Oritani Financial Corp - FORM 10-K

Attached files

file	filename
EX-32 - EXHIBIT 32 - Oritani Financial Corp	c22304exv32.htm
EX-23 - EXHIBIT 23 - Oritani Financial Corp	c22304exv23.htm
EX-31.2 - EXHIBIT 31.2 - Oritani Financial Corp	c22304exv31w2.htm
EX-31.1 - EXHIBIT 31.1 - Oritani Financial Corp	c22304exv31w1.htm

SECURITIES AND EXCHANGE COMMISSION

450 Fifth Street, N.W.
Washington, D.C. 20549

FORM 10-K


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

For the Fiscal Year Ended June 30, 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		(I.R.S. Employer
incorporation or organization)		Identification Number)

370 Pascack Road, Township of Washington		07676

(Address of Principal Executive Offices)		Zip Code

(201) 664-5400

(Registrant’s telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered

Common Stock, $0.01 par value		The NASDAQ Stock Market, LLC

Securities Registered Pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES o NO þ

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 twelve 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company (as defined in Rule 12b-2 of the Exchange Act).


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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

As of September 9, 2011, there were 56,245,065 shares of the Registrant’s common stock, par value $0.01 per share, issued and 51,084,979 shares outstanding.

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on December 31, 2010, as reported by the Nasdaq Global Market, was approximately $612.7 million.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the 2011 Annual Meeting of Stockholders of the Registrant (Part III).

Oritani Financial Corp.
2011 Annual Report on Form 10-K

Index


	Page
Part I

Item 1. Business		2

Item 1A. Risk Factors		38

Item 1B. Unresolved Staff Comments		43

Item 2. Properties		43

Item 3. Legal Proceedings		43

Item 4. Reserved		44

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		44

Item 6. Selected Financial Data		46

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		47

Item 7A. Quantitative and Qualitative Disclosures About Market Risk		63

Item 8. Financial Statements and Supplemental Data		63

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		64

Item 9A. Controls and Procedures		64

Item 9B. Other Information		64

Part III

Item 10. Directors, Executive Officers and Corporate Governance		65

Item 11. Executive Compensation		65

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		65

Item 13 Certain Relationships and Related Transactions, and Director Independence		65

Item 14. Principal Accountant Fees and Services		65

Part IV

Item 15. Exhibits and Financial Statement Schedules		65

Signatures		115

Exhibit 23
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I


ITEM 1.		BUSINESS

Forward Looking Statements

This Annual 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.

Oritani Financial Corp.

Oritani Financial Corp. (“the Company”) is the stock holding company for Oritani Bank. It is a Delaware corporation that was incorporated in March 2010. The Company is the successor to Oritani Financial Corp. (“Oritani-Federal”), a federal corporation and former stock holding company of 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 has been revised to reflect the 1.50- to- one conversion rate.

Oritani Financial Corp. owns 100% of the outstanding shares of common stock of Oritani Bank. Oritani Financial Corp. primarily engages in the business of holding the common stock of Oritani Bank as well as two limited liability companies that own a variety of real estate investments. Oritani Financial Corp.’s executive office is located at 370 Pascack Road, in the Township of Washington, New Jersey 07676, and its telephone number is (201) 664-5400. Oritani Financial Corp. is subject to comprehensive regulation and examination by the Federal Reserve Bank (“FRB”). At June 30, 2011, Oritani Financial Corp. had consolidated assets of $2.59 billion, consolidated deposits of $1.38 billion and consolidated stockholders’ equity of $645.4 million. Its consolidated net income for the fiscal year ended June 30, 2011 was $28.5 million.

Oritani Financial Corp.’s website (www.oritani.com) contains a link to the Company’s filings with the Securities and Exchange Commission including copies of annual reports on Form 10-K, current reports on Form 8-K, and amendments to these filings, if any. These filings can be found under the ‘Investor Relations’ heading. Oritani-Federal filings can also be found here. Information on the website should not be considered a part of this report.

Oritani Bank

General

Oritani Bank is a New Jersey-chartered savings bank headquartered in the Township of Washington, New Jersey. Oritani Bank was originally founded in 1911, as a New Jersey building and loan association. Over the years, Oritani Bank has expanded through internal growth as well as through a series of business combinations. Oritani Bank conducts business from its main office located at 370 Pascack Road, in the Township of Washington, New Jersey 07676, and its 23 branch offices located in the New Jersey Counties of Bergen, Hudson, Essex and Passaic. The telephone number at its main office is (201) 664-5400. At June 30, 2011, our assets totaled $2.59 billion and our deposits totaled $1.38 billion. Oritani Bank was formerly known as Oritani Savings Bank. Effective September 8, 2008, the name was changed to Oritani Bank.

Our principal business consists of attracting retail and commercial bank deposits from the general public in the areas surrounding our main office in the Township of Washington, New Jersey and our branch offices located in the New Jersey Counties of Bergen, Hudson, Essex and Passaic , and investing those deposits, together with funds generated from operations, in multifamily 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 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 primary sources of funds are deposits, borrowings and principal and interest payments on loans and securities.

Market Area

From our headquarters in the Township of Washington, New Jersey, we operate 24 full service branches, including our main office. We operate branches in four counties of New Jersey: Bergen, Hudson, Essex and Passaic. The majority of our branches (seventeen) and deposits are located in Bergen County. In addition, we operate five branches in Hudson County, one branch in Essex County and one branch in Passaic County. Our market area for commercial lending is broader, generally extending about 150 miles from our headquarters. Our lending area includes the state of New Jersey, the broader New York metropolitan area, southern New York, eastern Pennsylvania, and southern Connecticut. Our consumer lending is generally limited to the bank’s designated lending area which is considerably closer to our branch offices.

In terms of population, Bergen County ranks as the largest county in New Jersey (out of 21 counties) while Hudson County ranks fourth, Essex County ranks third and Passaic County ranks ninth. The economy in our primary market area has benefited from being varied and diverse. It is largely urban and suburban with a broad economic base. As one of the wealthiest states in the nation, New Jersey, with a population of 8.8 million, is considered one of the most attractive banking markets in the United States. As of July 2011, the unemployment rate for New Jersey was 9.5%, which was slightly higher than the national rate of 9.1%, with a total of 3.9 million New Jersey residents employed as of July 2011. Bergen County is considered part of the New York metropolitan area. Its county seat is Hackensack. Bergen County ranks 16th among the highest-income counties in the United States in 2009 in terms of per-capita income. Some of Bergen County’s major employers are: Hackensack University Medical Center; New Jersey Sports and Expo Authority; Merck-Medco Managed Care; AT&T Wireless Services, Inc.; Becton Dickinson & Company; Mellon Investor Services; Marcal Paper Mills; Mercedes-Benz of North America, Inc.; KPMG, LLP and United States Postal Service. See “Item 1A, Risk Factors — Current Market and Economic Conditions May Significantly Affect Our Operations and Financial Condition.”

Bergen County is bordered by Rockland County, New York to the north, the Hudson River to the east, Hudson County to the south, a small border with Essex County also to the south and Passaic County to the west.

Passaic County is bordered by Orange County, New York to the north, Rockland County, New York to the northeast, Bergen County to the east, Essex County to the south, Morris County to the southwest and Sussex County to the west.

Hudson County’s only land border is with Bergen County to the north and west. It is bordered by the Hudson River and Upper New York Bay to the east; Kill van Kull (which connects Newark Bay with Upper New York Bay) to the south and Newark Bay and the Hackensack River or the Passaic River to the west.

Competition

We face intense competition within our market area both in making loans and attracting deposits. Our market area has a high concentration of financial institutions including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. As of June 30, 2010, the latest date for which statistics are available, our market share of deposits was approximately 2.9% in Bergen County and less than 1.0% in each of Hudson and Passaic Counties . We had no deposits in Essex County at June 30, 2010.

Our competition for loans and deposits comes principally from locally owned and out-of-state commercial banks, savings institutions, mortgage banking firms, insurance companies, the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA) and credit unions. We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies. Our primary focus is to build and develop profitable customer relationships across all lines of business while maintaining our role as a community bank.

Lending Activities

Our principal lending activity is the origination of multifamily loans and commercial real estate loans as well as residential real estate mortgage loans and construction loans secured by property located primarily in our market area. Our multifamily loans consist primarily of mortgage loans secured by apartment buildings. Our commercial real estate loans consist primarily of mortgage loans secured by commercial offices, retail space, warehouses and mixed-use buildings. Our residential real estate mortgage loans consist of one to four family residential real property and consumer loans. Construction loans consist primarily of one to four family and commercial development projects. We curtailed construction lending during fiscal 2009 due to market and economic conditions and now only originate such loans on an exception basis. Second mortgage and equity loans consist primarily of home equity loans and home equity lines of credit. Multifamily and commercial real estate loans represented $1.38 billion, or 81%, of our total loan portfolio at June 30, 2011. One to four family residential real estate mortgage loans represented $173.0 million, or 10.1%, of our total loan portfolio at June 30, 2011. As market rates for residential loans have decreased, Oritani’s rate for these products have been less than competitive. Consequently, residential loan balances have been decreasing throughout the last two fiscal years. We also offer second mortgages and equity loans. At June 30, 2011, such loans totaled $38.7 million, or 2.3%, of our loan portfolio. At June 30, 2011, construction and land loans totaled $86.5 million, or 5.0%, of our loan portfolio. At June 30, 2011, other loans, which primarily consist of business and to a smaller extent, account loans, totaled $30.6 million, or 1.8% of our loan portfolio.

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, by type of loan at the dates indicated.


	At June 30,
	2011					2010					2009					2008				2007
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent		Amount		Percent
	(Dollars in thousands)
Residential	$	172,972		10.1	%	$	244,126		15.9	%	$	265,962		20.4	%	$	223,087		21.8	$	188,941		24.6	%
Multi-family		474,776		27.8			360,380		23.5			277,589		21.3			237,490		23.2		210,587		27.4
Commercial real estate		901,916		52.9			760,076		49.5			562,138		43.3			359,681		35.2		240,544		31.3
Second mortgage and equity loans		38,706		2.3			48,110		3.1			54,769		4.2			59,886		5.8		65,240		8.5
Construction and land loans		86,502		5.1			102,137		6.6			130,831		10.0			138,195		13.5		62,704		8.1
Other loans		30,571		1.8			21,753		1.4			10,993		0.8			4,880		0.5		1,140		0.1

Total loans		1,705,443		100.0	%		1,536,582		100.0	%		1,302,282		100.0	%		1,023,219		100.0		769,156		100.0	%


Other items:
Net deferred loan origination fees		6,080					4,800					2,979					2,610				1,732
Allowance for loan losses		26,514					25,902					20,680					13,532				8,882

Total loans, net	$	1,672,849				$	1,505,880				$	1,278,623				$	1,007,077			$	758,542

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at June 30, 2011. Maturities are based on the final contractual payment date and do not reflect the effect of prepayments and scheduled principal amortization.


	Residential					Multi-family					Commercial					Second Mortgage					Construction and Land					Other Loans					Total
			Weighted					Weighted					Weighted					Weighted					Weighted					Weighted					Weighted
	Amount		Average Rate			Amount		Average Rate			Amount		Average Rate			Amount		Average Rate			Amount		Average Rate			Amount		Average Rate			Amount		Average Rate
	(Dollars in thousands)

Due During the Years Ending June 30,
2012		224		5.42			2,439		6.08			48,390		6.03			91		5.48			65,654		6.52			6,917		2.82			123,715		6.11
2013		5,426		5.37			564		7.30			16,186		6.47			421		5.66			6,915		3.31			10,208		6.12			39,720		5.68
2014 to 2015		7,320		5.20			26,890		6.13			58,583		6.22			2,420		5.08			846		6.00			3,476		5.83			99,535		6.08
2016 to 2020		21,879		5.05			143,561		5.79			420,275		6.31			8,832		5.34			1,757		6.15			2		5.50			596,306		6.12
2021 to 2025.		21,480		5.35			150,538		5.39			204,684		5.85			10,688		5.33			—		0.00			9,000		5.88			396,390		5.63
2026 and beyond		116,643		5.58			150,784		5.80			153,798		6.36			16,254		5.73			11,330		6.34			968		6.27			449,777		5.95

Total	$	172,972		5.46	%	$	474,776		5.69	%	$	901,916		6.20	%	$	38,706		5.49	%	$	86,502		6.23	%	$	30,571		5.27	%	$	1,705,443		5.95	%

The following table sets forth, at June 30, 2011, the dollar amount of all fixed- and adjustable-rate loans that are contractually due after June 30, 2012.


	Due After June 30, 2012
	Fixed		Adjustable		Total
	(In thousands)

Residential	$	138,585	$	34,162	$	172,747
Multi-family		156,840		315,497		472,337
Commercial estate Loans		397,301		456,227		853,528
Second mortgage and equity loans		30,126		8,489		38,615
Construction and land loans		14,215		6,632		20,847
Other loans		10,988		12,666		23,654


Total loans	$	748,055	$	833,673	$	1,581,728

Loans:

Residential Loans. We originate one to four family residential mortgage loans substantially all of which are secured by properties located in our primary market area. At June 30, 2011, $173.0 million, or 10.1% of our loan portfolio, consisted of one to four family residential mortgage loans. We generally retain for our portfolio substantially all of these loans that we originate. One to four family mortgage loan originations are generally obtained from existing or past customers, through advertising, and through referrals from local builders, real estate brokers, and attorneys and are underwritten pursuant to Oritani Bank’s policies and standards. In 2008, the Company began a program where a fee is paid to a broker for a loan referral that results in an origination or a purchase of a recently closed loan. Generally, one to four family residential mortgage loans are originated in amounts up to 80% of the lesser of the appraised value or purchase price of the property, with private mortgage insurance required on loans with a loan-to-value ratio in excess of 80%. We generally will not make loans with a loan-to-value ratio in excess of 90%. Fixed rate mortgage loans are originated for terms of up to 30 years. Generally, fixed rate residential mortgage loans are underwritten according to Freddie Mac guidelines, policies and procedures, with a maximum origination amount of $2.0 million. We do not originate or purchase, and our loan portfolio does not include, any sub-prime loans.

We also offer adjustable rate mortgage loans for one to four family properties, with an interest rate based on the weekly average yield on U.S. Treasuries adjusted to a constant maturity of one-year, which adjust either annually or every three years from the outset of the loan or which adjusts annually after a five-, seven- or ten-year initial fixed rate period. Originations and purchases of adjustable rate one to four family residential loans totaled $14.7 million during the fiscal year ended June 30, 2011 as compared to total originations and purchases of $20.2 million of one to four family residential loans during the same fiscal year. Our adjustable rate mortgage loans generally provide for maximum rate adjustments of 2% per adjustment, with a lifetime maximum adjustment up to 6%, regardless of the initial rate. Our adjustable rate mortgage loans amortize over terms of up to 30 years.

Adjustable rate mortgage loans decrease the risk associated with changes in market interest rates by periodically repricing, but involve other risks because, as interest rates increase, the underlying payments by the borrower increase, thus increasing the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate is also limited by the maximum periodic and lifetime interest rate adjustments permitted by our loan documents and, therefore, the effectiveness of adjustable rate mortgage loans may be limited during periods of rapidly rising interest rates. At June 30, 2011, $34.2 million, or 19.8% of our one to four family residential real estate loans, had adjustable rates of interest.

In an effort to provide financing for first-time homebuyers, we offer our own first-time homebuyer loan program. This program offers one to four family residential mortgage loans to qualified individuals. These loans are offered with terms and adjustable and fixed rates of interest similar to our other one to four family mortgage loan products. With this program, borrowers receive a discounted mortgage interest rate and do not pay certain loan origination fees. Such loans must be secured by an owner-occupied residence. These loans are originated using similar underwriting guidelines as our other one to four family mortgage loans. Such loans are originated in amounts of up to 90% of the lower of the property’s appraised value or the sale price. Private mortgage insurance is not required for such loans. The maximum amount of such loan is $275,000. We also participate in the Federal Home Loan Bank’s (“FHLB”) Mortgage Partnership Finance (“MPF”) program. The MPF program offers lower rates to qualified individuals on one to four family residential mortgage loans and provides the Bank with additional opportunity for income. Loans originated through the MPF program can be sold to FHLB with minimal recourse to the Bank.

We also offer our directors, officers and employees who satisfy certain criteria and our general underwriting standards fixed or adjustable rate loan products with reduced interest rates, excluding loans originated through the MPF program. Employee loans adhere to all other terms and conditions contained in the loan policy.

All residential mortgage loans that we originate include “due-on-sale” clauses, which give us the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid. Regulations limit the amount that a savings bank may lend relative to the appraised value of the real estate securing the loan, as determined by an appraisal of the property at the time the loan is originated. All borrowers are required to obtain title insurance for the benefit of Oritani Bank. We also require homeowner’s insurance and fire and casualty insurance and, where circumstances warrant, flood insurance on properties securing real estate loans.

Multifamily and Commercial Real Estate Loans. We originate non-residential commercial real estate mortgage loans and loans on multifamily dwellings. At June 30, 2011, $1.38 billion, or 81% of our loan portfolio, consisted of multifamily and commercial real estate loans. Our commercial real estate mortgage loans are primarily permanent loans secured by improved property such as mixed-use properties, office buildings, retail stores and commercial warehouses. Our multifamily mortgage loans are primarily permanent loans secured by apartment buildings. The typical loan has a fixed rate of interest for the first five years, after which the loan reprices to a market index plus a spread, with a floor of the original rate. The fixed rate period is occasionally extended to as much as ten years. These loans typically amortize over 25 years and the maximum amortization period is 30 years. We also offer such loans on a self-amortizing basis with fixed rate terms up to 20 years. References to commercial real estate loans below refer to multifamily and commercial real estate.

The terms and conditions of each loan are tailored to the needs of the borrower and based on the financial strength of the project and any guarantors. In reaching a decision on whether to make a commercial real estate loan, we consider the net operating income of the property, the borrower’s expertise and credit history, risks inherent in the properties tenants, the global cash flows of the borrower, the value of the underlying property and other factors. Loan to value ratios are a very important consideration. While our lending policies allow commercial real estate loan originations in an amount up to 80% of the appraised value or the purchase price of the property, whichever is less, our maximum loan to value ratio is generally 75%. Other factors we consider, with respect to commercial real estate rental properties, include the term of the lease(s) and the quality of the tenant(s). We generally require that the properties securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service) of at least 1.2 times. Environmental reports are generally required for commercial real estate loans. Commercial real estate loans made to corporations, partnerships and other business entities may require personal guarantees by the principals as warranted. Property inspections are conducted no less than every three years, or more frequently as warranted. Bank lending policies allow lending up to the 80% loan to value level and 1.2 times debt service coverage ratio. However, in the fourth calendar quarter of 2008, we informally reduced our maximum loan to value ratios and increased our maximum debt service coverage ratio, as well as taking a more conservative approach on other underwriting issues. We continue to underwrite to these informal changes. We believe these actions have resulted in originations that are more conservative in nature than Bank policy allows. We intend to maintain this conservative posture at least as long as we perceive a heightened economic risk in this type of lending.

A commercial borrower’s financial information is monitored on an ongoing basis by requiring periodic financial statement updates, payment history reviews and periodic face-to-face meetings with the borrower. We require commercial borrowers to provide annually updated financial statements and federal tax returns. These requirements also apply to the individual principals of our commercial borrowers. We also require borrowers with rental investment property to provide an annual report of income and expenses for the property, including a tenant list and copies of leases, as applicable. We had two separate $21 million commercial real estate loans in our portfolio at June 30, 2011. These loans were the largest loans in the portfolio at that date. Both are secured by shopping malls, one located in Ocean County, New Jersey and the other located in Putnam County, New York. These loans are performing in accordance with their terms. Our largest commercial real estate relationship consisted of 10 properties primarily secured by multifamily dwellings located mainly in our primary market area with a real estate investor. The aggregate outstanding loan balance for this relationship is $50.9 million at June 30, 2011, and these loans are all performing in accordance with their terms.

Loans secured by commercial real estate, including multifamily properties, generally involve larger principal amounts and a greater degree of risk than one to four family residential mortgage loans. Because payments on loans secured by commercial real estate are often dependent on successful operation or management of the properties, repayment of such loans may be affected by adverse conditions in the real estate market or the economy. See “Item 1A, Risk Factors — Current Market and Economic Conditions May Significantly Affect Our Operations and Financial Condition.”

Second Mortgage and Equity Loans. We also offer second mortgage and equity loans and home equity lines of credit, each of which are secured by one to four family residences, substantially all of which are located in our primary market area. At June 30, 2011, second mortgage and equity loans totaled $38.7 million, or 2.3% of total loans. Additionally, at June 30, 2011, the unadvanced amounts of home equity lines of credit totaled $39.4 million. The underwriting standards utilized for home equity loans and equity lines of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan and the value of the collateral securing the loan. The combined (first and second mortgage liens) loan-to-value ratio for home equity loans and equity lines of credit is generally limited to 70%. Home equity loans are offered with fixed and adjustable rates of interest and with terms of up to 30 years. Our home equity lines of credit have adjustable rates of interest which are indexed to the prime rate, as reported in The Wall Street Journal.

Equity loans entail greater risk than do residential mortgage loans, particularly if they are secured by an asset that has a superior security interest. In addition, equity loan collections depend on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Construction Loans. We originate construction loans for the development of one to four family residential properties located in our primary market area. Residential construction loans are generally offered to experienced local developers operating in our primary market area and to individuals for the construction of their personal residences. At June 30, 2011, residential construction loans amounted to $29.6 million, or 1.7% of total loans.

Our residential construction loans generally provide for the payment of interest only during the construction phase, but in no event exceeding 24 months. Residential construction loans can be made with a maximum loan-to-value ratio of 75% of the appraised value of the land and 100% of the costs associated with the construction. Residential construction loans are generally made on the same terms as our one to four family mortgage loans. At June 30, 2011, the largest residential construction loan commitment was for $20.3 million, with an outstanding balance of $20.3 million and is secured by a single family estate home with an appraised value of $50.0 million. The construction phase has been completed and is currently listed with a broker. While this loan has performed according to its terms, the loan has been extended primarily due to the “select” market availability for a home of this magnitude. This loan was classified as watch and was performing according to it terms at June 30, 2011.

We also make construction loans for commercial development projects. The projects include multifamily, apartment, retail and office buildings. We generally require that a commitment for permanent financing be in place prior to closing the construction loan. The maximum loan-to-value ratio limit applicable to these loans is generally 80%. At June 30, 2011, commercial construction loans totaled $56.9 million, or 3.3% of total loans. At June 30, 2011, the largest outstanding commercial construction loan commitment was for $10.5 million, with an outstanding balance of $10.5 million and is secured by an office and warehouse space complex. This loan was performing according to its terms at June 30, 2011.

Before making a commitment to fund a construction loan, we require an appraisal on the property by an independent licensed appraiser. We require title insurance and, if applicable, an environmental survey prior to making a commitment to fund a construction loan. We generally also review and inspect each property before disbursement of funds during the terms of the construction loan. Loan proceeds are disbursed after inspection based on the percentage of completion method.

Construction and development financing is generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, we may be required to advance funds beyond the amount originally committed in order to protect the value of the property. Additionally, if the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value which is insufficient to assure full repayment.

We chose to reduce our exposure to construction lending during fiscal 2009 due to current market and economic conditions. Such loans are now only originated on an exception basis. Construction originations for the years ended June 30, 2011 and 2010 were $11.8 million and $19.1 million, respectively, versus $45.1 million for the comparable 2009 period.

Other Loans. Other loans totaled $30.6 million, or 1.8% of our total loan portfolio at June 30, 2011. Other loans primarily consist of business loans secured by cash and other business assets, account loans, and commercial line of credit loans. Commercial line of credit loans totaled $7.7 million. In 2009, Oritani decided to limit new line of credit lending to well-established customers.

Loan Originations, Purchases, Sales, Participations and Servicing of Loans. Lending activities are conducted primarily by our loan personnel operating at our main office as well as commercial real estate origination offices in Rockland County, New York and New York City. All loans originated by us are underwritten pursuant to our policies and procedures. We originate both adjustable rate and fixed rate loans. Our ability to originate fixed or adjustable rate loans is dependent upon the relative customer demand for such loans, which is affected by the current and expected future levels of market interest rates.

During the fiscal year ended June 30, 2011, loan originations totaled $418.6 million and purchases totaled $12.5 million, all of which were retained by us. There were no sales of loans in fiscal 2011 or 2010.

We will also participate in loans, sometimes as the “lead lender.” Whether we are the lead lender or not, we underwrite our participation portion of the loan according to our own underwriting criteria and procedures. At June 30, 2011, we had $50.9 million in loan participation interests.

At June 30, 2011, we were servicing loans sold in the amount of $4.8 million. Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans.

Non-performing and Problem Assets

We commence collection efforts when a loan becomes ten days past due with system generated reminder notices. Subsequent late charges and delinquent notices are issued and the account is monitored on a regular basis thereafter. Collections meetings with executive management are regularly held and every delinquent loan is discussed. When a loan is more than 30 days past due, the credit file is reviewed and, if deemed necessary, information is updated or confirmed and collateral re-evaluated. Personal, direct contact with the borrower is attempted early in the collection process. We make every effort to contact the borrower and develop a plan of repayment to cure the delinquency. A summary report of all loans 30 days or more past due is reported to the Board of Directors on a monthly basis. If no repayment plan is in process and the loan is delinquent at least two payments, the file is referred to counsel for the commencement of foreclosure or other collection efforts.

Loans are placed on non-accrual status when they are more than 90 days delinquent. When loans are placed on a non-accrual status, unpaid accrued interest is fully reversed. Once the outstanding principal balance is brought current, income is recognized to the extent the loan is deemed fully collectible. If the deficiencies causing the delinquency are resolved, such loans may be returned to accrual status once all arrearages are resolved. See additional discussion regarding our non-performing assets at June 30, 2011 in “Management Discussion and Analysis.”

Non-Performing Assets and Restructured Loans. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. At June 30, 2011, we had troubled debt restructurings (“TDR”) of $8.0 million which are included in the appropriate categories in the non-accrual table below. Additionally, we had $1.5 million of troubled debt restructurings on accrual status at June 30, 2011, which do not appear in the table below. We had no troubled debt restructurings at June 30, 2010, 2009, 2008, and 2007.


	At June 30,
	2011⁽¹⁾			2010			2009⁽⁽²⁾			2008⁽³⁾			2007
	(Dollars in thousands)
Non-accrual loans:
Residential	$	1,005		$	55		$	98		$	67		$	—
Multifamily		549			—			6,291			—			—
Commercial real estate		3,456			17,835			25,685			—			—
Second mortgage and equity loans		263			62			—			—			—
Construction and land loans		8,332			20,173			20,391			14,143			—
Other loans		1,698			—			—			—			—


Total non-accrual loans	$	15,303		$	38,125		$	52,465		$	14,210		$	—


Loans greater than 90 days delinquent and still accruing	$	—		$	—		$	—		$	—		$	—

Total non-performing loans	$	15,303		$	38,125		$	52,465		$	14,210		$	—

Real estate owned		3,967			3,031			—			—			—

Total non-performing assets	$	19,270		$	41,156		$	52,465		$	14,210		$	—


Ratios:
Non-performing loans to total loans		0.90	%		2.48	%		4.03	%		1.39	%		—	%
Non-performing assets to total assets		0.74	%		1.66	%		2.74	%		0.98	%		—	%


⁽¹⁾		Two construction loans totaling $4.9 million and one other loan totaling $1.5 million were less than 30 days delinquent at June 30, 2011 and were classified as non-accrual.

⁽²⁾		Two construction loans totaling $4.2 million were less than 60 days delinquent at June 30, 2009 and were classified as non-accrual.

⁽³⁾		One construction loan totaling $335,000 was less than 60 days delinquent at June 30, 2008 and was classified as non-accrual.

As noted in the above table, there were nonaccrual loans of $15.3 million at June 30, 2011 and $38.1 million at June 30, 2010. Additional interest income of $2.4 million and $3.0 million would have been recorded during the years ended June 30, 2011 and 2010, respectively, if the loans had performed in accordance with their original terms. Interest income on these loans of $423,000 and $595,000 was included in net income for the years ended June 30, 2011 and 2010, respectively. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Comparison of Operating Results for the Years Ended June 30, 2011 and June 30, 2010, Provision for Loan Losses.”

Delinquent Loans. The following table sets forth our loan delinquencies by type, by amount and by percentage of type at the dates indicated.


	Loans Delinquent For
	60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount
	(Dollars in thousands)
At June 30, 2011
Residential		4	$	1,087		4	$	1,005		8	$	2,092
Multifamily		2		3,810		3		550		5		4,360
Commercial real estate		1		307		6		3,456		7		3,763
Second mortgage and equity loans		2		123		3		263		5		386
Construction and land loans		—		—		4		8,332		4		8,332
Other loans		—		—		3		1,697		3		1,697

Total		9	$	5,327		23	$	15,303		32	$	20,630


At June 30, 2010
Residential		4	$	762		1	$	55		5	$	817
Multifamily		—		—		—		—		—		—
Commercial real estate		4		2,105		3		17,835		7		19,940
Second mortgage and equity loans		1		19		1		62		2		81
Construction and land loans		1		1,743		5		20,173		6		21,916
Other loans		—		—		—		—		—		—

Total		10	$	4,629		10	$	38,125		20	$	42,754


At June 30, 2009
Residential		1	$	197		2	$	98		3	$	295
Multifamily		—		—		2		6,291		2		6,291
Commercial real estate		3		17,209		6		25,685		9		42,894
Second mortgage and equity loans		—		—		—		—		—		—
Construction and land loans		1		419		6		20,391		7		20,810
Other loans		—		—		—		—		—		—

Total		5	$	17,825		16	$	47,839		21	$	65,664


At June 30, 2008
Residential		—	$	—		2	$	68		2	$	68
Multifamily		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Second mortgage and equity loans		1		18		—		—		1		18
Construction and land loans		—		—		2		13,808		2		13,808
Other loans		—		—		—		—		—		—

Total		1	$	18		4	$	13,876		5	$	13,894


At June 30, 2007
Residential		—	$	—		—	$	—		—	$	—
Multifamily		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Second mortgage and equity loans		1		39		—		—		1		39
Construction and land loans		—		—		—		—		—		—
Other loans		—		—		—		—		—		—

Total		1	$	39		—	$	—		1	$	39

In addition to the delinquent loans listed above, we had loans that were delinquent 90 days or more past due as to principal. Such loans had passed their maturity date but continued making monthly payments, keeping their interest current. All such loans have subsequently been extended by us, which negated their past due maturity status. These loans totaled $6.3 million, $5.6 million, and $3.1 million at June 30, 2011, 2010 and 2009, respectively.

Real Estate Owned. Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until sold. When property is acquired it is recorded at the lower of cost or fair market value at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value result in charges to expense after acquisition. The Company had real estate owned of $4.0 million at June 30, 2011 and $3.0 million at June 30, 2010. During the twelve months ended June 30, 2011, Oritani Bank obtained title to ten properties securing $9.3 million of non-performing loans. The properties were written down to $8.9 million upon acquisition and were subsequently written down further to $7.2 million by June 30, 2011. The Company sold four properties with book value of $6.4 million during the twelve months ended June 30, 2011. Proceeds from the sale of real estate owned were $7.2 million, resulting in gross gains and gross losses of $720,000 and $2,000, respectively.

Classified Assets. Federal Deposit Insurance Corporation (“FDIC”) regulations provide that loans and other assets of lesser quality should be classified as “substandard,” “doubtful” or “loss” assets. 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.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

We are required to establish general allowances for loan losses for loans classified substandard or doubtful, as well as for other problem loans, including those classified as special mention or watch. General allowances represent loss allowances which have been established to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When we classify problem assets as “loss,” we are required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount. Since 2005, the Company has engaged a third party loan review firm to help ensure that loans are properly classified. They report to the Audit Committee quarterly and their scope is determined by the Audit Committee annually. The loan review firm reviews a significant portion of the existing portfolio over the course of the year, typically at least 55% of the commercial real estate, multifamily and construction loan portfolios. Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the FDIC and the New Jersey Department of Banking and Insurance (“NJDOBI”) which can order the establishment of additional general or specific loss allowances. Such examinations typically occur annually. Our last examination was as of March 31, 2009 by the FDIC and an FDIC safety and soundness examination is currently in process. An examination by the NJDOBI, as of March 31, 2010, was completed on September 9, 2010.

The following table shows the aggregate amounts of our classified assets, including non-performing loans, at the date indicated.


	Classified Assets At
	June 30, 2011				June 30, 2010				June 30, 2009
	Number		Amount		Number		Amount		Number		Amount
Substandard assets:
Residential		4	$	1,005		1	$	55		2	$	109
Multi-family loans		3		3,979		—		—		5		7,602
Commercial real estate loans		9		8,590		9		25,219		9		28,827
Second mortgage and equity loans		3		263		—		—		—		—
Construction and land loans		8		15,195		11		31,424		4		19,273
Other loans		3		1,698		2		699		—		—

Total		30	$	30,730		23	$	57,397		20	$	55,811

The loan portfolio is reviewed on a regular basis to determine whether any loans require classification in accordance with applicable regulations. Not all classified assets constitute non-performing assets.

We also utilize additional classification for assets that do not meet the definition of any of the classified assets yet contain an element that warrants a rating that is less than “pass.” We classify an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention. While such assets are not impaired, management has concluded that if the potential weakness in the asset is not addressed, the value of the asset may deteriorate, adversely affecting the repayment of the asset. Our assets classified as “special mention” totaled $32.2 million, $21.6 million, and $24.2 million at June 30, 2011, 2010, and 2009, respectively. Effective September 30, 2009, we began to also utilize the classification of “watch” for assets where complete current information has not been procured or a minor weakness is indicated. Our assets classified as “watch” totaled $103.7 million and $32.2 at June 30, 2011 and June 30, 2010.

Impaired Loans. 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. Loans we individually classify as impaired include multifamily, commercial mortgage and construction loans. Impaired loans are individually assessed to determine that each loan’s carrying value is not in excess of the fair value of the related collateral or the present value of the expected future cash flows. If the loan’s carrying value does exceed the fair value, specific reserves are established to reduce the loan’s carrying value. For classification purposes, impaired loans are typically classified as substandard.

Allowance for Loan Losses

Our allowance for loan losses is maintained at a level necessary to absorb loan losses that are both probable and reasonably estimable. Management, in determining the allowance for loan losses, considers the losses inherent in our loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. Loan losses are charged to the allowance for loans losses and recoveries are credited to it. Additions to the allowance for loan losses are provided by charges against income based on various factors which, in our judgment, deserve current recognition in estimating probable losses. We regularly review the loan portfolio and make adjustments for loan losses in order to maintain the allowance for loan losses in accordance with U.S. generally accepted accounting principles (“GAAP”). The allowance for loan losses consists primarily of the following two components:

(1) Allowances are established for impaired loans (generally defined by the Company 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). The amount of impairment provided for as an allowance is represented by the deficiency, if any, between the present value of expected future cash flows discounted at the original loan’s effective interest rate or the underlying collateral value (less estimated costs to sell,) if the loan is collateral dependent, and the carrying value of the loan. Impaired loans that have no impairment losses are not considered for general valuation allowances described below.

(2) General allowances are established for loan losses on a portfolio basis for loans that do not meet the definition of impaired. The portfolio is grouped into similar risk characteristics, primarily loan type, collateral type, if collateral dependent, and internal credit risk rating. We apply an estimated loss rate to each loan group. The loss rates applied are based on our cumulative prior two year loss experience adjusted, as appropriate, for the environmental factors discussed below. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions. Actual loan losses may be significantly more than the allowance for loan losses we have established, which could have a material negative effect on our financial results.

The adjustments to our loss experience are based on our evaluation of several environmental factors, including:

	•		changes in local, regional, national, and international economic and business conditions and developments that affect the collectibility of our portfolio, including the condition of various market segments;

	•		changes in the nature and volume of our portfolio and in the terms of our loans;

	•		changes in the experience, ability, and depth of lending management and other relevant staff;

	•		changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

	•		changes in the quality of our loan review system;

	•		changes in the value of underlying collateral for collateral-dependent loans;

	•		the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and

	•		the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in our existing portfolio

In evaluating the estimated loss factors to be utilized for each loan group, management also reviews actual loss history over an extended period of time as reported by the FDIC for institutions both nationally and in our market area for periods that are believed to have been under similar economic conditions.

We evaluate the allowance for loan losses based on the combined total of the impaired and general components. Generally when the loan portfolio increases, absent other factors, our allowance for loan loss methodology results in a higher dollar amount of estimated probable losses than would be the case without the increase. Generally when the loan portfolio decreases, absent other factors, our allowance for loan loss methodology results in a lower dollar amount of estimated probable losses than would be the case without the decrease.

Each quarter we evaluate the allowance for loan losses and adjust the allowance as appropriate through a provision or recovery for loan losses. While we use the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an integral part of their examination process, the NJDOBI and the FDIC will periodically review the allowance for loan losses. They may require us to adjust the allowance based on their analysis of information available to them at the time of their examination. Such examinations typically occur annually. Our last examination was as of March 31, 2009 by the FDIC and an FDIC safety and soundness examination is currently in process. An examination by the NJDOBI, as of March 31, 2010, was completed on September 9, 2010.

The Company also maintains an unallocated component related to the general allowance. Management does not target a specific unallocated percentage of the total general allocation, or total allowance for loan losses. The primary purpose of the unallocated component is to account for the inherent imprecision of the loss estimation process related primarily to periodic updating of appraisals on impaired loans, as well as periodic updating of commercial loan credit risk ratings by loan officers and the Company’s internal credit review process.

Allowance for Loan Losses. The following table sets forth activity in our allowance for loan losses for the fiscal years indicated.


	At or For the Years Ended June 30,
	2011			2010			2009			2008			2007
	(Dollars in thousands)
Balance at beginning of period	$	25,902		$	20,680		$	13,532		$	8,882		$	7,672


Charge-offs:
Conventional		—			—			—			—			—
Multifamily		—			16			260			—			—
Commercial real estate		3,018			1,196			—			—			—
Second mortgage and equity loans		—			—			—			—			—
Construction and land loans		5,750			3,526			2,250			—			—
Other loans		—			43			222			—			—

Total charge-offs		8,768			4,781			2,732			—			—

Recoveries:
Conventional		—			—			—			—			—
Multifamily		—			—			—			—			—
Commercial real estate		80			—			—			—			—
Second mortgage and equity loans		—			—			—			—			—
Construction and land loans		—			3			—			—			—
Other loans		—			—			—			—			—

Total recoveries		80			3			—			—			—

Net charge-offs		(8,688	)		(4,778	)		(2,732	)		—			—

Provision for loan losses		9,300			10,000			9,880			4,650			1,210


Balance at end of year	$	26,514		$	25,902		$	20,680		$	13,532		$	8,882


Ratios:
Net charge-offs to average loans outstanding (annualized)		0.54	%		0.35	%		0.23	%		—	%		—	%
Allowance for loan losses to total loans at end of period		1.55	%		1.69	%		1.59	%		1.32	%		1.15	%

Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category, the total loan balances by category (including loans held for sale), and the percent of loans in each category to total loans at the dates indicated. 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.


	At June 30,
	2011					2010					2009
			Percent of Loans					Percent of					Percent of
	Allowance		in Each			Allowance		Loans in Each			Allowance		Loans in Each
	for Loan		Category to			for Loan		Category to			for Loan		Category to
	Losses		Total Loans			Losses		Total Loans			Losses		Total Loans
	(Dollars in thousands)

Conventional	$	1,274		10.1	%	$	1,390		15.9	%	$	1,012		20.4	%
Multifamily		2,703		27.8			2,175		23.5			2,912		21.3
Commercial real estate		15,597		52.9			15,295		49.5			9,683		43.3
Second mortgage and equity loans		369		2.3			421		3.1			274		4.2
Construction and land loans		3,455		5.1			4,595		6.6			5,791		10.0
Other loans		1,625		1.8			482		1.4			268		0.8
Unallocated		1,491		—			1,544		—			740		—


Total	$	26,514		100.0	%	$	25,902		100.0	%	$	20,680		100.0	%


	At June 30,
	2008					2007
	Allowance		Percent of Loans					Percent of Loans
	for Loan		in Each Category			Allowance for		in Each Category
	Losses		to Total Loans			Loan Losses		to Total Loans
	(Dollars in thousands)

Conventional	$	845		21.8	%	$	709		24.6	%
Multifamily		2,535		23.2			2,254		27.4
Commercial real estate		5,560		35.2			3,889		31.3
Second mortgage and equity loans		299		5.8			326		8.5
Construction and land loans		3,883		13.5			979		8.1
Other loans		92		0.5			15		0.1
Unallocated		318		—			710		—


Total	$	13,532		100.0	%	$	8,882		100.0	%

The increase in the allowance for loan losses since 2008, and related provisions, is primarily due to charge-off levels, the evaluation of ongoing local and regional economic factors and the growth in the multifamily and commercial real estate portfolios. The continued increase in the multifamily and commercial real estate loan portfolio is a factor as these types of loans inherently contain more credit risk than one to four family residential loans. The high level of charge-offs in the 2011 period were primarily incurred in conjunction with the disposal of two large problem assets.

Investments

The Board of Directors is responsible for adopting our investment policy. The investment policy is reviewed periodically by management and any changes to the policy are recommended to and subject to the approval of the Board of Directors. Authority to make investments under the approved investment policy guidelines is delegated to appropriate officers. While general investment strategies are developed and authorized by the Board of Directors, the execution of specific actions primarily rests with Oritani Bank’s President, Chief Financial Officer and Asset/Liability Committee, which have responsibility for ensuring that the guidelines and requirements included in the investment policy are followed and that all securities are considered prudent for investment. Each of our President, Chief Financial Officer and Asset/Liability Committee have specified authority to purchase various types of investments; all individual investment purchases in excess of $20.0 million and all daily purchases in excess of $30 million must be approved by our Board of Directors. All investment transactions are reviewed and ratified or approved (as the case may be) at regularly scheduled meetings of the Board of Directors. Any investment which, subsequent to its purchase, fails to meet the guidelines of the policy is reported to the Board of Directors at its next meeting where the Board decides whether to hold or sell the investment.

New Jersey-chartered savings banks have authority to invest in various types of assets, including U.S. Treasury obligations, securities of various federal agencies, mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks and corporate debt instruments. Oritani Financial Corp., as a Delaware Corporation, may invest in equity securities subject to certain limitations.

The investment policy requires that all securities transactions be conducted in a safe and sound manner. Investment decisions must be based upon a thorough analysis of each security instrument to determine if its quality and inherent risks fit within Oritani Bank’s overall asset/liability management objectives, the effect on its risk-based capital measurement and the prospects for yield and/or appreciation. The investment policy provides that Oritani Bank may invest in U.S. treasury notes, U.S. and state agency securities, mortgage-backed securities, and other conservative investment opportunities. Typical investments are currently in U.S. agency or Federal Home Loan Bank securities and government sponsored mortgage-backed securities as well as overnight loans to other banks.

Our investment portfolio at June 30, 2011, consisted of $87.9 million in federal agency obligations, $2.0 million of corporate debt instruments and $1.5 million in equity securities. We also invest in mortgage-backed securities, all of which are guaranteed by government sponsored enterprises. At June 30, 2011, our mortgage-backed securities portfolio totaled $543.5 million, or 21.0% of total assets, and consisted of $516.7 million in fixed-rate securities and $26.8 million in adjustable-rate securities, guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Securities can be classified as held to maturity or available for sale at the date of purchase.

U.S. Government and Federal Agency Obligations. At June 30, 2011, our U.S. Government and federal agency securities portfolio totaled $87.9 million, all of which was classified as available for sale.

Corporate Bonds. At June 30, 2011, our corporate bond portfolio totaled $2.0 million, which consisted of one security, rated BBB-, classified as available for sale. The industry represented by our corporate bond issuer was financial. Although corporate bonds may offer higher yields than U.S. Treasury or agency securities of comparable duration, corporate bonds also have a higher risk of default due to possible adverse changes in the credit-worthiness of the issuer.

Equity Securities. At June 30, 2011, our equity securities portfolio totaled $1.5 million, or 0.10% of our total assets, all of which were classified as available for sale. The portfolio consists of financial industry common stock. During fiscal 2011 and 2010, several of these holdings were deemed other-than-temporarily impaired and the Company recorded non-cash impairment charges to earnings of $31,000 and $202,000, respectively. Equity securities are not insured or guaranteed investments and are affected by market interest rates and stock market fluctuations. Such investments are carried at their fair value and fluctuations in the fair value of such investments, including temporary declines in value, directly affect out net capital position.

Mortgage-Backed Securities. We purchase mortgage-backed securities insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. We invest in mortgage-backed securities to achieve positive interest rate spreads with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac, Fannie Mae or Ginnie Mae. Our investment policy also authorizes the investment in collateralized mortgage obligations (“CMOs”), also insured or issued by Freddie Mac, Fannie Mae and Ginnie Mae. We limit CMO investments to those classes of CMOs carrying the most stable cash flows and lowest prepayment risk of any class of CMOs and which pass the Federal Financial Institutions Examination Council’s average life restriction tests at the time of purchase. These CMO classes are typically referred to as Planned Amortization Classes or sequentials.

Mortgage-backed securities are created by the pooling of mortgages and the issuance of a security with an interest rate which is less than the interest rate on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multifamily mortgages, although we focus our investments on mortgage-backed securities backed by one to four family mortgages. The issuers of such securities (generally U.S. government agencies and government sponsored enterprises, including Fannie Mae, Freddie Mac and Ginnie Mae) pool and resell the participation interests in the form of securities to investors such as us, and guarantee the payment of principal and interest to investors. Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed securities are usually more liquid than individual mortgage loans and may be used to collateralize our specific liabilities and obligations.

At June 30, 2011, our mortgage-backed securities totaled $543.5 million or 21.0%, of total assets and 22.5% of interest earning assets. At June 30, 2011, 5.0% of the mortgage-backed securities were backed by adjustable rate mortgage loans and 95.0% were backed by fixed rate mortgage loans. The mortgage-backed securities portfolio had a weighted average yield of 2.64% at June 30, 2011. The estimated fair value of our mortgage-backed securities at June 30, 2011 was $544.5 million, which is $7.2 million more than the amortized cost of $537.3 million. Investments in mortgage-backed securities involve a risk that actual prepayments may differ from estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments thereby changing the net yield on such securities. There is also reinvestment risk associated with the cash flows from such securities or if such securities are redeemed by the issuer. In addition, the market value of such securities may be adversely affected by changes in interest rates. All of the Company’s mortgage-backed securities are insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

Securities Portfolios. The following table sets forth the composition of our investment securities portfolio at the dates indicated.

Securities and Mortgage-Backed Securities Held to Maturity


	At June 30,
	2011				2010				2009
	Amortized				Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)

Mortgage-backed securities:
Freddie Mac	$	7,546	$	7,948	$	11,449	$	12,015	$	18,783	$	19,063
Ginnie Mae		3,425		3,490		2,282		2,316		5,161		5,157
Fannie Mae		22,413		22,743		21,593		22,348		31,329		31,943
Collateralized mortgage obligations		4,225		4,341		31,144		31,943		63,544		64,218


Total securities held to maturity	$	37,609	$	38,522	$	66,468	$	68,622	$	18,817	$	20,381

Securities and Mortgage-Backed Securities Available for Sale


	At June 30,
	2011				2010				2009
	Amortized				Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)

United States Government and federal agency obligations	$	88,355	$	87,884	$	347,470	$	349,959	$	134,754	$	134,837
Corporate bonds		2,000		2,021		2,000		2,072		2,000		2,156
Mutual funds		—		—		4,671		4,937		5,636		5,676
Equity securities		1,472		1,537		1,763		1,755		1,965		1,750
Mortgage-backed securities:
Freddie Mac		9,448		10,118		17,988		19,061		26,979		27,875
Fannie Mae		75,789		77,026		22,869		24,020		27,023		27,911
Ginnie Mae		—		—		—		—		2,537		2,557
Collateralized mortgage obligations		414,443		418,788		34,399		35,396		68,571		70,260


Total securities available for sale	$	591,507	$	597,374	$	431,160	$	437,200	$	269,465	$	273,022

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at June 30, 2011 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.


						More than One Year					More than Five Years
						through Five Years					through Ten Years					More than Ten Years					Total Securities
	One Year or Less							Weighted					Weighted					Weighted							Weighted
	Amortized		Weighted			Amortized		Average			Amortized		Average			Amortized		Average			Amortized				Average
	Cost		Average Yield			Cost		Yield			Cost		Yield			Cost		Yield			Cost		Fair Value		Yield
	(Dollars in thousands)
Mortgage-backed securities:
Freddie Mac	$	—		—		$	741		4.01	%	$	—		—		$	6,805		3.25	%	$	7,546	$	7,949		3.32	%
Ginnie Mae		—		—			—		—			—		—			3,425		3.07			3,425		3,490		3.07
Fannie Mae		—		—			—		—			5,072		2.83			17,341		2.50			22,413		22,742		2.58
Collateralized mortgage obligations		—		—			—		—			4,225		3.73			—		—			4,225		4,341		3.73


Total securities held to maturity	$	—		—		$	741		4.01	%	$	9,297		3.24	%	$	27,571		2.76	%	$	37,609	$	38,522		2.91


United States Government and federal agency obligations	$	—		—		$	74,866		1.58	%	$	13,489		1.00	%	$	—		—	%	$	88,355	$	87,884		1.49	%
Corporate bonds		2,000		8.09			—		—			—		—			—		—			2,000		2,021		8.09
Equity securities		1,472		—			—		—			—		—			—		—			1,472		1,537		—
Mortgage-backed securities:
Freddie Mac		1,065		5.00			—		—			7,954		4.71			429		3.34			9,448		10,118		4.68
Fannie Mae		—		—			—		—			71,431		3.33			4,358		4.94			75,789		77,026		3.42
Collateralized mortgage obligations		—		—			2,280		5.23			220,108		2.33			192,055		2.61			414,443		418,788		2.43


Total securities available for sale	$	4,537		4.74	%	$	77,146		1.69	%	$	312,982		2.56	%	$	196,842		2.49	%	$	591,507	$	597,374		2.47	%

Sources of Funds

General. Deposits have traditionally been the primary source of funds for use in lending and investment activities. We also use borrowings, primarily Federal Home Loan Bank advances, to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management purposes and to manage the cost of funds. In addition, funds are derived from scheduled loan payments, mortgaged-backed securities scheduled payments and prepayments, investment maturities, loan prepayments, retained earnings and income on other earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

Deposits. Our deposits are generated primarily from residents and businesses within our primary market area. We offer a selection of deposit accounts, including checking accounts (demand deposits and NOW), money market deposit accounts, savings accounts, retirement accounts and time deposits. The Bank accepts brokered deposits on a limited basis, when it is deemed cost effective. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate.

Interest rates, maturity terms, service fees and other account features are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. Personalized customer service, attractive account features, long-standing relationships with customers, convenient locations, competitive rates of interest and an active marketing program are relied upon to attract and retain deposits.

The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates and competition. The variety of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand while managing interest rate risk and minimizing interest expense. At June 30, 2011, $675.6 million, or 48.91% of our deposit accounts were time deposits, of which $519.3 million had maturities of one year or less.

At June 30, 2011 we had brokered time deposits totaling $22.9 million. There were no brokered time deposits at June 30, 2010. The following table sets forth the distribution of total deposits by account type, at the dates indicated.


	At June 30,
	2011								2010
						Weighted								Weighted
						Average								Average
	Balance		Percent			Rate			Balance		Percent			Rate
	(Dollars in thousands)

Deposit type:
Checking accounts	$	162,147		11.74	%		0.42	%	$	131,029		10.16	%		0.71	%
Money market accounts		390,684		28.28			1.01			297,540		23.07			1.07
Savings accounts		152,906		11.07			0.55			146,675		11.37			0.68
Time deposits		675,573		48.91			1.48			714,502		55.40			1.76


Total deposits	$	1,381,310		100.00	%		1.12	%	$	1,289,746		100.00	%		1.37	%


	At June 30,
	2009								2008
						Weighted								Weighted
						Average								Average
	Balance		Percent			Rate			Balance		Percent			Rate
	(Dollars in thousands)								(Dollars in thousands)

Deposit type:
Checking accounts	$	88,759		7.87	%		0.90	%	$	73,949		10.58	%		0.89	%
Money market accounts		199,965		17.73			2.07			57,117		8.17			2.92
Savings accounts		147,669		13.10			1.04			149,062		21.33			1.35
Time deposits		691,237		61.30			2.84			418,804		59.92			3.84


Total deposits	$	1,127,630		100.00	%		2.32	%	$	698,932		100.00	%		2.92	%

As of June 30, 2011 the aggregate amount of outstanding time deposits in amounts greater than or equal to $100,000 was approximately $276.8 million. The following table sets forth the maturity of those deposits as of June 30, 2011.


	At
	June 30, 2011
	(In thousands)

Three months or less	$	83,492
Over three months through six months		48,133
Over six months through one year		69,096
Over one year to three years		48,690
Over three years		27,348


Total	$	276,759

Borrowings. Our borrowings consist of advances from the FHLB of New York. As of June 30, 2011, we had total borrowings in the amount of $509.3 million, which represented 26.2% of total liabilities, with an estimated weighted average maturity of 4.5 years and a weighted average rate of 3.8%. The weighted average maturity is estimated because several of our borrowings, under certain circumstances, can be called by the FHLB prior to the scheduled maturity. If this were to occur, our weighted average maturity would decrease. At June 30, 2011 borrowings are secured by mortgage-backed securities and investment securities with a book value of $524.3 million and performing mortgage loans with an outstanding balance of $530.9 billion.

The following table sets forth information concerning balances and interest rates on our FHLB advances and other borrowings at and for the periods shown:


	At or For the Years Ended June 30,
	2011			2010			2009
	(Dollars in thousands)

Balance at end of period	$	509,315		$	495,552		$	508,991
Average balance during period	$	521,541		$	506,592		$	505,599
Maximum outstanding at any month end	$	621,680		$	529,004		$	544,238
Weighted average interest rate at end of period		3.77	%		4.00	%		3.96	%
Average interest rate during period		3.95	%		4.10	%		4.00	%

Subsidiary Activities and Joint Venture Information

Oritani Financial Corp. is the owner of Oritani Bank, Hampshire Financial LLC and Oritani LLC. Hampshire Financial LLC and Oritani LLC are New Jersey limited liability companies that own real estate and investments in real estate as described below. In addition, at June 30, 2011, Oritani Financial Corp., either directly or through one of its subsidiaries, had loans with an aggregate balance of $38.5 million on 13 of the properties in which it (either directly or through one of its subsidiaries) had an ownership interest. All such loans are performing in accordance with their terms.

Oritani Bank has the following subsidiaries: Ormon LLC, Oritani Finance Company, Oritani Investment Corp. and Oritani Asset Corporation. Ormon LLC is a New Jersey limited liability company that owns real estate investments in New Jersey as well as investments in joint ventures that own income-producing commercial and residential rental properties in New Jersey as described below.

Oritani Finance Company is a New Jersey corporation that invests in non-New Jersey multifamily and commercial real estate loans and provides lending opportunities in New York and the surroundings states, other than New Jersey.

Oritani Investment Corp. is a New Jersey corporation that owns Oritani Asset Corporation, a real estate investment trust, formed in 1998 for the sole purpose of acquiring mortgage loans and mortgage-backed securities from Oritani Bank.

Oritani Asset Corporation’s primary objective is to maximize long-term returns on equity. At June 30, 2011, Oritani Asset Corporation had $350.0 million in assets. Oritani Asset Corporation is taxed and operates in a manner that enables it to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

Through these various subsidiaries, we maintain investments in real estate and investment in joint ventures. Detailed below is a summary of these various investments by subsidiary and by type.

Ormon LLC

Ormon LLC is a wholly-owned subsidiary of Oritani Bank. Ormon LLC maintains the following investments in real estate and joint ventures:

Investments in Real Estate

Park Lane Associates — Ormon LLC maintains a 50% undivided ownership interest in Park Lane Associates. Park Lane Associates is a 142-unit apartment complex located in Little Falls, New Jersey. Our initial investment was made in March 1980. For the year ended June 30, 2011, we recognized net income of $406,000 on the investment and received cash distributions of $317,000 during this period. At June 30, 2011, we had a loan to Park Lane Associates totaling $1.7 million.

Park View Apartments — Ormon LLC maintains a 50% undivided ownership interest in Park View Apartments. Park View Apartments is a 114-unit apartment complex located in White Hall, Pennsylvania. We initially invested in Park View in December 1986. For the year ended June 30, 2011, we recognized net income of $76,000 on the investment in Park View and received cash distributions of $28,000 during this period. At June 30, 2011, we had a loan to Park View Apartments totaling $1.2 million.

Winstead Village — Ormon LLC maintains a 50% undivided ownership interest in Winstead Village. Winstead Village is a 40-unit apartment complex located in Moorestown, New Jersey. We initially invested in Winstead in December 1986. For the year ended June 30, 2011, we recognized net income of $37,000 on the investment and also received cash distributions of $50,000 during that period. At June 30, 2011, we had a loan to Winstead Village totaling $757,000.

Parkway East — Ormon LLC maintains a 50% undivided ownership interest in Parkway East. Parkway East is a 43-unit apartment complex located in Caldwell, New Jersey. We initially invested in Parkway East in July 1981. For the year ended June 30, 2011, we recognized net income of $91,000 on the investment in Parkway East and received cash distributions of $100,000 during this period. We have no loans to this entity.

Marine View Apartments — Ormon LLC maintains a 75% undivided ownership interest in Marine View Apartments. Marine View is an 85-unit apartment complex located in Perth Amboy, New Jersey. We initially invested in Marine View in October 1993. For the year ended June 30, 2011, we recognized net income of $206,000 on the investment in Marine View and received cash distributions of $244,000 over that period. We have no loans to this entity.

Ormon LLC also wholly owns one property that is held and operated for investment purposes. The property is a 54-unit mixed-use property (49 residential units and 5 store fronts) located in Palisades Park, New Jersey. We recognized net income of $383,000 for the year ended June 30, 2011, from the operation of this property.

During the quarter ended September 30, 2009, Ormon LLC sold a 19-unit office building located in Hillsdale, New Jersey and recognized a net gain of $1.0 million.

Investments in Joint Ventures

Oaklyn Associates — Oaklyn Associates is a 50% owned joint venture on a 100-unit apartment complex located in Oaklyn, New Jersey. We initially invested in this joint venture in February 1978. For the year ended June 30, 2011, we recognized net income of $68,000 on the investment and received cash distributions of $48,000 over that period. At June 30, 2011, we had a loan to Oaklyn Associates totaling $803,000.

Madison Associates — Madison Associates is a 50% owned joint venture on 30-unit apartment complex located in Madison, New Jersey. We initially invested in this joint venture in January 1989. For the year ended June 30, 2011, we recognized net income of $71,000 on the investment and received cash distribution of $80,000 over that period. We have no loans to this entity.

Brighton Court Associates — Brighton Court Associate is a 50% owned joint venture on a 47-unit apartment complex located in Bethlehem, Pennsylvania. We initially invested in Brighton Court in July 1996. For the year ended June 30, 2011, we recognized profit of less than $1,000 on the investment and did not receive cash distributions. At June 30, 2011, our loans to Brighton Court Associates totaled $1.4 million.

Plaza 23 Associates — Plaza 23 Associates is 50% owned joint venture on a shopping center in Pequannock, New Jersey. We initially invested in Plaza 23 Associates in October 1983. For the year ended June 30, 2011, we recognized net income of $536,000 related to the investment and received cash distributions of $769,000 during that period. We have no loans to Plaza 23 Associates but have a $10.1 million loan to its partner in this joint venture, Plains Plaza Ltd. Plains Plaza Ltd. has pledged its equity interest in Plaza 23 Associates as collateral for this loan.

Oritani, LLC

Oritani, LLC is a wholly-owned limited liability corporation of Oritani Financial Corp. The primary business of Oritani, LLC is real estate investments.

Investments in Joint Ventures

Ridge Manor Associates — Ridge Manor Associates is a 50% owned joint venture on a 44-unit apartment complex located in Park Ridge, New Jersey. We initially invested in Ridge Manor Associates in May 2004. For the year ended June 30, 2011 we recognized net loss of $24,000 related to the investment, and also received cash distributions of $33,000 during that period. At June 30, 2011, we had a loan to this entity that totaled $4.2 million.

Van Buren Apartments — Van Buren Apartments is a 50% owned joint venture on a 32-unit apartment complex located in River Edge, New Jersey. We initially invested in Van Buren in March 2002. For the year ended June 30, 2011, we recognized a net income on the investment of $26,000 and received cash distributions of $38,000 during that period. At June 30, 2011, we had a loan to Van Buren Apartments that totaled $2.2 million.

10 Landing Lane — 10 Landing Lane is a 50% owned joint venture on a 143-unit apartment complex located in New Brunswick, New Jersey. We initially invested in 10 Landing Lane in August 1998. For the year ended June 30, 2011, we recognized net loss of $180,000 related to the investment and received cash distributions of $190,000 during that period. We have no loans to this entity.

FAO Hasbrouck Heights — FAO Hasbrouck Heights is a 50% owned joint venture on 93 mixed-use units (primarily residential) in Hasbrouck Heights, New Jersey. We initially invested in FAO Hasbrouck Heights in November 2005. For the year ended June 30, 2011, we recognized a net income of $11,000 related to the investment and received cash distributions of $36,000 over that period. At June 30, 2011, we had a loan to FAO Hasbrouck Heights that totaled $7.6 million.

FAO Terrace Associates— FAO Terrace Associates is a 50% owned joint venture on a 34-unit apartment complex located in Hasbrouck Heights, New Jersey. We initially invested in FAO Terrace Associates in January 2009. For the year ended June 30, 2011, we recognized a net loss of $6,000 related to the investment and received cash distributions of $30,000 over that period. At June 30, 2011, we had a loan to FAO Terrace Associates that totaled $2.6 million.

FAO Gardens Associates— FAO Garden Associates is a 50% owned joint venture on a 34-unit apartment complex located in Hackensack, New Jersey. We initially invested in FAO Garden Associates in February 2009. For the year ended June 30, 2011, we recognized a net loss of $5,000 related to the investment and received cash distributions of $10,000 over that period. At June 30, 2011, we had a loan to FAO Garden Associates that totaled $2.5 million.

River Villas Mews, LLC— River Villas Mews, LLC is a 50% owned joint venture on a 44 unit apartment complex located in Palmyra, New Jersey. We initially invested in River Villa Mews, LLC in August, 2009. For the year ended June 30, 2011, we recognized a net loss of $11,000 related to the investment and did not receive cash distributions. At June 30, 2011, we had a loan to River Villa Mews, LLC that totaled $613,000.

Hampshire Financial is a wholly-owned subsidiary of Oritani Financial Corp. The primary business of Hampshire Financial is real estate investments.

Investments in Joint Ventures

Hampshire Realty — Hampshire Realty is a 50% owned joint venture on an 81-unit apartment complex located in Allentown, Pennsylvania. We initially invested in Hampshire in June 2002. For the year ended June 30, 2011, we recognized net income of $11,000 related to the investment and received cash distributions of $23,000 over that period. At June 30, 2011, we had a loan to Hampshire that totaled $2.9 million.

The following table presents a summary of our investments in real estate and investments in joint ventures (in thousands).


	Book			Year Ended June 30, 2011								Book
	Value at			Profit /			Distributions			Additional		Value at
Property Name	June 30, 2010			(Loss)			Received			Investment		June 30, 2011
Real Estate Held For Investment
Ormon, LLC — Undivided Interests in Real Estate
Park Lane	$	(486	)	$	406		$	(317	)	$	—	$	(397	)
Park View		(383	)		76			(28	)		—		(335	)
Winstead Village		(207	)		37			(50	)		—		(220	)
Parkway East		(342	)		91			(100	)		—		(350	)
Marine View		890			206			(244	)		—		852
Ormon, LLC — Wholly Owned Properties
Palisades Park⁽¹⁾		331			383			—			—		714
Real Estate Held For Investment Summary
Assets⁽¹⁾	$	1,221		$	589		$	(244	)	$	—	$	1,566
Liabilities	$	(1,418	)	$	610		$	(495	)	$	—	$	(1,302	)

Investments in Joint Ventures
Ormon, LLC
Oaklyn Associates	$	(199	)	$	68		$	(48	)	$	—	$	(179	)
Madison Associates		(47	)		71			(80	)		—		(55	)
Brighton Court Associates		107			—			—			—		107
Plaza 23 Associates		3,000			536			(769	)		150		2,917
Oritani, LLC
Ridge Manor Associates		505			(24	)		(33	)		—		449
Van Buren Apartments		138			26			(38	)		—		126
10 Landing Lane		(309	)		180			(190	)		—		(319	)
FAO Hasbrouck Heights		329			11			(36	)		—		304
FAO Terrace Associates		569			(6	)		(30	)		—		533
FAO Gardens		419			(5	)		(10	)		—		404
River Villas Mews, LLC		394			(11	)		—			—		383
Hampshire Financial
Hampshire Realty		99			11			(23	)		—		87
Investments in Joint Ventures Summary
Assets	$	5,562		$	538		$	(939	)	$	150	$	5,309
Liabilities	$	(555	)	$	319		$	(318	)	$	—	$	(553	)


⁽¹⁾		The book values for wholly owned properties represent the costs of the fixed assets associated with the property, less accumulated depreciation.

Personnel

As of June 30, 2011, we had 155 full-time employees and 51 part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good relations with our employees.

SUPERVISION AND REGULATION

General

Federal law allows a state savings bank, such as Oritani Bank, that qualifies as a “qualified thrift lender” (discussed below), to elect to be treated as a savings association for purposes of the savings and loan holding company provisions of the Home Owners’ Loan Act, as amended (“HOLA”). Such an election results in the savings bank’s holding company being regulated as savings and loan holding company rather than as a bank holding company. At the time of its reorganization into a holding company structure, Oritani Bank elected to be treated as a savings association under the applicable provisions of the HOLA. Accordingly, Oritani Financial Corp. is a savings and loan holding company and is required to file certain reports with, and is subject to examination by, and otherwise must comply with the rules and regulations of the Federal Reserve Board that are applicable to savings and loan holding companies. On July 21, 2011, the Federal Reserve Board assumed the regulatory authority over savings and loan holding company previously exercised by the Office of Thrift Supervision (“OTS”) pursuant to a regulatory restructuring required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). Oritani Financial Corp. is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Oritani Bank is a New Jersey-chartered savings bank, and its deposit accounts are insured up to applicable limits by the Deposit Insurance Funds (“DIF”) of the FDIC. Oritani Bank is subject to extensive regulation, examination and supervision by the Commissioner of the NJDOBI as the issuer of its charter, and by the FDIC as the deposit insurer and its primary federal regulator. Oritani Bank must file reports with the NJDOBI and the FDIC concerning its activities and financial condition, and it must obtain regulatory approval prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions and opening or acquiring branch offices. The NJDOBI and the FDIC conduct periodic examinations to assess Oritani Bank’s compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank may engage and is intended primarily for the protection of the deposit insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.

Any change in these laws or regulations, whether by the NJDOBI, the FDIC, the FRB or the U.S. Congress, could have a material adverse impact on Oritani Financial Corp., Oritani Bank and their operations.

Certain of the regulatory requirements that are or will be applicable to Oritani Bank and Oritani Financial Corp. are described below. This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on Oritani Bank and Oritani Financial Corp. and is qualified in its entirety by reference to the actual statutes and regulations.

New Jersey Banking Regulation

Activity Powers. Oritani Bank derives its lending, investment and other powers primarily from the applicable provisions of the New Jersey Banking Act and its related regulations. Under these laws and regulations, savings banks, such as Oritani Bank, generally may invest in:

	(1)		real estate mortgages;

	(2)		consumer and commercial loans;

	(3)		specific types of debt securities, including certain corporate debt securities and obligations of federal, state and local governments and agencies;

	(4)		certain types of corporate equity securities; and

	(5)		certain other assets.

A savings bank may also invest pursuant to a “leeway” power that permits investments not otherwise permitted by the New Jersey Banking Act. “Leeway” investments must comply with a number of limitations on the individual and aggregate amounts of “leeway” investments. Under this “leeway” authority, New Jersey savings banks may exercise those powers, rights, benefits or privileges authorized for national banks or out-of-state banks or for federal or out-of-state savings banks or savings associations, provided that before exercising any such power, right, benefit or privilege, prior approval by the NJDOBI by regulation or by specific authorization is required. A savings bank may also exercise trust powers upon approval of the NJDOBI. The exercise of these lending, investment and activity powers are limited by federal law and the related regulations. See “Federal Banking Regulation-Activity Restrictions on State-Chartered Banks” below.

Loans-to-One-Borrower Limitations. With certain specified exceptions, a New Jersey-chartered savings bank may not make loans or extend credit to a single borrower or to entities related to the borrower in an aggregate amount that would exceed 15% of the bank’s capital funds. A savings bank may lend an additional 10% of its capital funds if the loan is secured by collateral meeting the requirements of the New Jersey Banking Act. Oritani Bank currently complies with applicable loans-to-one-borrower limitations.

Dividends. Under the New Jersey Banking Act, a stock savings bank may declare and pay a dividend on its capital stock only to the extent that the payment of the dividend would not impair the capital stock of the savings bank. In addition, a stock savings bank may not pay a dividend unless the savings bank would, after the payment of the dividend, have a surplus of not less than 50% of its capital stock, or alternatively, the payment of the dividend would not reduce the surplus. Federal law may also limit the amount of dividends that may be paid by Oritani Bank. See “-Federal Banking Regulation-Prompt Corrective Action” below.

Minimum Capital Requirements. Regulations of the NJDOBI impose on New Jersey-chartered depository institutions, such as Oritani Bank, minimum capital requirements similar to those imposed by the FDIC on insured state banks. See “Federal Banking Regulation-Capital Requirements.”

Examination and Enforcement. The NJDOBI may examine Oritani Bank whenever it deems an examination advisable. The NJDOBI examines Oritani Bank at least every two years. The NJDOBI may order any savings bank to discontinue any violation of law or unsafe or unsound banking practice, and may direct any director, officer, attorney or employee of a savings bank engaged in an objectionable activity, after the NJDOBI has ordered the activity to be terminated, to show cause at a hearing before the NJDOBI why such person should not be removed.

Federal Banking Regulation

Capital Requirements. FDIC regulations require banks to maintain minimum levels of capital. The FDIC regulations define two tiers, or classes, of capital.

Tier 1 capital is comprised of the sum of:

	•		common stockholders’ equity, excluding the unrealized appreciation or depreciation, net of tax, from available for sale securities;

	•		non-cumulative perpetual preferred stock, including any related retained earnings; and

	•		minority interests in consolidated subsidiaries minus all intangible assets, other than qualifying servicing rights and any net unrealized loss on marketable equity securities.

The components of Tier 2 capital currently include:

	•		cumulative perpetual preferred stock;

	•		certain perpetual preferred stock for which the dividend rate may be reset periodically;

	•		hybrid capital instruments, including mandatory convertible securities;

	•		term subordinated debt;

	•		intermediate term preferred stock;

	•		allowance for loan losses; and

	•		up to 45% of pretax net unrealized holding gains on available for sale equity securities with readily determinable fair market values.

The allowance for loan losses includible in Tier 2 capital is limited to a maximum of 1.25% of risk-weighted assets (as discussed below). Overall, the amount of Tier 2 capital that may be included in total capital cannot exceed 100% of Tier 1 capital. The FDIC regulations establish a minimum leverage capital requirement for banks in the strongest financial and managerial condition of not less than a ratio of 3.0% of Tier 1 capital to total assets. For all other banks, the minimum leverage capital requirement is 4.0%, unless a higher leverage capital ratio is warranted by the particular circumstances or risk profile of the depository institution.

The FDIC regulations also require that banks meet a risk-based capital standard. The risk-based capital standard requires the maintenance of a ratio of total capital, which is defined as the sum of Tier 1 capital and Tier 2 capital, to risk-weighted assets of at least 8% and a ratio of Tier 1 capital to risk-weighted assets of at least 4%. In determining the amount of risk-weighted assets, all assets, plus certain off balance sheet items, are multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in the type of asset or item.

The federal banking agencies, including the FDIC, have also adopted regulations to require an assessment of an institution’s exposure to declines in the economic value of a bank’s capital due to changes in interest rates when assessing the bank’s capital adequacy. Under such a risk assessment, examiners evaluate a bank’s capital for interest rate risk on a case-by-case basis, with consideration of both quantitative and qualitative factors. Institutions with significant interest rate risk may be required to hold additional capital. According to the agencies, applicable considerations include:

	•		the quality of the bank’s interest rate risk management process;

	•		the overall financial condition of the bank; and

	•		the level of other risks at the bank for which capital is needed.

The following table shows Oritani Bank’s Core capital, Tier 1 risk-based capital, and Total risk-based capital ratios at June 30, 2011:


	As of June 30, 2011
			Percent of
	Capital		Assets⁽¹⁾
	(Dollars in thousands)

Core capital		415,516		16.41	%
Tier 1 risk-based capital		415,516		22.55	%
Total risk-based capital		438,588		23.81	%


(1)		For purposes of calculating Core capital, assets are based on adjusted total leverage assets. In calculating Tier 1 risk-based capital and total risk-based capital, assets are based on total risk-weighted assets.

As the table shows, as of June 30, 2011, Oritani Bank was considered “well capitalized” under FDIC guidelines.

Prompt Corrective Action. Federal law requires, among other things, that the federal bank regulatory authorities take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the law establishes five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. The FDIC’s regulations define the five capital categories as follows:

An institution is classified as “well capitalized” if:

	•		its ratio of total capital to risk-weighted assets is at least 10%;

	•		its ratio of Tier 1 capital to risk-weighted assets is at least 6%; and

	•		its ratio of Tier 1 capital to total assets is at least 5%, and it is not subject to any order or directive by the FDIC to meet a specific capital level.

An institution is classified as “adequately capitalized” if:

	•		its ratio of total capital to risk-weighted assets is at least 8%; or

	•		its ratio of Tier 1 capital to risk-weighted assets is at least 4%; and

	•		its ratio of Tier 1 capital to total assets is at least 4% (3% if the bank receives the highest rating under the Uniform Financial Institutions Rating System) and it is not a well-capitalized institution.

An institution is classified as “undercapitalized” if:

	•		its total risk-based capital is less than 8%; or

	•		its Tier 1 risk-based-capital is less than 4%; and

	•		its leverage ratio is less than 4% (or less than 3% if the institution receives the highest rating under the Uniform Financial Institutions Rating System).

An institution is classified as “significantly undercapitalized” if:

	•		its total risk-based capital is less than 6%;

	•		its Tier 1 capital is less than 3%; or

	•		its leverage ratio is less than 3%.

An institution that has a tangible capital to total assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.”

The FDIC is required, with some exceptions, to appoint a receiver or conservator for an insured state bank if that bank is “critically undercapitalized.” The FDIC may also appoint a conservator or receiver for a state bank on the basis of the institution’s financial condition or upon the occurrence of certain events, including:

	•		insolvency, or when the assets of the bank are less than its liabilities to depositors and others;

	•		substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices;

	•		existence of an unsafe or unsound condition to transact business;

	•		likelihood that the bank will be unable to meet the demands of its depositors or to pay its obligations in the normal course of business; and

	•		insufficient capital, or the incurring or likely incurring of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment of capital without federal assistance.

Activity Restrictions on State-Chartered Banks. Federal law and FDIC regulations generally limit the activities and investments of state-chartered FDIC insured banks and their subsidiaries to those permissible for national banks and their subsidiaries, unless such activities and investments are specifically exempted by law or consented to by the FDIC.

Before making a new investment or engaging in a new activity as principal that is not permissible for a national bank or otherwise permissible under federal law or FDIC regulations, an insured bank must seek approval from the FDIC to make such investment or engage in such activity. The FDIC will not approve the activity unless the bank meets its minimum capital requirements and the FDIC determines that the activity does not present a significant risk to the FDIC insurance funds. Certain activities of subsidiaries that are engaged in activities permitted for national banks only through a “financial subsidiary” are subject to additional restrictions.

Federal law permits a state-chartered savings bank to engage, through financial subsidiaries, in any activity in which a national bank may engage through a financial subsidiary and on substantially the same terms and conditions. In general, the law permits a national bank that is well-capitalized and well-managed to conduct, through a financial subsidiary, any activity permitted for a financial holding company other than insurance underwriting, insurance investments, real estate investment or development or merchant banking. The total assets of all such financial subsidiaries may not exceed the lesser of 45% of the bank’s total assets or $50 billion. The bank must have policies and procedures to assess the financial subsidiary’s risk and protect the bank from such risk and potential liability, must not consolidate the financial subsidiary’s assets with the bank’s and must exclude from its own assets and equity all equity investments, including retained earnings, in the financial subsidiary. State chartered savings banks may retain subsidiaries in existence as of March 11, 2000 and may engage in activities that are not authorized under federal law. Although Oritani Bank meets all conditions necessary to establish and engage in permitted activities through financial subsidiaries, it has not yet determined to do so.

Insurance of Deposit Accounts. Oritani Bank is a member of the DIF, which is administered by the FDIC. Deposit accounts at Oritani Bank are insured by the FDIC, generally up to a maximum of $250,000. The Dodd-Frank Act extends unlimited deposit insurance to certain non-interest paying checking accounts through December 31, 2012.

The FDIC imposes an assessment for deposit insurance against all insured depository institutions. This assessment is primarily based on the risk category of the institution, and certain risk adjustments specified by the FDIC, with riskier institutions paying higher assessments. Effective April 1, 2011, the FDIC implemented a requirement of the Dodd-Frank Act that it revise its assessment system to base it on each institution’s total assets less tangible capital of each institution instead of deposits. The FDIC also revised its assessment schedule so that it ranges from 2.5 basis points for the least risky institutions to 45 basis points for the riskiest.

On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. Our total expense for the special assessment was $846,000 as of June 30, 2009.

The FDIC also adopted a rule pursuant to which all insured depository institutions were required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. The prepayment amount was collected on December 30, 2009. The assessment rate for the fourth quarter of 2009 and for 2010 was based on each institution’s total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 was equal to the modified third quarter assessment rate plus an additional three basis points. In addition, each institution’s base assessment rate for each period was calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. We recorded the pre-payment as a prepaid expense, which will be amortized to expense over three years. On December 30, 2009, the Company paid $8.1 million in estimated assessments, of which $7.1 million is prepaid for the 2010, 2011 and 2012 assessment periods.

The deposit insurance assessment rates are in addition to the assessments for payments on the bonds issued in the late 1980s by the Financing Corporation, or FICO, to recapitalize the now defunct Federal Savings and Loan Insurance Corporation. The FICO payments will continue until the FICO bonds mature in 2017 through 2019. Excluding the special assessment noted above, our expense for the assessment of deposit insurance and the FICO payments was $1.4 million for the year ended June 30, 2011 and $2.2 million for the year ended June 30, 2010.

The FDIC has authority to increase deposit insurance assessments. A material increase in insurance assessments would likely have an adverse effect on the operating expenses and results of the Bank.

Federal Home Loan Bank System. Oritani Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. As a member of the FHLB of New York, Oritani Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank in an amount at least equal to 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, 4.5% of its borrowings from the Federal Home Loan Bank, or 0.3% of assets, whichever is greater. As of June 30, 2010 Oritani Bank was in compliance with this requirement.

Enforcement. The FDIC has extensive enforcement authority over insured savings banks, including Oritani Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist orders, to remove directors and officers and terminate deposit insurance. In general, these enforcement actions may be initiated in response to violations of laws and regulations and to unsafe or unsound practices.

Transactions with Affiliates of Oritani Bank. Transactions between an insured bank, such as Oritani Bank, and any of its affiliates are governed by Sections 23A and 23B of the Federal Reserve Act and implementing regulations. An affiliate of an insured bank is any company or entity that controls, is controlled by or is under common control with the bank. Generally, a subsidiary of a bank that is not also a depository institution or financial subsidiary is not treated as an affiliate of the bank for purposes of Sections 23A and 23B.

Section 23A:

	•		limits the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such bank’s capital stock and retained earnings, and limits all such transactions with all affiliates to an amount equal to 20% of such capital stock and retained earnings; and

	•		requires that all such transactions be on terms that are consistent with safe and sound banking practices.

The term “covered transaction” includes the making of loans, purchase of assets, issuance of guarantees and other similar types of transactions. Further, most loans by a bank to any of its affiliates must be secured by collateral in amounts ranging from 100% to 130% of the loan amounts. There is a general prohibition on the purchase of a low quality asset from an affiliate. In addition, any covered transaction by a bank with an affiliate and any purchase of assets or services by a bank from an affiliate must be on terms that are substantially the same, or at least as favorable to the bank, as those that would be provided to a non-affiliate.

Prohibitions Against Tying Arrangements. Banks are subject to the prohibitions of 12 U.S.C. Section 1972 on certain tying arrangements. A depository institution is prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Privacy Standards. FDIC regulations require Oritani Bank to disclose its privacy policy, including identifying with whom it shares “non-public personal information,” of customers at the time of establishing the customer relationship and annually thereafter. Oritani Bank does not share “non-public personal information” with third parties.

In addition, Oritani Bank is required to provide its customers with the ability to “opt-out” of having Oritani Bank share their non-public personal information with unaffiliated third parties before they can disclose such information, subject to certain exceptions.

The FDIC and other federal banking agencies adopted guidelines establishing standards for safeguarding customer information. The guidelines describe the agencies’ expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities. The standards set forth in the guidelines are intended to insure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

Community Reinvestment Act and Fair Lending Laws. All FDIC insured institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of a state chartered savings bank, the FDIC is required to assess the institution’s record of compliance with the Community Reinvestment Act. Among other things, the current Community Reinvestment Act regulations replace the prior process-based assessment factors with an evaluation system that rates an institution based on its actual performance in meeting community needs. In particular, the current evaluation system focuses on three tests:

	•		a lending test, to evaluate the institution’s record of making loans in its service areas;

	•		an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses; and

	•		a service test, to evaluate the institution’s delivery of services through its branches, ATMs and other offices.

An institution’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in an inability to receive regulatory approval for certain activities such as branching and acquisitions. Oritani Bank received a “satisfactory” Community Reinvestment Act rating in our most recently completed federal examination, which was conducted by the FDIC in 2009.

In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the FDIC, as well as other federal regulatory agencies and the Department of Justice.

Loans to a Bank’s Insiders

Federal Regulation. A bank’s loans to its executive officers, directors, any owner of more than 10% or more of its stock (each, an insider) and any of certain entities affiliated with any such persons (an insider’s related interest) are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve Act and its implementing regulations. Under these restrictions, the aggregate amount of the loans to any insider and the insider’s related interests may not exceed the loans-to-one-borrower limit applicable to national banks, which is comparable to the loans-to-one-borrower limit applicable to Oritani Bank. See “New Jersey Banking Regulation-Loans-to-One Borrower Limitations.” All loans by a bank to all insiders and insiders’ related interests in the aggregate generally may not exceed the bank’s unimpaired capital and unimpaired surplus. With certain exceptions, loans to an executive officer, other than loans for the education of the officer’s children and certain loans secured by the officer’s primary residence, may not exceed the lesser of (1) $100,000 or (2) the greater of $25,000 or 2.5% of the bank’s unimpaired capital and surplus. Federal regulation also requires that any proposed loan to an insider or a related interest of that insider be approved in advance by a majority of the board of directors of the bank, with any interested directors not participating in the voting, if such loan, when aggregated with any existing loans to that insider and the insider’s related interests, would exceed either (1) $500,000 or (2) the greater of $25,000 or 5% of the bank’s unimpaired capital and surplus.

Generally, loans to insiders must be made on substantially the same terms as, and follow credit underwriting procedures that are not less stringent than, those that are prevailing at the time for comparable transactions with other persons. An exception is made for extensions of credit made pursuant to a benefit or compensation plan of a bank that is widely available to employees of the bank and that does not give any preference to insiders of the bank over other employees of the bank.

In addition, federal law prohibits extensions of credit to a bank’s insiders and their related interests by any other institution that has a correspondent banking relationship with the bank, unless such extension of credit is on substantially the same terms as those prevailing at the time for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features.

New Jersey Regulation. Provisions of the New Jersey Banking Act impose conditions and limitations on the liabilities to a savings bank of its directors and executive officers and of corporations and partnerships controlled by such persons that are comparable in many respects to the conditions and limitations imposed on the loans and extensions of credit to insiders and their related interests under federal law, as discussed above. The New Jersey Banking Act also provides that a savings bank that is in compliance with federal law is deemed to be in compliance with such provisions of the New Jersey Banking Act.

Other Regulations

Interest and other charges collected or contracted for by Oritani Bank are subject to state usury laws and federal laws concerning interest rates. Oritani Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

	•		Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

	•		Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

	•		Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

	•		Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

	•		Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

	•		rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of Oritani Bank also are subject to the:

	•		Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

	•		Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

	•		Check Clearing for the 21^st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

	•		Title III of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT Act”), which significantly expanded the responsibilities of financial institutions, including savings banks, in preventing the use of the U.S. financial system to fund terrorist activities. Among other provisions, the USA PATRIOT Act and the related regulations of the FRB require savings associations operating in the United States to develop new anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control Regulations; and

	•		The Gramm-Leach-Bliley Act, which placed limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

The Dodd-Frank Act

Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in 2010. That new law is significantly changing the current bank regulatory structure and affecting the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act required various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and consequently, many of the details and much of the ultimate impact of the Dodd-Frank Act may not be known for many months or years.

Certain provisions of the Dodd-Frank Act have had a near term effect on us. For example, the law provided for the elimination of the OTS, which is the former primary federal regulator for Oritani Financial Corp. The Board of Governors of the Federal Reserve System assumed supervision and regulation of all savings and loan holding companies that were formerly regulated by the OTS, including Oritani Financial Corp., on July 21, 2011. The Office of the Comptroller of the Currency, which is the primary federal regulator for national banks, became the primary federal regulator for federal thrifts on the same date.

The Dodd-Frank Act eliminated the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest bearing checking accounts, as of July 21, 2011. Depending on competitive responses, this significant change to existing law could have an adverse effect on our interest expense. The legislation also requires that originators of certain securitized loans retain a percentage of the risk for transferred loans, directed the FRB to regulate pricing of certain debit card interchange fees and contains a number of reforms regarding home mortgage originators.

The Dodd-Frank Act also broadened the base for Federal Deposit Insurance Corporation insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of a depository institution, rather than deposits. The Dodd-Frank Act also permanently increase the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008, and non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2013.

The Dodd-Frank Act also requires publicly traded companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and authorized the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.

The Dodd-Frank Act created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau, which was created as of July 21, 2011, has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets continue to be examined for compliance by their applicable bank regulators. The Dodd-Frank Act also weakens the federal preemption rules that have been applicable for national banks and federal savings associations, and gives state attorneys general the ability to enforce federal consumer protection laws.

It is difficult to predict at this time what specific impact the Dodd-Frank Act ultimately will have on community banks. However, it is expected that, at a minimum, our operating and compliance costs will increase.

Holding Company Regulation

General. Oritani Financial Corp. is a non-diversified savings and loan holding company within the meaning of the HOLA. As such, Oritani Financial Corp. is registered with the Federal Reserve Board and subject to Federal Reserve Board regulations, examinations, supervision and reporting requirements. In addition, the Federal Reserve Board has enforcement authority over Oritani Financial Corp and its subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. As a Delaware corporation, Oritani Financial Corp. is generally subject to state business organization laws. Oritani Financial Corp. is subject to the requirements of Delaware law that generally limit dividends to an amount equal to the difference between the amount by which total assets exceed total liabilities and the amount equal to the aggregate par value of the outstanding shares of capital stock. If there is no difference between these amounts, dividends are limited to net income for the current and/or preceding year. The rights of the stockholders of Oritani Financial Corp. are governed by the Delaware General Corporate Law.

Permitted Activities. Pursuant to the HOLA and federal regulations and policy, a savings and loan holding company such as Oritani Financial Corp. may generally engage in the activities permitted for financial holding companies under Section 4(k) of the Bank Holding Company Act and certain other activities that have been authorized for savings and loan holding companies by regulation.

The HOLA prohibits a savings and loan holding company, including Oritani Financial Corp., directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior regulatory approval. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a non-subsidiary company engaged in activities other than those permitted by the HOLA, or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

Any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state is prohibited, subject to two exceptions:

	(i)		the approval of interstate supervisory acquisitions by savings and loan holding companies; and

	(ii)		the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions.

Qualified Thrift Lender Test. In order for Oritani Financial Corp. to continue to be regulated as a savings and loan holding company (rather than as a bank holding company), Oritani Bank must qualify as a “qualified thrift lender” under federal law or satisfy the “domestic building and loan association” test under the Internal Revenue Code. The qualified thrift lender test requires that a savings institution maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangible, including goodwill; and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed and related securities) in at least nine out of each 12 month period. Oritani Bank currently maintains the majority of its portfolio assets in qualified thrift investments and has met the qualified thrift lender test in each of the last 12 months.

Capital. Savings and loan holding companies are not currently subject to specific regulatory capital requirements. The Dodd-Frank Act, however, requires the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to depository institutions themselves. Instruments such as cumulative preferred stock and trust preferred securities will no longer be includable as Tier 1 capital, which is currently permitted for bank holding companies. Instruments issued by May 19, 2010 will be grandfathered for companies with consolidated assets of $15 billion or less. There is a five-year transition period (from the July 21, 2010 effective date of the Dodd-Frank Act) before the capital requirements will apply to savings and loan holding companies.

Source of Strength. The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies. The regulatory agencies must issue regulations requiring that all bank and savings and loan holding companies serve as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

Dividends. Oritani must notify the Federal Reserve Board thirty days before declaring any dividend to the Company. The financial impact of a holding company on its subsidiary institution is a matter that is evaluated by the regulator and the agency has authority to order cessation of activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution.

Acquisition. Under the Federal Change in Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve Board has found that the acquisition will not result in control of the company. A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock. Under the Change in Control Act, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Certain acquisitions of control of a New Jersey savings bank or its parent company require the prior approval of the NJDOBI. In addition, federal regulations prohibit, for three years following the completion of a conversion, the direct or indirect acquisition of more than 10.0% of any class of equity security of a savings institution or regulated holding company of a converted institution without the prior approval of the Board of Governors of the Federal Reserve System.

Federal Securities Laws

Oritani Financial Corp.’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Oritani Financial Corp. is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

Oritani Financial Corp. common stock held by persons who are affiliates (generally officers, directors and principal stockholders) of Oritani Financial Corp. may not be resold without registration or unless sold in accordance with certain resale restrictions. If Oritani Financial Corp. meets specified current public information requirements, each affiliate of Oritani Financial Corp. is able to sell in the public market, without registration, a limited number of shares in any three-month period.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act of 2002, our Chief Executive Officer and Chief Financial Officer each will be required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act of 2002 have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls; they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal controls; and they have included information in our quarterly and annual reports about their evaluation and whether there have been significant changes in our internal controls or in other factors that could significantly affect internal controls. Oritani Financial Corp is required to report under Section 404 of the Sarbanes-Oxley Act and has reported that it complies with such in all material respects.

FEDERAL AND STATE TAXATION

Federal Taxation

General. Oritani Financial Corp. and Oritani Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. Neither Oritani Financial Corp.’s nor Oritani Bank’s federal tax returns are currently under audit, and neither entity has been audited during the past five years. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to Oritani Financial Corp. or Oritani Bank.

Method of Accounting. For federal income tax purposes, Oritani Financial Corp. currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal and state income tax returns.

Bad Debt Reserves. Historically, Oritani Bank has been subject to special provisions in the tax law regarding allowable tax bad debt deductions and related reserves. Tax law changes were enacted in 1996, pursuant to the Small Business Protection Act of 1996 (the “1996 Act”), that eliminated the use of the percentage of taxable income method for tax years after 1995 and required recapture into taxable income over a six year period of all bad debt reserves accumulated after 1988. Oritani Bank recaptured its reserve balance over the six-year period ended December 31, 2003.

Currently, the Oritani Bank consolidated group uses the specific charge-off method to account for bad debt deductions for income tax purposes.

Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt reserves created prior to January 1, 1988 were subject to recapture into taxable income should Oritani Bank fail to meet certain thrift asset and definitional tests.

At June 30, 2011, our total federal pre-base year reserve was approximately $15.1 million. However, under current law, pre-base year reserves remain subject to recapture should Oritani Bank make certain non-dividend distributions, repurchase any of its stock, pay dividends in excess of tax earnings and profits, or cease to maintain a bank charter.

Alternative Minimum Tax. The Internal Revenue Code of 1986, as amended (the “Code”) imposes an alternative minimum tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax preferences (“alternative minimum taxable income” or “AMTI”). The AMT is payable to the extent such AMTI is in excess of an exemption amount and the AMT exceeds the regular income tax. Net operating losses can offset no more than 90% of AMTI. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. Oritani Financial Corp. and Oritani Bank have not been subject to the AMT and have no such amounts available as credits for carryover.

Net Operating Loss Carryforwards. A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At June 30, 2010, Oritani Bank had no net operating loss carryforwards for federal income tax purposes.

State Taxation

New Jersey State Taxation. Oritani Financial Corp. and it’s subsidiaries file New Jersey Corporation Business income tax returns on a calendar year basis. Generally, New Jersey income, which is calculated based on federal taxable income, subject to certain adjustments, is subject to New Jersey tax. New Jersey corporate tax is imposed in an amount equal to the corporate business tax (“CBT”) at 9% of taxable income or the minimum tax due per entity, whichever is greater. However, if Oritani Investment Corp, a subsidiary of the Bank, meets certain requirements, it may be eligible to elect to be taxed as a New Jersey Investment Company, which would allow it to be taxed at a rate of 3.6%.

New Jersey tax law does not and has not allowed for a taxpayer to file a tax return on a combined or consolidated basis with another member of the affiliated group where there is common ownership. However, under recent tax legislation, if the taxpayer cannot demonstrate by clear and convincing evidence that the tax filing discloses the true earnings of the taxpayer on its business carried on in the State of New Jersey, the New Jersey Director of the Division of Taxation may, at the director’s discretion, require the taxpayer to file a consolidated return for the entire operations of the affiliated group or controlled group, including its own operations and income.

New York State Taxation. Oritani Bank files New York State franchise tax returns on a calendar year basis. New York State imposes an annual franchise tax on banking corporations, based on net income allocable to New York State at a rate of 7.1%. If, however, the application of an alternative minimum tax (based on taxable assets allocated to New York, “alternative” net income, or a flat minimum fee) results in a greater tax, an alternative minimum tax will be imposed. In addition, New York State imposes a tax surcharge of 17% of the New York State Franchise Tax, calculating using an annual franchise tax of 9.00% (which represents the 2000 annual franchise rate), allocable to business activities carried on in the Metropolitan Commuter Transportation District. These taxes apply to Oritani Bank.

New York City Taxation. Oritani Bank is also subject to the New York City Financial Corporation Tax calculated, subject to a New York City income and expense allocation, on a similar basis as the New York State Franchise Tax. A significant portion of Oritani’s entire net income is derived from outside of the New York City jurisdiction which has the effect of significantly reducing the New York City taxable income of Oritani Bank.

Delaware State Taxation. As a Delaware holding company not earning income in Delaware, the Company is exempt from Delaware corporate income tax but is required to file annual returns and pay annual fees and a franchise tax to the state of Delaware.

Our state tax returns are not currently under audit or have not been subject to an audit during the past five years.


ITEM 1A.		RISK FACTORS

Future Changes in Interest Rates Could Reduce Our Profits.

Our ability to make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between:

	•		the interest income we earn on our interest-earning assets, such as loans and securities; and

	•		the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings.

In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A reduction in interest rates results in increased prepayments of loans and mortgage-backed and related securities, as borrowers refinance their debt in order to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Reinvestment risk is particularly high in this current rate environment. Increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable rate loans.

Changes in interest rates also affect the current market value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At June 30, 2011 the fair value of our available for sale agency securities, mortgage-backed securities and corporate debt obligations totaled $595.8 million. Unrealized net gains on these available for sale securities totaled approximately $5.8 million at June 30, 2011 and are reported as a separate component of stockholders’ equity. Decreases in the fair value of securities available for sale in future periods would have an adverse effect on stockholders’ equity.

In addition, many of our FHLB of New York advances are callable, often five years from the date of issuance. To the extent the FHLB of New York calls all or a portion of these advances, we would need to find another funding source, which might be more expensive to us than these advances.

The Company’s net interest income is particularly vulnerable to a scenario in which market interest rates “flatten.” This would occur if short term interest rates were approximately the same rate as long term interest rates. In such a scenario, interest income would likely decrease and interest expense would likely increase.

We evaluate interest rate sensitivity by estimating the change in Oritani Bank’s net portfolio value over a range of interest rate scenarios. Net portfolio value is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. At June 30, 2011, in the event of an immediate 200 basis point increase in interest rates, the model projects that we would experience a $95.9 million, or 14.6%, decrease in net portfolio value. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Management of Market Risk.”

Historically Low Interest Rates May Adversely Affect Our Net Interest Income and Profitability.

During the past three years it has been the policy of the Board of Governors of the Federal Reserve System to maintain interest rates at historically low levels through its targeted federal funds rate and the purchase of mortgage-backed securities. As a result, market rates on the loans we have originated and the yields on securities we have purchased have been at lower levels than as available prior to 2008. Consequently, the average yield on our interest earning assets has decreased to 4.87% for the year ended June 30, 2011 from 5.57% for the year ended June 30, 2009. This trend of decreasing average yield on interest earning assets is expected to continue. Our cost of interest bearing liabilities has also decreased over the period, to 1.99% for the year ended June 30, 2011 from 3.21% for the year ended June 30, 2009. However, many of our deposit products are currently priced below 1.00% and the ability to reduce these costs further is limited. The Board of Governors of the Federal Reserve System has indicated its intention to maintain low interest rates in the near future. Accordingly, our net interest income (the difference between interest income earned on assets and interest expense paid on liabilities) may decrease, which may have an adverse affect on our profitability.

Our Continued Emphasis On Multifamily and Commercial Real Estate Lending Could Expose Us To Increased Lending Risks.

Our business strategy centers on continuing our emphasis on multifamily, and commercial real estate lending. We have grown our loan portfolio in recent years with respect to these types of loans and intend to continue to emphasize these types of lending. At June 30, 2011, $1.4 billion, or 80.7%, of our total loan portfolio consisted of multifamily loans and commercial real estate loans. As a result, our credit risk profile will be higher than traditional thrift institutions that have higher concentrations of one to four family residential loans. Loans secured by multifamily and commercial real estate generally expose a lender to greater risk of non-payment and loss than one to four family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the underlying property. This risk increases during a negative economic cycle. Additionally, such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one to four family residential mortgage loans. Accordingly, an adverse development with respect to one loan or one credit relationship can expose us to greater risk of loss compared to an adverse development with respect to a one to four family residential mortgage loan. We seek to minimize these risks through our underwriting policies, which require such loans to be qualified on the basis of the property’s collateral value, net income and debt service ratio; however, there is no assurance that our underwriting policies will protect us from credit-related losses. Finally, if we foreclose on multifamily and commercial real estate loans, our holding period for the collateral typically is longer than one to four family residential mortgage loans because there a fewer potential purchasers of the collateral.

We had two separate $21.0 million commercial real estate loans in our portfolio at June 30, 2011. These loans were the largest loans in the portfolio at that date. Both are secured by shopping malls, one located in Ocean County, New Jersey and the other located in Putnam County, New York. Our largest loan relationship consisted of multifamily properties located mainly in our primary market area with a real estate investor. The aggregate outstanding loan balance for this relationship is $50.9 million at June 30, 2011. As discussed in “Business of Oritani Financial Corp-Lending Activities”, we have recently been utilizing stricter underwriting for these types of loans, and curtailed our construction lending.

If Our Allowance for Loan Losses is Not Sufficient to Cover Actual Loan Losses, Our Earnings Will Decrease.

We make various assumptions and judgments about the collectibility of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance. While our allowance for loan losses was 1.55% of total loans at June 30, 2011, material additions to our allowance could materially decrease our net income.

In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on our financial condition and results of operations.

Current Market and Economics Conditions May Significantly Affect Our Operations and Financial Condition.

Uncertainty in the financial markets and downturn in general economic conditions, including increased levels of unemployment, has persisted over the past few years. The resulting economic pressure on consumers and businesses may adversely affect our business, financial condition, and results of operations. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial services industry. In general, loan and investment securities credit quality has deteriorated at many institutions and the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. Indications of the deterioration of the value of real estate collateral have been evidenced on a national level as well as in our Market Area. These developments could have a significant negative effect on our borrowers and the values of underlying collateral securing loans, which could negatively affect our financial performance. Housing market conditions in the New York metropolitan area, where most of our lending activity occurs, deteriorated over the past several years. The S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed that the price of existing single family homes in the New York metro area as June 2011 decreased 3.6% versus the June 2010 prices. RealtyTrac, a leading online marketplace for foreclosure properties, reported that national foreclosure filings for July 2011 decreased 35% versus July 2010. The decreasing trend in foreclosures is not an indicator of a recovering economy but more likely the result of short-term interventions such as loan modifications, national and state-level foreclosure prevention efforts and foreclosure processing delays. Though total non-performing assets decreased to $19.3 million or 0.74% of total assets at June 30, 2011 from $41.2 million or 1.66% of total assets at June 30, 2010, and classified assets decreased from $57.4 million at June 30, 2010 to $30.7 million at June 30, 2011, if loans that are currently non-performing further deteriorate or loans that are currently performing become non-performing loans, we may need to increase our allowance for loan losses, which would have an adverse impact on our financial condition and results of operations. The Company would have recognized an additional $2.4 million in interest income during the year ended June 30, 2011 had non-performing loans performed in accordance with the original terms.

United States Political, Credit and Financial Market Conditions May Negatively Affect or Impair the Value of Our Current Portfolio of Residential Mortgage-Backed Securities Issued or Guaranteed by Fannie Mae and Freddie Mac.

As a result of the uncertain domestic political, credit and financial market conditions, investments in residential mortgage-backed securities issued or guaranteed by Fannie Mae and Freddie Mac (“GSEs”) pose increased risks arising from liquidity and credit concerns. Given that future deterioration in the United States credit and financial markets is a possibility, no assurance can be made that losses or significant deterioration in the fair value of our investments will not occur. Currently we have approximately $543.5 million invested in residential mortgage-backed securities issued or guaranteed by GSEs. On August 5, 2011, Standard and Poor’s lowered the United States of America’s long-term sovereign credit rating from “AAA” to “AA+.” This downgrade could affect the stability of residential mortgage-backed securities issued or guaranteed by GSEs. These factors could affect the liquidity or valuation of our current portfolio of residential mortgage-backed securities issued or guaranteed by GSEs, and could result in our counterparties requiring additional collateral for our borrowings. Further, unless and until the current United States political, credit and financial market conditions have been sufficiently resolved, it may increase our future borrowing costs.

Our Deposit Growth Has Been A Primary Funding Source. If Deposit Growth Slows, It May Be More Expensive For Us To Fund Loan Originations.

During the year ended June 30, 2009, we experienced a period of unprecedented deposit growth, with a 61.3% increase in deposit balances. We continued to realize strong deposit growth subsequent to this period. Management believes a portion of this growth was due to external factors, as funds were withdrawn from the stock market and deposited into investment options considered safe by the investors, such as Oritani Bank. Such depositors may choose to redeploy these funds in the stock market at a future date, regardless of our efforts. If this occurs, it would hamper our ability to grow deposits and could even result in a net outflow of deposits. In addition, the increase in deposit insurance limits also may have contributed to our deposit growth and we could experience a net outflow of deposits of such deposit insurance limits were reduced. Another factor increasing the risk of an outflow of deposits pertains to money market accounts. The majority of the deposit growth by the Company was in money market accounts. Money market funds can be withdrawn by depositors at any time without penalty. We will continue to focus on deposit growth, which we use to fund loan originations and purchase investment securities. However, if we are unable to continue to sufficiently increase our deposit balances, we may be required to utilize alternative sources of funding, including Federal Home Loan Bank advances, or increase our deposit rates, each of which will increase our cost of funds.

Higher Federal Deposit Insurance Corporation Insurance Premiums Have Increased Our Expenses and Any Future Insurance Premium Increases Will Adversely Affect Our Earnings.

As of April 1, 2011, the FDIC implemented a directive of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to revise its deposit assessment scheme to base the assessment on each institution’s total assets less tangible capital, instead of deposits. While the FDIC has indicated that it anticipates the change to be revenue neutral on an overall basis, the relative effect on individual institutions may differ. In addition, the FDIC has increased assessments in recent years due to the stress on the Deposit Insurance Fund caused by bank and thrift failures. Such increases adversely affect our earnings.

If Our Investment in the Federal Home Loan Bank of New York is Classified as Other-Than-Temporarily Impaired or as Permanently Impaired, Our Earnings Could Decrease.

We own common stock of the Federal Home Loan Bank of New York (FHLB-NY). We hold the FHLB-NY common stock to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the FHLB-NY’s advance program. The aggregate cost and fair value of our FHLB-NY common stock as of June 30, 2011 was $26.8 million based on its par value. There is no market for our FHLB-NY common stock.

Certain member banks of the Federal Home Loan Bank System may be subject to accounting rules and asset quality risks that could result in materially lower regulatory capital levels. In an extreme situation, it is possible that the capitalization of a Federal Home Loan Bank, including the FHLB-NY, could be substantially diminished or reduced to zero. Consequently, we believe that there is some risk that our investment in FHLB-NY common stock could be deemed other-than-temporarily impaired at some time in the future, and if this occurs, it would cause our earnings to decrease by the after-tax amount of the impairment charge.

Our Inability to Achieve Profitability on New Branches May Negatively Affect Our Earnings.

We have expanded our presence throughout our market area and we intend to pursue further expansion through de novo branching. The profitability of our expansion strategy will depend on whether the income that we generate from the new branches will offset the increased expenses resulting from operating these branches. We expect that it may take a period of time before these branches can become profitable, especially in areas in which we do not have an established presence. During this period, the expense of operating these branches may negatively affect our net income.

Because the Nature of the Financial Services Business Involves a High Volume of Transactions, We Face Significant Operational Risks.

We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity. In the event of a breakdown in the internal control system, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and suffer damage to our reputation

Risks Associated with System Failures, Interruptions, or Breaches of Security Could Negatively Affect Our Earnings.

Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, securities, deposits, and loans. We have established policies and procedures to prevent or limit the impact of system failures, interruptions, and security breaches, but such events may still occur and may not be adequately addressed if they do occur. In addition any compromise of our systems could deter customers from using our products and services. Although we rely on security systems to provide security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.

In addition, we outsource a majority of our data processing to certain third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any system failures, interruption, or breach of security could damage our reputation and result in a loss of customers and business thereby subjecting us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.

Strong Competition Within Our Market Area May Limit Our Growth and Profitability.

Competition in the banking and financial services industry is intense. In our market area, we compete with numerous commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of our competitors have substantially greater resources and lending limits than we have, have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than we do. Our profitability depends upon our continued ability to successfully compete in our market area. The greater resources and deposit and loan products offered by some of our competitors may limit our ability to increase our interest-earning assets. For additional information see “Business of Oritani Financial Corp — Competition.”

We Operate in a Highly Regulated Industry, Which Limits the Manner and Scope of Our Business Activities.

We are subject to extensive supervision, regulation and examination by the NJDOBI, FDIC and Federal Reserve Board. As a result, we are limited in the manner in which we conduct our business, undertake new investments and activities and obtain financing. This regulatory structure is designed primarily for the protection of the DIF and our depositors, and not to benefit our stockholders. This regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to capital levels, the timing and amount of dividend payments, stock repurchases, the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. In addition, we must comply with significant anti-money laundering and anti-terrorism laws. Government agencies have substantial discretion to impose significant monetary penalties on institutions which fail to comply with these laws.

The Dodd-Frank Wall Street Reform and Consumer Protection Act has changed the bank regulatory framework, created an independent consumer protection bureau that has assumed the consumer protection responsibilities of the various federal banking agencies, and established more stringent capital standards for banks and bank holding companies. Bank regulatory agencies also have been responding aggressively to concerns and adverse trends identified in examinations. Ongoing uncertainty and adverse developments in the financial services industry and the domestic and international credit markets, and the effect of the Dodd-Frank Act and regulatory actions, may adversely affect our operations by restricting our business activities, including our ability to originate or sell loans, modify loan terms, or foreclose on property securing loans. These risks could affect the performance and value of our loan and investment securities portfolios, which also would negatively affect our financial performance.


ITEM 1B.		UNRESOLVED STAFF COMMENTS

Not applicable.


ITEM 2.		PROPERTIES

At June 30, 2011, the Company and the Bank conducted business from its corporate headquarters in Washington Township, New Jersey, and 23 full service branch offices located in Bergen, Hudson, Essex and Passaic Counties, New Jersey. The aggregate net book value of premises and equipment was $15.0 million at June 30, 2011.


ITEM 3.		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 results of operations.


ITEM 4.		RESERVED

PART II


ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our shares of common stock are traded on the NASDAQ Global Market under the symbol “ORIT”. As of June 30, 2011, we have 2,053 stockholders of record (excluding the numbers of person or entities holding stock in street name through various brokerage firms), and 55,513,265 shares outstanding. The following table presents quarterly market information for Oritani Financial Corp.’s common stock for the periods indicated, adjusted to reflect the 1.50-for-one stock split in connection with the second step transaction. The following information was provided by the NASDAQ Stock Market.


	For the Years Ended June 30,
	2011						2010
	High		Low		Dividends		High		Low		Dividends
First Quarter	$	10.07	$	9.10		0.075	$	9.74	$	8.50		0.03
Second Quarter		12.68		9.82		0.100		9.67		8.31		0.05
Third Quarter		12.98		11.75		0.100		10.93		8.40		0.05
Fourth Quarter		12.96		11.83		0.100		11.43		9.06		0.05

The Company’s Board of Directors intends to review the payment of dividends quarterly and plans to maintain a regular cash dividend in the future, subject to capital requirements, financial condition, results of operations, tax considerations, industry standards, economic conditions, regulatory restrictions that affect the payment of dividends by the Bank to the Company and other relevant factors. No assurances can be given that any cash dividends will be paid or that, if paid, will not be reduced or eliminated in the future.

The sources of funds for the payment of a cash dividend are the retained proceeds from the sale of shares of common stock and earnings on those proceeds, interest and principal payments with respect to Oritani Financial Corp.’s loan to the Employee Stock Ownership Plan, and dividends from Oritani Bank. For a discussion of the limitations applicable to Oritani Bank’s ability to pay dividends, see “Supervision and Regulation—Federal Banking Regulation.”

Stock Performance Graph

Set forth below is a stock performance graph comparing (a) the cumulative total return on the Company’s Common Stock, adjusted to reflect the 1.5-for-one stock split in connection with the second step transaction, for the period beginning January 24, 2007, the date that Oritani Financial Corp. began trading as a public company as reported by the NASDAQ Global Market (at a closing price of $10.65 per share on such date), through June 30, 2011, the cumulative total return on stocks over such period included in (b) the NASDAQ Bank Index, (c) the NASDAQ Composite Index. (d) the SNL US Thrift Index and (e) the KBW Bank index. The SNL US Thrift and the KBW indices have been added to enhance stockholder perspective of the Company’s stock performance. The initial offering price of Oritani Financial Corp. common stock was $6.67 per share and the first trading day increase in the value of the stock is not reflected in the graph. Cumulative return assumes the reinvestment of dividends, and is expressed in dollars based on an assumed investment of $100.

Oritani Financial Corporation


	Period Ending
Index	1/24/2007		6/30/2007		6/30/2008		6/30/2009		6/30/2010		6/30/2011
Oritani Financial Corporation		100.00		89.48		100.19		85.85		96.13		127.11
NASDAQ Bank		100.00		95.38		64.02		49.69		55.24		58.96
NASDAQ Composite		100.00		105.93		94.07		76.08		88.27		117.28
SNL US Thrift Index		100.00		92.54		47.88		32.44		35.24		34.96
KBW Bank		100.00		97.11		52.24		34.02		43.45		46.08


*		Source: SNL Financial LC, Charlottesville, VA

The Company does not have any equity compensation program that was not approved by stockholders, other than its employee stock ownership plan.

The following table shows Company’s repurchase of its common stock for each calendar month in the three months ended June 30, 2011 and the stock repurchase plan approved by our Board of Directors.


					Total Number of		Maximum Number of
	Total Number		Average		Shares Purchased as		Shares That May Yet
	of Shares		Price Paid		part of Publicly		Be Purchased Under
Period	Repurchased		Per Share		Announced Plan		the Plan (1)
April 1, 2011 through April 30, 2011		—		—		—		—
May 1, 2011 through May 31, 2011		—		—		—		—
June 1, 2011 through June 30, 2011		731,800	$	12.71		731,800		4,892,706

(1)

On June 27, 2011, the Board of Directors of the Company authorized a stock repurchase program pursuant to which the Company intends to repurchase up to 5,624,506 shares, representing approximately 10% of its then outstanding shares. The timing of the repurchases will depend on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity and capital requirements, and alternative uses of capital. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. The Company is conducting such repurchases in accordance with a Rule 10b5-1 trading plan.

As of September 9, 2011, the Company has repurchased, under its current repurchase plan, 5,160,086 shares of its stock at an average price of $12.88 per share.


ITEM 6.		SELECTED FINANCIAL DATA

The following information is derived from the audited consolidated financial statements of Oritani Financial Corp. For additional information, reference is made to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements of Oritani Financial Corp. and related notes included elsewhere in this Annual Report.


	At June 30,
	2011		2010		2009		2008		2007
	(In thousands)

Selected Financial Condition Data:
Total assets	$	2,587,233	$	2,477,420	$	1,913,521	$	1,443,294	$	1,194,443
Loans, net		1,672,849		1,505,880		1,278,623		1,007,077		758,542
Securities available for sale, at market value		91,442		358,723		144,419		22,285		35,443
Securities held to maturity		—		—		—		—		5,415
Mortgage-backed securities held to maturity		37,609		66,468		118,817		163,950		217,406
Mortgage-backed securities available for sale, at market value		505,932		78,477		128,603		149,209		38,793
Bank owned life insurance		44,689		30,529		29,385		26,425		25,365
Federal Home Loan Bank of New York stock, at cost		26,844		25,081		25,549		21,547		10,619
Accrued interest receivable		9,237		9,425		7,967		5,646		4,973
Investments in real estate joint ventures, net		5,309		5,562		5,767		5,564		6,200
Real estate held for investment		1,185		1,221		1,338		3,681		2,492
Deposits		1,381,310		1,289,746		1,127,630		698,932		695,757
Borrowings		509,315		495,552		508,991		433,672		196,661
Stockholders’ equity		645,412		643,393		240,098		278,975		272,570

Selected Operating Data:
Interest income	$	117,353	$	105,339	$	88,429	$	71,591	$	63,349
Interest expense		36,330		42,386		44,500		37,208		32,829

Net interest income		81,023		62,953		43,929		34,383		30,520

Provision for loan losses		9,300		10,000		9,880		4,650		1,210

Net interest income after provision for loan losses		71,723		52,953		34,049		29,733		29,310
Other income		5,452		5,486		2,780		4,936		5,309
Other expense		31,716		42,779		27,257		19,491		25,249


Income before income tax expense		45,459		15,660		9,572		15,178		9,370
Income tax expense (benefit)		16,952		7,296		4,020		6,218		(1,664	)

Net income	$	28,507	$	8,364	$	5,552	$	8,960	$	11,034


	At or For the Years Ended June 30,
	2011			2010			2009			2008			2007

Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income to average total assets)		1.13	%		0.41	%		0.33	%		0.68	%		0.94	%
Return on equity (ratio of net income to average equity)		4.42	%		3.26	%		2.20	%		3.21	%		5.48	%
Average interest rate spread (1)		2.88	%		2.99	%		2.36	%		2.06	%		2.23	%
Net interest margin (2)		3.36	%		3.25	%		2.77	%		2.77	%		2.73	%
Efficiency ratio (3)		36.68	%		48.22	%		58.35	%		49.59	%		70.47	%
Non-interest expense to average total assets		1.26	%		2.11	%		1.63	%		1.49	%		2.14	%
Average interest-earning assets to average interest-bearing liabilities		132.25	%		111.83	%		114.47	%		123.59	%		117.00	%

Asset Quality Ratios:
Non-performing assets to total assets		0.74	%		1.66	%		2.74	%		0.98	%		—	%
Non-performing loans to total loans		0.90	%		2.48	%		4.03	%		1.39	%		—	%
Allowance for loan losses to total loans		1.55	%		1.69	%		1.59	%		1.32	%		1.15	%

Capital Ratios:
Total capital (to risk-weighted assets)		35.46	%		39.64	%		19.15	%		27.78	%		34.87	%
Tier I capital (to risk-weighted assets)		34.21	%		38.38	%		17.90	%		26.53	%		33.77	%
Tier I capital (to average assets)		25.09	%		31.58	%		14.31	%		19.71	%		23.10	%

Other Data:
Number of full service offices		23			22			21			19			19
Full time equivalent employees		184			179			174			155			144


(1)		The average interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted- average cost of interest-bearing liabilities for the period.

(2)		The net interest margin represents net interest income as a percent of average interest-earning assets for the period.

(3)		The efficiency ratio represents non-interest expense divided by the sum of net interest income before provision for loan losses and non-interest income. For the year ended June 30, 2010, excludes non-recurring expense associated with the accelerated vesting of stock awards and options triggered by the second step transaction and income from problem loan dispositions.


ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Strategy

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. We cannot assure you that we will successfully implement our business strategy.

Highlights of our business strategy are discussed below:

Continuing to focus on multifamily and commercial real estate lending. Unlike many traditional thrifts, we have focused on the origination of multifamily and commercial real estate loans. Such loans comprise 80.7% of our total loan portfolio at June 30, 2011. We have focused on this type of lending because the interest rates earned for such loans are higher than the prevailing rates for residential loans, resulting in a greater level of interest income potential. We are also able to generate significantly higher fee income on such loans. In addition, the repayment terms usually expose us to less interest rate risk than fixed-rate residential loans. We generally incorporate one or more of the following features into our terms for multifamily and commercial real estate loans, thereby decreasing their interest rate risk: interest rates reset after five years at a predetermined spread to FHLB Advance rates; minimum stated interest rates; balloon repayment date or maximum fixed-rate self-amortizing loan term of 20 years. While our actual origination volume will depend on market conditions, we intend to continue our emphasis on multifamily and commercial real estate lending.

We have experienced substantial growth in our combined multifamily and commercial real estate loan portfolio in recent years. The annual growth rate of the portfolio has been 22.9%; 33.43%; 40.62%; 32.37% and 18.97% for years ended June 30, 2011, 2010, 2009, 2008 and 2007, respectively. We have been involved in multifamily lending for over thirty years. Over the past eight years, we have assembled a department exclusively devoted to the origination and administration of multifamily and commercial real estate loans. Over the past three years, we have established a separate credit department to review all such originations and ensure compliance with our underwriting standards. There are presently ten loan officers as well as support staff in the origination department and two officers as well as support staff in the credit department. Our business plan projects continued growth of the portfolio and continued additions to our staff to support such growth. In addition, due to current economic conditions and related risks, management has been applying stricter underwriting guidelines, including requiring higher debt service coverage ratios and lower loan to value ratios, to these loans. We have also focused our multifamily and commercial real estate lending on more seasoned and experienced developers.

Aggressively remedy remaining delinquent loans and such additional loans that may occur. One of management’s objectives is to reduce further our level of problem assets. Management’s tactics toward delinquent borrowers are considered aggressive. We have commenced legal action against virtually all borrowers who are more than 45 days delinquent. We have generally refused to extend the maturity date of any construction loan, even if the interest payments are current, unless the borrower agrees to reduce our exposure through additional principal payments and/or additional collateral, and agrees to an additional fee if the loan is not paid in full on or before the new maturity date. We realize that such actions contribute to a higher level of delinquencies but believe this is the most prudent path to addressing problem loans. Since June 30, 2009, our level of non-performing assets to total assets has declined from 2.74% to 0.74% at June 30, 2011. While no assurances can be provided regarding results, management will focus a significant amount of its time on the resolution of problem assets.

Maintain and increase core deposits. During the past three years, we have devoted significant internal attention to growing our deposits. We hired key, experienced personnel and have implemented an incentive program that rewards branch personnel for attracting core deposit relationships. We have also begun to emphasize obtaining deposits from our commercial borrowers, reexamined our pricing strategies and promoted our status as a local community bank. As a result of these efforts and external factors, we have recently experienced a period of strong deposit growth. Our deposit balances grew 97.6% from June 30, 2008 to June 30, 2011. Much of the increase came in the area of money market accounts. In addition to the initiatives described above, management believes that external factors also contributed to our deposit growth. Due to uncertainty in the financial markets and a downturn in the U.S. economy, many investors withdrew funds from the stock market and deposited them into investment options considered safe by investors, such as Oritani Bank deposit accounts. Management believes a portion of our growth was due to this activity, particularly during the June 30, 2008 to June 30, 2009 period. Other external factors, including an increase in insured deposit limits, also may have contributed to our deposit growth however; management believes any impact due to increased deposit limits is minimal. Our ongoing focus will be to build upon our successes, with a particular emphasis on growing core commercial and retail deposits. In addition to continuing to attract new customers to Oritani Bank, we will also focus on cross-selling core deposit accounts to customers who have limited deposit services with Oritani Bank and seeking to further develop the relationship by providing quality customer service as well as continuing our de novo branch strategy

Expand our market share within our primary market area. Our deposit growth significantly boosted our market penetration in Bergen County, the primary county of our operations. We increased our percentage of Bergen County deposits from 1.8%, or the 14th ranked financial institution, at June 30, 2008 to 2.9%, or the 8th ranked financial institution, at June 30, 2011. In February 2011, we opened a de novo branch in Ramsey, New Jersey. This branch had deposit totals of $14.6 million at June 30, 2011. We intend to continue the strategy of opportunistic de novo branching. We typically seek de novo branch locations in under-banked areas that are either a contiguous extension or fill-in of our existing branch network. We also have budgeted monies for infrastructure improvements in our existing branches. We may also consider the acquisition of branches from other financial institutions in our market area. We believe these strategies, along with continued growth, will help us achieve our goal of deposit growth and market expansion.

Continue to emphasize operating efficiencies and cost control. One of the hallmarks of our operations has been expense control as evidenced by an efficiency ratio of 36.68% for the year ended June 30, 2011. Our efficiency ratio as well as numerous other expense measurement ratios, have consistently outperformed peers. We intend to maintain our posture on expense control while continuing to make prudent investments in our operations by effectively managing costs in a relation to revenues. We expect that our efficiency ratio will increase as we amortize the costs associated with the stock benefit plans recently approved by stockholders. However, we expect that we will still be able to achieve an efficiency ratio that compares favorably to peers.

Critical Accounting Policies

We consider accounting policies that require management to exercise significant judgment or discretion or to make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income, to be critical accounting policies. We consider the following to be our critical accounting policies.

Allowance for Loan Losses, Impaired Loans And Real Estate Owned. The allowance for loan losses is the estimated amount considered necessary to cover probable and reasonably estimable credit losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses that is charged against income. In determining the allowance for loan losses, we make significant estimates and, therefore, have identified the allowance as a critical accounting policy. The methodology for determining the allowance for loan losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.

The allowance for loan losses has been determined in accordance with U.S. generally accepted accounting principles. We are responsible for the timely and periodic determination of the amount of the allowance required. We believe that our allowance for loan losses is adequate to cover specifically identifiable losses, as well as estimated losses inherent in our portfolio for which certain losses are probable but not specifically identifiable.

Management performs a quarterly evaluation of the adequacy of the allowance for loan losses. The analysis of the allowance for loan losses has two components: specific and general allocations. Specific allocations are made for loans that are impaired. Management will identify loans that have demonstrated issues that cause concern regarding full collectibility in the required time frame. Delinquency and internal credit department reviews are key indicators of such issues. In addition, the Company utilizes the services of a third party loan review firm. The loan review firm reviews a significant portion of the existing portfolio over the course of the year, typically at least 55% of the commercial real estate, multifamily and construction loan portfolios, on an annual basis. Their scope is determined by the Audit Committee. This firm prepares quarterly reports that include recommendations for classification. Their services assist in identifying loans that should be classified prior to delinquency issues. Management summarizes all problem loans and classifies such loans within the following industry standard categories: Watch, Special Mention, Substandard, Doubtful or Loss. In addition, a classified loan may be considered impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, collateral category and internal credit risk rating. We also analyze historical loss experience, delinquency trends, general economic conditions, geographic concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allocation. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions. Actual loan losses may be significantly more than the allowance for loan losses we have established, which could have a material negative effect on our financial results.

On a quarterly basis, the Chief Financial Officer reviews the current status of various loan assets in order to evaluate the adequacy of the allowance for loan losses. In this evaluation process, specific loans are analyzed to determine their potential risk of loss. This process includes all loans, concentrating on non-accrual and classified loans. Each non-accrual or classified loan is evaluated for potential loss exposure. Any shortfall results in a charge to the allowance if the likelihood of loss is evaluated as probable. To determine the adequacy of collateral on a particular loan, an estimate of the fair market value of the collateral is based on the most current appraised value available. If appropriate, the appraised value is then reduced to reflect estimated liquidation expenses.

The results of this quarterly process are summarized along with recommendations and presented to executive management for their review. Based on these recommendations, loan loss allowances are approved by executive management. All supporting documentation with regard to the evaluation process, loan loss experience, allowance levels and the schedules of classified loans are maintained by the Chief Financial Officer. A summary of loan loss allowances is presented to the Board of Directors on a quarterly basis.

We have a concentration of loans secured by real property located in our lending area. Our lending area generally extends approximately 150 miles from our headquarters. As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisal valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly impact the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals are c reviewed by management to determine that the resulting values reasonably reflect amounts realizable on the related loans. Based on the composition of our loan portfolio, we believe the primary risks are increases in interest rates, a decline in the economy generally, and a decline in real estate market values in our lending area. Any one or combination of these events may adversely affect our loan portfolio resulting in increased delinquencies, loan losses and future levels of loan loss provisions. We consider it important to maintain the ratio of our allowance for loan losses to total loans at an adequate level. Factors such as current economic conditions, interest rates, and the composition of the loan portfolio will effect our determination of the level of this ratio for any particular period.

Our allowance for loan losses in recent years reflects probable losses resulting from the actual growth in our loan portfolio, ongoing local and regional economic conditions and our overall levels of charge-offs, delinquencies, impaired loans and nonaccrual loans. We believe the ratio of the allowance for loan losses to total loans at June 30, 2011 adequately reflects our portfolio credit risk, given our emphasis on multifamily and commercial real estate lending and current market conditions.

Although we believe we have established and maintained the allowance for loan losses at adequate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment. Although management uses the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short-term change. In addition, the FDIC and the NJDOBI, as an integral part of their examination process, will periodically review our allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on its judgments about information available to them at the time of their examination.

Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned. When the Company acquires other real estate owned, it generally obtains a current appraisal to substantiate the net carrying value of the asset. The asset is recorded at the lower of cost or estimated fair value, establishing a new cost basis. Holding costs and declines in estimated fair value result in charges to expense after acquisition.

Deferred Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance may be established. We consider the determination of this valuation allowance to be a critical accounting policy because of the need to exercise significant judgment in evaluating the amount and timing of recognition of deferred tax liabilities and assets, including projections of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change. A valuation allowance for deferred tax assets may be required if the amounts of taxes recoverable through loss carry backs decline, or if we project lower levels of future taxable income. Such a valuation allowance would be established through a charge to income tax expense that would adversely affect our operating results.

Asset Impairment Judgments. Some of our assets are carried on our consolidated balance sheets at cost, fair value or at the lower of cost or fair value. Valuation allowances or write-downs are established when necessary to recognize impairment of such assets. We periodically perform analyses to test for impairment of such assets. In addition to the impairment analyses related to our loans discussed above, another significant impairment analysis is the determination of whether there has been an other-than-temporary decline in the value of one or more of our securities.

Our available-for-sale securities portfolio is carried at estimated fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity. If management has the intent and the ability at the time of purchase to hold securities until maturity, they are classified as held to maturity. We conduct a periodic review and evaluation of the securities portfolio to determine if the value of any security has declined below its cost or amortized cost, and whether such decline is other-than-temporary. Any portion of unrealized loss on an individual equity security deemed to be other-than-temporary is recognized as a loss in operations in the period in which such determination is made. For debt investments securities (where we do not intend to sell the security and it is not more likely than not that we will be required to sell the security prior to recovery of the security’s amortized cost) deemed other than temporarily impaired, the investment is written down through current earnings by the impairment related to the estimated credit loss and the non-credit related impairment is recognized in other comprehensive income.

Stock-Based Compensation. We recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards in accordance with ASC 718.

We estimate the per share fair value of option grants on the date of grant using the Black-Scholes option pricing model using assumptions for the expected dividend yield, expected stock price volatility, risk-free interest rate and expected option term. These assumptions are subjective in nature, involve uncertainties and, therefore, cannot be determined with precision. The Black-Scholes option pricing model also contains certain inherent limitations when applied to options that are not traded on public markets.

The per share fair value of options is highly sensitive to changes in assumptions. In general, the per share fair value of options will move in the same direction as changes in the expected stock price volatility, risk-free interest rate and expected option term, and in the opposite direction as changes in the expected dividend yield. For example, the per share fair value of options will generally increase as expected stock price volatility increases, risk-free interest rate increases, expected option term increases and expected dividend yield decreases. The use of different assumptions or different option pricing models could result in materially different per share fair values of options.

At the Special Meeting of Stockholders of the Company held on July 26, 2011, the stockholders of the Company approved the Oritani Financial Corp. 2011 Equity Incentive Plan (“2011 Plan”). On August 18, 2011, certain officers and employees of the Company were granted in aggregate 3,033,750 stock options and 1,227,100 shares of restricted stock, and non-employee directors received in aggregate 932,500 stock options and 373,000 shares of restricted stock. The Company will expense the fair value of all share-based compensation granted over the requisite service periods.

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

Total Assets. Total assets increased $109.8 million, or 4.4%, to $2.59 billion at June 30, 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 $213.1 million, or 61.5%, to $133.2 million at June 30, 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 deployed in securities available for sale and MBS available for sale by December 31, 2010. Over the quarter ended June 30, 2011, the Company accumulated excess liquidity primarily due to loan originations being slightly less than projections and loans prepayments being higher than projections, along with the very low rates of return available on investments. Management anticipates prudent deployment of this excess liquidity.

Loans, net. Loans, net increased $167.0 million to $1.67 billion at June 30, 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 $418.6 million and purchases totaled $12.5 million for the year ended June 30, 2011. Loan originations have been impacted by increased competition and tighter market spreads on loans.

Securities Available For Sale. Securities AFS decreased $267.3 million to $91.4 million at June 30, 2011, from $358.7 million at June 30, 2010. The decrease was primarily due to sales of $174.7 million and security calls of $286.9 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 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. As market interest rates decreased over the quarter ended June 30, 2011, investment purchases slowed due to the decreased return available on investments.

Mortgage-Backed Securities Held to Maturity. Mortgage backed securities held to maturity decreased $28.9 million, or 43.4% to $37.6 million at June 30, 2011, from $66.5 million at June 30, 2010. The decrease was due to principal repayments and sales. The held to maturity securities sold were mortgage backed securities with 15% or less of their original purchased balances remaining.

Mortgage-Backed Securities Available For Sale. Mortgage-backed securities AFS increased $427.5 million to $505.9 million at June 30, 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.

Real Estate Owned. Real estate owned (“REO”) increased $936,000 to $4.0 million at June 30, 2011, from $3.0 million at June 30, 2010. The increase is due to the Bank acquiring title to nine properties during the twelve months ended June 30, 2011, with book values of $8.2 million less write-downs of $1.7 million. Included in the $1.7 million total were $799,000 and $665,000 in write-downs during the quarter ended March 31, 2011 and the quarter ended June 30, 2011, respectively. These write-downs were based on updated appraised values of the REO properties. The increase from acquisitions was partially offset by the sale of three REO properties with net book values of $5.5 million. Proceeds from the sale of REO were $6.3 million and a net gain of $784,000 was recognized. One of these sales occurred during the quarter ended June 30, 2011 involving an REO property with a carrying value of $2.5 million being sold with a net recovery of $65,000. In conjunction with the sale, Oritani Bank provided financing to the purchaser at market rates and market terms. The REO balance at June 30, 2011 consists of eight properties. Management is trying to dispose of these properties as quickly and efficiently as possible.

Deposits. Deposits increased $91.6 million, or 7.1%, to $1.38 billion at June 30, 2011, from $1.29 billion at June 30, 2010. The trend in deposit balances through December 31, 2010 had been negative as the interest rates offered on many of the Company’s deposit products were less than those of its direct competitors, primarily due to the Company’s high liquidity position. 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 $125.3 million during the six months ended June 30, 2011 and $22.9 million of this increase was due to brokered deposits. The growth over this period, excluding the impact of the brokered deposits, reflects an actual rate of 8.2% and an annualized rate of 16.3%. Continued strong deposit growth remains a strategic objective. A new branch location opened during the March 2011 quarter in Ramsey, New Jersey. Two additional de novo branches are anticipated in fiscal 2012, one of which is currently scheduled to open in September.

Borrowings. Borrowings increased $13.8 million, or 2.8%, to $509.3 million at June 30, 2011, from $495.6 million at June 30, 2010. During the quarter ended June 30, 2011, the Company modified $52.5 million of FHLB advances. The modification caused the average term of these advances to increase by three years and the average cost to decrease 169 basis points.

Stockholders’ equity. Stockholders’ equity increased $2.0 million to $645.4 million at June 30, 2011, from $643.4 million at June 30, 2010. The increase was primarily due to net income partially offset by dividends and treasury stock repurchases. At June 30, 2011, there were 56,245,065 shares issued, 55,513,265 shares outstanding and 731,800 shares held as treasury stock. The cost of the treasury stock purchases was $9.3 million. On June 22, 2011, the Company announced that a 10% repurchase program (5,624,506 shares) would commence on June 27, 2011. As of September 9, 2011, the Company had repurchased a total of 5,160,086 shares at a total cost of $66.5 million and an average cost of $12.88 per share. In conjunction with the 2011 Equity Incentive Plan, the Company issued 1,600,100 shares, effective August 18, 2011. These shares were purchased on the open market at a total cost of $19.3 million and an average cost of $12.06 per share. Our book value per share at June 30, 2011 was $11.63. Based on our June 30, 2011 closing price of $12.79 per share, the Company stock was trading at 110.0% of book value at that date.

Comparison of Operating Results for the Years Ended June 30, 2011 and June 30, 2010

Net Income. Net income increased $20.1 million to $28.5 million, or $0. 54 per share, for the twelve months ended June 30, 2011, from net income of $8.4 million, or $0.15 per share, for the corresponding 2010 period. The primary cause of the increased income in the 2011 period was increased net interest income. The twelve month period ended June 30, 2011 was positively impacted by a higher net interest spread and a larger asset base. In addition results for the 2010 periods were reduced due to the expenses associated with the accelerated vesting of stock awards and options triggered by the Company’s second step transaction on June 24, 2010.

Total interest income. Total interest income increased $12.0 million, or 11.4%, to $117.4 million for the year ended June 30, 2011, from $105.3 million for the year ended June 30, 2010. The largest increase occurred in interest on loans, which increased $12.6 million or 14.4%, to $100.0 million for the year ended June 30, 2011, from $87.4 million for the year ended June 30, 2010. Over that same period, the average balance of loans increased $231.9 million and the yield on the portfolio decreased 13 basis points on an actual basis and increased 4 basis points on a normalized basis. Included in interest on loans for the year ended June 30, 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 $2.5 million to $5.9 million for the year ended June 30, 2011, from $8.4 million for the year ended June 30, 2010. The average balance of securities AFS decreased $17.5 million over that same period while the yield decreased 73 basis points. Interest on MBS HTM decreased $1.7 million to $1.6 million for the year ended June 30, 2011, from $3.3 million for the year ended June 30, 2010. The average balance of MBS HTM decreased $39.9 million over that same period while the yield decreased 46 basis points. Interest on MBS AFS increased $3.5 million to $8.3 million for the year ended June 30, 2011, from $4.8 million for the year ended June 30, 2010. The average balance of MBS AFS increased $256.1 million over that same period while the yield decreased 232 basis points. See “Comparison of Financial Condition at June 30, 2011 and June 30, 2010 — Securities Available for Sale” for a discussion of the investment decisions impacting the balances.

Interest Expense. Total interest expense decreased by $6.1 million, or 14.3%, to $36.3 million for the twelve months ended June 30, 2011, from $42.4 million for the twelve months ended June 30, 2010. The majority of the decrease occurred in interest expense on deposits, which decreased $5.9 million, or 27.3%, to $15.7 million for the twelve months ended June 30, 2011, versus $21.6 million for the corresponding 2010 period. The decrease occurred despite an increase in deposit balances. The average balance of deposits increased $75.2 million to $1.3 billion for the twelve months ended June 30, 2011 from $1.2 billion for the twelve months ended June 30, 2010. Over that same period, the cost of deposits decreased 55 basis points to 1.21% from 1.76%. The Company was able to successfully reprice and attract deposits at lower rates, primarily due to market conditions. The Company also succeeded growing core deposits, particularly money market accounts. Interest expense on borrowings decreased $152,000 to $20.6 million for the twelve months ended June 30, 2011, versus $20.8 million for the corresponding 2010 period. The average balance of borrowings increased $14.9 million and the cost decreased 15 basis points over the periods.

Net interest income. Net interest income increased $18.1 million, or 28.7%, to $81.0 million for the year ended June 30, 2011, from $63.0 million for the year ended June 30, 2010. The Company’s net interest rate spread and margin increased to 2.88% and 3.36% for the year ended June 30, 2011, from 2.87% (normalized) and 3.13% (normalized) for the year ended June 30, 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 2.99% and 3.25%, respectively. 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 $2.4 million and $3.0 million for the years ended June 30, 2011 and 2010, respectively, due to the impact of nonaccrual loans.

Provision for Loan Losses. The Company recorded provisions for loan losses of $9.3 million for the twelve months ended June 30, 2011 as compared to $10.0 million for the twelve months ended June 30, 2010. The Company charged off a total of $8.8 million and $4.8 million in loans during the years ended June 30, 2011 and 2010, respectively. The Company’s allowance for loan losses is analyzed quarterly and many factors are considered. The primary contributors to the current level of provision for loan losses are the delinquency and nonaccrual totals, changes in loan risk ratings, loan growth, charge-offs and economic factors.

Delinquency information is provided below:


	At June 30,
	2011		2010		2009		2008
	(In thousands)
30 - 59 days past due	$	7,025	$	12,330	$	6,727	$	27,985
60 - 89 days past due		5,327		4,629		17,825		18
Non-accrual		15,303		38,125		52,465		14,210

Total	$	27,655	$	55,084	$	77,017	$	42,213

During the year ended June 30, 2011, nonaccrual loan totals were reduced by $22.8 million and total delinquent loans were reduced by $27.4 million. One of management’s ongoing focuses is a further reduction in the level of delinquent loans. While significant progress was made in the reduction of nonaccrual and total delinquent loans over the year, management seeks to reduce these balances further. The Company has continued its aggressive posture toward delinquent borrowers.

A discussion of the significant components of the nonaccrual loan total at June 30, 2011 follows:

Oritani is involved in a participation loan in which it is not the lead lender. The loan involves four separate residential construction developments in Orange County, New York. Oritani’s portion of the loan totals $6.4 million. Although the loan has paid as agreed, the loan was placed on nonaccrual and deemed impaired as of June 30, 2011 due to a dramatic slowdown in sales at all four of the projects. The slowdown in sales negatively impacted the estimated value of the projects. In accordance with the results of the impairment analysis for this loan, a $675,000 impairment reserve was recorded as of June 30, 2011. The basis for the impairment calculation was the 2010 appraisals of the properties, which were discounted to estimate the impact of the current situation. Updated appraisals and valuation determinations are in process. If any adjustment to the impairment reserve is considered necessary, it will be reflected in the period ending September 30, 2011. Oritani has an additional $1.0 million participation loan with this lead lender to a related borrower on a different project. This loan is categorized as an accruing loan with a substandard classification as of June 30, 2011.

A $2.5 million construction loan for a luxury home in Morris County, New Jersey. Construction at the property ceased and foreclosure proceedings have commenced. While the foreclosure action is proceeding, court ordered mediation discussions are occurring. 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 June 30, 2011. In accordance with the results of the impairment analysis for this loan, based primarily on a recent appraisal, a charge off of $208,000 was recognized against this loan during the quarter ended June 30, 2011.

There are ten other multifamily/commercial real estate loans, totaling $5.1 million, classified as nonaccrual at June 30, 2011. The largest of these loans has a balance of $931,000. One of the loans, with a principal balance of $690,000, paid in full in July. Four of the loans are classified as impaired, however, no impairment reserves were considered necessary as of June 30, 2011.

There are seven other residential loans, totaling $1.3 million, classified as nonaccrual at June 30, 2011. The largest of these loans has a balance of $301,000.

Other Income. Other income decreased $34,000 with income of $5.5 million for each of the twelve months ended June 30, 2011 and 2010. Despite the stable overall results, there were fluctuations within the components. Service charges decreased $167,000 to $1.3 million for the twelve months ended June 30, 2011, from $1.5 million for the twelve months ended June 30, 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 from investments in real estate joint ventures increased $319,000 to $857,000 for the twelve months ended June 30, 2011, from $538,000 for the twelve months ended June 30, 2010. The change is primarily due to reduced income in 2010 at one commercial property due to a flood and estimated settlement costs regarding a legal matter at a multifamily property. The 2010 reduced income due to flooding is expected to recur in fiscal 2012 as the commercial property was again recently flooded and rental income at this property will likely decrease. The income reported in this caption (as well as real estate operations, net) is dependent upon the operations of various properties and is subject to fluctuation. The remaining changes are primarily due to changes in gains on sales and valuations of assets. During the twelve months ended June 30, 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. A net gain of $718,000 was realized on the sale of a real estate owned property during the twelve months ended June 30, 2011. The Company recognized impairment charges on holdings in its investment portfolio in both the 2011 and 2010 periods. The impairment charges recognized were greater in the 2010 period.

Operating Expenses. Operating expenses decreased $11.1 million to $31.7 million for the twelve months ended June 30, 2011, from $42.8 million for the twelve months ended June 30, 2010. The decrease was primarily in compensation, payroll taxes and fringe benefits, which decreased $13.2 million to $19.7 million for the twelve months ended June 30, 2011, from $32.9 million for the twelve months ended June 30, 2010. The Company’s second step transaction, which was completed on June 24, 2010, triggered an accelerated vesting of stock awards and options which had a significant impact on expenses in the 2010 period. The pre-tax charge associated with the accelerated vesting of these benefits recognized by the Company totaled $10.6 million. The year ended June 30, 2010 included charges totaling $3.7 million regarding the normal amortization of the cost of stock awards and options. There were also significant fluctuations in other expense captions. Federal deposit insurance premiums decreased $867,000 over the periods primarily due to decreased FDIC insurance rates based on our increased capital levels. Real estate owned operations increased $1.5 million primarily due to write-downs based on updated appraised values of REO. Other expenses increased $1.2 million 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.

Income Taxes. Income tax expense for the twelve months ended June 30, 2011, was $17.0 million, due to pre-tax income of $45.5 million, resulting in an effective tax rate of 37.3%. For the twelve months ended June 30, 2010, income tax expense was $7.3 million, due to pre-tax income of $15.7 million, resulting in an effective tax rate of 46.6%. The tax rate for the 2010 period was impacted by limitations on deductions associated with compensation expense. The vesting of the stock awards caused compensation for several employees to exceed the level where the full cost could be recognized as a deductible expense. Income tax benefit was reduced by $1.1 million in the 2010 period due to this limitation.

Comparison of Operating Results for the Years Ended June 30, 2010 and June 30, 2009

Net Income. Net income increased $2.8 million to $8.4 million, or $0.15 per share, for the twelve months ended June 30, 2010, from net income of $5.6 million, or $0.10 per share, for the corresponding 2009 period. The twelve month period ended June 30, 2010 was positively impacted by a higher net interest spread, a larger asset base and recoveries associated with problem loan disposals. The increased net income is also partially attributable to securities writedowns in the 2009 period (which reduced 2009 net income) and a gain on sale of assets in the 2010 period. Over the twelve month period ended June 30, 2010, we 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 these recoveries totaled $1.9 million. In addition to these non-recurring items, another significant item which negatively impacted the twelve month period ended June 30, 2010 was the accelerated vesting of stock awards and options triggered by the second step transaction. The pre-tax charge associated with the accelerated vesting of these benefits totaled $10.6 million. This charge represents an accelerated recognition of expenses that, absent the conversion, would have been amortized ratably over the period ending May 31, 2013. The vesting of these benefits also had an indirect effect on results for the 2010 period as expense associated with a nonqualified benefit plan increased by $910,000 due to the higher than anticipated compensation levels of the participants. In addition, the tax benefit associated with the net loss for the period was reduced by $1.1 million due to limitations on the deductibility of certain compensation expense. The after tax impact of the above items, which negatively impacted earnings, was $8.1 million. Net income for the twelve month period ended June 30, 2010, absent the non-recurring items discussed, would have been $14.6 million, or $0.27 per basic and fully diluted share. Our return on average assets was 0.41% (0.72% normalized) and our annualized return on average equity was 3.26% (5.69% normalized) for the twelve month period ended June 30, 2010, compared to 0.33% and 2.20% for the twelve month period ended June 30, 2009, respectively. A reconciliation of actual results for the twelve months ended June 30, 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 (1)
	For the Twelve Months Ended June 30, 2010
								Income from
	Actual GAAP		Accelerated			Subtotal Pre-		Problem Loan			Non-GAAP
	Results		Vesting			Normalized		Dispositions			Normalized (1)
	(Dollars in thousands, except per share amounts)
Selected Operating Data:
Interest income	$	105,339				$	105,339	$	(2,318	)	$	103,021
Interest expense		42,386					42,386					42,386

Net interest income		62,953		—			62,953		(2,318	)		60,635
Provision for loan losses		10,000					10,000					10,000

Net interest income after provision for loan losses		52,953		—			52,953		(2,318	)		50,635
Other income		5,486					5,486		(297	)		5,189
Other expense		42,779		(11,539	)		31,240		501			31,741

Income before income tax expense		15,660		11,539			27,199		(3,116	)		24,083
Income tax expense		7,296		3,438			10,734		(1,218	)		9,516

Net income	$	8,364	$	8,101		$	16,465	$	(1,898	)	$	14,567

Net income available to common shareholders	$	8,174				$	16,275				$	14,377


Earnings per share-basic & diluted	$	0.23				$	0.45				$	0.40

Earnings per share-basic and diluted, adjusted for the effect of the 1.50 -for-one stock split in connection with the second step transaction	$	0.15				$	0.30				$	0.27

(1)

This non-GAAP information is being disclosed because management believes that providing these non-GAAP financial measures provides investors with information useful in understanding the Company’s normalized, core operating financial performance in fiscal 2010, absent the acceleration of the vesting of the option and restricted stock grants and certain items relating to problem loan dispositions. While the Company’s management uses these non-GAAP measures in its analysis of the Company’s performance, this information should not be viewed as a substitute for financial results determined in accordance with GAAP or considered to be more important than financial results determined in accordance with GAAP.

Total interest income. Total interest income increased by $16.9 million, or 19.1%, to $105.3 million for the twelve months ended June 30, 2010, from $88.4 million for the twelve months ended June 30, 2009. The largest increase occurred in interest on loans, which increased $15.2 million, or 21.1%, to $87.4 million for the twelve months ended June 30, 2010, from $72.2 million for the twelve months ended June 30, 2009. Over that same period, the average balance of loans, net increased by $198.7 million while the yield on the portfolio increased 22 basis points on an actual basis and 6 basis points on a normalized basis. Included in interest on loans for the twelve months ended June 30, 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. Interest on securities AFS increased by $5.9 million to $8.4 million for the twelve months ended June 30, 2010, from $2.5 million for the twelve months ended June 30, 2009. The average balance of securities AFS increased $223.8 million over that same period. Excess liquidity was primarily deployed in securities classified as AFS as management believes such investments provide the best risk/reward profile considering the current and projected cash needs of the Company. Such investments are typically callable notes of government sponsored agencies with limited optionality and call features that increase the likelihood that the note would be called. Management classified the investments as AFS so that they could be sold should unexpected liquidity or other needs develop. Interest on MBS HTM decreased by $2.4 million to $3.3 million for the twelve months ended June 30, 2010, from $5.6 million for the twelve months ended June 30, 2009. Interest on MBS AFS decreased by $2.2 million to $4.8 million for the twelve months ended June 30, 2010, from $7.0 million for the twelve months ended June 30, 2009. The combined average balances of the two MBS portfolios decreased $94.0 million over the period.

Interest Expense. Total interest expense decreased by $2.1 million, or 4.8%, to $42.4 million for the twelve months ended June 30, 2010, from $44.5 million for the twelve months ended June 30, 2009. Interest expense on deposits decreased $2.6 million, or 10.9%, to $21.6 million for the twelve months ended June 30, 2010, versus $24.3 million for the corresponding 2009 period. The decrease occurred despite a significant increase in deposit balances. The average balance of deposits increased $346.4 million to $1.23 billion for the twelve months ended June 30, 2010 from $880.8 million for the twelve months ended June 30, 2009. Over that same period, the cost of deposits decreased 99 basis points to 1.76% from 2.75%. The growth was primarily in money market accounts, whose average balances increased $159.7 million over the periods, and time deposits, whose average balances increased $140.0 million over the periods. The Company was able to successfully reprice and attract deposits at lower rates, primarily due to market conditions. Interest expense on borrowings increased $525,000, or 2.6%, to $20.8 million for the twelve months ended June 30, 2010, versus $20.2 million for the corresponding 2009 period. The average balance of borrowings increased $993,000 and the cost increased 10 basis points over the periods.

Net interest income. Net interest income increased by $19.0 million, or 43.3%, to $63.0 million for the twelve months ended June 30, 2010, from $43.9 million for the twelve months ended June 30, 2009. The Company’s normalized net interest rate spread and margin for the twelve months ended June 30, 2010 were 2.87% and 3.13% (2.99% and 3.25%, actual), respectively, versus 2.36% and 2.77% for the comparable 2009 period.

The Company’s net interest income and net interest rate spread were both negatively impacted in both periods due to the reversal of accrued interest income on loans delinquent more than 90 days. The total of such income reversed was $3.0 million and $3.7 million for the twelve month periods ended June 30, 2010 and 2009, respectively.

Provision for Loan Losses. The Company recorded provisions for loan losses of $10.0 million for the twelve months ended June 30, 2010 as compared to $9.9 million for the twelve months ended June 30, 2009. The Company charged off a total of $4.8 million and $2.7 million in loans during the years ended June 30, 2010 and 2009, respectively. The Company’s allowance for loan losses is analyzed quarterly and many factors are considered. The delinquency and nonaccrual total, along with charge-offs, economic factors and loan growth, remain primary contributors to the current level of provision for loan losses.

Delinquency information is provided below:


	At June 30,
	2010		2009		2008		2007
	(In thousands)
30 - 59 days past due	$	12,330	$	6,727	$	27,985	$	555
60 - 89 days past due		4,629		17,825		18		39
Non-accrual		38,125		52,465		14,210		—

Total	$	55,084	$	77,017	$	42,213	$	594

Over the year ended June 30, 2010, nonaccrual loan totals were reduced by $14.3 million and total delinquent loans were reduced by $21.9 million. One of management’s primary objectives remains a reduction in the level of problem assets. While significant progress was made in the reduction of nonaccrual and total delinquent loans over the year, management still considered such loans to be at an elevated level.

Other Income. Other income increased by $2.7 million to $5.5 million for the twelve months ended June 30, 2010, from $2.8 million for the twelve months ended June 30, 2009. Results for the twelve months ended June 30, 2009 were reduced by a $2.0 million impairment charge taken regarding equity securities in the Company’s AFS portfolio. Included in the results for the 2010 period is a $1.0 million gain on the sale of a commercial office property that had been held and operated as a real estate investment. In addition, the 2010 period includes $297,000 of late charges received in connection with problem loan disposals and a $250,000 estimate of settlement costs regarding a legal matter at a multifamily joint venture property.

Operating Expenses. Operating expenses increased by $15.5 million to $42.8 million for the twelve months ended June 30, 2010, from $27.3 million for the twelve months ended June 30, 2009. Compensation, payroll taxes and fringe benefits increased $14.2 million to $32.9 million for the twelve months ended June 30, 2010, from $18.7 million for the twelve months ended June 30, 2009 primarily due to a $10.6 million charge associated with the accelerated vesting of stock awards and options in conjunction with the second step transaction. In addition, the vesting of these benefits necessitated a $910,000 increase in the cost of a nonqualified benefit plan. The balance of the increase was primarily due to a $1.7 million direct increase in payroll expense, and increased costs associated with the director pension plan and a nonqualified SERP. Federal deposit insurance premiums increased $474,000 and other expenses increased $553,000 primarily due to expenses associated with problem loans, such as legal costs related to foreclosure actions.

Income Taxes. Income tax expense for the twelve months ended June 30, 2010, was $7.3 million, due to pre-tax income of $15.7 million, resulting in an effective tax rate of 46.6%. The tax rate for this period was impacted by limitations on deductions associated with compensation expense. The vesting of the stock awards caused compensation for several employees to exceed the level where the full cost could be recognized as a deductible expense. Income tax benefit was reduced by $1.1 million in the 2010 period due to this limitation. For the twelve months ended June 30, 2009, income tax expense was $4.0 million, due to pre-tax income of $9.6 million, resulting in an effective tax rate of 42.0%.

Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.


	For the Years Ended June 30,
	2011							2010							2009
	Average							Average							Average
	Outstanding				Yield/			Outstanding				Yield/			Outstanding				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate
	(Dollars in thousands)
Interest-earning assets:
Loans, net ⁽¹⁾	$	1,611,961	$	99,963		6.20	%	$	1,380,040	$	87,373		6.33	%	$	1,181,385	$	72,158		6.11	%
Securities available for sale at market value		273,739		5,863		2.14			291,255		8,360		2.87			67,479		2,468		3.66
Securities held to maturity		26,515		1,399		5.28			25,506		1,343		5.27			24,937		1,069		4.29
Mortgage-backed securities available for sale at market value		360,953		8,299		2.30			104,882		4,840		4.61			145,713		7,046		4.84
Mortgage-backed securities held to maturity		49,418		1,571		3.18			89,360		3,252		3.64			142,484		5,615		3.94
Federal Funds sold and short term investments		89,575		258		0.29			47,931		171		0.36			25,021		73		0.29

Total interest-earning assets		2,412,161		117,353		4.87			1,938,974		105,339		5.43			1,587,019		88,429		5.57

Non-interest-earning assets		104,721							92,118							84,535

Total assets	$	2,516,882						$	2,031,092						$	1,671,554


Interest-bearing liabilities:
Savings accounts	$	149,977		941		0.63	%	$	156,444		1,279		0.82	%	$	144,810		1,979		1.37	%
Money market deposit accounts		312,574		3,177		1.02			263,675		3,784		1.44			103,932		2,626		2.53
Checking accounts		152,256		855		0.56			110,393		825		0.75			75,324		628		0.83
Time deposits		687,602		10,746		1.56			696,732		15,735		2.26			556,730		19,029		3.42

Total deposits		1,302,409		15,719		1.21			1,227,244		21,623		1.76			880,796		24,262		2.75
Borrowings		521,541		20,611		3.95			506,592		20,763		4.10			505,599		20,238		4.00

Total interest-bearing liabilities		1,823,950		36,330		1.99	%		1,733,836		42,386		2.44	%		1,386,395		44,500		3.21	%

Non-interest-bearing liabilities		48,505							41,032							33,071

Total liabilities		1,872,455							1,774,868							1,419,466
Stockholders’ Equity		644,427							256,224							252,088

Total liabilities and Stockholders’ Equity	$	2,516,882						$	2,031,092						$	1,671,554


Net interest income			$	81,023						$	62,953						$	43,929

Net interest rate spread ⁽²⁾						2.88	%						2.99	%						2.36	%

Net interest-earning assets⁽³⁾	$	588,211						$	205,138						$	200,624

Net interest margin ⁽⁴⁾						3.36	%						3.25	%						2.77	%

Ratio of interest-earning assets to interest-bearing liabilities						132.25	%						111.83	%						114.47	%


(1)		Includes nonaccrual loans.

(2)		Includes Federal Home Loan Bank stock.

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

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

(5)		Net interest margin represents net interest income as a percent of average interest-earning assets for the period.

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the fiscal years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total increase (decrease) column represents the sum of the prior columns.


	Years Ended June 30,									Years Ended June 30,
	2011 vs. 2010									2010 vs. 2009
	Increase (Decrease)						Total			Increase (Decrease)Due						Total
	Due to						Increase			to						Increase
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans, net	$	14,683		$	(2,093	)	$	12,590		$	12,134		$	3.081		$	15,215
Securities available for sale		(503	)		(1,994	)		(2,497	)		8,184			(2,292	)		5,892
Securities held to maturity		53			3			56			24			250			274
Mortgage-backed securities available for sale		11,817			(8,358	)		3,459			(1,974	)		(232	)		(2,206	)
Mortgage-backed securities held to maturity		(1,454	)		(227	)		(1,681	)		(2,094	)		(269	)		(2.363	)
Federal Funds sold and short term investments		149			(62	)		87			67			31			98


Total interest-earning assets		24,746			(12,732	)		12,014			16,341			569			16,910


Interest-bearing liabilities:
Savings accounts		(53	)		(285	)		(338	)		159			(859	)		(700	)
Money market		702			(1,309	)		(607	)		4,036			(2,878	)		1,158
Checking accounts		313			(283	)		30			292			(95	)		197
Time deposits		(206	)		(4,783	)		(4,989	)		4,785			(8,079	)		(3,294	)

Total deposits		756			(6,660	)		(5,904	)		9,272			(11,911	)		(2,639	)

Borrowings		613			(765	)		(152	)		40			485			525


Total interest-bearing liabilities		1,368			(7,424			(6,056	)		9,312			(11,426	)		(2,114	)


Change in net interest income	$	23,377		$	(5,307	)	$	18,070		$	7,029		$	11,995		$	19,024

Management of Market Risk

General. 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. In addition, in 2011, the Company has engaged the services of an outside consultant to assist with the measurement and analysis of interest rate risk.

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 multifamily and commercial real estate loans that generally tend to have shorter interest duration and generally have interest rates that reset at five years;

	(ii)		investing in shorter duration securities and mortgage-backed securities;

	(iii)		obtaining general financing through FHLB advances with a fixed long term: and

	(iv)		obtaining financing through the use of long term brokered deposits.

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. In addition, if changes occur that cause the estimated duration of a security to lengthen significantly, management will consider the sale of such security. 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 our 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 June 30, 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)
Change in Interest			Estimated Increase (Decrease) in									Increase
Rates (basis	Estimated		NPV									(Decrease)
points) (1)	NPV (2)		Amount			Percent			NPV Ratio (4)			(basis points)
(Dollars in thousands)

+200		561,699		(95,897	)		(14.6	)%		23.1	%		(229	)
0		657,596		—			—			25.4			—
-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 June 30, 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. This data does not reflect any future actions we may take in response to changes in interest rates, such as changing the mix of our assets and liabilities, which could change the results of the NPV and net interest income calculations.

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.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan and security repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, mortgage prepayments and security prepayments and calls are greatly influenced by general interest rates, economic conditions and competition. Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs of our customers as well as unanticipated contingencies. Our Asset/Liability Management Committee focuses on our level of liquid assets as well as our borrowing capacity with the FHLB. Funds can be obtained from the FHLB on a same day basis, significantly reducing the need to maintain excess liquid assets to address liquidity concerns.

We regularly adjust our investments in liquid assets based upon our assessment of:

	(i)		expected loan demand;

	(ii)		expected deposit flows;

	(iii)		expected payments from the loan and investment portfolios;

	(iv)		funds available through borrowings;

	(v)		yields available on interest-earning deposits and securities

	(vi)		yields and structures available on alternate investments; and.

	(vii)		the objectives of our asset/liability management program

Excess liquid assets are invested generally in interest-earning deposits and short- and intermediate-term securities.

Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At June 30, 2011, cash and cash equivalents totaled $133.2 million. Securities and mortgage-backed securities classified as available for sale, which provide additional sources of liquidity, totaled $597.4 million at June 30, 2011.

Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Consolidated Statements of Cash Flows included in our Consolidated Financial Statements.

At June 30, 2011, we had $101.9 million in loan commitments outstanding. In addition to commitments to originate loans, we had $51.5 million in unused lines of credit to borrowers. Time deposits due within one year of June 30, 2011 totaled $519.3 million, or 37.6% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other time deposits and FHLB advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the time deposits. We believe, however, based on past experience, that a significant portion of our time deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our primary investing activity currently is the origination of loans and the purchase of loans and securities. During the year ended June 30, 2011, we originated $418.6 million of loans, purchased $12.5 million of loans, and purchased $747.8 million of securities. During the year ended June 30, 2010, we originated $417.4 million of loans, purchased $34.5 million of loans, and purchased $448.4 million of securities.

Financing activities consist primarily of activity in deposit accounts and FHLB advances. We experienced a net increase in total deposits of $91.6 million and $162.1 million for the fiscal years ended June 30, 2011 and 2010, respectively. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors.

Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB of New York, which provide an additional source of funds. FHLB advances reflected a net increase of $13.8 million and a net decrease of $13.43 million during the fiscal years ended June 30, 2011 and 2010, respectively. FHLB advances have primarily been used to fund loan demand and provide longer-term sources of funding. At June 30, 2011, the Company had additional borrowing capacity of $821.4 million with the FHLB.

Oritani Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2011, Oritani Bank exceeded all regulatory capital requirements. Oritani Bank is considered “well capitalized” under regulatory guidelines. See “Supervision and Regulation-Federal Banking Regulation-Capital Requirements” and Note 15 of the Notes to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit, standby letters of credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. We consider commitments to extend credit in determining our allowance for loan losses. For additional information, see Note 3, “Loans,” to our Consolidated Financial Statements.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment.

The following table summarizes our significant fixed and determinable contractual obligations and other funding needs by payment date at June 30, 2011. The payment amounts represent those amounts due to the recipient and do not include any unamortized premiums or discounts or other similar carrying amount adjustments.


	Payments Due by Period
	Less than		One to Three		Three to Five		More than
	One Year		Years		Years		Five Years		Total
Contractual Obligations	(In thousands)
Federal Home Loan Bank advances	$	—	$	144,934	$	139,381	$	225,000	$	509,315

Operating leases		539		836		478		177		2,030

Total	$	539	$	145,770	$	139,859	$	225,177	$	511,345

Commitments to extend credit	$	100,166	$	1,700	$	—	$	—	$	101,866

Unadvanced construction loans	$	12,032	$	—	$	—	$	—	$	12,032

Unused lines of credit	$	39,434	$	—	$	—	$	—	$	39,434

Commitments to purchase securities	$	—	$	—	$	—	$	—	$	—

Impact of Inflation and Changing Prices

Our consolidated financial statements and related notes have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.


ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For information regarding market risk, see Item 7- “Management’s Discussion and Analysis of Financial Conditions and Results of Operation.”


ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements are included in Part III, Item 15 of this Form 10-K.


ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable


ITEM 9A.		CONTROLS AND PROCEDURES

(a)

Evaluation of disclosure 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 fiscal year (the “Evaluation Date”). Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

(b)

Changes in internal controls.

The Company considers management of internal controls to be an ongoing matter. While various adjustments to internal controls have been made over the period, there were no changes made in our internal control over financial reporting during the Company’s fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

(c)

Management report on internal control over financial reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of Oritani Financial Corp.; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Oritani Financial Corp.’s management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2011. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment we believe that, as of June 30, 2011, the Company’s internal control over financial reporting is effective based on those criteria.

Oritani Financial Corp.’s independent registered public accounting firm that audited the consolidated financial statements has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of June 30, 2011. This report appears on page 67.

The Sarbanes-Oxley Act Section 302 Certifications have been filed with the SEC as exhibit 31.1 and exhibit 31.2 to this Annual Report on Form 10-K.


ITEM 9B.		OTHER INFORMATION

Not Applicable.

PART III


ITEM 10.		DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The “Proposal I—Election of Directors” section of the Company’s definitive proxy statement for the Company’s 2011 Annual Meeting of Stockholders (the “2011 Proxy Statement”) is incorporated herein by reference.


ITEM 11.		EXECUTIVE COMPENSATION

The “Proposal I—Election of Directors” section of the Company’s 2011 Proxy Statement is incorporated herein by reference.


ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The “Proposal I—Election of Directors” section of the Company’s 2011 Proxy Statement is incorporated herein by reference.

The Company does not have any equity compensation program that was not approved by stockholders, other than its employee stock ownership plan.


ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The “Transactions with Certain Related Persons” section of the Company’s 2011 Proxy Statement is incorporated herein by reference.


ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES

The “Proposal II — Ratification of Appointment of Independent Registered Public Accounting Firm” Section of the Company’s 2011 Proxy Statement is incorporated herein by reference.


ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

The following documents are filed as part of this Form 10-K.

	(A)		Report of Independent Registered Public Accounting Firm

	(B)		Consolidated Balance Sheets — at June 30, 2011 and 2010

	(C)		Consolidated Statements of Income — Years ended June 30, 2011, 2010 and 2009

	(D)		Consolidated Statements of Stockholders’ Equity — Years ended June 30, 2011, 2010 and 2009

	(E)		Consolidated Statements of Cash Flows — Years ended June 30, 2011, 2010 and 2009

	(F)		Notes to Consolidated Financial Statements.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Oritani Financial Corp.
Township of Washington, New Jersey:

We have audited the accompanying consolidated balance sheets of Oritani Financial Corp. and subsidiaries (the Company) as of June 30, 2011 and 2010 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Oritani Financial Corp. and subsidiaries as of June 30, 2011 and 2010 and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2011 in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 12, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP
Short Hills, New Jersey
September 12, 2011

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Oritani Financial Corp.
Township of Washington, New Jersey:

We have audited Oritani Financial Corp.’s and subsidiaries (the Company) internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Oritani Financial Corp. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Oritani Financial Corp. and subsidiaries as of June 30, 2011 and 2010, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2011, and our report dated September 12, 2011 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
Short Hills, New Jersey
September 12, 2011

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Consolidated Balance Sheets
June 30, 2011 and 2010


	2011			2010
	(Dollars in thousands)
Assets
Cash and cash equivalents on hand and in banks	$	6,978		$	6,511
Federal funds sold and short term investments		126,265			339,828

Cash and cash equivalents (note 3)		133,243			346,339

Loans, net (notes 4 and 5)		1,672,849			1,505,880
Securities available for sale, at fair value (notes 7 and 12)		91,442			358,723
Mortgage-backed securities held to maturity, fair value of $38,522 and $68,622 (notes 6 and 12)		37,609			66,468
Mortgage-backed securities available for sale, at fair value (notes 7 and 12)		505,932			78,477
Bank Owned Life Insurance (at cash surrender value)		44,689			30,529
Federal Home Loan Bank of New York stock, at cost		26,844			25,081
Accrued interest receivable (note 8)		9,237			9,425
Investments in real estate joint ventures, net		5,309			5,562
Real estate held for investment		1,185			1,221
Real estate owned		3,967			3,031
Office properties and equipment, net (note 9)		15,012			14,832
Deferred tax assets, net (note 11)		22,607			23,154
Other assets		17,308			8,698

Total assets	$	2,587,233		$	2,477,420


Liabilities and Stockholders’ Equity
Liabilities:
Deposits (note 10)	$	1,381,310		$	1,289,746
Borrowings (note 12)		509,315			495,552
Advance payments by borrowers for taxes and insurance		12,846			11,060
Official checks outstanding		5,409			4,742
Other liabilities (note 13)		32,941			32,927

Total liabilities		1,941,821			1,834,027


Stockholders’ Equity (notes 2 and 16):
Common stock, $0.01 par value; 150,000,000 shares authorized; 56,245,065 shares issued and 55,513,265 shares outstanding at June 30, 2011; 56,202,485 shares issued and outstanding at June 30, 2010		562			562
Additional paid-in capital		489,593			488,684
Unallocated common stock held by the employee stock ownership plan		(28,808	)		(30,033	)
Treasury stock, at cost; 731,800 shares at June 30, 2011		(9,300	)		—
Retained income (note 11)		190,955			182,172
Accumulated other comprehensive income, net of tax		2,410			2,008

Total stockholders’ equity		645,412			643,393


Commitments and contingencies (notes 4 and 15)
Total liabilities and stockholders’ equity	$	2,587,233		$	2,477,420

See accompanying notes to consolidated financial statements.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Consolidated Statements of Income
Years ended June 30, 2011, 2010 and 2009


	2011			2010			2009
	(Dollars in thousands)
Interest income:
Interest on mortgage loans	$	99,963		$	87,373		$	72,158
Interest on securities held to maturity and dividends on FHLB stock		1,399			1,343			1,069
Interest on securities available for sale		5,863			8,360			2,468
Interest on mortgage-backed securities held to maturity		1,571			3,252			5,615
Interest on mortgage-backed securities available for sale		8,299			4,840			7,046
Interest on federal funds sold and short term investments		258			171			73

Total interest income		117,353			105,339			88,429


Interest expense:
Deposits (note 10)		15,719			21,623			24,262
Borrowings (note 12)		20,611			20,763			20,238

Total interest expense		36,330			42,386			44,500


Net interest income before provision for loan losses		81,023			62,953			43,929
Provision for loan losses (note 5)		9,300			10,000			9,880

Net interest income after provision for loan losses		71,723			52,953			34,049


Other income:
Service charges		1,310			1,477			1,122
Real estate operations, net		1,199			1,267			1,294
Income from investments in real estate joint ventures		857			538			1,124
BOLI income		1,210			1,144			1,127
Net loss on sale and write down of securities		(49	)		(167	)		(2,045	)
Gain on sale of real estate held for investment		—			1,043			—
Gain on sale of real estate owned		718			—			—
Other income		207			184			158

Total other income		5,452			5,486			2,780


Operating expenses:
Compensation, payroll taxes and fringe benefits (notes 13 and 14)		19,682			32,871			18,670
Advertising		657			665			635
Office occupancy and equipment expense (notes 9 and 15)		2,425			2,290			2,088
Data processing service fees		1,231			1,131			1,069
Federal insurance premiums		1,381			2,248			1,774
Real estate owned expense		1,996			462			—
Other expenses		4,344			3,112			3,021

Total operating expenses		31,716			42,779			27,257


Income before income tax expense		45,459			15,660			9,572
Income tax expense (note 11)		16,952			7,296			4,020

Net income	$	28,507		$	8,364		$	5,552

Net income available to common stockholders	$	28,507		$	8,174		$	5,459

Basic and fully diluted income per common share	$	0.54		$	0.15		$	0.10

See accompanying notes to consolidated financial statements.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Consoldiated Statements of Stockholders’ Equity
Years ended June 30, 2011, 2010 and 2009


															Accumu-
									Un-						lated
									allocated						other
									common						compre-			Total
			Additional						stock						hensive			stock-
	Common		paid-in			Treasury			held by			Retained			income(loss)			holders’
	Stock		capital			Stock			ESOP			income			net of tax			equity
Balance at June 30, 2008	$	130	$	128,656		$	(5,926	)	$	(14,704	)	$	171,160		$	(341	)	$	278,975
Comprehensive income:
Net income		—		—			—			—			5,552			—			5,552
Unrealized holding gain on securities available for sale arising during year, net of tax $200		—		—			—			—			—			203			203
Reclassification adjustment for losses included in net income, net of tax of $815		—		—			—			—			—			1,231			1,231
Change in funded status of retirement obligations, net of tax of $249		—		—			—			—			—			(372	)		(372	)

Total comprehensive income																			6,614

Cash dividends declared		—		—			—			—			(437	)		—			(437	)
Cumulative effect adjustment upon adoption of EITF 06-4		—		—			—			—			(76	)		—			(76	)
Purchase of treasury stock (4,818,506 shares)		—		—			(49,989	)		—			—			—			(49,989	)
Treasury stock allocated to restricted stock plan (238,439 shares)		—		(2,497	)		2,497			—			—			—			—
Compensation cost for stock options and restricted stock		—		3,804			—			—			—			—			3,804
ESOP shares allocated or committed to be released		—		412			—			795			—			—			1,207

Balance at June 30, 2009	$	130	$	130,375		$	(53,418	)	$	(13,909	)	$	176,199		$	721		$	240,098

Comprehensive income:
Net income		—		—			—			—			8,364			—			8,364
Unrealized holding gain on securities available for sale arising during year, net of tax $987		—		—			—			—			—			1,436			1,436
Reclassification adjustment for losses included in net income, net of tax of $15		—		—			—			—			—			45			45
Change in funded status of retirement obligations, net of tax of $131		—		—			—			—			—			(194	)		(194	)

Total comprehensive income																			9,651

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Consoldiated Statements of Stockholders’ Equity
Years ended June 30, 2011, 2010 and 2009


																Accumu-
										Un-						lated
										allocated						other
										common						compre-			Total
				Additional						stock						hensive			stock-
	Common			paid-in			Treasury			held by			Retained			income(loss)			holders'
	Stock			capital			Stock			ESOP			income			net of tax			equity
Cash dividends declared		—			—			—			—			(2,391	)		—			(2,391	)
Purchase of treasury stock (137,250 shares)		—			—			(1,231	)		—			—			—			(1,231	)
Treasury stock allocated to restricted stock plan (159,353 shares)		—			(1,616	)		1,616			—			—			—			—
Corporate Reorganization:
Oritani Financial Corp., MHC capital contribution		—			209			—			—			—			—			209
Treasury stock retired		(34	)		(52,999	)		53,033			—			—			—			—
Exchange of common stock		(96	)		94			—			—			—			—			(2	)
Proceeds from stock offering, net of offering expenses		557			401,195			—			—			—			—			401,752
Issuance of stock for restricted stock awards		5			(5	)
Purchase of cmmon stock by ESOP		—			—			—			(17,134	)		—			—			(17,134	)
Compensation cost for stock options and restricted stock		—			11,115			—			—			—			—			11,115
ESOP shares allocated or committed to be released		—			267			—			1,010			—			—			1,277
Tax benefit from stock-based compensation		—			49			—			—			—			—			49

Balance at June 30, 2010	$	562		$	488,684		$	—		$	(30,033	)	$	182,172		$	2,008		$	643,393

Net income		—			—			—			—			28,507			—			28,507
Unrealized holding gain on securities available for sale arising during year, net of tax $114		—			—			—			—			—			(214	)		(214	)
Reclassification adjustment for losses included in net income, net of tax of $60		—			—			—			—			—			95			95
Change in funded status of retirement obligations, net of tax of $347		—			—			—			—			—			521			521

Total comprehensive income																				28,909

Cash dividends declared		—			—			—			—			(19,724	)		—			(19,724	)
Purchase of treasury stock (731,800 shares)		—			—			(9,300	)		—			—			—			(9,300	)
Exercise of stock options		—			429			—			—			—			—			429
Compensation cost for stock options		—			23			—			—			—			—			23
ESOP shares allocated or committed to be released		—			457			—			1,225			—			—			1,682

Balance at June 30, 2011	$	562		$	489,593		$	(9,300	)	$	(28,808	)	$	190,955		$	2,410		$	645,412

See accompanying notes to consolidated financial statements.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Consolidated Statements of Cash Flows
Years ended June 30, 2011, 2010 and 2009


	2011			2010			2009
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	28,507		$	8,364		$	5,552
Adjustments to reconcile net income to net cash provided by operating activities:
ESOP and stock-based compensation expense		1,705			12,392			5,011
Depreciation of premises and equipment		856			815			701
Amortization (accretion) of premiums and discounts, net		850			(155	)		62
Provision for losses on loans		9,300			10,000			9,880
Writedown of real estate owned		1,703			437			—
Accretion of deferred loan fees, net		(1,076	)		(913	)		(797	)
Decrease (increase) in deferred taxes		213			(3,337	)		(4,438	)
Impairment charge on securities		291			202			1,984
(Gain) loss on sale of securities		(242	)		(35	)		61
Gain on sale of real estate held for investment		—			(1,043	)		—
Gain on sale of real estate owned		(718	)		—			—
Increase in cash surrender value of bank owned life insurance		(1,210	)		(1,144	)		(1,127	)
Decrease (increase) in accrued interest receivable		188			(1,458	)		(2,321	)
Decrease (increase) in other assets		1,710			(6,250	)		(1,125	)
Increase in other liabilities		797			9,923			3,557

Net cash provided by operating activities		42,874			27,798			17,000

Cash flows from investing activities:
Net increase in loans receivable		(178,307	)		(209,367	)		(243,561	)
Purchase of mortgage loans		(12,548	)		(34,445	)		(37,068	)
Proceeeds from sales of mortgage loans		—			4,000			—
Purchase of securities available for sale		(197,486	)		(443,246	)		(163,679	)
Purchase of mortgage-backed securities held to maturity		(8,334	)		—			—
Purchase of mortgage-backed securities available for sale		(542,023	)		(5,106	)		(11,257	)
(Purchase) redemption of Federal Home Loan Bank of New York stock		(1,763	)		468			(4,002	)
Principal payments on mortgage-backed securities held to maturity		27,156			42,737			44,928
Principal payments on mortgage-backed securities available for sale		110,196			49,170			34,562
Proceeds from calls and maturities of securities available for sale		286,880			230,640			38,895
Proceeds from sales of mortgage-backed securities held to maturity		10,176			9,361			—
Proceeds from sales of mortgage-backed securities available for sale		6,355			6,087			—
Proceeds from sales of securities available for sale		174,694			1,000			500
Purchase of Bank Owned Life Insurance		(12,950	)		—			(1,833	)
Net increase in real estate held for investment		(79	)		(33	)		(1,445	)
Proceeds from sale of real estate		4,349			1,182			—
Net decrease (increase) in real estate joint ventures		251			552			(366	)
Purchase of fixed assets		(1,055	)		(1,870	)		(1,500	)

Net cash used by investing activities		(334,488	)		(348,870	)		(345,826	)

Cash flows from financing activities:
Net increase in deposits		91,564			162,116			428,698
Net proceeds from issuance of common stock		429			401,752			—
Purchase of common stock for ESOP		—			(17,134	)		—
Dividends paid to shareholders		(19,724	)		(2,830	)		—
Increase in advance payments by borrowers for taxes and insurance		1,786			2,759			1,277
Proceeds from borrowed funds		438,380			43,475			341,225
Repayment of borrowed funds		(424,617	)		(56,914	)		(265,906	)
Purchase of treasury stock		(9,300	)		(1,231	)		(49,989	)
Tax benefit from stock-based compensation		—			49			—

Net cash provided by financing activities		78,518			532,042			455,305

Net (decrease) increase in cash and cash equivalents		(213,096	)		210,970			126,479
Cash and cash equivalents at beginning of year		346,339			135,369			8,890

Cash and cash equivalents at end of year	$	133,243		$	346,339		$	135,369

Supplemental cash flow information:
Cash paid during the year for:
Interest	$	36,445		$	42,633		$	44,262
Income taxes		13,440			12,685			9,812
Noncash transfers
Loans receivable transferred to real estate owned		8,978			3,468			—
Loans transferred to other assets		9,484			—			—
RE Held for Investment transferred to Office, Property and Equipment		—			—			3,690

See accompanying notes to consolidated financial statements.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

Principles of Consolidation

		The consolidated financial statements are comprised of the accounts of Oritani Financial Corp. (the Company), and 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 intercompany balances and transactions have been eliminated in consolidation.

		*Business*

The Company provides a wide range of deposit banking services to individual and corporate customers in the New Jersey counties of Bergen, Hudson, Essex and Passaic. The Company provides loans to individual and corporate customers in New Jersey and portions of the states of New York, Connecticut, Pennsylvania, Delaware and Maryland. The Company is subject to competition from other financial institutions and to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

		The following are the significant accounting policies which were followed in preparing and presenting these consolidated financial statements.

		*Basis of Financial Statement Presentation*

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 June 30, 2011 and 2010, and in the Consolidated Statements of Income for the years ended June 30, 2011, 2010 and 2009. Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowance for loan losses, management generally obtains independent appraisals for significant properties.

A substantial portion of the Company’s loans are secured by real estate in the New Jersey, New York and Pennsylvania markets. In addition, the real estate joint ventures and real estate owned are located in that same market. Accordingly, as with most financial institutions in the market area, the ultimate collectibility of a substantial portion of the Company’s loan portfolio and the recovery of the carrying amount of real estate joint ventures and real estate owned are susceptible to changes in market conditions.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Notes to Consolidated Financial Statements

Securities

		Securities include debt, mortgage-backed and marketable equity securities. Management determines the appropriate classification of securities as either available for sale or held to maturity at the purchase date. Securities that may be sold in response to changing market and interest rate conditions or as part of an overall asset/liability strategy are classified as available for sale. Gains or losses on sales of securities available for sale are based upon the specific-identification method. Securities classified as available for sale are carried at fair value with unrealized gains and losses net of applicable taxes, included in accumulated other comprehensive income (loss), a component of equity. If management has the intent and the ability at the time of purchase to hold securities until maturity, they are classified as held to maturity. Securities held to maturity are carried at cost, adjusted for unamortized purchase premiums and discounts. Premiums and discounts on securities are accreted or amortized using the level-yield method over the estimated lives of the securities, including the effect of prepayments. Any portion of unrealized loss on an individual equity security deemed to be other than temporary is recognized as a loss in operations in the period in which such determination is made. For debt investment securities deemed other than temporarily impaired, the investment is written down through current earnings by the impairment related to the estimated credit loss and the non-credit related impairment is recognized in other comprehensive income. In the ordinary course of business, securities are pledged as collateral in conjunction with the Company’s borrowings and lines of credit.

		*Loans*

Mortgages on real estate and other loans are stated at the outstanding principal amount of the loans, net of deferred loan fees/costs and the allowance for loan losses. Loan origination and commitment fees, net of related costs, are deferred and amortized as an adjustment to the loan’s yield, utilizing the level yield method, over the actual lives of the related loans. Interest income on loans is accrued and credited to interest income as earned. Loans are generally placed on nonaccrual status when they become delinquent 90 days or more as to principal or interest, or when it appears that principal or interest is uncollectible. Interest accrued prior to a loan being placed on nonaccrual status is subsequently reversed. Interest income on nonaccrual loans is recognized only in the period it is ultimately collected. Loans are returned to an accrual status when factors indicating doubtful collectibility no longer exist. Loans are generally charged off after an analysis is completed which indicates collectibility of principal and interest is in doubt.

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. Loans individually classified as impaired include multifamily, commercial mortgage and construction loans. Impaired loans are individually assessed to determine that each loan’s carrying value is not in excess of the fair value of the related collateral or the present value of the expected future cash flows. Residential mortgage and consumer loans are deemed smaller balance homogeneous loans which are evaluated collectively for impairment and are generally excluded from the population of impaired loans.

Consumer loans and any portion of residential real estate mortgage loans not adequately secured are generally charged off when deemed to be uncollectible unless it can be clearly demonstrated that repayment will occur regardless of the delinquency status. Examples that would demonstrate repayment include; a loan that is secured by collateral and is in the process of collection; a loan supported by a valid guarantee or insurance; or a loan supported by a valid claim against a solvent estate. Charge-offs of commercial real estate mortgage loans are made on the basis of management’s ongoing evaluation of nonperforming loans. In the ordinary course of business, loans are pledged as collateral in conjunction with the Company’s borrowings.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Notes to Consolidated Financial Statements

Allowance for Loan Losses

An allowance for loan losses is charged to operations based on management’s evaluation of the probable losses inherent in its portfolio. Such evaluation includes a review of all loans for which full collectibility may not be reasonably assured and considers, among other matters, the estimated net realizable value of the underlying collateral, economic conditions and other matters which warrant consideration. Subsequent recoveries, if any, are credited to the allowance.

		Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions in the Company’s market area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

		*Troubled-Debt Restructuring*

		Troubled debt restructured (“TDR”) loans 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 restructured debt is at 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.

		*Real Estate Owned*

		Real Estate acquired through foreclosure or deed-in-lieu of foreclosure 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. 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. Operating costs after acquisition are expensed.

		*Bank Owned Life Insurance*

Bank-owned life insurance is accounted for using the cash surrender value method and is recorded at its realizable value. The change in the cash surrender value is included in other noninterest income.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Notes to Consolidated Financial Statements

Federal Home Loan Bank of New York Stock

		The Bank, as a member of the Federal Home Loan Bank of New York (“FHLB”), is required to hold _____shares of capital stock in the FHLB in an amount based on the Bank’s total investment in mortgage related assets and advances. The requirement pertaining to mortgage related assets is a range from 0.10% to 0.25% of mortgage related assets, and is currently equal to 0.20%. The requirement pertaining to advances is a range from 4.0% to 5.0% of total advances, and is currently equal to 4.5%. The stock is carried at cost. In performing our other-than-temporary impairment analysis of FHLB stock, we evaluated, among other things, (i) its earnings performance, including the significance of any decline in net assets of the FHLB as compared to the regulatory capital amount of the FHLB, (ii) the commitment by the FHLB to make required dividend payments, and (iii) the liquidity position of the FHLB. We do not consider this security to be impaired at June 30, 2011.

		*Investments in Real Estate Joint Ventures, Net*

		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.

		*Real Estate Held for Investment*

		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.

		*Office Properties and Equipment*

		Office properties and equipment are carried at cost, less accumulated depreciation. Depreciation of office properties and equipment is computed on a straight-line basis over the estimated useful lives of the related assets. The Company uses the following estimated useful lives for its office properties and equipment categories: land improvements — 15 years; building and major building improvements — 40 years; minor building improvements — 10 years and furniture and fixtures — 3 to 7 years. Leasehold improvements are amortized over the lesser of the remaining life of the lease or the useful life of the improvement.

		*Employee Benefit Plans*

The Bank has a defined benefit pension plan which covers all employees who satisfy the eligibility requirements. The Bank participates in a multi-employer plan. Costs of the pension plan are based on the contribution required to be made to the program. The Bank’s policy is to fund at least the minimum contribution required by the Employee Retirement Income Security Act of 1974, as amended. The Plan was frozen as of December 31, 2008.

The Bank has a 401(k) savings incentive plan covering substantially all employees of the Bank. The Bank may match a percentage of the first 6% of employee contributions. The contribution percentage is determined annually by the Board of Directors.

The employee stock ownership plan (“ESOP”) is accounted for in accordance with the provisions of ASC 718, “Employers’ Accounting for Employee Stock Ownership Plans.” The funds borrowed by the ESOP from the Company to purchase the Company’s common stock will be repaid from the Bank’s contributions over a period of up to 25 years. The Company’s common stock not yet allocated to participants is recorded as a reduction of stockholders’ equity at cost. Compensation expense for the ESOP is based on the market price of the Company’s stock and is recognized as shares are committed to be released to participants.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Notes to Consolidated Financial Statements

The Bank provides several nonqualified, defined benefit plans which provide benefits to executive officers and directors of the Company. These plans are unfunded and the costs of the plans are recognized over the period that services are provided.

The Company provides several post-retirement benefit plans to directors and certain retired employees and will provide such benefits to certain active officers that are accounted for in accordance with ASC 715, “Compensation-Retirement Benefits”. This guidance requires an employer to: (a) recognize in its statement of financial condition the overfunded or underfunded status of a defined benefit postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation; (b) measure a plan’s assets and its obligations that determine its funded status as of the date of its year-end balance sheet and (c) recognize as a component of other comprehensive income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period. The Company accrues the cost of post-retirement benefit plans during the employee’s period of active service.

		The Company’s equity incentive plan is accounted for in accordance with ASC 718, “Compensation-Stock Compensation”. This guidance requires companies to recognize in the statement of earnings the grant-date fair value of stock based awards issued to employees. Compensation cost related to stock based awards is recognized on a straight-line basis over the requisite service periods.

		*Income Taxes*

		The Company records income taxes in accordance with ASC 740, “Income Taxes,” using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns; (ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled. Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment. The valuation allowance is adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant. Income taxes are allocated to the individual entities within the consolidated group based on the effective tax rate of the entity.

		*Comprehensive Income*

		Comprehensive income is divided into net income and other comprehensive income. Other comprehensive income includes items recorded directly to equity, such as unrealized gains and losses on securities available for sale, change in actuarial gains and losses on other post retirement benefits, and change in service cost on other postretirement benefits, net of taxes. Comprehensive income is presented in the consolidated statements of changes in equity.

		*Earnings Per Share*

Basic earnings per share, or EPS, is computed by dividing net income by the weighted average number of shares outstanding for the period. ASC 260, “Earnings Per Share”, provides that unvested share-based payment awards that contain non-forfeitable 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 our outstanding non-vested restricted stock awards are 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.

ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey

Notes to Consolidated Financial Statements

		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 and unvested shares of restricted stock were exercised and converted into common stock. 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 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.

		*Reclassifications*

Certain items previously reported have been reclassified to conform with the current period’s reporting format.

(2) Stock Transactions

Stock Offering

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 vesti

Oritani Financial Corp - FORM 10-K - September 12, 2011

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