Edgar Filing: Oritani Financial Corp

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller Reporting company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2012

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

For the transition period from to

Commission File No. 001-34786

Oritani Financial Corp.

(Exact name of registrant as specified in its charter)

Delaware

30-0628335

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

370 Pascack Road, Township of Washington, New Jersey 07676

(Address of Principal Executive Offices)

(201) 664-5400

(Registrant’s telephone number)

N/A

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

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

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 x NO ¨ .

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

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

As of February 8, 2013, there were 56,245,065 shares of the Registrant’s common stock, par value $0.01 per share, issued and 45,383,031 shares outstanding.

Oritani Financial Corp.

FORM 10-Q

Index


		Page
	Part I. Financial Information

Item 1.	Financial Statements		3

	Consolidated Balance Sheets as of December 31, 2012 (unaudited) and June 30, 2012		3

	Consolidated Statements of Income for the Three and Six Months Ended December 31, 2012 and 2011 (unaudited)		4

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended December 31, 2012 and 2011 (unaudited)		5

	Consolidated Statements of Stockholders’ Equity for the Six Months Ended December 31, 2012 and 2011 (unaudited)		6

	Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2012 and 2011 (unaudited)		7

	Notes to unaudited Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		42

Item 4.	Controls and Procedures		44

	Part II. Other Information

Item 1.	Legal Proceedings		44

Item 1A.	Risk Factors		44

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

Item 3.	Defaults upon Senior Securities		45

Item 4.	Mine Safety Disclosures		45

Item 5.	Other Information		46

Item 6.	Exhibits		46

	Signature Page		47

Part I. Financial Information

Item 1. Financial Statements

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Balance Sheets

(In thousands, except share data)


	December 31,			June 30,
	2012			2012
	(unaudited)			(audited)
Assets
Cash on hand and in banks	$	4,216		$	4,016
Federal funds sold and short term investments		5,857			7,423

Cash and cash equivalents		10,073			11,439

Loans, net		2,182,162			1,992,817
Securities available for sale, at market value		400,378			499,951
Securities held to maturity, market value of $35,808 and $37,648		33,974			36,130
Bank Owned Life Insurance (at cash surrender value)		57,743			46,283
Federal Home Loan Bank of New York stock (“FHLB”), at cost		44,919			38,222
Accrued interest receivable		9,479			10,630
Investments in real estate joint ventures, net		5,525			5,441
Real estate held for investment		1,000			1,123
Real estate owned		2,817			2,740
Office properties and equipment, net		15,173			15,442
Deferred tax assets, net		27,341			25,570
Other assets		19,102			15,194

Total Assets	$	2,809,686		$	2,700,982

Liabilities
Deposits	$	1,351,666		$	1,389,706
Borrowings		893,578			745,865
Advance payments by borrowers for taxes and insurance		15,932			15,217
Other liabilities		42,348			39,485

Total liabilities		2,303,524			2,190,273

Stockholders’ Equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 56,245,065 shares issued; 45,381,531 shares outstanding at December 31, 2012 and 45,198,765 shares outstanding at June 30, 2012		562			562
Additional paid-in capital		496,283			495,704
Unallocated common stock held by the employee stock ownership plan		(26,522	)		(27,582	)
Restricted Stock Awards		(15,900	)		(19,146	)
Treasury stock, at cost; 10,863,534 shares at December 31, 2012 and 11,046,300 shares at June 30, 2012		(141,278	)		(143,469	)
Retained income		188,697			200,718
Accumulated other comprehensive income, net of tax		4,320			3,922

Total stockholders’ equity		506,162			510,709

Total Liabilities and Stockholders’ Equity	$	2,809,686		$	2,700,982

See accompanying notes to unaudited consolidated financial statements.

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Statements of Income

(In thousands, except per share data)


	Three months ended December 31,						Six months ended December 31,
	2012			2011			2012		2011
	unaudited						unaudited
Interest income:
Interest on mortgage loans	$	29,079		$	26,936		$	58,161	$	52,865
Interest on securities available for sale		1,865			3,080			3,963		6,320
Interest on securities held to maturity		225			226			459		475
Dividends on FHLB stock		437			281			844		580
Interest on federal funds sold and short term investments		1			1			2		30

Total interest income		31,607			30,524			63,429		60,270

Interest expense:
Deposits		2,135			3,292			4,469		6,975
Borrowings		5,401			5,195			10,699		10,271

Total interest expense		7,536			8,487			15,168		17,246

Net interest income before provision for loan losses		24,071			22,037			48,261		43,024
Provision for loan losses		1,500			2,000			3,000		5,500

Net interest income after provision for loan losses		22,571			20,037			45,261		37,524

Other income:
Service charges		206			285			450		612
Real estate operations, net		256			236			626		586
(Loss) income from investments in real estate joint ventures		(127	)		215			12		416
Bank-owned life insurance		455			400			860		804
Net gain (loss) on sale of assets		36			(12	)		44		557
Net writedown of securities		—			(262	)		—		(262	)
Other income		61			58			120		113

Total other income		887			920			2,112		2,826

Other expenses:
Compensation, payroll taxes and fringe benefits		6,973			6,446			13,881		12,034
Advertising		90			118			180		270
Office occupancy and equipment expense		700			672			1,382		1,278
Data processing service fees		400			360			807		675
Federal insurance premiums		331			329			601		616
Real estate operations		58			184			110		548
Other expenses		954			954			1,778		1,831

Total operating expenses		9,506			9,063			18,739		17,252

Income before income tax expense		13,952			11,894			28,634		23,098
Income tax expense		5,206			4,268			10,677		8,137

Net income	$	8,746		$	7,626		$	17,957	$	14,961

Earnings per basic common share	$	0.21		$	0.18		$	0.43	$	0.33

Earnings per diluted common share	$	0.20		$	0.18		$	0.42	$	0.32

See accompanying notes to unaudited consolidated financial statements.

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Statements of Comprehensive Income

(In thousands, unaudited)


	Three months ended December 31,					Six months ended December 31,
	2012		2011			2012		2011
Gross:
Net income	$	13,952	$	11,894		$	28,634	$	23,098
Other comprehensive income
Unrealized holding gain on securities available for sale		360		85			463		5,185
Reclassification adjustment for security gains (losses) included in net income		—		(262	)		—		(262	)
Amortization related to post-retirement obligations		110		25			220		100
Change in funded status of retirement obligations		—		(141	)		—		(141	)
Reclassification adjustment for retirement obligation losses included in net income		—		241			—		241

Total other comprehensive income		470		(52	)		683		5,123

Total comprehensive income		14,422		11,842			29,317		28,221

Tax applicable to:
Net income		5,206		4,268			10,677		8,137
Other comprehensive income
Unrealized holding gain on securities available for sale		149		21			197		2,119
Reclassification adjustment for security gains (losses) included in net income		—		(107	)		—		(107	)
Amortization related to post-retirement obligations		44		10			88		40
Change in funded status of retirement obligations		—		(56	)		—		(56	)
Reclassification adjustment for retirement obligation losses included in net income		—		96			—		96

Total other comprehensive income		193		(36	)		285		2,092

Total comprehensive income		5,399		4,232			10,962		10,229

Net of tax:
Net income		8,746		7,626			17,957		14,961
Other comprehensive income
Unrealized holding gain on securities available for sale		211		64			266		3,066
Reclassification adjustment for security gains (losses) included in net income		—		(155	)		—		(155	)
Amortization related to post-retirement obligations		66		15			132		60
Change in funded status of retirement obligations		—		(85	)		—		(85	)
Reclassification adjustment for retirement obligation losses included in net income		—		145			—		145

Total other comprehensive income		277		(16	)		398		3,031

Total comprehensive income	$	9,023	$	7,610		$	18,355	$	17,992

See accompanying notes to unaudited consolidated financial statements.

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Statements of Stockholders’ Equity

Six Months ended December 31, 2012 and 2011 (unaudited)

(In thousands, except share data)


	Shares Outstanding			Common stock		Additional paid-in capital			Restricted Stock Awards			Treasury stock			Un- allocated common stock held by ESOP			Retained income			Accumu- lated other compre- hensive income, net of tax		Total stock- holders’ equity
Balance at June 30, 2011		55,513,265		$	562	$	489,593		$	—		$	(9,300	)	$	(28,808	)	$	190,955		$	2,410	$	645,412
Net income		—			—		—			—			—			—			14,961			—		14,961
Other comprehensive income, net of tax		—			—		—			—			—			—			—			3,031		3,031
Cash dividend declared		—			—		—			—			—			—			(10,278	)		—		(10,278	)
Purchase of treasury stock		(10,048,505	)		—		—			—			(130,603	)		—			—			—		(130,603	)
Purchase of restricted stock awards		(1,598,100	)		—		—			(19,266	)		—			—			—			—		(19,266	)
Issuance of restricted stock awards		1,598,100			—		—			—			—			—			—			—		—
Compensation cost for stock options and restricted stock		—			—		2,298			—			—			—			—			—		2,298
ESOP shares allocated or committed to be released		—			—		334			—			—			613			—			—		947
Exercise of stock options		12,774			—		—			—			166			—			(33	)		—		133
Vesting of restricted stock awards		—			—		(60	)		60			—			—			—			—		—
Tax benefit from stock-based compensation		—			—		81			—			—			—			—			—		81

Balance at December 31, 2011		45,477,534		$	562	$	492,246		$	(19,206	)	$	(139,737	)	$	(28,195	)	$	195,605		$	5,441	$	506,716

Balance at June 30, 2012		45,198,765		$	562	$	495,704		$	(19,146	)	$	(143,469	)	$	(27,582	)	$	200,718		$	3,922	$	510,709
Net income		—			—		—			—			—			—			17,957			—		17,957
Other comprehensive income, net of tax		—			—		—			—			—			—			—			398		398
Cash dividend declared		—			—		—			—			—			—			(29,358	)		—		(29,358	)
Purchase of treasury stock		(103,095	)		—		—			—			(1,524	)		—			—			—		(1,524	)
Issuance of restricted stock awards		45,000								(585	)		585											—
Compensation cost for stock options and restricted stock		—			—		3,008			—			—			—			—			—		3,008
ESOP shares allocated or committed to be released		—			—		779			—			—			1,060			—			—		1,839
Exercise of stock options		240,861			—		—			—			3,130			—			(585	)		—		2,545
Vesting of restricted stock awards		—			—		(3,796	)		3,831			—			—			(35	)		—		—
Tax benefit from stock-based compensation		—			—		588			—			—			—			—			—		588

Balance at December 31, 2012		45,381,531		$	562	$	496,283		$	(15,900	)	$	(141,278	)	$	(26,522	)	$	188,697		$	4,320	$	506,162

See accompanying notes to unaudited consolidated financial statements.

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Statements of Cash Flows

(unaudited)


	Six months ended December 31,
	2012			2011
	(In thousands)
Cash flows from operating activities:
Net income	$	17,957		$	14,961
Adjustments to reconcile net income to net cash provided by operating activities:
ESOP and stock-based compensation expense		4,847			3,245
Depreciation of premises and equipment		492			447
Net amortization and accretion of premiums and discounts on securities		1,176			1,070
Provision for losses on loans		3,000			5,500
Amortization and accretion of deferred loan fees, net		(1,275	)		(683	)
Increase in deferred taxes		(2,061	)		(408	)
Gain on sale of loans		(36	)		—
Impairment charge on securities		—			262
Gain on sale of other assets		—			(565	)
Gain (loss) on sale of real estate owned		(8	)		8
Writedown of real estate owned		20			230
Proceeds from sale of real estate owned		461			478
Increase in cash surrender value of bank owned life insurance		(860	)		(804	)
(Decrease) increase in accrued interest receivable		1,151			(239	)
(Increase) decrease in other assets		(3,685	)		6,701
Increase (decrease) in other liabilities		3,035			(2,038	)

Net cash provided by operating activities		24,214			28,165

Cash flows from investing activities:
Net increase in loans receivable		(192,729	)		(154,786	)
Purchase of mortgage loans		—			(2,000	)
Proceeds from sale of mortgage loans		1,146			—
Purchase of securities available for sale		—			(155,576	)
Proceeds from payments, calls and maturities of securities available for sale		98,890			166,227
Proceeds from payments, calls and maturities of securities held to maturity		2,126			3,260
Purchase of Bank Owned Life Insurance		(10,600	)		—
Purchase of Federal Home Loan Bank of New York stock		(6,697	)		(8,154	)
Net decrease in real estate held for investment		21			16
Net increase in real estate joint ventures		(154	)		(17	)
Purchase of fixed assets		(222	)		(973	)
Proceeds from sale of other assets		—			2,748

Net cash used in investing activities		(108,219	)		(149,255	)

Cash flows from financing activities:
Net decrease in deposits		(38,040	)		(25,614	)
Purchase of treasury stock		(1,524	)		(130,603	)
Purchase of restricted stock awards		—			(19,266	)
Dividends paid to shareholders		(29,358	)		(10,277	)
Exercise of stock options		2,545			133
Decrease in advance payments by borrowers for taxes and insurance		715			987
Proceeds from borrowed funds		309,263			215,000
Repayment of borrowed funds		(161,550	)		(33,800	)
Tax benefit from stock based compensation		588			81

Net cash provided by (used in) financing activities		82,639			(3,359	)

Net decrease in cash and cash equivalents		(1,366	)		(124,449	)
Cash and cash equivalents at beginning of period		11,439			133,243

Cash and cash equivalents at end of period	$	10,073		$	8,794

Supplemental cash flow information:
Cash paid during the period for:
Interest	$	15,552		$	17,239
Income taxes	$	17,201		$	9,968
Noncash transfer
Loans receivable transferred to real estate owned	$	550		$	1,654

See accompanying notes to unaudited consolidated financial statements.

1. Basis of Presentation

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

In the opinion of management, all of the adjustments (consisting of normal and recurring adjustments) necessary for the fair presentation of the consolidated financial condition and the consolidated results of operations for the unaudited periods presented have been included. The results of operations and other data presented for the three and six months period ended December 31, 2012 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending June 30, 2013.

Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the preparation of the Form 10-Q. The consolidated financial statements presented should be read in conjunction with the Company’s audited consolidated financial statements and notes to consolidated financial statements included in the Company’s June 30, 2012 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 12, 2012.

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, 2012 and December 31, 2012 and in the Consolidated Statements of Income for the three months ended December 31, 2012 and 2011. Actual results could differ significantly from those estimates.

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

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

2. Earnings Per Share

Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. The weighted average common shares outstanding includes the average number of shares of common stock outstanding and allocated or committed to be released Employee Stock Ownership Plan shares.

Diluted earnings per share is computed using the same method as basic earnings per share, but reflects the potential dilution that could occur if stock options were exercised and converted into common stock.

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 stock options. We then divide this sum by our average stock price to calculate shares assumed to be repurchased. The excess of the number of shares issuable over the number of shares assumed to be repurchased is added to basic weighted average common shares to calculate diluted EPS.

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


	For the Three Months ended December 31,				For the Six Months ended December 31,
	2012		2011		2012		2011
	(In thousands, except per share data)
Net income	$	8,746	$	7,626	$	17,957	$	14,961

Weighted average common shares outstanding—basic		42,030		42,442		41,970		45,679
Effect of dilutive non-vested shares and stock options outstanding		823		511		785		501

Weighted average common shares outstanding—diluted		42,853		42,953		42,755		46,180

Earnings per share-basic	$	0.21	$	0.18	$	0.43	$	0.33

Earnings per share-diluted	$	0.20	$	0.18	$	0.42	$	0.32

3. Stock Repurchase Program

On June 27, 2011, the Board of Directors of the Company authorized a stock repurchase plan pursuant to which the Company repurchased 5,624,506 shares, representing approximately 10% of its then outstanding shares. A second stock repurchase plan, for 10% of the outstanding shares, or 5,062,056 shares, was announced on September 14, 2011 and a third repurchase plan for 5% of the outstanding shares, or 2,278,776 shares, was announced on November 14, 2011. At December 31, 2012, a total of 11,159,700 shares were acquired under these repurchase programs at a weighted average cost of $13.00 per share. The timing of the repurchases 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. Repurchased shares will be held as treasury stock and will be available for general corporate purposes. The Company conducts such repurchases in accordance with a Rule 10b5-1 trading plan. At December 31, 2012, there are 1,801,381 shares yet to be purchased under the current plan.

4. Equity Incentive Plans

The 2007 Equity Incentive Plan (“the 2007 Equity Plan”) was approved by the Company’s stockholders on April 22, 2008, which authorized the issuance of up to 4,172,817 shares of Company common stock pursuant to grants of incentive and non-statutory stock options, stock appreciation rights, and restricted stock awards. The 2011 Equity Incentive Plan (“2011 Equity Plan”) was approved by the Company’s stockholders on July 26, 2011. The 2011 Equity Plan authorized the issuance of up to 5,790,849 shares of the Company’s common stock pursuant to grants of stock options, restricted stock awards and restricted

stock units, with no more than 1,654,528 of the shares be issued as restricted stock awards or restricted stock units. Employees and outside directors of the Company or Oritani Bank are eligible to receive awards under the Equity Plans.

Stock options are granted at an exercise price equal to the market price of our common stock on the grant date, based on quoted market prices. Stock options generally vest over a five-year service period and expire ten years from issuance. The vesting of the options accelerate upon death or disability, retirement or a change in control and expire 90 days after termination of service, excluding disability or retirement. The Company recognizes compensation expense for all option grants over the awards’ respective requisite service periods. Management estimated the fair values of all option grants using the Black-Scholes option-pricing model. Since there is limited historical information on the volatility of the Company’s stock, management considered the average volatilities of similar entities for an appropriate period in determining the assumed volatility rate used in the estimation of fair value. Management estimated the expected life of the options using the simplified method. The Treasury yield in effect at the time of the grant provides the risk-free rate for periods within the contractual life of the option. The Company classified share-based compensation for employees and outside directors within “compensation, payroll taxes and fringe benefits” in the consolidated statements of income to correspond with the same line item as the cash compensation paid. The fair value of the options issued during the six months ended December 31, 2012 and 2011 was estimated using the Black-Scholes options-pricing model with the following assumptions:


	Six months ended December 31,
	2012			2011
Option shares granted		100,000			3,900,250
Expected dividend yield		5.38	%		4.42	%
Expected volatility		35.25	%		37.10	%
Risk-free interest rate		0.99	%		1.30	%
Expected option life		6.5			6.5

The following is a summary of the Company’s stock option activity and related information for its options plan as of December 31, 2012 and changes therein during the six months then ended:


	Number of Stock Options			Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Outstanding at June 30, 2012		6,619,245		$	2.54	$	11.32		7.8
Granted		100,000			2.65		14.55		10.0
Exercised		(240,861	)		2.33		10.57		5.9
Forfeited		—			—		—		—
Expired		—			—		—		—

Outstanding at December 31, 2012		6,478,384		$	2.55	$	11.40		7.4

Exercisable at December 31,2012		3,246,591

The Company recorded $526,000 and $520,000 of share based compensation expense related to the options granted for the three months ended December 31, 2012 and 2011, respectively and $1.1 million and $810,000 for the six months ended December 31, 2012 and 2011, respectively. Expected future expense related to the non-vested options outstanding at December 31, 2012 is $7.8 million over a

weighted average period of 3.6 years. Upon exercise of vested options, management expects to draw on treasury stock as the source of the shares.

Restricted stock shares vest over a five-year service period on the anniversary date of the grant. Vesting of the restricted stock shares accelerate upon death or disability, retirement or a change in control. The product of the number of shares granted and the grant date market price of the Company’s common stock determines the fair value of restricted shares under the Company’s restricted stock plan. The Company recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.

The following is a summary of the status of the Company’s restricted stock shares as of December 31, 2012 and changes therein during the six months then ended:


	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Non-vested at June 30, 2012		1,588,100		$	11.95
Granted		45,000			14.55
Vested		(317,620	)		11.95
Forfeited		—			—

Non-vested at December 31, 2012		1,315,480		$	12.04

The Company recorded $960,000 and $952,000 of share based compensation expense related to the restricted stock shares granted for the three months ended December 31, 2012 and 2011, respectively and $1.9 million and $1.5 million for the six months ended December 31, 2012 and 2011, respectively. Expected future expense related to the non-vested restricted shares at December 31, 2012 is $14.4 million over a weighted average period of 3.7 years.

5. Postretirement Benefits

The Company provides several post-retirement benefit plans to directors and to certain active and retired employees. The Company has a nonqualified Directors’ Retirement Plan (the Retirement Plan), a nonqualified Benefit Equalization Plan (BEP Plan) which provides benefits to employees who are disallowed certain benefits under the Company’s qualified benefit plans and a Post Retirement Medical Plan (the Medical Plan) for directors and certain eligible employees. Net periodic benefit costs for the three and six months ended December 31, 2012 and 2011 are presented in the following tables.


	Retirement Plan					BEP Plan				Medical Plan
	Three months ended December 31,					Three months ended December 31,				Three months ended December 31,
	2012		2011			2012		2011		2012			2011
	(In thousands)
Service cost	$	38	$	64		$	—	$	—	$	(8	)	$	31
Interest cost		49		56			8		22		(10	)		55
Loss recognized		—		—			—		241		—			—
Amortization of unrecognized:
Prior service cost		15		15			—		—		—			—
Net loss		37		(2	)		7		2		51			10

Total	$	139	$	133		$	15	$	265	$	33			96


	Retirement Plan					BEP Plan				Medical Plan
	Six months ended December 31,					Six months ended December 31,				Six months ended December 31,
	2012		2011			2012		2011		2012			2011
	(In thousands)
Service cost	$	76	$	125		$	—	$	—	$	27		$	44
Interest cost		99		111			17		43		41			96
Loss recognized		—		—			—		241		—			—
Amortization of unrecognized:
Prior service cost		30		30			—		—		—			—
Net loss		73		25			13		8		104			37

Total	$	278	$	291		$	30	$	292	$	172			177

The $241,000 loss recognized in the BEP Plan during the 2011 periods was recognized in accordance with settlement accounting. A portion of this plan was settled during the three months ended December 31, 2011. The loss was due to the actuarial discount utilized in calculation of the settlement versus the assumed discount rate that had been utilized in plan valuation.

6. Loans

Net Loans are summarized as follows:


	December 31, 2012			June 30, 2012
	(In thousands)
Residential	$	133,324		$	139,072
Multifamily		827,869			679,783
Commercial real estate		1,172,828			1,116,335
Second mortgage and equity loans		26,267			30,052
Construction and land loans		44,035			48,887
Other loans		18,065			17,622

Total loans		2,222,388			2,031,751
Less:
Deferred loan fees, net		(8,317	)		(7,747	)
Allowance for loan losses		(31,909	)		(31,187	)

Net loans	$	2,182,162		$	1,992,817

The Company’s allowance for loan losses is analyzed quarterly and many factors are considered, including growth in the portfolio, delinquencies, nonaccrual loan levels, and other environmental factors. See discussion of delinquent loans in “Comparison of Financial Condition at December 31, 2012 and June 30, 2012.” There have been no material changes to the allowance for loan loss methodology disclosed in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 12, 2012.

The activity in the allowance for loan losses for the three and six months ended December 31, 2012 and 2011 is summarized as follows:


	Three months ended						Six months ended
	December 31,						December 31,
	(In thousands)
	2012			2011			2012			2011
Balance at beginning of period	$	32,504		$	27,540		$	31,187		$	26,514
Provisions for loan losses		1,500			2,000			3,000			5,500
Recoveries of loans previously charged off		116			—			117			—
Loans charged off		(2,211	)		(721	)		(2,395	)		(3,195	)

Balance at end of period	$	31,909		$	28,819		$	31,909		$	28,819

The following table provides the three and six month activity in the allowance for loan losses allocated by loan category at December 31, 2012 and 2011. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.


	For the three months ended December 31, 2012
	Residential			Multifamily			Commercial Real Estate			Second mortgage and equity loans			Construction and land loans			Other loans			Unallocated		Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	2,391		$	3,641		$	20,366		$	456		$	3,090		$	337		$	2,223	$	32,504
Charge-offs		—			—			(385	)		—			(1,826	)		—			—		(2,211	)
Recoveries		—			115			—			—			1			—			—		116
Provisions		38			60			261			(32	)		125			154			894		1,500

Ending balance	$	2,429		$	3,816		$	20,242		$	424		$	1,390		$	491		$	3,117	$	31,909


	For the six months ended December 31, 2012
	Residential			Multifamily			Commercial Real Estate			Second mortgage and equity loans			Construction and land loans			Other loans			Unallocated		Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	2,343		$	3,113		$	20,087		$	475		$	2,498		$	348		$	2,323	$	31,187
Charge-offs		—			—			(569	)		—			(1,826	)		—			—		(2,395	)
Recoveries		—			115			—			—			2			—			—		117
Provisions		86			588			724			(51	)		716			143			794		3,000

Ending balance	$	2,429		$	3,816		$	20,242		$	424		$	1,390		$	491		$	3,117	$	31,909


	For the three months ended December 31, 2011
	Residential			Multifamily			Commercial Real Estate			Second mortgage and equity loans			Construction and land loans			Other loans			Unallocated		Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	1,707		$	2,364		$	16,533		$	469		$	4,668		$	694		$	1,105	$	27,540
Charge-offs		(465	)		—			—			—			(158	)		(98	)		—		(721	)
Recoveries		—			—			—			—			—			—			—		—
Provisions		432			346			988			32			(341	)		(268	)		811		2,000

Ending balance	$	1,674		$	2,710		$	17,521		$	501		$	4,169		$	328		$	1,916	$	28,819


	For the six months ended December 31, 2011
	Residential			Multifamily			Commercial Real Estate			Second mortgage and equity loans			Construction and land loans			Other loans			Unallocated		Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	1,274		$	2,703		$	15,597		$	369		$	3,455		$	1,625		$	1,491	$	26,514
Charge-offs		(465	)		(194	)		(41	)		—			(897	)		(1,598	)		—		(3,195	)
Recoveries		—			—			—			—			—			—			—		—
Provisions		865			201			1,965			132			1,611			301			425		5,500

Ending balance	$	1,674		$	2,710		$	17,521		$	501		$	4,169		$	328		$	1,916	$	28,819

The following table details the amount of loans receivables that are evaluated individually, and collectively, for impairment, and the related portion of allowance for loan loss that is allocated to each loan portfolio segment at December 31, 2012 and June 30, 2012.


	At December 31, 2012
	Residential		Multifamily		Commercial Real Estate		Second mortgage and equity loans		Construction and land loans		Other loans		Unallocated		Total
	(In thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	263	$	—	$	265	$	—	$	241	$	—	$	—	$	769
Collectively evaluated for impairment		2,166		3,816		19,977		424		1,149		491		3,117		31,140

Total	$	2,429	$	3,816	$	20,242	$	424	$	1,390	$	491	$	3,117	$	31,909

Loans receivables:
Individually evaluated for impairment	$	2,198	$	2,456	$	10,175	$	—	$	7,336	$	—			$	22,165
Collectively evaluated for impairment		131,126		825,413		1,162,653		26,267		36,699		18,065				2,200,223

Total	$	133,324	$	827,869	$	1,172,828	$	26,267	$	44,035	$	18,065			$	2,222,388


	At June 30, 2012
	Residential		Multifamily		Commercial Real Estate		Second mortgage and equity loans		Construction and land loans		Other loans		Unallocated		Total
	(In thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	—	$	—	$	549	$	—	$	1,210	$	—	$	—	$	1,759
Collectively evaluated for impairment		2,343		3,113		19,538		475		1,288		348		2,323		29,428

Total	$	2,343	$	3,113	$	20,087	$	475	$	2,498	$	348	$	2,323	$	31,187

Loans receivables:
Individually evaluated for impairment	$	379	$	—	$	7,112	$	—	$	9,824	$	—			$	17,315
Collectively evaluated for impairment		138,693		679,783		1,109,223		30,052		39,063		17,622				2,014,436

Total	$	139,072	$	679,783	$	1,116,335	$	30,052	$	48,887	$	17,622			$	2,031,751

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

past due 90 days (or more) and all impaired loans. The following table provides information about the loan credit quality at December 31, 2012 and June 30, 2012:


	Credit Quality Indicator at December 31, 2012
	Satisfactory		Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Residential	$	121,680	$	5,918	$	193	$	5,533	$	—	$	133,324
Multifamily		792,802		20,704		6,416		7,947		—		827,869
Commercial real estate		1,031,314		72,183		44,034		25,297		—		1,172,828
Second mortgage and equity loans		25,808		269		—		190		—		26,267
Construction and land loans		16,855		19,157		—		8,023		—		44,035
Other loans		17,959		20		—		86		—		18,065

Total	$	2,006,418	$	118,251	$	50,643	$	47,076	$	—	$	2,222,388


	Credit Quality Indicator at June 30 ,2012
	Satisfactory		Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Residential	$	125,208	$	6,923	$	1,722	$	5,219	$	—	$	139,072
Multifamily		649,083		21,465		3,231		6,004		—		679,783
Commercial real estate		973,235		84,009		35,298		23,793		—		1,116,335
Second mortgage and equity loans		29,651		127		7		267		—		30,052
Construction and land loans		15,771		19,667		2,750		10,699		—		48,887
Other loans		17,505		—		—		117		—		17,622

Total	$	1,810,453	$	132,191	$	43,008	$	46,099	$	—	$	2,031,751

The following table provides information about loans past due at December 31, 2012 and June 30, 2012:


	At December 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Nonaccrual
	(In thousands)
Residential	$	1,182	$	213	$	4,096	$	5,491	$	127,833	$	133,324	$	4,893
Multifamily		1,844		2,292		4,280		8,416		819,453		827,869		4,280
Commercial real estate		4,759		4,854		12,376		21,989		1,150,839		1,172,828		12,710
Second mortgage and equity loans		363		—		96		459		25,808		26,267		96
Construction and land loans		—		—		5,629		5,629		38,406		44,035		7,336
Other loans		70		—		36		106		17,959		18,065		86

Total	$	8,218	$	7,359	$	26,513	$	42,090	$	2,180,298	$	2,222,388	$	29,401


	At June 30, 2012
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Nonaccrual
	(In thousands)
Residential	$	1,924	$	1,722	$	4,539	$	8,185	$	130,887	$	139,072	$	4,573
Multifamily		5,374		1,125		616		7,115		672,668		679,783		616
Commercial real estate		6,358		2,520		6,124		15,002		1,101,333		1,116,335		6,124
Second mortgage and equity loans		127		7		267		401		29,651		30,052		274
Construction and land loans		—		3,188		4,895		8,083		40,804		48,887		6,637
Other loans		—		—		118		118		17,504		17,622		118

Total	$	13,783	$	8,562	$	16,559	$	38,904	$	1,992,847	$	2,031,751	$	18,342

The Company defines an impaired loan as a loan for which it is probable, based on current information, that the Company will not collect all amounts due under the contractual terms of the loan agreement. At December 31, 2012 impaired loans were primarily collateral-dependent and totaled $22.2 million, of which $5.8 million had a specific allowance for credit losses of $769,000 and $16.4 million of impaired loans had no related allowance for credit losses. At June 30, 2012 impaired loans were primarily collateral dependent and totaled $17.3 million, of which $7.3 million of impaired loans had a related allowance for credit losses of $1.8 million and $10.0 million of impaired loans had no related allowance for credit losses.

The following table provides information about the Company’s impaired loans at December 31, 2012 and June 30, 2012:


	Impaired Financing Receivables
	At December 31, 2012						Six months ended December 31, 2012
	Recorded Investment		Unpaid Principal Balance		Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded;
Multifamily	$	2,456	$	2,456	$	—	$	2,460	$	17
Commercial real estate		9,055		9,055		—		8,943		93
Construction and land loans		4,895		4,895		—		4,913		—

		16,406		16,406		—		16,316		110
With an allowance recorded:
Residential	$	1,935	$	2,198	$	263	$	2,045	$	12
Commercial real estate		854		1,119		265		1,033		6
Construction and land loans		2,200		2,441		241		2,377		—

		4,989		5,758		769		5,455		18
Total:
Residential	$	1,935	$	2,198	$	263	$	2,045	$	12
Mulifamily		2,456		2,456		—		2,460		17
Commercial real estate		9,909		10,174		265		9,976		99
Construction and land loans		7,095		7,336		241		7,290		—

	$	21,395	$	22,164	$	769	$	21,771	$	128


	Impaired Financing Receivables
	At June 30, 2012						Year ended June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded;
Residential	$	379	$	379	$	—	$	389	$	20
Commercial real estate		4,712		4,712		—		4,808		318
Construction and land loans		4,930		4,930		—		5,017		188

		10,021		10,021		—		10,214		526
With an allowance recorded:
Commercial real estate	$	1,851	$	2,400	$	549	$	2,523	$	45
Construction and land loans		3,684		4,894		1,210		3,979		—

		5,535		7,294		1,759		6,502		45
Total:
Residential	$	379	$	379	$	—	$	389	$	20
Commercial real estate		6,563		7,112		549		7,331		363
Construction and land loans		8,614		9,824		1,210		8,996		188

	$	15,556	$	17,315	$	1,759	$	16,716	$	571

Troubled debt restructured loans (“TDRs”) are those loans whose terms have been modified because of deterioration in the financial condition of the borrower. The Company has selectively modified certain borrower’s loans to enable the borrower to emerge from delinquency and keep their loans current. The eligibility of a borrower for a TDR modification depends upon the facts and circumstances of each transaction, which may change from period to period, and involve judgment by management regarding the likelihood that the modification will result in the maximum recovery by the Company. Modifications could include extension of the terms of the loan, reduced interest rates, and forgiveness of accrued interest and/or principal. Once an obligation has been restructured because of such credit problems, it continues to be considered restructured until paid in full or, if the obligation yields a market rate (a rate equal to or greater than the rate the Company was willing to accept at the time of the restructuring for a new loan with comparable risk), until the year subsequent to the year in which the restructuring takes place, provided the borrower has performed under the modified terms for a six month period. Management classifies all TDRs as impaired loans. Included in impaired loans at December 31, 2012 are $6.9 million of loans which are deemed troubled debt restructurings. At June 30, 2012, TDRs totaled $ 11.7 million.

The following table presents additional information regarding the Company’s TDRs as of December 31, 2012 and June 30, 2012:


	Troubled Debt Restructurings at December 31, 2012
	Performing		Nonperforming		Total
	(In thousands)
Residential	$	376	$	201	$	577
Commercial real estate		4,660		—		4,660
Construction and land loans		—		1,707		1,707

Total	$	5,036	$	1,908	$	6,944

Allowance	$	38	$	20	$	58


	Troubled Debt Restructurings at June 30, 2012
	Performing		Nonperforming		Total
	(In thousands)
Residential	$	379	$	—	$	379
Commercial real estate		4,712		—		4,712
Construction and land loans		—		6,636		6,636

Total	$	5,091	$	6,636	$	11,727

Allowance	$	—	$	1,210	$	1,210

The following tables summarize loans that were modified in a troubled debt restructuring during the six months ended December 31, 2012.


	Six months ended December 31, 2012
	Number of Relationships		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings Residential		1	$	187	$	181

Total		1	$	187	$	181

The relationship in the table above was granted a reduced rate and extended maturity.

There have not been any loans that were restructured during the last twelve months that have subsequently defaulted during the current quarter ended December 31, 2012.

7. Investment Securities

Securities Held to Maturity

The following is a comparative summary of securities held to maturity at December 31, 2012 and June 30, 2012:


	December 31, 2012
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
	(In thousands)
Mortgage-backed securities:
FHLMC	$	5,062	$	378	$	—	$	5,440
FNMA		24,008		1,248		—		25,256
GNMA		3,096		150		—		3,246
CMO		1,808		58		—		1,866

	$	33,974	$	1,834	$	—	$	35,808


	June 30, 2012
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
	(In thousands)
Mortgage-backed securities:
FHLMC	$	5,438	$	308	$	—	$	5,746
FNMA		24,955		988		—		25,943
GNMA		3,200		150		—		3,350
CMO		2,537		72		—		2,609

	$	36,130	$	1,518	$	—	$	37,648

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

The Company did not sell any securities held to maturity during the six months ended December 31, 2012 and 2011. Securities with fair values of $32.6 million and $24.0 million at December 31, 2012 and June 30, 2012, respectively, were pledged as collateral for advances. The Company did not record other than temporary impairment charges on securities held to maturity during the six months ended December 31, 2012 and 2011.

There were no unrealized losses on securities held to maturity at December 31 and June 30, 2012.

Securities Available for Sale

The following is a comparative summary of securities available for sale at December 31, 2012 and June 30, 2012:


	December 31, 2012
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		market
	cost		gains		losses		value
	(In thousands)
U.S. Government and federal agency obligations

Due in one to five years	$	9,986	$	353	$	—	$	10,339
Equity securities		1,210		391		—		1,601
Mortgage-backed securities:
FHLMC		11,992		383		—		12,375
FNMA		50,819		3,081		—		53,900
CMO		316,116		6,242		195		322,163

	$	390,123	$	10,450	$	195	$	400,378


	June 30, 2012
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
	(In thousands)
U.S. Government and federal agency obligations

Due in one to five years	$	24,283	$	339	$	—	$	24,622
Equity securities		1,210		240		41		1,409
Mortgage-backed securities:
FHLMC		15,822		614		—		16,436
FNMA		59,232		3,113		—		62,345
CMO		389,613		5,825		299		395,139

	$	490,160	$	10,131	$	340	$	499,951

The contractual maturities of mortgage-backed securities available for sale generally exceed 20 years; however, the effective lives are expected to be shorter due to anticipated prepayments and, in the case of

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

The Company did not sell any securities available for sale during the six months ended December 31, 2012 and 2011. There were no impairment charges on available for sale securities for the six months ended December 31, 2012. The Company recorded a non-cash impairment charge to earnings of $262,000 for the six months ended December 31, 2011 on equity securities. The Equity securities caption relates to holdings of shares in financial institutions common stock. Available for sale securities with fair values of $300.7 million and $357.6 million at December 31, 2012 and June 30, 2012, respectively, were pledged as collateral for advances.

Gross unrealized losses on securities available for sale and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2012 and June 30, 2012 were as follows:


	December 31, 2012
	Less than 12 months				Greater than 12 months				Total
	Estimated market value		Gross unrealized losses		Estimated market value		Gross unrealized losses		Estimated market value		Gross unrealized losses
	(In thousands)
Mortgage-backed securities:
CMO	$	—		—		16,240		195		16,240		195

	$	—		—		16,240		195		16,240		195


	June 30, 2012
	Less than 12 months				Greater than 12 months				Total
	Estimated market value		Gross unrealized losses		Estimated market value		Gross unrealized losses		Estimated market value		Gross unrealized losses
	(In thousands)
Equity securities		505		41		—		—		505		41
Mortgage-backed securities:
CMO		19,856		299		—		—		19,856		299

	$	20,361		340		—		—		20,361		340

Management evaluated the securities in the above tables and concluded that none of the securities with losses has impairments that are other-than-temporary.

8. Deposits

Deposits include checking (non-interest and interest-bearing demand deposits), money market, savings and time deposits. The Bank accepts brokered deposits on a limited basis, when deemed cost effective. At December 31, 2012 and June 30, 2012, we had brokered time deposits totaling $22.9 million with weighted average interest rates of 2.46% and weighted average maturities of 3.3 years and 3.8 years, respectively. Deposit balances are summarized as follows:


	December 31, 2012		June 30, 2012
	Amount		Amount
	(In thousands)
Checking accounts	$	242,134	$	215,566
Money market deposit accounts		436,885		444,476
Savings accounts		162,273		160,115
Time deposits		510,374		569,549

	$	1,351,666	$	1,389,706

9. Income Taxes

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

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

The Company files income tax returns in the United States federal jurisdiction and in New Jersey, Pennsylvania and New York state jurisdictions. The Company is no longer subject to federal and state income tax examinations by tax authorities for years prior to 2008. Currently, the Company is not under examination by any taxing authority.

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

The Company accounts for investments in joint ventures under the equity method. The balance reflects the cost basis of investments, plus the Company’s share of income earned on the joint venture operations, less cash distributions, including excess cash distributions, and the Company’s share of losses on joint venture operations. Cash received in excess of the Company’s recorded investment in a joint venture is recorded as unearned revenue in other liabilities. The net book value of real estate joint ventures was $4.9 million and $4.8 million at December 31, 2012 and June 30, 2012 respectively.

Real estate held for investment includes the Company’s undivided interest in real estate properties accounted for under the equity method and properties held for investment purposes. Cash received in excess of the Company’s recorded investment for an undivided interest in real estate property is recorded as unearned revenue in other liabilities. The operations of the properties held for investment purposes are reflected in the financial results of the Company and included in the Other Income caption in the Income Statement. Properties held for investment purposes are carried at cost less accumulated depreciation. The net book value of real estate held for investment was $(72,000) and $(50,000) at December 31, 2012 and June 30, 2012, respectively.

11. Fair Value Measurements

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

Basis of Fair Value Measurement:

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

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

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

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

Following are descriptions of the valuation methodologies and key inputs used to measure assets recorded at fair value, as well as a description of the methods and significant assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis. The descriptions include an indication of the level of the fair value hierarchy in which the assets or liabilities are classified.

Cash and Cash Equivalents

Due to their short-term nature, the carrying amount of these instruments approximates fair value.

Securities

The Company records securities held to maturity at amortized cost and securities available for sale at fair value on a recurring basis. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. The estimated fair values for securities are obtained from an independent nationally recognized third-party pricing service. Our independent pricing service provides us with prices which are primarily categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the majority of securities in our portfolio. Various modeling techniques are used to determine pricing for our securities portfolio, including option pricing and discounted cash flows. Inputs to these models include market spreads, dealer quotes, prepayment speeds, credit information and the instrument’s terms and conditions, among

other things. Management compares the pricing to a second independent pricing source for reasonableness. Equity securities are reported at Level 1 based on quoted market prices for identical securities in active markets.

FHLB of New York Stock

FHLB of New York Stock is recorded at cost (par value) and evaluated for impairment based on the ultimate recoverability of the par value. There is no active market for this stock and no significant observable market data is available for this instrument. The Company considers the profitability and asset quality of FHLB, dividend payment history and recent redemption experience, when determining the ultimate recoverability of the par value. The Company believes its investment in FHLB stock is ultimately recoverable at par. The carrying amount of FHLB stock approximates fair value, since this is the amount for which it could be redeemed.

Loans

The Company does not record loans at fair value on a recurring basis. However, periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements. The Estimated fair value for significant nonperforming loans and impaired loans are valued utilizing independent appraisals of the collateral securing such loans that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience. The appraisals are adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date and the timing of anticipated cash flows. The Company classifies impaired loans as Level 3.

Fair value for loans held for investment is estimated using portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential, multifamily, commercial real estate, construction, land and consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming/impaired categories. Fair value of performing loans is estimated using a discounted cash flow model that employs a discount rate that reflects the current market pricing for loans with similar characteristics and remaining maturity, adjusted by an amount for estimated credit losses inherent in the portfolio at the balance sheet date. The rates take into account the expected yield curve. The Company classifies the estimated fair value of loans held for investment as Level 3.

Real Estate Owned

Assets acquired through foreclosure or deed in lieu of foreclosure are recorded at estimated fair value less estimated selling costs when acquired, thus establishing a new cost basis. Subsequently, real estate owned is carried at the lower of cost or fair value, less estimated selling costs. Fair value is generally based on independent appraisals. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience, and are considered Level 3. 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.

Deposit Liabilities

The estimated fair value of deposits with no stated maturity, such as checking, savings, and money market accounts, is equal to the amount payable on demand at the balance sheet date. The estimated fair value of term deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The Company classifies the estimated fair value of term deposits as Level 2.

Borrowings

The estimated fair value of overnight borrowings approximates the estimated fair value. The estimated fair value of term borrowings is calculated based on the discounted cash flow of contractual amounts due, using market rates currently available for borrowings of similar amount and remaining maturity. The Company classifies the estimated fair value of term borrowings as Level 2.

Commitments to Extend Credit and to Purchase or Sell Securities

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

Assets Recorded at Fair Value on a Recurring Basis

The following tables present the recorded amount of assets measured at fair value on a recurring basis as of December 31, 2012 and June 30, 2012 by level within the fair value hierarchy. There were no transfers between levels within the fair value hierarchy during the six months ended December 31, 2012.


	Fair Value as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(In thousands)
Assets:
U.S. Government and federal agency obligations	$	10,339	$	—	$	10,339	$	—
Equity Securities		1,601		1,601		—		—
Mortgage-backed securities available for sale
FHLMC		12,375		—		12,375		—
FNMA		53,900		—		53,900		—
CMO		322,163		—		322,163		—

Total measured on a recurring basis	$	400,378	$	1,601	$	398,777	$	—


	Fair Value as of June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(In thousands)
Assets:
U.S. Government and federal agency obligations	$	24,622	$	—	$	24,622	$	—
Equity Securities		1,409		1,409		—		—
Mortgage-backed securities available for sale
FHLMC		16,436		—		16,436		—
FNMA		62,345		—		62,345		—
CMO		395,139		—		395,139		—

Total measured on a recurring basis	$	499,951	$	1,409	$	498,542	$	—

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure the fair value of certain other financial assets on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. The

adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write downs of individual assets. The following tables present the recorded amount of assets measured at fair value on a nonrecurring basis as of December 31, 2012 and June 30, 2012 by level within the fair value hierarchy.


	Fair Value as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Impaired loans:
Residential	$	1,935	$	—	$	—	$	1,935
Commercial real estate		2,854		—		—		2,854
Construction and land loans		3,907		—		—		3,907

Total impaired loans		8,696		—		—		8,696

Real estate owned
Residential		595		—		—		595
Commercial real estate		1,102		—		—		1,102
Construction and land loans		1,120		—		—		1,120

Total real estate owned		2,817		—		—		2,817

Total measured on a non-recurring basis	$	11,513	$	—	$	—	$	11,513


	Fair Value as of June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Impaired loans:
Commercial real estate	$	1,851	$	—	$	—	$	1,851
Construction and land loans		5,426		—		—		5,426

Total impaired loans		7,277		—		—		7,277

Real estate owned
Residential		595		—		—		595
Commercial real estate		1,005		—		—		1,005
Construction and land loans		1,140		—		—		1,140

Total real estate owned		2,740		—		—		2,740

Total measured on a non-recurring basis	$	10,017	$	—	$	—	$	10,017

Estimated Fair Value of Financial Instruments

The following tables present the carrying amount, estimated fair value, and placement in the fair value hierarchy of financial instruments not recorded at fair values in their entirety on a recurring basis on the Company’s balance sheet at December 31, 2012 and June 30, 2012. These tables exclude financial instruments for which the carrying amount approximates fair value. Financial instruments for which the carrying amount approximates fair value include cash and cash equivalents, FHLB stock, non-maturity deposits, and overnight borrowings.


	At December 31, 2012				Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	Carrying Amount		Fair Value				Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(In thousands)
Financial assets:
Securities held to maturity	$	33,974	$	35,808	$	—	$	35,808	$	—
Loans, net (1)		2,182,162		2,295,933		—		—		2,295,933

Financial liabilities:
Term deposits		510,374		511,592		—		511,592		—
Term borrowings		608,578		658,354		—		658,354		—

(1)	Comprised of loans (including impaired loans), net of deferred loan fees and the allowance for loan losses.


	At June 30, 2012				Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	Carrying Amount		Fair Value				Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(In thousands)
Financial assets:
Securities held to maturity		36,130		37,648		—		37,648		—
Loans, net (1)		1,992,817		2,074,056		—		—		2,074,056

Financial assets:
Term deposits		569,549		573,371		—		573,371		—
Term borrowings		584,315		626,139		—		626,139		—

(1)	Comprised of loans (including impaired loans), net of deferred loan fees and the allowance for loan losses.

Limitations

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

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

12. Recent Accounting Pronouncements

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” Under the new guidance, the components of net income and the components of other comprehensive income can be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance eliminates the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity but does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In December 2011, the FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-050” which defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income. All other requirements in ASU 2011-05 are not affected by this update. These updates should be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. Adoption of this guidance is expected to result in presentation changes to the Company’s statements of income and the addition of a statement of comprehensive income. We adopted the applicable requirements on July 1, 2012 and have provided the related disclosures as required with no significant impact on the Company’s financial statements.

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

Forward Looking Statements

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

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

Overview

Oritani Financial Corp. (“the Company”) is a Delaware corporation that was incorporated in March 2010. The Company is the stock holding company of Oritani Bank. The Company owns 100% of the outstanding shares of common stock of the Bank. The Company has engaged primarily in the business of holding the common stock of the Bank and two limited liability companies that own a variety of real estate investments. In addition, the Company has engaged in limited lending to the real estate investment properties in which (either directly or through one of its subsidiaries) it maintains an ownership interest. The Bank’s principal business consists of attracting retail and commercial bank deposits from the general public and investing those deposits, together with funds generated from operations, in multi-family and commercial real estate loans, one- to four-family residential mortgage loans as well as in second mortgage and equity loans, construction loans, business loans, other consumer loans, and investment securities. The Bank originates loans primarily for investment and holds such loans in its portfolio. Occasionally, the Bank will also enter into loan participations. The Bank’s primary sources of funds are deposits, borrowings and principal and interest payments on loans and securities. The Bank’s revenues are derived principally from interest on loans and securities as well as our investments in real estate and real estate joint ventures. The Bank also generates revenue from fees and service charges and other income. The Bank’s results of operations depend significantly on its net interest income; which is the difference between the interest earned on interest-earning assets and the interest paid on interest-bearing liabilities. The Bank’s net interest income is primarily affected by the market interest rate environment, the shape of the U.S. Treasury yield curve, the timing of the placement of interest-earning assets and interest-bearing liabilities, and the prepayment rate on its mortgage-related assets. Provisions for loan losses and asset impairment charges can also have a significant impact on

results of operations. Other factors that may affect the Bank’s results of operations are general and local economic and competitive conditions, government policies and actions of regulatory authorities.

The Bank’s business strategy is to operate as a well-capitalized and profitable financial institution dedicated to providing exceptional personal service to its individual and business customers. The Bank’s primary focus has been, and will continue to be, growth in multi-family and commercial real estate lending.

Comparison of Financial Condition at December 31, 2012 and June 30, 2012

Total Assets. Total assets increased $108.7 million, or 4.0%, to $2.81 billion at December 31, 2012, from $2.70 billion at June 30, 2012. The primary investing activity was in loans funded by increases in short term borrowings and cash flows from the investment portfolio.

Cash and Cash Equivalents. Cash and cash equivalents (which include fed funds and short term investments) decreased $1.4 million to $10.1 million at December 31, 2012, from $11.4 million at June 30, 2012.

Net Loans. Loans, net increased $189.3 million, or 9.5%, to $2.18 billion at December 31, 2012, from $1.99 billion at June 30, 2012. The Company continues its emphasis on loan originations, particularly multifamily and commercial real estate loans. Loan originations totaled $359.6 million for the six months ended December 31, 2012 versus $262.1 million for the six months ended December 31, 2011.

Delinquency and non performing asset information is provided below:


	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011
	(Dollars in thousands)
Delinquency Totals
30—59 days past due	$	8,169		$	15,544		$	13,783		$	11,325		$	12,823
60—89 days past due		7,005			7,363			8,555			7,900			7,939
Nonaccrual		29,401			26,275			18,342			18,715			18,244

Total	$	44,575		$	49,182		$	40,680		$	37,940		$	39,006

Non Performing Asset Totals
Nonaccrual loans, per above	$	29,401		$	26,275		$	18,342		$	18,715		$	18,244
Real Estate Owned		2,817			2,837			2,740			4,266			4,951

Total	$	32,218		$	29,112		$	21,082		$	22,981		$	23,195

Nonaccrual loans to total loans		1.32	%		1.22	%		0.90	%		0.96	%		0.98	%
Delinquent loans to total loans		2.01	%		2.28	%		2.00	%		1.95	%		2.10	%
Non performing assets to total assets		1.15	%		1.04	%		0.78	%		0.87	%		0.89	%

Total delinquent loans have decreased slightly from the September 30, 2012 total but, in management’s opinion, remain at an elevated level. Over the quarter, the notes regarding a construction loan relationship in which Oritani was a participant were sold. Oritani did not lend any funds to the purchaser. A charge off was incurred in conjunction with this sale which constituted the majority of the charge off total for the quarter. The bulk of the charge off total on this relationship was previously recognized as an impairment reserve. Despite this disposal, nonaccrual loans increased versus the September 31, 2012 total. Management has worked diligently to remedy these matters. As detailed below, some progress did occur over the quarter although full resolution has not yet occurred.

At December 31, 2012, there are nine nonaccrual loans with balances greater than $1.0 million. These loans are discussed below:

•

A $3.2 million construction loan for a luxury home in Morris County, New Jersey. The loan is classified as impaired. In accordance with the results of the impairment analysis for this loan, no reserve was required as of December 31, 2012, primarily due to a low estimated loan to value. The loan had paid as agreed, but the collateral for the loan remained unsold upon maturity. The borrower was unwilling to agree to the terms required by the Company to extend the loan. The Company initiated foreclosure proceedings and the borrower stopped making interest payments. The borrower had tentatively indicated a willingness to consent to the extension terms required by the Company. An extension did not occur by December 31, 2012, as was originally expected by the Company. However, a resolution acceptable to the Company was verbally agreed to by the borrower in January, 2013.

•

A $2.0 million mixed use building in Bergen County, New Jersey. The loan is classified as impaired. In accordance with the results of the impairment analysis for this loan, a charge off of $417,000 was previously recognized against this loan and an additional $400,000 charge off was recognized in the December 31, 2012 quarter. The Company has agreed to a cash settlement from the borrower, in exchange for the release of his personal guarantee, and this payment is currently in escrow. The Company expected title to the property by December 31, 2012, but encountered delays. Foreclosure proceedings are continuing in case title cannot be conveyed via deed in lieu of foreclosure.

•

A $1.8 million construction loan for a luxury home in Morris County, New Jersey. The Company reached a settlement and forbearance agreement with the borrower on this matter during the quarter ended March 31, 2012. As part of the agreement, the borrower is completing the home with no additional funding from Oritani, which serves to further lower the loan to value on this loan. The loan is classified as a nonaccrual troubled debt restructuring (“TDR”) as of December 31, 2012. As such, this loan is included in the nonaccrual loan total at December 31, 2012. However, the borrower has complied with all facets of the new agreement since its origination, including interest payments, and is fully current. The home is on schedule to be completed shortly, after which it will be marketed for sale.

•

A $1.6 million residential loan on a single family residence in Bergen County, New Jersey. A foreclosure action was initiated when loan payments became delinquent. The loan is classified as impaired. In accordance with the results of the impairment analysis for this loan, a $205,000 impairment reserve was established against this loan as of December 31, 2012.

•

A $2.5 million construction loan on improved land in Somerset County, New Jersey. The loan is classified as impaired. In accordance with the results of the impairment analysis for this loan, no reserve was required as of December 31, 2012. The loan matured in April, 2012 and the borrowers and the Company have been unable to agree on extension terms acceptable to the Company. Although all monthly payments continue to be made on the loan, the loan has been classified as nonaccrual and all payments received on the loan have been utilized to reduce principal exposure. In January 2013, the borrowers notified the Company that they had a commitment from another financial institution and that the Company’s loan would be paid in full from the proceeds of the new loan.

•

A $1.1 million loan on a mixed use property in Bergen County, New Jersey. The loan is classified as impaired. In accordance with the results of the impairment analysis for this loan, a $265,000 impairment reserve was established against this loan as of December 31, 2012. The loan initially exhibited delinquency approximately one year ago and legal action commenced at that time. Since that time, the borrower has not consistently made timely payments nor complied with a payment plan. A monetary judgment has been obtained against the guarantors and foreclosure proceedings continue.

•

A $2.5 million loan on a multifamily property in New York City. The loan is classified as impaired. In accordance with the results of the impairment analysis for this loan, no reserve was required as of

December 31, 2012. There is a pending contract for sale of this property for $3.7 million. The closing is being delayed due to legal matters related to the seller.

•

A $2.4 million loan on a warehouse/light industrial building in Bergen County, NJ. In accordance with the results of the impairment analysis for this loan, no reserve was required as of December 31, 2012. The borrower is deceased and his son is managing for the estate. The primary tenant was lost and the building was listed for sale. There had been an executed contract for sale for $3.9 million. Due to these circumstances, the estate no longer made payments. The premises were damaged by Hurricane Sandy and the purchaser terminated the contract. Repairs are being made to the building and all amounts are covered by insurance. Legal action by Oritani is proceeding.

There is one other loan greater than $1.0 million classified as nonaccrual at December 31, 2012 (with a balance of $1.5 million) which we are currently evaluating for impairment. The loan is classified as Substandard and carries a general reserve allocation consistent with our other Substandard loans at December 31, 2012.

There are twenty-one other multifamily/commercial real estate loans, totaling $7.7 million, classified as nonaccrual at December 31, 2012. The largest of these loans has a balance of $780,000.

There are ten other residential loans, totaling $3.4 million, classified as nonaccrual at December 31, 2012. The largest of these loans has a balance of $958,000.

See additional information regarding the allowance for loan losses in footnote 6 of the financial statements.

Mortgage-backed Securities Available For Sale. Mortgage-backed securities AFS decreased $85.5 million to $388.4 million at December 31, 2012, from $473.9 million at June 30, 2012.

Real Estate Owned. Real estate owned (“REO”) increased $77,000 to $2.8 million at December 31, 2012, from $2.7 million at June 30, 2012. During the six months ended December 31, 2012, the Company took title to one property and disposed of one property. The $2.8 million balance consists of 5 properties.

Deposits. Deposits decreased $38.0 million, or 2.7%, to $1.35 billion at December 31, 2012, from $1.39 billion at June 30, 2012. Growth in core deposit accounts was offset by outflows of time deposits.

Borrowings. Borrowings increased $147.7 million, or 19.8%, to $893.6 million at December 31, 2012, from $745.9 million at June 30, 2012.

Stockholders’ Equity. Stockholders’ equity decreased $4.5 million to $506.2 million at December 31, 2012, from $510.7 million at June 30, 2012. The decrease was primarily the result of dividends, including a $0.40 special dividend paid in December, 2012, partially offset by net income. Based on our December 31, 2012 closing price of $15.32 per share, the Company stock was trading at 137.4% of book value.

Average Balance Sheet for the Three and Six Months Ended December 31, 2012 and 2011

The following table presents certain information regarding Oritani Financial Corp.’s financial condition and net interest income for the three and six months ended December 31, 2012 and 2011. The tables present the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the periods indicated. Interest income includes fees that we consider adjustments to yields, including prepayment penalties.


	Average Balance Sheet and Yield/Rate Information
	For the Three Months Ended (unaudited)
	December 31, 2012							December 31, 2011
	Average Outstanding Balance		Interest Earned/Paid		Average Yield/Rate			Average Outstanding Balance		Interest Earned/ Paid		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans ⁽¹⁾	$	2,117,712	$	29,079		5.49	%	$	1,778,394	$	26,936		6.06	%
Federal Home Loan Bank Stock		41,836		437		4.18	%		34,039		281		3.30	%
Securities available for sale		11,934		58		1.94	%		52,006		304		2.34	%
Mortgage backed securities held to maturity		34,869		225		2.58	%		35,488		226		2.55	%
Mortgage backed securities available for sale		414,692		1,807		1.74	%		595,317		2,776		1.87	%
Federal funds sold and short term investments		1,573		1		0.25	%		1,675		1		0.24	%

Total interest-earning assets		2,622,616		31,607		4.82	%		2,496,919		30,524		4.89	%

Non-interest-earning assets		133,044							107,492

Total assets	$	2,755,660						$	2,604,411

Interest-bearing liabilities:
Savings deposits		137,876		97		0.28	%		154,466		160		0.41	%
Money market		448,852		550		0.49	%		377,170		677		0.72	%
Checking accounts		247,570		138		0.22	%		202,910		214		0.42	%
Time deposits		520,796		1,350		1.04	%		644,642		2,241		1.39	%

Total deposits		1,355,095		2,135		0.63	%		1,379,188		3,292		0.95	%
Borrowings		825,163		5,401		2.62	%		666,710		5,195		3.12	%

Total interest-bearing liabilities		2,180,258		7,536		1.38	%		2,045,898		8,487		1.66	%

Non-interest-bearing liabilities		57,939							49,214

Total liabilities		2,238,197							2,095,112
Stockholders’ equity		517,463							509,299

Total liabilities and stockholders’ equity	$	2,755,660						$	2,604,411

Net interest income			$	24,071						$	22,037

Net interest rate spread ⁽²⁾						3.44	%						3.23	%

Net interest-earning assets ⁽³⁾	$	442,358						$	451,021

Net interest margin ⁽⁴⁾						3.67	%						3.53	%

Average of interest-earning assets to interest-bearing liabilities						120.29	%						122.05	%

(1)	Includes nonaccrual loans.

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

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

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


	Average Balance Sheet and Yield/Rate Information
	For the Six Months Ended (unaudited)
	December 31, 2012							December 31, 2011
	Average Outstanding Balance		Interest Earned/Paid		Average Yield/ Rate			Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans ⁽¹⁾	$	2,068,595	$	58,161		5.62	%	$	1,744,180	$	52,865		6.06	%
Federal Home Loan Bank Stock		40,210		844		4.20	%		30,933		580		3.75	%
Securities available for sale		16,056		132		1.64	%		70,173		686		1.96	%
Mortgage backed securities held to maturity		35,349		459		2.60	%		36,269		475		2.62	%
Mortgage backed securities available for sale		436,818		3,831		1.75	%		573,512		5,634		1.96	%
Federal funds sold and short term investments		1,584		2		0.25	%		20,650		30		0.29	%

Total interest-earning assets		2,598,612		63,429		4.88	%		2,475,717		60,270		4.87	%

Non-interest-earning assets		128,022							107,976

Total assets	$	2,726,634						$	2,583,693

Interest-bearing liabilities:
Savings deposits		137,929		195		0.28	%		153,931		371		0.48	%
Money market		446,129		1,109		0.50	%		383,107		1,517		0.79	%
Checking accounts		243,894		273		0.22	%		189,339		426		0.45	%
Time deposits		536,470		2,892		1.08	%		656,580		4,661		1.42	%

Total deposits		1,364,421		4,469		0.66	%		1,382,957		6,975		1.01	%
Borrowings		789,192		10,699		2.71	%		598,923		10,271		3.43	%

Total interest-bearing liabilities		2,153,613		15,168		1.41	%		1,981,880		17,246		1.74	%

Non-interest-bearing liabilities		56,666							49,845

Total liabilities		2,210,279							2,031,725
Stockholders’ equity		516,355							551,968

Total liabilities and stockholder’s equity	$	2,726,634						$	2,583,693

Net interest income			$	48,261						$	43,024

Net interest rate spread ⁽²⁾						3.47	%						3.13	%

Net interest-earning assets ⁽³⁾	$	444,999						$	493,837

Net interest margin ⁽⁴⁾						3.71	%						3.48	%

Average of interest-earning assets to interest-bearing liabilities						120.66	%						124.92	%

(1)	Includes nonaccrual loans.

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

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

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

Comparison of Operating Results for the Three Months Ended December 31, 2012 and 2011

Net Income. Net income increased $1.1 million, or 14.7%, to $8.7 million for the quarter ended December 31, 2012, from $7.6 million for the corresponding 2011 quarter. The primary cause of the increased income was increased net interest income and a lower provision for loan losses.

Interest Income. Total interest income increased $1.1 million, or 3.5%, to $31.6 million for the three months ended December 31, 2012, from $30.5 million for the three months ended December 31, 2011. The components of interest income changed as follows:


	Three Months Ended December 31										Increase / (decrease)
	2012					2011								Average
	$		Yield			$		Yield			$			Balance			Yield
	(Dollars in thousands)
Interest on mortgage loans	$	29,079		5.49	%	$	26,936		6.06	%	$	2,143		$	339,318			-0.57	%
Dividends on FHLB stock		437		4.18	%		281		3.30	%		156			7,797			0.88	%
Interest on securities AFS		58		1.94	%		304		2.34	%		(246	)		(40,072	)		-0.40	%
Interest on MBS HTM		225		2.58	%		226		2.55	%		(1	)		(619	)		0.03	%
Interest on MBS AFS		1,807		1.74	%		2,776		1.87	%		(969	)		(180,625	)		-0.13	%
Interest on federal funds sold and short term investments		1		0.25	%		1		0.24	%		—			(102	)		0.01	%

Total interest income	$	31,607		4.82	%	$	30,524		4.89	%	$	1,083		$	125,697			-0.07	%

The changes in average balance reveal the effects of two of the Company’s strategic business decisions. The Company’s primary focus is organic growth of multifamily and commercial real estate loans. The average balance of loans increased $339.3 million over the periods. On a linked quarter basis (December 31, 2012 versus September 30, 2012), the average balance of loans grew $98.2 million. The growth was primarily achieved through originations. Loan originations totaled $141.6 million for the three months ended December 31, 2012. The yield on the loan portfolio decreased 57 basis points for the quarter ended December 31, 2012 versus the comparable 2011 period. The decreased yield was primarily due to the impact of current market rates on new originations, refinancings, prepayments and repricings. The decrease would have been larger; however, prepayment penalties were higher in the 2012 period. Prepayment penalties are recognized as interest on loans. Prepayment penalties totaled $1.2 million in the 2012 period versus $387,000 in the 2011 period. Prepayment penalty provisions are incorporated into all of the Company’s multifamily and commercial real estate loan documents. The penalties are intended to protect the Company from the prepayment of loans or provide the Company with compensation if the loan is prepaid. The current interest rate environment provides an economic incentive for many of our existing loans to refinance, despite the prepayment penalties. Prepayment penalties boosted annualized loan yield by 23 basis points in the 2012 period versus 9 basis points in the 2011 period. The second strategic business decision evidenced in the chart was the determination to no longer deploy the cash flows from the investment portfolio back into new investments. This decision impacted the periods subsequent to September 30, 2011 and was made because the Company determined that the risk/reward profiles of permissible securities no longer warranted additional investment. Consequently, the average balances of virtually all the investment related captions declined from 2011 to 2012. The only average balance caption that showed an increase was dividends on FHLB stock and this was only due to required purchases of FHLB stock in conjunction with increased FHLB borrowings. The decision has aided overall yield on interest earning assets as the Company now has a lower percentage of its interest earning assets in lower yielding assets like mortgage backed securities (“MBS”), investment securities and federal funds sold. The limited decrease in yield on interest earnings assets that occurred in 2012 versus 2011 (7 basis points), despite a much lower interest rate environment, is partially attributable to this decision.

Interest Expense. Total interest expense decreased $951,000, or 11.2%, to $7.5 million for the three months ended December 31, 2012, from $8.5 million for the three months ended December 31, 2011. The components of interest expense changed as follows:


	Three Months Ended December 31										Increase / (decrease)
	2012					2011								Average
	$		Cost			$		Cost			$			Balance			Cost
	(Dollars in thousands)
Savings deposits	$	97		0.28	%	$	160		0.41	%	$	(63	)	$	(16,590	)		-0.13	%
Money market		550		0.49	%		677		0.72	%		(127	)		71,682			-0.23	%
Checking accounts		138		0.22	%		214		0.42	%		(76	)		44,660			-0.20	%
Time deposits		1,350		1.04	%		2,241		1.39	%		(891	)		(123,846	)		-0.35	%

Total deposits		2,135		0.63	%		3,292		0.95	%		(1,157	)		(24,094	)		-0.32	%
Borrowings		5,401		2.62	%		5,195		3.12	%		206			158,453			-0.50	%

Total interest expense	$	7,536		1.38	%	$	8,487		1.66	%	$	(951	)	$	134,359			-0.28	%

The Company continued its strategic objective of increasing core deposits. However, increases in core account balances have been offset by decreases in time deposits. Overall deposit growth has not met management’s expectations. The Company has managed deposit costs with a priority on profitability. Deposit costs are compared to alternate sources of funds and priced accordingly. This approach has contributed to increased income but has negatively impacted overall deposit growth and caused an increased reliance on borrowings. Management is considering adjustments to this strategy with a goal of increasing deposits, although such strategies may increase costs. The average cost of interest bearing deposits decreased 32 basis points over the periods. On a linked quarter basis, the average cost of interest bearing deposits decreased 5 basis points. The average balance of borrowings increased significantly ($158.5 million) over the period while the cost decreased significantly (50 basis points). Overnight and other short term borrowings totaled $285.0 million at December 31, 2012. These borrowings had a very low cost associated with them and the rate of interest on these borrowings is expected to remain low for the foreseeable future. However, the Company is aware of the risk inherent in short term borrowings. As discussed in prior public filings, the Company has taken steps to mitigate the risk associated with its borrowing position. The Company is poised to deploy additional strategies to mitigate this risk and is regularly analyzing the most opportune time to deploy such strategies. The aforementioned goal of increasing deposits, if achieved, will also reduce the short term borrowing level.

Net Interest Income Before Provision for Loan Losses. Net interest income increased by $2.0 million, or 9.2%, to $24.1 million for the three months ended December 31, 2012, from $22.0 million for the three months ended December 31, 2011. The Company’s net interest income, spread and margin over the period are detailed in the chart below.


	Net Interest
For the Three Months Ended	Income Before
For the Three Months Ended	Provision		Spread			Margin
	(Dollars in thousands)
December 31, 2012	$	24,071		3.44	%		3.67	%
September 30, 2012		24,190		3.50	%		3.76	%
June 30, 2012		23,335		3.40	%		3.66	%
March 31, 2012		22,298		3.30	%		3.58	%
December 31, 2011		22,037		3.23	%		3.53	%
September 30, 2011		20,987		3.02	%		3.42	%

The Company’s spread and margin increased steadily over the 2012 fiscal year. That expansion had continued into the first quarter of the current fiscal year but retreated somewhat in the current quarter. As previously disclosed, the Company expects that its spread and margin will remain under pressure in the current interest rate environment due to several factors, including: rates on new loan originations and investment purchases; modifications of loans within the existing loan portfolio; prepayments of higher yielding loans and investments; limited ability to further reduce deposit and borrowing costs; promotional interest costs to attract new deposit customers and increases in borrowing costs which may be necessary to reduce interest rate risk. The Company has been able to largely offset these pressures. Several factors have contributed to this result. One such factor has been the utilization of short term borrowings. In the recent rate environment, such borrowings have a very low cost which contributed to the increased spread, margin and net interest income. The shifting of assets out of investments and into higher yielding loans also contributed to increased spread, margin and net interest income. In addition, the Company has been able to lower the cost of overall deposits. The Company believes that the most effective means for it to offset the impact of decreased spread and margin is loan growth, through quality loan originations. The Company has been able to achieve quality loan growth and continuation of this occurrence remains one of its strategic goals. The Company’s largest interest rate risk exposure is to a flat or inverted yield curve.

A component of the strong performance of the spread, margin and net interest income has been prepayment penalties (discussed in “Interest Income”). The prepayment penalties boosted the spread and margin for the quarter ended December 31, 2012 by 18 basis points each. The penalty income also boosted the September 30, 2012 quarterly spread and margin by 21 and 22 basis points, respectively and the June 30, 2012 quarterly spread and margin by 10 basis points each.

The Company’s net interest income and net interest rate spread were both negatively impacted in all periods due to the reversal of accrued interest income on loans delinquent more than 90 days. The total of such income reversed was $486,000 and $322,000 for the three months ended December 31, 2012 and 2011, respectively.

Provision for Loan Losses. The Company recorded provisions for loan losses of $1.5 million for the three months ended December 31, 2012 as compared to $2.0 million for the three months ended December 31, 2011. The activity in the allowance for loan losses for the three months ended December, 2012 and 2011 is presented below:


	Three Months Ended
	December 31,
	2012			2011
	(Dollars in thousands)
Balance at beginning of period	$	32,504		$	27,540
Provisions charged to operations		1,500			2,000
Recoveries of loans previously charged off		116			—
Loans charged off		(2,211	)		(721	)

Balance at end of period	$	36,331		$	30,261

Allowance for loan losses to total loans		1.44	%		1.55	%
Net charge-offs (annualized) to average loans outstanding		0.40	%		0.16	%

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. The effect on the Company of the storm that impacted our market area in late October 2012 has been immaterial. See additional information regarding the allowance for loan losses in footnote 6 of the financial

statements and “Comparison of Financial Condition at December 31, 2012 and June 30, 2012-Net Loans”.

Other Income. Other income decreased $33,000 to $887,000 for the three months ended December 31, 2012, from $920,000 for the three months ended December 31, 2011. The decrease is primarily due to a $342,000 decrease on income from investments in joint ventures. As discussed in prior public releases, income is expected to be below historical levels for the remainder of the fiscal year. The reason primarily relates to one commercial property that incurred flood damage in 2011. Repairs on this property were extensive and the situation has caused changes in the tenant base. During the quarter ended December 31, 2012, the situation was exacerbated by negative adjustments to expected insurance reimbursements. An overall loss of $127,000 was incurred on investments in real estate joint ventures for the quarter ended December 31, 2012, primarily due to the results at the commercial property. The other significant change for the quarter was due to a $262,000 impairment charge for equity securities that was recognized in the 2011 period. A similar charge was not incurred in the 2012 period.

Operating Expenses. Operating expenses increased $443,000 to $9.5 million for the three months ended December 31, 2012, from $9.1 million for the three months ended December 31, 2011. The increase was primarily due to compensation, payroll taxes and fringe benefits, which increased $527,000 to $7.0 million for the three months ended December 31, 2012, from $6.4 million for the three months ended December 31, 2011. The increase was primarily due to expenses associated with the Company’s ESOP as increases in the trading price of Company’s common stock caused increases in related ESOP expenses. There were also increases in direct compensation due to additional staffing and salary adjustments.

Income Tax Expense. Income tax expense for the three months ended December 31, 2012 was $5.2 million on pre-tax income of $14.0 million, resulting in an effective tax rate of 37.3%. Income tax expense for the three months ended December 31, 2011 was $4.3 million on pre-tax income of $11.9 million, resulting in an effective tax rate of 35.9%. The increase in tax rate is primarily due to limitations on deductions associated with compensation expense.

Comparison of Operating Results for the Six Months Ended December 31, 2012 and 2011

Net Income. Net income increased $3.0 million, or 20.0%, to $18.0 million for the six months ended December 31, 2012, from $15.0 million for the corresponding 2011 period. The primary cause of the increased income was increased net interest income and decreased provision for loan losses.

Interest Income. Total interest income increased $3.2 million, or 5.2%, to $63.4 million for the six months ended December 31, 2012, from $60.3 million for the six months ended December 31, 2011. The components of interest income for the six months ended December 31, 2012 and 2011, changed as follows:


	Six Months Ended December 31										Increase / (decrease)
	2012					2011								Average
	$		Yield			$		Yield			$			Balance			Yield
	(Dollars in thousands)
Interest on mortgage loans	$	58,161		5.62	%	$	52,865		6.06	%	$	5,296		$	324,415			-0.44	%
Dividends on FHLB stock		844		4.20	%		580		3.75	%		264			9,277			0.45	%
Interest on securities AFS		132		1.64	%		686		1.96	%		(554	)		(54,117	)		-0.32	%
Interest on MBS HTM		459		2.60	%		475		2.62	%		(16	)		(920	)		-0.02	%
Interest on MBS AFS		3,831		1.75	%		5,634		1.96	%		(1,803	)		(136,694	)		-0.21	%
Interest on federal funds sold and short term investments		2		0.25	%		30		0.29	%		(28	)		(19,066	)		-0.04	%

Total interest income	$	63,429		4.88	%	$	60,270		4.87	%	$	3,159		$	122,895			0.01	%

The explanations provided in “Comparison of Operating Results for the Three Months Ended December 31, 2012 and 2011, Interest Income” regarding changes for the three month period comparison are also applicable to the six month period comparison. Loan originations for the six months ended December 31, 2012 totaled $359.6 million. Prepayment penalties totaled $2.6 million in the 2012 period versus $485,000 in the 2011 period, and boosted annualized loan yield by 25 basis points in the 2012 period versus 6 basis points in the 2011 period.

Interest Expense. Total interest expense decreased $2.1 million, or 12.0%, to $15.2 million for the six months ended December 31, 2012, from $17.2 million for the six months ended December 31, 2011. The components of interest expense for the six months ended December 31, 2012 and 2011, changed as follows:


	Six Months Ended December 31										Increase / (decrease)
	2012					2011								Average
	$		Cost			$		Cost			$			Balance			Cost
	(Dollars in thousands)
Savings deposits	$	195		0.28	%	$	371		0.48	%	$	(176	)	$	(16,002	)		-0.20	%
Money market		1,109		0.50	%		1,517		0.79	%		(408	)		63,022			-0.29	%
Checking accounts		273		0.22	%		426		0.45	%		(153	)		54,555			-0.23	%
Time deposits		2,892		1.08	%		4,661		1.42	%		(1,769	)		(120,110	)		-0.34	%

Total deposits		4,469		0.66	%		6,975		1.01	%		(2,506	)		(18,535	)		-0.35	%
Borrowings		10,699		2.71	%		10,271		3.43	%		428			190,269			-0.72	%

Total interest expense	$	15,168		1.41	%	$	17,246		1.74	%	$	(2,078	)	$	171,734			-0.33	%

The explanations provided in “Comparison of Operating Results for the Three Months Ended December 31, 2012 and 2011, Interest Expense” regarding changes for the three month period comparison are also applicable to the six month period comparison.

Net Interest Income Before Provision for Loan Losses. Net interest income increased by $5.2 million, or 12.2%, to $48.3 million for the six months ended December 31, 2012, from $43.0 million for the six months ended December 31, 2011. The Company’s net interest rate spread and margin increased to 3.47% and 3.71% for the six months ended December 31, 2012, from 3.13% and 3.48% for the six months ended December 31, 2011, respectively. The factors described in “Comparison of Operating Results for the Three Months Ended December 31, 2012 and 2011, Net Interest Income Before Provision for Loan Losses” also impacted the six month periods. The Company’s net interest income was reduced $1.3 million and $650,000 for the six months ended December 31, 2012 and 2011, respectively, due to the impact of nonaccrual loans.

Provision for Loan Losses. The Company recorded provisions for loan losses of $3.0 million for the six months ended December 31, 2012 as compared to $5.5 million for the six months ended December 31, 2011. A rollforward of the allowance for loan losses for the six months ended December 31, 2012 and 2011 is presented below:


	Six Months Ended
	December 31,
	2012			2011
	(Dollars in thousands)
Balance at beginning of period	$	31,187		$	26,514
Provisions charged to operations		3,000			5,500
Recoveries of loans previously charged off		117			—
Loans charged off		(2,395	)		(3,195	)

Balance at end of period	$	31,909		$	28,819

Allowance for loan losses to total loans		1.44	%		1.55	%
Net charge-offs (annualized) to average loans outstanding		0.22	%		0.37	%

See discussion of the allowance for loan losses in “Comparison of Financial Condition at December 31, 2012 and June 30, 2012” and footnote 6 of the financial statements.

Other Income. Other income decreased $714,000 to $2.1 million for the six months ended December 31, 2012 from $2.8 million for the six months ended December 31, 2011. The six month period was also impacted by the issues described in “Comparison of Operating Results for the Three Months Ended December 31, 2012 and 2011, Other Income” regarding income from investments in joint ventures and net loss on sale of and write down of securities. In addition, a net gain on sale of assets of $557,000 was realized in 2011. This net gain primarily pertained to the sale of a loan classified as held for sale. Gains on sale of assets totaled $44,000 in the 2012 period resulting in a decrease of $513,000 between the periods.

Operating Expenses. Operating expenses increased $1.5 million to $18.7 million for the six months ended December 31, 2012, from $17.3 million for the six months ended December 31, 2011. The increase was primarily due to compensation, payroll taxes and fringe benefits, which increased $1.8 million to $13.9 million for the six months ended December 31, 2012, from $12.0 million for the six months ended December 31, 2011. The six month period was also impacted by the issues described in “Comparison of Operating Results for the Three Months Ended December 31, 2012 and 2011, Other Expenses” but was also impacted by costs associated with stock based compensation. Stock awards and options were granted under the Company’s 2011 Equity Incentive Plan (“the Equity Plan”) on August 18, 2011. The 2011 period only contained 4.5 months of amortization of Equity Plan costs versus 6 months in the 2012 period. Expenses associated with the Equity Plan were $710,000 greater in the 2012 period versus the 2011 period.

Income Tax Expense. Income tax expense for the six months ended December 31, 2012, was $10.7 million, due to pre-tax income of $28.6 million, resulting in an effective tax rate of 37.3%. For the six months ended December 31, 2011, income tax expense was $8.1 million, due to pre-tax income of $23.1 million, resulting in an effective tax rate of 35.2%. The increase in tax rate is primarily due to limitations on deductions associated with compensation expense.

Liquidity and Capital Resources

The Company’s primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, Federal Home Loan Bank (“FHLB”) borrowings and investment maturities. While scheduled amortization of loans is a predictable source of funds, deposit flows and mortgage

prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity if a need for additional funds arises, including advances from the FHLB and Federal Reserve Bank of New York.

At December 31, 2012 and June 30, 2012, the Company had $135.0 million and $161.6 million in overnight borrowings from the FHLB, respectively. In addition, the Company had additional short term borrowings at December 31, 2012 totaling $150.0 million and maturing on January 7, 2013. The Company had total borrowings of $893.6 million at December 31, 2012 and $745.9 million at June 30, 2012. The Company’s total borrowings at December 31, 2012 include $608.6 million in longer term borrowings with the FHLB. In the normal course of business, the Company routinely enters into various commitments, primarily relating to the origination of loans. At December 31, 2012, outstanding commitments to originate loans totaled $113.0 million and outstanding commitments to extend credit totaled $24.5 million. The Company expects to have sufficient funds available to meet current commitments in the normal course of business.

Time deposits scheduled to mature in one year or less totaled $372.2 million at December 31, 2012. Based upon historical experience, management estimates that a large portion of such deposits will remain with the Company. The portion that remains will be significantly impacted by the renewal rates offered by the Company.

On September 29, 2009, the Federal Deposit Insurance Corporation issued a rule pursuant to which all insured depository institutions would be required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. On December 30, 2009, the Company paid $8.2 million in estimated assessments, of which $3.7 million is prepaid at December 31, 2012.

As of December 31, 2012 and June 30, 2012, the Company and Bank exceeded all regulatory capital requirements as follows:


	December 31, 2012
	Actual					Required
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Company:
Total capital (to risk-weighted assets)	$	531,521		22.4	%	$	189,767		8.0	%
Tier I capital (to risk-weighted assets)		501,842		21.2			94,883		4.0
Tier I capital (to average assets)		501,842		18.2			110,226		4.0

	Actual					Required
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Bank:
Total capital (to risk-weighted assets)	$	439,320		18.8	%	$	187,458		8.0	%
Tier I capital (to risk-weighted assets)		409,997		17.5			93,729		4.0
Tier I capital (to average assets)		409,997		14.8			111,125		4.0


	At June 30, 2012
	Actual					Required
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Company:
Total capital (to risk-weighted assets)	$	534,102		24.48	%	$	174,509		8.0	%
Tier I capital (to risk-weighted assets)		506,787		23.23			87,255		4.0
Tier I capital (to average assets)		506,787		19.02			106,607		4.0

	Actual					Required
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Bank:
Total capital (to risk-weighted assets)	$	438,837		20.51	%	$	171,207		8.0	%
Tier I capital (to risk-weighted assets)		412,031		19.25			85,603		4.0
Tier I capital (to average assets)		412,031		15.42			106,858		4.0

Critical Accounting Policies

Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended June 30, 2012, included in the Company’s Annual Report on Form 10-K, as supplemented by this report, contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried in the consolidated Balance Sheets at estimated fair value or the lower of cost or estimated fair value. Policies with respect to the methodologies used to determine the allowance for loan losses and judgments regarding the valuation of securities as well as the valuation allowance against deferred tax assets are the most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations, involve a higher degree of complexity, and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition. These critical accounting policies and their application are reviewed periodically and, at least annually, with the Audit Committee of the Board of Directors. For a further discussion of the critical accounting policies of the Company, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K, for the year ended June 30, 2012.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

(i)

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

(ii)

investing in mortgage-backed securities and collateralized mortgage obligations with shorter durations and/or cash flow prioritization; and

(iii)

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

Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities, as well as loans and securities with variable rates of interest, helps to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. Management actively monitors the interest rate risk position of the Company. As initially discussed in the Company’s Form 10-Q for the quarterly period ended December 31, 2011, and also discussed in “Comparison of Financial Condition at December 31, 2012 and June 30, 2012” and “Comparison of Operating Results for the Three Months Ended December 31, 2012 and 2011,” the Company is not currently following strategy (ii), above. Management is aware that the Company’s interest rate risk remained at an elevated level over the quarter. The elevated level, versus historical amounts, is primarily due to the level of short term borrowings as well as a reduced investment and mortgage backed security position. Management feels the level of interest rate risk is manageable and has previously executed strategies to limit the elevation of the risk. The Company is poised to deploy additional strategies to mitigate this risk and is regularly analyzing the most opportune time to deploy such strategies. The execution of these strategies may have a negative impact on net interest income. Given the current interest rate outlook, management intends to continue to maintain an elevated level of interest rate risk (versus historical amounts).

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

The table below sets forth, as of December 31, 2012, 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.


Change in Interest Rates (basis points) (1)	Estimated NPV (2)		Estimated Increase (Decrease) in NPV						NPV as a Percentage of Present Value of Assets (3)
			Estimated Increase (Decrease) in NPV						NPV Ratio (4)			Increase (Decrease) basis points
			Amount			Percent			NPV Ratio (4)			Increase (Decrease) basis points
(Dollars in thousands)
+200	$	483,161	$	(119,078	)		(19.8	)%		17.5	%		(289	)
+100		539,098		(63,141	)		(10.5	)		18.9			(149	)
0		602,239		—			0.0			20.4			—
-100		673,194		70,955			11.8			22.1			165

(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 December 31, 2012, in the event of a 100 basis point decrease in interest rates, we would experience an 11.8% increase in net portfolio value. In the event of a 200 basis point increase in interest rates, we would experience a 19.8% decrease in net portfolio value. These changes in net portfolio value are within the limitations established in our asset and liability management policies.

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

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief 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 Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the Company’s internal controls (as defined by Rule 13a–15(f) under the Securities Exchange Act of 1934) and determined that there were no changes made in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting during the period covered by this report.

Part II – Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes from those risk factors previously disclosed in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 12, 2012. In addition to the risks disclosed in the annual report and the other risks described in this quarterly report, there may also be additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or operating results. As a result, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risks disclosed are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

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

(a)

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

(b)

Use of Proceeds. Not applicable.

(c)

Repurchase of Our Equity Securities.

The following table shows the Company’s repurchases of its common stock for each calendar month in the quarter ended December 31, 2012 and the stock repurchase plans approved by our Board of Directors.


Period	Total Number of Shares Repurchased		Average Price Paid Per Share		Total Number of Shares Purchased as part of Publicly Announced Plans		Maximum Number of Shares That May Yet Be Purchased Under the Plans (1)
October 2012		—	$	—		—		1,801,381
November 2012		—		—		—		1,801,381
December 2012		—		—		—		1,801,381

		—				—

(1)

On November 14, 2011, the Company announced its third Share Repurchase Program, which authorized the purchase of an additional 5% of its outstanding shares of common stock, or 2,278,776 shares. This stock repurchase program commenced upon the completion of the second repurchase program on November 14, 2011. The timing of the repurchases 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. Repurchased shares will be held as treasury stock and will be available for general corporate purposes. The Company conducts such repurchases in accordance with a Rule 10b5-1 trading plan. This program has no expiration date and has 1,801,381 shares yet to be purchased as of December 31, 2012.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

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


3.1		Certificate of Incorporation of Oritani Financial Corp. *

3.2		Bylaws of Oritani Financial Corp. *

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

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

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

10.3		Oritani Bank Director Retirement Plan, ***

10.4		Oritani Bank Benefit Equalization Plan, ***

10.5		Oritani Bank Executive Supplemental Retirement Income Agreement, ***

10.6		Form of Employee Stock Ownership Plan, ***

10.7		Director Deferred Fee Plan, ***

10.8		Oritani Financial Corp. 2007 Equity Incentive Plan, ***

10.9		Oritani Financial Corp. 2011 Equity Incentive Plan*, ***

14		Code of Ethics****

21		Subsidiaries of Registrant**

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

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

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

101		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements ******

*	Incorporated by reference to the Registration Statement on Form S-1 of Oritani Financial Corp. (file no. 333-165226), originally filed with the Securities and Exchange Commission on March 5, 2011.

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

***	Incorporated by reference to the Company’s Proxy Statement for the 2011 Special Meeting of Stockholders filed with the Securities and Exchange Commission on June 27, 2011 (file No. 001-34786).

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

*****

Management contract, compensatory plan or arrangement.

******

As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

SIGNATURES

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


						ORITANI FINANCIAL CORP.

Date: February 8, 2013						/s/ Kevin J. Lynch
						Kevin J. Lynch
						President and Chief Executive Officer

Date: February 8, 2013						/s/ John M. Fields, Jr.
						John M. Fields, Jr.
						Executive Vice President and Chief Financial Officer