Oritani Financial Corp - FORM 10-Q

Attached files

file	filename
EX-32 - EXHIBIT 32 - Oritani Financial Corp	c16806exv32.htm
EX-31.1 - EXHIBIT 31.1 - Oritani Financial Corp	c16806exv31w1.htm
EX-31.2 - EXHIBIT 31.2 - Oritani Financial Corp	c16806exv31w2.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-34786

Oritani Financial Corp.

(Exact name of registrant as specified in its charter)


Delaware		30-0628335

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

370 Pascack Road, Township of Washington, New Jersey 07676
(Address of Principal Executive Offices)

(201) 664-5400

(Registrant’s telephone number)

N/A

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. YES þ NO o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller Reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

As of May 9, 2011, there were 56,202,485 shares of the Registrant’s common stock, par value $0.01 per share, issued and outstanding.

Oritani Financial Corp.
FORM 10-Q

Index


	Page
Part I. Financial Information

Item 1. Financial Statements 3

Consolidated Balance Sheets as of March 31, 2011 (unaudited) and June 30, 2010		3

Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2011 and 2010 (unaudited)		4

Consolidated Statements of Stockholders’ Equity for the Nine Months Ended March 31, 2011 and 2010 (unaudited)		5

Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2011 and 2010 (unaudited)		6

Notes to unaudited Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		28

Item 3. Quantitative and Qualitative Disclosures About Market Risk		41

Item 4. Controls and Procedures		43

Part II. Other Information

Item 1. Legal Proceedings		43

Item 1A. Risk Factors		44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		45

Item 3. Defaults upon Senior Securities		45

Item 4. Reserved		45

Item 5. Other Information		45

Item 6. Exhibits		45

Signature Page		46

Exhibit 31.1
Exhibit 31.2
Exhibit 32

Part I. Financial Information

Item 1. Financial Statements

Oritani Financial Corp. and Subsidiaries
Township of Washington, New Jersey

Consolidated Balance Sheets

(in thousands, except share data)


	March 31,			June 30,
	2011			2010
	(unaudited)
Assets
Cash on hand and in banks	$	7,324		$	6,511
Federal funds sold and short term investments		7,943			339,828

Cash and cash equivalents		15,267			346,339

Loans, net		1,653,229			1,505,880
Securities available for sale, at market value		164,290			358,723
Mortgage-backed securities held to maturity, fair value of $50,398 and $68,622 at March 31, 2011 and June 30, 2010, respectively		49,307			66,468
Mortgage-backed securities available for sale, at fair value		528,215			78,477
Loans held for sale, at fair value		9,484			—
Bank Owned Life Insurance (at cash surrender value)		41,358			30,529
Federal Home Loan Bank of New York stock (“FHLB”), at cost		26,743			25,081
Accrued interest receivable		9,717			9,425
Investments in real estate joint ventures, net		5,338			5,562
Real estate held for investment		1,166			1,221
Real estate owned		5,953			3,031
Office properties and equipment, net		14,787			14,832
Deferred tax assets, net		25,463			23,154
Other assets		7,046			8,698

Total Assets	$	2,557,363		$	2,477,420


Liabilities
Deposits	$	1,325,577		$	1,289,746
Borrowings		532,485			495,552
Advance payments by borrowers for taxes and insurance		12,749			11,060
Accrued taxes payable		2,814			—
Official checks outstanding		4,250			4,742
Other liabilities		33,078			32,927

Total liabilities		1,910,953			1,834,027


Stockholders’ Equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 56,202,485 issued and outstanding at March 31, 2011 and June 30, 2010		562			562
Additional paid-in capital		488,992			488,684
Unallocated common stock held by the employee stock ownership plan		(29,114	)		(30,033	)
Retained income		188,966			182,172
Accumulated other comprehensive (loss) income, net of tax		(2,996	)		2,008

Total stockholders’ equity		646,410			643,393


Total Liabilities and Stockholders’ Equity	$	2,557,363		$	2,477,420

See accompanying notes to unaudited consolidated financial statements.

Oritani Financial Corp. and Subsidiaries
Township of Washington, New Jersey

Consolidated Statements of Income

Three and Nine Months Ended March 31, 2011 and 2010 (unaudited)
(in thousands, except per share data)


	Three months ended					Nine months ended
	March 31,					March 31,
	2011			2010		2011		2010

Interest income:
Interest on mortgage loans	$	25,378		$	22,568	$	74,369	$	64,633
Interest on securities held to maturity and dividends on FHLB stock		390			360		1,092		1,077
Interest on securities available for sale		1,190			2,204		5,319		5,942
Interest on mortgage-backed securities held to maturity		380			730		1,285		2,648
Interest on mortgage-backed securities available for sale		2,238			1,141		5,413		3,859
Interest on federal funds sold and short term investments		16			17		207		107

Total interest income		29,592			27,020		87,685		78,266


Interest expense:
Deposits		3,708			5,016		11,803		17,139
Borrowings		5,294			5,122		15,702		15,616

Total interest expense		9,002			10,138		27,505		32,755


Net interest income before provision for loan losses		20,590			16,882		60,180		45,511

Provision for loan losses		2,300			2,500		6,800		7,550

Net interest income		18,290			14,382		53,380		37,961


Other income:
Service charges		311			435		998		1,191
Real estate operations, net		256			250		855		960
Income from investments in real estate joint ventures		196			229		435		837
Bank-owned life insurance		270			278		829		866
Net gain on sale of assets		—			—		718		1,043
Net (loss) gain on sales of and writedowns of securities		(8	)		12		5		(178	)
Other income		50			39		151		137

Total other income		1,075			1,243		3,991		4,856


Other expenses:
Compensation, payroll taxes and fringe benefits		4,725			4,982		14,931		15,198
Advertising		188			169		548		498
Office occupancy and equipment expense		710			644		1,861		1,748
Data processing service fees		309			298		908		844
Federal insurance premiums		389			567		1,058		1,726
Real estate owned operations		894			—		1,240		—
Other expenses		1,067			764		3,225		2,404

Total operating expenses		8,282			7,424		23,771		22,418


Income before income tax expense		11,083			8,201		33,600		20,399
Income tax expense		4,078			3,189		12,349		7,975

Net income	$	7,005		$	5,012	$	21,251	$	12,424


Net income available to common stockholders	$	7,005		$	4,870	$	21,251	$	12,098


Basic and fully diluted income per common share	$	0.13		$	0.09	$	0.40	$	0.23

See accompanying notes to unaudited consolidated financial statements.

Oritani Financial Corp. and Subsidiaries
Township of Washington, New Jersey

Consolidated Statements of Stockholders’ Equity

Nine Months ended March 31, 2011 and 2010 (unaudited)
(In thousands)


															Accumu-
															lated
									Un-						other
									allocated						compre-
									common						hensive			Total
			Additional						stock						(loss)			stock-
	Common		paid-in			Treasury			held by			Retained			income,			holders’
	stock		capital			stock			ESOP			income			net of tax			equity
Balance at June 30, 2009	$	130	$	130,375		$	(53,418	)	$	(13,909	)	$	176,199		$	721		$	240,098
Comprehensive income:
Net income		—		—			—			—			12,424			—			12,424
Unrealized holding gain on securities available for sale arising during year, net of tax		—		—			—			—			—			805			805
Reclassification adjustment for losses included in net income, net of tax		—		—			—			—			—			51			51
Amortization related to post- retirement obligations, net of tax		—		—			—			—			—			105			105

Total comprehensive income																			13,385
Cash dividend declared		—		—			—			—			(1,739	)		—			(1,739	)
Purchase of treasury stock		—		—			(1,231	)		—			—			—			(1,231	)
Compensation cost for stock options and restricted stock		—		2,682			—			—			—			—			2,682
ESOP shares allocated or committed to be released		—		231			—			596			—			—			827
Tax benefit from stock-based compensation		—		61			—			—			—			—			61


Balance at March 31, 2010	$	130	$	133,349		$	(54,649	)	$	(13,313	)	$	186,884		$	1,682		$	254,083


Balance at June 30, 2010	$	562	$	488,684		$	—		$	(30,033	)	$	182,172		$	2,008		$	643,393
Comprehensive income:
Net income		—		—			—			—			21,251			—			21,251
Unrealized holding loss on securities available for sale arising during year, net of tax		—		—			—			—			—			(5,138	)		(5,138	)
Reclassification adjustment for gains included in net income, net of tax		—		—			—			—			—			(1	)		(1	)
Amortization related to post- retirement obligations, net of tax		—		—			—			—			—			135			135

Total comprehensive income																			16,247
Cash dividend declared		—		—			—			—			(14,457	)		—			(14,457	)
Compensation cost for stock options and restricted stock		—		16			—			—			—			—			16
ESOP shares allocated or committed to be released		—		307			—			919			—			—			1,226
Exercise of stock options		—		(15	)		—			—			—			—			(15	)


Balance at March 31, 2011	$	562	$	488,992		$	—		$	(29,114	)	$	188,966		$	(2,996	)	$	646,410

See accompanying notes to unaudited consolidated financial statements.

Oritani Financial Corp. and Subsidiaries
Township of Washington, New Jersey

Consolidated Statements of Cash Flows

(unaudited)


	Nine months ended
	March 31,
	2011			2010
	(in thousands)
Cash flows from operating activities:
Net income	$	21,251		$	12,424
Adjustments to reconcile net income to net cash provided by operating activities:
ESOP and stock-based compensation expense		1,242			3,509
Depreciation of premises and equipment		647			598
Amortization and accretion of premiums and discounts, net		456			(42	)
Provision for losses on loans		6,800			7,550
Amortization and accretion of deferred loan fees, net		(755	)		(666	)
Decrease (increase) in deferred taxes		1,171			(2,278	)
Impairment charge on securities		260			202
Gain on sale of securities		(265	)		(24	)
Gain on sale of assets		—			(1,043	)
Gain on sale of real estate owned		(718	)		—
Writedown of real estate owned		1,038			378
Increase in cash surrender value of bank owned life insurance		(829	)		(865	)
Increase in accrued interest receivable		(292	)		(1,036	)
Decrease (increase) in other assets		1,891			(6,205	)
Increase in other liabilities		2,475			7,952

Net cash provided by operating activities		34,372			20,454


Cash flows from investing activities:
Net increase in loans receivable		(154,521	)		(112,434	)
Purchase of mortgage loans		(12,548	)		(34,673	)
Purchase of securities available for sale		(197,486	)		(310,927	)
Purchase of mortgage-backed securities held to maturity		(6,927	)		—
Purchase of mortgage-backed securities available for sale		(533,400	)		(5,106	)
Principal payments on mortgage-backed securities held to maturity		24,132			32,375
Principal payments on mortgage-backed securities available for sale		80,104			37,601
Proceeds from calls and maturities of securities available for sale		276,880			145,000
Proceeds from sales of mortgage-backed securities held to maturity		—			9,361
Proceeds from sales of mortgage-backed securities available for sale		—			6,087
Proceeds from sales of securities available for sale		109,396			750
Purchase of Bank Owned Life Insurance		(10,000	)		—
(Purchase) redemption of Federal Home Loan Bank of New York stock		(1,662	)		553
Proceeds from sale of real estate owned		949			—
Proceeds from sale of real estate held for investment		—			1,182
Additional investment in real estate joint ventures		(150	)		(387	)
Distributions received from real estate joint ventures		427			401
Purchase of fixed assets		(619	)		(1,709	)


Net cash used in investing activities		(425,425	)		(231,926	)

Cash flows from financing activities:
Net increase in deposits		35,831			129,471
Purchase of treasury stock		—			(1,231	)
Dividends paid to shareholders		(14,457	)		(2,177	)
Tax benefit from stock-based compensation		—			61
Exercise of stock options		(15	)		—
Increase in advance payments by borrowers for taxes and insurance		1,689			2,017
Proceeds from borrowed funds		369,750			—
Repayment of borrowed funds		(332,817	)		(12,354	)

Net cash provided by financing activities		59,981			115,787


Net decrease in cash and cash equivalents		(331,072	)		(95,685	)
Cash and cash equivalents at beginning of period		346,339			135,369

Cash and cash equivalents at end of period	$	15,267		$	39,684


Supplemental cash flow information:
Cash paid during the period for:
Interest	$	27,501		$	32,993
Income taxes	$	130		$	2,793
Noncash transfer
Loans receivable transferred to real estate owned	$	6,991		$	812

See accompanying notes to unaudited consolidated financial statements.

1. Basis of Presentation

The consolidated financial statements are composed of the accounts of Oritani Financial Corp., its wholly owned subsidiaries, Oritani Bank (the Bank); Hampshire Financial, LLC, and Oritani, LLC, and the wholly owned subsidiaries of Oritani Bank; Oritani Finance Company, Ormon LLC (Ormon), and Oritani Investment Corp., as well as its wholly owned subsidiary, Oritani Asset Corporation (a real estate investment trust), collectively, the Company. All significant intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, all of the adjustments (consisting of normal and recurring adjustments) necessary for the fair presentation of the consolidated financial condition and the consolidated results of operations for the unaudited periods presented have been included. The results of operations and other data presented for the nine month period ended March 31, 2011 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending June 30, 2011.

Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the preparation of the Form 10-Q. The consolidated financial statements presented should be read in conjunction with the Company’s audited consolidated financial statements and notes to consolidated financial statements included in the Company’s June 30, 2010 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 13, 2010.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities presented in the Consolidated Balance Sheets at March 31, 2011 and June 30, 2010 and in the Consolidated Statements of Income for the three and nine months ended March 31, 2011 and 2010. Actual results could differ significantly from those estimates.

A material estimate that is particularly susceptible to significant changes relates to the determination of the allowance for loan losses. The allowance for loan losses represents management’s best estimate of losses known and inherent in the portfolio that are both probable and reasonable to estimate. While management uses the most current information available to estimate losses on loans, actual losses are dependent on future events and, as such, increases in the allowance for loan losses may be necessary.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

2. Earnings Per Share

Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. ASC 260, “Earnings Per Share”, provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. We determined that the nonvested restricted stock awards outstanding at March 31, 2010, all of which vested upon completion of the second step transaction, were participating securities. Accordingly, earnings per common share is computed using the two-class method. The weighted average common shares outstanding includes the average number of shares of common stock outstanding and allocated or committed to be released Employee Stock Ownership Plan shares.

Diluted earnings per share is computed using the same method as basic earnings per share, but reflects the potential dilution that could occur if stock options were exercised and converted into common stock and unvested shares of restricted stock were to vest. These potentially dilutive shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. When applying the treasury stock method, we add: (1) the assumed proceeds from option exercises; (2) the tax benefit that would have been credited to additional paid-in capital assuming exercise of non-qualified stock options and vesting of shares of restricted stock; and (3) the average unamortized compensation costs related to unvested shares of restricted stock and stock options. We then divide this sum by our average stock price to calculate shares assumed to be repurchased. The excess of the number of shares issuable over the number of shares assumed to be repurchased is added to basic weighted average common shares to calculate diluted EPS.

The following is a summary of the Company’s earnings per share calculations and reconciliations of net income to net income available to common shareholders and basic to diluted earnings per share.


	For the Three Months					For the Nine Months
	ended March 31,					ended March 31,
	2011		2010			2011		2010
	(in thousands, except earnings per share data)

Net income	$	7,005	$	5,012		$	21,251	$	12,424
Undistributed earnings allocated to unvested restricted awards		—		(142	)		—		(326	)

Net income available to common shareholders	$	7,005	$	4,870		$	21,251	$	12,098


Weighted average common shares outstanding — basic		52,681		53,545			52,644		53,535
Effect of dilutive non-vested shares and stock options outstanding		440		—			158		—

Weighted average common shares outstanding — diluted		53,121		53,545			52,802		53,535

Earnings per share-basic and fully diluted	$	0.13	$	0.09		$	0.40	$	0.23

3. Stock Transactions

Oritani Financial Corp. (“the Company”) is a Delaware corporation that was incorporated in March 2010 to be the successor to Oritani Financial Corp. (Oritani-federal), a federal corporation and the former stock holding company for Oritani Bank, upon completion of the second step transaction of Oritani Financial Corp., MHC, the former mutual holding company parent. The conversion was completed on June 24, 2010. The Company sold a total of 41,363,214 shares of common stock at $10.00 per share in the related offering. Concurrent with the completion of the offering, shares of Oritani-federal common stock owned by public stockholders were exchanged for 1.50 shares of the Company’s common stock. In lieu of fractional shares, shareholders were paid in cash. The Company also issued 481,546 shares of common stock for the accelerated vesting of restricted stock awards triggered by the conversion. As a result of the offering, the exchange, and the shares issued due to the accelerated vesting of stock awards, as of June 30, 2010, the Company had 56,202,485 shares of common stock outstanding. Net proceeds from the offering were $401.8 million. As a result of the conversion, all per share information for periods prior to the completed conversion has been revised to reflect the 1.50 -to- 1.0 exchange rate. This stock transaction is referred to as the “second step transaction” throughout this document.

4. Equity Incentive Plan

All stock awards granted under the 2007 Plan vested upon completion of the second step transaction. In addition, all of the options that were issued under the 2007 Plan, except for the 50,000 options issued subsequent to May 24, 2010, also vested upon completion of the second step transaction. Stock options generally vest over a five-year service period and expire ten years from issuance. Options vest immediately upon a change in control and expire 90 days after termination of service, excluding disability or retirement. The Company recognizes compensation expense for all option grants over the awards’ respective requisite service periods. Management estimated the fair values of all option grants using the Black-Scholes option-pricing model. Since there is limited historical information on the volatility of the Company’s stock, management considered the average volatilities of similar entities for an appropriate period in determining the assumed volatility rate used in the estimation of fair value. Management estimated the expected life of the options using the simplified method. The Treasury yield in effect at the time of the grant provides the risk-free rate for periods within the contractual life of the option. The Company classified share-based compensation for employees and outside directors within “compensation and fringe benefits” in the consolidated statements of income to correspond with the same line item as the cash compensation paid.

The fair value of the options issued during the nine months ended March 31, 2011 was estimated using the Black-Scholes options-pricing model with the following assumptions:


	November 2010
Option shares granted		20,000
Expected dividend yield		4.33	%
Expected volatility		38.22	%
Risk-free interest rate		1.91	%
Expected option life		6.5

Stock-based compensation expense of $6,000 and $897,000 was recognized for the three months ended March 31, 2011 and 2010, respectively. Stock-based compensation expense of $16,000 and $2.7 million was recognized for the nine months ended March 31, 2011 and 2010, respectively.

The following is a summary of the Company’s stock option activity and related information for its options plan as of March 31, 2011 and changes therein during the nine months then ended:


			Weighted		Weighted		Weighted Average
			Average		Average		Remaining
	Number of		Grant Date		Exercise		Contractual
	Stock Options		Fair Value		Price		Life (years)
Outstanding at June 30, 2010		2,792,588	$	2.30	$	10.43		7.9
Granted		20,000		2.73		11.11		10.0
Exercised		12,773		2.29		10.43		7.6
Forfeited		—		—		—		—
Expired		—		—		—		—

Outstanding at March 31, 2011		2,799,815	$	2.30	$	10.43		7.2

Exercisable at March 31, 2011		2,749,815

Expected future compensation expense related to the non-vested options outstanding as of March 31, 2011 is $112,000 over a weighted average period of 3.2 years.

5. Postretirement Benefits

The Company provides several post-retirement benefit plans to directors and to certain active and retired employees. The Company has a nonqualified Directors’ Retirement Plan (the Retirement Plan), a nonqualified Benefit Equalization Plan (BEP Plan) which provides benefits to employees who are disallowed certain benefits under the Company’s qualified benefit plans and a Post Retirement Medical Plan (the Medical Plan) for directors and certain eligible employees. Net periodic benefit costs for the three and nine months ended March 31, 2011 and 2010 are presented in the following table (in thousands):


	BEP Plan and Retirement Plan
	Three months ended				Nine months ended
	March 31,				March 31,
	2011		2010		2011		2010
Service cost	$	62	$	18	$	177	$	163
Interest cost		73		84		219		231
Amortization of unrecognized:
Prior service cost		15		15		45		45
Net loss		33		25		100		57

Total	$	183	$	142	$	541	$	496


	Medical Plan
	Three months ended				Nine months ended
	March 31,				March 31,
	2011		2010		2011		2010
Service cost	$	29	$	23	$	72	$	51
Interest cost		46		44		147		133
Amortization of unrecognized:
Prior service cost		—		—		—		—
Net loss		12		7		66		37

Total	$	87	$	74	$	285	$	221

6. Loans

Net Loans are summarized as follows:


	March 31, 2011			June 30, 2010
	(In thousands)
First mortgage loans:
Residential	$	190,615		$	244,126
Multifmaily real estate		452,958			360,380
Commerical real estate		862,801			760,076

Total first mortgage		1,506,374			1,364,582

Second mortgage and equity loans		40,566			48,110
Construction and land loans		113,976			102,137
Other loans		22,292			21,753

Total loans		1,683,208			1,536,582
Less:
Deferred loan fees, net		(5,650	)		(4,800	)
Allowance for loan losses		(24,330	)		(25,902	)

Net loans	$	1,653,229		$	1,505,880

Loans held for sale amounted to $9.5 million at March 31, 2011. At June 30, 2010, there were no loans held for sale.

The Company’s allowance for loan losses is analyzed quarterly and many factors are considered, including growth in the portfolio, delinquencies, nonaccrual loan levels, and other environmental factors. See discussion of delinquent loans in “Comparison of Financial Condition at March 31, 2011 and June 30, 2010.” There have been no material changes to the allowance for loan loss methodology disclosed in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 13, 2010.

The activity in the allowance for loan losses for the three and nine months ended March 31, 2011 is summarized as follows:


	Three months ended						Nine months ended
	March 31,						March 31,
	(In thousands)						(In thousands)
	2011			2010			2011			2010
Balance at beginning of period	$	24,181		$	22,164		$	25,902		$	20,680
Provisions for loan losses		2,300			2,500			6,800			7,550
Recoveries of loans previously charged off		—			—			80			3
Loans charged off		(2,151	)		(71	)		(8,452	)		(3,640	)

Balance at end of period	$	24,330		$	24,593		$	24,330		$	24,593

The following tables provide the three and nine month activity in the allowance for loan losses allocated by loan category. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.


	For the three months ended March 31, 2011
								Second
								mortgage
					Commercial			and equity			Construction
	Residential		Multifamily		Real Estate			loans			and land loans			Other loans		Unallocated		Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	1,473	$	1,953	$	13,863		$	401		$	3,937		$	611	$	1,943	$	24,181
Charge-offs		—		—		(1,904	)		—			(247	)		—		—		(2,151	)
Recoveries		—		—		—			—			—			—		—		—
Provisions		48		217		1,318			(21	)		554			101		83		2,300

Ending balance	$	1,521	$	2,170	$	13,277		$	380		$	4,244		$	712	$	2,026	$	24,330


	For the nine months ended March 31, 2011
									Second
									mortgage and
						Commercial			equity			Construction
	Residential		Multifamily			Real Estate			loans			and land loans			Other loans		Unallocated		Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	1,390	$	2,175		$	15,295		$	421		$	4,595		$	482	$	1,544	$	25,902
Charge-offs		—		—			(2,910	)		—			(5,542	)		—		—		(8,452	)
Recoveries		—		—			80			—			—			—		—		80
Provisions		131		(5	)		812			(41	)		5,191			230		482		6,800

Ending balance	$	1,521	$	2,170		$	13,277		$	380		$	4,244		$	712	$	2,026	$	24,330

The following table details the amount of loans receivables that are evaluated individually, and collectively, for impairment, and the related portion of allowance for loan loss that is allocated to each loan portfolio segment.


	At March 31, 2011
							Second
							mortgage and
					Commercial		equity		Construction
	Residential		Multifamily		Real Estate		loans		and land loans		Other loans		Unallocated		Total
	(In thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	—	$	—	$	240	$	—	$	310	$	—	$	—	$	550
Collectively evaluated for impairment		1,521		2,170		13,037		380		3,934		712		2,026		23,780

Total	$	1,521	$	2,170	$	13,277	$	380	$	4,244	$	712	$	2,026	$	24,330


Loans receivables:
Individually evaluated for impairment	$	—	$	—	$	2,057	$	—	$	11,350	$	1,500	$	—	$	14,907
Collectively evaluated for impairment		190,615		452,958		860,744		40,566		102,626		20,792		—		1,668,301

Total	$	190,615	$	452,958	$	862,801	$	40,566	$	113,976	$	22,292	$	—	$	1,683,208

The Company continuously monitors the credit quality of its loan receivables. In addition to internal staff, the Company utilizes the services of a third party loan review firm to rate the credit quality of its loan receivables. Credit quality is monitored by reviewing certain credit quality indicators. Assets classified as “Satisfactory” are deemed to possess average to superior credit quality, requiring no more than normal attention. Assets classified as “Pass/Watch” have generally acceptable asset quality yet possess higher risk characteristics/circumstances than satisfactory assets. Such characteristics include strained liquidity, slow pay, stale financial statements or other circumstances requiring greater attention from bank staff. We classify an asset as “Special Mention” if the asset has a potential weakness that warrants management’s close attention. Such weaknesses, if left uncorrected may result in the deterioration of the repayment prospects of the asset. An asset is considered “Substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the “distinct possibility” that we will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Included in the Substandard caption at March 31, 2011 are all loans that were past due 90 days (or more) and all impaired loans. Doubtful assets include those characterized by the highly possible that we will sustain a loss. The following table provides information about the loan credit quality at March 31, 2011:


	Credit Quality Indicator at March 31, 2011
					Special
	Satisfactory		Pass/Watch		Mention		Substandard		Doubtful		Total
	(In thousands)
Residential	$	184,395	$	1,491	$	2,060	$	2,669	$	—	$	190,615
Multifamily		439,608		8,175		1,184		3,991		—		452,958
Commercial real estate		792,434		39,543		21,784		9,040		—		862,801
Second mortgage and equity loans		40,111		174		76		205		—		40,566
Construction and land loans		68,830		27,662		3,188		14,296		—		113,976
Other loans		17,629		2,900		59		1,608		97		22,292

Total	$	1,543,007	$	79,945	$	28,351	$	31,809	$	97	$	1,683,208

The following table provides an analysis of the age of the recorded investment in loans that are past due at the end of the period. The following table provides information about loans past due at March 31, 2011:


	At March 31, 2011
			60-89		Greater
	30-59 Days		Days Past		Than 90		Total Past
	Past Due		Due		Days		Due		Current		Total Loans		Nonaccrual
	(In thousands)
First mortgage loan balances:
Residential	$	904	$	—	$	2,669	$	3,573	$	187,042	$	190,615	$	2,669
Multifamily		1,184		3,612		379		5,175		447,783		452,958		379
Commercial real estate		2,519		—		3,565		6,084		856,717		862,801		3,565
Second mortgage and equity loans		174		76		204		454		40,112		40,566		204
Construction and land loans		1,742		—		5,540		7,282		106,694		113,976		5,540
Other loans		—		—		205		205		22,087		22,292		205

Total	$	6,523	$	3,688	$	12,563	$	22,774	$	1,660,434	$	1,683,208	$	12,563

The Company defines an impaired loan as a loan for which it is probable, based on current information, that the Company will not collect all amounts due under the contractual terms of the loan agreement. At March 31, 2011 impaired loans were primarily collateral-dependent and totaled $14.9 million of which $5.0 million of impaired loans had a specific allowance for credit losses of $550,000 and $9.9 million of impaired loans had no specific allowance for credit losses. At June 30, 2010 impaired loans were primarily collateral dependent and totaled $21.9 million, of which $17.0 million of impaired loans had a related allowance for credit losses of $1.4 million and $4.9 million of impaired loans had no related allowance for credit losses.

The following table provides information about the Company’s impaired loans at March 31, 2011:


			Unpaid				Average		Interest
	Recorded		Principal				Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	(In thousands)
Commercial real estate	$	1,817	$	2,057	$	240	$	2,007	$	49
Construction and land loans		11,040		11,350		310		12,414		185
Other loans		1,500		1,500		—		1,500		52

Total	$	14,357	$	14,907	$	550	$	15,921	$	286

Troubled debt restructured loans (“TDRS”) are those loans whose terms have been modified because of deterioration in the financial condition of the borrower. Modifications could include extension of the terms of the loan, reduced interest rates, and forgiveness of accrued interest and/or principal. Once an obligation has been restructured because of such credit problems, it continues to be considered restructured until paid in full or, if the obligation yields a market rate (a rate equal to or greater than the rate the Company was willing to accept at the time of the restructuring for a new loan with comparable risk), until the year subsequent to the year in which the restructuring takes place, provided the borrower has performed under the modified terms for a six month period. Included in impaired loans at March 31, 2011 are $9.5 million of loans which are deemed troubled debt restructurings. The Company had no troubled-debt restructurings at June 30, 2010. The increase in TDRs since June 30, 2010 is due to an effort by management to proactively deal with delinquent loans. The Company has selectively modified certain borrower’s loans to enable the borrower to emerge from delinquency and keep their loans current. The eligibility of a borrower for a TDR modification depends upon the facts and circumstances of each transaction, which may change from period to period, and involve judgment by management regarding the likelihood that the modification will result in the maximum recovery by the Company.

The following table presents additional information regarding the Company’s TDRs as of March 31, 2011:


	Troubled Debt Restructurings
	Performing		Nonperforming		Total
	(in thousands)
Commercial real estate	$	600	$	626	$	1,226
Construction and land loans		5,810		936		6,746
Other loans		1,500		—		1,500

Total	$	7,910	$	1,562	$	9,472


Allowance	$	295	$	—	$	295

7. Mortgage-backed Securities Held to Maturity

The following is a comparative summary of mortgage-backed securities held to maturity at March 31, 2011 and June 30, 2010:


	March 31, 2011
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
	(In thousands)
Mortgage-backed securities:
FHLMC	$	9,064	$	418	$	—	$	9,482
FNMA		23,874		658		336		24,196
GNMA		2,077		21		—		2,098
CMO		14,292		330		—		14,622


	$	49,307	$	1,427	$	336	$	50,398


	June 30, 2010
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
	(In thousands)
Mortgage-backed securities:
FHLMC	$	11,449	$	566	$	—	$	12,015
FNMA		21,593		755		—		22,348
GNMA		2,282		34		—		2,316
CMO		31,144		799		—		31,943


	$	66,468	$	2,154	$	—	$	68,622

The Company did not sell any mortgage-backed securities held to maturity during the nine months ended March 31, 2011. Proceeds from the sale of securities held to maturity for the nine months ended March 31, 2010 were $9.4 million, resulting in gross gains and gross losses of $41,000 and $148,000, respectively. These securities had an amortized cost of $9.5 million. The held to maturity securities sold were mortgage backed securities with 15% or less of their original purchased balances remaining. Mortgage-backed securities with fair values of $43.2 million and $67.8 million at March 31, 2011 and June 30, 2010, respectively, were pledged as collateral for advances. The Company did not record other than temporary impairment charges on securities held to maturity during the nine months ended March 31, 2011 or 2010.

The contractual maturities of mortgage-backed securities held-to-maturity generally exceed 20 years; however, the effective lives are expected to be shorter due to anticipated prepayments. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

Gross unrealized losses on mortgage-backed securities held-to-maturity and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2011 were as follows:


	March 31, 2011
	Less than 12 months				Greater than 12 months						Total
			Gross				Gross					Gross
	Estimated		unrealized		Estimated		unrealized		Estimated			unrealized
	market value		losses		market value		losses		market value			losses

Mortgage-backed securities:
FNMA	$	6,675	$	336	$	—	$	—	$	6,675		$	336

	$	6,675	$	336	$	—	$	—	$	6,675		$	336

8. Securities and Mortgage-Backed Securities Available for Sale

The following is a comparative summary of securities and mortgage-backed securities available for sale at March 31, 2011 and June 30, 2010:


	March 31, 2011
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		market
	cost		gains		losses		value
	(In thousands)
Securities available for sale
U.S. Government and federal agency obligations
Due in one to five years	$	150,386	$	50	$	3,405	$	147,031
Due in five to ten years		13,485		21		—		13,506
Corporate bonds		2,000		39		—		2,039
Equity securities		1,503		219		8		1,714


	$	167,374	$	329	$	3,413	$	164,290

Mortgage-backed securities:
FHLMC	$	11,690	$	672	$	—	$	12,362
FNMA		84,182		1,235		329		85,088
CMO		431,925		958		2,118		430,765


	$	527,797	$	2,865	$	2,447	$	528,215


	June 30, 2010
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
	(In thousands)
Securities available for sale
U.S. Government and federal agency obligations
Due in one or less	$	10,000	$	183	$	—	$	10,183
Due in one to five years		325,970		2,215		—		328,185
Due in five to ten years		11,500		91		—		11,591
Corporate bonds		2,000		72		—		2,072
Mutual funds		4,671		266		—		4,937
Equity securities		1,763		74		82		1,755


	$	355,904	$	2,901	$	82	$	358,723

Mortgage-backed securities:
FHLMC	$	17,988	$	1,073	$	—	$	19,061
FNMA		22,869		1,192		41		24,020
GNMA		—		—		—		—
CMO		34,399		997		—		35,396


	$	75,256	$	3,262	$	41	$	78,477

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

Proceeds from the sale of U.S. Government and federal agency securities available for sale for the nine months ended March 31, 2011 were $104.5 million, resulting in gross gains and gross losses of $217,000 and $218,000, respectively. These securities had an amortized cost of $104.5 million. The Company did not sell any U.S. Government and federal agency securities available for sale during the nine months ended March 31, 2010. The Company did not sell any mortgage-backed securities during the nine months ended March 31, 2011. Proceeds from mortgage-backed securities available for sale for the nine months ended March 31, 2010 were $6.1 million, resulting in gross gains and gross losses of $112,000 and $5,000, respectively. These securities had an amortized cost of $6.0 million. The Mutual Fund caption was related to holdings of shares in an Asset Management Fund with underlying investments in adjustable rate mortgages. The Company sold it’s investment in this fund during the nine months ended March 31, 2011. There were no impairment charges on this security for the nine months ended March 31, 2011 and 2010. Proceeds from the sale of the mutual fund were $4.9 million and $750,000 for nine months ending March 31, 2011 and 2010, respectively. The Company recognized gains from the sale of mutual funds of $266,000 and $24,000 for the nine months ended March 31, 2011 and 2010, respectively. The Equity securities caption relates to holdings of shares in financial institutions common stock. The Company recorded non-cash impairment charges on equity securities through earnings of $260,000 and $202,000 for the nine months ended March 31, 2011 and 2010, respectively. Available for sale securities with fair values of $330.3 million and $260.2 million at March 31, 2011 and June 30, 2010, respectively, were pledged as collateral for advances.

Gross unrealized losses on securities and mortgage-backed securities available for sale and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2011 and June 30, 2010 were as follows:


	March 31, 2011
	Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross
	Estimated		unrealized		Estimated		unrealized		Estimated		unrealized
	market value		losses		market value		losses		market value		losses
	(In thousands)
Securities available for sale:
U.S. Government and federal agency obligations	$	126,981		3,405		—		—		126,981		3,405
Equity securities		133		8		—		—		133		8

	$	127,114		3,413		—		—		127,114		3,413


Mortgage-backed securities:
FNMA	$	34,598		329		—		—		34,598		329
CMO	$	279,520		2,118		—		—		279,520		2,118

	$	314,118		2,447		—		—		314,118		2,447


	June 30, 2010
	Less than 12 months				Greater than 12 months				Total
			Gross				Gross				Gross
	Estimated		unrealized		Estimated		unrealized		Estimated		unrealized
	market value		losses		market value		losses		market value		losses
	(In thousands)
Securities available for sale:
Equity securities	$	998		82		—		—		998		82

	$	998		82		—		—		998		82


Mortgage-backed securities:
FNMA		24,020		41		—		—		24,020		41

	$	24,020		41		—		—		24,020		41

At March 31, 2011, management has evaluated the securities in the above table and has concluded that none of the securities with losses has impairments that are other-than-temporary. The Equity securities caption relates to holdings of shares in financial industry common stock. Management evaluated its portfolio of equity securities and, based on its evaluation of the financial condition and near-term prospects of an issuer, management believed that it could recover its investment in the security.

9. Fair Value Measurements

The Company adopted ASC 820, “Fair Value Measurements and Disclosures”, on July 1, 2008. Under ASC 820, fair value measurements are not adjusted for transaction costs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described below:

Basis of Fair Value Measurement:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Price or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company’s cash instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The estimated fair values for securities and mortgage-backed securities available for sale are obtained from an independent nationally recognized third-party pricing service for identical assets or significantly similar securities. The estimated fair values are derived primarily from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds. Broker/dealer quotes are utilized as well when such quotes are available and deemed representative of the market. The significant inputs utilized in the cash flow models are based on market data obtained from sources independent of the Company (observable inputs,) and are therefore classified as Level 2 within the fair value hierarchy. The estimated fair value of equity securities classified as Level 1, are derived from quoted market prices in active markets.

The following table sets forth the Company’s financial assets that were accounted for at fair values on a recurring basis as of March 31, 2011 and June 30, 2010 by level within the fair value hierarchy. As required by ASC 820, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurements (in thousands):


			Quoted Prices in
			Active Markets
			for Identical		Significant Other		Unobservable
	Fair Value as of		Assets		Observable Inputs		Inputs
	March 31, 2011		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Securities available for sale
U.S. Government and federal agency obligations	$	160,537	$	—	$	160,537	$	—
Corporate bonds		2,039		—		2,039		—
Equity Securities		1,714		1,714		—		—

Total securities available for sale	$	164,290	$	1,714	$	162,576	$	—


Mortgage-backed securities available for sale
FHLMC	$	12,362	$	—	$	12,362	$	—
FNMA		85,088		15,116		69,972		—
CMO		430,765		50,033		380,732		—

Total mortgage-backed securities available for sale	$	528,215	$	65,149	$	463,066	$	—


			Quoted Prices in
			Active Markets
			for Identical		Significant Other		Unobservable
	Fair Value as of		Assets		Observable Inputs		Inputs
	June 30, 2010		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Securities available for sale
U.S. Government and federal agency obligations	$	349,959	$	67,050	$	282,909	$	—
Corporate bonds		2,072		—		2,072		—
Mutual Funds		4,937		4,937		—		—
Equity Securities		1,755		1,755		—		—

Total securities available for sale	$	358,723	$	73,742	$	284,981	$	—


Mortgage-backed securities available for sale
FHLMC	$	19,061	$	—	$	19,061	$	—
FNMA		24,020		—		24,020		—
CMO		35,396		—		35,396		—

Total mortgage-backed securities available for sale	$	78,477	$	—	$	78,477	$	—

Also, the Company may be required, from time to time, to measure the fair value of certain other financial assets on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. The adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write downs of individual assets.

The following tables set forth the Company’s financial assets that were accounted for at fair values on a nonrecurring basis as of March 31, 2011 and June 30, 2010 by level within the fair value hierarchy. As required by ASC 820, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurements (in thousands):


			Quoted Prices		Significant
			in Active		Other
			Markets for		Observable		Unobservable
	Fair Value as of		Identical Assets		Inputs		Inputs
	March 31, 2011		(Level 1)		(Level 2)		(Level 3)
Measured on a non-recurring basis:
Assets:
Impaired loans:
Commercial real estate	$	1,817	$	—	$	—	$	1,817
Construction and land loans		11,040		—		—		11,040
Other loans		1,500		—		—		1,500

Total impaired loans	$	14,357	$	—	$	—	$	14,357


Loans Held for sale	$	9,484	$	—	$	—	$	9,484


Real estate owned
Residential	$	993	$	—	$	—	$	993
Commercial real estate		3,050		—		—		3,050
Construction and loan loans		1,910		—		—		1,910

Total real estate owned	$	5,953	$	—	$	—	$	5,953


			Quoted Prices		Significant
			in Active		Other
			Markets for		Observable		Unobservable
	Fair Value as of		Identical Assets		Inputs		Inputs
	June 30, 2010		(Level 1)		(Level 2)		(Level 3)
Measured on a non-recurring basis:
Assets:
Impaired loans:
Commercial real estate	$	5,454	$	—	$	—	$	5,454
Construction and land loans		14,973		—		—		14,973

Total impaired loans		20,427		—		—		20,427


Real estate owned
Commercial real estate		2,656		—		—		2,656
Construction and loan loans		375		—		—		375

Total real estate owned	$	3,031	$	—	$	—	$	3,031

Impaired Loans: The Company had impaired loans with outstanding principal balances of $14.9 million and $21.9 million at March 31, 2011 and June 30, 2010, respectively, that were recorded at their estimated fair value (less cost to sell) of $14.4 million and $20.4 million at March 31, 2011 and June 30, 2010, respectively. Specific reserves for impaired loans totaled $550,000 at March 31, 2011 and $1.4 million at June 30, 2010. The Company recorded net impairment charges of $5.2 million and $1.6 million for the nine months ended March 31, 2011 and 2010, respectively. Impaired loans are valued utilizing current appraisals adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date and are considered level 3 inputs.

Loans Held for Sale: The Company had loans held for sale of $9.5 million at March 31, 2011. There were no loans held for sale at June 30, 2010. Loans held for sale are valued utilizing current appraisals adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date, including indicative sale values and are considered level 3 inputs.

Other Real Estate Owned: The Company had assets acquired through foreclosure or deed-in-lieu of foreclosure of $6.0 million at March 31, 2011 and $3.0 million at June 30, 2010. Other real estate owned is recorded at estimated fair value less estimated selling costs when acquired, thus establishing a new cost basis. Fair value is generally based on independent appraisals. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience, and are considered level 3 inputs. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses. If the estimated fair value of the asset declines, a write-down is recorded through expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in the economic conditions. Subsequent valuation adjustments to other real estate owned totaled $1.0 million for the nine months ended March 31, 2011, reflective of continued deterioration in estimated fair values. Operating costs after acquisition are expensed.

10. Fair Value of Financial Instruments

ASC 825, “Financial Instruments”, requires that the Company disclose estimated fair values for its financial instruments. Fair value estimates, methods and assumptions are set forth below for the Company’s financial instruments.

Cash and Cash Equivalents

For cash on hand and due from banks and federal funds sold and short-term investments, the carrying amount approximates fair value.

Securities

The fair values for substantially all of our securities are obtained from an independent nationally recognized pricing service. The independent pricing service utilizes market prices of same or similar securities whenever such prices are available. Prices involving distressed sellers are not utilized in determining fair value. Where necessary, the independent third-party pricing service estimates fair value using models employing techniques such as discounted cash flow analyses. The assumptions used in these models typically include assumptions for interest rates, credit losses, and prepayments, utilizing market observable data where available.

FHLB of New York Stock

The fair value for FHLB stock is its carrying value, since this is the amount for which it could be redeemed. There is no active market for this stock and the Bank is required to maintain a minimum balance based upon the unpaid principal of home mortgage loans.

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential mortgage, construction, land and consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories. This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC 820, “Fair Value Measurements and Disclosures.”

Fair value of performing loans is estimated by discounting cash flows using estimated market discount rates at which similar loans would be made to borrowers and reflect similar credit ratings and interest rate risk for the same remaining maturities.

Fair value for significant nonperforming loans is based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows.

Deposit Liabilities

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, and NOW and money market accounts, is equal to the amount payable on demand as of March 31, 2011 and June 30, 2010. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Borrowings

The fair value of borrowings due in six months or less is equal to the amount payable. The fair value of all other borrowings is calculated based on the discounted cash flow of contractual amounts due, using market rates currently available for borrowings of similar amount and remaining maturity.

Commitments to Extend Credit and to Purchase or Sell Securities

The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of commitments to purchase or sell securities is estimated based on bid quotations received from securities dealers.

The estimated fair values of the Company’s financial instruments are presented in the following table. Since the fair value of off-balance-sheet commitments approximates book value, these disclosures are not included.


	March 31, 2011				June 30, 2010
	Carrying		Fair		Carrying		Fair
	value		value		value		value
	(In thousands)
Financial assets:
Cash and cash equivalents	$	15,267		15,267		346,339		346,339
Securities available for sale		164,290		164,290		358,723		358,723
Mortgage-backed securities held to maturity		49,307		50,398		66,468		68,622
Mortgage-backed securities available for sale		528,215		528,215		78,477		78,477
Federal Home Loan Bank of New York stock		26,743		26,743		25,081		25,081
Loans,net		1,653,229		1,684,486		1,505,880		1,604,852
Loans held for sale		9,484		9,484		—		—
Financial liabilities — deposits		1,325,577		1,317,496		1,289,746		1,293,912
Financial liabilities — borrowings		532,485		557,362		495,552		549,967

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include the mortgage banking operation, deferred tax assets, and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

11. Deposits

The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated.:


	March 31, 2011		June 30, 2010
	(In thousands)

Checking accounts	$	149,622	$	131,029
Money market accounts		337,699		297,540
Savings accounts		152,447		146,675
Time deposits		685,809		714,502

Total deposits	$	1,325,577	$	1,289,746

Included in total deposits at March 31, 2011 were brokered time deposits of $22.9 million. Brokered time deposits had weighted average interest rates of 2.46% and weighted average maturity of 5.1 years. There were no brokered time deposits at June 30, 2010.

12. Income Taxes

In June 2006, the FASB issued ASC 740, “Income Taxes”, which establishes a recognition threshold and measurement for income tax positions recognized in an enterprise’s financial statements. ASC 740 also prescribes a two-step evaluation process for tax positions. The first step is recognition and the second is measurement. For recognition, an enterprise judgmentally determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of related appeals or litigation processes, based on the technical merits of the position. If the tax position meets the more-likely-than-not recognition threshold it is measured and recognized in the financial statements as the largest amount of tax benefit that is greater than 50% likely of being realized. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, where applicable, in income tax expense.

Tax positions that meet the more-likely-than-not recognition threshold at the effective date of ASC 740 may be recognized or, continue to be recognized, upon adoption of this standard. The Company, through its various wholly owned subsidiaries, deploys several tax strategies. Based on the facts surrounding these strategies and applicable laws, the Company believes these strategies are more likely than not of being sustained under examination. The Company believes it will receive 100% of the benefit of the tax positions and has recognized the effects of the tax positions in the financial statements.

The Company files income tax returns in the United States federal jurisdiction and in New Jersey, Pennsylvania and New York state jurisdictions. The Company is no longer subject to federal and state income tax examinations by tax authorities for years prior to 2006. Currently, the Company is not under examination by any taxing authority.

13. Real Estate Joint Ventures, net and Real Estate Held for Investment

The Company accounts for investments in joint ventures under the equity method. The balance reflects the cost basis of investments, plus the Company’s share of income earned on the joint venture operations, less cash distributions, including excess cash distributions, and the Company’s share of losses on joint venture operations. Cash received in excess of the Company’s recorded investment in a joint venture is recorded as unearned revenue in other liabilities. The net book value of real estate joint ventures was $4.7 million and $5.0 million at March 31, 2011 and June 30, 2010, respectively.

Real estate held for investment includes the Company’s undivided interest in real estate properties accounted for under the equity method and properties held for investment purposes. Cash received in excess of the Company’s recorded investment for an undivided interest in real estate property is recorded as unearned revenue in other liabilities. The operations of the properties held for investment purposes are reflected in the financial results of the Company and included in the Other Income caption in the Income Statement. Properties held for investment purposes are carried at cost less accumulated depreciation. The net book value of real estate held for investment was $(197,000) at March 31, 2011 and June 30, 2010.

14. Recent Accounting Pronouncements

In April 2011, the FASB issued Accounting Standards Update No. 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring “, to amend previous guidance with respect to troubled debt restructurings. This updated guidance is designed to assist creditors with determining whether or not a restructuring constitutes a troubled debt restructuring. In particular, additional guidance has been added to help creditors determine whether a concession has been granted and whether a debtor is experiencing financial difficulties. Both of these conditions are required to be met for a restructuring to constitute a troubled debt restructuring. The amendments in the update are effective for the first interim period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The provisions of this update are not expected to have a material impact on the Company’s financial position, results or operations or cash flows.

In July 2010, the FASB issued Accounting Standards Update 2010-20, which amends ASC Topic 310 (Receivables) to require significant new disclosures about the credit quality of financing receivables and the allowance for credit losses. The objective of the new disclosures is to improve financial statement users’ understanding of (1) the nature of an entity’s credit risk associated with its financing receivables, and (2) the entity’s assessment of that risk in estimating its allowance for credit losses, as well as changes in the allowance and the reasons for those changes. The disclosures are to be presented at the level of disaggregation that management uses when assessing and monitoring the portfolio’s risk and performance (either by portfolio segment or by class of financing receivables). The required disclosures include, among other things, a rollforward of the allowance for credit losses by portfolio segment, as well as information about credit quality indicators and modified, impaired, non-accrual, and past due loans. The disclosures related to period-end information is required in all interim and annual reporting periods ending on or after December 15, 2010 (December 31, 2010 for the Bank). Disclosures of activity that occurs during a reporting period (e.g., loan modifications and the rollforward of the allowance for credit losses by portfolio segment) will be required in interim or annual periods beginning on or after December 15, 2010 (March 31, 2011 for the Bank). We adopted these requirements on December 31, 2010.

In January 2010, the FASB issued Accounting Standards Update 2010-06, which amends ASC Topic 820 (Fair Value Measurements and Disclosures) to add new requirements for disclosures about significant transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. It also requires disaggregation of fair value disclosures for each class of assets and liabilities and disclosures about inputs and valuation techniques used to measure fair value. The guidance is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide Level 3 activity on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (including interim periods). In the period of initial adoption, entities are not required to provide the amended disclosures for any previous periods presented for comparative purposes. We adopted these requirements on January 1, 2010.

In June 2009, the FASB issued ASC 810 (formerly Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)”), relating to the variable interest entities (“VIE”). The objective of the guidance is to improve financial reporting by enterprises involved with VIE’s and to provide more relevant and reliable information to users of financial statements. ASC 810 addresses the effects of eliminating the “qualifying special-purpose entity” concept, changes the approach to determining the primary beneficiary of a VIE and requires companies to assess more frequently whether a VIE must be consolidated. These provisions also require enhanced interim and year-end disclosures about the significant judgments and assumptions considered in determining whether a VIE must be consolidated, the nature of restrictions on a consolidated VIE’s assets, the risks associated with a company’s involvement with a VIE and how that involvement affects the company’s financial position, financial performance and cash flows. This guidance is effective for fiscal years beginning after November 15, 2009 and for interim periods within those fiscal years with early application prohibited. The adoption of this guidance did not have a material impact on the consolidated financial statements.

In June 2009, the FASB issued guidance which amends the derecognition guidance in topic 860, “Transfer and Servicing, to enhance reporting about transfers of financial assets, including securitizations, and where companies having continuing exposure to the risks related to transferred financial assets. The guidance eliminates the concept of “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets and requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. This guidance is effective for financial asset transfers occurring in fiscal years beginning after November 15, 2009. The adoption of this guidance did not have a material impact on the consolidated financial statements.

In 2008, the FASB issued Staff Position No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (ASC Topic 715-20-65). This guidance expands the disclosure by requiring the following new disclosures: 1) how investment allocation decisions are made by management; 2) major categories of plan assets; and 3) significant concentrations of risk. Additionally, ASC 715-20-65 will require an employer to disclose information about the valuation of plan assets similar to that required in ASC topic 820 Fair Value Measurements and Disclosures. This guidance is effective for fiscal years beginning after December 15, 2009. The adoption did not have a material effect on the consolidated financial statements.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report contains certain “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward looking statements may be identified by reference to a future period or periods, or by use of forward looking terminology, such as “may,” “will,” “believe,” ‘expect,” “estimate,” ‘anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which Oritani Financial Corp. (the “Company”) operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions, which may be made to any forward looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Overview

Oritani Financial Corp. (“the Company”) is a Delaware corporation that was incorporated in March 2010 to be the successor to Oritani Financial Corp. (“Oritani-Federal”), a federal corporation. Oritani-Federal is the former stock holding company for Oritani Bank. In conjunction with the second step transaction of Oritani Financial Corp., MHC, the former mutual holding company parent, Oritani-Federal ceased to exist and the Company became its successor. The second step transaction was completed on June 24, 2010. The Company sold a total of 41,363,214 shares of common stock at $10.00 per share in the related stock offering. Concurrent with the completion of the offering, shares of Oritani-Federal common stock owned by public stockholders were exchanged for 1.50 shares of the Company’s common stock. In lieu of fractional shares, shareholders were paid in cash. The Company also issued 481,546 shares of common stock for the accelerated vesting of restricted stock awards triggered by the conversion. As a result of the offering, the exchange, and shares issued due to the accelerated vesting, as of June 30, 2010, the Company had 56,202,485 shares outstanding. Net proceeds from the offering were $401.8 million. As a result of the conversion, all share information for periods prior to the conversion has been revised to reflect the 1.50- to- 1.0 exchange rate.

Oritani Financial Corp. is a Delaware chartered stock holding company of Oritani Bank. Oritani Financial Corp. owns 100% of the outstanding shares of common stock of Oritani Bank. Oritani Financial Corp. has engaged primarily in the business of holding the common stock of Oritani Bank and two limited liability companies that own a variety of real estate investments. In addition, Oritani Financial Corp. has engaged in limited lending to the real estate investment properties in which (either directly or through one of its subsidiaries) Oritani Financial Corp. has an ownership interest. Oritani Bank’s principal business consists of attracting retail and commercial bank deposits from the general public and investing those deposits, together with funds generated from operations, in multi-family and commercial real estate loans, one- to four-family residential mortgage loans as well as in second mortgage and equity loans, construction loans, business loans, other consumer loans, and investment securities. We originate loans primarily for investment and hold such loans in our portfolio. Occasionally, we will also enter into loan participations. Our primary sources of funds are deposits, borrowings and principal and interest payments on loans and securities. Our revenues are derived principally from interest on loans and securities as well as our investments in real estate and real estate joint ventures. We also generate revenues from fees and service charges and other income. Our results of operations depend primarily on our net interest income which is the difference between the interest we earn on interest-earning assets and the interest paid on our interest-bearing liabilities. Our net interest income is primarily affected by the market interest rate environment, the shape of the U.S. Treasury yield curve, the timing of the placement of interest-earning assets and interest-bearing liabilities, and the prepayment rate on our mortgage-related assets. Provisions for loan losses and asset impairment charges can also have a significant impact on our results of operations. Other factors that may affect our results of operations are general and local economic and competitive conditions, government policies and actions of regulatory authorities.

Our business strategy is to operate as a well-capitalized and profitable financial institution dedicated to providing exceptional personal service to our individual and business customers. Our primary focus has been, and will continue to be, growth in multi-family and commercial real estate lending. We do not originate or purchase sub-prime loans, and our loan portfolio does not include any such loans.

Comparison of Financial Condition at March 31, 2011 and June 30, 2010

Balance Sheet Summary

Total Assets. Total assets increased $80.0 million, or 3.2%, to $2.56 billion at March 31, 2011, from $2.48 billion at June 30, 2010. The increase was primarily in loans and mortgage-backed securities available for sale which were partially offset by decreases in cash and cash equivalents and securities available for sale.

Cash and Cash Equivalents. Cash and cash equivalents (which include fed funds and short term investments) decreased $331.1 million, or 95.6%, to $15.3 million at March 31, 2011, from $346.3 million at June 30, 2010. The balance at June 30, 2010 was primarily due to the proceeds from the second step transaction. These funds were deployed as quickly as possible while prudently following the disciplines of the Company’s investment policy. These excess funds were fully deployed in securities available for sale and MBS available for sale by December 31, 2010.

Net Loans. Loans, net increased $147.3 million to $1.65 billion at March 31, 2011, from $1.51 billion at June 30, 2010. The Company continues its emphasis on loan originations, particularly multifamily and commercial real estate loans. Loan originations totaled $320.3 million and purchases totaled $12.5 million for the nine months ended March 31, 2011. Loan originations totaled $76.3 million and purchases totaled $2.7 million for the three months ended March 31, 2011. The reduced level of originations during the quarter was directly related to increased competition and tighter market spreads on loans.

Delinquency and non performing asset information is provided below:


	3/31/2011		12/31/2010		9/30/2010		6/30/2010		3/31/2010		12/31/2009
	(in thousands)
Delinquency Totals
30 - 59 days past due	$	6,523	$	14,460	$	9,306	$	12,330	$	6,670	$	9,613
60 - 89 days past due		3,688		2,437		3,278		4,629		4,293		1,974
nonaccrual		12,563		25,055		41,720		38,125		41,170		51,907

Total	$	22,774	$	41,952	$	54,304	$	55,084	$	52,133	$	63,494


Non Performing Asset Totals
Nonaccrual loans	$	11,001	$	25,055	$	41,720	$	38,125	$	41,170	$	51,907
Troubled debt restructuring¹		1,562		—		—		—		—		—
Real Estate Owned		5,953		6,102		5,074		3,031		434		600
Loans Held For Sale		9,484		9,484		—		—		—		—

Total	$	28,000	$	40,641	$	46,794	$	41,156	$	41,604	$	52,507


(1)		The Company has an additional $7.9 million of troubled debt restructurings which are performing in accordance with their contractual terms.

Over the quarter ended March 31, 2011, total delinquent loans decreased $19.2 million; nonaccrual loans decreased $12.5 million and nonperforming assets decreased $12.6 million. Over the nine months ended March 31, 2011, total delinquent loans decreased $32.3 million; nonaccrual loans decreased $25.6 million and nonperforming assets decreased $13.2 million.

A discussion of the significant components of the nonaccrual loan total at December 31, 2010 and March 31, 2011 follows. These loans have been discussed in prior public releases.

• A $14.1 million loan secured by a multi-tenant commercial property in Hudson County, New Jersey that was a component of the December 31, 2010 nonaccrual total was disposed through a sale of the note. The note sale resulted in a $1.9 million charge off. Oritani provided financing to the purchaser at market rates and market terms.

• A $2.7 million construction loan for a luxury home in Morris County, New Jersey. Construction at the property ceased and foreclosure proceedings have commenced. Due to the extended time period currently associated with New Jersey foreclosures, this loan is likely to be a component of the nonaccrual total for the foreseeable future. The loan is classified as impaired as of March 31, 2011. In accordance with the results of the impairment analysis for this loan, based primarily on a recent appraisal, specific reserves totaling $208,000 have been recorded against this loan.

• A $1.9 million residential construction loan for two luxury homes and an improved lot located in Essex County, New Jersey. The loan was classified as impaired as of March 31, 2011. A total of $463,000 of this loan has been charged off including $193,000 during the quarter ended March 31, 2011. In April, 2011, Oritani obtained title to the collateral via deed in lieu of foreclosure and transferred the loans to REO. There was a contract for sale on one of the two homes which closed in May 2011.

• A $936,000 multifamily construction loan in Hudson County, New Jersey. Three units remain from this original eight unit project. Two of the remaining units have been rented and the remaining unit is being marketed for sale. Oritani entered into a forbearance agreement with the borrower. Under the terms of the agreement, the loan has been modified and extended to reflect the posture regarding the collateral (rental versus sale). The new loan is at market rates and terms, and the cash flows from the property are being controlled by Oritani.

• A participation loan on a commercial building in Bergen County, NJ. The total loan is $924,000 and Oritani owns $832,000. The borrowers have declared bankruptcy and the building is being marketed for sale by the bankruptcy trustee. The loan was classified as impaired as of March 31, 2011. In accordance with the results of the impairment analysis for this loan, based primarily on a recent appraisal, Oritani has recorded a specific reserve of $47,000 against its portion of this loan.

• There are nine other multifamily/commercial real estate loans, totaling $3.3 million, classified as nonaccrual at March 31, 2011. The largest of these loans has a balance of $690,000.

• There are six other residential loans, totaling $2.7 million, classified as nonaccrual at March 31, 2011. The largest of these loans has a balance of $1.2 million.

As discussed in prior filings, the Company has continued its aggressive posture toward delinquent borrowers. The Company realizes that this posture contributes to the high level of delinquencies but believes this is the most prudent path to addressing problem loans.

Securities Available For Sale. Securities AFS decreased $194.4 million to $164.3 million at March 31, 2011, from $358.7 million at June 30, 2010. The decrease was primarily due to sale of $109.1 million and security calls of $276.9 million, partially offset by purchases of $197.5 million and changes in fair value. Management’s investment decisions have impacted the balances in Securities AFS as well as MBS AFS. Excess liquidity has generally been deployed in investments classified as available for sale as such classifications provide greater flexibility should cash needs develop. Specific investments purchased consider the risk/reward profile of the investment as well as the interest rate risk position and the projected cash needs of the Company. During fiscal 2010, the typical investment of the Company was a callable note of government sponsored agency with limited optionality and call features that increased the likelihood that the note would be called. Such investments were classified as Securities AFS. During fiscal 2011, the Company has favored certain short structures of MBS or collateralized mortgage obligations (“CMOs”) with relatively short repayment windows and limited extension risk issued by government sponsored agencies. While the yield on such securities is low, management has prioritized structure over yield. Such investments are classified as MBS AFS. The primary reason for the switch from Securities AFS to MBS AFS was the desire to reduce the impact of interest rate fluctuations on the cash flows from the investment portfolio. In order to accelerate the investment in MBS AFS, the Company sold $104.5 million of callable notes, classified as Securities AFS, in February, 2011. The net effect of this sale resulted in no income statement gain or loss. The proceeds from this sale were ultimately redeployed into MBS AFS. In March, 2011, the Company sold all of its shares in an Asset Management Fund with underlying investments in adjustable rate mortgages. The proceeds from this sale were $4.6 million. A gain of $253,000 was recognized on this sale. Impairment charges had previously been recognized on the Asset Management Fund.

Mortgage-backed Securities Available For Sale. Mortgage-backed securities AFS increased $449.7 million to $528.2 million at March 31, 2011, from $78.5 million at June 30, 2010. See “Securities Available For Sale,” above, for a discussion of the investment decisions impacting the balances in this caption.

Loans Held For Sale. There is one loan that comprises this caption. The collateral for the loan is a condominium construction project in Bergen County, New Jersey. The loan was classified as held for sale as of December 31, 2010 because the Company had changed its posture regarding the likely method of disposal of the loan. The Company had contracted with a marketing agent to solicit bids for the property. Accordingly, all specific reserves associated with the loan were charged off and the loan was transferred to held for sale at the remaining value of $9.5 million. Prior to December 31, 2010, the loan had been classified as nonaccrual. As of March 31, 2011, the loan is under contract for sale. The estimated net proceeds from the sale are sufficient to avoid any additional writedowns of this loan. While closing is anticipated during the quarter ended June 30, 2011, there are contingencies associated with the contract and the Company makes no assurances that the contract will close. During the quarter ended March 31, 2011, all variance issues regarding the project were resolved with the municipality.

Real Estate Owned. Real estate owned (“REO”) increased $2.9 million to $6.0 million at March 31, 2011, from $3.0 million at June 30, 2010. The increase is due to the Bank acquiring title to seven properties during the nine months ended March 31, 2011 with book values of $7.0 million less write-downs of $1.0 million. Included in the $1.0 million total is a $799,000 write-down that occurred during the quarter ended March 31, 2011. This write-down was based on an updated appraised value of one of the REO properties. The increase from acquisitions was partially offset by the sale of two REO properties with net book values of $3.0 million. Proceeds from the sale of REO were $3.7 million and a net gain of $718,000 was recognized. The REO balance at March 31, 2011 consists of seven properties. Management is attempting to dispose of these properties as quickly and efficiently as possible. In May 2011, a verbal agreement for the sale of one REO property, with a book value of $2.5 million, was obtained and negotiations for a contract are being finalized. The estimated net proceeds from the sale are sufficient to avoid any additional writedowns of this asset.

Deposits. Deposits increased $35.8 million, or 2.8%, to $1.33 billion at March 31, 2011, from $1.29 billion at June 30, 2010. The trend in deposit balances through December 31, 2010 had been negative. Primarily due to the Company’s high liquidity position, the interest rates offered on many of the Company’s deposit products were less than those of its direct competitors. This action helped reduce interest expense but also negatively impacted deposit balances. Deposit pricing returned to competitive levels once the excess liquidity from the second step conversion was deployed. Deposits increased $69.6 million during the quarter ended March 31, 2011 and $22.9 million of this increase was due to brokered deposits. The quarterly growth, excluding the impact of the brokered deposits, reflects a 3.7% rate of increase and a 14.9% annualized rate of increase. Continued strong deposit growth remains a strategic objective. A new branch location opened during the quarter in Ramsey, New Jersey. Two additional de novo branches are anticipated in calendar 2011.

Borrowings. Borrowings increased $36.9 million, or 7.5%, to $532.5 million at March 31, 2011, from $495.6 million at June 30, 2010. The increase is due to the Company’s usage of short term borrowings with a low cost, thereby increasing spread and margin. The Company expects to increase its long term borrowing position to protect against future increases in interest rates. This action will likely result in an increased cost of borrowings.

Stockholders’ Equity. Stockholders’ equity increased $3.0 million to $646.4 million at March 31, 2011, from $643.4 million at June 30, 2010. The increase was primarily due to net income in excess of dividends. This increase was partially offset by a decline in the fair value of the available for sale portfolio. The increase in interest rates that occurred primarily in November and December, 2010 had a negative impact on the value of the available for sale portfolio. At March 31, 2011, there were 56,202,485 shares outstanding. Our book value per share was $11.50. Based on our March 31, 2011 closing price of $12.68 per share, the Company stock was trading at 1.10% of book value.

Average Balance Sheet for the Three and Nine Months Ended March 31, 2011 and 2010

The following tables present certain information regarding Oritani Financial Corp.’s financial condition and net interest income for the three and nine months ended March 31, 2011 and 2010. The tables present the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the periods indicated. Interest income includes fees that we consider adjustments to yields.


	Average Balance Sheet and Yield/Rate Information
	For the Three Months Ended (unaudited)
	March 31, 2011							March 31, 2010
	Average		Interest		Average			Average		Interest		Average
	Outstanding		Earned/		Yield/			Outstanding		Earned/		Yield/
	Balance		Paid		Rate			Balance		Paid		Rate
	(Dollars in thousands)

Interest-earning assets:
Loans ⁽¹⁾	$	1,644,046	$	25,377		6.17	%	$	1,386,530	$	22,568		6.51	%
Securities held to maturity ⁽²⁾		27,741		390		5.62	%		25,554		360		5.64	%
Securities available for sale		257,450		1,190		1.85	%		316,342		2,204		2.79	%
Mortgage backed securities held to maturity		47,184		380		3.22	%		79,882		730		3.66	%
Mortgage backed securities available for sale		426,104		2,238		2.10	%		99,080		1,141		4.61	%
Federal funds sold and short term investments		24,176		16		0.26	%		18,157		17		0.37	%

Total interest-earning assets		2,426,701		29,591		4.88	%		1,925,545		27,020		5.61	%

Non-interest-earning assets		105,281							96,047

Total assets	$	2,531,982						$	2,021,592


Interest-bearing liabilities:
Savings deposits		150,027		224		0.60	%		146,296		303		0.83	%
Money market		316,353		787		1.00	%		283,557		986		1.39	%
Checking accounts		146,804		196		0.53	%		109,881		198		0.72	%
Time deposits		674,301		2,501		1.48	%		683,358		3,529		2.07	%

Total deposits		1,287,485		3,708		1.15	%		1,223,092		5,016		1.64	%
Borrowings		553,893		5,294		3.82	%		506,182		5,122		4.05	%

Total interest-bearing liabilities		1,841,378		9,002		1.96	%		1,729,274		10,138		2.35	%

Non-interest-bearing liabilities		49,463							42,191

Total liabilities		1,890,841							1,771,465
Stockholders’ equity		641,141							250,127

Total liabilities and stockholders’ equity	$	2,531,982						$	2,021,592


Net interest income			$	20,589						$	16,982

Net interest rate spread ⁽³⁾						2.92	%						3.26	%

Net interest-earning assets ⁽⁴⁾	$	585,323						$	196,271

Net interest margin ⁽⁵⁾						3.39	%						3.51	%

Average of interest-earning assets to interest-bearing liabilities						131.79	%						111.35	%


(1)		Includes loans held for sale and nonaccrual loans.

(2)		Includes Federal Home Loan Bank Stock

(3)		Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)		Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5)		Net interest margin represents net interest income divided by average total interest-earning assets.


	Average Balance Sheet and Yield/Rate Information
	For the Nine Months Ended (unaudited)
	March 31, 2011							March 31, 2010
	Average		Interest		Average			Average		Interest		Average
	Outstanding		Earned/		Yield/			Outstanding		Earned/		Yield/
	Balance		Paid		Rate			Balance		Paid		Rate
	(Dollars in thousands)

Interest-earning assets:
Loans ⁽¹⁾	$	1,594,923	$	74,368		6.22	%	$	1,353,417	$	64,633		6.37	%
Securities held to maturity ⁽²⁾		26,479		1,092		5.50	%		25,526		1,077		5.63	%
Securities available for sale		314,163		5,319		2.26	%		279,029		5,942		2.84	%
Mortgage backed securities held to maturity		51,755		1,285		3.31	%		95,752		2,648		3.69	%
Mortgage backed securities available for sale		317,668		5,413		2.27	%		111,193		3,859		4.63	%
Federal funds sold and short term investments		94,231		207		0.29	%		38,366		107		0.37	%

Total interest-earning assets		2,399,219		87,684		4.87	%		1,903,283		78,266		5.48	%

Non-interest-earning assets		102,490							89,607

Total assets	$	2,501,709						$	1,992,890


Interest-bearing liabilities:
Savings deposits		148,765		710		0.64	%		146,307		978		0.89	%
Money market		294,371		2,217		1.00	%		252,788		2,994		1.58	%
Checking accounts		150,384		649		0.58	%		104,490		602		0.77	%
Time deposits		690,266		8,227		1.59	%		695,816		12,565		2.41	%

Total deposits		1,283,786		11,803		1.23	%		1,199,401		17,139		1.91	%
Borrowings		526,367		15,702		3.98	%		507,491		15,616		4.10	%

Total interest-bearing liabilities		1,810,153		27,505		2.03	%		1,706,892		32,755		2.56	%

Non-interest-bearing liabilities		47,980							40,148

Total liabilities		1,858,133							1,747,040
Stockholders’ equity		643,576							245,850

Total liabilities and stockholder’s equity	$	2,501,709						$	1,992,890


Net interest income			$	60,179						$	45,511

Net interest rate spread ⁽³⁾						2.84	%						2.92	%

Net interest-earning assets⁽⁴⁾	$	589,066						$	196,391

Net interest margin ⁽⁵⁾						3.34	%						3.20	%

Average of interest-earning assets to interest-bearing liabilities						132.54	%						111.51	%


(1)		Includes loans held for sale and nonaccrual loans.

(2)		Includes Federal Home Loan Bank Stock

(3)		Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)		Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5)		Net interest margin represents net interest income divided by average total interest-earning assets.

Comparison of Operating Results for the Quarter Ended March 31, 2011 and 2010

Net Income. Net income increased $2.0 million, or 39.7%, to $7.0 million, or $0.13 per share, for the quarter ended March 31, 2011, from $5.0 million, or $0.09 per share, for the corresponding 2010 quarter. The primary cause of the increased income in the 2011 periods was increased net interest income. Our annualized return on average assets was 1.11% for the quarter ended March 31, 2011 and 0.99% for the corresponding 2010 quarter.

Total Interest Income. Total interest income increased $2.6 million or 9.5%, to $29.6 million for the three months ended March 31, 2011, from $27.0 million for the three months ended March 31, 2010. The largest increase occurred in interest on loans, which increased $2.8 million or 12.4%, to $25.4 million for the three months ended March 31, 2011, from $22.6 million for the three months ended March 31, 2010. During that same period, the average balance of loans increased $257.5 million, while the yield on the portfolio decreased 34 basis points on an actual basis and decreased 4 basis points on a normalized basis. Included in interest on loans for the three months ended March 31, 2010 is $1.0 million of prior period and penalty interest recovered in conjunction with problem loan disposals. These amounts were not included in income for the normalized calculation of loan yield. Other captions of interest income were impacted by market interest rates and management’s investment decisions. See “Comparison of Financial Condition at March 31, 2011 and June 30, 2010 — Securities Available for Sale” for a discussion of the investment decisions impacting the balances. Interest on securities available for sale (“AFS”) decreased $1.0 million, or 46.0%, to $1.2 million for the three months ended March 31, 2011, from $2.2 million for the three months ended March 31, 2010. The average balance of securities AFS decreased $58.9 million for the three months ended March 31, 2011 versus the corresponding 2010 period. The yield on the portfolio decreased 94 basis points primarily due to a decline in market rates, as well as the conservative structure of the 2011 purchases. Interest on mortgage-backed securities (“MBS”) held to maturity (“HTM”) decreased $350,000, or 47.9%, to $380,000 for the three months ended March 31, 2011, from $730,000 for the three months ended March 31, 2010. Cash flows from this portfolio were not reinvested into held to maturity securities. The average balance of MBS HTM decreased $32.7 million for the three months ended March 31, 2011 versus the corresponding 2010 period, while the yield on the portfolio decreased 43 basis points. Interest on MBS AFS increased $1.1 million to $2.2 million for the three months ended March 31, 2011, from $1.1 million for the three months ended March 31, 2010. The average balance of MBS AFS increased $327.0 million for the three months ended March 31, 2011 versus the corresponding 2010 period, while the yield on the portfolio decreased 251 basis points.

Total Interest Expense. Total interest expense decreased $1.1 million, or 11.2%, to $9.0 million for the three months ended March 31, 2011, from $10.1 million for the three months ended March 31, 2010. Interest expense on deposits decreased $1.3 million, or 26.1%, to $3.7 million for the three months ended March 31, 2011, from $5.0 million for the three months ended March 31, 2010. The average balance of interest bearing deposits increased $64.4 million over the period while the average cost of these funds decreased 49 basis points. Market interest rates allowed the Bank to reprice many maturing time deposits, as well as other interest bearing deposits, at lower rates, decreasing the cost of funds. The rate at which the cost of deposits has been decreasing has slowed as most deposits have repriced in a lower rate environment. Interest expense on borrowings increased $172,000 to $5.3 million for the three months ended March 31, 2011, from $5.1 million for the three months ended March 31, 2010. The average balance of borrowings increased $47.7 million over the period while the cost decreased 22 basis points.

Net Interest Income Before Provision for Loan Losses. Net interest income increased $3.7 million, or 22.0%, to $20.6 million for the three months ended March 31, 2011, from $16.9 million for the three months ended March 31, 2010. As detailed in the chart below, the Company’s net interest rate spread decreased to 2.92% for the three months ended March 31, 2011, from 3.05% (normalized) for the three months ended March 31, 2010. The Company’s net interest margin increased to 3.39% for the three months ended March 31, 2011, from 3.29% (normalized) for the three months ended March 31, 2010. The normalized results for the 2010 period exclude the impact of $1.0 million of prior period and penalty interest recovered in conjunction with problem loan disposals. The Company’s net interest rate spread and net interest margin were hindered by the nonaccrual loan level in both the 2011 and 2010 periods. The Company’s net interest income was reduced $535,000 and $256,000 for the three months ended March 31, 2011 and 2010, respectively, due to the impact of nonaccrual loans. The spread and margin were impacted in the 2011 period due to the deployment of the proceeds from the second step conversion in lower yielding assets. The spread and margin benefited from the steep yield curve in both periods but to a greater extent in 2011. The low interest rate environment and steep yield curve allowed the Company to reprice deposits at lower rates with a lesser impact on loan rates. The Company is liability sensitive and has begun addressing its exposure to higher market interest rates. The $104.5 million investment restructure discussed in “Comparison of Financial Condition at March 31, 2011 and June 30, 2010 — Securities Available for Sale” was done to partially mitigate this exposure. During the quarter ended March 31, 2011, the Company obtained $22.9 million of brokered deposits. The deposit maturities range from 4 to 7 years with a weighted average cost to the Company of 2.46%. These brokered deposits will increase the cost of deposits but also assist in partially mitigating the exposure to higher market interest rates. Management expects to continue deploying strategies to address the exposure to higher market interest rates. Such strategies will likely have a negative impact on the Company’s spread and margin.


	Net Interest
	Income Before		Actual						Normalized
Quarter Ended:	Provision		Spread			Margin			Spread			Margin

March 31, 2011		20,586		2.92	%		3.39	%		2.92	%		3.39	%
December 31, 2010		20,287		2.89	%		3.39	%		2.89	%		3.39	%
September 30, 2010		19,303		2.72	%		3.25	%		2.72	%		3.25	%
June 30, 2010		17,422		3.17	%		3.41	%		3.17	%		3.41	%
March 31, 2010		16,882		3.26	%		3.51	%		3.05	%		3.29	%
December 31, 2009		14,410		2.75	%		3.02	%		2.75	%		3.02	%
September 30, 2009		14,219		2.75	%		3.03	%		2.47	%		2.76	%

Provision for Loan Losses. The Company recorded provisions for loan losses of $2.3 million for the three months ended March 31, 2011 and $2.5 million three months ended March 31, 2010. See discussion of allowance for loan losses in “Comparison of Financial Condition at March 31, 2011 and June 30, 2010” and footnote 7 of the financial statements.

Other Income. Other income decreased $168,000 to $1.1 million for the three months ended March 31, 2011, from $1.2 million for the three months ended March 31, 2010. Service charges decreased $124,000 to $311,000 for the three months ended March 31, 2011, from $435,000 for the three months ended March 31, 2010. The decrease is primarily due to late charges of $146,000 received in the 2010 period in conjunction with problem loan disposals. In the 2011 period, the Company recognized an impairment charge of $261,000 pertaining to equity securities in its investment portfolio. This charge was partially offset by a $253,000 gain recognized in conjunction with the sale of its position of mutual fund holdings. See “Comparison of Financial Condition at March 31, 2011 and June 30, 2010 — Securities Available for Sale” for additional information regarding this sale.

Operating Expenses. Operating expenses increased $858,000 to $8.3 million for the three months ended March 31, 2011, from $7.4 million for the three months ended March 31, 2010. The increase was primarily due to real estate owned operations, which increased $725,000. This increase was principally due to a $799,000 write-down that was based on an updated appraised value of one of the REO properties. In addition, other expenses increased $472,000, primarily due to expenses associated with problem assets. In the 2010 period, other expenses were reduced by $149,000 due to legal fees recovered in conjunction with problem asset disposals. These increases were partially offset by decreases in compensation and FDIC insurance premiums. Compensation, payroll taxes and fringe benefits decreased $257,000 primarily due to an $891,000 decrease in the cost associated with the Company’s stock benefit plan. A significant portion of awards and options granted under the stock benefit plan fully vested in June 2010 and the expenses associated with the vested shares were recorded at that time. This decrease was partially offset by a $456,000 increase in the cost associated with the Company’s benefit plans and a $149,000 increase in compensation costs. Federal deposit insurance premiums decreased $178,000 over the periods primarily due to decreased FDIC insurance rates based on our increased capital levels.

Income Tax Expense. Income tax expense for the three months ended March 31, 2011 was $4.1 million on pre-tax income of $11.1 million, resulting in an effective tax rate of 36.8%. Income tax expense for the three months ended March 31, 2010 was $3.2 million on pre-tax income of $8.2 million, resulting in an effective tax rate of 38.9%. The Company has implemented various strategic objectives and one of the consequences of their implementation is an anticipated reduction in the Company’s effective tax rate.

Comparison of Operating Results for the Nine Months Ended March 31, 2011 and 2010.

Net Income. Net income increased $8.9 million, or 71.8%, to $21.3 million, or $0.40 per basic and diluted share, for the nine months ended March 31, 2011, from $12.4 million, or $0.23 per basic and diluted share, for the corresponding 2010 period. The primary driver of the increased income in the 2011 period was increased net interest income. Net interest income increased by $14.7 million, or 32.2%, to $60.2 million for the nine months ended March 31, 2011, from $45.5 million for the nine months ended March 31, 2010. The increase is primarily due to decreasing cost of funds and a larger asset base. Net income for the 2010 period was augmented by recoveries associated with problem loan disposals. Over the nine months ended March 31, 2010, the Company collected $2.3 million of delinquent interest and prepayment penalties, $297,000 of late charges and $501,000 of reimbursed legal expenses in connection with problem loan disposals. The after tax impact of such items totaled $1.9 million. Our annualized return on average assets was 1.13% for the nine months ended March 31, 2011 and 0.83% (0.70% normalized) for the corresponding 2010 period. A reconciliation of actual results for the nine months ended March 31, 2010 to normalized, non-GAAP results (actual results adjusted for non-recurring items) for the same period is provided in the following table:


	Analysis of operating results adjusted for non-recurring revenues and
	expenses-Normalized
	For the Nine Months Ended March 31, 2010
				Income from
	Actual GAAP			Problem Loan			Non-GAAP
	Results			Dispositions			Normalized
	(Dollars in thousands, except per share amounts)
Selected Operating Data:
Interest income	$	78,266		$	(2,318	)	$	75,948
Interest expense		32,755			—			32,755

Net interest income		45,511			(2,318	)		43,193

Provision for loan losses		7,550			—			7,550

Net interest income after provision
for loan losses		37,961			(2,318	)		35,643

Other income		4,856			(297	)		4,559
Other expense		22,418			501			22,919

Income before income tax expense		20,399			(3,116	)		17,283

Income tax expense		7,975			(1,218	)		6,757

Net income		12,424			(1,898	)		10,526


Net income available to common shareholders		12,098						6,135


Earnings per share-basic & diluted	$	0.23					$	0.19


Return on average assets		0.83	%					0.70	%
Return on average equity		6.74	%					5.71	%
Net interest spread		2.92	%					2.76	%
Net interest margin		3.20	%					3.03	%

Total Interest Income. Total interest income increased $9.4 million, or 12.0%, to $87.7 million for the nine months ended March 31, 2011, from $78.3 million for the nine months ended March 31, 2010. The largest increase occurred in interest on loans, which increased $9.7 million or 15.1%, to $74.4 million for the nine months ended March 31, 2011, from $64.6 million for the nine months ended March 31, 2010. Over that same period, the average balance of loans increased $241.5 million and the yield on the portfolio decreased 15 basis points on an actual basis and increased 8 basis points on a normalized basis. Included in interest on loans for the nine months ended March 31, 2010 is $2.3 million of prior period and penalty interest recovered in conjunction with problem loan disposals. These amounts were not included in income for the normalized calculation of loan yield. Prepayment penalties and deferred fees on loans paid in full in the 2011 period contributed to the increase in yield realized on a normalized basis. Interest on securities AFS decreased $623,000 to $5.3 million for the nine months ended March 31, 2011, from $5.9 million for the nine months ended March 31, 2010. The average balance of securities AFS increased $35.1 million over that same period while the yield decreased 58 basis points. Interest on MBS HTM decreased $1.4 million to $1.3 million for the nine months ended March 31, 2011, from $2.6 million for the nine months ended March 31, 2010. Interest on MBS AFS increased $1.6 million to $5.4 million for the nine months ended March 31, 2011, from $3.9 million for the nine months ended March 31, 2010. See “Comparison of Financial Condition at March 31, 2011 and June 30, 2010 - Securities Available for Sale” for a discussion of the investment decisions impacting the balances. The changes in these three captions are primarily due to the reasons described in “Comparison of Operating Results for the Quarter Ended March 31, 2011 and 2010, Total Interest Income.”

Total Interest Expense. Total interest expense decreased $5.3 million, or 16.0%, to $27.5 million for the nine months ended March 31, 2011, from $32.8 million for the nine months ended March 31, 2010. Interest expense on deposits decreased $5.3 million, or 31.1%, to $11.8 million for the nine months ended March 31, 2011, from $17.1 million for the nine months ended March 31, 2010. The average balance of interest bearing deposits increased $84.4 million over this period while the average cost of these funds decreased 68 basis points. Interest expense on borrowings increased $86,000, or 0.6%, to $15.7 million for the nine months ended March 31, 2011, from $15.6 million for the nine months ended March 31, 2010. The average balance of borrowings increased $18.9 million over the period while the cost decreased 13 basis points.

Net Interest Income Before Provision for Loan Losses. Net interest income increased $14.7 million, or 32.2%, to $60.2 million for the nine months ended March 31, 2011, from $45.5 million for the nine months ended March 31, 2010. The Company’s net interest rate spread and margin increased to 2.84% and 3.34% for the nine months ended March 31, 2011, from 2.76% (normalized) and 3.03% (normalized) for the nine months ended March 31, 2010, respectively. The 2010 calculations exclude non-recurring interest on loans totaling $2.3 million realized in conjunction with problem loan disposals. The actual net interest rate spread and margin in the 2010 period were 2.92% and 3.19%, respectively. The factors described in “Comparison of Operating Results for the Quarter Ended March 31, 2011 and 2010, Net Interest Income Before Provision for Loan Losses” also impacted the nine month periods. The Company’s net interest income was reduced $2.0 million and $2.4 million for the nine months ended March 31, 2011 and 2010, respectively, due to the impact of nonaccrual loans.

Provision for Loan Losses. The Company recorded provisions for loan losses of $6.8 million for the nine months ended March 31, 2011 as compared to $7.6 million for the nine months ended March 31, 2010. See discussion of the allowance for loan losses in “Comparison of Financial Condition at December 31, 2010 and June 30, 2010” and footnote 6 of the financial statements.

Other Income. Other income decreased $865,000 to $4.0 million for the nine months ended March 31, 2011 from $4.9 million for the nine months ended March 31, 2010. Service charges decreased $193,000 to $1.0 million for the nine months ended March 31, 2011, from $1.2 million for the nine months ended March 31, 2010. The decrease is primarily due to late charges of $297,000 received in the 2010 period in conjunction with problem loan disposals. Net income on the real estate investment captions of net real estate operations and income from investments in real estate joint ventures decreased $507,000 to $1.3 million for the nine months ended March 31, 2011, from $1.8 million for the nine months ended March 31, 2010. The change is due to several components. The income reported in these captions is dependent upon the operations of various properties and is subject to fluctuation. Overall, however, joint venture operations have been slightly impacted by increased vacancies and operational costs. In addition to these factors, income had been reduced since March 2010 at one commercial property due to a flood. Repairs and improvements have been made at this property. Return to normal operations and cash flows at this property resumed and are reflected in the results for the quarter ended March 31, 2011. However, the property is in a flood zone and subject to future disruptions. The remaining decrease is due to changes in gains on sales of assets. During the nine months ended March 31, 2010, the Company recognized a $1.0 million gain on the sale of a commercial office property that had been held and operated as a real estate investment. The 2010 gain is partially offset by a $718,000 net gain realized on the sale of a real estate owned property during the nine months ended March 31, 2011.

Other Expense. Operating expenses increased $1.4 million to $23.8 million for the nine months ended March 31, 2011, from $22.4 million for the nine months ended March 31, 2010. The increase was primarily due to other expenses, which increased $1.2 million. This increase was primarily due to expenses associated with problem assets. In the 2010 period, other expenses were reduced by $501,000 due to legal fees recovered in conjunction with problem asset disposals. Real estate owned operations increased $849,000 primarily due to the $799,000 write-down described above. These increases were partially offset by decreases in compensation and FDIC insurance premiums. Compensation, payroll taxes and fringe benefits decreased $267,000 primarily due to a $2.7 million decrease in the cost associated with the Company’s stock benefit plan. This decrease was partially offset by a $2.1 million increase in the cost associated with the Company’s benefit plans and a $218,000 increase in compensation costs. Federal deposit insurance premiums decreased $668,000 over the periods primarily due to decreased FDIC insurance rates based on our increased capital levels.

Income Tax Expense. Income tax expense for the nine months ended March 31, 2011, was $12.3 million, due to pre-tax income of $33.6 million, resulting in an effective tax rate of 36.8%. For the nine months ended March 31, 2010, income tax expense was $8.0 million, due to pre-tax income of $20.4 million, resulting in an effective tax rate of 39.1%. The Company has implemented various strategic objectives and one of the consequences of their implementation is an anticipated reduction in the Company’s effective tax rate.

Liquidity and Capital Resources

The Company’s primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, Federal Home Loan Bank (“FHLB”) borrowings and investment maturities. While scheduled amortization of loans is a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity if a need for additional funds arises, including an overnight line of credit and advances from the FHLB.

At March 31, 2011, the Company had $39.3 million in overnight borrowings from the FHLB. At June 30, 2010, the Company had no overnight borrowings from the FHLB. The Company utilizes the overnight line from time to time to fund short-term liquidity needs. The Company had total borrowings of $532.5 million at March 31, 2011 and $496.0 million at June 30, 2010. The Company’s total borrowings at March 31, 2011 include $493.2 million in longer term borrowings with the FHLB. In the normal course of business, the Company routinely enters into various commitments, primarily relating to the origination of loans. At March 31, 2011, outstanding commitments to originate loans totaled $77.0 million and outstanding commitments to extend credit totaled $58.2 million. The Company expects to have sufficient funds available to meet current commitments in the normal course of business.

Time deposits scheduled to mature in one year or less totaled $497.7 million at March 31, 2011. Based upon historical experience, management estimates that a significant portion of such deposits will remain with the Company.

On September 29, 2009, the Federal Deposit Insurance Corporation issued a rule pursuant to which all insured depository institutions would be required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. On December 30, 2009, the Company paid $8.2 million in estimated assessments, of which $5.6 million is prepaid at March 31, 2011.

As of March 31, 2011, the Company and Bank exceeded all regulatory capital requirements as follows:


	Actual					Required
Company:	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	672,618		36.2	%	$	148,471		8.0	%
Tier I capital (to risk-weighted assets)		649,405		35.0			74,235		4.0
Tier I capital (to average assets)		649,405		25.7			101,279		4.0


	Actual					Required
Bank:	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	431,233		23.7	%	$	145,566		8.0	%
Tier I capital (to risk-weighted assets)		408,469		22.5			72,783		4.0
Tier I capital (to average assets)		408,469		16.3			100,254		4.0

Critical Accounting Policies

Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended June 30, 2010, included in the Company’s Annual Report on Form 10-K, as supplemented by this report, contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried in the consolidated Balance Sheets at estimated fair value or the lower of cost or estimated fair value. Policies with respect to the methodologies used to determine the allowance for loan losses and judgments regarding the valuation of intangible assets and securities as well as the valuation allowance against deferred tax assets are the most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations, involve a higher degree of complexity, and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition. These critical accounting policies and their application are reviewed periodically and, at least annually, with the Audit Committee of the Board of Directors. For a further discussion of the critical accounting policies of the Company, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K, for the year ended June 30, 2010.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk

The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has the authority and responsibility for managing interest rate risk. Oritani Bank has established an Asset/Liability Management Committee, comprised of various members of its senior management, which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for recommending to the Board the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. The Asset/Liability Management Committee reports its activities to the Board on a monthly basis. An interest rate risk analysis is presented to the Board on a quarterly basis.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. As part of our ongoing asset-liability management, we currently use the following strategies to manage our interest rate risk:

(i)

originating multi-family and commercial real estate loans that generally tend to have shorter interest duration and generally reset at five years;

(ii)

investing in shorter duration mortgage-backed securities and securities with call provisions that are considered likely to be invoked; and

(iii)

obtaining general financing through longer-term Federal Home Loan Bank advances.

Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities, as well as loans and securities with variable rates of interest, helps to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. By following these strategies, we believe that we are well-positioned to react to increases in market interest rates.

Net Portfolio Value. We compute the amounts by which the net present value of cash flow from assets, liabilities and off balance sheet items (the institution’s net portfolio value or “NPV”) would change in the event of a range of assumed changes in market interest rates. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

The table below sets forth, as of March 31, 2011, the estimated changes in our net portfolio value that would result from the designated instantaneous changes in the United States Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates and loan prepayment and deposit decay rates, and should not be relied upon as indicative of actual results.


									NPV as a Percentage of Present
									Value of Assets (3)
												Increase
Change in Interest			Estimated Increase (Decrease) in NPV									(Decrease)
Rates (basis points) (1)	Estimated NPV (2)		Amount			Percent			NPV Ratio (4)			basis points
(Dollars in thousands)

+200	$	561,699	$	(95,897	)		(14.6	)%		23.1	%		(229	)
+100		614,267		(43,329	)		(6.6	)		24.4			(94	)
0		657,596		—			0.0			25.4			0
-100		690,093		32,497			4.9			26.0			62


(1)		Assumes an instantaneous uniform change in interest rates at all maturities.

(2)		NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3)		Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4)		NPV Ratio represents NPV divided by the present value of assets.

The table above indicates that at March 31, 2011, in the event of a 100 basis point decrease in interest rates, we would experience a 4.9% increase in net portfolio value. In the event of a 200 basis point increase in interest rates, we would experience a 14.6% decrease in net portfolio value. These changes in net portfolio value are within the limitations established in our asset and liability management policies.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net portfolio value table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net portfolio value table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.


Item 4.		Controls and Procedures

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

There were no significant changes made in the Company’s internal controls over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II — Other Information


Item 1.		Legal Proceedings

The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition or results of operations.


Item 1A.		Risk Factors

There have been no material changes from those risk factors previously disclosed in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 13, 2010. In addition to the risks disclosed in the annual report and the other risks described in this quarterly report, there may also be additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or operating results. As a result, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risks disclosed are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

(a)

Unregistered Sale of Equity Securities. There were no sales of unregistered securities during the period covered by this report.

(b)

Use of Proceeds. Not applicable.

(c)

Repurchase of Our Equity Securities. There were no repurchases of our equity s securities during the period covered by this report.


Item 3.		Defaults Upon Senior Securities

Not applicable.


Item 4.		Reserved


Item 5.		Other Information

Not applicable


Item 6.		Exhibits

The following exhibits are either filed as part of this report or are incorporated herein by reference:


	3.1			Certificate of Incorporation of Oritani Financial Corp. *

	3.2			Bylaws of Oritani Financial Corp. *

	4			Form of Common Stock Certificate of Oritani Financial Corp. *

	10.1			Employment Agreement between Oritani Financial Corp. and Kevin J. Lynch, **

	10.2			Form of Employment Agreement between Oritani Financial Corp. and executive officers,**

	10.3			Oritani Bank Director Retirement Plan, **

	10.4			Oritani Bank Benefit Equalization Plan, **

	10.5			Oritani Bank Executive Supplemental Retirement Income Agreement, **

	10.6			Form of Employee Stock Ownership Plan, **

	10.7			Director Deferred Fee Plan, **

	10.8			Oritani Financial Corp. 2007 Equity Incentive Plan, *

	14			Code of Ethics***

	21			Subsidiaries of Registrant**

	31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32			Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


*		Incorporated by reference to the Registration Statement on Form S-1 of Oritani Financial Corp. (file no. 333-165226), originally filed with the Securities and Exchange Commission on March 5, 2010.

**		Incorporated by reference to the Registration Statement on Form S-1 of Oritani Financial Corp. (file no. 333-137309), originally filed with the Securities and Exchange Commission on September 14, 2006.

***		Available on our website www.oritani.com

****		Management contract, compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	ORITANI FINANCIAL CORP.
Date: May 9, 2011	/s/ Kevin J. Lynch
	Kevin J. Lynch
	President and Chief Executive Officer

Date: May 9, 2011	/s/ John M. Fields, Jr.
	John M. Fields, Jr.
	Executive Vice President and Chief Financial Officer

Oritani Financial Corp - FORM 10-Q - May 9, 2011

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