Performance Factor Value | Performance Factor Multiplier |
Earnings | 60% |
| 103.33% | |
Net Income | 33% | 12,171,035 | 11,770,368 | 96.71% |
Return on Average Assets (%) | 33% | 0.31% | 0.32% | 103.73% |
Return on Average Equity (%) | 0% | 1.55% | 2.04% | 131.71% |
Earnings per Share | 33% | 0.15 | 0.16 | 109.56% |
Total Allocation | 100% |
| ||
Loans | 15% |
| 59.47% | |
Commercial Mortgage Growth: Commercial RE | 25% | 160,161,957 | 28,577,704 | 0.00% |
Commercial Mortgage Growth: Multifamily | 15% | 108,463,704 | 297,371,736 | 200.00% |
Business (C&I) Loan Growth: Retail | 20% | 17,200,891 | (4,639,696) | 0.00% |
Business (C&I) Loan Growth: Wholesale | 20% | 32,779,377 | 36,829,932 | 112.36% |
Residential (1-4) 1st Mortgage Loan Growth | 10% | 16,736,091 | 11,709,290 | 69.96% |
Total Performance Factor Loan Growth | 0% | 335,342,020 | 369,848,965 | 110.29% |
SBA Sale Gains | 10% | 500,000 | 111,081 | 0.00% |
Total Allocation | 100% |
| ||
Deposits | 15% |
| 26.27% | |
NIB Core Deposit Growth (Retail) | 50% | 21,023,634 | (5,520,530) | 0.00% |
IB Core Deposit Growth (Retail) | 40% | 65,636,815 | 43,107,564 | 65.68% |
Certificate of Deposit Growth: Retail | 10% | 75,391,920 | (65,197,327) | 0.00% |
Wholesale Deposit Growth | 0% | 30,995,632 | 47,864,347 | 154.42% |
Total Deposit Growth | 0% | 193,048,001 | 20,254,055 | 0.00% |
Total Allocation | 100% |
| ||
Asset Quality | 5% |
| 125.93% | |
Nonperforming Loan Ratio (%) | 50% | 1.45% | 1.09% | 124.91% |
Nonperforming Asset Ratio (%) | 50% | 0.77% | 0.56% | 126.94% |
Total Allocation | 100% |
| ||
Interest Rate Risk | 5% |
| 176.94% | |
EVE Ratio Risk Factor | 25% | 5.50 | 1.00 | 181.82% |
EVE Sensitivity Risk Factor | 25% | 6.75 | 3.00 | 155.56% |
NII Sensitivity Y1 (M1-M12) | 25% | 6.75 | 1.00 | 185.19% |
NII Sensitivity Y2 (M13-M24) | 25% | 6.75 | 1.00 | 185.19% |
Total Allocation | 100% |
| ||
| ||||
| 100% |
| 90.00% |
3
Incentive Compensation Target | Incentive Compensation as % of Base Salary | Incentive Compensation as % of Target | ||
William Ledgerwood, Senior EVP & COO | 25.00% | 22.50% | 90.00% | |
| ||||
Performance Factor | Weight | Performance Factor Target | Performance Factor Value | Performance Factor Multiplier |
Earnings | 60% |
| 103.33% | |
Net Income | 33% | 12,171,035 | 11,770,368 | 96.71% |
Return on Average Assets (%) | 33% | 0.31% | 0.32% | 103.73% |
Return on Average Equity (%) | 0% | 1.55% | 2.04% | 131.71% |
Earnings per Share | 33% | 0.15 | 0.16 | 109.56% |
Total Allocation | 100% |
| ||
Loans | 15% |
| 59.47% | |
Commercial Mortgage Growth: Commercial RE | 25% | 160,161,957 | 28,577,704 | 0.00% |
Commercial Mortgage Growth: Multifamily | 15% | 108,463,704 | 297,371,736 | 200.00% |
Business (C&I) Loan Growth: Retail | 20% | 17,200,891 | (4,639,696) | 0.00% |
Business (C&I) Loan Growth: Wholesale | 20% | 32,779,377 | 36,829,932 | 112.36% |
Residential (1-4) 1st Mortgage Loan Growth | 10% | 16,736,091 | 11,709,290 | 69.96% |
Total Performance Factor Loan Growth | 0% | 335,342,020 | 369,848,965 | 110.29% |
SBA Sale Gains | 10% | 500,000 | 111,081 | 0.00% |
Total Allocation | 100% |
| ||
Deposits | 15% |
| 26.27% | |
NIB Core Deposit Growth (Retail) | 50% | 21,023,634 | (5,520,530) | 0.00% |
IB Core Deposit Growth (Retail) | 40% | 65,636,815 | 43,107,564 | 65.68% |
Certificate of Deposit Growth: Retail | 10% | 75,391,920 | (65,197,327) | 0.00% |
Wholesale Deposit Growth | 0% | 30,995,632 | 47,864,347 | 154.42% |
Total Deposit Growth | 0% | 193,048,001 | 20,254,055 | 0.00% |
Total Allocation | 100% |
| ||
Asset Quality | 5% |
| 125.93% | |
Nonperforming Loan Ratio (%) | 50% | 1.45% | 1.09% | 124.91% |
Nonperforming Asset Ratio (%) | 50% | 0.77% | 0.56% | 126.94% |
Total Allocation | 100% |
| ||
Interest Rate Risk | 5% |
| 176.94% | |
EVE Ratio Risk Factor | 25% | 5.50 | 1.00 | 181.82% |
EVE Sensitivity Risk Factor | 25% | 6.75 | 3.00 | 155.56% |
NII Sensitivity Y1 (M1-M12) | 25% | 6.75 | 1.00 | 185.19% |
NII Sensitivity Y2 (M13-M24) | 25% | 6.75 | 1.00 | 185.19% |
Total Allocation | 100% |
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| ||||
| 100% |
| 90.00% |
4
Incentive Compensation Target | Incentive Compensation as % of Base Salary | Incentive Compensation as % of Target | ||
Patrick Joyce, EVP Chief Lending Officer | 20.00% | 16.80% | 84.01% | |
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Performance Factor | Weight | Performance Factor Target | Performance Factor Value | Performance Factor Multiplier |
Earnings | 40% |
| 103.33% | |
Net Income | 33% | 12,171,035 | 11,770,368 | 96.71% |
Return on Average Assets (%) | 33% | 0.31% | 0.32% | 103.73% |
Return on Average Equity (%) | 0% | 1.55% | 2.04% | 131.71% |
Earnings per Share | 33% | 0.15 | 0.16 | 109.56% |
Total Allocation | 100% |
| ||
Loans | 40% |
| 59.47% | |
Commercial Mortgage Growth: Commercial RE | 25% | 160,161,957 | 28,577,704 | 0.00% |
Commercial Mortgage Growth: Multifamily | 15% | 108,463,704 | 297,371,736 | 200.00% |
Business (C&I) Loan Growth: Retail | 20% | 17,200,891 | (4,639,696) | 0.00% |
Business (C&I) Loan Growth: Wholesale | 20% | 32,779,377 | 36,829,932 | 112.36% |
Residential (1-4) 1st Mortgage Loan Growth | 10% | 16,736,091 | 11,709,290 | 69.96% |
Total Performance Factor Loan Growth | 0% | 335,342,020 | 369,848,965 | 110.29% |
SBA Sale Gains | 10% | 500,000 | 111,081 | 0.00% |
Total Allocation | 100% |
| ||
Deposits | 5% |
| 0.00% | |
NIB Core Deposit Growth (Retail) | 100% | 21,023,634 | (5,520,530) | 0.00% |
IB Core Deposit Growth (Retail) | 0% | 65,636,815 | 43,107,564 | 65.68% |
Certificate of Deposit Growth: Retail | 0% | 75,391,920 | (65,197,327) | 0.00% |
Wholesale Deposit Growth | 0% | 30,995,632 | 47,864,347 | 154.42% |
Total Deposit Growth | 0% | 193,048,001 | 20,254,055 | 0.00% |
Total Allocation | 100% |
| ||
Asset Quality | 15% |
| 125.93% | |
Nonperforming Loan Ratio (%) | 50% | 1.45% | 1.09% | 124.91% |
Nonperforming Asset Ratio (%) | 50% | 0.77% | 0.56% | 126.94% |
Total Allocation | 100% |
| ||
Interest Rate Risk | 0% |
| 0.00% | |
EVE Ratio Risk Factor | 0% | 5.50 | 1.00 | 181.82% |
EVE Sensitivity Risk Factor | 0% | 6.75 | 3.00 | 155.56% |
NII Sensitivity Y1 (M1-M12) | 0% | 6.75 | 1.00 | 185.19% |
NII Sensitivity Y2 (M13-M24) | 0% | 6.75 | 1.00 | 185.19% |
Total Allocation | 0% |
| ||
| ||||
| 100% |
| 84.01% |
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Incentive Compensation Target | Incentive Compensation as % of Base Salary | Incentive Compensation as % of Target | ||
Erika Parisi, EVP Branch Administration | 20.00% | 11.16% | 55.78% | |
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Performance Factor | Weight | Performance Factor Target | Performance Factor Value | Performance Factor Multiplier |
Earnings | 40% |
| 103.33% | |
Net Income | 33% | 12,171,035 | 11,770,368 | 96.71% |
Return on Average Assets (%) | 33% | 0.31% | 0.32% | 103.73% |
Return on Average Equity (%) | 0% | 1.55% | 2.04% | 131.71% |
Earnings per Share | 33% | 0.15 | 0.16 | 109.56% |
Total Allocation | 100% |
| ||
Loans | 5% |
| 0.00% | |
Commercial Mortgage Growth: Commercial RE | 0% | 160,161,957 | 28,577,704 | 0.00% |
Commercial Mortgage Growth: Multifamily | 0% | 108,463,704 | 297,371,736 | 200.00% |
Business (C&I) Loan Growth: Retail | 100% | 17,200,891 | (4,639,696) | 0.00% |
Business (C&I) Loan Growth: Wholesale | 0% | 32,779,377 | 36,829,932 | 112.36% |
Residential (1-4) 1st Mortgage Loan Growth | 0% | 16,736,091 | 11,709,290 | 69.96% |
Total Performance Factor Loan Growth | 0% | 335,342,020 | 369,848,965 | 110.29% |
SBA Sale Gains | 0% | 500,000 | 111,081 | 0.00% |
Total Allocation | 100% |
| ||
Deposits | 55% |
| 26.27% | |
NIB Core Deposit Growth (Retail) | 50% | 21,023,634 | (5,520,530) | 0.00% |
IB Core Deposit Growth (Retail) | 40% | 65,636,815 | 43,107,564 | 65.68% |
Certificate of Deposit Growth: Retail | 10% | 75,391,920 | (65,197,327) | 0.00% |
Wholesale Deposit Growth | 0% | 30,995,632 | 47,864,347 | 154.42% |
Total Deposit Growth | 0% | 193,048,001 | 20,254,055 | 0.00% |
Total Allocation | 100% |
| ||
Asset Quality | 0% |
| 0.00% | |
Nonperforming Loan Ratio (%) | 0% | 1.45% | 1.09% | 124.91% |
Nonperforming Asset Ratio (%) | 0% | 0.77% | 0.56% | 126.94% |
Total Allocation | 0% |
| ||
Interest Rate Risk | 0% |
| 0.00% | |
EVE Ratio Risk Factor | 0% | 5.50 | 1.00 | 181.82% |
EVE Sensitivity Risk Factor | 0% | 6.75 | 3.00 | 155.56% |
NII Sensitivity Y1 (M1-M12) | 0% | 6.75 | 1.00 | 185.19% |
NII Sensitivity Y2 (M13-M24) | 0% | 6.75 | 1.00 | 185.19% |
Total Allocation | 0% |
| ||
| ||||
| 100% |
| 55.78% |
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Incentive Compensation Target | Incentive Compensation as % of Base Salary | Incentive Compensation as % of Target | ||
Eric Heyer, EVP Chief Financial Officer | 20.00% | 18.51% | 92.55% | |
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Performance Factor | Weight | Performance Factor Target | Performance Factor Value | Performance Factor Multiplier |
Earnings | 60% |
| 103.33% | |
Net Income | 33% | 12,171,035 | 11,770,368 | 96.71% |
Return on Average Assets (%) | 33% | 0.31% | 0.32% | 103.73% |
Return on Average Equity (%) | 0% | 1.55% | 2.04% | 131.71% |
Earnings per Share | 33% | 0.15 | 0.16 | 109.56% |
Total Allocation | 100% |
| ||
Loans | 15% |
| 59.47% | |
Commercial Mortgage Growth: Commercial RE | 25% | 160,161,957 | 28,577,704 | 0.00% |
Commercial Mortgage Growth: Multifamily | 15% | 108,463,704 | 297,371,736 | 200.00% |
Business (C&I) Loan Growth: Retail | 20% | 17,200,891 | (4,639,696) | 0.00% |
Business (C&I) Loan Growth: Wholesale | 20% | 32,779,377 | 36,829,932 | 112.36% |
Residential (1-4) 1st Mortgage Loan Growth | 10% | 16,736,091 | 11,709,290 | 69.96% |
Total Performance Factor Loan Growth | 0% | 335,342,020 | 369,848,965 | 110.29% |
SBA Sale Gains | 10% | 500,000 | 111,081 | 0.00% |
Total Allocation | 100% |
| ||
Deposits | 15% |
| 26.27% | |
NIB Core Deposit Growth (Retail) | 50% | 21,023,634 | (5,520,530) | 0.00% |
IB Core Deposit Growth (Retail) | 40% | 65,636,815 | 43,107,564 | 65.68% |
Certificate of Deposit Growth: Retail | 10% | 75,391,920 | (65,197,327) | 0.00% |
Wholesale Deposit Growth | 0% | 30,995,632 | 47,864,347 | 154.42% |
Total Deposit Growth | 0% | 193,048,001 | 20,254,055 | 0.00% |
Total Allocation | 100% |
| ||
Asset Quality | 0% |
| 0.00% | |
Nonperforming Loan Ratio (%) | 0% | 1.45% | 1.09% | 124.91% |
Nonperforming Asset Ratio (%) | 0% | 0.77% | 0.56% | 126.94% |
Total Allocation | 0% |
| ||
Interest Rate Risk | 10% |
| 176.94% | |
EVE Ratio Risk Factor | 25% | 5.50 | 1.00 | 181.82% |
EVE Sensitivity Risk Factor | 25% | 6.75 | 3.00 | 155.56% |
NII Sensitivity Y1 (M1-M12) | 25% | 6.75 | 1.00 | 185.19% |
NII Sensitivity Y2 (M13-M24) | 25% | 6.75 | 1.00 | 185.19% |
Total Allocation | 100% |
| ||
| ||||
| 100% |
| 92.55% |
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