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Oritani Financial Corp. Announces 2nd Quarter Results and Dividend

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TOWNSHIP OF WASHINGTON, N.J., Jan. 26, 2016 (GLOBE NEWSWIRE) -- Oritani Financial Corp. (the "Company" or "Oritani") (NASDAQ: ORIT), the holding company for Oritani Bank (the "Bank"), reported net income of $15.9 million, or $0.38 per basic (and $0.37 diluted) common share, for the three months ended December 31, 2015, and $28.0 million, or $0.68 per basic (and $0.66 diluted) common share, for the six months ended December 31, 2015. Net income was $10.0 million, or $0.24 per basic and diluted common share, for the three months ended December 31, 2014, and $20.2 million, or $0.48 per basic (and $0.47 diluted) common share, for the six months ended December 31, 2014.

The Company also reported that its Board of Directors has declared a $0.175 quarterly cash dividend on the Company's common stock. The record date for the dividend will be February 5, 2016 and the payment date will be February 19, 2016.

"I am pleased to report robust financial results and ongoing accomplishments," said Kevin J. Lynch, the Company's Chairman, President and CEO. "Our loan growth rebounded strongly and our overall pace for fiscal 2016 is now in line with our vigorous historical growth; we realized continued progress regarding the unwinding of our joint venture and real estate portfolios, materially augmenting income in the process; and we implemented a balance sheet restructure that had a direct positive impact on net interest income." Mr. Lynch continued: "We continue to share our strong performance with our shareholders. Between the regular dividend and our $0.50 per share special dividend, we paid out over $28.0 million in dividends in the December quarter. In addition, another regular dividend was declared today."

Comparison of Operating Results for the Periods Ended December 31, 2015 and 2014

Net Income. Net income increased $5.8 million to $15.9 million for the quarter ended December 31, 2015, from $10.0 million for the corresponding 2014 quarter. Net income increased $7.8 million to $28.0 million for the six months ended December 31, 2015, from $20.2 million for the corresponding 2014 period. The primary cause of the increase was profits on the sale of investments in real estate joint ventures, partially offset by prepayment fees on the prepayment of FHLB advances.

Total Interest Income.  The components of interest income for the three months ended December 31, 2015 and 2014, changed as follows:

  Three Months Ended December 31,Increase / (decrease)
   2015  2014  Average 
  $Yield$Yield$BalanceYield
  (Dollars in thousands)
Interest on mortgage loans$  31,148  4.43%$  31,041  4.81%$  107 $  232,472  -0.38%
Dividends on FHLB stock   391  4.58%   500  4.65%   (109)   (8,870) -0.07%
Interest on securities AFS   1,154  1.98%   1,671  2.00%   (517)   (101,126) -0.02%
Interest on securities HTM   663  1.94%   450  2.05%   213    48,922  -0.11%
Interest on federal funds sold and short term investments   1  0.25%   1  0.25%   -     (35) -%
Total interest income$  33,357  4.15%$  33,663  4.42%$  (306)$  171,363  -0.27%
         

The Company's primary strategic business objective remains the organic growth of multifamily and commercial real estate loans. The average balance of the loan portfolio increased $232.5 million, or 9.0%, for the three months ended December 31, 2015 versus the comparable 2014 period. On a linked quarter basis (December 31, 2015 versus September 30, 2015), the annualized growth rates of the portfolio were 7.7% and 21.3%, when measured based on average and period end balances, respectively. The disparity in these results is due to a significant amount of loan growth in the month of December, 2015. After a somewhat disappointing result in the September 2015 quarter, loan growth rebounded significantly over the quarter ended December 31, 2015. Loan originations totaled $221.1 million and loan purchases totaled $37.3 million for the three months ended December 31, 2015. While management will strive to continue to realize meaningful loan growth, growth at the levels experienced for the quarter ended December 31, 2015 are not expected to continue. Management is currently exploring a loan sale that may partially offset loan growth in the March, 2016 quarter. The amount of this potential sale would approximate the amount purchased in the December quarter. Loan principal payments totaled $112.1 million over that same period. The prepayment level remains elevated. The Company continues to limit the origination of loans with certain features that are desirable to borrowers in the current market (primarily fixed rate periods greater than 5 years and interest only periods greater than one year). This decision contributes to the elevated prepayments in addition to having a negative impact on originations. Management believes this restraint is in the best long term interests of the Company.

The yield on the loan portfolio decreased 38 basis points for the quarter ended December 31, 2015 versus the comparable 2014 period. A portion of the decrease in yield is due to the impact of decreased prepayment penalties. Absent prepayment penalties, the yield on the loan portfolio decreased 27 basis points over the periods. On a linked quarter basis, the yield on the loan portfolio decreased 3 basis points. The decrease continues a trend of decreased yield on loans and was primarily attributable to the impact of current market rates on new originations as well as refinancings, prepayments and repricings. Competition for multifamily and commercial real estate loan originations remains elevated and the spread to alternative costs of funds remains lower than historical levels. The market rates on new originations are below the average yield of the loan portfolio. The vast majority of our multifamily and commercial real estate loan originations reprice in five years or less. This discipline offers greater interest rate risk protection but provides lower yields than loans with longer fixed rate terms. Prepayment penalties totaled $1.6 million for the quarter ended December 31, 2015 versus $2.2 million for the quarter ended December 31, 2014. Prepayment penalties boosted annualized loan yield by 22 basis points in the 2015 period versus 33 basis points in the 2014 period. 

The average balance of securities available for sale decreased $101.1 million for the three months ended December 31, 2015 versus the comparable 2014 period, while the average balance of securities held to maturity increased $48.9 million over the same period. The Company has been classifying the majority of new purchases as held to maturity and $59.7 million of securities available for sale were sold over the preceding 12 months. The overall level of securities was reduced due to loan growth and the low rates of return available on investment purchases.

The components of interest income for the six months ended December 31, 2015 and 2014, changed as follows:

  Six Months Ended December 31,Increase / (decrease)
   2015  2014  Average 
  $Yield$Yield$BalanceYield
  (Dollars in thousands)
Interest on mortgage loans$  61,937  4.45%$  60,768  4.74%$  1,169 $  220,975  -0.29%
Dividends on FHLB stock   792  4.40%   976  4.24%   (184)   (9,986) 0.16%
Interest on securities AFS   2,357  1.95%   3,471  1.99%   (1,114)   (106,419) -0.04%
Interest on securities HTM   1,234  1.99%   814  2.13%   420    47,790  -0.14%
Interest on federal funds sold and short term investments   2  0.25%   3  0.25%   (1)   (724) -%
Total interest income$  66,322  4.16%$  66,032  4.35%$  290 $  151,636  -0.19%
         

The explanations for changes described above for the three month period are also applicable to the six month period. Loan originations and purchases for the six months ended December 31, 2015 totaled $335.7 million and $37.3 million, respectively. Loan originations for the six months ended December 31, 2014 totaled $340.5 million (and there were no loan purchases over that period). Prepayment penalties totaled $3.1 million in both the 2015 and 2014 periods, and boosted annualized loan yield by 23 basis points in the 2015 period versus 24 basis points in the 2014 period. 

Total Interest Expense. The components of interest expense for the three months ended December 31, 2015 and 2014, changed as follows:

  Three Months Ended December 31,Increase / (decrease)
   2015  2014  Average 
  $Cost$Cost$BalanceCost
  (Dollars in thousands)
Savings deposits$  94  0.24%$  96  0.24%$  (2)$  (2,907) 0.00%
Money market 1,347  0.80% 557  0.49% 790  213,162  0.31%
Checking accounts 418  0.37% 440  0.38% (22) (9,099) -0.01%
Time deposits 2,597  1.24% 1,750  0.99% 847  134,210  0.25%
Total deposits 4,456  0.84% 2,843  0.64% 1,613  335,366  0.20%
Borrowings 3,607  2.16% 5,756  2.67% (2,149) (194,271) -0.51%
Total interest expense$  8,063  1.16%$  8,599  1.30%$  (536)$  141,095  -0.14%
         

Strong deposit growth remains a strategic objective of the Company. As detailed above, the average balance of deposits increased $335.4 million for the quarter ended December 31, 2015 versus the comparable 2014 period. The average balance of deposits increased $118.7 million when measured versus the quarter ended September 30, 2015, and $162.5 million when measured versus the quarter ended June 30, 2015. A portion of the growth in the fiscal year has been due to brokered deposits. However, absent the impact of brokered funds, the average balance of deposits increased $70.5 million and $146.3 million versus the quarters ended September 30, 2015, and June 30, 2015, respectively. The overall cost of deposits increased 20 basis points for the quarter ended December 31, 2015 versus the comparable 2014 period. On a linked quarter basis, the cost of deposits increased 11 basis points. This increase was primarily driven by an increase in the cost of money market accounts, which increased from a cost of 54 basis points for the quarter ended September 30, 2015 to a cost of 80 basis points for the quarter ended December 31, 2015. Included in money market balance are $230.0 million of brokered deposits whose costs are tied to a LIBOR index. These balances were used as the hedged item for interest rate swaps that were established in October, 2015. The cost of the swaps is now being reflected as interest expense on these money market funds as the money market funds are the item hedged by the swap. The cost of the swap is higher than the previous cost of the money market accounts as the swap provides much greater interest rate protection. See additional information under "Net Interest Income Before Provision for Loan Losses – Balance Sheet Restructure."

As detailed in table above, the average balance of borrowings decreased $194.3 million for the three months ended December 31, 2015 versus the comparable 2014 period, while the cost decreased 51 basis points. On a linked quarter basis, the average balance and cost of borrowings decreased $82.3 million and 58 basis points, respectively. The cost of borrowings was also affected by the balance sheet restructure; please see "Net Interest Income Before Provision for Loan Losses – Balance Sheet Restructure" for additional information. The average balance of borrowings decreased as an increase in the average balance of deposits allowed the Company to pay down borrowings. Although the average balance decreased, on a linked quarter basis the period end balance increased. The increase was primarily due to significant loan closings that occurred toward the end of December. 

The components of interest expense for the six months ended December 31, 2015 and 2014, changed as follows:

  Six Months Ended December 31,Increase / (decrease)
   2015  2014  Average 
  $Cost$Cost$BalanceCost
  (Dollars in thousands)
Savings deposits$  188  0.24%$  192  0.24%$  (4)$  (2,572) 0.00%
Money market 2,186  0.68% 1,081  0.49% 1,105  203,142  0.19%
Checking accounts 814  0.37% 918  0.40% (104) (11,483) -0.03%
Time deposits 4,930  1.22% 3,266  1.01% 1,664  166,394  0.21%
Total deposits 8,118  0.79% 5,457  0.64% 2,661  355,481  0.15%
Borrowings 8,761  2.47% 11,561  2.50% (2,800) (214,204) -0.03%
Total interest expense$  16,879  1.22%$  17,018  1.30%$  (139)$  141,277  -0.08%
         

The explanations for changes described above for the three month period regarding deposits are also applicable to the six month period. 

Net Interest Income Before Provision for Loan Losses. Net interest income increased by $230,000 to $25.3 million for the three months ended December 31, 2015, from $25.1 million for the three months ended December 31, 2014. Net interest income increased by $429,000 to $49.4 million for the six months ended December 31, 2015, from $49.0 million for the six months ended December 31, 2014. The Company's net interest income, spread and margin over the period are detailed in the chart below.

 Including Prepayment PenaltiesExcluding Prepayment Penalties *
 Net Interest  Net Interest  
 Income Before Income Before 
Quarter EndedProvisionSpreadMarginProvisionSpreadMargin
 (dollars in thousands)
December 31, 2015$  25,294  2.99% 3.14%$  23,744  2.79% 2.95%
September 30, 2015   24,149  2.89% 3.05%   22,567  2.69% 2.85%
June 30, 2015   23,921  2.89% 3.05%   23,091  2.78% 2.95%
March 31, 2015   23,815  2.90% 3.07%   23,363  2.86% 3.01%
December 31, 2014   25,064  3.12% 3.29%   22,894  2.83% 3.01%
* - Prepayment penalties on FHLB advances that occurred in the quarters ended 12/31/2015 and 03/31/2015 are also excluded.
      

The Company's spread and margin have been significantly impacted by prepayment penalties. Due to this situation, the chart above details results with and without the impact of prepayment penalties. While prepayment penalty income is expected to continue, significant fluctuations in the level of prepayment income are also expected. 

Excluding the impact of the balance sheet restructure (see below) and prepayment penalties, the spread and margin are expected to continue to experience compression. The Company's spread and margin remain under pressure due to several factors, including: the further flattening of the treasury yield curve; rates on new loan originations and investment purchases; modifications of loans within the existing loan portfolio; prepayments of higher yielding loans and investments; limited ability to reduce deposit and borrowing costs (without substantial penalty); and promotional interest costs to attract new deposit customers. The rates on new loan originations are being impacted by increased competition. The spread on new loan rates versus external sources of funds have decreased over the past year. In addition, the Company typically originates loans that have a reset period of 5 years or less. Such loans generally bear a lower rate of interest versus loans with a longer reset period. 

The Company's net interest income and net interest rate spread were both negatively impacted in all periods due to the reversal of accrued interest income on loans delinquent more than 90 days. The total of such income reversed was $123,000 and $299,000 for the three and six months ended December 31, 2015, respectively, and 256,000 and $505,000 for the three and six months ended December 31, 2014, respectively. 

Balance Sheet restructure. The Company took several steps over the quarter to improve its net interest income and interest rate risk position. These steps are detailed below:

  • The Company had (and maintains) $100.0 million of deferred interest rate swaps. The Company's liability costs were variable until the effective date of these swaps (the dates when the cash flows are exchanged). The Company executed $100.0 million of short term swaps in order to fix their costs until the existing deferred swaps become effective. The details of these short term swaps are below:

 NotionalEffectiveMaturity 
 AmountDateDateRate
     
 $  50,000,000 10/12/20154/11/2016 0.279%
    25,000,000 10/12/20151/11/2017 0.435%
    25,000,000 10/12/20157/11/2017 0.548%
total / weighted average$100,000,000 10/12/201510/10/2016 0.385%
         
  • The Company executed $130.0 million of additional swaps, as detailed below:

 NotionalEffectiveMaturity 
 AmountDateDateRate
     
 $  30,000,000 10/1/201510/1/2020 1.233%
    20,000,000 10/1/20154/1/2021 1.326%
    20,000,000 10/1/201510/1/2021 1.407%
    25,000,000 10/1/20154/1/2022 1.480%
    35,000,000 10/1/20154/1/2023 1.611%
total / weighted average$  130,000,000 10/1/201512/9/2021 1.423%
         
  • The Company prepaid a total of $185.0 million of FHLB advances with a weighted average cost of 4.325%.  In conjunction with the prepayments, the Company incurred fees totaling $13.9 million.
     
  • The Company sold certain investment securities and purchased replacement securities, as detailed below:

 PrincipalEffective 
DescriptionAmountYieldGain
Purchased   
Seasoned 15 year pass through$  24,811,459  1.95%n/a
Seasoned 10/1 ARM    17,081,581  2.01%n/a
total$  41,893,040  1.98% 
    
Sold   
Various AFS securities$  37,456,522  1.54%$ 198,530 
    

The Company believes the above transactions achieved their objectives and the Company will continue to investigate transactions that improve net interest income and interest rate risk position.

Provision for Loan Losses. The Company recorded no provision for loan losses for the three and six months ended December 31, 2015 as compared to $0 and $200,000 for the three and six months ended December 31, 2014, respectively. A rollforward of the allowance for loan losses for the three and six months ended December 31, 2015 and 2014 is presented below:

 Quarter ended Six months ended
 December 31, December 31,
  2015   2014   2015   2014 
 (Dollars in thousands)
Balance at beginning of period$30,634  $31,569  $30,889  $31,401 
Provisions charged to operations   -      -      -      200 
Recoveries of loans previously charged off   1     1     1     2 
Loans charged off   -      304     255     337 
Balance at end of period$30,635  $31,266  $30,635  $31,266 
        
Allowance for loan losses to total loans 1.04%  1.18%  1.04%  1.18%
Net charge-offs (annualized) to average loans outstanding-%  0.047%  0.018%  0.026%
              

Delinquency and nonaccrual trends, changes in loan risk ratings, loan growth, charge-offs and economic and business conditions continue to have a meaningful impact on the level of provision for loan losses.

Delinquency and non performing asset information is provided below:

 12/31/20159/30/20156/30/20153/31/201512/31/2014
 (Dollars in thousands)
Delinquency Totals     
30 - 59 days past due$  6,320 $  8,188 $  2,535 $  5,126 $  3,824 
60 - 89 days past due   404    190    416    291    205 
Nonaccrual   10,880    10,879    12,575    13,191    17,533 
Total$  17,604 $  19,257 $  15,526 $  18,608 $  21,562 
      
Non Performing Asset Totals     
Nonaccrual loans, per above$  10,880 $  10,879 $  12,575 $  13,191 $  17,533 
Real Estate Owned   487    2,926    4,059    5,594    4,368 
Total$  11,367 $  13,805 $  16,634 $  18,785 $  21,901 
      
Nonaccrual loans to total loans 0.37% 0.39% 0.45% 0.48% 0.66%
Delinquent loans to total loans 0.60% 0.69% 0.55% 0.68% 0.81%
Non performing assets to total assets 0.32% 0.41% 0.50% 0.57% 0.67%
                

Delinquent loan and non performing asset totals continue to illustrate minimal credit issues at the Company. In addition, of the $10.9 million in loans classified as nonaccrual at December 31, 2015, $8.6 million were fully current. 

Other IncomeOther income increased $25.7 million to $27.5 million for the three months ended December 31, 2015, from $1.8 million for the three months ended December 31, 2014. The Company continued its previously announced intention of the strategic disposition of its investments in real estate joint ventures and real estate held for investment portfolios. The pretax gain realized on such dispositions for the quarter ended December 31, 2015 was $25.3 million. There was also a gain of $225,000 on the disposition of real estate owned. There were no sales of real estate joint venture or real estate held for investment in the comparable 2014 period. See additional information under "Comparison of Financial Condition at December 31, 2015 and June 30, 2015," regarding the sales of investments in real estate joint ventures and real estate held for investment. Net income from investments in real estate joint ventures decreased by $176,000 to $311,000 for the three months ended December 31, 2015, from $487,000 for the three months ended December 31, 2014. Income from real estate operations, net decreased by $279,000 to $36,000 for the three months ended December 31, 2015, from $315,000 for the three months ended December 31, 2014. Earnings from these two categories have decreased due to the sale of properties that had contributed income. This trend can be expected to continue as the Company continues to strategically sell such properties. A gain of $604,000 was realized on the sale of equity securities as well as the sale of investment securities sold in conjunction with the balance sheet restructure. See "Net Interest Income Before Provision for Loan Losses – Balance Sheet Restructure" for additional information. 

Other income increased $29.7 million to $33.5 million for the six months ended December 31, 2015 from $3.8 million for the six months ended December 31, 2014. The six month period was also impacted by the issues described above regarding the sales of, and income from, investments in real estate joint ventures and real estate held for investment.

Other ExpensesOther expenses increased $15.6 million to $26.9 million for the three months ended December 31, 2015, from $11.3 million for the three months ended December 31, 2014. The increase was primarily due to prepayment fees incurred in connection with the prepayment of various FHLB advances. See "Net Interest Income Before Provision for Loan Losses – Balance Sheet Restructure" for additional information. Compensation, payroll taxes and fringe benefits increased $2.3 million to $10.1 million for the three months ended December 31, 2015, from $7.7 million for the three months ended December 31, 2014. The increase was primarily due to increased ESOP expense but also impacted by increases in direct compensation, primarily due to additional staffing and salary adjustments. Real estate owned operations decreased $979,000 to $11,000 for the three months ended December 31, 2015, from $990,000 for the three months ended December 31, 2014. The decrease was principally due to a $900,000 valuation adjustment recognized on a REO property in the 2014 period.

Other expenses increased $16.3 million to $37.7 million for the six months ended December 31, 2015, from $21.4 million for the six months ended December 31, 2014. The six month period was also affected by the items described above for the three month period. 

Income Tax ExpenseIncome tax expense for the three months ended December 31, 2015 was $10.0 million on pre-tax income of $25.8 million, resulting in an effective tax rate of 38.7%. Income tax expense for the three months ended December 31, 2014 was $5.5 million on pre-tax income of $15.5 million, resulting in an effective tax rate of 35.3%. Income tax expense for the six months ended December 31, 2015, was $17.2 million, due to pre-tax income of $45.2 million, resulting in an effective tax rate of 38.0%. For the six months ended December 31, 2014, income tax expense was $11.0 million, due to pre-tax income of $31.2 million, resulting in an effective tax rate of 35.3%. 

Comparison of Financial Condition at December 31, 2015 and June 30, 2015

Total Assets. Total assets increased $159.9 million to $3.51 billion at December 31, 2015, from $3.35 billion at June 30, 2015. 

Cash and Cash Equivalents. Cash and cash equivalents (which include fed funds and short term investments) decreased $5.3 million to $9.9 million at December 31, 2015, from $15.1 million at June 30, 2015.

Net Loans. Loans, net increased $155.3 million to $2.91 billion at December 31, 2015, from $2.76 billion at June 30, 2015. See "Total Interest Income" for discussion regarding loans balances.

Securities available for sale. Securities AFS decreased $34.5 million to $224.4 million at December 31, 2015, from $259.0 million at June 30, 2015. In conjunction with balance sheet restructure, the Company sold securities AFS totaling $38.0 million and purchased such securities totaling $42.2 million. The overall decrease in Securities AFS was due to principal payments that occurred over the period.

Securities held to maturity. Securities HTM increased $49.6 million to $157.6 million at December 31, 2015, from $108.0 million at June 30, 2015.  Purchases over the period totaled $59.0 million.

Investments in Real Estate Joint Ventures, Net and Real Estate Held for Investment. The Company previously announced its intention to explore the sale of the properties and interests in these portfolios. The table below details the properties that have been sold:

    Book  
EntityType Proceeds  Value  Gain
(dollars in thousands)
Oaklyn Associatesa$  1,963 $  (125)$  2,088 
Palisades Parkb   9,833    304    9,529 
2015 Fiscal year    11,796    179    11,617 
     
Madison Associatesa   2,453    (45)   2,498 
Van Buren Apartmentsa   1,811    145    1,666 
34 Grant LLCa   342    297    45 
Quarter Ended 9/30/2015   4,606    397    4,209 
     
Hampshire Realtya   1,469    (26)   1,495 
10 Landing Lanea   5,807    (586)   6,393 
River Villa Mews, LLCa   579    274    305 
Marine Viewb   4,697    648    4,049 
Brighton Court Associatesa   1,207    80    1,127 
Park Laneb   7,021    (161)   7,182 
Parkway Eastb   1,701    (332)   2,033 
Park Viewb   2,571    (174)   2,745 
Quarter Ended 12/31/2015   25,052    (277)   25,329 
     
2016 Fiscal Year    29,658    120    29,538 
     
Total Sales $  41,454 $  299 $  41,155 
     
a - Investment in real estate joint venture  
b - Real estate held for investment  

As of December 31, 2015, there were seven entities remaining in the portfolios. Four of these entities are under contract for sale and the remaining three are being marketed for sale.

Real Estate Owned. REO decreased $3.6 million to $487,000 at December 31, 2015, from $4.1 million at June 30, 2015.  The balance at December 31, 2015 consisted of 2 properties and the balance at June 30, 2015 consisted of 8 properties.

Deposits. Deposits increased $157.7 million to $2.12 billion at December 31, 2015, from $1.96 billion at June 30, 2015. See "Total Interest Expense" for discussion regarding deposit balances.

Borrowings. Borrowings decreased $2.6 million to $793.8 million at December 31, 2015, from $796.4 million at June 30, 2015. See "Total Interest Expense" for discussion regarding borrowing amounts.

Stockholders' Equity. Stockholders' equity increased $686,000 to $518.4 million at December 31, 2015, from $517.7 million at June 30, 2015. The increase was primarily due to net income and the net impact of the amortization of stock based compensation plans, partially offset by dividends and repurchases. Dividends paid over the six month period include two regular dividends, totaling $0.35 per share, as well as a $0.50 per share special dividend. During the six months ended December 31, 2015, 100,978 shares of stock were repurchased at a total cost of $1.6 million and an average cost of $15.77 per share. Based on our December 31, 2015 closing price of $16.50 per share, the Company stock was trading at 141.3% of book value. 

About the Company

Oritani Financial Corp. is the holding company for Oritani Bank, a New Jersey state chartered bank offering a full range of retail and commercial loan and deposit products. Oritani Bank is dedicated to providing exceptional personal service to its individual and business customers. The Bank currently operates its main office and 24 full service branches in the New Jersey Counties of Bergen, Hudson, Essex and Passaic. A new branch in Westwood, New Jersey (in Bergen County) will be opening soon. For additional information about Oritani Bank, please visit www.oritani.com.

Forward Looking Statements

Certain statements contained herein are "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 the 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 those risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 2015 (as supplemented by our quarterly reports), and the following: those related to the economic environment, particularly in the market areas in which 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, 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 result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Oritani Financial Corp. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
         
    Dec. 31, June 30,
Assets 2015 2015
     (unaudited)  (audited)
Cash on hand and in banks $ 9,859  $ 11,380 
Federal funds sold and short term investments  —    3,749 
Cash and cash equivalents   9,859    15,129 
         
Loans, net    2,911,468    2,756,212 
Securities available for sale, at fair value   224,434    258,963 
Securities held to maturity, fair value of $156,292 and $107,749 at Dec. 31, 2015 and June 30, 2015, respectively   157,570    107,990 
Bank Owned Life Insurance (at cash surrender value)   91,983    90,609 
Federal Home Loan Bank of New York stock ("FHLB"), at cost   39,761    39,898 
Accrued interest receivable   6,335    9,266 
Investments in real estate joint ventures, net   5,599    6,658 
Real estate held for investment  —    655 
Real estate owned   487    4,059 
Office properties and equipment, net   14,567    14,431 
Deferred tax assets   41,811    41,356 
Other assets   9,117    7,839 
Total Assets $ 3,512,991  $ 3,353,065 
         
Liabilities      
Deposits  $ 2,120,476  $ 1,962,737 
Borrowings    793,807    796,372 
Advance payments by borrowers for taxes and insurance   20,006    20,445 
Official checks outstanding   3,096    3,528 
Other liabilities   57,250    52,313 
Total liabilities   2,994,635    2,835,395 
         
Stockholders' Equity      
       
Common stock, $0.01 par value; 150,000,000 shares authorized; 56,245,065 shares issued; 44,397,697 shares outstanding at Dec. 31, 2015 and 44,012,239 shares outstanding at June 30, 2015   562    562 
Additional paid-in capital   510,016    508,999 
Unallocated common stock held by the employee stock ownership plan   (21,158)   (22,803)
Restricted Stock Awards   (4,242)   (8,088)
Treasury stock, at cost; 11,847,368 shares at Dec. 31, 2015 and 12,232,826 shares at June 30, 2015   (157,466)   (162,344)
Retained income   194,871    203,192 
Accumulated other comprehensive loss, net of tax   (4,227)   (1,848)
Total stockholders' equity   518,356    517,670 
Total Liabilities and Stockholders' Equity $ 3,512,991  $ 3,353,065 
         


Oritani Financial Corp. and Subsidiaries
Consolidated Statements of Income
Three  and Six Months Ended December 31, 2015 and 2014
(In thousands, except share data)
              
    Three months ended  Six months ended
    Dec. 31,  Dec. 31,
    2015 2014  2015  2014 
     unaudited
Interest income:           
Mortgage loans $31,148 $ 31,041  $61,937$ 60,768 
Dividends on FHLB stock 391   500   792  976 
Securities available for sale 1,154   1,671   2,357  3,471 
Securities held to maturity 663   450   1,234  814 
Federal funds sold and short term investments 1   1   2  3 
Total interest income 33,357   33,663   66,322  66,032 
              
Interest expense:           
Deposits  4,456   2,843   8,118  5,457 
Borrowings  3,607   5,756   8,761  11,561 
Total interest expense 8,063   8,599   16,879  17,018 
              
Net interest income before provision for loan losses 25,294   25,064   49,443  49,014 
              
Provision for loan losses —   —   —   200 
Net interest income after provision for loan losses 25,294   25,064   49,443  48,814 
              
Other income:           
Service charges  208   240   466  463 
Real estate operations, net 36   315   271  668 
Net income from investments in real estate joint ventures 311   487   718  1,335 
Bank-owned life insurance 678   680   1,374  1,192 
Net gain (loss) on sale of assets 25,554   (10)  29,866  (10)
Net gain (loss) on sale of securities 604  —   604  (2)
Other income  91   69   168  142 
Total other income 27,482   1,781   33,467  3,788 
              
Other expenses:           
Compensation, payroll taxes and fringe benefits 10,056   7,730   17,759  14,954 
Advertising  90   105   180  195 
Office occupancy and equipment expense 689   692   1,407  1,421 
Data processing service fees 496   472   1,014  935 
Federal insurance premiums 399   390   798  778 
Real estate owned operations 11   990   341  1,129 
FHLBNY prepayment penalties 13,873  —   13,873 — 
Other expenses  1,315   930   2,294  1,954 
Total other expenses 26,929   11,309   37,666  21,366 
              
Income before income tax expense 25,847   15,536   45,244  31,236 
Income tax  expense  9,996   5,490   17,211  11,029 
Net  income $15,851 $ 10,046  $28,033  20,207 
              
Earnings per basic  common share$  0.38 $   0.24  $  0.68$   0.48 
Earnings per diluted common share$  0.37 $   0.24  $  0.66$   0.47 
              


  Average Balance Sheet and Yield/Rate Information
  For the Three Months Ended (unaudited)
  December 31, 2015 December 31, 2014
  Average
Outstanding
Balance
 Interest
Earned/ 
Paid
 Average
Yield/
Rate
 Average
Outstanding
Balance
 Interest
Earned/ 
Paid
 Average
Yield/
Rate
  (Dollars in thousands)
             
Interest-earning assets:            
Loans (1)  $  2,812,491  $  31,148   4.43% $  2,580,019  $   31,041   4.81%
Federal Home Loan Bank Stock    34,155   391   4.58%    43,025   500   4.65%
Securities available for sale    233,061   1,154   1.98%    334,187   1,671   2.00%
Securities held to maturity    136,653   663   1.94%    87,731   450   2.05%
Federal funds sold and short term investments    1,600   1   0.25%    1,635   1   0.25%
Total interest-earning assets    3,217,960     33,357   4.15%    3,046,597     33,663   4.42%
Non-interest-earning assets    181,344         181,083     
Total assets $  3,399,304      $  3,227,680     
             
             
Interest-bearing liabilities:            
Savings deposits    157,025   94   0.24%    159,932   96   0.24%
Money market    670,240   1,347   0.80%    457,078   557   0.49%
Checking accounts    448,086   418   0.37%    457,185   440   0.38%
Time deposits    839,997   2,597   1.24%    705,787   1,750   0.99%
Total deposits  2,115,348   4,456   0.84%  1,779,982   2,843   0.64%
Borrowings    668,983     3,607   2.16%    863,254     5,756   2.67%
Total interest-bearing liabilities  2,784,331   8,063   1.16%  2,643,236   8,599   1.30%
Non-interest-bearing liabilities    80,764         64,448     
Total liabilities  2,865,095       2,707,684     
Stockholders' equity    534,209         519,996     
Total liabilities and stockholders' equity $  3,399,304      $  3,227,680     
             
Net interest income   $  25,294      $  25,064   
Net interest rate spread (2)      2.99%      3.12%
Net interest-earning assets (3) $  433,629      $  403,361     
Net interest margin (4)      3.14%      3.29%
Average of interest-earning assets to interest-bearing liabilities        115.57%      115.26%
             



  Average Balance Sheet and Yield/Rate Information
  For the Six Months Ended (unaudited)
  December 31, 2015 December 31, 2014
  Average
Outstanding
Balance
 Interest
Earned/ 
Paid
 Average
Yield/
Rate
 Average
Outstanding
Balance
 Interest
Earned/ 
Paid
 Average
Yield/
Rate
  (Dollars in thousands)
             
Interest-earning assets:            
Loans (1)  $  2,785,918  $  61,937   4.45% $  2,564,943  $   60,768   4.74%
Federal Home Loan Bank Stock    36,012     792   4.40%    45,998   976   4.24%
Securities available for sale    242,252     2,357   1.95%    348,671   3,471   1.99%
Securities held to maturity    124,166     1,234   1.99%    76,376   814   2.13%
Federal funds sold and short term investments    1,630     2   0.25%    2,354   3   0.25%
Total interest-earning assets    3,189,978     66,322   4.16%    3,038,342     66,032   4.35%
Non-interest-earning assets    180,870         171,444     
Total assets $  3,370,848      $  3,209,786     
             
Interest-bearing liabilities:            
Savings deposits    157,956   188   0.24%    160,528   192   0.24%
Money market    644,928   2,186   0.68%    441,786   1,081   0.49%
Checking accounts    442,274   814   0.37%    453,757   918   0.40%
Time deposits    810,822   4,930   1.22%    644,428   3,266   1.01%
Total deposits  2,055,980   8,118   0.79%  1,700,499   5,457   0.64%
Borrowings    710,119     8,761   2.47%    924,323     11,561   2.50%
Total interest-bearing liabilities  2,766,099   16,879   1.22%  2,624,822   17,018   1.30%
Non-interest-bearing liabilities    76,991         63,176     
Total liabilities  2,843,090       2,687,998     
Stockholders' equity    527,758         521,788     
Total liabilities and stockholder's equity $  3,370,848      $  3,209,786     
             
Net interest income   $  49,443      $  49,014   
Net interest rate spread (2)      2.94%      3.05%
Net interest-earning assets (3) $  423,879      $  413,520     
Net interest margin (4)      3.10%      3.23%
Average of interest-earning assets to interest-bearing liabilities      115.32%      115.75%
     
(1)  Includes nonaccrual loans and prepayment income. 
(2)  Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. 
(3)  Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. 
(4)  Net interest margin represents net interest income divided by average total interest-earning assets. 

 

For further information contact: Kevin J. Lynch Chairman, President and Chief Executive Officer Oritani Financial Corp. (201) 664-5400

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