Oritani Financial 10-Q 2009 Q3 Quarterly report

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 March 31, 2009

OR

¨ 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. 001-33223

Oritani Financial Corp.

(Exact name of registrant as specified in its charter)

United States	22-3617996
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	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 ¨   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.

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

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

YES ¨   NO x

As of April 30, 2009, there were 40,552,162 shares of the Registrant’s common stock, par value $0.01 per share issued, and 37,159,462 outstanding, of which 27,575,476, or 74.2%, were held by Oritani Financial Corp., MHC, the Registrant’s mutual holding company parent.

Oritani Financial Corp.

FORM 10-Q

Index

		Page
Part I. Financial Information
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of March 31, 2009 (unaudited) and June 30, 2008	3
	Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2009 and 2008 (unaudited)	4
	Consolidated Statements of Stockholders’ Equity for the Nine months ended March 31, 2009 and 2008 (unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2009 and 2008 (unaudited)	6
	Notes to unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
Part II. Other Information
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults upon Senior Securities	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
	Signature Page	33

2

Part I. Financial Information

Item 1.     Financial Statements

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Balance Sheets

(in thousands, except share data)

	March 31,			June 30
	2009			2008
	(unaudited)
Assets
Cash on hand and in banks	$	32,525		$	7,332
Federal funds sold and short term investments		25,068			1,558
Cash and cash equivalents		57,593			8,890
Loans, net of deferred loan fees		1,255,404			1,020,609
Allowance for loan losses		(21,307	)		(13,532	)
Net Loans		1,234,097			1,007,077
Securities available for sale, at fair value		119,193			22,285
Mortgage-backed securities held to maturity, estimated fair value of $134,846 and $162,671 at March 31, 2009 and June 30, 2008, respectively		133,584			163,950
Mortgage-backed securities available for sale, at fair value		142,442			149,209
Bank Owned Life Insurance (at cash surrender value)		29,095			26,425
Federal Home Loan Bank of New York stock, at cost		24,971			21,547
Accrued interest receivable		7,030			5,646
Investments in real estate joint ventures, net		5,917			5,564
Real estate held for investment		1,337			3,681
Office properties and equipment, net		13,760			9,287
Other assets		23,374			19,733
Total assets	$	1,792,393		$	1,443,294
Liabilities
Deposits	$	1,002,040		$	698,932
Borrowings		509,743			433,672
Advance payments by borrowers for taxes and insurance		7,911			7,024
Accrued taxes payable		3,897			—
Official checks outstanding		4,475			4,143
Other liabilities		22,154			20,548
Total liabilities		1,550,220			1,164,319
Stockholders' Equity
Common stock, $0.01 par value; 80,000,000 shares authorized; 40,552,162 issued at March 31, 2009 and June 30, 2008 37,232,662 outstanding at March 31, 2009 and 40,187,062 outstanding at June 30, 2008		130			130
Additional paid-in capital		131,640			128,656
Unallocated common stock held by the employee stock ownership plan		(14,108	)		(14,704	)
Treasury stock, at cost; 3,319,500 shares at March 31, 2009 and 365,100 shares at June 30, 2008		(52,312	)		(5,926	)
Retained income		175,129			171,160
Accumulated other comprehensive gain (loss), net of tax		1,694			(341	)
Total stockholders' equity		242,173			278,975
Total liabilities and stockholders' equity	$	1,792,393		$	1,443,294

See accompanying notes to unaudited consolidated financial statements.

3

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Statements of Income

(unaudited)

	Three months ended						Nine months ended
	March 31,						March 31,
	2009			2008			2009			2008
	(in thousands, except per share data)
Interest income:
Interest on mortgage loans	$	18,553		$	14,173		$	53,198		$	40,417
Interest on securities held to maturity		190			349			725			934
Interest on securities available for sale		713			373			1,346			1,418
Interest on mortgage-backed securities held to maturity		1,373			1,787			4,405			5,766
Interest on mortgage-backed securities available for sale		1,763			1,285			5,436			3,147
Interest on federal funds sold and short term investments		6			351			7			1,401
Total interest income		22,598			18,318			65,117			53,083
Interest expense:
Deposits		6,680			5,943			17,796			18,464
Borrowings		5,118			3,651			15,058			9,213
Total interest expense		11,798			9,594			32,854			27,677
Net interest income before provision for loan losses		10,800			8,724			32,263			25,406
Provision for loan losses		2,400			750			7,775			2,050
Net interest income		8,400			7,974			24,488			23,356
Other income:
Service charges		255			292			863			836
Real estate operations, net		280			272			982			1,036
Income from investments in real estate joint ventures		196			281			739			879
Bank-owned life insurance		294			264			837			787
Net loss on sale of and write down of securities		(237	)		(352	)		(2,037	)		(352	)
Other income		34			34			106			108
Total other income		822			791			1,490			3,294
Other expenses:
Compensation, payroll taxes and fringe benefits		4,569			3,231			13,598			9,815
Advertising		150			128			414			376
Office occupancy and equipment expense		643			435			1,566			1,223
Data processing service fees		270			268			799			792
Federal insurance premiums		46			25			106			72
Telephone, Stationary, Postage and Supplies		214			114			475			313
Insurance, Legal, Audit and Accounting		427			395			1,305			805
Other expenses		333			155			805			495
Total other expenses		6,652			4,751			19,068			13,891
Income before income tax expense		2,570			4,014			6,910			12,759
Income tax expense		1,067			1,649			2,862			5,226
Net income	$	1,503		$	2,365		$	4,048		$	7,533
Basic and fully diluted income per common share	$	0.04			0.06		$	0.11			0.19

See accompanying notes to unaudited consolidated financial statements.

4

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Statements of Stockholders' Equity

Nine Months ended March 31, 2009 and 2008 (unaudited)

(In thousands)

														Accumu-
														lated
								Un-						other
								allocated						compre-
								common						hensive			Total
			Additional					stock						income			stock-
	Common		paid-in		Treasury			held by			Retained			(loss),			holders'
	Stock		capital		Stock			ESOP			income			net of tax			equity
Balance at June 30, 2007	$	130	$	127,710	$	—		$	(15,499	)	$	161,300		$	(1,071	)	$	272,570
Comprehensive income:
Net income		—		—		—			—			7,533			—			7,533
Unrealized holding gain on securities available for sale arising during year, net of tax of $1,062		—		—		—			—			—			1,537			1,537
Amortization related to post- retirement obligations, net of tax of $46		—		—		—			—			—			69			69
Total comprehensive income																		9,139
Cumulative transition adjustment related to the adoption of FIN 48		—		—		—			—			900			—			900
ESOP shares allocated or committed to be released		—		223		—			596			—			—			819
Balance at March 31, 2008	$	130	$	127,933	$	—		$	(14,903	)	$	169,733		$	535		$	283,428
Balance at June 30, 2008	$	130	$	128,656	$	(5,926	)	$	(14,704	)	$	171,160		$	(341	)	$	278,975
Comprehensive income:
Net income		—		—		—			—			4,048			—			4,048
Unrealized holding gain on securities available for sale arising during year, net of tax benefit of $675		—		—		—			—			—			862			862
Reclassification adjustment for losses included in net income, net of tax $586		—		—		—			—			—			902			902
Amortization related to post- retirement obligations, net of tax of $180		—		—		—			—			—			271			271
Total comprehensive income																		6,083
Adoption of EITF 06-4		—		—		—			—			(79	)		—			(79	)
Purchase of treasury stock		—		—		(46,386	)		—			—			—			(46,386	)
Compensation cost for stock options and restricted stock		—		2,653		—			—			—			—			2,653
ESOP shares allocated or committed to be released		—		331		—			596			—			—			927
Balance at March 31, 2009	$	130	$	131,640	$	(52,312	)	$	(14,108	)	$	175,129		$	1,694		$	242,173

See accompanying notes to unaudited consolidated financial statements.

5

Oritani Financial Corp. and Subsidiaries

Township of Washington, New Jersey

Consolidated Statements of Cash Flows

(unaudited)

	Nine months ended
	March 31,
	2009			2008
	(in thousands)
Cash flows from operating activities:
Net income	$	4,048		$	7,533
Adjustments to reconcile net income to net cash provided by operating activities:
ESOP and stock-based compensation expense		3,580			819
Depreciation of premises and equipment		511			397
Amortization and accretion of premiums and discounts, net		42			187
Provision for losses on loans		7,775			2,050
Amortization and accretion of deferred loan fees, net		(650	)		(546	)
Increase in deferred taxes		(5,017	)		(98	)
Impairment charge on securities		1,976			352
Loss on sale of securities		61			-
Increase in cash surrender value of bank owned life insurance		(837	)		(787	)
Income from real estate held for investment		(688	)		(507	)
Income from real estate joint ventures		(739	)		(879	)
Increase in accrued interest receivable		(1,384	)		(1,096	)
Decrease (increase) in other assets		387			(1,134	)
Increase in other liabilities		5,905			783
Net cash provided by operating activities		14,970			7,074
Cash flows from investing activities:
Net increase in loans receivable		(199,552	)		(152,002	)
Purchase of mortgage loans		(34,593	)		(1,350	)
Purchase of securities available for sale		(108,842	)		(17,718	)
Purchase of  mortgage-backed securities available for sale		(10,117	)		(82,145	)
Purchase of Federal Home Loan Bank of New York  stock		(3,424	)		(8,678	)
Principal payments on mortgage-backed securities held to maturity		30,200			38,800
Principal payments on mortgage-backed securities available for sale		19,429			8,816
Proceeds from calls and maturities of securities available for sale		10,000			25,000
Proceeds from sales of  securities available for sale		500			-
Purchase of Bank Owned Life Insurance		(1,833	)		-
Additional investment in real estate held for investment		(1,290	)		(503	)
Distributions received from real estate held for investment		546			426
Additional investment in real estate joint ventures		(780	)		-
Distributions received from real estate joint ventures		1,102			1,324
Purchase of fixed assets		(1,293	)		(509	)
Net cash used in investing activities		(299,947	)		(186,124	)
Cash flows from financing activities:
Net increase in deposits		303,108			7,496
Purchase of treasury stock		(46,386	)		-
Increase in advance payments by borrowers for taxes and insurance		887			653
Proceeds from borrowed funds		341,225			195,000
Repayment of borrowed funds		(265,154	)		(2,149	)
Net cash provided by financing activities		333,680			201,000
Net increase (decrease) in cash and cash equivalents		48,703			21,950
Cash and cash equivalents at beginning of period		8,890			63,526
Cash and cash equivalents at end of period	$	57,593		$	85,476
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	32,616		$	26,753
Income taxes	$	4,888		$	5,354
Noncash transfer
RE held for investment transferred to Office property and equipment	$	3,690		$	-

See accompanying notes to unaudited consolidated financial statements.

6

Oritani Financial Corp. and Subsidiaries

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, Ormon LLC (Ormon), and Oritani Asset Corporation (a real estate investment trust), collectively, the “Company.”

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 nine month periods ended March 31, 2009 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending June 30, 2009.

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, 2008 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 15, 2008.

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 as of the date of the consolidated statements of financial condition and revenues and expenses for the periods then ended.  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, including shares held by Oritani Financial Corp., MHC and allocated or committed to be released Employee Stock Ownership Plan shares.

7

Oritani Financial Corp. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

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

The following is a summary of the Company’s earnings per share calculations and reconciliation of basic to diluted earnings per share.

	For the Three Months Ended March 31,				For the Nine Months Ended March 31,
	2009		2008		2009		2008
	(in thousands, except earnings per share data)
Net income available to common shareholders	$	1,503	$	2,365	$	4,048	$	7,533
Weighted average common shares outstanding - basic		36,090		39,049		37,047		39,029
Effect of dilutive non-vested shares and stock options outstanding		-		-		-		-
Weighted average common shares outstanding - diluted		36,090		39,049		37,047		39,029
Earnings per share-basic	$	0.04	$	0.06	$	0.11	$	0.19

3. Stock Repurchase Program

On June 2, 2008, the Company announced a stock repurchase plan to acquire up to 10% of its publicly-held outstanding shares of common stock, or 1,297,668 shares.  Additional stock repurchase plans were announced on: September 18, 2008, for 10% of the publicly-held outstanding shares, or 1,173,008 shares, on November 21, 2008 for 10% of the publicly-held outstanding shares, or 1,061,098 shares, and on March 18, 2009, for 10% of the publicly-held outstanding shares, or 967,828 shares.  Under the stock repurchase program, shares of the Company’s common stock may be purchased in the open market and through privately negotiated transactions, from time to time, depending on market conditions and prices, the Company's liquidity requirements and alternative uses of capital. A total of 3,319,500 shares were acquired under these repurchase plans at a weighted average cost of $15.76 per share.   Repurchased shares will be held as treasury stock and will be available for general corporate purposes. At March 31, 2009, there are 946,728 shares yet to be purchased under the current plan.

4. Equity Incentive Plan

At the Special Meeting of Stockholders of the Company (the “Meeting”) held on April 22, 2008, the stockholders of the Company approved the Oritani Financial Corp. 2007 Equity Incentive Plan. On May 7, 2008, certain officers and employees of the Company were granted in aggregate 1,311,457 stock options and 588,171 shares of restricted stock, and non-employee directors received in aggregate 476,892 stock options and 206,652 shares of restricted stock.  During the nine months ended March 31, 2009, 70,000 stock options were granted at an exercise price equal to the fair value of our common stock on the grant date, based on quoted market prices.  All option grants have a vesting period of five years and an expiration period of ten years.  The fair values of all options grants were estimated using the Black Schloes option-pricing model using the following assumptions: an expected life of 6.5 years, risk-free rate of 3.37%, volatility of 28.22% and a dividend yield of 3.55%.  The Company adopted SFAS No. 123R, “Share-Based Payment”, upon approval of the Plan, and began to expense the fair value of all share-based compensation granted over the requisite service periods.

8

Oritani Financial Corp. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

During the nine months ended March 31, 2009, the Company recorded $2.6 million of stock-based expense, comprised of stock option expense of $827,000 and restricted stock expense of $1.8 million.  There was no stock-based compensation, and accordingly no stock-based expense, during the nine months ended March 31, 2008.

The following is a summary of the status of the Company’s non-vested options as of March 31, 2009 and changes therein during the nine 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, 2008		1,788,349	$	3.44	$	15.65		10.0
Granted		70,000		3.44		15.62		10.0
Exercised		-		-		-
Forfeited		10,000		3.44		15.65		9.1
Outstanding at March 31, 2009		1,848,349	$	3.44	$	15.65		9.1
Exercisable at March 31, 2009		-	$	-	$	-		-

Expected future compensation expense related to the non-vested options outstanding as of March 31, 2009 is $4.6 million over a weighted average period of 4.1 years.

Upon exercise of vested options, management expects to draw on treasury stock as the source of the shares.

The following is a summary of the status of the Company’s restricted shares as of March 31, 2009 and changes therein during the nine months then ended:

	Number of Shares Awarded		Weighted Average Grant Date Fair Value
Non-vested at June 30, 2008		794,823	$	15.65
Granted		-		-
Vested		-		-
Forfeited		-		-
Non-vested at March 31, 2009		794,823	$	15.65

Expected future compensation expense relating to the non-vested restricted shares as of March 31, 2009 is $9.6 million over a weighted average period of 4.1 years.

9

Oritani Financial Corp. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

5. Net Loans and Allowance for Loan Loss

Net Loans are summarized as follows:

	March 31, 2009			June 30, 2008
	(In thousands)
Conventional one to four family	$	280,029		$	223,087
Multifamily and commercial real estate		769,083			597,171
Second mortgage and equity loans		56,229			59,886
Construction loans		142,437			138,195
Other loans		10,287			4,880
Total loans		1,258,065			1,023,219
Deferred loan fees, net		(2,661	)		(2,610	)
Loans, net of deferred loan fees		1,255,404			1,020,609
Allowance for loan losses		(21,307	)		(13,532	)
Net loans	$	1,234,097		$	1,007,077

The activity in the allowance for loan losses is summarized as follows:

	Three months ended				Nine months ended
	March 31,				March 31,
	(In thousands)				(In thousands)
	2009		2008		2009			2008
Balance at beginning of period	$	18,907	$	10,182	$	13,532		$	8,882
Provisions charged to operations		2,400		750		7,775			2,050
Recoveries of loans previously charged off		—		—		—			—
Loans charged off		—		—		—			—
Balance at end of period	$	21,307	$	10,932	$	21,307		$	10,932
Allowance for loan losses to Loans, net of deferred fees at end of period						1.70	%		1.19	%

The Company's allowance for loan losses is analyzed quarterly and many factors are considered, including comparison to peer reserve levels.  A component of the increased provision in the 2008 period was loan growth.  The delinquency and nonaccrual totals also had an impact on the provision for loan losses.  The increase in delinquencies was a significant factor in the increase in the allowance for loan losses, which resulted in larger provisions in the 2008 period.  See discussion of the allowance for loan losses in “Comparison of Financial Condition at March 31, 2009 and June 30, 2008.”

6. Fair Value of Financial Instruments

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.157, "Fair Value Measurements", on July 1, 2008. Under SFAS No. 157, fair value measurements are not adjusted for transaction costs. SFAS No. 157 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 SFAS No. 157 are described below:

10

Oritani Financial Corp. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Basis of Fair Value Measurement:

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

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

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

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

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

The types of instruments whose values are based on quoted market prices in active markets include most U.S. government and agency securities, mortgage-backed securities, many other sovereign government obligations, and active listed securities. Such instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy. As required by SFAS No. 157, the Company does not adjust the quoted price for such instruments.

The type of instruments whose values are based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels or price transparency include less liquid mortgage products, less liquid equities, and state municipal and provincial obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy.

The following table sets forth the Company's financial assets that were accounted for at fair values on a recurring basis as of March 31, 2009 by level within the fair value hierarchy.  As required by SFAS No. 157, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurements (in thousands):

	Fair Value as of March 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	2009		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities available for sale	$	119,193	$	31,106	$	88,087	$	-
Mortgage-backed securities available for sale		142,442		-		142,442		-
	$	261,635	$	31,106	$	230,529	$	-

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

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Oritani Financial Corp. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

At March 31, 2009, the Company had impaired loans with outstanding principal balances of $52.1 million that were recorded at their estimated fair value (less cost to sell) of $46.5 million.  Specific reserves for impaired loans totaled $5.4 million at March 31, 2009 and $1.4 million at June 30, 2008.  The Company recorded impairment charges of $1.2 million and $4.0 million for the three and nine months ended March 31, 2009, utilizing Level 3 inputs. Impaired loans are valued utilizing current appraisals adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date.

Certain non-financial assets and liabilities measured on a recurring and nonrecurring basis include goodwill and other intangible assets and other non-financial long-lived assets.  The Financial Accounting Standards Board (“FASB”) has delayed provisions of SFAS No. 157 related to the fair value measurement of non-financial assets and liabilities until fiscal periods beginning after November 15, 2008; therefore, the Company will apply the applicable provisions of SFAS No. 157 for non-financial assets and liabilities beginning July 1, 2009.

7. Deposits

Deposits are summarized as follows:

	March 31, 2009		June 30, 2008
	(In thousands)
Checking accounts	$	72,553	$	73,949
Money market deposit accounts		131,581		57,117
Savings accounts		144,504		149,062
Time deposits		653,402		418,804
Total deposits	$	1,002,040	$	698,932

8. Income Taxes

In June 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”).  FIN 48 establishes a recognition threshold and measurement for income tax positions recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 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.

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Oritani Financial Corp. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Tax positions that meet the more-likely-than-not recognition threshold at the effective date of FIN 48 may be recognized or, continue to be recognized, upon adoption of this Interpretation. The cumulative effect of applying the provisions of FIN 48 shall be reported as an adjustment to the opening balance of retained earnings for that fiscal year.  The Company adopted FIN 48 on July 1, 2007.  The adoption of FIN 48 resulted in a $900,000 transition adjustment which increased retained income at July 1, 2007.  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 and Pennsylvania state jurisdictions.  The Company is no longer subject to federal and state income tax examinations by tax authorities for years prior to 2004.  Currently, the Company is not under examination by any taxing authority.  

9. Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations.” SFAS 141R requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at “full fair value.” SFAS No. 141R applies to all business combinations, including combinations among mutual entities and combinations by contract alone. Under SFAS No. 141R, all business combinations will be accounted for by applying the acquisition method. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company does not expect that the adoption of SFAS No. 141R will have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” SFAS No. 160 will require noncontrolling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. SFAS No. 160 applies to the accounting for noncontrolling interests and transactions with noncontrolling interest holders in consolidated financial statements. SFAS No. 160 is effective for periods beginning on or after December 15, 2008. Earlier application is prohibited. The Company does not expect that the adoption of SFAS No. 160 will have a material impact on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company does not expect that the adoption of SFAS No. 161 will have a material impact on its consolidated financial statements.

In June 2008, EITF 03-6-1 was issued which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share. The Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of EITF 03-6-1 is not expected to have a material impact on the Company’s consolidated financial statements.

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Oritani Financial Corp. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

In June 2008, FASB ratified EITF Issue No. 08-3, “Accounting by Lessees for Nonrefundable Maintenance Deposits” (“EITF No. 08-3”). EITF No. 08-3 requires that all nonrefundable maintenance deposits be accounted for as a deposit with the deposit expensed or capitalized in accordance with the lessee's maintenance accounting policy when the underlying maintenance is performed. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, it is to be recognized as additional expense at the time such determination is made. EITF No. 08-3 is effective for fiscal years beginning after July 1, 2009. The adoption of EITF 08-3 is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2009, the FASB issued FASB Staff Position EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20.’’  This FASB Staff Position (FSP) amends the impairment guidance in EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets," to achieve more consistent determination of whether an other-than-temporary impairment has occurred.  The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and other related guidance.  The FSP shall be effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted.  The Company does not expect that the adoption will have a material impact on its consolidated financial statements.

In April 2009, the FASB issued Staff Position, or FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. This proposed FSP provides additional guidance fir estimating fair value in accordance with FASB Statement No. 157, “Fair Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased. This FSP notes that a reporting entity should evaluate the following to determine whether there has been a significant decrease in the volume and activity for the asset or liability when compared with normal activity for the asset or liability. Factors include, but are not limited to: few recent transactions (based on volume and level of activity in the market), price quotations are not based on current information, price quotations vary substantially over time or among market makers, indexes that previously were highly correlated with the fair values of the asset are demonstrably uncorrelated with recent fair values, abnormal liquidity risk premiums or implied yields for quoted prices when compared with reasonable estimates of credit and other non-performance risk for the asset class, abnormally wide bid-ask spread or significant increases in the bid-ask spread, and little information is released publicly. If the reporting entity concludes there has been a significant decrease in the volume or activity for the asset or liability in relation to normal market activity than further analysis of the transactions or quoted prices is needed.  This would include a change in valuation technique or the use of multiple valuation techniques to assist in the determination of a fair value of the asset or liability. This FSP shall be effective for interim and annual periods ending after June 15, 2009 and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted. If a reporting entity elects to adopt early either FSP FAS 115-2 and FAS 124-2 or FSP FAS 107-1 and APB 28-1, the reporting entity also is required to adopt early this FSP. Additionally, if the reporting entity elects to adopt early this FSP, FSP FAS 115-2 and FAS 124-2 also must be adopted early.  The Company does not expect FSP FAS 157-4 will have a material impact on our financial condition, results of operations or financial statement disclosures.

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Oritani Financial Corp. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”. This FSP amends the disclosure requirements in SFAS No.107, “Disclosures about Fair Value of Financial Instruments”, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. This FSP also amends APB No. 28, “Interim Financial Reporting”, to require such disclosures in all interim financial statements. This FSP requires an entity to disclose in the body or in the accompanying notes of its interim financial statements and its annual financial statements the fair value of all financial instruments, whether recognized or not recognized in the statements of financial position, as required by SFAS No. 107.  Fair value information disclosed in the interim period notes will be presented together with the related carrying amount in a form that makes it clear whether the fair value and carrying amount represent assets or liabilities and how the carrying amount relates to what is reported in the statements of financial position. An entity will also disclose the methods and significant assumptions used to estimate the fair value of financial instruments. This FSP shall be effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2.

In April 2009, the FASB issued FSP FAS 115-2 and APB 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. This FSP amends the other-than-temporary impairment guidance in U.S. generally accepted accounting principles for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP shall be effective for interim reporting periods ending after June 15, 2009, with early adoption permitted after periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted. If an entity elects to adopt early either FSP FAS 157-4, or FSP FAS 107-1 and APB 28-1, the entity also is required to adopt early this FSP. Additionally, if an entity elects to adopt early this FSP, it is required to adopt FSP FAS 157-4. The Company does not expect that FSP FAS 115-2 and APB 124-2 will have a material impact on our financial condition, results of operations or financial statement disclosures.

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Oritani Financial Corp. and Subsidiaries

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.

Executive Summary

Oritani Financial Corp. is the federally chartered mid-tier stock holding company of Oritani Bank.  Oritani Financial Corp. owns 100% of the outstanding shares of common stock of Oritani Bank.  Since being formed in 1998, Oritani Financial Corp. has engaged primarily in the business of holding the common stock of Oritani Bank and two limited liability companies that own a variety of real estate investments.In addition, Oritani Financial Corp. has engaged in limited lending to the real estate investment properties in which (either directly or through one of its subsidiaries)Oritani Financial Corp. has an ownership interest.  Oritani Bank’s principal business consists of attracting retail and commercial bank deposits from the general public and investing those deposits, together with funds generated from operations, in multi-family and commercial real estate loans, one- to four-family residential mortgage loans as well as in second mortgage and equity loans, construction loans, business loans, other consumer loans, and investment securities.  We originate loans primarily for investment and hold such loans in our portfolio.  Occasionally, we will also enter into loan participations.  Our primary sources of funds are deposits, borrowings and principal and interest payments on loans and securities.  Our revenues are derived principally from interest on loans and securities as well as our investments in real estate and real estate joint ventures.  We also generate revenues from fees and service charges and other income.  Our results of operations depend primarily on our net interest income which is the difference between the interest we earn on interest-earning assets and the interest paid on our interest-bearing liabilities.  Our net interest income is primarily affected by the market interest rate environment, the shape of the U.S. Treasury yield curve, the timing of the placement of interest-earning assets and interest-bearing liabilities, and the prepayment rate on our mortgage-related assets.  Provisions for loan losses and asset impairment charges can also have a significant impact on our results of operations.  Other factors that may affect our results of operations are general and local economic and competitive conditions, government policies and actions of regulatory authorities.

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Oritani Financial Corp. and Subsidiaries

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

Comparison of Financial Condition at March 31, 2009 and June 30, 2008

Balance Sheet Summary

Total Assets.  Total assets increased $349.1 million, or 24.2%, to $1.79 billion at March 31, 2009, from $1.44 billion at June 30, 2008.  The increases were primarily in the captions of loans and securities available for sale ("AFS"), and were primarily funded through increased deposits and borrowings.

Cash and cash equivalents.  Cash and cash equivalents increased $48.7 million to $57.6 million at March 31, 2009, from $8.9 million at June 30, 2008.  The increase in liquid funds is primarily attributable to the sharp increase in deposits.  Excess liquid assets are typically redeployed into loans or investments and increases in both of these captions have occurred over the nine month period.   A reduction in liquid assets through further deployment, particularly in loans, is expected in the coming months.

Net Loans.  Loans, net increased $227.0 million, or 22.5%, to $1.23 billion at March 31, 2009, from $1.01 billion at June 30, 2008. The Company continued its emphasis on loan originations, particularly multi-family and commercial real estate loans. Loan originations and purchases totaled $356.5 million for the nine months ended March 31, 2009.

The allowance for loan losses increased $7.8 million to $21.3 million at March 31, 2009, from $13.5 million at June 30, 2008.  There were no recoveries or charge-offs during the  nine month periods ending March 31, 2009 and 2008..  A component of the increased provision in the 2009 period was loan growth.  Loans, net increased $227.0 million over the nine months ended March 31, 2009, versus growth of $151.8 million over the comparable 2008 period.  The delinquency and nonaccrual totals, however, also had a considerable impact on the provision for loan losses.

Delinquency Totals (in thousands)
	03/31/09		12/31/08		09/30/08		06/30/08		03/31/08
30 - 59 days past due	$	4,897	$	4,979	$	16,624	$	25,367	$	23,531
60 - 89 days past due		2,130		5,942		1,381		18		14,034
90+ days past due and accruing		-		-		-		-		-
Nonaccrual		52,260		44,067		25,337		14,211		384
Total	$	59,287	$	54,988	$	43,342	$	39,596	$	37,949

The level and magnitude of the delinquent loan total have increased since the last quarter.  The Company has continued its aggressive posture toward delinquent borrowers.  The Company has commenced legal action against virtually all borrowers who are more than 45 days delinquent.  The Company has refused to extend the maturity date of any construction loan, even if the interest payments are current, unless the borrower agrees to reduce the Company's exposure and agrees to an additional fee if the loan is not paid in full on or before the new maturity date.

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Oritani Financial Corp. and Subsidiaries

The nonaccrual total of $52.3 million at March 31, 2009, includes all of the loans ($44.1 million) that were classified as nonaccrual at December 31, 2008.  These loans have been discussed in prior reports.  Two of these loans are to one borrower and totaled $18.3 million at December 31, 2008.  The loans are secured by a condominium construction project and raw land with all building approvals, both of which are in Northern New Jersey.  Oritani has been working with the borrower.  The construction of the condominium project is virtually complete and the individual unit sales process has commenced.  Several units are currently under contract with closings expected to begin in late May 2009.  As of March 31, 2009, the total outstanding on these loans was $19.4 million.  These two loans were considered impaired as of March 31, 2009.  In accordance with the results of the Company’s Statement of Financial Accounting Standards #114 (“FAS 114”) impairment analyses, a specific reserve of $4.8 million has been recorded against these loans.  In January, 2009, the borrower for these loans filed for Chapter 11 bankruptcy protection.  In the filing, the borrower named Oritani Bank as its largest creditor with a balance owed of $20 million.  This $20 million amount pertains to the two loans described above.  Delinquent interest and other amounts due on the loans bring the total owed by the borrower to approximately the amount noted on his filing.  These two loans have been reported as delinquent by Oritani since March 31, 2008; and they have been classified as impaired and placed on nonaccrual since June 30, 2008.  The bankruptcy filing has not had a material impact on the completion of the project or the individual unit sales process.  No additional reserves were considered necessary due to the bankruptcy filing as the Company had not ascribed any value to the borrower’s guarantee in its impairment analyses.  Another significant component of nonaccrual loans at March 31, 2009, were three loans to another borrower.  One of these loans is a $7.9 million loan secured by a retail mall in Northern New Jersey.  The other two loans total $10.2 million and are secured by a golf course in Bergen County, New Jersey.  All three of these loans are classified as nonaccrual and impaired, in accordance with FAS#114, at March 31, 2009.  Oritani is in litigation with this borrower, foreclosure proceedings have commenced and a rent receiver has been placed in control of the operations of these properties.  Net cash generated from the operation of these properties is being forwarded from the rent receiver to Oritani.  In accordance with the results of the impairment analyses, no reserve was required for these loans as they were considered to be well collateralized.  Another significant portion of the nonaccrual total at March 31, 2009, were three loans to one borrower that totaled $6.6 million.  These loans were secured by various warehouse properties in Rockland, Nassau and Westchester counties, New York.  All three of these loans are classified as nonaccrual and impaired, in accordance with FAS 114, at March 31, 2009.  Oritani is in litigation with this borrower and foreclosure proceedings have commenced.   A rent receiver has been appointed on two of the properties and we are attempting to have a rent receiver appointed on the other property.  In accordance with the results of the impairment analyses, a specific reserve of $40,000 has been recorded against one of these loans.  No reserve was required for the other loans as they were considered to be well collateralized.  The largest addition to the nonaccrual total at March 31, 2009 was a $5.9 million multifamily loan located in Bergen County, New Jersey.  This loan was included in the 60-89 days past due total at December 31, 2008.  The borrower on this loan has declared bankruptcy, a rent receiver is in place, net cash flows from the operation of the property are being forwarded to Oritani, and the bankruptcy trustee is actively marketing the property for sale.  In accordance with the results of the impairment analysis for this loan, no reserve was required as the loan is considered to be well collateralized.  The nonaccrual total at March 31, 2009 also includes two loans that required an impairment reserve as of March 31, 2009.  One of these loans is a $1.1 million condominium construction loan located in Morris County, New Jersey.  This loan was not delinquent at December 31, 2008.  The other loan is a $609,000 multifamily loan located in Middlesex County, New Jersey.  This loan was included in the 60-89 days past due total at December 31, 2008.  In accordance with the impairment analyses performed for these two loans, specific reserves of $315,000 and $300,000, respectively, have been recorded against these two loans

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Oritani Financial Corp. and Subsidiaries

Securities Available for Sale.  Securities available for sale increased $96.9 million to $119.2 million at March 31, 2009 from $22.3 million at June 30, 2008.  This increase was due to purchases during the period partially offset by maturities, an impairment charge of $2.0 million and sales.  The purchases made over the period were primarily to deploy excess liquid funds in structures that are likely to return the funds to the Company within one year.  The Company felt the returns for longer term investments were insufficient to compensate for the additional interest rate risk.

Mortgage-Backed Securities Held to Maturity. Mortgage-backed securities held to maturity decreased $30.4 million, or 18.5%, to $133.6 million at March 31, 2009, from $164.0 million at June 30, 2008.  This decreased was primarily due to principal repayments received.

Investments in real estate joint ventures, net. Investments in real estate joint ventures, net increased $353,000 to $5.9 million at March 31, 2009, from $5.6 million at June 30, 2008.  The Company invested in two new joint venture projects over the period.  The investments in these projects were partially offset by distributions from existing investments.

Real Estate Held for Investment. Real estate held for investment decreased $2.3 million, or 63.7%, to $1.3 million at March 31, 2009, from $3.7 million at June 30, 2008.   This decrease was due to the completion of construction of the Emerson de novo branch location during the 2009 period and the subsequent transfer of the property to office properties and equipment.

Office Properties and Equipment, net. Office properties and equipment increased $4.5 million, or 48.2%. to $13.8 million at March 31, 2009, from $9.3 million at June 30, 2008.  This increase is due to the opening of two de novo branch locations, one of which was previously classified as real estate held for investment while in the construction phase.

Deposits.  Deposits increased $303.1 million, or 43.4%, to $1.00 billion at March 31, 2009, from $698.9 million at June 30, 2008.  Deposits increased $122.1 million during the quarter ended March 31, 2009.  The Bank has implemented several initiatives designed to achieve deposit growth.  Two new branch locations have recently been opened.  Strong deposit growth remains a strategic objective of the Company.

Borrowings.  Borrowings increased $76.1 million, or 17.5%, to $509.7 million at March 31, 2009, from $433.7 million at June 30, 2008. The Company committed to various long term advances from the FHLB-NY over the period.

Stockholders’ Equity.  Stockholders' equity decreased $36.8 million, or 13.2%, to $242.2 million at March 31, 2009, from $279.0 million at June 30, 2008.  On March 18, 2009, the Company announced the completion of its third 10% repurchase program as well as the commencement of a fourth (967,828 shares) 10% repurchase program.  As of March 31, 2009, the Company had repurchased a total of 3,319,500 shares at a total cost of $52.3 million and an average cost of $15.76 per share.  Through April 21, 2009, the Company had repurchased a total of 3,376,600 shares at a total cost of $53.1 million and an average cost of $15.73 per share.

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Oritani Financial Corp. and Subsidiaries

 

Average Balance Sheets for the Three Months and Nine Months Ended March 31, 2009 and 2008

The following tables present certain information regarding Oritani Financial Corp.’s financial condition and net interest income for the three and nine months ended March 31, 2009 and 2008.  The table presents 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.

	Oritani Financial Corp. and Subsidiaries
	Average Balance Sheet and Yield/Rate Information
	For the Three Months Ended (unaudited)
	March 31, 2009							March 31, 2008
	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	$	1,220,390	$	18,553		6.08	%	$	885,223	$	14,173		6.40	%
Securities held to maturity		24,909		190		3.05	%		20,075		349		6.95	%
Securities available for sale		73,025		713		3.91	%		31,419		373		4.75	%
Mortgage backed securities held to maturity		138,493		1,373		3.97	%		185,414		1,787		3.86	%
Mortgage backed securities available for sale		147,157		1,763		4.79	%		99,854		1,285		5.15	%
Federal funds sold and short term investments		5,107		6		0.47	%		44,737		351		3.14	%
Total interest-earning assets		1,609,081		22,598		5.62	%		1,266,722		18,318		5.78	%
Non-interest-earning assets		120,435							73,147
Total assets	$	1,729,516						$	1,339,869
Interest-bearing liabilities:
Savings deposits		143,321		469		1.31	%		149,229		587		1.57	%
Money market		108,444		659		2.43	%		48,793		439		3.60	%
NOW accounts		73,047		161		0.88	%		73,862		203		1.10	%
Time deposits		620,470		5,391		3.48	%		418,681		4,714		4.50	%
Total deposits		945,282		6,680		2.83	%		690,565		5,943		3.44	%
Borrowings		508,368		5,118		4.03	%		340,138		3,651		4.29	%
Total interest-bearing liabilities		1,453,650		11,798		3.25	%		1,030,703		9,594		3.72	%
Non-interest-bearing liabilities		32,709							27,751
Total liabilities		1,486,359							1,058,454
Stockholders' equity		243,157							281,415
Total liabilities and stockholders' equity	$	1,729,516						$	1,339,869
Net interest income			$	10,800						$	8,724
Net interest rate spread (1)						2.37	%						2.06	%
Net interest-earning assets (2)	$	155,431						$	236,019
Net interest margin (3)						2.68	%						2.75	%
Average of interest-earning assets to interest-bearing liabilities						1.11	X						1.23	X

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

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

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

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Oritani Financial Corp. and Subsidiaries

	Oritani Financial Corp. and Subsidiaries
	Average Balance Sheet and Yield/Rate Information
	For the Nine Months Ended (unaudited)
	March 31, 2009							March 31, 2008
	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	$	1,155,755	$	53,198		6.14	%	$	829,967	$	40,417		6.49	%
Securities held to maturity		24,733		725		3.91	%		18,753		934		6.64	%
Securities available for sale		43,699		1,346		4.11	%		36,641		1,418		5.16	%
Mortgage backed securities held to maturity		148,556		4,405		3.95	%		199,225		5,766		3.86	%
Mortgage backed securities available for sale		148,429		5,436		4.88	%		79,163		3,147		5.30	%
Federal funds sold and short term investments		1,875		7		0.50	%		41,622		1,401		4.49	%
Total interest-earning assets		1,523,047		65,117		5.70	%		1,205,371		53,083		5.87	%
Non-interest-earning assets		91,501							69,018
Total assets	$	1,614,548						$	1,274,389
Interest-bearing liabilities:
Savings deposits		144,247		1,536		1.42	%		152,576		1,885		1.65	%
Money market		83,402		1,735		2.77	%		44,128		1,317		3.98	%
NOW accounts		74,405		486		0.87	%		73,662		640		1.16	%
Time deposits		520,303		14,039		3.60	%		419,109		14,622		4.65	%
Total deposits		822,357		17,796		2.89	%		689,475		18,464		3.57	%
Borrowings		504,384		15,058		3.98	%		280,181		9,213		4.38	%
Total interest-bearing liabilities		1,326,741		32,854		3.30	%		969,656		27,677		3.81	%
Non-interest-bearing liabilities		32,271							27,025
Total liabilities		1,359,012							996,681
Stockholders' equity		255,536							277,708
Total liabilities and stockholder's equity	$	1,614,548						$	1,274,389
Net interest income			$	32,263						$	25,406
Net interest rate spread (1)						2.40	%						2.06	%
Net interest-earning assets (2)	$	196,306						$	235,715
Net interest margin (3)						2.82	%						2.81	%
Average of interest-earning assets to interest-bearing liabilities						1.15	X						1.24	X

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

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

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

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Oritani Financial Corp. and Subsidiaries

Comparison of Operating Results for the Three Months Ended March 31, 2009 and 2008.

Net Income.  Net income decreased $862,000 to $1.5 million for the quarter ended March 31, 2009, from $2.4 million for the corresponding 2008 quarter. The most significant differences between the two periods is in the provision for loan losses and other expenses.  Provision for loan losses increased $1.7 million over the periods.  In addition, other expenses increased $1.9 million over the periods.  These items were partially offset by a $2.1 million increase in net interest income before provision for loan losses.  These changes are discussed in greater detail below.  Our annualized return on average assets was 0.35% for the quarter ended March 31, 2009, and 0.71% for the corresponding 2008 quarter.  Our annualized return on average equity was 2.47% for the quarter ended March 31, 2009, and 3.36% for the corresponding 2008 quarter.

Total Interest Income.  Total interest income increased by $4.3 million or 23.4%, to $22.6 million for the three months ended March 31, 2009, from $18.3 million for the three months ended March 31, 2008.  The largest increase occurred in interest on loans, which increased $4.4 million or 30.9%, to $18.6 million for the three months ended March 31, 2009, from $14.2 million for the three months ended March 31, 2008.  Over that same period, the average balance of loans increased $335.2 million and the yield on the portfolio decreased 32 basis points.  Interest on the investment related captions of securities held to maturity (“HTM”) and mortgage-backed securities (“MBS”) HTM decreased by $573,000, or 26.8%, to $1.6 million for the three months ended March 31, 2009, from $2.1 million for the three months ended March 31, 2008.  The combined average balances of these portfolios decreased $42.1 million over the period while the combined average yield decreased 33 basis points.  The Company has focused on loan originations and investment activity has been concentrated on the Available for Sale portfolios.  Interest on securities available for sale increased $340,000, or 91.2%, to $713,000 for the three months ended March 31, 2009, from $373,000 for the three months ended March 31, 2008.  The average balance of securities available for sale increased by $41.6 million and yield on the portfolio decreased 84 basis points over the same period.  Interest on mortgage-backed securities available for sale (“MBS AFS”) increased by $478,000 to $1.8 million for the three months ended March 31, 2009, from $1.3 million for the three months ended March 31, 2008.  The average balance of MBS AFS increased $47.3 million and the yield on the portfolio decreased 36 basis points over that same period.  There was minimal interest income on federal funds sold and short term investments over the three months ended March 31, 2009.  This portfolio has been redeployed into loans and MBS AFS.  The average balance of this portfolio decreased $39.6 million over the period.

Total Interest Expense. Total interest expense increased by $2.2 million, or 23.0%, to $11.8 million for the three months ended March 31, 2009, from $9.6 million for the three months ended March 31, 2008.  Interest expense on deposits increased by $737,000, or 12.4%, to $6.7 million for the three months ended March 31, 2009, from $5.9 million for the three months ended March 31, 2008.  The average balance of deposits increased $254.7 million and the average cost of these funds decreased 62 basis points over the period.  Market interest rates allowed the Bank to reprice many maturing time deposits at lower rates, decreasing the cost of funds.  The interest rate environment also allowed the Company to decrease interest rates on borrowings while significantly increasing balances.  Interest expense on borrowings increased by $1.5 million to $5.1 million for the three months ended March 31, 2009, from $3.7 million for the three months ended March 31, 2008.  The average balance of borrowings increased $168.2 million and the cost decreased 26 basis points over the period.  The increase in the average balance was used to fund asset growth.

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Oritani Financial Corp. and Subsidiaries

Net Interest Income Before Provision for Loan Losses.  Net interest income increased by $2.1 million, or 23.8%, to $10.8 million for the three months ended March 31, 2009, from $8.7 million for the three months ended March 31, 2008. The Company’s net interest rate spread increased to 2.37% for the three months ended March 31, 2009, from 2.06% for the three months ended March 31, 2008.  However, the Company’s net interest margin decreased to 2.68% for the three months ended March 31, 2009, from 2.75% for the three months ended March 31, 2008.  The Company’s net interest rate spread and net interest margin were hindered in the 2009 period due to nonaccrual loans.  The Company’s net interest income was reduced by $1.2 million for the three months ended March 31, 2009, due to the impact of nonaccrual loans.  On a linked quarter comparison, the Company’s net interest rate spread increased 3 basis points to 2.37% from 2.34% for the three months ended December 31, 2008 and the Company’s net interest margin decreased 11 basis points to 2.68% from 2.79% for the three months ended December 31, 2008.   The Company’s net interest income was reduced by $913,000 for the three months ended December 31, 2008 due to the impact of nonaccrual loans.

Provision for Loan Losses.  The Company recorded provisions for loan losses of $2.4 million for the three months ended March 31, 2009 as compared to $750,000 for the three months ended March 31, 2008.   There were no recoveries or charge-offs in either period.  See discussion of the allowance for loan losses in “Comparison of Financial Condition at March 31, 2009 and June 30, 2008” and footnote 5 of the financial statements.

Other Income.  Other income increased by $31,000 to $822,000 for the three months ended March 31, 2009, from $791,000 for the three months ended March 31, 2008.  Results for the three months ended March 31, 2009 were reduced by a $225,000 impairment charge and a $12,000 loss on partial sale of a mutual fund holding in the Company's AFS portfolio.  Results for the three months ended March 31, 2008 were reduced by a $352,000 impairment charge taken regarding three equity securities in the Company's securities AFS portfolio.  Income on the real estate investment captions of net real estate operations and income from investments in real estate joint ventures decreased by $77,000, or 13.9%, to $476,000 for the three months ended March 31, 2009, from $553,000 for the three months ended March 31, 2008.  The income reported in these captions is dependent upon the operations of various properties and is subject to fluctuation.  Overall, however, joint venture operations have been slightly impacted by increased vacancies and operational costs.

Other Expense.  Other expenses increased $1.9 million to $6.7 million for the three months ended March 31, 2009, from $4.8 million for the three months ended March 31, 2008.  Compensation, payroll taxes and fringe benefits increased $1.3 million over the period.  The primary factor in this increase was $896,000 of expense in the 2009 quarter associated with the expense of the Company’s stock benefit plans.  There was also an increase of $282,000 directly pertaining to compensation, due to additional staff and merit increases.  Office occupancy and equipment expense increased $208,000 to $643,000 for the three months ended March 31, 2009, from $435,000 for the corresponding 2008 period.  The increase was primarily comprised of increases in maintenance expense, depreciation and real estate taxes, particularly for the two new branches that the Company opened in October, 2008.  Other expense increased $178,000 to $333,000 for the three months ended March 31, 2009, from $155,000 for the corresponding 2008 period.  The increase was primarily due to expenses associated with problem loans, such as legal costs related to foreclosure actions.

Income Tax Expense.  Income tax expense for the three months ended March 31, 2009, was $1.1 million, due to pre-tax income of $2.6 million, resulting in an effective tax rate of 41.5%.  For the three months ended March 31, 2008, income tax expense was $1.6 million, due to pre-tax income of $4.0 million, resulting in an effective tax rate of 41.1%.  The Company’s effective tax rate increased during the 2009 period due to a valuation allowance on future tax benefits associated with the impairment charges on equity securities.

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Oritani Financial Corp. and Subsidiaries

Comparison of Operating Results for the Nine months ended March 31, 2009 and 2008.

Net Income.  Net income decreased $3.5 million to $4.0 million for the nine months ended March 31, 2009, from net income of $7.5 million for the corresponding 2008 period.  Results for the periods ended March 31, 2009 were negatively impacted by increased provision for loan losses and impairment charges related to equity investments, as well as increased compensation expense, partially offset by increased net interest income.

Total Interest Income.  Total interest income increased by $12.0 million, or 22.7%, to $65.1 million for the nine months ended March 31, 2009, from $53.1 million for the nine months ended March 31, 2008.  The largest increase occurred in interest on loans, which increased $12.8 million or 31.6%, to $53.2 million for the nine months ended March 31, 2009, from $40.4 million for the nine months ended March 31, 2008.  Over that same period, the average balance of loans increased $325.8 million and the yield on the portfolio decreased 36 basis points.  Interest on the investment related captions of securities held to maturity (“HTM”) and mortgage-backed securities (“MBS”) HTM decreased by $1.6 million, or 23.4%, to $5.1 million for the nine months ended March 31, 2009, from $6.7 million for the nine months ended March 31, 2008.  The combined average balances of these portfolios decreased $44.7 million over the period while the combined average yield decreased 15 basis points.  The Company has focused on loan originations, and investment activity has been concentrated on the MBS AFS portfolio.  Interest on MBS AFS increased by $2.3 million to $5.4 million for the nine months ended March 31, 2009, from $3.1 million for the nine months ended March 31, 2008.  The average balance of MBS AFS increased $69.3 million and the yield on the portfolio decreased 42 basis points over that same period.  There was minimal interest income on federal funds sold and short term investments over the nine months ended March 31, 2009.  This portfolio has been redeployed into loans and MBS AFS.   The average balance of this portfolio decreased $39.7 million over the period.

Total Interest Expense. Total interest expense increased by $5.2 million, or 18.7%, to $32.9 million for the nine months ended March 31, 2009, from $27.7 million for the nine months ended March 31, 2008.  Interest expense on deposits decreased by $668,000, or 3.6%, to $17.8 million for the nine months ended March 31, 2009, from $18.5 million for the nine months ended March 31, 2008.  The average balance of deposits increased $132.9 million and the average cost of these funds decreased 68 basis points over this period.  Interest expense on borrowings increased by $5.8 million, or 63.4%, to $15.1 million for the nine months ended March 31, 2009, from $9.2 million for the nine months ended March 31, 2008.  The average balance of borrowings increased $224.2 million and the cost decreased 40 basis points over this period.  The factors described above for the three month period also affected the nine month period.

Net Interest Income Before Provision for Loan Losses.  Net interest income increased by $6.9 million, or 27.0%, to $32.3 million for the nine months ended March 31, 2009, from $25.4 million for the nine months ended March 31, 2008. The Company’s net interest rate spread increased to 2.40% for the nine months ended March 31, 2009, from 2.06% for the nine months ended March 31, 2008.  The Company’s net interest margin increased to 2.82% for the nine months ended March 31, 2009, from 2.81% for the nine months ended March 31, 2008.  The Company’s net interest rate spread and net interest margin were hindered in the 2009 period due to nonaccrual loans.  The Company’s net interest income was reduced by $2.5 million for the nine months ended March 31, 2009 due to the impact of nonaccrual loans.

Provision for Loan Losses.  The Company recorded provisions for loan losses of $7.8 million for the nine months ended March 31, 2009 as compared to $2.1 million for the nine months ended March 31, 2008.   There were no recoveries or charge-offs in either period.  See discussion of the allowance for loan losses in “Comparison of Financial Condition at March 31, 2009 and June 30, 2008” and footnote 5 of the financial statements.

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Oritani Financial Corp. and Subsidiaries

Other Income.  Other income decreased by $1.8 million to $1.5 million for the nine months ended March 31, 2009, from $3.3 million for the nine months ended March 31, 2008.  The primary change was the $1.8 million impairment charge taken regarding equity securities in the Company’s AFS portfolio.  Income on the real estate investment captions of net real estate operations and income from investments in real estate joint ventures decreased by $194,000, or 10.13%, to $1.7 million for the nine months ended March 31, 2009, from $1.9 million for the nine months ended March 31, 2008. 

Other Expense.  Other expenses increased by $5.2 million or 37.3% to $19.1 million for the nine months ended March 31, 2009, from $13.9 million for the nine months ended March 31, 2008.  The increase was primarily due to compensation, payroll taxes and fringe benefits, which increased $3.8 million, or 38.5%, over the period.  This increase was primarily comprised of $2.7 million in costs associated with the Company’s stock benefit plans, a $763,000 increase in compensation, and $252,000 pertaining to other retirement/insurance benefits.  Insurance, legal, audit and accounting expenses increased $500,000 primarily due to increased costs associated with our audit and exams, SOX and compliance during the 2009 period.

Income Tax Expense.  Income tax expense for the nine months ended March 31, 2009, was $2.9 million, due to pre-tax income of $6.9 million, resulting in an effective tax rate of 41.4%.  For the nine months ended March 31, 2008, income tax expense was $5.2 million, due to pre-tax income of $12.8 million, resulting in an effective tax rate of 41.0%.  The Company’s effective tax rate increased during the 2009 period due to a valuation allowance on future tax benefits associated with the impairment charges on equity securities.

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, to a lesser extent, investment maturities. While scheduled amortization of loans is a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity if a need for additional funds arises, including an overnight line of credit and advances from the FHLB.

At March 31, 2009, the Company had no overnight borrowings from the FHLB.  At June 30, 2008, the Company had $700,000 in overnight borrowings from the FHLB.  The Company utilizes the overnight line from time to time to fund short-term liquidity needs.  The Company had total borrowings of $509.7 million at March 31, 2009, an increase of $76.0 million from $433.7 million at June 30, 2008.  The vast majority of the increase in borrowed funds occurred during the quarter ended September 30, 2008.  This increase was primarily the result of funding the strong loan growth as well as the opportunity to commit to various advances under terms considered to be favorable.  Deposit growth has provided sufficient liquidity subsequent to September 30, 2008.  The Company’s total borrowings at March 31, 2009, consisted of the $509.4 million in longer term borrowings with the FHLB and minor amounts due to Oritani Financial Corp, MHC.  In the normal course of business, the Company routinely enters into various commitments, primarily relating to the origination of loans.  At March 31, 2009, outstanding commitments to originate loans totaled $52.4 million and outstanding commitments to extend credit totaled $74.9 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 $560.9 million at March 31, 2009.  Based upon historical experience, management estimates that a significant portion of such deposits will remain with the Company.

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Oritani Financial Corp. and Subsidiaries

As of March 31, 2009, the Company exceeded all regulatory capital requirements as follows:

	Actual					Required
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	256,533		20.1	%	$	102,321		8.0	%
Tier I capital (to risk-weighted assets)		240,479		18.8			51,160		4.0
Tier I capital (to average assets)		240,479		13.9			69,181		4.0

On October 14, 2008, the Treasury announced a voluntary Capital Purchase Program to encourage U.S. financial institutions to build capital and increase financing.  Oritani is not participating in this program.  Oritani currently supports very strong capital ratios and capital levels have not been, and are not anticipated to be, a hindrance on our ability to lend.  In addition, participation in the program could limit our flexibility regarding capital management strategies such as dividends and repurchases.  The Treasury and the FDIC have also announced an insurance guarantee program, whereby all funds in non-interest bearing transaction deposit account, regardless of their balance, would be covered by FDIC insurance through December 31, 2009.  Oritani is a participant in this program.

Critical Accounting Policies

Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended June 30, 2008, included in the Company’s Annual Report on Form 10-K, as supplemented by this report, contains a summary of significant accounting policies.  Various elements of these accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments.  Certain assets are carried in the consolidated Balance Sheets at estimated fair value or the lower of cost or estimated fair value.  Policies with respect to the methodologies used to determine the allowance for loan losses and judgments regarding the valuation of intangible assets and securities as well as the valuation allowance against deferred tax assets are the most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations, involve a higher degree of complexity, and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters.  The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition.  These critical accounting policies and their application are reviewed periodically and, at least annually, with the Audit Committee of the Board of Directors.  For a further discussion of the critical accounting policies of the Company, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K, for the year ended June 30, 2008.

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Oritani Financial Corp. and Subsidiaries

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

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

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

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

(ii) originating certain construction and commercial real estate loans that have short maturities and/or monthly interest resets.

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

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

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

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

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Oritani Financial Corp. and Subsidiaries

The table below sets forth, as of March 31, 2009, 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.

	Net  Portfolio Value								NPV  as a Percent of Present Value of Ass ets (3)						Net  Interest Income
Cha nge in Interest			Est imated Increase (Decrease)														Inc rease (Decrease) in estimated Net interest income
Rat es (basis points) (1)	Est imated NPV (2)		Amo unt			Per cent			NPV Ratio (4)			Inc rease (Decrease) (ba sis points)			Est imated Net Int erest Income		Amo unt			Per cent
(do llars in thousands)
+300bp	$	168,474	$	(49,355	)		(22.66	)%		10.10	%		(199	)	$	44,973	$	(2,540	)		(5.35	)%
+200bp		184,010		(33,819	)		(15.53	)		10.78			(131	)		45,810		(1,703	)		(3.58	)
+100bp		205,187		(12,642	)		(5.80	)		11.68			(41	)		47,083		(430	)		(0.91	)
0bp		217,829		-			-			12.09			-			47,513		-			0.00

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

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

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

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

The table above indicates that at March 31, 2009, in the event of a 100 basis point increase in interest rates, we would experience a 6.4% decrease in net portfolio value.  In the event of a 200 basis point increase in interest rates, we would experience a 17.0% decrease in net portfolio value.  These changes in net portfolio value are within the limitations established in our asset and liability management policies.

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

Item 4.    Controls and Procedures

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

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

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Oritani Financial Corp. and Subsidiaries

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

The risks set forth below, in addition to the other risks described in this quarterly report, represent 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 15, 2008, and may adversely affect our business, financial condition and operating results.  In addition to the risks set forth below 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 risk factors set forth below also 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.

Our Expenses Will Increase as a Result of Increases in FDIC Insurance Premiums

The Federal Deposit Insurance Corporation (“FDIC”) imposes an assessment against institutions for deposit insurance.  This assessment is based on the risk category of the institution and ranges from 7 to 77.5 basis points of the institution’s deposits.  Federal law requires that the designated reserve ratio for the deposit insurance fund be established by the FDIC at 1.15% to 1.50% of estimated insured deposits.  If this reserve ratio drops below 1.15% or the FDIC expects it to do so within six months, the FDIC must, within 90 days, establish and implement a plan to restore the designated reserve ratio to 1.15% of estimated insured deposits within five years (absent extraordinary circumstances).

The Emergency Economic Stabilization Act of 2008 temporarily increased the limit on FDIC coverage to $250,000 for all accounts, through December 31, 2009.  We have also enrolled in the Temporary Liquidity Guarantee Program for noninterest-bearing transaction deposit accounts.  In addition, the reserve ratios are below 1.15% of estimated insured deposits and in February 2009, the FDIC proposed an interim rule that further increases deposit insurance premiums, including a one-time special assessment on deposits as of June 30, 2009.  This, along with the full utilization of our assessment credit in early 2009, will cause the premiums assessed by the FDIC to increase.  These actions will significantly increase our noninterest expense in 2009 and in future years as long as the increased premiums are in place.  Based upon our review of the Federal Deposit Insurance Corporation’s proposed rulings, if the rules were implemented as proposed, our annual expense for FDIC insurance based on deposits as of March 31, 2009, would increase by approximately $1.3 million.  Additionally our expense would increase an additional $1.0 million based the interim rule related to the one time assessment of 10 basis points.

29

Oritani Financial Corp. and Subsidiaries

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

We own common stock of the Federal Home Loan Bank of New York (FHLB-NY).  We hold the FHLB-NY common stock to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the FHLB-NY’s advance program.  The aggregate cost and fair value of our FHLB-NY common stock as of March 31, 2009 was $25.0 million based on its par value.  There is no market for our FHLB-NY common stock.

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

Current Market and Economic Conditions May Significantly Affect Our Operations and Financial Condition

Recent negative developments in the national and global credit markets have resulted in uncertainty in the financial markets and downturn in general economic conditions, including increased levels of unemployment. The resulting economic pressure on consumers and businesses may adversely affect our business, financial condition, and results of operations. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial services industry. In general, loan and investment securities credit quality has deteriorated at many institutions and the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. Indications of the deterioration of the value of real estate collateral have been evidenced on a national level as well as in our Market Area. These developments could have a significant negative effect on our borrowers and the values of underlying collateral securing loans, which could negatively affect our financial performance.

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

The following table shows Company repurchases of its common stock for each calendar month in the quarter ended March 31, 2009 and the stock repurchase plan approved by our Board of Directors.

				Total Number of	Maximum Number of
	Total Number	Average		Shares Purchased	Shares That May Yet
	of Shares	Price Paid		as part of Publicly	Be Purchased Under
Period	Repurchased	Per Share		Announced Plans	the Plans (1)
January	260,000		15.99	260,000	438,698
February	130,500		13.12	130,500	308,198
March	200,900		11.45	200,900	946,728
	591,400	$	13.81	591,400

30

Oritani Financial Corp. and Subsidiaries

 

(1) On March 18, 2009, the Company announced its fourth Share Repurchase Program, which authorized the purchase of an additional 10% of its publicly-held outstanding shares of common stock, or 967,828 shares.  This stock repurchase program commenced upon the completion of the third repurchase program on March 18, 2009.  This program has no expiration date and has 946,728 shares yet to be purchased as of March 31, 2009.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

During the period covered by this report, the Company did not submit any matters to the vote of security holders.

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 Charter 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 Bancorp, Inc. Executive Supplemental Retirement Income Agreement*

10.6 Form of Employee Stock Ownership Plan*

10.7 Director Deferred Fee Plan*

10.8 Oritani Financial Corp. 2007 Equity Incentive Plan**

14           Code of Ethics***

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

31

Oritani Financial Corp. and Subsidiaries

* Filed as exhibits to the Company’s Registration Statement on Form S-1, and any amendments thereto, with the Securities and Exchange Commission (Registration No. 333-137309).

** Filed as part of the Company’s definitive proxy statement, with the Securities and Exchange Commission on March 20, 2008.

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

32

SIGNATURES

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

		ORITANI FINANCIAL CORP.
Date: May 11, 2009	/s/ Kevin J. Lynch
		Kevin J. Lynch
		President and Chief Executive Officer
Date: May 11, 2009	/s/ John M. Fields, Jr.
		John M. Fields, Jr.
		Executive Vice President and Chief Financial Officer

33