e424b3
PROSPECTUS
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-165226
(Proposed Holding Company for Oritani Bank)
Up to 44,850,000 Shares of Common Stock
(Subject to Increase to up to 51,577,500 Shares)
Oritani Financial Corp., a newly-formed Delaware corporation
(Oritani-Delaware), is offering up to
44,850,000 shares of common stock for sale at $10.00 per
share in connection with the conversion of Oritani Financial
Corp., MHC from the mutual to the stock form of organization. We
may sell up to 51,577,500 shares of common stock because of
demand for the shares of common stock, as a result of regulatory
considerations or changes in the market for financial
institutions stock, without resoliciting purchases. The shares
of common stock we are offering represent the ownership interest
in Oritani Financial Corp., a federal corporation (Oritani
Financial Corp.) currently owned by Oritani Financial
Corp., MHC. In addition, at the conclusion of the offering,
existing shares of Oritani Financial Corp. common stock
currently held by the public will be exchanged for up to
15,395,458 shares of Oritani-Delaware common stock. The
number of shares to be issued in the exchange may be increased
to up to 17,704,777 shares of common stock, if we sell
51,577,500 shares of common stock in the offering. Oritani
Financial Corp.s common stock is currently traded on the
Nasdaq Global Market under the trading symbol ORIT.
We expect that Oritani-Delawares shares of common stock
will trade on the Nasdaq Global Market under the trading symbol
ORITD for a period of 20 trading days after the
completion of this stock offering. Thereafter,
Oritani-Delawares trading symbol will revert to
ORIT. At the conclusion of the offering, Oritani
Financial Corp. will cease to exist. We will refer to Oritani
Financial Corp., a Delaware corporation formed for this stock
offering, as Oritani-Delaware and Oritani Financial
Corp., the existing federal corporation, as
Oritani-Federal in this document.
Oritani-Delaware is offering the shares for sale to eligible
depositors of Oritani Bank in a subscription offering and to the
general public through a syndicate of selected dealers. Eligible
depositors of Oritani Bank have a priority right to purchase
shares of Oritani-Delaware common stock in the subscription
offering, and accordingly, the number of shares available for
sale in the syndicated community offering will be reduced by the
number of shares sold in the subscription offering. In order to
complete the subscription offering and the syndicated community
offering, we must sell, in the aggregate, a minimum of
33,150,000 shares. The minimum purchase is 25 shares.
Stifel, Nicolaus & Company, Incorporated is acting as
the sole book running manager, and Sandler
ONeill & Partners, L.P. and Sterne,
Agee & Leach, Inc. are acting as joint lead managers,
for the syndicated community offering, which is being conducted
on a best efforts basis. None of Stifel, Nicolaus &
Company, Incorporated, Sandler ONeill &
Partners, L.P., Sterne, Agee & Leach, Inc. or any
other member of the syndicate is required to purchase any shares
in the subscription or syndicated community offering.
OFFERING SUMMARY
Price: $10.00 per
share
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Minimum
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Midpoint
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Maximum
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Adjusted Maximum
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Number of shares
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33,150,000
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39,000,000
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44,850,000
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51,577,500
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Gross offering proceeds
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$
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331,500,000
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$
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390,000,000
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$
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448,500,000
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$
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515,775,000
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Estimated offering expenses excluding selling agent commissions
and expenses
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$
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1,762,400
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$
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1,762,400
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$
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1,762,400
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$
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1,762,400
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Estimated selling agent commissions and expenses(1)
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$
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11,368,400
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$
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13,334,000
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$
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15,299,600
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$
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17,560,040
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Net proceeds
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$
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318,369,200
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$
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374,903,600
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$
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431,438,000
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$
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496,452,560
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Net proceeds per share
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$
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9.60
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$
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9.61
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$
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9.62
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$
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9.63
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(1)
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Includes; (i) selling
commissions payable by us to Stifel, Nicolaus &
Company, Incorporated in connection with the subscription and
community offerings equal to 1.0% of the aggregate amount of
common stock in the subscription and community offerings (net of
insider purchases and shares purchased by our ESOP), or
approximately $1.8 million, at the adjusted maximum of the
offering range, assuming that forty percent of the offering is
sold in the subscription and community offerings and the
remaining sixty percent of the offering will be sold by a
syndicate of broker-dealers in a syndicated community offering;
(ii) fees and selling commissions payable by us to Stifel,
Nicolaus & Company, Incorporated and any other
broker-dealers participating in the syndicated offering equal to
5.0% of the aggregate amount of common stock sold in the
syndicated community offering, or approximately
$15.5 million at the adjusted maximum of the offering; and
(iii) other expenses of the offering payable to Stifel,
Nicolaus & Company, Incorporated as selling agent
estimated to be $0.2 million. For information regarding
compensation to be received by Stifel, Nicolaus &
Company, Incorporated and the other broker-dealers that may
participate in the syndicated community offering, including the
assumptions regarding the number of shares that may be sold in
the subscription and community offerings and the syndicated
community offering to determine the estimated offering expenses,
see Pro Forma Data on page 52 and The
Conversion and Offering Marketing Arrangements
on page 167.
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(2)
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If all shares of common stock are
sold in the syndicated community offering, the maximum selling
agent commissions and expenses would be $16.5 million at
the minimum, $18.9 million at the midpoint,
$21.7 million at the maximum, and $24.9 million at the
maximum, as adjusted.
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This investment involves a degree of risk, including the
possible loss of principal.
Please read Risk Factors beginning on
page 23.
These securities are not deposits or savings accounts and
are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. None of the
Securities and Exchange Commission, the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the New
Jersey Department of Banking and Insurance, or any state
securities regulator has approved or disapproved of these
securities or determined if this prospectus is accurate or
complete. Any representation to the contrary is a criminal
offense.
Sole Book-Running Manager
Stifel Nicolaus
Co-Managers
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Sandler
ONeill + Partners, L.P. |
Sterne Agee |
The date of this prospectus is May 10, 2010.
TABLE OF CONTENTS
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F-1 |
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i
SUMMARY
The following summary explains the material aspects of the conversion, the offering and the
exchange of existing shares of Oritani-Federal common stock for new shares of Oritani-Delaware
common stock. It may not contain all of the information that is important to you. For additional
information before making an investment decision, you should read this prospectus carefully,
including the consolidated financial statements, the notes to the consolidated financial
statements, and the section entitled Risk Factors.
The Companies
Oritani-Delaware
Oritani-Delaware is a newly-formed Delaware corporation that was incorporated in February 2010
to be the successor corporation to Oritani-Federal upon completion of the conversion. Pursuant to
the Plan of Conversion and Reorganization, a new, state chartered holding company needed to be
formed because an Office of Thrift Supervision-chartered federal corporation cannot be a fully
public holding company. Oritani-Delaware will own all of the outstanding shares of common stock of
Oritani Bank upon completion of the conversion.
Oritani-Delawares executive offices are located at 370 Pascack Road, Township of Washington,
New Jersey 07676. Our telephone number at this address is (201) 664-5400.
Oritani Financial Corp., MHC
Oritani Financial Corp., MHC is the federally chartered mutual holding company of
Oritani-Federal. Oritani Financial Corp., MHCs principal business activity is the ownership of
27,575,476 shares of common stock of Oritani-Federal, or 74.2% of the issued and outstanding shares
as of the date of this prospectus. The remaining 9,571,943 shares of Oritani-Federal common stock
outstanding as of the date of this prospectus were held by the public. After the completion of the
conversion, Oritani Financial Corp., MHC will cease to exist.
Oritani-Federal
Oritani-Federal is a federally chartered stock holding company that owns all of the
outstanding common stock of Oritani Bank. At December 31, 2009, Oritani-Federal had consolidated
assets of $2.01 billion, deposits of $1.21 billion and stockholders equity of $248.0 million.
After the completion of the conversion, Oritani-Federal will cease to exist, and will be succeeded
by Oritani-Delaware, a new Delaware corporation. As of the date of this prospectus,
Oritani-Federal had 40,552,162 shares of common stock issued and 37,147,419 shares of common stock
outstanding, of which 27,575,476 shares were owned by Oritani Financial Corp., MHC.
Oritani Bank
Oritani Bank is a New Jersey-chartered stock savings bank headquartered in Township of
Washington, New Jersey, and the wholly-owned subsidiary of Oritani-Federal. Oritani Bank was
originally founded in 1911 as a mutual (meaning no stockholders) organization. In 1997, Oritani
Bank converted to a mutual savings bank charter, and in March 1998, reorganized into the two-tier
mutual holding company structure.
1
Our Business
We are a full service retail banking institution. Our primary business lines involve
generating funds from deposits or borrowings and investing such funds in loans and investment
securities.
Oritani Bank conducts business from its main office located at 370 Pascack Road, in the
Township of Washington, New Jersey 07676, and its 21 branch offices located in the New Jersey
counties of Bergen, Hudson and Passaic. Oritani Bank was formerly known as Oritani Savings Bank.
Effective September 8, 2008, the name was changed to Oritani Bank.
Our principal business consists of attracting retail and commercial deposits from the general
public in the areas surrounding our main office in the Township of Washington, New Jersey and our
branch offices located in the New Jersey counties of Bergen (16 branches, including our main
office), Hudson (five branches) and Passaic (one branch), 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 revenues are derived principally from interest on loans and
securities as well as our investments in real estate and real estate joint ventures. We also
generate revenues from fees and service charges and other income. Our primary sources of funds are
deposits, borrowings and principal and interest payments on loans and securities.
Market Area
From our headquarters in the Township of Washington, New Jersey, we operate 22 full service
branches, including our main office. We operate branches in three counties in New Jersey: Bergen,
Hudson and Passaic. The majority of our branches (sixteen) and deposits are located in Bergen
County. In addition, we operate five branches in Hudson County and one branch in Passaic County.
Our market area for lending is broader and includes the state of New Jersey, the broader New York
metropolitan area, eastern Pennsylvania, and southern Connecticut.
In terms of population, Bergen County ranks as the largest county in New Jersey (out of 21
counties) while Hudson County ranks fifth and Passaic County ranks ninth. The economy in our
primary market area has benefited from being varied and diverse. It is largely urban and suburban
with a broad economic base. As one of the wealthiest states in the nation, New Jersey, with a
population of 8.7 million, is considered one of the most attractive banking markets in the United
States. As of December 2009, the unemployment rate for New Jersey increased to 10.1%, which was
slightly higher than the national rate of 10.0%. Despite the recent downturn, a total of 3.9
million New Jersey residents remain employed as of December 2009. Bergen County is considered part
of the New York metropolitan area. Its county seat is Hackensack. Bergen County ranks 16th among
the highest-income counties in the United States in 2009 in terms of per-capita income. Some of
Bergen Countys major employers are: Hackensack University Medical Center; New Jersey Sports and
Expo Authority; Merck-Medco Managed Care; AT&T Wireless Services, Inc.; Becton Dickinson & Company;
Mellon Investor Services; Marcal Paper Mills; Mercedes-Benz of North America, Inc.; KPMG, LLP and
United States Postal Service.
Bergen County is bordered by Rockland County, New York to the north, the Hudson River to the
east, Hudson County to the south, a small border with Essex County also to the south and Passaic
County to the west.
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Passaic County is bordered by Orange County, New York to the north, Rockland County, New York
to the northeast, Bergen County to the east, Essex County to the south, Morris County to the
southwest and Sussex County to the west.
Hudson Countys only land border is with Bergen County to the north and west. It is bordered
by the Hudson River and Upper New York Bay to the east; Kill van Kull (which connects Newark Bay
with Upper New York Bay) to the south and Newark Bay and the Hackensack River or the Passaic River
to the west.
Competition
We face intense competition within our market area both in making loans and attracting
deposits. Our market area has a high concentration of financial institutions including large money
center and regional banks, community banks and credit unions. Some of our competitors offer
products and services that we currently do not offer, such as trust services and private banking.
As of June 30, 2009, the latest date for which statistics are available, our market share of
deposits was approximately 2.6% in Bergen County, and less than 1.0% in each of Hudson and Passaic
Counties.
Our competition for loans and deposits comes principally from commercial banks, savings
institutions, mortgage banking firms, insurance companies and credit unions. We face additional
competition for deposits from short-term money market funds, brokerage firms, mutual funds and
insurance companies. Our primary focus is to build and develop profitable customer relationships
across all lines of business while maintaining our role as a community bank.
Our Business Strategy
We intend to continue to operate as a well-capitalized and profitable financial institution
dedicated to understanding the banking needs of both our individual and business customers, and
tailoring our products and services accordingly. This approach enables us to be more flexible and
responsive to our customers and to provide an exceptional level of personal service.
Highlights of our business strategy are discussed below:
Continue our focus on multi-family and commercial real estate lending. Unlike many
traditional thrifts, we have focused on the origination of multi-family and commercial real estate
loans. Such loans comprised 66.9% of our total loan portfolio at December 31, 2009. We have
focused on this type of lending because the interest rates earned for such loans are higher than
the prevailing rates for residential loans, resulting in a greater level of interest income
potential. We are also able to generate significantly higher fee income on such loans. In
addition, the repayment terms usually expose us to less interest rate risk than fixed-rate
residential loans. While our actual origination volume will depend on market conditions, we intend
to continue our emphasis on multi-family and commercial real estate lending.
We have experienced substantial growth in our combined multi-family and commercial real estate
loan portfolio in recent years. The growth rate of the portfolio has been 20.27%; 40.62%; 32.37%;
18.97%; and 39.71% for the six months ended December 31, 2009 (annualized) and years ended June 30,
2009, 2008, 2007 and 2006, respectively. In addition, despite our more stringent underwriting
standards discussed below, we believe that the exit of many larger banks and conduit lenders from
the commercial real estate lending market due to the financial crisis has enabled us, as a
community bank, to increase the number and size of the commercial real estate loans that we
originate while lending to a higher quality of borrower.
3
We have been involved in multi-family lending for over 30 years. Over the past seven years,
we have assembled a department exclusively devoted to the origination and administration of
multi-family and commercial real estate loans. Over the past two years, we have established a
separate credit department to review all such originations and ensure compliance with our
underwriting standards. There are presently eight loan officers as well as support staff in the
origination department and three officers as well as support staff in the credit department. Our
business plan projects continued growth of the portfolio and continued additions to our staff to
support such growth. In addition, due to current economic conditions and related risks, management
has been applying stricter underwriting guidelines, including requiring higher debt service
coverage ratios and lower loan to value ratios, to these loans. We have also focused our
multi-family and commercial real estate lending on more seasoned and experienced developers.
Reduce problem assets and aggressively remedy delinquent loans. One of managements primary
objectives is to reduce our level of problem assets. While no assurances can be provided regarding
results, management will focus a significant amount of its time on the resolution of problem
assets. Managements tactics toward delinquent borrowers are considered aggressive. We have
commenced legal action against virtually all borrowers who are more than 45 days delinquent. We
have generally refused to extend the maturity date of any construction loan, even if the interest
payments are current, unless the borrower agrees to reduce our exposure through additional
principal payments and/or additional collateral, and agrees to an additional fee if the loan is not
paid in full on or before the new maturity date. We realize that such actions contribute to the
high level of delinquencies but believe this is the most prudent path to addressing delinquent
loans. Since June 30, 2009, our level of non-performing assets to total assets has declined from
2.74% to 2.62% at December 31, 2009. Additionally, $13.9 million of our delinquent loans are
expected to be resolved in the coming months as the underlying collateral are under contracts for
sale.
Increase core deposits. During the past two years, we have devoted significant internal
attention to growing our deposits. We hired key, experienced personnel and have implemented an
incentive program that rewards branch personnel for attracting core deposit relationships. We have
also begun to emphasize obtaining deposits from our commercial borrowers, reexamined our pricing
strategies and promoted our status as a local community bank. As a result of these efforts and
external factors, we have recently experienced a period of unprecedented deposit growth. Our
deposit balances grew 61.3% from June 30, 2008 to June 30, 2009. The growth has continued as our
annualized growth for the six month period ended December 31, 2009 was 14.7%. Much of the increase
came in the areas of certificates of deposit and money market accounts. In addition to the
initiatives described above, management believes that external factors also contributed to our
deposit growth. Due to uncertainty in the financial markets and a downturn in the U.S. economy,
many investors withdrew funds from the stock market and deposited them into investment options
considered safe by investors, such as Oritani Bank deposit accounts. Management believes a portion
of our growth was due to this activity, particularly during the June 30, 2008 to June 30, 2009
period. Other external factors, including a relaxation of the insured deposit limits, also may
have contributed to our deposit growth however; management believes any impact due to increased
deposit limits is minimal. Our ongoing focus will be to build upon our successes, with a
particular emphasis on growing core commercial and retails deposits. In addition to continuing to
attract new customers to Oritani Bank, we will also focus on cross-selling core deposit accounts to
customers who have limited deposit services with Oritani Bank and seeking to further develop the
relationship by providing quality customer service.
Expand our market share within our primary market area. Our deposit growth significantly
boosted our market penetration in Bergen County, the primary county of our operations. We
increased our percentage of Bergen County deposits from 1.8%, or the 14th highest
financial institution, at June 30, 2008 to 2.6%, or the 9th highest financial
institution, at June 30, 2009. In October 2008, Oritani Bank
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opened two de novo branches. These branches had combined deposit totals of $49.6 million at
December 31, 2009. In February 2010, we opened a de novo branch in Bergenfield, New Jersey. We
intend to continue the strategy of opportunistic de novo branching. We typically seek de novo
branch locations in under-banked areas that are either a contiguous extension or fill-in of our
existing branch network. We also have budgeted monies for infrastructure improvements in our
existing branches. We may also consider the acquisition of branches from other financial
institutions in our market area. We believe these strategies, along with continued growth, will
help us achieve our goal of deposit growth and market expansion.
Continue to emphasize operating efficiencies and cost control. One of the hallmarks of our
operations has been expense control as evidenced by an efficiency ratio of 46.5% for the six months
ended December 31, 2009. Our efficiency ratio, as well as numerous other expense measurement
ratios, have consistently outperformed peers. We intend to maintain our posture on expense control
while continuing to make prudent investments in our operations by effectively managing costs in
relation to revenues. We realize that our expense ratios will be challenged in the future with the
intended implementation of stock benefit plans. However, we have recently been able to generate
favorable peer comparisons with such plans in place.
Remain true to our core competencies. We are very proud of the institution we have helped to
build. We realize many of our peers have ventured into other areas of banking operations, such as
C&I lending, leasing and sales of alternative investment products. While these areas may be
profitable, they also have inherent risks and require significant expertise separate from our core
lending and deposit gathering operations. For the foreseeable future, we do not intend to utilize
our capital to enter into new types of lending or other areas of operations that we consider to be
risky. We believe that we possess expertise in our current types of lending and operations and
intend to rely on this existing expertise for future growth and profitability.
Our Current Organizational Structure
Oritani-Federal completed its initial public stock offering on January 23, 2007.
Oritani-Federal sold 12,165,649 shares, or 30.0% of its outstanding common stock, to subscribers in
the offering, including 1,589,644 shares purchased by the Oritani Bank Employee Stock Ownership
Plan. Proceeds from the offering, including the value of shares issued to the charitable
foundation but net of expenses, were $127.6 million. Oritani-Federal contributed $59.7 million of
the proceeds to Oritani Bank. At December 31, 2009, Oritani Financial Corp., MHC owned 74.4% of
the Oritani-Federals outstanding common stock.
Pursuant to the terms of Oritani Financial Corp., MHCs Plan of Conversion and Reorganization,
Oritani Financial Corp., MHC will convert from the mutual holding company to the stock holding
company corporate structure. As part of the conversion, we are offering for sale in a subscription
offering, a community offering and possibly a syndicated community offering, the ownership interest
of Oritani-Federal that is currently owned by Oritani Financial Corp., MHC. Upon the completion of
the conversion, Oritani Financial Corp., MHC will cease to exist, and we will complete the
transition from partial to full public stock ownership. In addition, as part of the conversion
existing public stockholders of Oritani-Federal will receive shares of common stock of
Oritani-Delaware in exchange for their shares of Oritani-Federal common stock pursuant to an
exchange ratio that maintains the same percentage ownership in Oritani-Delaware (excluding any new
shares purchased by them in the offering and their receipt of cash in lieu of fractional exchange
shares) that existing stockholders had in Oritani-Federal immediately prior to the completion of
the conversion and offering.
5
The following diagram shows our current organizational structure:
Our Organizational Structure Following the Conversion
After the conversion and offering are completed, we will be organized as a fully public stock
holding company, as follows:
Reasons for the Conversion and the Offering
Our primary reasons for converting and raising additional capital through the offering are:
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to support internal growth through lending and deposit gathering in the
communities we serve; |
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to enhance existing products and services, and support the development of
new products and services to support growth and enhanced customer service; |
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to improve the liquidity of our shares of common stock and enhance
stockholder returns through higher earnings and more flexible capital management
strategies; |
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to finance the acquisition of branches from other financial institutions
or build or lease new branch facilities primarily in, or adjacent to New Jersey,
although we do not currently have any agreements or understandings regarding any
specific acquisition transaction; |
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to finance the acquisition of financial institutions or other financial
service companies primarily in, or adjacent to New Jersey, although we do not currently
have any understandings or agreements regarding any specific acquisition transaction; |
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to maintain our capital position during a period of significant economic
uncertainty, especially for the financial services industry (although, as of December
31, 2009, Oritani Bank was considered well capitalized for regulatory purposes and is
not subject to any directive or recommendation from the Federal Deposit Insurance
Corporation (the FDIC) or the New Jersey Department of Banking and Insurance to raise
capital); and |
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to use the additional capital for other general corporate purposes. |
Terms of the Offering
Pursuant to Oritani Financial Corp., MHCs Plan of Conversion and Reorganization, our
organization will convert from the partially public mutual holding company form to the fully public
stock holding company structure. In connection with the conversion, we are selling shares of
common stock that represent the ownership interest in Oritani-Federal currently held by Oritani
Financial Corp., MHC.
We are offering between 33,150,000 and 44,850,000 shares of common stock to eligible
depositors of Oritani Bank, to our tax-qualified employee benefit plans, including our employee
stock ownership plan, and, to the extent shares remain available, to persons residing in the New
Jersey counties of Bergen, Passaic, Sussex, Hudson, Essex, Morris, Warren, Union, Somerset,
Hunterdon, Middlesex and Mercer; certain borrowers as of December 31, 2009, and to our existing
public stockholders as of May 5, 2010. There are no plans to make any additional contributions to
our existing charitable foundation. The number of shares of common stock to be sold may be
increased to up to 51,577,500 as a result of regulatory considerations, demand for our shares, or
changes in the market for financial institution stocks. Unless the number of shares of common
stock to be offered is increased to more than 51,577,500 shares or decreased to fewer than
33,150,000 shares, or the offering is extended beyond July 24, 2010, purchasers will not have the
opportunity to modify or cancel their stock orders once submitted. If the number of shares of
common stock to be sold is increased to more than 51,577,500 shares or decreased to fewer than
33,150,000 shares, or if the offering is extended beyond July 24, 2010, purchasers will have the
opportunity to maintain, cancel or change their orders for shares of common stock during a
designated resolicitation period or have their funds delivered to us to purchase shares in the
subscription offering and community offering returned promptly with interest. If you do not
provide us with written indication of your intent, your stock order will be canceled, your funds
delivered to us to purchase shares in the subscription and community offerings will be returned to
you with interest calculated at Oritani Banks passbook savings rate and any deposit account
withdrawal authorizations will be canceled.
The purchase price of each share of common stock to be offered for sale in the offering is
$10.00. All investors will pay the same purchase price per share. Investors will not be charged a
commission to purchase shares of common stock in the offering. Stifel, Nicolaus & Company,
Incorporated, our
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conversion advisor and marketing agent in the offering, will use its best efforts to assist us
in selling shares of our common stock. Stifel, Nicolaus & Company, Incorporated is not obligated
to purchase any shares of common stock in the offering.
We may also offer for sale to the general public in a syndicated community offering through a
syndicate of selected dealers shares of our common stock not purchased in the subscription offering
or the community offering. We may begin the syndicated community offering at any time following the
commencement of the subscription offering. Stifel, Nicolaus & Company, Incorporated is acting as
sole book-running manager and Sandler ONeill & Partners, L.P. and Sterne, Agee & Leach, Inc. are
acting as co-managers for the syndicated community offering, which is also being conducted on a
best efforts basis. Neither Stifel, Nicolaus & Company, Incorporated nor any other member of the
syndicate is required to purchase any shares in the syndicated community offering. Alternatively,
we may sell remaining shares in an underwritten public offering, which would be conducted on a firm
commitment basis.
How We Determined the Offering Range, the Exchange Ratio and the $10.00 Per Share Stock Price
The offering range and exchange ratio are based on an independent appraisal of the estimated
market value of Oritani-Delaware, assuming the conversion, the exchange and the offering are
completed. RP Financial, LC., an appraisal firm experienced in appraisals of financial
institutions, has estimated that, as of February 19, 2010, this estimated pro forma market value
ranged from $445.3 million to a maximum of $602.5 million, with a midpoint of $523.8 million and an
adjusted maximum of $692.8 million. Based on this valuation, the ownership interest held by
Oritani Financial Corp., MHC being sold in the offering and the $10.00 per share price, the number
of shares of common stock being offered for sale by us will range from 33,150,000 shares to
44,850,000 shares. The $10.00 per share price was selected primarily because it is the price most
commonly used in mutual-to-stock conversions of financial institutions. The exchange ratio will
range from 1.2022 shares at the minimum of the offering range to 1.6264 shares at the maximum of
the offering range in order to approximately preserve the existing percentage ownership of public
stockholders of Oritani-Federal (excluding any new shares purchased by them in the offering and
their receipt of cash in lieu of fractional exchange shares). If demand for shares or market
conditions warrant, the appraisal can be increased by 15%. At this adjusted maximum of the
offering range, and as of February 19, 2010, the estimated pro forma market value is $692.8
million, the number of shares of common stock offered for sale will be 51,577,500 and the exchange
ratio will be 1.8704 shares.
The independent appraisal is based in part on Oritani-Federals financial condition and
results of operations, the pro forma impact of the additional capital raised by the sale of shares
of common stock in the offering, and an analysis of a peer group of 10 publicly traded savings bank
and thrift holding companies that RP Financial, LC. considered comparable to Oritani-Federal.
8
The appraisal peer group consists of the following companies. Total assets are as of December
31, 2009, unless otherwise indicated.
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Company Name and Ticker Symbol |
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Exchange |
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|
Headquarters |
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|
Total Assets |
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|
|
|
|
|
|
|
|
(in millions) |
|
Beacon Federal Bancorp (BFED) |
|
NASDAQ |
|
East Syracuse, NY |
|
$ |
1,070 |
(1) |
Brookline Bancorp, Inc. (BRKL) |
|
NASDAQ |
|
Brookline, MA |
|
$ |
2,616 |
|
Danvers Bancorp, Inc. (DNBK) |
|
NASDAQ |
|
Danvers, MA |
|
$ |
2,500 |
|
ESB Financial Corp. (ESBF) |
|
NASDAQ |
|
Ellwood City, PA |
|
$ |
1,979 |
(1) |
ESSA Bancorp, Inc. (ESSA) |
|
NASDAQ |
|
Stroudsburg, PA |
|
$ |
1,034 |
|
OceanFirst Financial Corp. (OCFC) |
|
NASDAQ |
|
Toms River, NJ |
|
$ |
1,989 |
|
Parkvale Financial Corp. (PVSA) |
|
NASDAQ |
|
Monroeville, PA |
|
$ |
1,916 |
|
Provident NY Bancorp (PBNY) |
|
NASDAQ |
|
Montebello, NY |
|
$ |
2,918 |
|
United Financial Bancorp, Inc. (UBNK) |
|
NASDAQ |
|
West Springfield, MA |
|
$ |
1,247 |
(1) |
Westfield Financial, Inc. (WFD) |
|
NASDAQ |
|
Westfield, MA |
|
$ |
1,191 |
|
|
|
|
(1) |
|
As of September 30, 2009. |
The independent appraisal does not indicate actual market value. Do not assume or expect
that the estimated pro forma market value as indicated above means that, after the offering, the
shares of our common stock will trade at or above the $10.00 purchase price.
The following table presents a summary of selected pricing ratios for the peer group companies
and Oritani-Delaware (on a pro forma basis). The pricing ratios are based on earnings and other
information as of and for the six months ended December 31, 2009, stock price information as of
February 19, 2010, as reflected in RP Financial, LC.s appraisal report, dated February 19, 2010,
and the number of shares outstanding as described in Pro Forma Data. Compared to the average
pricing of the peer group, our pro forma pricing ratios at the maximum of the offering range
indicated a premium of 6.5% on a price-to-book value basis, a discount of 6.4% on a
price-to-tangible book value basis, and a premium of 183.1% on a price-to-earnings basis.
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Price-to-earnings multiple |
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|
Price-to-book |
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|
Price-to-tangible |
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(1) |
|
|
value ratio |
|
|
book value ratio |
|
Oritani (on a pro
forma basis,
assuming completion
of the conversion) |
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Minimum |
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|
39.21 |
x |
|
|
82.44 |
% |
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|
82.44 |
% |
Midpoint |
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|
45.45 |
x |
|
|
88.50 |
% |
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|
88.50 |
% |
Maximum |
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|
51.50 |
x |
|
|
93.63 |
% |
|
|
93.63 |
% |
Maximum, as adjusted |
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|
58.25 |
x |
|
|
98.52 |
% |
|
|
98.52 |
% |
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|
Valuation of peer group companies, as of |
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February 19, 2010 |
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Averages |
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|
18.19 |
x |
|
|
87.90 |
% |
|
|
100.03 |
% |
Medians |
|
|
14.00 |
x |
|
|
95.34 |
% |
|
|
103.58 |
% |
|
|
|
(1) |
|
Information is derived from the RP Financial appraisal report and are based upon
estimated earnings for the twelve months ended December 31, 2009. These ratios are
different from the ratios in Pro Forma Data. |
Our Board of Directors, in reviewing and approving the independent appraisal, considered
the range of price-to-earnings multiples, the range of price-to-book value and price-to-tangible
book value ratios at the different ranges of shares of common stock to be sold in the offering, and
did not consider one valuation approach to be more important than the other. Instead, in approving
the independent appraisal, the Board of Directors concluded that these ranges represented the
appropriate balance of the three approaches to establishing our estimated valuation range, and the
number of shares of common stock to be sold, in comparison to the peer group institutions.
Specifically, in approving the independent appraisal, the Board of Directors believed that we would
not be able to sell our shares at a price-to-book
9
value and price-to-tangible book value that was in line with the peer group without
unreasonably exceeding the peer group on a price-to-earnings basis. The estimated appraised value
and the resulting discounts took into consideration the potential financial impact of the offering
as well as the trading price of Oritani-Federal common stock, which closed at $13.80 per share on
February 19, 2010, the date of the independent appraisal.
RP Financial, LC. will update the independent appraisal prior to the completion of the
conversion. If the estimated appraised value, including offering shares and exchange shares,
changes to either below $445.3 million or above $692.8 million, we will resolicit persons who
submitted stock orders. See The Conversion and OfferingStock Pricing and Number of Shares to be
Issued.
After-Market Stock Price Performance Provided by Independent Appraiser
The following table presents stock price performance information for all second-step
conversions completed between January 1, 2009 and April 9, 2010. None of these companies were
included in the group of 10 comparable public companies utilized in RP Financial, LC.s valuation
analysis.
Second-Step Conversion Offerings
Completed Closing Dates between January 1, 2009 and April 9, 2010
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|
Percentage Price Appreciation (Depreciation) |
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|
From Initial Trading Date |
|
Company Name and |
|
Conversion |
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|
Through April 9, |
|
Ticker Symbol |
|
Date |
|
|
Exchange |
|
One Day |
|
|
One Week |
|
|
One Month |
|
|
2010 |
|
Eagle Bancorp Montana, Inc. (EBMT) |
|
|
4/5/10 |
|
|
NASDAQ |
|
|
5.5 |
% |
|
|
6.5 |
% |
|
|
N/A |
|
|
|
5.0 |
% |
Ocean Shore Holding Co. (OSHC) |
|
|
12/21/09 |
|
|
NASDAQ |
|
|
7.5 |
% |
|
|
12.3 |
% |
|
|
13.1 |
% |
|
|
37.4 |
% |
Northwest Bancshares, Inc. (NWBI) |
|
|
12/18/09 |
|
|
NASDAQ |
|
|
13.5 |
% |
|
|
13.0 |
% |
|
|
14.0 |
% |
|
|
18.5 |
% |
This table is not intended to be indicative of how our common stock may perform. Data in
this table reflects a small number of transactions and is not necessarily indicative of general
stock market performance trends or of price performance trends of all companies that have
undertaken second-step conversions. The transactions listed above do not necessarily reflect
current market conditions for new offerings. Furthermore, this table presents only short-term price
performance with respect to several companies that only recently completed their second-step
conversions and may not be indicative of the longer-term stock price performance of these
companies. Stock price is affected by many factors, including, but not limited to: general market
and economic conditions; the interest rate environment; the amount of proceeds a company raises in
its offering; and numerous factors relating to the specific company, including the experience and
ability of management, historical and anticipated operating results, the nature and quality of the
companys assets, and the companys market area. The companies listed in the table above may not be
similar to Oritani-Delaware, the pricing ratios for their offerings were in some cases different
from the pricing ratios for Oritani-Delawares common stock, and the market conditions in which
these offerings were completed were different from current market conditions. Any or all of these
differences may cause our common stock to perform differently from these other offerings. Before
you make an investment decision, we urge you to carefully read this prospectus, including, but not
limited to, the Risk Factors section beginning on page 23.
You should be aware that stock prices of a number of second-step conversion offerings
completed prior to 2009 decreased below their initial offering price. We can give you no assurance
that our common stock will not trade below the $10.00 purchase price or that our common stock will
perform similarly to other recent second-step conversions.
10
The Exchange of Existing Shares of Oritani Financial Corp. Common Stock
At the conclusion of the conversion, shares held by existing stockholders of Oritani-Federal
will be canceled and exchanged for shares of common stock of Oritani-Delaware. The number of
shares of common stock received will be based on an exchange ratio determined as of the conclusion
of the conversion and offering, which will depend upon our final appraised value. The number of
shares received will not be based on the market price of our currently outstanding shares.
Instead, the exchange ratio will ensure that existing public stockholders of Oritani-Federal will
retain the same percentage ownership of our organization after the offering, exclusive of their
purchase of any additional shares of common stock in the offering or their receipt of cash in lieu
of fractional exchange shares. In addition, if options to purchase shares of Oritani-Federal
common stock are exercised before consummation of the conversion, there will be an increase in the
percentage of shares of Oritani-Federal held by public stockholders, an increase in the number of
shares of common stock issued to public stockholders in the share exchange and a decrease in the
exchange ratio.
The following table shows how the exchange ratio will adjust, based on the number of shares of
common stock issued in the offering and the shares of common stock issued and outstanding as of
December 31, 2009. The number of shares of common stock outstanding may change between the date of
this prospectus and the closing of the offering. The table also shows the number of whole shares
of Oritani-Delaware common stock a hypothetical owner of Oritani-Federal common stock would receive
in exchange for 100 shares of Oritani-Federal common stock owned at the completion of the
conversion, depending on the number of shares of common stock sold in the offering.
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New |
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Shares |
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That |
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|
Total Shares |
|
|
|
|
|
|
|
|
|
|
Equivalent |
|
|
Would |
|
|
|
|
|
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|
|
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|
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|
of Common |
|
|
|
|
|
|
Equivalent |
|
|
Pro Forma |
|
|
be |
|
|
|
|
|
|
|
|
|
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|
|
|
|
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Stock to be |
|
|
|
|
|
|
Per Share |
|
|
Book Value |
|
|
Received |
|
|
|
|
|
|
|
|
|
|
|
New Shares to be |
|
|
Outstanding |
|
|
|
|
|
|
Based Upon |
|
|
per |
|
|
for 100 |
|
|
|
New Shares to be Sold in |
|
|
Exchanged for Existing |
|
|
After the |
|
|
Exchange |
|
|
Offering |
|
|
Exchanged |
|
|
Existing |
|
|
|
This Offering |
|
|
Shares of Oritani-Federal |
|
|
Offering |
|
|
Ratio |
|
|
Price (1) |
|
|
Share (2) |
|
|
Shares |
|
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
33,150,000 |
|
|
|
74.45 |
% |
|
|
11,379,252 |
|
|
|
25.55 |
% |
|
|
44,529,252 |
|
|
|
1.2022 |
|
|
$ |
12.02 |
|
|
$ |
14.58 |
|
|
|
120 |
|
Midpoint |
|
|
39,000,000 |
|
|
|
74.45 |
% |
|
|
13,387,355 |
|
|
|
25.55 |
% |
|
|
52,387,355 |
|
|
|
1.4143 |
|
|
$ |
14.14 |
|
|
$ |
15.98 |
|
|
|
141 |
|
Maximum |
|
|
44,850,000 |
|
|
|
74.45 |
% |
|
|
15,395,458 |
|
|
|
25.55 |
% |
|
|
60,245,458 |
|
|
|
1.6264 |
|
|
$ |
16.26 |
|
|
$ |
17.37 |
|
|
|
162 |
|
Adjusted Maximum |
|
|
51,577,500 |
|
|
|
74.45 |
% |
|
|
17,704,777 |
|
|
|
25.55 |
% |
|
|
69,282,277 |
|
|
|
1.8704 |
|
|
$ |
18.70 |
|
|
$ |
18.98 |
|
|
|
187 |
|
|
|
|
(1) |
|
Represents the value of shares of Oritani-Delaware common stock received in the conversion by
a holder of one share of Oritani-Federal at the exchange ratio, assuming the offering price of
$10.00 per share. |
|
(2) |
|
Represents the pro forma tangible stockholders equity per share at each level of the
offering range multiplied by the respective exchange ratio. |
No fractional shares of Oritani-Delaware common stock will be issued to any public
stockholder of Oritani-Federal. For each fractional share that would otherwise be issued,
Oritani-Delaware will pay in cash an amount equal to the product obtained by multiplying the
fractional share interest to which the holder would otherwise be entitled by the $10.00 per share
purchase price of the common stock in the offering.
Outstanding options to purchase shares of Oritani-Federal common stock also will convert into
and become options to purchase new shares of Oritani-Delaware common stock. The number of shares
of common stock to be received upon exercise of these options and the exercise price per share to
be adjusted based upon the exchange ratio so that the aggregate exercise price and the duration of
such
11
options remain unchanged. All such options will vest upon completion of the conversion.
Oritani-Federal anticipates the pre-tax expense of such accelerated vesting as well as the
accelerated vesting for outstanding stock awards will be approximately $11.3 million, with such
expense to be incurred during the fiscal quarter in which the stock offering is completed. At
December 31, 2009, there were 1,841,725 outstanding options to purchase shares of
Oritani-Federal common stock, 368,345 of which have vested. Such options will be
converted into options to purchase 2,214,122 shares of common stock at the minimum of the offering
range and 3,444,762 shares of common stock at the maximum of the offering range.
How We Intend to Use the Proceeds From the Offering
Assuming we sell 44,850,000 shares of common stock in the stock offering, and we have net
proceeds of $431.4 million, we intend to distribute the net proceeds as follows:
|
|
|
$215.7 million (50.0% of the net proceeds) will be invested in Oritani Bank; |
|
|
|
|
$17.9 million (4.2% of the net proceeds) will be loaned by Oritani-Delaware to the
employee stock ownership plan to fund its purchase of our shares of common stock; and |
|
|
|
|
$197.8 million (45.8% of the net proceeds) will be retained by Oritani-Delaware. |
The amount to be loaned to the employee stock ownership plan may increase if we exercise our
right to have the plan purchase more than 4.0% of the shares of common stock sold in the offering
if necessary to complete the offering at the minimum of the offering range. We may use the
remaining funds we receive for investments, to pay cash dividends, to repurchase shares of common
stock and for other general corporate purposes. Oritani Bank may use the proceeds it receives to
support increased lending and other products and services. The net proceeds retained also may be
used for future business expansion through opening or acquiring branch offices and the acquisition
of banks, thrifts and other financial services companies. We have no current arrangements or
agreements with respect to any such acquisitions. Initially, a substantial portion of the net
proceeds be invested in short-term investments and mortgage-backed securities consistent with our
investment policy.
Please see How We Intend to Use the Proceeds from the Offering for more information on the
proposed use of the proceeds from the offering.
Our Dividend Policy
As of December 31, 2009, Oritani-Federal paid a quarterly cash dividend of $0.075 per share,
which equals $0.30 per share on an annualized basis. After the conversion, we intend to continue
to pay cash dividends on a quarterly basis. Oritani-Delaware expects the annual dividends to equal
$0.30 per share at each of the minimum, midpoint, maximum and adjusted maximum of the offering
range, respectively, which represents an annual dividend yield of 3.0%, at each of the minimum,
midpoint, maximum and adjusted maximum of the offering range, respectively, based upon a price of
$10.00 per share. The amount of dividends that we intend to pay after the conversion will preserve
the dividend rate that Oritani-Federal stockholders currently receive, however, total dividends
received will be positively adjusted to reflect the exchange ratio. The dividend rate and the
continued payment of dividends will depend on a number of factors, including our capital
requirements, our financial condition and results of operations, tax considerations, statutory and
regulatory limitations, and general economic conditions. No assurance can be given that we will
continue to pay dividends or that they will not be reduced or eliminated in the future.
12
See Selected Consolidated Financial and Other Data and Market for the Common Stock for
information regarding our historical dividend payments.
Purchases and Ownership by our Officers and Directors
Our directors, executive officers and their associates intend to purchase 216,500 shares of
common stock in the offering. The purchase price paid by them will be the same $10.00 per share
price paid by all other persons who purchase shares of common stock in the offering. After the
conversion, as a result of purchases in the offering and the shares they will receive in exchange
for shares of Oritani-Federal that they currently own, our directors and executive officers,
together with their associates, are expected to beneficially own approximately 2.1 million and 2.8
million shares of common stock, or 4.8% and 4.7% of our total outstanding shares of common stock,
at the minimum and the maximum of the offering range, respectively.
Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion
Employee Stock Ownership Plan. Our tax-qualified employee stock ownership plan may purchase
up to 4.0% of the shares of common stock we sell in the offering, or 2,063,100 shares of common
stock, assuming we sell the maximum, as adjusted, number of shares proposed to be sold which, when
combined with the existing employee stock ownership plan, will be less than 8% of the shares
outstanding following the conversion. If we receive orders for more shares of common stock than
the maximum of the offering range, the employee stock ownership plan will have first priority to
purchase shares over this maximum, up to a total of 4.0% of the shares of common stock sold in the
offering. We reserve the right to purchase shares of common stock in the open market following the
offering in order to fund all or a portion of the employee stock ownership plan. Assuming the
employee stock ownership plan purchases 1,560,000 shares in the offering and the loan is repaid
over a 20 year period, at the midpoint of the offering range, we will recognize additional
compensation expense of approximately $780,000 annually (or approximately $476,000 after tax) over
a 20-year period, assuming the loan to the employee stock ownership plan has a 20-year term and an
interest rate equal to the prime rate as published in The Wall Street Journal, and the shares of
common stock have a fair market value of $10.00 per share for the full 20-year period. If, in the
future, the shares of common stock have a fair market value greater or less than $10.00, the
compensation expense will increase or decrease accordingly. We also reserve the right to have the
employee stock ownership plan purchase more than 4.0% of the shares of common stock sold in the
offering if necessary to complete the offering at the minimum of the offering range.
Stock-Based Incentive Plan. Our current intention is to implement a new stock-based incentive
plan no earlier than twelve months after completion of the conversion. Stockholder approval of
this plan will be required. If implemented 12 months or more following completion of the
conversion, the stock-based incentive plan will reserve a number of shares equal to 4.0% of the
shares of common stock sold in the offering, or 2,063,100 shares of common stock at the maximum, as
adjusted of the offering range, for awards of restricted stock to key employees and directors, at
no cost to the recipients. If the shares of restricted stock awarded under the stock-based
incentive plan come from authorized but unissued shares of common stock, stockholders would
experience dilution of up to approximately 2.89% in their ownership interest in Oritani-Delaware.
If implemented 12 months or more following the completion of the conversion, the stock-based
incentive plan will also reserve a number of shares equal to 10.0% of the shares of common stock
sold in the offering, or 5,157,750 shares of common stock at the maximum as adjusted of the
offering range, for issuance pursuant to grants of stock options to key employees and directors.
For a description of our current stock-based incentive plan, see ManagementCompensation
Discussion and Analysis.
13
The following table summarizes the number of shares of common stock and the aggregate dollar
value of grants that are expected under the new stock-based incentive plan as a result of the
conversion. The table also shows the dilution to stockholders if all such shares are issued from
authorized but unissued shares, instead of shares purchased in the open market. A portion of the
stock grants shown in the table below may be made to non-management employees.
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Number of Shares to be Granted or Purchased (1) |
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|
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Dilution |
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|
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Resulting |
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Value of Grants (2) (3) |
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As a |
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From |
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(Dollars in thousands) |
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|
|
|
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At |
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Percentage |
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Issuance of |
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At |
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At |
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Maximum |
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of Common |
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Shares for |
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At |
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Maximum |
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Minimum of |
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as adjusted |
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Stock to be |
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|
Stock-Based |
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Minimum |
|
|
as adjusted |
|
|
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Offering |
|
|
of Offering |
|
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Sold in the |
|
|
Incentive |
|
|
of Offering |
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|
of Offering |
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Range |
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Range |
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Offering |
|
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Plans (4) |
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Range |
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|
Range |
|
Employee stock ownership plan |
|
|
1,326,000 |
|
|
|
2,063,100 |
|
|
|
4.0 |
% |
|
|
|
% |
|
$ |
13,260 |
|
|
$ |
20,631 |
|
Restricted stock awards |
|
|
1,326,000 |
|
|
|
2,063,100 |
(1) |
|
|
4.0 |
|
|
|
2.89 |
|
|
|
13,260 |
|
|
|
20,631 |
|
Stock options |
|
|
3,315,000 |
|
|
|
5,157,750 |
(2) |
|
|
10.0 |
|
|
|
6.93 |
|
|
|
11,370 |
|
|
|
17,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total |
|
|
5,967,000 |
|
|
|
9,283,950 |
|
|
|
18.0 |
% |
|
|
9.44 |
% |
|
$ |
37,890 |
|
|
$ |
58,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
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(1) |
|
The table assumes that the stock-based incentive plan is implemented twelve months or more
following the completion of the conversion and offering. If implemented within 12 months of
the completion of the conversion, the number of shares that may be reserved for grants of
restricted stock cannot exceed 4% of the total number of shares to be outstanding upon
completion of the conversion, less the number of shares of restricted stock (adjusted for the
exchange ratio) reserved under previously adopted benefit plans. |
|
(2) |
|
The table assumes that the stock-based incentive plan is implemented twelve months or more
following the completion of the conversion and offering. If implemented within 12 months of
the completion of the conversion, the number of shares that may be reserved for grants of
stock options cannot exceed 10% of the total number of shares to be outstanding upon
completion of the conversion, less the number of option shares (adjusted for the exchange
ratio) reserved under previously adopted benefit plans. |
|
(3) |
|
The actual value of restricted stock awards will be determined based on their fair value as
of the date grants are made. For purposes of this table, fair value for stock awards is
assumed to be the same as the offering price of $10.00 per share. The fair value of stock
options has been estimated at $3.43 per option using the Black-Scholes option pricing model
with the following assumptions: a grant-date share price and option exercise price of $10.00;
an expected option life of ten years; a dividend yield of 3.0%; an interest rate of 3.85%; and
a volatility rate of 36.45% based on an index of publicly traded thrift institutions. The
actual value of option grants will be determined by the grant-date fair value of the options,
which will depend on a number of factors, including the valuation assumptions used in the
option pricing model ultimately adopted. |
|
(4) |
|
Represents the dilution of stock ownership interest. No dilution is reflected for the
employee stock ownership plan because such shares are assumed to be purchased in the offering. |
We may fund our plans through open market purchases, as opposed to new issuances of
common stock; however, if any options previously granted under our existing stock option plans are
exercised during the first year following completion of the offering, they will be funded with
newly-issued shares as Office of Thrift Supervision (the OTS) regulations do not permit us to
repurchase our shares during the first year following the completion of this offering except to
fund the grants of restricted stock under the stock-based incentive plan or, with prior regulatory
approval, under extraordinary circumstances. The OTS has previously advised that the exercise of
outstanding options and cancellation of treasury shares in the conversion will not constitute an
extraordinary circumstance or a compelling business purpose for satisfying this test.
14
The following table presents information as of December 31, 2009 regarding our existing
employee stock ownership plan, our existing stock option plans, our existing recognition and
retention plan, our proposed employee stock ownership plan purchases and our proposed stock-based
incentive plan, all assuming an exchange ratio of 1.6264. The table below assumes that 60,245,458
shares are outstanding after the offering, which includes the sale of 44,850,000 shares in the
offering at the maximum of the offering range, and the issuance of 15,395,458 shares in exchange
for shares of Oritani-Federal using an exchange ratio of 1.6264. It also assumes that the value of
the stock is $10.00 per share.
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|
|
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|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
Existing and New Stock-Based |
|
|
|
|
|
|
|
Estimated Value of |
|
|
After the |
|
Incentive Plans |
|
Participants |
|
Shares |
|
|
Shares |
|
|
Conversion |
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
Existing employee stock ownership plan |
|
Employees |
|
|
2,585,397 |
(1) |
|
$ |
25,854 |
|
|
|
4.29 |
% |
New employee stock ownership plan |
|
Employees |
|
|
1,794,000 |
|
|
|
17,940 |
|
|
|
2.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Total employee stock ownership plan |
|
Employees |
|
|
4,379,397 |
|
|
|
43,794 |
|
|
|
7.27 |
% |
Existing shares of restricted stock |
|
Directors, Officers and Employees |
|
|
1,292,700 |
(2) |
|
|
12,927 |
(3) |
|
|
2.15 |
% |
New shares of restricted stock |
|
Directors, Officers and Employees |
|
|
1,794,000 |
|
|
|
17,940 |
|
|
|
2.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Total shares of restricted stock |
|
Directors, Officers and Employees |
|
|
3,086,700 |
|
|
|
30,867 |
|
|
|
5.13 |
% |
Existing stock options |
|
Directors, Officers and Employees |
|
|
3,231,746 |
(4) |
|
|
11,117 |
|
|
|
5.36 |
% |
New stock options |
|
Directors, Officers and Employees |
|
|
4,485,000 |
|
|
|
15,384 |
(5) |
|
|
7.44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Total stock options |
|
Directors, Officers and Employees |
|
|
7,716,746 |
|
|
|
26,501 |
|
|
|
12.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Total of stock-based incentive plans |
|
|
|
|
15,182,843 |
(6) |
|
$ |
101,162 |
|
|
|
25.20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of December 31, 2009, Oritani-Federals existing employee stock ownership plan held
1,588,649 shares, 237,451 of which have been allocated. |
|
(2) |
|
Represents shares of restricted stock authorized for grant under our existing recognition and
retention plans. |
|
(3) |
|
The actual value of restricted stock awards will be determined based on their fair value as
of the date grants are made. For purposes of this table, fair value is assumed to be the same
as the offering price of $10.00 per share. |
|
(4) |
|
Represents shares authorized for grant under our existing stock option plans. |
|
(5) |
|
The value of stock options to be granted under the new stock-based incentive plan has been
estimated based on an index of publicly traded thrift institutions at $3.43 per option using
the Black-Scholes option pricing model with the following assumptions; exercise price, $10.00;
trading price on date of grant, $10.00; dividend yield, 3.0%; expected life, ten years;
expected volatility, 36.45%; and interest rate, 3.85%. |
|
(6) |
|
The number of shares of restricted stock and stock options set forth in the table would
exceed regulatory limits if a stock-based incentive plan was adopted within one year of the
completion of the conversion and offering. Accordingly, the number of new shares of
restricted stock and stock options set forth in the table would have to be reduced such that
the aggregate amount of outstanding stock awards would be 4.0% or less and outstanding stock
options would be 10.0% or less, unless we obtain a waiver from the OTS, or we implement the
incentive plan after twelve months following the completion of the conversion and offering.
Our current intention is to implement a new stock-based incentive plan no earlier than twelve
months after completion of the conversion and offering. |
The value of the restricted shares awarded under the stock-based incentive plan will be
based on the market value of our common stock at the time the shares are awarded. The stock-based
incentive plan is subject to stockholder approval, and cannot be implemented until at least six
months after completion of the offering. The following table presents the total value of all
shares of restricted stock that would be available for award and issuance under the new stock-based
incentive plan, assuming the new stock-based incentive plan is adopted more than one year after
completion of the conversion, the shares are awarded when the market price of our common stock
ranges from $8.00 per share to $14.00 per share.
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,362,000 Shares |
|
|
1,560,000 Shares |
|
|
1,794,000 Shares |
|
|
2,063,100 Shares |
|
|
|
|
Awarded at Minimum of |
|
|
Awarded at Maximum of |
|
|
Awarded at Maximum of |
|
|
Awarded at Maximum of |
|
|
Share Price |
|
Range |
|
|
Range |
|
|
Range |
|
|
Range, As Adjusted |
|
(Dollars in thousands, except per share data) |
|
$ |
8.00 |
|
$ |
10,608 |
|
|
$ |
12,480 |
|
|
$ |
14,352 |
|
|
$ |
16,505 |
|
|
10.00 |
|
|
13,260 |
|
|
|
15,600 |
|
|
|
17,940 |
|
|
|
20,631 |
|
|
12.00 |
|
|
15,912 |
|
|
|
18,720 |
|
|
|
21,528 |
|
|
|
24,757 |
|
|
14.00 |
|
|
18,564 |
|
|
|
21,840 |
|
|
|
25,116 |
|
|
|
28,883 |
|
The grant-date fair value of the options granted under the new stock-based incentive plan
will be based in part on the price of shares of common stock of Oritani-Delaware at the time the
options are granted. The value will also depend on the various assumptions used in the option
pricing model ultimately adopted. The following table presents the total estimated value of the
options to be available for grant under the stock-based incentive plan, assuming the new
stock-based incentive plan is adopted more than one year after completion of the conversion, the
market price and exercise price for the stock options are equal and the range of market prices for
the shares is $8.00 per share to $14.00 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,315,000 Options |
|
|
3,900,000 Options |
|
|
4,485,000 Options |
|
|
5,157,750 Options |
|
|
|
|
Grant-Date Fair |
|
|
at Minimum of |
|
|
at Midpoint of |
|
|
at Maximum of |
|
|
at Maximum of |
|
|
Exercise Price |
|
Value Per Option |
|
|
Range |
|
|
Range |
|
|
Range |
|
|
Range, As Adjusted |
|
|
(Dollars in thousands, except per share data) |
|
$ |
8.00 |
|
$ |
2.74 |
|
|
$ |
9,083 |
|
|
$ |
10,686 |
|
|
$ |
12,289 |
|
|
$ |
14,132 |
|
|
10.00 |
|
|
3.43 |
|
|
|
11,370 |
|
|
|
13,377 |
|
|
|
15,384 |
|
|
|
17,691 |
|
|
12.00 |
|
|
4.12 |
|
|
|
13,658 |
|
|
|
16,068 |
|
|
|
18,478 |
|
|
|
21,250 |
|
|
14.00 |
|
|
4.80 |
|
|
|
15,912 |
|
|
|
18,720 |
|
|
|
21,528 |
|
|
|
24,757 |
|
The tables presented above are provided for informational purposes only. Our shares of
common stock may trade below $10.00 per share. Before you make an investment decision, we urge you
to read this entire prospectus carefully, including, but not limited to, the section entitled Risk
Factors beginning on page 23.
Steps We May Take if We Do Not Receive Orders for the Minimum Number of Shares
If we do not receive orders for at least 33,150,000 shares of common stock in the
subscription, community and/or syndicated community offering, we may take several steps in order to
issue the minimum number of shares of common stock in the offering range. Specifically, we may:
|
|
|
increase the purchase and ownership limitations; and/or |
|
|
|
|
seek regulatory approval to extend the offering beyond July 24, 2010,
provided that any such extension will require us to resolicit subscriptions received in
the offering. |
Alternatively, we may terminate the offering, return funds with interest and cancel deposit account
withdrawal authorizations.
Conditions to Completion of the Conversion
The OTS has conditionally approved the Plan of Conversion and Reorganization; however, such
approval does not constitute recommendations or endorsements of the Plan of Conversion and
Reorganization by that agency.
16
We cannot complete the conversion unless:
|
|
|
The Plan of Conversion and Reorganization is approved by at least a
majority of votes eligible to be cast by members of Oritani Financial Corp., MHC
(depositors of Oritani Bank) as of April 30, 2010; |
|
|
|
|
The Plan of Conversion and Reorganization is approved by a vote of at
least two-thirds of the outstanding shares of common stock of Oritani-Federal as of May
5, 2010, including shares held by Oritani Financial Corp., MHC (because Oritani
Financial Corp., MHC owns 74.2% of the outstanding shares of Oritani-Federal common
stock, we expect that Oritani Financial Corp., MHC and our directors and executive
officers will control the outcome of this vote); |
|
|
|
|
The Plan of Conversion and Reorganization is approved by a vote of at
least a majority of the outstanding shares of common stock of Oritani-Federal as of May
5, 2010, excluding those shares held by Oritani Financial Corp., MHC; |
|
|
|
|
We sell at least the minimum number of shares of common stock offered; and |
|
|
|
|
We receive the final approval of the OTS to complete the conversion;
however, such approval does not constitute a recommendation or endorsement of the Plan
of Conversion and Reorganization by that agency. |
Oritani Financial Corp., MHC intends to vote its ownership interest in favor of the Plan of
Conversion and Reorganization. At May 5, 2010, Oritani Financial Corp., MHC owned 74.2% of the
outstanding shares of common stock of Oritani-Federal. The directors and executive officers of
Oritani-Federal and their affiliates beneficially owned approximately 1.6 million shares of
Oritani-Federal, or 4.3% of the outstanding shares of common stock as of May 5, 2010. They have
indicated their intention to vote those shares in favor of the Plan of Conversion and
Reorganization.
Market for the Common Stock
Shares of Oritani-Federals common stock currently trade on the Nasdaq Global Market under the
symbol ORIT. Upon completion of the conversion, the shares of common stock of Oritani-Delaware
will replace Oritani-Federals existing shares. We expect that Oritani-Delawares shares
of common stock will trade on the Nasdaq Global Market under the trading symbol ORITD for a
period of 20 trading days after the completion of the offering. Thereafter, Oritani-Delawares
trading symbol will revert to ORIT. In order to list our common stock on the Nasdaq Global
Market, we are required to have at least three broker-dealers who will make a market in our common
stock. Oritani-Federal currently has 28 registered market makers. Persons purchasing shares of
common stock in the offering may not be able to sell their shares at or above the $10.00 price per
share.
Tax Consequences
As a general matter, the conversion will not be a taxable transaction for federal or state
income tax purposes to Oritani Financial Corp., MHC, Oritani-Federal, Oritani Bank,
Oritani-Delaware, persons eligible to subscribe in the subscription offering, or existing
stockholders of Oritani-Federal. Existing stockholders of Oritani-Federal who receive cash in lieu
of fractional share interests in shares of Oritani-Delaware common stock will recognize a gain or
loss equal to the difference between the cash received and the tax basis of the fractional share.
17
Persons Who May Order Shares of Common Stock in the Subscription and Community Offerings
Subscription rights to purchase shares of common stock in a subscription offering have been
granted in the following descending order of priority:
|
(i) |
|
First, to depositors with accounts at Oritani Bank with aggregate balances of
at least $50.00 at the close of business on December 31, 2008. |
|
|
(ii) |
|
Second, to our tax-qualified employee benefit plans, including our employee
stock ownership plan and 401(k) plan, which will receive nontransferable subscription
rights to purchase in the aggregate up to 10.0% of the shares of common stock sold in
the offering. We expect our employee stock ownership plan to purchase up to 4.0% of
the shares of common stock sold in the offering. |
|
|
(iii) |
|
Third, to depositors with accounts at Oritani Bank with aggregate balances of
at least $50.00 at the close of business on March 31, 2010. |
|
|
(iv) |
|
Fourth, to depositors of Oritani Bank at the close of business on April 30,
2010. |
Shares of common stock not purchased in the subscription offering may be offered for sale in a
community offering with a preference given first to natural persons (including trusts of natural
persons) and then other persons (including any corporation, partnership, association, joint-stock
company, limited liability company, trust, unincorporated organization, or government or political
subdivision of a government) residing in the New Jersey counties of Bergen, Passaic, Sussex,
Hudson, Essex, Morris, Warren, Union, Somerset, Hunterdon, Middlesex and Mercer; then to eligible
borrowers of Oritani Bank with an outstanding loan or line of credit as of December 31, 2009 that
are meeting all of the terms and conditions of their loan agreements with Oritani Bank as of
December 31, 2009 and the date of purchase of the common stock (as determined solely in the
discretion of Oritani Bank); and then to Oritani-Federal public stockholders as of May 5, 2010.
The community offering, if held, may begin concurrently with, during or promptly after the
subscription offering, as we may determine at any time.
If we receive orders for more shares than we are offering, we may not be able to fully or
partially fill your order. Shares will be allocated first to categories in the subscription
offering in accordance with Oritani Financial Corp., MHCs Plan of Conversion and Reorganization.
A detailed description of share allocation procedures can be found in the section of this
prospectus entitled The Conversion and Offering.
We are also offering any shares of our common stock not purchased in the subscription offering
or community offering for sale to the general public in a syndicated community offering through a
syndicate of selected dealers. We may begin the syndicated community offering at any time following
the commencement of the subscription offering. Stifel, Nicolaus & Company, Incorporated is acting
as sole book-running manager and Sandler ONeill & Partners, L.P. and Sterne, Agee & Leach, Inc.
are acting as co-managers for the syndicated community offering, which is also being conducted on a
best efforts basis. The syndicated community offering will terminate no later than 45 days after
the expiration of the subscription offering, unless extended by us with approval of the OTS.
Neither Stifel, Nicolaus & Company, Incorporated nor any other member of the syndicate is required
to purchase any shares in the syndicated community offering. Alternatively, we may sell any
remaining shares in an underwritten public offering, which would be conducted on a firm commitment
basis. See The Conversion and OfferingSyndicated Community Offering.
18
Limits on How Much Common Stock You May Purchase
The minimum number of shares of common stock that may be purchased in the offering is 25.
The amount of shares of common stock that may be purchased by a person, or persons exercising
subscription rights through a single qualifying deposit account held jointly, is $500,000 (50,000
shares). If any of the following persons purchase shares of common stock, their purchases, in all
categories of the offering combined, when aggregated with your purchases, cannot exceed $1.0
million (100,000 shares) of common stock:
|
|
|
your spouse or relatives of you or your spouse living in your house; |
|
|
|
|
companies, trusts or other entities in which you are a trustee, have a
controlling beneficial interest or hold a senior position; or |
|
|
|
|
other persons who may be your associates or persons acting in concert with
you. |
Unless we determine otherwise, persons and persons exercising subscription rights through a
single qualifying deposit account held jointly will be subject to the overall purchase limitation
of $1.0 million (100,000 shares) of common stock in all categories of the offering combined.
In addition to the above purchase limitations, there is an ownership limitation for
Oritani-Federal stockholders other than our employee stock ownership plan. Shares of common stock
that you purchase in the offering individually and together with persons described above, plus any
shares you and they receive in exchange for existing shares of Oritani-Federal common stock, may
not exceed 5% of the total shares of common stock to be issued and outstanding after the completion
of the conversion and offering.
Subject to OTS approval, we may increase or decrease the purchase and ownership limitations at
any time. In the event that the maximum purchase limitation is increased to 5% of the shares sold
in the offering, such limitation may be further increased to 9.99%, provided that orders for shares
of common stock exceeding 5% of the shares sold in the offering shall not exceed in the aggregate
10.0% of the total shares sold in the offering.
See the detailed description of purchase limitations and definitions of acting in concert
and associate in The Conversion and OfferingAdditional Limitations on Common Stock Purchases.
How You May Purchase Shares of Common Stock
In the subscription and community offerings, you may pay for your shares only by:
|
(i) |
|
personal check, bank check or money order made payable directly to Oritani
Financial Corp.; or |
|
|
(ii) |
|
authorizing us to withdraw funds from the types of Oritani Bank deposit
accounts designated on the stock order form. |
Oritani Bank is not permitted to lend funds to anyone for the purpose of purchasing shares of
common stock in the offering. Additionally, you may not use an Oritani Bank line of credit check
or any type of third party check or wire transfer to pay for shares of common stock. Please do not
submit cash.
You may purchase shares of common stock in the offering by delivering a signed and completed
original stock order form, together with full payment payable to Oritani Financial Corp. or
authorization to withdraw funds from one or more of your Oritani Bank deposit accounts, provided
that the stock order
19
form is received before 2:00 p.m., Eastern Time, on June 9, 2010, which is the end of the
offering period. Checks and money orders will be immediately deposited in a segregated account with
Oritani Bank. We will pay interest calculated at Oritani Banks passbook savings rate from the
date funds are processed until completion of the conversion, at which time a subscriber will be
issued a check for interest earned. On your stock order form, you may not authorize direct
withdrawal from an Oritani Bank retirement account. If you wish to use funds in an individual or
other retirement account to purchase shares of our common stock, please see Using Retirement
Account Funds to Purchase Shares below. You also may not designate on your stock order form a
withdrawal from Oritani Bank accounts with check-writing privileges. Please provide a check
instead. If you request direct withdrawal, we reserve the right to interpret that as your
authorization to treat those funds as if we had received a check for the designated amount, and we
will immediately withdraw the amount from your checking account.
Withdrawals from certificates of deposit to purchase shares of common stock in the offering
may be made without incurring an early withdrawal penalty. If a withdrawal results in a
certificate of deposit account with a balance less than the applicable minimum balance requirement,
the certificate of deposit will be canceled at the time of withdrawal without penalty and the
remaining balance will earn interest at the current passbook savings rate subsequent to the
withdrawal. All funds authorized for withdrawal from deposit accounts at Oritani Bank must be
available in the accounts at the time the stock order is received. A hold will be placed on those
funds when your stock order is received, making the designated funds unavailable to you during the
offering period. Funds will not be withdrawn from an account until the completion of the
conversion and offering and will earn interest within the account at the applicable deposit account
rate until that time.
We are not required to accept copies or facsimiles of stock order forms. By signing the stock
order form, you are acknowledging both the receipt of this prospectus and that the shares of common
stock are not federally insured deposits or savings accounts or otherwise guaranteed by Oritani
Bank, Oritani-Delaware or the federal or state governments.
Submitting Your Order in the Subscription and Community Offerings
You may submit your stock order form by mail using the stock order reply envelope provided, by
overnight courier to the indicated address on the stock order form, or by hand-delivery to our
Stock Information Center, which is located at Oritani Banks main office, 370 Pascack Road,
Township of Washington, New Jersey. Stock order forms may not be delivered to other Oritani Bank
offices. Please do not mail your stock order forms to Oritani Bank. Once submitted, your order is
irrevocable unless the offering is terminated or extended beyond July 24, 2010, or the number of
shares of common stock to be sold is increased to more than 51,577,500 shares or decreased to fewer
than 33,150,000 shares.
Deadline for Orders of Common Stock in the Subscription or Community Offerings
If you wish to purchase shares of common stock, a properly completed and signed original stock
order form, together with full payment for the shares of common stock, must be received (not
postmarked) no later than 2:00 p.m., Eastern Time, on June 9, 2010.
Once submitted, your order is irrevocable unless the offering is terminated or extended or the
number of shares to be issued increases to more than 51,577,500 shares or decreases to less than
33,150,000 shares. We may extend the June 9, 2010 expiration date, without notice to you,
until July 24, 2010. If the offering is extended beyond July 24, 2010 or if the offering range is
increased or decreased, we will be required to resolicit purchasers before proceeding with the
offering. In either of these cases, purchasers will have the right to maintain, change or cancel
their orders. If we do not receive a written response from a purchaser regarding any
resolicitation, the purchasers order will be canceled and all
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funds received to purchase shares in the subscription offering and community offering will be
returned promptly with interest, and deposit account withdrawal authorizations will be canceled. No
extension may last longer than 90 days. All extensions, in the aggregate, may not last beyond June
18, 2012.
Although we will make reasonable attempts to provide this prospectus and offering materials to
holders of subscription rights, the subscription offering and all subscription rights will expire
at 2:00 p.m., Eastern Time, on June 9, 2010, whether or not we have been able to locate each person
entitled to subscription rights.
TO ENSURE THAT EACH PERSON RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE
EXPIRATION DATE OF THE OFFERING IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED ANY
LATER THAN FIVE DAYS PRIOR TO THE OFFERING EXPIRATION DATE OR HAND-DELIVERED ANY LATER THAN TWO
DAYS PRIOR TO THE OFFERING EXPIRATION DATE.
Using Retirement Account Funds to Purchase Shares
Persons interested in purchasing common stock using funds currently in an individual
retirement account (IRA) or any other retirement account, whether held through Oritani Bank or
elsewhere, should contact our Stock Information Center for guidance. Please contact the Stock
Information Center as soon as possible, preferably at least two weeks prior to the June 9, 2010
offering deadline, because processing such transactions takes additional time, and whether such
funds can be used may depend on limitations imposed by the institution where the funds are
currently held. Additionally, if such funds are not currently held in a self-directed retirement
account, then before placing your stock order, you will need to establish one with an independent
trustee or custodian, such as a brokerage firm. The new trustee or custodian will hold the shares
of common stock in a self-directed account in the same manner as we now hold retirement account
funds. An annual administrative fee may be payable to the new trustee or custodian. Assistance on
how to transfer such retirement accounts can be obtained from the Stock Information Center.
Oritani Bank cannot offer self-directed retirement accounts. If you wish to use some or all
of your funds that are currently held in an Oritani Bank IRA or other retirement account, you may
not designate on the stock order form that you wish funds to be withdrawn from the account(s) for
the purchase of common stock. Before you place your stock order, the funds you wish to use must be
transferred from those accounts to a self-directed retirement account at an independent trustee or
custodian, as described above.
Delivery of Stock Certificates
Certificates representing shares of common stock sold in the subscription and community
offerings will be mailed by first class mail to the persons entitled thereto at the certificate
registration address noted on the stock order form, as soon as practicable following consummation
of the offering and receipt of all necessary regulatory approvals as described above in
Conditions to Completion of the Conversion. It is possible that, until certificates for the
common stock are delivered, purchasers may not be able to sell the shares of common stock that they
ordered, even though the common stock will have begun trading. Your ability to sell shares of
common stock before you receive stock certificates will depend upon the arrangements you may make
with your brokerage firm. If you are currently a stockholder of Oritani-Federal, see The
Conversion and OfferingExchange of Existing Stockholders Stock Certificates.
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You May Not Sell or Transfer Your Subscription Rights
OTS regulations prohibit you from transferring your subscription rights. If you order shares
of common stock in the subscription offering, you will be required to state that you are purchasing
the common stock for yourself and that you have no agreement or understanding to sell or transfer
your subscription rights. We intend to take legal action, including reporting persons to federal
agencies, against anyone who we believe has sold or transferred his or her subscription rights. We
will not accept your order if we have reason to believe that you have sold or transferred your
subscription rights. On the stock order form, you may not add the names of others for joint stock
registration who do not have subscription rights or who qualify only in a lower subscription
offering priority than you do. You may add only those who were eligible to purchase shares of
common stock in the subscription offering at your date of eligibility. In addition, the stock
order form requires that you list all deposit accounts, giving all names on each account and the
account number at the applicable eligibility date. Failure to provide this information, or
providing incomplete or incorrect information, may result in a loss of part or all of your share
allocation, in the event of an oversubscription.
How You Can Obtain Additional Information Stock Information Center
Our banking office personnel may not, by law, assist with investment-related questions about
the offering. If you have any questions regarding the conversion or offering, please call or visit
our Stock Information Center, located at Oritani Banks main office, 370 Pascack Road, Township of
Washington, New Jersey. The Stock Information Center is open Monday through Friday between 10:00
a.m. and 4:00 p.m., Eastern Time. The Stock Information Center will be closed weekends and bank
holidays. Other Oritani Bank offices will not have offering materials and will not accept stock
order forms or proxy cards. The Stock Information Centers toll-free telephone number is
1-877-615-0411.
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RISK FACTORS
You should consider carefully the following risk factors in evaluating an investment in the
shares of common stock.
Risks Related to Our Business
Our Continued Emphasis On Multi-Family And Commercial Real Estate Lending Could Expose Us To
Increased Lending Risks.
Our business strategy centers on continuing our emphasis on multi-family and commercial real
estate lending. We have grown our loan portfolio in recent years with respect to these types of
loans and intend to continue to emphasize these types of lending. At December 31, 2009, $296.3
million, or 21.4%, of our total loan portfolio consisted of multi-family loans and $628.5 million,
or 45.5%, of our total loan portfolio consisted of commercial real estate loans. As a result, our
credit risk profile will be higher than traditional thrift institutions that have higher
concentrations of one- to four-family residential loans. Loans secured by multi-family and
commercial real estate generally expose a lender to greater risk of non-payment and loss than one-
to four-family residential mortgage loans because repayment of the loans often depends on the
successful operation of the property and the income stream of the underlying property.
Additionally, such loans typically involve larger loan balances to single borrowers or groups of
related borrowers compared to one- to four-family residential mortgage loans. Accordingly, an
adverse development with respect to one loan or one credit relationship can expose us to greater
risk of loss compared to an adverse development with respect to a one- to four-family residential
mortgage loan. We seek to minimize these risks through our underwriting policies, which require
such loans to be qualified on the basis of the propertys collateral value, net income and debt
service ratio; however, there is no assurance that our underwriting policies will protect us from
credit-related losses. Finally, if we foreclose on multi-family and commercial real estate loans,
our holding period for the collateral typically is longer than one-to four- family residential
mortgage loans because there are fewer potential purchasers of the collateral. As discussed in
Business of Oritani Financial Corp., MHC, Oritani-Federal and Oritani BankLending Activities,
we have recently been utilizing stricter underwriting standards for these types of loans, and have
curtailed our construction lending.
The largest commercial real estate loan in our portfolio at December 31, 2009 was a $21.0
million loan secured by a shopping mall located in Ocean County, New Jersey. Our largest
commercial real estate relationship consisted of properties located mainly in our primary market
area with a real estate investor. The aggregate outstanding loan balance for this relationship is
$47.6 million.
If Our Allowance For Loan Losses Is Not Sufficient To Cover Actual Loan Losses, Our Earnings Will
Decrease.
We make various assumptions and judgments about the collectability of our loan portfolio,
including the creditworthiness of our borrowers and the value of the real estate and other assets
serving as collateral for the repayment of many of our loans. In determining the amount of the
allowance for loan losses, we review our loans and our loss and delinquency experience, and we
evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may
not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our
allowance. Our delinquent and nonaccrual loans have risen significantly over the past 24 months,
and this growth increases the possibility that our allowance for loan losses may be insufficient in
the future. In addition, the majority of our loan growth since June 30, 2005 has been in
commercial real estate loans. According to Real Estate Econometrics, a property research firm,
default rates on commercial loans climbed to a 16 year high during the quarter ended September 30,
2009. Real Estate Econometrics projects that the default rate will
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peak in 2011, before falling back. While our allowance for loan losses was 1.60% of total
loans at December 31, 2009, material additions to our allowance could materially decrease our net
income.
In addition, bank regulators periodically review our allowance for loan losses and may require
us to increase our provision for loan losses or recognize further loan charge-offs. Any increase
in our allowance for loan losses or loan charge-offs as required by these regulatory authorities
might have a material adverse effect on our financial condition and results of operations.
Future Changes In Interest Rates Could Reduce Our Profits.
Our ability to make a profit largely depends on our net interest income, which could be
negatively affected by changes in interest rates. Net interest income is the difference between:
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the interest expense we pay on our interest-bearing liabilities, such as
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In addition, changes in interest rates can affect the average life of loans and
mortgage-backed and related securities. A reduction in interest rates usually results in increased
prepayments of loans and mortgage-backed and related securities, as borrowers refinance their debt
in order to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we
may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the
original loans or securities. Increases in interest rates may decrease loan demand and/or make it
more difficult for borrowers to repay adjustable rate loans.
Changes in interest rates also affect the current market value of our interest-earning
securities portfolio. Generally, the value of securities moves inversely with changes in interest
rates. At December 31, 2009, the fair value of our securities and mortgage-backed securities
available for sale totaled $419.0 million. Unrealized net gains on these available for sale
securities totaled approximately $2.4 million, net of taxes, at December 31, 2009 and are reported
as a separate component of stockholders equity. Decreases in the fair value of securities
available for sale in future periods would have an adverse effect on stockholders equity.
In addition, many of our FHLB-NY advances are callable, often five years from the date of
issuance. To the extent the FHLB-NY calls all or a portion of these advances, we would need to
find another funding source, which might be more expensive to us than these advances.
We evaluate interest rate sensitivity by estimating the change in Oritani Banks net portfolio
value over a range of interest rate scenarios. Net portfolio value is the discounted present value
of expected cash flows from assets, liabilities and off-balance sheet contracts. At December 31,
2009, in the event of an immediate 200 basis point increase in interest rates, the model projects
that we would experience a $53.6 million, or 20.9%, decrease in net portfolio value. See
Managements Discussion and Analysis of Financial Condition and Results of OperationsManagement
of Market Risk.
Our Direct Investments In Real Estate May Be Riskier Than More Traditional Real Estate Loans.
Oritani-Federal and Oritani Bank each have formed companies that have invested directly in
real estate. While these investments have provided us net income during the course of these
investments, they are direct investments and represent a greater risk than loans. With loans, the
borrower has an investment
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interest in the property that partially insulates the loan from the negative consequences of
decreases in the propertys value. There is no such protection with a direct real estate
investment. Any decline in performance of these investments may have an adverse effect on our net
income. As detailed in Business of Oritani Financial Corp., MHC, Oritani-Federal and Oritani
Bank-Subsidiary Activities and Joint Venture Information, we have increased our investments in
these types of assets.
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. Housing market conditions in the New York metro area,
where most of our lending activity occurs, have deteriorated as evidenced by reduced levels of
sales, increasing inventories of houses on the market, declining house prices and an increase in
the length of time houses remain on the market. The S&P/Case-Shiller Home Price Indices, the
leading measure of U.S. home prices, showed that the price of existing single family homes in the
New York metro area at June 30, 2009, suffered a 12.0% decline versus the prior year. RealtyTrac,
a leading online marketplace for foreclosure properties, noted in its 2008 U.S. Foreclosure Market
Report, that New Jersey foreclosures in 2008 had increased 101.2% from 2007, and that the overall
foreclosure rate in New Jersey for 2008 was 1.80%. Foreclosure filings in New Jersey in the first
six months of 2009, increased 31.6% compared to the first half of 2008. Weakening economic
conditions in the residential and commercial real estate sector have adversely affected, and may
continue to adversely affect, our loan portfolio. Total non-performing assets increased from $44.1
million at December 31, 2008 to $52.5 million at December 31, 2009. Total non-performing loans as
a percentage of total assets decreased to 2.59% at December 31, 2009 as compared to 2.66% at
December 31, 2008. If loans that are currently non-performing further deteriorate or loans that
are currently performing become non-performing loans, we may need to increase our allowance for
loan losses, which would have an adverse impact on our financial condition and results of
operations. We would have recognized an additional $2.1 million and $3.6 million in interest
income during the six months ended December 31, 2009 and year ended June 30, 2009, respectively,
had non-performing loans performed in accordance with the original terms.
Our Deposit Growth Has Been A Primary Funding Source. If Deposit Growth Slows, It May Be More
Expensive For Us To Fund Loan Originations.
We have recently experienced a period of unprecedented deposit growth, with a 61.3% increase
in deposit balances from June 30, 2008 to June 30, 2009, and annualized growth for the six month
period ended December 31, 2009 of 14.7%. Management believes a portion of this growth was due to
external factors, as funds were withdrawn from the stock market and deposited into investment
options considered safe by the investors, such as Oritani Bank. Such depositors may choose to
redeploy these funds in the stock market at a future date, regardless of our efforts. If this
occurs, it would hamper our ability to grow deposits and could even result in a net outflow of
deposits. In addition, the increase in deposit insurance limits also may have contributed to our
deposit growth and we could experience a net outflow of deposits
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of such deposit insurance limits were reduced. We will continue to focus on deposit growth, which
we use to fund loan originations and purchase investment securities. However, if we are unable to
continue to sufficiently increase our deposit balances, we may be required to utilize alternative
sources of funding, including Federal Home Loan Bank (FHLB) advances, or increase our deposit
rates, each of which will increase our cost of funds.
Any Future Federal Deposit Insurance Corporation Insurance Premiums Or Special Assessments Will
Adversely Impact Our Earnings.
On May 22, 2009, the FDIC adopted a final rule levying a five basis point special assessment
on each insured depository institutions assets minus Tier 1 capital as of June 30, 2009. We
recorded an expense of $846,000 during the quarter ended June 30, 2009, to reflect the special
assessment. Any further special assessments that the FDIC levies will be recorded as an expense
during the appropriate period. In addition, the FDIC increased the general assessment rate and,
therefore, our FDIC general insurance premium expense will increase compared to prior periods.
The FDIC also issued a final rule pursuant to which all insured depository institutions were
required to prepay on December 30, 2009 their estimated assessments for the fourth quarter of 2009,
and for all of 2010, 2011 and 2012. The assessment rate for the fourth quarter of 2009 and for
2010 was based on each institutions total base assessment rate for the third quarter of 2009,
modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for
the entire third quarter, and the assessment rate for 2011 and 2012 would be equal to the modified
third quarter assessment rate plus an additional three basis points. In addition, each
institutions base assessment rate for each period was calculated using its third quarter
assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base
through the end of 2012. We made a payment of $7.6 million to the FDIC on December 30, 2009, and
recorded the payment as a prepaid expense, which will be amortized to expense over three years.
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 (the 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-NYs advance program. The aggregate cost and fair value of
our FHLB-NY common stock as of December 31, 2009 was $25.5 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 asset quality-related risks that could result in materially lower
regulatory capital levels. In an extreme situation, it is possible that the capitalization of a
FHLB, 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.
Our Inability To Achieve Profitability On New Branches May Negatively Affect Our Earnings.
We have expanded our presence throughout our market area and we intend to pursue further
expansion through de novo branching. The profitability of our expansion strategy will depend on
whether the income that we generate from the new branches will offset the increased expenses
resulting from operating these branches. We expect that it may take a period of time before these
branches can become
26
profitable, especially in areas in which we do not have an established presence. During this
period, the expense of operating these branches may negatively affect our net income.
Strong Competition Within Our Market Area May Limit Our Growth and Profitability.
Competition in the banking and financial services industry is intense. In our market area, we
compete with numerous commercial banks, savings institutions, mortgage brokerage firms, credit
unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking
firms operating locally and elsewhere. Some of our competitors have substantially greater resources
and lending limits than we have, have greater name recognition and market presence that benefit
them in attracting business, and offer certain services that we do not or cannot provide. In
addition, larger competitors may be able to price loans and deposits more aggressively than we do.
Our profitability depends upon our continued ability to successfully compete in our market area.
The greater resources and deposit and loan products offered by some of our competitors may limit
our ability to increase our interest-earning assets.
We Operate In A Highly Regulated Industry, Which Limits the Manner And Scope Of Our Business
Activities.
We are subject to extensive supervision, regulation and examination by the New Jersey
Department of Banking and Insurance and by the FDIC. As a result, we are limited in the manner in
which we conduct our business, undertake new investments and activities and obtain financing. This
regulatory structure is designed primarily for the protection of the FDICs Deposit Insurance Fund
(the DIF) and our depositors, and not to benefit our stockholders. This regulatory structure
also gives the regulatory authorities extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with respect to capital levels,
the timing and amount of dividend payments, the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. In addition, we must comply with significant
anti-money laundering and anti-terrorism laws. Government agencies have substantial discretion to
impose significant monetary penalties on institutions which fail to comply with these laws.
A Legislative Proposal Has Passed the House of Representatives That Would Require Oritani-Delaware
To Become A Bank Holding Company.
Legislation has passed the House of Representatives that would implement sweeping changes to
the current bank regulatory structure. The proposal would, among other things, merge the OTS into
the Office of the Comptroller of the Currency. As discussed further under Supervision and
RegulationHolding Company Regulation, federal law allows a state savings bank that qualifies as
a Qualified Thrift Lender, such as Oritani Bank, to elect to be treated as a savings association
for purposes of the savings and loan holding company provisions of the Home Owners Loan Act of
1933, as amended (HOLA). Such election results in the state savings banks holding company being
regulated as a savings and loan holding company by the OTS rather than as a bank holding company
regulated by the Board of Governors of the Federal Reserve System. Under the House bill,
Oritani-Delaware would become a bank holding company subject to regulation and supervision under
the Bank Holding Company Act of 1956, as amended, and the supervision and regulation of the Board
of Governors of the Federal Reserve System, including holding company regulatory capital
requirements to which Oritani-Federal is not currently subject. Legislation has also been proposed
in the U.S. Senate, which would eliminate the OTS and result in Oritani-Delaware being regulated by
the FDIC. See Supervision and Regulation-Proposed Federal Legislation. Such regulatory changes
could impact our ability to continue our real estate investments and joint ventures.
27
Risks Related to the Offering
The Future Price Of The Shares of Common Stock May Be Less Than The $10.00 Purchase Price Per Share
In The Offering.
If you purchase shares of common stock in the offering, you may not be able to sell them later
at or above the $10.00 purchase price in the offering. In several cases, shares of common stock
issued by newly converted savings institutions or mutual holding companies have traded below the
initial offering price. The aggregate purchase price of the shares of common stock sold in the
offering will be based on an independent appraisal. The independent appraisal is not intended, and
should not be construed, as a recommendation of any kind as to the advisability of purchasing
shares of common stock. The independent appraisal is based on certain estimates, assumptions and
projections, all of which are subject to change from time to time. After our shares begin trading,
the trading price of our common stock will be determined by the marketplace, and may be influenced
by many factors, including prevailing interest rates, the overall performance of the economy,
investor perceptions of Oritani-Delaware and the outlook for the financial services industry in
general. Price fluctuations may be unrelated to the operating performance of particular companies.
We Have Broad Discretion To Deploy Our Net Proceeds. Our Failure To Timely Or Effectively Deploy
The Net Proceeds May Have An Adverse Impact On Our Financial Performance And The Value Of Our
Common Stock.
Oritani-Delaware intends to contribute between $159.2 million and $215.7 million of the net
proceeds of the offering (or $248.4 million at the adjusted maximum of the offering range) to
Oritani Bank. Oritani-Delaware may use the remaining net proceeds to invest in short-term
investments (which generally have low interest rates), to repurchase shares of common stock, to pay
dividends or for other general corporate purposes. Oritani-Delaware also expects to use a portion
of the net proceeds it retains to fund a loan for the purchase of shares of common stock in the
offering by the employee stock ownership plan. Oritani Bank may use the net proceeds it receives
to fund new loans, to purchase investment securities, to acquire financial institutions or
financial services companies, build or acquire new branches, or for other general corporate
purposes. With the exception of the loan to the employee stock ownership plan and some of our
branching initiatives, we have not allocated specific amounts of the net proceeds for any of these
purposes, and we will have significant flexibility in determining the amount of the net proceeds we
apply to different uses and the timing of such applications. We have not established a timetable
for reinvesting of the net proceeds, and we cannot predict how long we will require to reinvest the
net proceeds.
Our Return On Equity Initially Will Be Low Compared To Our Historical Performance. A Lower Return
On Equity May Negatively Impact The Trading Price Of Our Common Stock.
Net income divided by average stockholders equity, known as return on average equity is a
ratio many investors use to compare the performance of a financial institution to its peers. Our
return on average equity ratio of 6.08% for the six months ended December 31, 2009, compared to an
average negative return on equity of 0.57% based on trailing twelve-month earnings for all publicly
traded fully converted savings institutions as of February 19, 2010. Although we expect that our
net income will increase following the offering, we expect that our return on average equity will
decrease as a result of the additional capital that we will raise in the offering. For example,
our pro forma return on equity for the six months ended December 31, 2009 is 2.50%, assuming the
sale of shares at the maximum of the offering range. Over time, we intend to use the net proceeds
from the offering to increase earnings per share and book value per share, without assuming undue
risk, with the goal of achieving a return on equity that is comparable to our historical
performance. This goal may take a number of years to achieve,
28
and we cannot assure you that we will be able to achieve it. Consequently, you should not
expect a return on equity similar to our current return on equity in the near future. Failure to
achieve a competitive return on equity may make an investment in our common stock unattractive to
some investors and may cause our common stock to trade at lower prices than comparable companies
with higher returns on equity. See Pro Forma Data for an illustration of the financial impact of
the offering.
The Ownership Interest Of Management And Employees Could Enable Insiders To Prevent A Merger That
May Provide Stockholders A Premium For Their Shares.
The shares of common stock that our directors and officers intend to purchase in the offering,
when combined with the shares that they will receive in the exchange for their existing shares of
Oritani-Federal common stock are expected to result in management and the Board of Directors
controlling approximately 4.1% of our outstanding shares of common stock at the midpoint of the
offering range. In addition, our employee stock ownership plan is expected to purchase up to 4.0%
of the shares of common stock sold in the stock offering, and additional stock options and shares
of common stock would be granted to our directors and employees if a stock-based incentive plan is
adopted in the future. This would result in management and employees controlling a significant
percentage of our shares of common stock. If these individuals were to act together, they could
have significant influence over the outcome of any stockholder vote. This voting power may
discourage a potential sale of Oritani-Delaware that our stockholders may desire.
The Implementation Of The Stock-Based Incentive Plan May Dilute Your Ownership Interest.
We intend to adopt a new stock-based incentive plan following the offering, subject to receipt
of stockholder approval. This stock-based incentive plan may be funded either through open market
purchases or from the issuance of authorized but unissued shares of common stock of
Oritani-Delaware. While our intention is to fund this plan through open market purchases,
stockholders would experience an 8.15% reduction in ownership interest at the adjusted maximum of
the offering range in the event newly issued shares of our common stock are used to fund stock
options or shares of restricted common stock under the plan in an amount equal to up to 10.0% and
4.0%, respectively, of the shares sold in the offering. In the event we adopt the plan within
twelve months following the conversion, shares of common stock reserved for issuance pursuant to
awards of restricted stock and grants of options under the stock-based incentive plan would be
limited to 4.0% and 10.0%, respectively, of the total shares to be outstanding upon completion of
the conversion, less the number of shares of common stock reserved for stock awards and stock
options (adjusted by the exchange ratio) received under previously adopted benefit plans. In the
event we adopt the plan more than one year following the conversion, the plan will not be subject
to these limitations. Our current intention is to implement a new stock-based incentive plan no
earlier than twelve months after completion of the conversion and offering.
Although the implementation of the stock-based benefit plan will be subject to stockholder
approval, historically, the overwhelming majority of stock-based benefit plans adopted by savings
institutions and their holding companies following mutual-to-stock conversions have been approved
by stockholders.
Additional Expenses Following The Conversion From The Compensation And Benefit Expenses Associated
With The Implementation Of The New Stock-Based Incentive Benefit Plan Will Adversely Affect Our
Profitability.
We intend to adopt a new stock-based incentive plan after the offering, subject to stockholder
approval, pursuant to which plan participants would be awarded restricted shares of our common
stock (at no cost to them) and options to purchase shares of our common stock. If the stock-based
incentive plan is
29
implemented within twelve months of the completion of the offering, the number of shares of
common stock reserved for issuance for awards of restricted stock or grants of options under such
stock-based incentive plan may not exceed 4.0% and 10.0%, respectively, of the total shares to be
outstanding upon completion of the conversion, less the number of shares of common stock reserved
for stock awards and stock option (adjusted by the exchange ratio) received under previously
adopted benefit plans. If we award restricted shares of common stock or grant options in excess of
these amounts under a stock-based incentive plan adopted more than one year after the completion of
the offering, our costs would increase further. Our current intention is to implement a new
stock-based incentive plan no earlier than twelve months after completion of the offering.
Following the offering, our non-interest expenses are likely to increase as we will recognize
additional annual employee compensation and benefit expenses related to the shares granted to
employees and executives under our stock-based incentive plan. We cannot predict the actual amount
of these new stock-related compensation and benefit expenses because applicable accounting
practices require that expenses be based on the fair market value of the shares of common stock at
specific points in the future; however, we expect them to be material. In addition, we would
recognize expense for our employee stock ownership plan when shares are committed to be released to
participants accounts (i.e., as the loan used to acquire these shares is repaid), and we would
recognize expense for restricted stock awards and stock options over the vesting period of awards
made to recipients. The expense in the first year following the issuance of such shares has been
estimated to be approximately $8.7 million ($6.0 million after tax) at the adjusted maximum of the
offering range as set forth in the pro forma financial information under Pro Forma Data, assuming
the $10.00 per share purchase price as fair market value. Our current intention is to implement a
new stock-based incentive plan no earlier than twelve months after completion of the offering.
Actual expenses, however, may be higher or lower, depending on the price of our common stock. In
addition, all stock options and stock awards currently outstanding will vest upon completion of the
conversion. We anticipate the pre-tax expense of such accelerated vesting as well as the
accelerated vesting for outstanding stock awards will be approximately $11.3 million, with such
expense to be incurred during the fiscal quarter in which the stock offering is completed. For
further discussion of our proposed stock-based plans, see ManagementCompensation Discussion and
Analysis.
Stock-Based Incentive Plans Implemented Twelve Months Following The Stock Offering May Exceed
Regulatory Restrictions On The Size Of Stock-Based Incentive Plans.
If we implement stock-based incentive plans within twelve months following the completion of
the stock offering, then we may reserve shares of common stock for awards of restricted stock or
grants of stock options under our stock-based incentive plans for up to 4.0% and 10.0%,
respectively, of the shares of stock to be outstanding upon completion of the stock offering, less
the number of shares of restricted stock and option shares (adjusted for the exchange ratio)
reserved under previously adopted benefit plans. The amount of stock awards and stock options
available for grant under the stock-based incentive plans may exceed these amounts, provided the
stock-based incentive plans are implemented twelve months or more following the stock offering.
Although the implementation of the stock-based benefit plan will be subject to stockholder
approval, the determination as to the timing of the implementation of such a plan will be at the
discretion of our Board of Directors. Stock-based incentive plans that provide for awards in excess
of these amounts would increase our costs beyond the amounts estimated in Additional Expenses
Following The Conversion From The Compensation And Benefit Expenses Associated With The
Implementation Of The New Stock-Based Incentive Benefit Plan Will Adversely Affect Our
Profitability. Stock-based incentive plans that provide for awards in excess of these amounts
could also result in dilution to stockholders in excess of that described in The Implementation
Of The Stock-Based Incentive Plan May Dilute Your Ownership Interest. Our current intention is to
implement a new stock-based incentive plan no earlier than twelve months after the completion of
the conversion.
30
Proforma data is presented herein assumes the reservation of 4% and 10% of the outstanding shares
of common stock upon completion of the stock offering for awards of estimated stock or grants of
stock options, respectively, and the expenses associated with such amounts.
Various Factors May Make Takeover Attempts More Difficult To Achieve.
Our Board of Directors has no current intention to sell control of Oritani-Delaware.
Provisions of our certificate of incorporation and bylaws, federal regulations, Delaware law and
various other factors may make it more difficult for companies or persons to acquire control of
Oritani-Delaware without the consent of our Board of Directors. You may want a takeover attempt to
succeed because, for example, a potential acquirer could offer a premium over the then prevailing
price of our common stock. The factors that may discourage takeover attempts or make them more
difficult include:
|
|
|
Office of Thrift Supervision Regulations. OTS regulations prohibit, for
three years following the completion of a conversion, the direct or indirect
acquisition of more than 10.0% of any class of equity security of a savings institution
or holding company regulated by the OTS regulated holding company of a converted
institution without the prior approval of the OTS. |
|
|
|
|
Certificate of incorporation and statutory provisions. Provisions of the
certificate of incorporation and bylaws of Oritani-Delaware and Delaware law may make
it more difficult and expensive to pursue a takeover attempt that management opposes,
even if the takeover is favored by a majority of our stockholders. These provisions
also would make it more difficult to remove our current Board of Directors or
management, or to elect new directors. Additional provisions include limitations on
voting rights of beneficial owners of more than 10.0% of our common stock, the election
of directors to staggered terms of three years and not permitting cumulative voting in
the election of directors. Our bylaws also contain provisions regarding the timing and
content of stockholder proposals and nominations and qualification for service on the
Board of Directors. |
|
|
|
|
Issuance of stock options and restricted stock. We also intend to issue
stock options and shares of restricted stock to key employees and directors that will
require payments to these persons in the event of a change in control of
Oritani-Delaware. These payments may have the effect of increasing the costs of
acquiring Oritani-Delaware, thereby discouraging future takeover attempts. |
|
|
|
|
Employment agreements. Oritani-Federal has employment agreements with
each of its executive officers which will remain in effect following the stock
offering. These agreements may have the effect of increasing the costs of acquiring
Oritani-Delaware, thereby discouraging future takeover attempts. |
There May Be A Decrease In Stockholders Rights For Existing Stockholders Of Oritani-Federal.
As a result of the conversion, existing stockholders of Oritani-Federal will become
stockholders of Oritani-Delaware. Some rights of stockholders of Oritani-Delaware will be reduced
compared to the rights stockholders currently have in Oritani-Federal. The reduction in
stockholder rights results from differences between the federal and Delaware charters and bylaws,
and from distinctions between federal and Delaware law. Many of the differences in stockholder
rights under the certificate of incorporation and bylaws of Oritani-Delaware are not mandated by
Delaware law but have been chosen by management as being in the best interests of Oritani-Delaware
and its stockholders. The certificate of incorporation
31
and bylaws of Oritani-Delaware include the following provisions: (i) approval by at least a
majority of outstanding shares required to remove a director for cause; (ii) greater lead time
required for stockholders to submit proposals for new business or to nominate directors; and (iii)
approval by at least 80% of outstanding shares of capital stock entitled to vote generally is
required to amend the bylaws and certain provisions of the certificate of incorporation. See
Comparison of Stockholders Rights For Existing Stockholders of Oritani-Federal for a discussion
of these differences.
You May Not Revoke Your Decision To Purchase Oritani-Delaware Common Stock In The Subscription And
Community Offerings After You Send Us Your Subscription.
Funds submitted or automatic withdrawals authorized in the connection with a purchase of
shares of common stock in the subscription and community offerings will be held by us until the
completion or termination of the conversion and offering, including any extension of the expiration
date. Because completion of the conversion and offering will be subject to regulatory approvals
and an update of the independent appraisal prepared by RP Financial, LC., among other factors,
there may be one or more delays in the completion of the conversion and offering. Orders submitted
in the subscription and community offerings are irrevocable, and purchasers in the subscription and
community offerings will not have access to their funds unless the offering is terminated, or
extended beyond July 24, 2010, or the number of shares to be sold in the offering is increased to
more than 51,577,500 shares or decreased to less than 33,150,000 shares.
32
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The summary financial information presented below is derived in part from the consolidated
financial statements of Oritani-Federal and subsidiaries. The following is only a summary and you
should read it in conjunction with the consolidated financial statements and notes beginning on
page F-1. The information at June 30, 2009 and 2008 and for the years ended June 30, 2009, 2008
and 2007 is derived in part from the audited consolidated financial statements of Oritani-Federal
that appear in this prospectus. The operating data for the three months and six months ended
December 31, 2009 and 2008 and the financial condition data at December 31, 2009 were not audited.
However, in the opinion of management of Oritani-Federal, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the results of operations for the
unaudited periods have been made. No adjustments were made other than normal recurring entries.
The results of operations for the three months and six months ended December 31, 2009 are not
necessarily indicative of the results of operations that may be expected for the entire year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December |
|
|
June 30, |
|
|
|
31, 2009 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Selected Financial Condition Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,006,874 |
|
|
$ |
1,913,521 |
|
|
$ |
1,443,294 |
|
|
$ |
1,194,443 |
|
|
$ |
1,031,421 |
|
|
$ |
1,051,702 |
|
Loans, net |
|
|
1,357,157 |
|
|
|
1,278,623 |
|
|
|
1,007,077 |
|
|
|
758,542 |
|
|
|
643,064 |
|
|
|
493,554 |
|
Securities available for sale, at market value |
|
320,439 |
|
|
|
144,419 |
|
|
|
22,285 |
|
|
|
35,443 |
|
|
|
10,499 |
|
|
|
60,924 |
|
Securities held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,415 |
|
|
|
13,415 |
|
|
|
25,500 |
|
Mortgage-backed securities held to maturity |
|
|
86,182 |
|
|
|
118,817 |
|
|
|
163,950 |
|
|
|
217,406 |
|
|
|
274,695 |
|
|
|
372,104 |
|
Mortgage-backed securities available for sale, at market value |
|
|
98,513 |
|
|
|
128,603 |
|
|
|
149,209 |
|
|
|
38,793 |
|
|
|
17,426 |
|
|
|
25,659 |
|
Bank owned life insurance |
|
|
29,973 |
|
|
|
29,385 |
|
|
|
26,425 |
|
|
|
25,365 |
|
|
|
24,381 |
|
|
|
18,988 |
|
Federal Home Loan Bank of New York stock, at cost |
|
|
25,481 |
|
|
|
25,549 |
|
|
|
21,547 |
|
|
|
10,619 |
|
|
|
9,367 |
|
|
|
9,088 |
|
Accrued interest receivable |
|
|
8,786 |
|
|
|
7,967 |
|
|
|
5,646 |
|
|
|
4,973 |
|
|
|
3,910 |
|
|
|
3,405 |
|
Investments in real estate joint ventures, net |
|
|
5,836 |
|
|
|
5,767 |
|
|
|
5,564 |
|
|
|
6,200 |
|
|
|
6,233 |
|
|
|
5,438 |
|
Real estate held for investment |
|
|
1,222 |
|
|
|
1,338 |
|
|
|
3,681 |
|
|
|
2,492 |
|
|
|
2,223 |
|
|
|
1,425 |
|
Deposits |
|
|
1,210,507 |
|
|
|
1,127,630 |
|
|
|
698,932 |
|
|
|
695,757 |
|
|
|
688,646 |
|
|
|
702,980 |
|
Borrowings |
|
|
507,439 |
|
|
|
508,991 |
|
|
|
433,672 |
|
|
|
196,661 |
|
|
|
169,780 |
|
|
|
182,129 |
|
Stockholders equity |
|
|
247,950 |
|
|
|
240,098 |
|
|
|
278,975 |
|
|
|
272,570 |
|
|
|
150,135 |
|
|
|
141,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Dollars in thousands, except per share amounts) |
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
$ |
25,467 |
|
|
$ |
21,862 |
|
|
$ |
51,246 |
|
|
$ |
42,519 |
|
Total interest expense |
|
|
11,057 |
|
|
|
11,169 |
|
|
|
22,617 |
|
|
|
21,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
14,410 |
|
|
|
10,693 |
|
|
|
28,629 |
|
|
|
21,463 |
|
Provision for loan losses |
|
|
2,500 |
|
|
|
3,500 |
|
|
|
5,050 |
|
|
|
5,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses |
|
|
11,910 |
|
|
|
7,193 |
|
|
|
23,579 |
|
|
|
16,088 |
|
Other income |
|
|
1,067 |
|
|
|
(565 |
) |
|
|
3,613 |
|
|
|
668 |
|
Other expense |
|
|
8,166 |
|
|
|
6,542 |
|
|
|
14,994 |
|
|
|
12,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
4,811 |
|
|
|
86 |
|
|
|
12,198 |
|
|
|
4,340 |
|
Income tax expense |
|
|
1,882 |
|
|
|
47 |
|
|
|
4,786 |
|
|
|
1,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,929 |
|
|
$ |
39 |
|
|
$ |
7,412 |
|
|
$ |
2,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.08 |
|
|
$ |
0.00 |
|
|
$ |
0.20 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.08 |
|
|
$ |
0.00 |
|
|
$ |
0.20 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
88,429 |
|
|
$ |
71,591 |
|
|
$ |
63,349 |
|
|
$ |
51,276 |
|
|
$ |
46,439 |
|
Interest expense |
|
|
44,500 |
|
|
|
37,208 |
|
|
|
32,829 |
|
|
|
23,522 |
|
|
|
18,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
43,929 |
|
|
|
34,383 |
|
|
|
30,520 |
|
|
|
27,754 |
|
|
|
28,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
9,880 |
|
|
|
4,650 |
|
|
|
1,210 |
|
|
|
1,500 |
|
|
|
800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
34,049 |
|
|
|
29,733 |
|
|
|
29,310 |
|
|
|
26,254 |
|
|
|
27,290 |
|
Other income |
|
|
2,780 |
|
|
|
4,936 |
|
|
|
5,309 |
|
|
|
4,560 |
|
|
|
1,663 |
|
Other expense |
|
|
27,257 |
|
|
|
19,491 |
|
|
|
25,249 |
|
|
|
17,524 |
|
|
|
14,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
9,572 |
|
|
|
15,178 |
|
|
|
9,370 |
|
|
|
13,290 |
|
|
|
14,153 |
|
Income tax expense (benefit) |
|
|
4,020 |
|
|
|
6,218 |
|
|
|
(1,664 |
) |
|
|
4,827 |
|
|
|
5,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,552 |
|
|
$ |
8,960 |
|
|
$ |
11,034 |
|
|
$ |
8,463 |
|
|
$ |
8,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Six Months |
|
|
|
|
|
|
Ended December 31,(1) |
|
|
At or For the Years Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Selected Financial Ratios and Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on assets (2) |
|
|
0.75 |
% |
|
|
0.42 |
% |
|
|
0.33 |
% |
|
|
0.68 |
% |
|
|
0.94 |
% |
|
|
0.81 |
% |
|
|
0.86 |
% |
Return on equity (3) |
|
|
6.08 |
% |
|
|
4.14 |
% |
|
|
2.20 |
% |
|
|
3.21 |
% |
|
|
5.48 |
% |
|
|
5.77 |
% |
|
|
6.51 |
% |
Net interest rate spread (4) |
|
|
2.75 |
% |
|
|
2.42 |
% |
|
|
2.36 |
% |
|
|
2.06 |
% |
|
|
2.23 |
% |
|
|
2.42 |
% |
|
|
2.54 |
% |
Net interest margin (5) |
|
|
3.03 |
% |
|
|
2.90 |
% |
|
|
2.77 |
% |
|
|
2.77 |
% |
|
|
2.73 |
% |
|
|
2.77 |
% |
|
|
2.80 |
% |
Efficiency ratio (6) |
|
|
46.50 |
% |
|
|
56.10 |
% |
|
|
58.35 |
% |
|
|
49.59 |
% |
|
|
70.47 |
% |
|
|
54.23 |
% |
|
|
49.74 |
% |
Non-interest expense to average total assets |
|
|
1.52 |
% |
|
|
1.59 |
% |
|
|
1.63 |
% |
|
|
1.49 |
% |
|
|
2.14 |
% |
|
|
1.68 |
% |
|
|
1.43 |
% |
Average interest-earning assets to average
interest-bearing liabilities |
|
|
111.59 |
% |
|
|
117.16 |
% |
|
|
114.47 |
% |
|
|
123.59 |
% |
|
|
117.00 |
% |
|
|
115.05 |
% |
|
|
114.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing assets to total assets |
|
|
2.62 |
% |
|
|
2.66 |
% |
|
|
2.74 |
% |
|
|
0.98 |
% |
|
|
|
% |
|
|
0.04 |
% |
|
|
0.02 |
% |
Non-performing loans to total loans |
|
|
3.75 |
% |
|
|
3.60 |
% |
|
|
4.03 |
% |
|
|
1.39 |
% |
|
|
|
% |
|
|
0.07 |
% |
|
|
0.04 |
% |
Allowance for loan losses to total loans |
|
|
1.60 |
% |
|
|
1.54 |
% |
|
|
1.59 |
% |
|
|
1.32 |
% |
|
|
1.15 |
% |
|
|
1.18 |
% |
|
|
1.23 |
% |
Allowance for loan losses to nonperforming loans |
|
|
42.70 |
% |
|
|
42.91 |
% |
|
|
39.42 |
% |
|
|
5.23 |
% |
|
|
N/M |
|
|
|
N/M |
|
|
|
N/M |
|
Net charge-offs to average loans |
|
|
0.50 |
% |
|
|
|
% |
|
|
0.23 |
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity to assets |
|
|
12.36 |
% |
|
|
14.94 |
% |
|
|
12.55 |
% |
|
|
19.33 |
% |
|
|
22.82 |
% |
|
|
14.56 |
% |
|
|
13.48 |
% |
Total capital (to risk-weighted assets) |
|
|
18.42 |
% |
|
|
21.30 |
% |
|
|
19.15 |
% |
|
|
27.78 |
% |
|
|
34.87 |
% |
|
|
26.98 |
% |
|
|
30.80 |
% |
Tier I capital (to risk-weighted assets) |
|
|
17.16 |
% |
|
|
20.04 |
% |
|
|
17.90 |
% |
|
|
26.53 |
% |
|
|
33.77 |
% |
|
|
25.73 |
% |
|
|
29.55 |
% |
Tier I capital (to average assets) |
|
|
12.36 |
% |
|
|
15.23 |
% |
|
|
14.31 |
% |
|
|
19.71 |
% |
|
|
23.10 |
% |
|
|
14.39 |
% |
|
|
13.62 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of full service offices |
|
|
21 |
|
|
|
19 |
|
|
|
21 |
|
|
|
19 |
|
|
|
19 |
|
|
|
19 |
|
|
|
21 |
|
Full time equivalent employees |
|
|
177 |
|
|
|
158 |
|
|
|
174 |
|
|
|
155 |
|
|
|
144 |
|
|
|
143 |
|
|
|
138 |
|
|
|
|
(1) |
|
Ratios are annualized where appropriate. |
|
(2) |
|
Represents net income divided by average total assets. |
|
(3) |
|
Represents net income divided by average equity. |
|
(4) |
|
Represents average yield on interest-owning assets less average cost of interest-bearing
liabilities. |
|
(5) |
|
Represents net interest income as a percent of average interest-earning assets. |
|
(6) |
|
Represents non-interest expense divided by the sum of net interest income before provision for loan losses and non-interest income. |
|
N/M |
|
Not meaningful. |
34
RECENT DEVELOPMENTS OF ORITANI FINANCIAL CORP. AND SUBSIDIARIES
The following tables set forth certain financial and other data of Oritani-Federal at and for
the periods indicated. The information at June 30, 2009 was derived from the audited consolidated
financial statements of Oritani-Federal and subsidiaries and should be read in conjunction with the
audited consolidated financial statements of Oritani-Federal and subsidiaries and notes thereto
presented elsewhere in this prospectus. The information at and for the three and nine months ended
March 31, 2010 and 2009 was derived from the unaudited consolidated financial statements of
Oritani-Federal and subsidiaries which, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) for a fair presentation of such information. The results
of operations and ratios and other data presented for the three and nine months ended March 31,
2010 are not necessarily indicative of the results of operations for the year ending June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
At March 31, |
|
|
At June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Selected Financial Condition Data: |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,054,230 |
|
|
$ |
1,913,521 |
|
Loans, net |
|
|
1,418,034 |
|
|
|
1,278,623 |
|
Securities available for sale, at market value |
|
|
311,363 |
|
|
|
144,419 |
|
Mortgage-backed securities held to maturity |
|
|
76,858 |
|
|
|
118,817 |
|
Mortgage-backed securities available for sale, at market value |
|
|
89,767 |
|
|
|
128,603 |
|
Bank owned life insurance |
|
|
30,250 |
|
|
|
29,385 |
|
Federal Home Loan Bank of New York stock, at cost |
|
|
24,996 |
|
|
|
25,549 |
|
Accrued interest receivable |
|
|
9,003 |
|
|
|
7,967 |
|
Investments in real estate joint ventures, net |
|
|
5,815 |
|
|
|
5,767 |
|
Real estate held for investment |
|
|
1,213 |
|
|
|
1,338 |
|
Deposits |
|
|
1,257,101 |
|
|
|
1,127,630 |
|
Borrowings |
|
|
496,637 |
|
|
|
508,991 |
|
Shareholders equity |
|
|
254,083 |
|
|
|
240,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(Unaudited - Dollars in thousands, except per share amounts) |
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
27,020 |
|
|
$ |
22,608 |
|
|
$ |
78,266 |
|
|
$ |
65,127 |
|
Interest expense |
|
|
10,138 |
|
|
|
11,798 |
|
|
|
32,755 |
|
|
|
32,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
16,882 |
|
|
|
10,810 |
|
|
|
45,511 |
|
|
|
32,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
2,500 |
|
|
|
2,400 |
|
|
|
7,550 |
|
|
|
7,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision
for loan losses |
|
|
14,382 |
|
|
|
8,410 |
|
|
|
37,961 |
|
|
|
24,498 |
|
Other income |
|
|
1,243 |
|
|
|
822 |
|
|
|
4,856 |
|
|
|
1,490 |
|
Other expense |
|
|
7,424 |
|
|
|
6,662 |
|
|
|
22,418 |
|
|
|
19,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
8,201 |
|
|
|
2,570 |
|
|
|
20,399 |
|
|
|
6,910 |
|
Income tax expense |
|
|
3,189 |
|
|
|
1,067 |
|
|
|
7,975 |
|
|
|
2,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,012 |
|
|
$ |
1,503 |
|
|
$ |
12,424 |
|
|
$ |
4,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share: |
|
$ |
0.14 |
|
|
$ |
0.04 |
|
|
$ |
0.34 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Three Months Ended |
|
|
At or For the Nine Months Ended |
|
|
|
March 31,(1) |
|
|
March 31,(1) |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(Unaudited) |
|
Selected Financial Ratios and Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on assets (ratio of net income to average
total assets) |
|
|
0.99 |
% |
|
|
0.35 |
% |
|
|
0.83 |
% |
|
|
0.33 |
% |
Adjusted return on assets (2,7) |
|
|
0.83 |
% |
|
|
0.35 |
% |
|
|
0.70 |
% |
|
|
0.33 |
% |
Return on equity (ratio of net income to average
equity) |
|
|
8.02 |
% |
|
|
2.47 |
% |
|
|
6.74 |
% |
|
|
2.11 |
% |
Adjusted return on equity (3,7) |
|
|
6.72 |
% |
|
|
2.47 |
% |
|
|
5.71 |
% |
|
|
2.11 |
% |
Net interest rate spread(4) |
|
|
3.26 |
% |
|
|
2.37 |
% |
|
|
2.92 |
% |
|
|
2.40 |
% |
Adjusted net interest rate spread(4,8) |
|
|
3.05 |
% |
|
|
2.37 |
% |
|
|
2.76 |
% |
|
|
2.40 |
% |
Net interest margin(5) |
|
|
3.51 |
% |
|
|
2.69 |
% |
|
|
3.19 |
% |
|
|
2.82 |
% |
Adjusted net interest margin(5,8) |
|
|
3.29 |
% |
|
|
2.69 |
% |
|
|
3.03 |
% |
|
|
2.82 |
% |
Efficiency ratio (6) |
|
|
40.96 |
% |
|
|
57.27 |
% |
|
|
44.51 |
% |
|
|
56.51 |
% |
Adjusted efficiency ratio (8) |
|
|
44.67 |
% |
|
|
57.27 |
% |
|
|
48.00 |
% |
|
|
56.51 |
% |
Average interest-earning assets to average
interest-bearing liabilities |
|
|
111.35 |
% |
|
|
110.69 |
% |
|
|
111.51 |
% |
|
|
114.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing assets to total assets |
|
|
2.03 |
% |
|
|
2.92 |
% |
|
|
|
|
|
|
|
|
Non-performing loans to total loans |
|
|
2.84 |
% |
|
|
4.15 |
% |
|
|
|
|
|
|
|
|
Allowance for loan losses to total loans |
|
|
1.70 |
% |
|
|
1.69 |
% |
|
|
|
|
|
|
|
|
Allowance for loan losses to nonperforming loans |
|
|
59.73 |
% |
|
|
40.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity to assets |
|
|
12.37 |
% |
|
|
13.51 |
% |
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets) |
|
|
18.00 |
% |
|
|
20.10 |
% |
|
|
|
|
|
|
|
|
Tier I capital (to risk-weighted assets) |
|
|
16.70 |
% |
|
|
18.80 |
% |
|
|
|
|
|
|
|
|
Tier I capital (to average assets) |
|
|
12.50 |
% |
|
|
13.90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of full-service offices |
|
|
22 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
Full time equivalent employees |
|
|
174 |
|
|
|
164 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Ratios are annualized where appropriate. |
|
(2) |
|
Represents net income divided by average total assets. |
|
(3) |
|
Represents net income divided by average equity. |
|
(4) |
|
Represents average yield on interest-owning assets less average cost of interest-bearing
liabilities. |
|
(5) |
|
Represents net interest income as a percent of average interest-earning assets. |
|
(6) |
|
Represents non-interest expense divided by the sum of net interest income before provision
for loan losses and non-interest income. |
|
(7) |
|
Excludes non-recurring after tax income of $807,000 for the three months ended March 31, 2010
and $1.9 million for the nine months ended March 31, 2010 received in conjunction with problem
loan dispositions. |
|
(8) |
|
Excludes non-recurring pre tax interest income of $1.0 million, late charges of $146,000 and
legal expense reimbursement of $150,000 for the three months ended March 31, 2010 and interest
income of $2.3 million, late charges of $297,000 and legal expense reimbursement of $501,000
for the nine months ended March 31, 2010 received in conjunction with problem loan
dispositions. |
36
Comparison of Financial Condition at March 31, 2010 and June 30, 2009
Total Assets. Total assets increased $140.7 million, or 7.4%, to $2.05 billion at March 31, 2010,
from $1.91 billion at June 30, 2009. The increase was due primarily to the growth of loans and
securities classified as available-for-sale (AFS), partially offset by decreases in
mortgage-backed securities (MBS) AFS and MBS held to maturity (HTM).
Cash and Cash Equivalents. Cash and cash equivalents (which includes fed funds and short term
investments) decreased $95.7 million to $39.7 million at March 31, 2010, from $135.4 million at
June 30, 2009 as excess liquidity was deployed into loans and securities.
Loans, net. Loans, net increased $139.4 million, or 10.9%, to $1.42 billion at March 31, 2010,
from $1.28 billion at June 30, 2009. We continued our emphasis on loan originations, particularly
multifamily and commercial real estate loans. Loan originations totaled $275.8 million and
purchases totaled $34.7 million for the nine months ended March 31, 2010.
Delinquency information is provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquency Totals |
|
March 31, 2010 |
|
|
December 31, 2009 |
|
|
September 30, 2009 |
|
|
June 30, 2009 |
|
|
March 31, 2009 |
|
30 59 days past due |
|
$ |
6,670 |
|
|
$ |
9,613 |
|
|
$ |
14,318 |
|
|
$ |
4,574 |
|
|
$ |
4,897 |
|
60 89 days past due |
|
|
4,293 |
|
|
|
1,974 |
|
|
|
1,049 |
|
|
|
17,825 |
|
|
|
1,042 |
|
Nonaccrual |
|
|
41,170 |
|
|
|
51,907 |
|
|
|
52,557 |
|
|
|
52,465 |
|
|
|
52,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
52,133 |
|
|
$ |
63,494 |
|
|
$ |
67,924 |
|
|
$ |
74,864 |
|
|
$ |
58,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total delinquent loans have decreased by $22.7 million during the nine months ended March 31,
2010 and by $11.4 million over the three months ended March 31, 2010. Substantial reductions in
nonaccrual assets were achieved over this past quarter, as compared to the totals from the prior
four quarters. Nonaccrual loans decreased $10.7 million, or 20.7%, over the three months ended
March 31, 2010. While reductions have been achieved, nonaccrual and total delinquent loan totals
remain at elevated levels.
A discussion of the significant components of the nonaccrual loan total at March 31, 2010 follows.
Two of these loans are to one borrower and totaled $16.5 million at March 31, 2010.
The loans are secured by a condominium construction project and raw land with all building
approvals, both of which are in Northern New Jersey. The borrower declared bankruptcy and Oritani
Bank has provided debtor in possession financing for the completion of the condominium construction
project. While the project is substantially complete, significant delays have been encountered in
finalizing the project and obtaining certificates of occupancy (CO) for the residential units.
Numerous residential units remain under contract and new sales are continuing. Prior charge-offs
of the construction loan totaled $4.0 million and prior charge-offs of the land loan totaled
$661,000. Both loans are classified as impaired as of March 31, 2010. In addition, specific
allowances for loan losses totaling $1.7 million have been recorded against these loans.
A $14.1 million loan secured by a multi-tenant commercial property in Hudson County,
New Jersey. The borrower has experienced cash flow difficulties. Oritani Bank is in litigation
with this borrower, foreclosure proceedings are progressing, summary judgment against the borrower
has been obtained and all tenant rent payments are being made directly to Oritani Bank. The rents
received were sufficient to make each of the monthly payments during the quarter.
A $3.1 million loan secured by a commercial property located in Bergen County, New
Jersey. The borrower and guarantor on this loan have declared bankruptcy. A contract for the sale
of the
37
property has been accepted by the bankruptcy trustee. This contract was originally expected
to close in March 2010. The closing has been postponed and is now expected to occur during the
quarter ended June 30, 2010. 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.
A $2.9 million loan secured by a warehouse property in Nassau County, New York. We
acquired this property via foreclosure in April 2010. Upon acquisition, the specific allowance for
loan loss of $355,000 associated with this loan was charged-off and the asset was transferred to
Real Estate Owned. We have had discussions with several parties regarding disposition and expect
to have a contract for sale of the property shortly.
A $2.4 million residential construction loan for two luxury homes and an improved lot
located in Essex County, New Jersey. The borrower encountered cash flow difficulties due to an
extended construction and marketing period. Oritani Bank is in litigation with this borrower,
foreclosure proceedings are progressing and summary judgment against the borrower has been
obtained.
Included in the $4.3 million of loans that are 60-89 days delinquent at March 31, 2010 is a $2.4
million loan. We have an executed letter of intention to sell this loan for an amount slightly in
excess of our book value.
Securities AFS. Securities AFS increased $166.9 million to $311.4 million at March 31, 2010, from
$144.4 million at June 30, 2009. As described under Total Interest Income below, we felt this
investment option currently presents the best risk/reward profile.
Deposits. Deposits increased $129.5 million, or 11.5%, to $1.26 billion at March 31, 2010, from
$1.13 billion at June 30, 2009. Strong deposit growth, particularly in core accounts, remains one
of our strategic objectives. Oritani Bank opened its 22nd branch location in
Bergenfield (Bergen County), New Jersey, in February 2010.
Stockholders Equity. Stockholders equity increased $14.0 million, or 5.8%, to $254.1 million at
March 31, 2010, from $240.1 million at June 30, 2009. The increase was primarily the result of net
income of $2.4 million for the nine months ended March 31, 2010. On March 18, 2009, we announced
the commencement of a fourth (967,828 shares) 10% repurchase program. As of March 31, 2010, we had
repurchased a total of 3,669,937 shares at a total cost of $57.1 million and an average cost of
$15.57 per share. The remaining shares authorized under the March 18, 2009 repurchase plan total
596,291.
Comparison of Operating Results for the Quarter Ended March 31, 2010 and 2009
Net Income. Net income increased $3.5 million to $5.0 million, or $0.14 per share, for the quarter
ended March 31, 2010, from $1.5 million, or $0.04 per share, for the corresponding 2009 quarter.
The primary cause of the increased income in the 2010 period was increased net interest income
before provision for loan losses. Net interest income increased by $6.1 million, or 56.2%, to
$16.9 million for the quarter ended March 31, 2010, from $10.8 million for the quarter ended March
31, 2009. The increase is primarily due to a higher net interest spread and a larger asset base.
Net income was also augmented by recoveries associated with problem loan disposals. Over the
quarter ended March 31, 2010, we collected $1.0 million of delinquent interest and prepayment
penalties, $146,000 of late charges and $150,000 of reimbursed legal expenses in connection with
problem loan disposals. The after tax impact of such items totaled $807,000. Our annualized
return on average assets was 0.99% for the quarter ended March 31, 2010 and 0.35% for the
corresponding 2009 quarter. Our annualized return on average equity was 8.02% for the quarter
ended March 31, 2010 and 2.47% for the corresponding 2009 quarter.
38
Total Interest Income. Total interest income increased by $4.4 million, or 19.5%, to $27.0 million
for the three months ended March 31, 2010, from $22.6 million for the three months ended March 31,
2009. The largest increase occurred in interest on loans, which increased $4.0 million, or 21.6%,
to $22.6 million for the three months ended March 31, 2010, from $18.6 million for the three months
ended March 31, 2009. Over that same period, the average balance of loans increased by $166.1
million while the yield on the portfolio increased 43 basis points on an actual basis, and 13 basis
points on a normalized basis. Included in interest on loans for the three months ended March 31,
2010 is $1.0 million of prior period and penalty interest recovered in conjunction with problem
loan disposals. These amounts were not included in income for the normalized calculation of loan
yield. Continuing a trend that began in the quarter ended June 30, 2009, excess liquidity is
generally being deployed in securities AFS as management believes such investments provide the best
risk/reward profile considering our current and projected cash needs. Such investments are
typically callable notes of government sponsored agencies with limited optionality and call
features that increase the likelihood that the note would be called. The investments were
classified as AFS so that they could be sold should unexpected liquidity needs develop. Interest
on securities AFS increased by $1.5 million to $2.2 million for the three months ended March 31,
2010, from $713,000 for the three months ended March 31, 2009. The average balance of securities
AFS increased $243.3 million over that same period. The yield on the portfolio decreased
considerably due to current market rates as well as the conservative structure of the new
investments. Cash flows from the MBS portfolios were primarily redeployed into securities AFS
because, as described above, management felt securities AFS provided the best risk/reward profile
given current economic circumstances and investment options. Interest on MBS HTM decreased by
$643,000, or 46.8%, to $730,000 for the three months ended March 31, 2010, from $1.4 million for
the three months ended March 31, 2009. Interest on MBS AFS decreased by $622,000, or 35.3%, to
$1.1 million for the three months ended March 31, 2010, from $1.8 million for the three months
ended March 31, 2009. The combined average balances of the two MBS portfolios decreased $106.7
million over the periods.
Total Interest Expense. Total interest expense decreased by $1.7 million, or 14.1%, to $10.1
million for the three months ended March 31, 2010, from $11.8 million for the three months ended
March 31, 2009. Interest expense on deposits decreased by $1.7 million, or 24.9%, to $5.0 million
for the three months ended March 31, 2010, from $6.7 million for the three months ended March 31,
2009. The average balance of interest bearing deposits increased by $277.8 million and the
average cost of these funds decreased 119 basis points over this period. Market interest rates
allowed Oritani Bank to reprice many maturing time deposits, as well as other interest bearing
deposits, at lower rates, decreasing the cost of funds. While we expect this trend to continue,
the rate of decrease is expected to decelerate significantly, as the majority of the deposit
portfolio has repriced in a low rate environment. Interest expense on borrowings was essentially
stable, the average balance decreased $2.2 million and the cost increased 2 basis points.
Net Interest Income Before Provision for Loan Losses. Net interest income increased by $6.1
million, or 56.2%, to $16.9 million for the three months ended March 31, 2010, from $10.8 million
for the three months ended March 31, 2009. Our net interest rate spread and margin increased to
3.26% and 3.51% for the three months ended March 31, 2010, from 2.37% and 2.69% for the three
months ended March 31, 2009, respectively. On a normalized basis (excluding the impact of the
recoveries associated with the problem asset disposals), our net interest rate spread and margin
for the three months ended March 31, 2010 were 3.05% and 3.29%, respectively. Our net interest
rate spread and net interest margin were hindered in both periods due to the impact of nonaccrual
loans. Our net interest income was $1.2 million lower for both the three months ended March 31,
2010 and 2009 due to the impact of nonaccrual loans. A portion of the 2009 interest reduction was
collected in 2010 in connection with problem loan disposals.
39
Provision for Loan Losses. We recorded provisions for loan losses of $2.5 million for the three
months ended March 31, 2010 as compared to $2.4 million for the three months ended March 31, 2009.
A rollforward of the allowance for loan losses for the three months ended March 31, 2010 and 2009
is presented below:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Balance at beginning of period |
|
$ |
22,164 |
|
|
$ |
18,907 |
|
Provisions charged to operations |
|
|
2,500 |
|
|
|
2,400 |
|
Loans charged off |
|
|
(71 |
) |
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
24,593 |
|
|
$ |
21,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to total loans |
|
|
1.70 |
% |
|
|
1.69 |
% |
The delinquency and nonaccrual totals, along with charge-offs and macro economic factors,
remain the primary contributors to the current level of provision for loan losses. Loan growth was
also a component of the provision for loan losses.
Other Income. Other income increased by $421,000 to $1.2 million for the three months ended March
31, 2010, from $822,000 for the three months ended March 31, 2009. Results for the quarter ended
March 31, 2010 were augmented due to the collection of $146,000 in late charges in connection with
problem loan disposals. Other income for the quarter ended March 31, 2009 was reduced due to a
$225,000 impairment charge and a $12,000 loss on partial sale of a mutual fund holding in our AFS
portfolio.
Operating Expenses. Operating expenses increased by $762,000, or 11.4%, to $7.4 million for the
three months ended March 31, 2010, from $6.7 million for the three months ended March 31, 2009.
Our efficiency ratio (total operating expenses divided by the sum of net interest income before
provision for loan losses plus total other income), on an actual basis, for the 2010 quarter was
41.0%. On a normalized basis, the ratio was 44.7%. Compensation, payroll taxes and fringe
benefits increased $413,000, or 9.0%, to $5.0 million for the three months ended March 31, 2010,
from $4.6 million for the three months ended March 31, 2009. The increase is primarily due to
increases in payroll taxes and health insurance. Federal deposit insurance premiums increased
significantly over the period due to an increase in FDIC deposit insurance rates, an increase in
insurable deposits and the depletion of a credit against FDIC deposit insurance charges. FDIC
deposit insurance premiums increased to $567,000 for the three months ended March 31, 2010, from
$46,000 for the three months ended March 31, 2009. Other expense decreased $220,000 to $764,000
for the three months ended March 31, 2010, from $984,000 for the corresponding 2009 period. The
decrease was primarily due to $150,000 of reimbursed legal expenses received in conjunction with
problem loan dispositions.
Income Tax Expense. Income tax expense for the three months ended March 31, 2010 was $3.2 million,
due to pre-tax income of $8.2 million, resulting in an effective tax rate of 38.9%. 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%.
40
Comparison of Operating Results for the Nine Months Ended March 31, 2010 and 2009
Net Income. Net income increased $8.4 million to $12.4 million, or $0.34 per share, for the nine
months ended March 31, 2010, from net income of $4.0 million, or $0.11 per share, for the
corresponding 2009 period. The nine month period ended March 31, 2010 was positively impacted by a
higher net interest spread, a larger asset base and recoveries associated with problem loan
disposals. Over the nine month period ended March 31, 2010, we collected $2.3 million of
delinquent interest and prepayment penalties, $297,000 of late charges and $501,000 of reimbursed
legal expenses in connection with problem loan disposals. The after tax impact of these recoveries
totaled $1.9 million. The increased net income is also partially attributable to securities
writedowns in the 2009 period (which reduced 2009 net income) and a gain on sale of assets in the
2010 period. Our annualized return on average assets was 0.83% and our annualized return on
average equity was 6.74% for the nine month period ended March 31, 2010, compared to 0.33% and
2.11% for the nine month period ended March 31, 2009, respectively.
Total Interest Income. Total interest income increased by $13.1 million, or 20.2%, to $78.3
million for the nine months ended March 31, 2010, from $65.1 million for the nine months ended
March 31, 2009. The largest increase occurred in interest on loans, which increased $11.4 million,
or 21.5%, to $64.6 million for the nine months ended March 31, 2010, from $53.2 million for the
nine months ended March 31, 2009. Over that same period, the average balance of loans increased by
$197.7 million while the yield on the portfolio increased 23 basis points on an actual basis and
was flat on a normalized basis. Included in interest on loans for the nine months ended March 31,
2010 is $2.3 million of prior period and penalty interest recovered in conjunction with problem
loan disposals. These amounts were not included in income for the normalized calculation of loan
yield. Due primarily to the reasons described in Comparison of Operating Results for the Quarter
Ended March 31, 2010 and 2009 Total Interest Income, there were significant changes to income
on securities AFS, MBS HTM and MBS AFS. Interest on securities AFS increased by $4.6 million to
$5.9 million for the nine months ended March 31, 2010, from $1.3 million for the nine months ended
March 31, 2009. The average balance of securities AFS increased $235.3 million over that same
period. Interest on MBS HTM decreased by $1.8 million to $2.6 million for the nine months ended
March 31, 2010, from $4.4 million for the nine months ended March 31, 2009. Interest on MBS AFS
decreased by $1.6 million to $3.9 million for the nine months ended March 31, 2010, from $5.4
million for the nine months ended March 31, 2009. The combined average balances of the two MBS
portfolios decreased $90.0 million over the period.
Total Interest Expense. Total interest expense decreased by $99,000 to $32.8 million for the nine
months ended March 31, 2010, from $32.9 million for the nine months ended March 31, 2009. Interest
expense on deposits decreased by $657,000, or 3.7%, to $17.1 million for the nine months ended
March 31, 2010, from $17.8 million for the nine months ended March 31, 2009. The average balance
of interest bearing deposits increased by $377.0 million and the average cost of these funds
decreased 98 basis points over this period. Market interest rates allowed Oritani Bank to reprice
many maturing time deposits, as well as other interest bearing deposits, at lower rates, decreasing
the cost of funds. Interest expense on borrowings increased by $558,000, or 3.7%, to $15.6 million
for the nine months ended March 31, 2010, from $15.1 million for the nine months ended March 31,
2009. The average balance of borrowings increased $3.1 million and the cost increased 12 basis
points over this period.
Net Interest Income Before Provision for Loan Losses. Net interest income increased by $13.2
million, or 41.0%, to $45.5 million for the nine months ended March 31, 2010, from $32.3 million
for the nine months ended March 31, 2009. Our net interest rate spread and margin increased to
2.92% and 3.19% for the nine months ended March 31, 2010, from 2.40% and 2.82% for the nine months
ended March 31,
41
2009, respectively. On a normalized basis, our net interest rate spread and margin for the nine
months ended March 31, 2010 were 2.76% and 3.03%, respectively. Our net interest income was
reduced by $2.4 million and $2.5 million for the nine months ended March 31, 2010 and 2009,
respectively, due to the impact of nonaccrual loans. A portion of the 2009 interest reduction was
collected in 2010 in connection with problem loan disposals.
Provision for Loan Losses. We recorded provisions for loan losses of $7.6 million for the nine
months ended March 31, 2010 as compared to $7.8 million for the nine months ended March 31, 2009.
A rollforward of the allowance for loan losses for the nine months ended March 31, 2010 and 2009 is
presented below:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Balance at beginning of period |
|
$ |
20,681 |
|
|
$ |
13,532 |
|
Provisions charged to operations |
|
|
7,550 |
|
|
|
7,775 |
|
Recoveries of loans previously charged off |
|
|
3 |
|
|
|
|
|
Loans charged off |
|
|
(3,641 |
) |
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
24,593 |
|
|
$ |
21,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to total loans |
|
|
1.70 |
% |
|
|
1.69 |
% |
The delinquency and nonaccrual totals, along with charge-offs and macro economic factors,
remain the primary contributors to the current level of provision for loan losses. Loan growth was
also a component of the provision for loan losses.
Other Income. Other income increased by $3.4 million to $4.9 million for the nine months ended
March 31, 2010, from $1.5 million for the nine months ended March 31, 2009. Other income for the
nine months ended March 31, 2009 was reduced due to a $1.8 million impairment charge taken
regarding equity securities in our AFS portfolio as well as a $225,000 impairment charge and a
$12,000 loss on partial sale of a mutual fund holding in our AFS portfolio. Included in the
results for the 2010 period is a $1.0 million gain on the sale of a commercial office property that
had been held and operated as a real estate investment. In addition, the 2010 period includes
$297,000 of late charges received in connection with problem loan disposals.
Operating Expenses. Operating expenses increased by $3.3 million, or 17.5%, to $22.4 million for
the nine months ended March 31, 2010, from $19.1 million for the nine months ended March 31, 2009.
Our efficiency ratio for the 2010 period, on an actual and normalized basis, was 44.5% and 48.0%,
respectively. Compensation, payroll taxes and fringe benefits increased $1.6 million, or 11.8%, to
$15.2 million for the nine months ended March 31, 2010, from $13.6 million for the nine months
ended March 31, 2009. The increase is primarily due to increases in payroll taxes and health
insurance, as well as increases in compensation. Federal deposit insurance premiums increased
significantly over the period due to an increase in FDIC deposit insurance rates, an increase in
insurable deposits and the depletion of a credit against FDIC deposit insurance charges. FDIC
deposit insurance premiums increased to $1.7 million for the nine months ended March 31, 2010, from
$106,000 for the nine months ended March 31, 2009. Other expense decreased $191,000 to $2.4
million for the nine months ended March 31, 2010, from $2.6 million for the corresponding 2009
period. The decrease was primarily due to $501,000 of reimbursed legal expenses received in
conjunction with problem loan dispositions.
Income Tax Expense. Income tax expense for the nine months ended March 31, 2010, was
$8.0 million, due to pre-tax income of $20.4 million, resulting in an effective tax rate of 39.1%.
For the nine months
42
ended March 31, 2009, income tax expense was $2.9 million, due to pre-tax
income of $6.9 million, resulting in an effective tax rate of 41.4%.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, which can be identified by the use of
words such as estimate, project, believe, intend, anticipate, plan, seek, expect
and words of similar meaning. These forward-looking statements include, but are not limited to:
|
|
|
statements of our goals, intentions and expectations; |
|
|
|
|
statements regarding our business plans, prospects, growth and operating
strategies; |
|
|
|
|
statements regarding the asset quality of our loan and investment
portfolios; and |
|
|
|
|
estimates of our risks and future costs and benefits. |
These forward-looking statements are based on current beliefs and expectations of our
management and are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control. In addition, these
forward-looking statements are subject to assumptions with respect to future business strategies
and decisions that are subject to change.
The following factors, among others, could cause actual results to differ materially from the
anticipated results or other expectations expressed in the forward-looking statements:
|
|
|
changes in laws or government regulations or policies affecting financial
institutions, including changes in regulatory fees and capital requirements; |
|
|
|
|
general economic conditions, either nationally or in our market areas,
that are worse than expected; |
|
|
|
|
competition among depository and other financial institutions; |
|
|
|
|
inflation and changes in the interest rate environment that reduce our
margins or reduce the fair value of financial instruments; |
|
|
|
|
adverse changes in the securities markets; |
|
|
|
|
our ability to enter new markets successfully and capitalize on growth
opportunities; |
|
|
|
|
our ability to successfully integrate acquired entities, if any; |
|
|
|
|
changes in consumer spending, borrowing and savings habits; |
|
|
|
|
changes in our organization, compensation and benefit plans; |
|
|
|
|
our ability to continue to increase and manage our commercial and
residential real estate, multi-family, and commercial and industrial loans; |
43
|
|
|
possible impairments of securities held by us, including those issued by
government entities and government sponsored enterprises; |
|
|
|
|
the level of future deposit premium assessments; |
|
|
|
|
the impact of the current recession on our loan portfolio (including cash
flow and collateral values), investment portfolio, customers and capital market
activities; |
|
|
|
|
the impact of the current governmental effort to restructure the U.S.
financial and regulatory system; |
|
|
|
|
changes in the financial performance and/or condition of our borrowers;
and |
|
|
|
|
the effect of changes in accounting policies and practices, as may be
adopted by the regulatory agencies, as well as the Securities and Exchange Commission,
the Public Company Accounting Oversight Board, the Financial Accounting Standards Board
and other accounting standard setters. |
Because of these and other uncertainties, our actual future results may be materially
different from the results indicated by these forward-looking statements. Please see Risk
Factors beginning on page 23.
44
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING
Although we cannot determine what the actual net proceeds from the sale of the shares of
common stock in the offering will be until the offering is completed, we anticipate that the
aggregate net proceeds will be between $318.4 million and $431.4 million, or $496.5 million if the
offering range is increased by 15%.
We intend to distribute the net proceeds from the stock offering as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based Upon the Sale at $10.00 Per Share of |
|
|
|
33,150,000 Shares |
|
|
39,000,000 Shares |
|
|
44,850,000 Shares |
|
|
51,577,500 Shares (1) |
|
|
|
|
|
|
|
Percent of Net |
|
|
|
|
|
|
Percent of Net |
|
|
|
|
|
|
Percent of Net |
|
|
|
|
|
|
Percent of Net |
|
|
|
Amount |
|
|
Proceeds |
|
|
Amount |
|
|
Proceeds |
|
|
Amount |
|
|
Proceeds |
|
|
Amount |
|
|
Proceeds |
|
|
|
(Dollars in thousands) |
|
Offering proceeds |
|
$ |
331,500 |
|
|
|
|
|
|
$ |
390,000 |
|
|
|
|
|
|
$ |
448,500 |
|
|
|
|
|
|
$ |
515,775 |
|
|
|
|
|
Less: offering expenses |
|
|
(13,131 |
) |
|
|
|
|
|
|
(15,096 |
) |
|
|
|
|
|
|
(17,062 |
) |
|
|
|
|
|
|
(19,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net offering proceeds |
|
$ |
318,369 |
|
|
|
100.0 |
% |
|
$ |
374,904 |
|
|
|
100.0 |
% |
|
$ |
431,438 |
|
|
|
100.0 |
% |
|
$ |
496,453 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of net proceeds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Oritani Bank |
|
$ |
159,184 |
|
|
|
50.0 |
% |
|
$ |
187,452 |
|
|
|
50.0 |
% |
|
$ |
215,719 |
|
|
|
50.0 |
% |
|
$ |
248,226 |
|
|
|
50.0 |
% |
To fund the loan to
employee stock ownership
plan |
|
$ |
13,260 |
|
|
|
4.2 |
% |
|
$ |
15,600 |
|
|
|
4.2 |
% |
|
$ |
17,940 |
|
|
|
4.2 |
% |
|
$ |
20,631 |
|
|
|
4.2 |
% |
Retained by Oritani-Delaware |
|
$ |
145,924 |
|
|
|
45.8 |
% |
|
$ |
171,852 |
|
|
|
45.8 |
% |
|
$ |
197,779 |
|
|
|
45.8 |
% |
|
$ |
227,595 |
|
|
|
45.8 |
% |
|
|
|
(1) |
|
As adjusted to give effect to an increase in the number of shares which could occur due to a
15% increase in the offering range to reflect demand for the shares or changes in market or
general financial conditions following the commencement of the offering. |
Payments for shares of common stock made through withdrawals from existing deposit
accounts will not result in the receipt of new funds for investment but will result in a reduction
of Oritani Banks deposits. The net proceeds may vary because total expenses relating to the
offering may be more or less than our estimates. For example, our expenses would increase if a
syndicated community offering were used to sell shares of common stock not purchased in the
subscription and community offerings.
Oritani-Delaware and Oritani Bank May Use the Proceeds it Retains From the Offering:
|
|
|
to support internal growth through lending and deposit gathering in the
communities we serve; |
|
|
|
|
to enhance existing products and services, and support the development of
new products and services to support growth and enhanced customer service; |
|
|
|
|
to improve the liquidity of our shares of common stock and stockholder
returns through higher earnings and more flexible capital management strategies; |
|
|
|
|
to finance the acquisition of branches from other financial institutions
or build or lease new branch facilities primarily in, or adjacent to New Jersey,
although we do not currently have any agreements or understandings regarding any
specific acquisition transaction; |
|
|
|
|
to finance the acquisition of financial institutions or other financial
service companies primarily in, or adjacent to New Jersey, although we do not currently
have any understandings or agreements regarding any specific acquisition transaction; |
45
|
|
|
to maintain our capital position during a period of significant economic
uncertainty, especially for the financial services industry (although, as of December
31, 2009, Oritani Bank was considered well capitalized for regulatory purposes and is
not subject to any directive or recommendation from the FDIC or the New Jersey
Department of Banking and Insurance to raise capital); and |
|
|
|
|
to use the additional capital for other general corporate purposes. |
Under current OTS regulations, we may not repurchase shares of our common stock during the
twelve months following the completion of the conversion, except to fund certain stock-based plans
or, with prior regulatory approval, when extraordinary circumstances exist.
Initially, a substantial portion of the net proceeds will likely be invested in short-term
investments, investment-grade debt obligations and mortgage-backed securities. The use of proceeds
may change based on changes in interest rates, equity markets, laws and regulations affecting the
financial services industry, our relative position in the financial services industry, the
attractiveness of potential acquisitions, and overall market conditions. Our business strategy for
the deployment of the net proceeds raised in the offering is discussed in more detail in
Managements Discussion and Analysis of Financial Condition and Results of OperationsBusiness
Strategy.
Our return on equity may be relatively low until we are able to effectively reinvest the
additional capital raised in the offering. Until we can deploy our capital until we have a
leverage ratio similar to peers, our return on equity may be below the industry average, which may
negatively affect the value of our common stock. See Risk FactorsOur Return On Equity Initially
Will Be Low Compared To Our Historical Performance. A Lower Return On Equity May Negatively Impact
the Trading Price of Our Common Stock.
OUR POLICY REGARDING DIVIDENDS
As of December 31, 2009, Oritani-Federal paid a quarterly cash dividend of $0.075 per share,
which equals $0.30 per share on an annualized basis. After the conversion, we intend to continue
to pay cash dividends on a quarterly basis. We expect the annual dividends to equal $0.30 per
share at each of the minimum, midpoint, maximum and adjusted maximum of the offering range,
respectively, which represents an annual dividend yield of 3.0% at each of the minimum, midpoint,
maximum and adjusted maximum of the offering range, respectively, based upon a stock price of
$10.00 per share. The amount of dividends that we intend to pay to our stockholders following the
conversion is intended to preserve the per share dividend rate that Oritani-Federal stockholders
currently receive. The dividend rate and the continued payment of dividends will depend on a
number of factors including our capital requirements, our financial condition and results of
operations, tax considerations, statutory and regulatory limitations, and general economic
conditions. We cannot assure you that we will not reduce or eliminate dividends in the future.
Oritani-Federal commenced the declaration of dividends during the quarter ended June 30, 2009.
Dividends have been declared in each subsequent quarterly period. Oritani Financial Corp., MHC
owns 27,575,476 shares of Oritani-Federal common stock. Oritani-Federal received permission from
the OTS to waive receipt of the dividend payment on the 27,575,476 shares owned by Oritani
Financial Corp., MHC for each quarterly period. Cash dividends paid by Oritani-Federal during the
six month period ended December 31, 2009 were $1.1 million.
Dividends waived by Oritani Financial Corp., MHC during the six month period ended December
31, 2009 were $3.4 million. Dividends paid and dividends waived during the period were $4.5
million.
46
However, there can be no assurance that the rate of dividend would have been maintained had
regulatory approval for the dividend waiver not been granted.
Under the rules of the OTS, Oritani Bank will not be permitted to pay dividends on its capital
stock to Oritani-Delaware, its sole stockholder, if Oritani Banks stockholders equity would be
reduced below the amount of the liquidation accounts established by Oritani-Delaware and Oritani
Bank in connection with the conversion. In addition, Oritani Bank will not be permitted to make a
capital distribution if, after making such distribution, it would be undercapitalized. See The
Conversion and OfferingLiquidation Rights.
Under the Plan of Conversion and Reorganization, Oritani-Delaware will not be permitted to pay
dividends on its capital stock if its stockholders equity would be reduced below the amount of the
liquidation account established in connection with the conversion. See The Conversion and
OfferingLiquidation Rights. Oritani-Delaware will also be subject to state law limitations on
the payment of dividends. Delaware law generally limits dividends to an amount equal to the excess
of our capital surplus over payments that would be owed upon dissolution to stockholders whose
preferential rights upon dissolution are superior to those receiving the dividend, and to an amount
that would not make us insolvent. In addition, pursuant to OTS regulations, during the three-year
period following the conversion, we will not take any action to declare an extraordinary dividend
to stockholders that would be treated by recipients as a tax-free return of capital for federal
income tax purposes.
See Selected Consolidated Financial and Other Data and Market for the Common Stock for
information regarding our historical dividend payments.
MARKET FOR THE COMMON STOCK
Oritani-Federals common stock currently trades on the Nasdaq Global Market under the symbol
ORIT. Upon completion of the offering, the shares of common stock of Oritani-Delaware will
replace Oritani-Federals shares of common stock. We expect that Oritani-Delawares
shares of common stock will trade on the Nasdaq Global Market under the trading symbol ORITD for
a period of 20 trading days after the completion of the offering. Thereafter, Oritani-Delawares
trading symbol will revert to ORIT. In order to list our common stock on the Nasdaq Global
Market, we are required to have at least three broker-dealers who will make a market in our common
stock. Oritani-Federal currently has 28 registered market makers.
The development of a public market having the desirable characteristics of depth, liquidity
and orderliness depends on the existence of willing buyers and sellers, the presence of which is
not within our control or that of any market maker. The number of active buyers and sellers of our
common stock at any particular time may be limited, which may have an adverse effect on the price
at which our common stock can be sold. You may not be able to sell your shares at or above the
$10.00 price per share in the offering. Purchasers of our common stock should have a long-term
investment intent and should recognize that there may be a limited trading market in our common
stock.
In connection with the conversion and offering, each existing publicly held share of common
stock of Oritani-Federal will be converted into a right to receive a number of shares of
Oritani-Delaware common stock, based upon the exchange ratio that is described in other sections of
this prospectus. See The Conversion and OfferingShare Exchange Ratio for Current Stockholders.
Options to purchase shares of Oritani-Federal common stock which are outstanding immediately prior
to the consummation of the conversion will be converted into options to purchase shares of
Oritani-Delaware common stock, with the number of shares subject to the option and the exercise
price per share to be adjusted based upon the exchange ratio. The vesting period of such options
as well as any outstanding stock awards will be
47
accelerated upon the closing of the conversion and the term of such options will remain
unchanged. We anticipate the pre-tax expense of such accelerated vesting will be approximately
$11.3 million, which represents the remaining amortization for such accelerated options and awards,
with such expense to be incurred during the fiscal quarter in which the stock offering is
completed.
Our shares of common stock are traded on the Nasdaq Global Market under the symbol ORIT. The
approximate number of holders of record of Oritani-Federals common stock as of May 5, 2010 was
1,337. Certain shares of Oritani-Federal are held in nominee or street name and accordingly,
the number of beneficial owners of such shares is not known or included in the foregoing number.
The following table presents quarterly market information for Oritani-Federals common stock for
the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010 |
|
|
|
High |
|
|
Low |
|
|
Dividends per share |
|
First Quarter |
|
$ |
14.61 |
|
|
$ |
12.75 |
|
|
$ |
0.050 |
|
Second Quarter |
|
|
14.50 |
|
|
|
12.46 |
|
|
|
0.075 |
|
Third Quarter
(through May 7,
2010) |
|
|
17.15 |
|
|
|
13.59 |
|
|
|
0.075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 |
|
|
Fiscal 2008 |
|
|
|
High |
|
|
Low |
|
|
Dividend per share |
|
|
High |
|
|
Low |
|
|
Dividend per share |
|
First Quarter |
|
$ |
20.12 |
|
|
$ |
15.50 |
|
|
$ |
|
|
|
$ |
15.93 |
|
|
$ |
12.55 |
|
|
$ |
|
|
Second Quarter |
|
|
17.33 |
|
|
|
13.25 |
|
|
|
|
|
|
|
17.23 |
|
|
|
12.17 |
|
|
|
|
|
Third Quarter |
|
|
17.04 |
|
|
|
9.56 |
|
|
|
|
|
|
|
15.25 |
|
|
|
10.78 |
|
|
|
|
|
Fourth Quarter |
|
|
15.10 |
|
|
|
12.73 |
|
|
|
0.05 |
|
|
|
17.15 |
|
|
|
14.87 |
|
|
|
|
|
The sources of funds for the payment of a cash dividend are the retained proceeds from
the initial sale of shares of common stock and earnings on those proceeds, interest and principal
payments with respect to Oritani-Federals loan to the Employee Stock Ownership Plan, and dividends
from Oritani Bank. For a discussion of the limitations applicable to Oritani Banks ability to pay
dividends, see Supervision and RegulationFederal Banking Regulation.
On February 18, 2010, the business day immediately preceding the public announcement of the
conversion, the closing price of Oritani-Federal common stock as reported on the Nasdaq Global
Market was $13.88 per share. At May 7, 2010, the closing price of Oritani-Federals common stock
was $15.18, and there were approximately 1,337 stockholders of record.
48
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
At December 31, 2009, Oritani Bank exceeded all of the applicable regulatory capital
requirements. The table below sets forth the historical equity capital and regulatory capital of
Oritani Bank at December 31, 2009, and the pro forma regulatory capital of Oritani Bank, after
giving effect to the sale of Oritani-Delawares shares of common stock at a $10.00 per share
purchase price. Accordingly, the table assumes the receipt by Oritani Bank of at least 50% of the
net proceeds. See How We Intend to Use the Proceeds from the Offering.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oritani Bank Historical |
|
|
|
|
|
|
at |
|
|
Pro Forma at December 31, 2009 Based Upon the Sale at $10.00 Per Share |
|
|
|
December 31, 2009 |
|
|
33,150,000 Shares |
|
|
39,000,000 Shares |
|
|
44,850,000 Shares |
|
|
51,577,500 Shares (1) |
|
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Percent of |
|
|
|
Amount |
|
|
Assets (2) |
|
|
Amount |
|
|
Assets (2) |
|
|
Amount |
|
|
Assets (2) |
|
|
Amount |
|
|
Assets (2) |
|
|
Amount |
|
|
Assets (2) |
|
|
|
(Dollars in thousands) |
|
Equity capital |
|
$ |
194,340 |
|
|
|
9.84 |
% |
|
$ |
327,213 |
|
|
|
15.33 |
% |
|
$ |
350,801 |
|
|
|
16.22 |
% |
|
$ |
374,388 |
|
|
|
17.08 |
% |
|
$ |
401,513 |
|
|
|
18.05 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core (leverage) capital |
|
$ |
193,183 |
|
|
|
9.76 |
% |
|
$ |
326,056 |
|
|
|
15.25 |
% |
|
$ |
349,644 |
|
|
|
16.14 |
% |
|
$ |
373,231 |
|
|
|
17.01 |
% |
|
$ |
400,356 |
|
|
|
17.98 |
% |
Core (leverage)
requirement (3) |
|
|
79,144 |
|
|
|
4.00 |
% |
|
|
85,512 |
|
|
|
4.00 |
% |
|
|
86,642 |
|
|
|
4.00 |
% |
|
|
87,773 |
|
|
|
4.00 |
% |
|
|
89,073 |
|
|
|
4.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess |
|
$ |
114,039 |
|
|
|
5.76 |
% |
|
$ |
240,544 |
|
|
|
11.25 |
% |
|
$ |
263,002 |
|
|
|
12.14 |
% |
|
$ |
285,458 |
|
|
|
13.01 |
% |
|
$ |
311,283 |
|
|
|
13.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 risk-based
capital (4) |
|
$ |
193,183 |
|
|
|
13.49 |
% |
|
$ |
326,056 |
|
|
|
22.27 |
% |
|
$ |
349,644 |
|
|
|
23.79 |
% |
|
$ |
373,231 |
|
|
|
25.29 |
% |
|
$ |
400,356 |
|
|
|
27.01 |
% |
Tier 1 requirement (3) |
|
|
85,943 |
|
|
|
6.00 |
% |
|
|
87,854 |
|
|
|
6.00 |
% |
|
|
88,193 |
|
|
|
6.00 |
% |
|
|
88,532 |
|
|
|
6.00 |
% |
|
|
88,922 |
|
|
|
6.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess |
|
$ |
107,240 |
|
|
|
7.49 |
% |
|
$ |
238,201 |
|
|
|
16.27 |
% |
|
$ |
261,451 |
|
|
|
17.79 |
% |
|
$ |
284,699 |
|
|
|
19.29 |
% |
|
$ |
311,434 |
|
|
|
21.01 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based
capital (4) |
|
$ |
211,236 |
|
|
|
14.75 |
% |
|
$ |
344,109 |
|
|
|
23.50 |
% |
|
$ |
367,697 |
|
|
|
25.02 |
% |
|
$ |
391,284 |
|
|
|
26.52 |
% |
|
$ |
418,409 |
|
|
|
28.23 |
% |
Risk-based requirement |
|
|
114,591 |
|
|
|
8.00 |
% |
|
|
117,138 |
|
|
|
8.00 |
% |
|
|
117,590 |
|
|
|
8.00 |
% |
|
|
118,043 |
|
|
|
8.00 |
% |
|
|
118,563 |
|
|
|
8.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess |
|
$ |
96,645 |
|
|
|
6.75 |
% |
|
$ |
226,971 |
|
|
|
15.50 |
% |
|
$ |
250,107 |
|
|
|
17.02 |
% |
|
$ |
273,241 |
|
|
|
18.52 |
% |
|
$ |
299,846 |
|
|
|
20.23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
capital infused into
Oritani Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds |
|
|
|
|
|
|
|
|
|
$ |
159,184 |
|
|
|
|
|
|
$ |
187,452 |
|
|
|
|
|
|
$ |
215,719 |
|
|
|
|
|
|
$ |
248,226 |
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock acquired
by employee
stock ownership
plan |
|
|
|
|
|
|
|
|
|
|
(13,260 |
) |
|
|
|
|
|
|
(15,600 |
) |
|
|
|
|
|
|
(17,940 |
) |
|
|
|
|
|
|
(20,631 |
) |
|
|
|
|
Common stock acquired
by the stock-based
incentive plan |
|
|
|
|
|
|
|
|
|
|
(13,260 |
) |
|
|
|
|
|
|
(15,600 |
) |
|
|
|
|
|
|
(17,940 |
) |
|
|
|
|
|
|
(20,631 |
) |
|
|
|
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets received
from MHC |
|
|
|
|
|
|
|
|
|
|
209 |
|
|
|
|
|
|
|
209 |
|
|
|
|
|
|
|
209 |
|
|
|
|
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma increase
in GAAP and
regulatory
capital (5) |
|
|
|
|
|
|
|
|
|
$ |
132,873 |
|
|
|
|
|
|
$ |
156,461 |
|
|
|
|
|
|
$ |
180,048 |
|
|
|
|
|
|
$ |
207,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As adjusted to give effect to an increase in the number of shares of common stock that
could occur due to a 15% increase in the offering range to reflect demand for the
shares, or changes in market or general financial conditions following the commencement
of the offering. |
|
(2) |
|
Tangible and core capital levels are shown as a percentage of total adjusted assets.
Risk-based capital levels are shown as a percentage of risk-weighted assets. |
|
(3) |
|
Although not adopted in regulation form, the New Jersey Department of Banking and Insurance
utilizes capital standards of 6% leverage capital and 8.0% risk-based capital. In addition,
the FDIC requires a Tier 1 risk-based capital ratio of 4.0% or greater. |
|
(4) |
|
Pro forma capital levels assume that we fund the stock-based incentive plans with purchases
in the open market equal to 4.0% of the shares of common stock sold in the stock offering at a
price equal to the price for which the shares of common stock are sold in the stock offering,
and that the employee stock ownership plan purchases 4.0% of the shares of common stock sold
in the stock offering with funds we lend. Pro forma GAAP and regulatory capital have been
reduced by the amount required to fund both of these plans. See Management for a discussion
of the stock-based incentive plan and employee stock ownership plan. We may award shares of
common stock under one or more stock-based incentive plans in excess of this amount if the
stock-based incentive plans are adopted more than one year following the stock offering. |
|
(5) |
|
Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20%
risk weighting. |
49
The following table reconciles the U.S. Generally Accepted Accounting Principles
(GAAP) capital of Oritani-Federal to the regulatory capital of Oritani Bank at December 31,
2009. |
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
(in thousands) |
|
Total consolidated GAAP equity |
|
$ |
247,950 |
|
Unconsolidated equity of Oritani-Federal |
|
|
(53,675 |
) |
|
|
|
|
Consolidated equity of Oritani Bank (1) |
|
|
194,275 |
|
Unrealized gain on available for sale securities |
|
|
(2,392 |
) |
Accumulated other comprehensive income: |
|
|
|
|
Post Retirement obligation |
|
|
1,300 |
|
|
|
|
|
Tier 1 capital |
|
|
193,183 |
|
Unrealized gains on available for sale equity
securities includable in Tier 2 capital |
|
|
96 |
|
Allowance for loan losses includable in Tier 2 capital |
|
|
17,957 |
|
|
|
|
|
Total capital |
|
$ |
211,236 |
|
|
|
|
|
|
|
|
(1) |
|
Does not include $65,000 that represents the minority ownership interest in
Oritani Asset Corporation. Such amount is included in Oritani Banks historical equity
capital. These interests are not applicable for regulatory capital purposes. |
50
CAPITALIZATION
The following table presents the historical consolidated capitalization of Oritani-Federal at
December 31, 2009 and the pro forma consolidated capitalization of Oritani-Delaware after giving
effect to the offering, based upon the assumptions set forth in the Pro Forma Data section.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oritani-Federal |
|
|
Oritani-Delaware $10.00 Per Share Pro Forma Based on the Sale of |
|
|
|
Historical at |
|
|
33,150,000 |
|
|
39,000,000 |
|
|
44,850,000 |
|
|
51,577,500 |
|
|
|
December 31, 2009 |
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
|
Shares (1) |
|
|
|
(Dollars in thousands) |
|
Deposits (2) |
|
$ |
1,210,507 |
|
|
$ |
1,210,507 |
|
|
$ |
1,210,507 |
|
|
$ |
1,210,507 |
|
|
$ |
1,210,507 |
|
Borrowed funds |
|
|
507,439 |
|
|
|
507,439 |
|
|
|
507,439 |
|
|
|
507,439 |
|
|
|
507,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits and borrowed funds |
|
$ |
1,717,946 |
|
|
$ |
1,717,946 |
|
|
$ |
1,717,946 |
|
|
$ |
1,717,946 |
|
|
$ |
1,717,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock $0.01 par value,
150,000,000 shares authorized
(post-conversion); shares to be
issued as reflected (3) (4) |
|
|
130 |
|
|
|
445 |
|
|
|
524 |
|
|
|
602 |
|
|
|
693 |
|
Preferred stock, $0.01 par value,
25,000,000 shares authorized
(post-conversion); no shares to be
issued as reflected (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital (3) |
|
|
132,339 |
|
|
|
450,393 |
|
|
|
506,849 |
|
|
|
563,305 |
|
|
|
628,229 |
|
Retained earnings (5) |
|
|
182,528 |
|
|
|
182,528 |
|
|
|
182,528 |
|
|
|
182,528 |
|
|
|
182,528 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oritani Financial Corp., MHC
capital contribution |
|
|
|
|
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
Accumulated other comprehensive
income |
|
|
1,114 |
|
|
|
1,114 |
|
|
|
1,114 |
|
|
|
1,114 |
|
|
|
1,114 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock |
|
|
(54,649 |
) |
|
|
(54,649 |
) |
|
|
(54,649 |
) |
|
|
(54,649 |
) |
|
|
(54,649 |
) |
Common stock to be acquired by the
ESOP (6) |
|
|
(13,512 |
) |
|
|
(26,772 |
) |
|
|
(29,112 |
) |
|
|
(31,452 |
) |
|
|
(34,143 |
) |
Common stock to be acquired by the
stock-based incentive plan (7) |
|
|
|
|
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
$ |
247,950 |
|
|
$ |
540,008 |
|
|
$ |
591,863 |
|
|
$ |
643,717 |
|
|
$ |
703,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares outstanding |
|
|
|
|
|
|
44,529,252 |
|
|
|
52,387,355 |
|
|
|
60,245,458 |
|
|
|
69,282,277 |
|
Exchange shares issued |
|
|
|
|
|
|
11,379,252 |
|
|
|
13,387,355 |
|
|
|
15,395,458 |
|
|
|
17,704,777 |
|
Shares offered for sale |
|
|
|
|
|
|
33,150,000 |
|
|
|
39,000,000 |
|
|
|
44,850,000 |
|
|
|
51,577,500 |
|
|
Total stockholders equity as a
percentage of total assets |
|
|
12.36 |
% |
|
|
23.49 |
% |
|
|
25.18 |
% |
|
|
26.79 |
% |
|
|
28.57 |
% |
Tangible equity ratio |
|
|
12.36 |
% |
|
|
23.49 |
% |
|
|
25.18 |
% |
|
|
26.79 |
% |
|
|
28.57 |
% |
|
|
|
(1) |
|
As adjusted to give effect to an increase in the number of shares of common stock that could
occur due to a 15% increase in the offering range to reflect demand for the shares, or changes
in market or general financial conditions following the commencement of the offering. |
|
(2) |
|
Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock
in the offering. These withdrawals would reduce pro forma deposits by the amount of the
withdrawals. |
|
(3) |
|
Oritani-Federal currently has 10,000,000 authorized shares of preferred stock and 80,000,000
authorized shares of common stock, par value $0.01 per share. Oritani-Federal currently has
no shares of preferred stock issued or outstanding and Oritani-Delaware will not issue shares
of preferred stock in the conversion. On a pro forma basis, Oritani-Delaware common stock and
additional paid-in capital have been revised to reflect the number of shares of
Oritani-Delaware common stock to be outstanding, which is 44,592,252 shares, 52,387,355
shares, 60,245,458 shares and 69,282,277 shares at the minimum, midpoint, maximum and adjusted
maximum of the offering range, respectively. |
|
(4) |
|
No effect has been given to the issuance of additional shares of Oritani-Delaware common
stock pursuant to stock options to be granted under a stock-based incentive plan. If this plan
is implemented within one year of the completion of the offering, an amount up to 10.0% of the
shares of Oritani-Delaware common stock sold in the offering will be reserved for issuance
upon the exercise of options. We may exceed this limit if the plan is implemented more than
one year following the completion of the offering. No effect has been given to the exercise
of options currently outstanding. See ManagementBenefits to be Considered Following
Completion of the Conversion. |
|
(5) |
|
The retained earnings of Oritani Bank will be substantially restricted after the conversion.
See The Conversion and OfferingLiquidation Rights and Supervision and Regulation. |
|
(6) |
|
Assumes that 4.0% of the shares sold in the offering will be acquired by the employee stock
ownership plan financed by a loan from Oritani-Delaware. The loan will have a term of 20 years
and an interest rate equal to the prime rate as published in The Wall Street Journal, and
be repaid principally from Oritani Banks contributions to the employee stock ownership
plan. Since Oritani-Delaware will finance the employee stock ownership plan debt, this debt
will be eliminated through consolidation and no liability will be reflected on
Oritani-Delawares consolidated financial statements. Accordingly, the amount of shares of
common stock acquired by the employee stock ownership plan is shown in this table as a
reduction of total stockholders equity. |
|
(7) |
|
Assumes at the minimum, midpoint, the maximum and the maximum as adjusted, of the offering
range that a number of shares of common stock equal to 4.0% of the shares of common stock to
be sold in the offering will be purchased by the stock-based incentive plan in open market
purchases. The stock-based incentive plan will be submitted to a vote of stockholders
following the completion of the offering. Our current intention is to implement a new
stock-based incentive plan no earlier than twelve months after completion of the conversion.
The funds to be used by the stock-based incentive plan to purchase the shares will be provided
by Oritani-Delaware. The dollar amount of common stock to be purchased is based on the $10.00
per share offering price and represents unearned compensation. This amount does not reflect
possible increases or decreases in the value of common stock relative to the subscription
price in the offering. As Oritani-Delaware accrues compensation expense to reflect the vesting
of shares pursuant to the stock-based incentive plan, the credit to capital will be offset by
a charge to operations. Implementation of the stock-based incentive plan will require
stockholder approval. |
51
PRO FORMA DATA
The following tables summarize historical data of Oritani-Federal and pro forma data at and
for the six months ended December 31, 2009 and at and for the year ended June 30, 2009. This
information is based on assumptions set forth below and in the tables, and should not be used as a
basis for projections of market value of the shares of common stock following the offering.
Moreover, pro forma stockholders equity per share does not give effect to the liquidation accounts
to be established in the conversion or, in the unlikely event of a liquidation of Oritani Bank, to
the recoverability of intangible assets or the tax effect of the recapture of the bad debt reserve.
See The Conversion and OfferingLiquidation Rights.
The net proceeds in the tables are based upon the following assumptions:
|
(i) |
|
forty percent of all shares of common stock will be sold in the subscription
and community offerings, including shares purchased by insiders, with the remaining
shares to be sold in the syndicated community offering; |
|
|
(ii) |
|
150,000 shares of common stock will be purchased by our executive officers and
directors, and their associates; |
|
|
(iii) |
|
our employee stock ownership plan will purchase 4.0% of the shares of common
stock sold in the offering, with a loan from Oritani-Delaware. We have assumed that
the loan will be repaid in substantially equal payments of principal and interest over
a period of 20 years; |
|
|
(iv) |
|
Stifel, Nicolaus & Company, Incorporated will receive a fee equal to 1% of all
shares of common stock sold in the subscription and community offerings and a fee equal
to 5% of all shares sold in the syndicated community offering. No fee will be paid
with respect to shares of common stock purchased by our qualified and non-qualified
employee stock benefit plans, or stock purchased by our officers, directors and
employees, and their immediate families; and |
|
|
(v) |
|
total expenses of the offering, including the marketing fees to be paid to
Stifel, Nicolaus & Company, Incorporated, will be between $13.1 million at the minimum
of the offering range and $19.3 million at the maximum of the offering range, as
adjusted. |
We calculated pro forma consolidated net income for the six months ended December 31, 2009 and
the year ended June 30, 2009 as if the estimated net proceeds we received had been invested at the
beginning of each period at an assumed interest rate of 2.69% (1.64% on an after-tax basis) and
2.54% (1.55% on an after-tax basis). This represents the five-year United States Treasury note
yield as of December 31, 2009 and June 30, 2009. We consider the resulting rate to reflect more
accurately the pro forma reinvestment rate than an arithmetic average method in light of current
market interest rates. The effect of withdrawals from deposit accounts for the purchase of shares
of common stock has not been reflected. Historical and pro forma per share amounts have been
calculated by dividing historical and pro forma amounts by the indicated number of shares of common
stock. No effect has been given in the pro forma stockholders equity calculations for the assumed
earnings on the net proceeds.
The pro forma tables give effect to the implementation of the stock-based incentive plan.
Subject to the receipt of stockholder approval, we have assumed that the stock-based incentive plan
will acquire for restricted stock awards a number of shares of common stock equal to 4.0% of the
shares of common stock sold in the stock offering at the same price for which they were sold in the
stock offering. We
52
assumed that shares of common stock are granted under the plans in awards that vest over a
five-year period.
We have also assumed that the stock-based incentive plans will grant options to acquire shares
of common stock equal to 10.0% of the shares of common stock sold in the stock offering. In
preparing the tables below, we assumed that stockholder approval was obtained, that the exercise
price of the stock options and the market price of the stock at the date of grant were $10.00 per
share and that the stock options had a term of ten years and vested over five years. We applied
the Black-Scholes option pricing model to estimate a grant-date fair value of $3.43 for each
option. In addition to the terms of the options described above, the Black-Scholes option pricing
model assumed an estimated volatility rate of 36.45% for the shares of common stock, a dividend
yield of 3.0%, an expected option life of eight years and a risk-free interest rate of 3.85%.
We may grant options and award shares of common stock under one or more stock-based incentive
plans in excess of 10.0% and 4.0%, respectively, of the shares of common stock sold in the stock
offering if the stock-based incentive plans are adopted more than twelve months following the stock
offering. Our current intention is to implement a new stock-based incentive plan no earlier than
twelve months after completion of the offering.
As discussed under How We Intend to Use the Proceeds from the Offering, we intend to
contribute at least 50% of the net proceeds from the stock offering to Oritani Bank, and we will
retain the remainder of the net proceeds from the stock offering. We will use a portion of the
proceeds we retain for the purpose of making a loan to the employee stock ownership plan and retain
the rest of the proceeds for future use.
The pro forma table does not give effect to:
|
|
|
withdrawals from deposit accounts for the purpose of purchasing shares of common
stock in the stock offering; |
|
|
|
|
our results of operations after the stock offering; or |
|
|
|
|
changes in the market price of the shares of common stock after the stock offering. |
The following pro forma information may not represent the financial effects of the stock
offering at the date on which the stock offering actually occurs and you should not use the table
to indicate future results of operations. Pro forma stockholders equity represents the difference
between the stated amount of our assets and liabilities, computed in accordance with GAAP. We did
not increase or decrease stockholders equity to reflect the difference between the carrying value
of loans and other assets and their market value. Pro forma stockholders equity is not intended
to represent the fair market value of the shares of common stock and does not give effect to any
bad debt reserve, liquidation accounts or any intangible assets or liabilities (which
Oritani-Federal did not have as of the date of the appraisal report), in event of liquidation, and
may be different than the amounts that would be available for distribution to stockholders if we
liquidated. Per share figures have been calculated based on shares of Oritani-Federal issued and
outstanding as of the date of this prospectus.
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Six Months Ended December 31, 2009 |
|
|
|
Based Upon the Sale at $10.00 Per Share of |
|
|
|
33,150,000 |
|
|
39,000,000 |
|
|
44,850,000 |
|
|
51,577,500 |
|
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
|
Shares (1) |
|
|
|
(Dollars in thousands, except per share amounts) |
|
Gross proceeds of offering |
|
$ |
331,500 |
|
|
$ |
390,000 |
|
|
$ |
448,500 |
|
|
$ |
515,775 |
|
Market value of shares issued in the exchange |
|
|
113,793 |
|
|
|
133,874 |
|
|
|
153,955 |
|
|
|
177,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma market capitalization |
|
$ |
445,293 |
|
|
$ |
523,874 |
|
|
$ |
602,455 |
|
|
$ |
692,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds of offering |
|
$ |
331,500 |
|
|
$ |
390,000 |
|
|
$ |
448,500 |
|
|
$ |
515,775 |
|
Less: Expenses |
|
|
(13,131 |
) |
|
|
(15,096 |
) |
|
|
(17,062 |
) |
|
|
(19,322 |
) |
Plus: Assets received from MHC |
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proceeds |
|
$ |
318,578 |
|
|
$ |
375,113 |
|
|
$ |
431,647 |
|
|
$ |
496,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Common stock purchased by employee stock ownership plan |
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
Less: Common stock purchased by the stock-based incentive
plan |
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proceeds, as adjusted |
|
$ |
292,058 |
|
|
$ |
343,913 |
|
|
$ |
395,767 |
|
|
$ |
455,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
7,412 |
|
|
$ |
7,412 |
|
|
$ |
7,412 |
|
|
$ |
7,412 |
|
Pro forma adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income on adjusted net proceeds |
|
|
2,395 |
|
|
|
2,820 |
|
|
|
3,246 |
|
|
|
3,735 |
|
Employee stock ownership plan (2) |
|
|
(202 |
) |
|
|
(238 |
) |
|
|
(274 |
) |
|
|
(315 |
) |
Shares granted under the stock-based incentive plan (3) |
|
|
(809 |
) |
|
|
(952 |
) |
|
|
(1,095 |
) |
|
|
(1,259 |
) |
Options granted under the stock-based incentive plan (4) |
|
|
(916 |
) |
|
|
(1,077 |
) |
|
|
(1,239 |
) |
|
|
(1,424 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income |
|
$ |
7,880 |
|
|
$ |
7,966 |
|
|
$ |
8,051 |
|
|
$ |
8,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share (5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
0.17 |
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.11 |
|
Pro forma adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income on adjusted net proceeds |
|
|
0.05 |
|
|
|
0.06 |
|
|
|
0.06 |
|
|
|
0.05 |
|
Employee stock ownership plan (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares granted under the stock-based incentive plan (3) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
Options granted under the stock-based incentive plan (4) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per share (5) (6) |
|
$ |
0.18 |
|
|
$ |
0.16 |
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price to pro forma net income per share (annualized) |
|
|
27.78x |
|
|
|
31.25x |
|
|
|
35.71x |
|
|
|
41.67x |
|
Number of shares used in net income per share calculations
(5) |
|
|
43,236,402 |
|
|
|
50,866,355 |
|
|
|
58,496,308 |
|
|
|
67,270,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
247,950 |
|
|
$ |
247,950 |
|
|
$ |
247,950 |
|
|
$ |
247,950 |
|
Estimated net proceeds |
|
|
318,369 |
|
|
|
374,904 |
|
|
|
431,438 |
|
|
|
496,453 |
|
Oritani Financial Corp., MHC capital contribution |
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
Less: Common stock acquired by employee stock ownership
plan (2) |
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
Less: Common stock acquired by the stock-based incentive
plan (3) |
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma tangible stockholders equity |
|
$ |
540,008 |
|
|
$ |
591,863 |
|
|
$ |
643,717 |
|
|
$ |
703,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity per share (7): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
5.57 |
|
|
$ |
4.73 |
|
|
$ |
4.11 |
|
|
$ |
3.58 |
|
Estimated net proceeds |
|
|
7.15 |
|
|
|
7.16 |
|
|
|
7.16 |
|
|
|
7.17 |
|
Oritani Financial Corp., MHC capital contribution |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
Less: Common stock acquired by employee stock ownership
plan (2) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
Less: Common stock acquired by the stock-based incentive
plan (3) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma tangible stockholders equity per share (7) |
|
$ |
12.13 |
|
|
$ |
11.30 |
|
|
$ |
10.68 |
|
|
$ |
10.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price as percentage of pro forma stockholders
equity per share |
|
|
82.44 |
% |
|
|
88.50 |
% |
|
|
93.63 |
% |
|
|
98.52 |
% |
Offering price as percentage of pro forma tangible
stockholders equity per share |
|
|
82.44 |
% |
|
|
88.50 |
% |
|
|
93.63 |
% |
|
|
98.52 |
% |
Number of shares outstanding for pro forma book value per
share calculations (8) |
|
|
44,529,252 |
|
|
|
52,387,355 |
|
|
|
60,245,458 |
|
|
|
69,282,277 |
|
54
|
|
|
(1) |
|
As adjusted to give effect to an increase in the number of shares that could occur due to a
15% increase in the offering range to reflect demand for the shares, or changes in market or
financial conditions following the commencement of the offering. |
|
|
|
|
(2) |
|
Assumes that 4.0% of shares of common stock sold in the offering will be purchased by the
employee stock ownership plan. For purposes of this table, the funds used to acquire these
shares are assumed to have been borrowed by the employee stock ownership plan from
Oritani-Delaware. It is assumed that the loan will have a term of 20 years and an interest
rate equal to the prime rate as published in The Wall Street Journal. Oritani Bank intends to
make annual contributions to the employee stock ownership plan in an amount at least equal to
the required principal and interest payments on the debt. Oritani Banks total annual
payments on the employee stock ownership plan debt are based upon 20 equal annual installments
of principal and interest. Statement of Position 93-6, Employers Accounting for Employee
Stock Ownership Plans (SOP 93-6), requires that an employer record compensation expense in
an amount equal to the fair value of the shares committed to be released to employees. The
pro forma adjustments assume that: (i) the employee stock ownership plan shares are allocated
in equal annual installments based on the number of loan repayment installments assumed to be
paid by Oritani Bank; (ii) the fair value of the common stock remains equal to the $10.00
subscription price; and (iii) the employee stock ownership plan expense reflects an effective
combined federal and state tax rate of 39.0%. The unallocated employee stock ownership plan
shares are reflected as a reduction of stockholders equity. No reinvestment is assumed on
proceeds contributed to fund the employee stock ownership plan. The pro forma net income
further assumes that 33,150, 39,000, 44,850 and 51,578 shares were committed to be released
during the period at the minimum, midpoint, maximum, and adjusted maximum of the offering
range, respectively, and in accordance with SOP 93-6, only the employee stock ownership plan
shares committed to be released during the period were considered outstanding for purposes of
net income per share calculations. |
|
(3) |
|
Gives effect to the grant of restricted stock awards pursuant to the stock-based incentive
plan expected to be adopted by following the offering and presented to stockholders for
approval not earlier than twelve months after the completion of the offering. We have assumed
that at the minimum, midpoint, maximum and maximum as adjusted, of the offering range this
plan acquires a number of shares of restricted common stock equal to 4.0% of the shares sold
in the offering, either through open market purchases, from authorized but unissued shares of
common stock or treasury stock. Funds used by the stock-based incentive plan to purchase the
shares of common stock will be contributed by Oritani-Delaware. In calculating the pro forma
effect of the stock-based incentive plan, it is assumed that the shares of restricted stock
were acquired by the plan in open market purchases at the beginning of the period presented
for a purchase price equal to the price for which the shares are sold in the offering, and
that 10.0% of the amount contributed was an amortized expense (20.0% annually based upon a
five-year vesting period) during the six months ended December 31, 2009. There can be no
assurance that the actual purchase price of the shares of common stock granted under the
stock-based incentive plan will be equal to the $10.00 subscription price. If shares are
acquired from authorized but unissued shares of common stock or from treasury shares, our net
income per share and stockholders equity per share will decrease. This will also have a
dilutive effect of approximately 2.89% (at the maximum of the offering range) on the ownership
interest of stockholders. The impact on pro forma net income per share and pro forma
stockholders equity per share is not material. |
|
(4) |
|
Gives effect to the granting of options pursuant to the stock-based incentive plan, which is
expected to be adopted by Oritani-Delaware following the offering and presented to
stockholders for approval not earlier than twelve months after the completion of the offering.
We have assumed that options will be granted to acquire shares of common stock equal to 10.0%
of the shares sold in the offering. In calculating the pro forma effect of the stock options,
it is assumed that the exercise price of the stock options and the trading price of the stock
at the date of grant were $10.00 per share, and the estimated grant-date fair value pursuant
to the application of the Black-Scholes option pricing model was $3.43 for each option. The
pro forma net income assumes that the options granted under the stock-based incentive plan
have a value of $3.43 per option, which was determined using the Black-Scholes option pricing
formula using the following assumptions: (i) the trading price on date of grant was $10.00
per share; (ii) exercise price is equal to the trading price on the date of grant; (iii)
dividend yield of 3.0%; (iv) expected life of ten years; (v) expected volatility of 36.45%;
(vi) risk-free interest rate of 3.85%; and (vii) 50% of the options awarded are non-qualified
options. If the fair market value per share on the date of grant is different than $10.00, or
if the assumptions used in the option pricing formula are different from those used in
preparing this pro forma data, the value of options and the related expense recognized will be
different. The aggregate grant date fair value of the stock options was amortized to expense
on a straight-line basis over a five-year vesting period of the options. There can be no
assurance that the actual exercise price of the stock options will be equal to the $10.00
price per share. If a portion of the shares to satisfy the exercise of options under the
stock-based incentive plan is obtained from the issuance of authorized but unissued shares of
common stock, our net income and stockholders equity per share will decrease. This also will
have a dilutive effect of up to 6.93% on the ownership interest of persons who purchase shares
of common stock in the offering. |
|
(5) |
|
The number of shares used to calculate pro forma net income per share is equal to the total
number of shares to be outstanding upon completion of the offering, and subtracting the
employee stock ownership plan shares which have not been committed for release during the
period in accordance with SOP 93-6. See footnote 2, above. |
|
(6) |
|
The retained earnings of Oritani Bank will be substantially restricted after the conversion.
See Our Policy Regarding Dividends, The Conversion and OfferingLiquidation Rights and
Supervision and Regulation. |
|
(7) |
|
Per share figures include publicly held shares of Oritani-Federal common stock that will be
exchanged for shares of Oritani-Delaware common stock in the conversion. Stockholders equity
per share calculations are based upon the sum of (i) the number of subscription shares assumed
to be sold in the offering; and (ii) shares to be issued in exchange for publicly held shares. |
|
(8) |
|
The number of shares used to calculate pro forma stockholders equity per share is equal to
the total number of shares to be outstanding upon completion of the offering. |
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Year Ended June 30, 2009 |
|
|
|
Based Upon the Sale at $10.00 Per Share of |
|
|
|
33,150,000 |
|
|
39,000,000 |
|
|
44,850,000 |
|
|
51,577,500 |
|
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
|
Shares (1) |
|
|
|
(Dollars in thousands, except per share amounts) |
|
Gross proceeds of offering |
|
$ |
331,500 |
|
|
$ |
390,000 |
|
|
$ |
448,500 |
|
|
$ |
515,775 |
|
Market value of shares issued in the exchange |
|
|
113,793 |
|
|
|
133,874 |
|
|
|
153,955 |
|
|
|
177,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma market capitalization |
|
$ |
445,293 |
|
|
$ |
523,874 |
|
|
$ |
602,455 |
|
|
$ |
692,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds of offering |
|
$ |
331,500 |
|
|
$ |
390,000 |
|
|
$ |
448,500 |
|
|
$ |
515,775 |
|
Less: Expenses |
|
|
(13,131 |
) |
|
|
(15,096 |
) |
|
|
(17,062 |
) |
|
|
(19,322 |
) |
Plus: Assets received from MHC |
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proceeds |
|
$ |
318,578 |
|
|
$ |
375,113 |
|
|
$ |
431,647 |
|
|
$ |
496,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Common stock purchased by employee stock ownership plan |
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
Less: Common stock purchased by the stock-based incentive
plan |
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proceeds, as adjusted |
|
$ |
292,058 |
|
|
$ |
343,913 |
|
|
$ |
395,767 |
|
|
$ |
455,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
5,552 |
|
|
$ |
5,552 |
|
|
$ |
5,552 |
|
|
$ |
5,552 |
|
Pro forma adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income on adjusted net proceeds |
|
|
4,522 |
|
|
|
5,325 |
|
|
|
6,129 |
|
|
|
7,053 |
|
Employee stock ownership plan (2) |
|
|
(404 |
) |
|
|
(476 |
) |
|
|
(547 |
) |
|
|
(629 |
) |
Shares granted under the stock-based incentive plan (3) |
|
|
(1,618 |
) |
|
|
(1,903 |
) |
|
|
(2,189 |
) |
|
|
(2,517 |
) |
Options granted under the stock-based incentive plan (4) |
|
|
(1,831 |
) |
|
|
(2,154 |
) |
|
|
(2,477 |
) |
|
|
(2,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income |
|
$ |
6,221 |
|
|
$ |
6,344 |
|
|
$ |
6,468 |
|
|
$ |
6,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share (5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.10 |
|
|
$ |
0.08 |
|
Pro forma adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income on adjusted net proceeds |
|
|
0.10 |
|
|
|
0.10 |
|
|
|
0.10 |
|
|
|
0.11 |
|
Employee stock ownership plan (2) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
Shares granted under the stock-based incentive plan (3) |
|
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
(0.04 |
) |
Options granted under the stock-based incentive plan (4) |
|
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per share (5) (6) |
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.11 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price to pro forma net income per share (annualized) |
|
|
71.43x |
|
|
|
83.33x |
|
|
|
90.91x |
|
|
|
100.00x |
|
Number of shares used in net income per share calculations
(5) |
|
|
42,269,552 |
|
|
|
50,905,355 |
|
|
|
58,541,158 |
|
|
|
67,322,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
240,098 |
|
|
$ |
240,098 |
|
|
$ |
240,098 |
|
|
$ |
240,098 |
|
Estimated net proceeds |
|
|
318,369 |
|
|
|
374,904 |
|
|
|
431,438 |
|
|
|
496,453 |
|
Oritani Financial Corp., MHC capital contribution |
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
|
|
209 |
|
Less: Common stock acquired by employee stock ownership
plan (2) |
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
Less: Common stock acquired by the stock-based incentive
plan (3) |
|
|
(13,260 |
) |
|
|
(15,600 |
) |
|
|
(17,940 |
) |
|
|
(20,631 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma tangible stockholders equity |
|
$ |
532,156 |
|
|
$ |
584,011 |
|
|
$ |
635,865 |
|
|
$ |
695,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity per share (7): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
5.39 |
|
|
$ |
4.58 |
|
|
$ |
3.98 |
|
|
$ |
3.46 |
|
Estimated net proceeds |
|
|
7.15 |
|
|
|
7.16 |
|
|
|
7.16 |
|
|
|
7.17 |
|
Oritani Financial Corp., MHC capital contribution |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
Less: Common stock acquired by employee stock ownership
plan (2) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
Less: Common stock acquired by the stock-based incentive
plan (3) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
(0.30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma tangible stockholders equity per share (7) |
|
$ |
11.95 |
|
|
$ |
11.15 |
|
|
$ |
10.55 |
|
|
$ |
10.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price as percentage of pro forma stockholders
equity per share |
|
|
83.68 |
% |
|
|
89.69 |
% |
|
|
94.79 |
% |
|
|
99.60 |
% |
Offering price as percentage of pro forma tangible
stockholders equity per share |
|
|
53.68 |
% |
|
|
89.69 |
% |
|
|
94.79 |
% |
|
|
99.60 |
% |
Number of shares outstanding for pro forma book value per
share calculations (8) |
|
|
44,529,252 |
|
|
|
52,387,355 |
|
|
|
60,245,458 |
|
|
|
69,282,277 |
|
56
|
|
|
(1) |
|
As adjusted to give effect to an increase in the number of shares that could occur due to a
15% increase in the offering range to reflect demand for the shares, or changes in market and
financial conditions following the commencement of the offering. |
|
|
|
|
(2) |
|
Assumes that 4.0% of shares of common stock sold in the offering will be purchased by the
employee stock ownership plan. For purposes of this table, the funds used to acquire
these shares are assumed to have been borrowed by the employee stock ownership plan from
Oritani-Delaware. It is assumed that the loan will have a term of 20 years and an
interest rate equal to the prime rate as published in The Wall Street Journal. Oritani
Bank intends to make annual contributions to the employee stock ownership plan in an
amount at least equal to the required principal and interest payments on the debt.
Oritani Banks total annual payments on the employee stock ownership plan debt are based
upon 20 equal annual installments of principal and interest. SOP 93-6 requires that an
employer record compensation expense in an amount equal to the fair value of the shares
committed to be released to employees. The pro forma adjustments assume that: (i) the
employee stock ownership plan shares are allocated in equal annual installments based on
the number of loan repayment installments assumed to be paid by Oritani Bank; (ii) the
fair value of the common stock remains equal to the $10.00 subscription price; and (iii)
the employee stock ownership plan expense reflects an effective combined federal and state
tax rate of 39%. The unallocated employee stock ownership plan shares are reflected as a
reduction of stockholders equity. No reinvestment is assumed on proceeds contributed to
fund the employee stock ownership plan. The pro forma net income further assumes that
66,300, 78,000, 89,700 and 103,155 shares were committed to be released during the year at
the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively,
and in accordance with SOP 93-6, only the employee stock ownership plan shares committed
to be released during the year were considered outstanding for purposes of net income per
share calculations. |
|
(3) |
|
Gives effect to the grant of restricted stock awards pursuant to the stock-based
incentive plan expected to be adopted by following the offering and presented to
stockholders for approval not earlier than six months after the completion of the
offering. We have assumed that at the midpoint, maximum and maximum as adjusted, of the
offering range this plan acquires a number of shares of restricted common stock equal to
4.0% of the shares sold in the stock offering, either through open market purchases, from
authorized but unissued shares of common stock or treasury stock. Funds used by the
stock-based incentive plan to purchase the shares of restricted stock will be contributed
by Oritani-Delaware. In calculating the pro forma effect of the stock-based incentive
plan, it is assumed that the shares of common stock were acquired by the plan in open
market purchases at the beginning of the period presented for a purchase price equal to
the price for which the shares are sold in the offering, and that 20.0% of the amount
contributed was an amortized expense (based upon a five-year vesting period) during the
year ended June 30, 2009. There can be no assurance that the actual purchase price of the
shares of common stock granted under the stock-based incentive plan will be equal to the
$10.00 subscription price. If shares are acquired from authorized but unissued shares of
common stock or from treasury shares, our net income per share and stockholders equity
per share will decrease. This will also have a dilutive effect of approximately 2.89% (at
the maximum of the offering range) on the ownership interest of stockholders. The impact
on pro forma net income per share and pro forma stockholders equity per share is not
material. |
|
(4) |
|
Gives effect to the granting of options pursuant to the stock-based incentive plan, which is
expected to be adopted by following the offering and presented to stockholders for approval
not earlier than twelve months after the completion of the offering. We have assumed that
options will be granted to acquire shares of common stock equal to 10.0% of the shares sold in
the offering. In calculating the pro forma effect of the stock options, it is assumed that
the exercise price of the stock options and the trading price of the stock at the date of
grant were $10.00 per share, and the estimated grant date fair value pursuant to the
application of the Black-Scholes option pricing model was $3.43 for each option. The pro
forma net income assumes that the options granted under the stock-based incentive plan have a
value of $3.43 per option, which was determined using the Black-Scholes option pricing formula
using the following assumptions: (i) the trading price on date of grant was $10.00 per share;
(ii) exercise price is equal to the trading price on the date of grant; (iii) dividend yield
of 3.00%; (iv) expected life of ten years; (v) expected volatility of 36.45%; (vi) risk-free
interest rate of 3.85%; and (vii) 50% of the options awarded are non-qualified options. If
the fair market value per share on the date of grant is different than $10.00, or if the
assumptions used in the option pricing formula are different from those used in preparing this
pro forma data, the value of options and the related expense recognized will be different.
The aggregate grant-date fair value of the stock options was amortized to expense on a
straight-line basis over a five-year vesting period of the options. There can be no assurance
that the actual exercise price of the stock options will be equal to the $10.00 price per
share. If a portion of the shares to satisfy the exercise of options under the stock-based
incentive plan is obtained from the issuance of authorized but unissued shares of common
stock, our net income and stockholders equity per share will decrease. This also will have a
dilutive effect of up to 6.93% on the ownership interest of persons who purchase shares of
common stock in the offering. |
|
(5) |
|
The number of shares used to calculate pro forma net income per share is equal to the total
number of shares to be outstanding upon completion of the offering, and subtracting the
employee stock ownership plan shares which have not been committed for release during the
period in accordance with SOP 93-6. See footnote 2, above. |
|
(6) |
|
The retained earnings of Oritani Bank will be substantially restricted after the conversion.
See Our Policy Regarding Dividends, The Conversion and OfferingLiquidation Rights and
Supervision and Regulation. |
|
(7) |
|
Per share figures include publicly held shares of Oritani-Federal common stock that will be
exchanged for shares of Oritani-Delaware common stock in the conversion. Stockholders equity
per share calculations are based upon the sum of (i) the number of subscription shares assumed
to be sold in the offering; and (ii) shares to be issued in exchange for publicly held shares.
The number of subscription shares actually sold and the corresponding number of exchange
shares may be more or less than the assumed amounts. |
|
(8) |
|
The number of shares used to calculate pro forma stockholders equity per share is equal to
the total number of shares to be outstanding upon completion of the offering. |
57
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis reflects our consolidated financial statements and other relevant
statistical data. The information in this section has been derived from the audited and unaudited
consolidated financial statements, which appear beginning on page F-1 of this prospectus. You
should read the information in this section in conjunction with the business and financial
information regarding Oritani-Federal provided in this prospectus.
Business Strategy
We intend to continue to operate as a well-capitalized and profitable financial institution
dedicated to understanding the banking needs of both our individual and business customers, and
tailoring our products and services accordingly. This approach enables us to be more flexible and
responsive to our customers and to provide an exceptional level of personal service.
Highlights of our business strategy are discussed below:
Continue our focus on multi-family and commercial real estate lending. Unlike many
traditional thrifts, we have focused on the origination of multi-family and commercial real estate
loans. Such loans comprise 66.9% of our total loan portfolio at December 31, 2009. We have
focused on this type of lending because the interest rates earned for such loans are higher than
the prevailing rates for residential loans, resulting in a greater level of interest income
potential. We are also able to generate significantly higher fee income on such loans. In
addition, the repayment terms usually expose us to less interest rate risk than fixed-rate
residential loans. While our actual origination volume will depend on market conditions, we intend
to continue our emphasis on multi-family and commercial real estate lending.
We have experienced substantial growth in our combined multi-family and commercial real estate
loan portfolio in recent years. The growth rate of the portfolio has been 20.27%; 40.62%; 32.37%;
18.97% and 39.71% for the six months ended December 31, 2009 (annualized) and years ended June 30,
2009, 2008, 2007 and 2006, respectively. In addition, despite our more stringent underwriting
standards discussed below, we believe that the exit of many larger banks and conduit lenders from
the commercial real estate lending market due to the financial crisis has enabled us, as a
community bank, to increase the number and size of the commercial real estate loans that we
originate while lending to a higher quality of borrower.
We have been involved in multi-family lending for over thirty years. Over the past seven
years, we have assembled a department exclusively devoted to the origination and administration of
multi-family and commercial real estate loans. Over the past two years, we have established a
separate credit department to review all such originations and ensure compliance with our
underwriting standards. There are presently eight loan officers as well as support staff in the
origination department and three officers as well as support staff in the credit department. Our
business plan projects continued growth of the portfolio and continued additions to our staff to
support such growth. In addition, due to current economic conditions and related risks, management
has been applying stricter underwriting guidelines, including requiring higher debt service
coverage ratios and lower loan to value ratios, to these loans. We have also focused our
multi-family and commercial real estate lending on more seasoned and experienced developers.
Reduce problem assets and aggressively remedy delinquent loans. One of managements primary
objectives is to reduce our level of problem assets. While no assurances can be provided regarding
results, management will focus a significant amount of its time on the resolution of problem
58
assets. Managements tactics toward delinquent borrowers are considered aggressive. We have
commenced legal action against virtually all borrowers who are more than 45 days delinquent. We
have generally refused to extend the maturity date of any construction loan, even if the interest
payments are current, unless the borrower agrees to reduce our exposure through additional
principal payments and/or additional collateral, and agrees to an additional fee if the loan is not
paid in full on or before the new maturity date. We realize that such actions contribute to the
high level of delinquencies but believe this is the most prudent path to addressing delinquent
loans. Since June 30, 2009, our level of non-performing assets to total assets has declined from
2.74% to 2.62% at December 31, 2009. Additionally, $13.9 million of our delinquent loans are expected to be resolved in the coming
months as the underlying collateral are under contracts for sale.
Increase core deposits. During the past two years, we have devoted significant internal
attention to growing our deposits. We hired key, experienced personnel and have implemented an
incentive program that rewards branch personnel for attracting core deposit relationships. We have
also begun to emphasize obtaining deposits from our commercial borrowers, reexamined our pricing
strategies and promoted our status as a local community bank. As a result of these efforts and
external factors, we have recently experienced a period of unprecedented deposit growth. Our
deposit balances grew 61.3% from June 30, 2008 to June 30, 2009. The growth has continued as our
annualized growth for the six month period ended December 31, 2009 was 14.7%. Much of the increase
came in the areas of certificates of deposit and money market accounts. In addition to the
initiatives described above, management believes that external factors also contributed to our
deposit growth. Due to uncertainty in the financial markets and a downturn in the U.S. economy,
many investors withdrew funds from the stock market and deposited them into investment options
considered safe by investors, such as Oritani Bank deposit accounts. Management believes a portion
of our growth was due to this activity, particularly during the June 30, 2008 to June 30, 2009
period. Other external factors, including a relaxation of the insured deposit limits, also may
have contributed to our deposit growth however; management believes any impact due to increased
deposit limits is minimal. Our ongoing focus will be to build upon our successes, with a
particular emphasis on growing core commercial and retails deposits. In addition to continuing to
attract new customers to Oritani Bank, we will also focus on cross-selling core deposit accounts to
customers who have limited deposit services with Oritani Bank and seeking to further develop the
relationship by providing quality customer service.
Expand our market share within our primary market area. Our deposit growth significantly
boosted our market penetration in Bergen County, the primary county of our operations. We
increased our percentage of Bergen County deposits from 1.8%, or the 14th highest
financial institution, at June 30, 2008 to 2.6%, or the 9th highest financial
institution, at June 30, 2009. In October 2008, Oritani Bank opened two de novo branches. These
branches had combined deposit totals of $49.6 million at December 31, 2009. In February 2010, we
opened a de novo branch in Bergenfield, New Jersey. We intend to continue the strategy of
opportunistic de novo branching. We typically seek de novo branch locations in under-banked areas
that are either a contiguous extension or fill-in of our existing branch network. We also have
budgeted monies for infrastructure improvements in our existing branches. We may also consider the
acquisition of branches from other financial institutions in our market area. We believe these
strategies, along with continued growth, will help us achieve our goal of deposit growth and market
expansion.
Continue to emphasize operating efficiencies and cost control. One of the hallmarks of our
operations has been expense control as evidenced by an efficiency ratio of 46.5% for the six months
ended December 31, 2009. Our efficiency ratio as well as numerous other expense measurement
ratios, have consistently outperformed peers. We intend to maintain our posture on expense control
while continuing to make prudent investments in our operations by effectively managing costs in a
relation to revenues. We realize that our expense ratios will be challenged in the future with the
intended
59
implementation of stock benefit plans. However, we have recently been able to generate
favorable peer comparisons with such plans in place.
Remain true to our core competencies. We are very proud of the institution we have helped to
build. We realize many of our peers have ventured into other areas of banking operations, such as
C&I lending, leasing and sales of alternative investment products. While these areas may be
profitable, they also have inherent risks and require significant expertise separate from our core
lending and deposit gathering operations. For the foreseeable future, we do not intend to utilize
our capital to enter into new types of lending or other areas of operations that we consider to be
risky. We believe that we possess expertise in our current types of lending and operations and
intend to rely on this existing expertise for future growth and profitability.
Critical Accounting Policies
We consider accounting policies that require management to exercise significant judgment or
discretion or to make significant assumptions that have, or could have, a material impact on the
carrying value of certain assets or on income, to be critical accounting policies. We consider the
following to be our critical accounting policies.
Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered
necessary to cover credit losses inherent in the loan portfolio at the balance sheet date. The
allowance is established through the provision for loan losses that is charged against income. The
allowance for loan losses is considered a critical accounting policy by management because of the
high degree of judgment involved, the subjectivity of the assumptions used, and the potential for
changes in the economic environment that could result in changes to the amount of the recorded
allowance for loan losses.
The allowance for loan losses has been determined in accordance with U.S. generally accepted
accounting principles, under which we are required to maintain an allowance for probable losses at
the balance sheet date. We are responsible for the timely and periodic determination of the amount
of the allowance required. We believe that our allowance for loan losses is adequate to cover
specifically identifiable losses, as well as estimated losses inherent in our portfolio for which
certain losses are probable but not specifically identifiable.
Management performs a quarterly evaluation of the adequacy of the allowance for loan losses.
The analysis of the allowance for loan losses has two components: specific and general allocations.
Specific allocations may be made for loans that are criticized or impaired. Management will
identify loans that have demonstrated issues that cause concern regarding full collectibility in
the required time frame. Delinquency is a key indicator of such issues. In addition, we utilize
the services of an external loan review firm to review a significant portion of new originations
and the existing portfolio over the course of the year. Their scope is determined by the Audit
Committee. This firm prepares quarterly reports that include recommendations for classification.
Their services assist in identifying loans that should be classified, particularly prior to
delinquency issues. Management summarizes all problem loans and classifies such loans within the
following industry standard categories: Watch; Special Mention; Substandard; Doubtful; or Loss. In
addition, a classified loan may be considered impaired. Impairment is measured by determining the
present value of expected future cash flows or, for collateral-dependent loans, the fair value of
the collateral adjusted for market conditions and selling expenses. The general allocation is
determined by segregating the remaining loans by type of loan, and specific collateral category.
We also analyze historical loss experience, delinquency trends, general economic conditions and
geographic concentrations. This analysis establishes factors that are applied to the loan groups
to determine the amount of the general allocation. This evaluation is inherently subjective, as it
requires material estimates that may be susceptible to significant revisions based upon changes in
economic and
60
real estate market conditions. Actual loan losses may be significantly more than the
allowance for loan losses we have established, which could have a material negative effect on our
financial results.
On a quarterly basis, the Chief Financial Officer reviews the current status of various loan
assets in order to evaluate the adequacy of the allowance for loan losses. In this evaluation
process, specific loans are analyzed to determine their risk of loss. This process includes all
loans, concentrating on non-accrual and classified loans. Each non-accrual or classified loan is
evaluated for loss exposure. To determine the adequacy of collateral on a particular loan, an
estimate of the fair market value of the collateral is based on the most current appraised value
available. This appraised value is then reduced to reflect estimated liquidation expenses. Any
shortfall results in a charge to the allowance if the likelihood of loss is evaluated as probable.
The results of this quarterly process are summarized along with recommendations and presented
to executive management for their review. Based on these recommendations, specific allowances for
loan losses are approved by executive management. All supporting documentation with regard to the
evaluation process, loan loss experience, allowance levels and the schedules of classified loans
are maintained by the Chief Financial Officer. A summary of specific allowances for loan losses is
presented to the Board of Directors on a quarterly basis.
We have a concentration of loans secured by real property located in New Jersey. As a
substantial amount of our loan portfolio is collateralized by real estate, appraisals of the
underlying value of property securing loans are critical in determining the amount of the allowance
required for specific loans. Assumptions for appraisal valuations are instrumental in determining
the value of properties. Overly optimistic assumptions or negative changes to assumptions could
significantly impact the valuation of a property securing a loan and the related allowance
determined. Only Board-approved appraisers are utilized. The assumptions supporting such
appraisals are carefully reviewed by management to determine that the resulting values reasonably
reflect amounts realizable on the related loans. Based on the composition of our loan portfolio,
we believe the primary risks are increases in interest rates, a decline in the economy generally,
and a decline in real estate market values in New Jersey. Any one or combination
of these events may adversely affect our loan portfolio resulting in increased delinquencies,
loan losses and future levels of loan loss provisions. We consider it important to maintain the
ratio of our allowance for loan losses to total loans at an adequate level. Factors such as
current economic conditions, interest rates, and the composition of the loan portfolio will effect
our determination of the level of this ratio for any particular period.
Our allowance for loan losses in recent years reflects probable losses resulting from the
actual growth in our loan portfolio. We recognize that our overall delinquencies, impaired loans
and nonaccrual loans have increased significantly over the past two years. We believe the
allowance for loan losses at December 31, 2009 adequately reflects our portfolio credit risk.
Although we believe we have established and maintained the allowance for loan losses at
adequate levels, additions may be necessary if future economic and other conditions differ
substantially from the current operating environment. Although management uses the best
information available, the level of the allowance for loan losses remains an estimate that is
subject to significant judgment and short-term change. In addition, the FDIC and the New Jersey
Department of Banking and Insurance, as an integral part of their examination process, will
periodically review our allowance for loan losses. Such agencies may require us to recognize
adjustments to the allowance based on its judgments about information available to them at the time
of their examination.
Deferred Income Taxes. We use the asset and liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of
existing assets and
61
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. If current available
information raises doubt as to the realization of the deferred tax assets, a valuation allowance
may be established. We consider the determination of this valuation allowance to be a critical
accounting policy because of the need to exercise significant judgment in evaluating the amount and
timing of recognition of deferred tax liabilities and assets, including projections of future
taxable income. These judgments and estimates are reviewed on a quarterly basis as regulatory and
business factors change. A valuation allowance for deferred tax assets may be required if the
amounts of taxes recoverable through loss carry backs decline, or if we project lower levels of
future taxable income. Such a valuation allowance would be established through a charge to income
tax expense that would adversely affect our operating results.
Asset Impairment Judgments. Some of our assets are carried on our consolidated balance sheets
at cost, fair value or at the lower of cost or fair value. Valuation allowances or write-downs are
established when necessary to recognize impairment of such assets. We periodically perform
analyses to test for impairment of such assets. In addition to the impairment analyses related to
our loans discussed above, another significant impairment analysis is the determination of whether
there has been an other-than-temporary decline in the value of one or more of our securities.
Our available-for-sale securities portfolio is carried at estimated fair value, with any
unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or
loss in stockholders equity. If management has the intent and the ability at the time of purchase
to hold securities until maturity, they are classified as held to maturity. We conduct a periodic
review and evaluation of the securities portfolio to determine if the value of any security has
declined below its cost or amortized cost, and whether such decline is other-than-temporary. Any
portion of unrealized loss on an individual equity security deemed to be other-than-temporary is
recognized as a loss in operations in the period in which such determination is made. For debt
investments securities (where we do not intend to sell the security and it is not more likely than
not that we will be required to sell the security prior to recovery of the securitys amortized
cost) deemed other than temporarily impaired, the investment is written down through current
earnings by the impairment related to the estimated credit loss and the non-credit related
impairment is recognized in other comprehensive income.
Stock-Based Compensation. We recognize the cost of employee services received in exchange for
awards of equity instruments based on the grant-date fair value of those awards in accordance with
SFAS No. 123(R) and its successor, FASB ASC Topic 718.
We estimate the per share fair value of option grants on the date of grant using the
Black-Scholes option pricing model using assumptions for the expected dividend yield, expected
stock price volatility, risk-free interest rate and expected option term. These assumptions are
subjective in nature, involve uncertainties and, therefore, cannot be determined with precision.
The Black-Scholes option pricing model also contains inherent limitations when applied to options
that are not traded on public markets.
The per share fair value of options is highly sensitive to changes in assumptions. In general,
the per share fair value of options will move in the same direction as changes in the expected
stock price volatility, risk-free interest rate and expected option term, and in the opposite
direction as changes in the expected dividend yield. For example, the per share fair value of
options will generally increase as expected stock price volatility increases, risk-free interest
rate increases, expected option term increases and expected dividend yield decreases. The use of
different assumptions or different option pricing models could result in materially different per
share fair values of options.
62
Comparison of Financial Condition at December 31, 2009 and June 30, 2009
Total Assets. Total assets increased $93.4 million, or 4.9%, to $2.01 billion at December 31,
2009, from $1.91 billion at June 30, 2009. The increase was due primarily to the growth of loans
and securities AFS.
Cash and Cash Equivalents. Cash and cash equivalents (which includes fed funds and short term
investments) decreased $109.1 million to $26.3 million at December 31, 2009 from $135.4 million at
June 30, 2009 as excess liquidity was deployed primarily into securities available for sale.
Loans, Net. Net loans increased $78.5 million, or 6.1%, to $1.36 billion at December 31, 2009 from
$1.28 billion at June 30, 2009. We continued our emphasis on loan originations, particularly
multi-family and commercial real estate loans. Loan originations and purchases totaled $192.1
million for the six months ended December 31, 2009.
The allowance for loan losses increased $1.5 million to $22.2 million at December 31, 2009 from
$20.7 million at June 30, 2009. We charged off loans of $3.6 million and recovered $3,000 in
previously charged off loans during the six months ended December 31, 2009. There were no
charge-offs or recoveries during the six months ended December 31, 2008. The delinquency and
nonaccrual totals, along with charge-offs and economic factors, remain the primary contributors to
the current level of provision for loan losses. Loan growth was also a component of the provision
for loan losses.
Delinquency information is provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
September 30, 2009 |
|
|
June 30, 2009 |
|
|
March 31, 2009 |
|
|
December 31, 2008 |
|
Delinquency Totals |
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
30 - 59 days past due |
|
$ |
9,613 |
|
|
$ |
14,318 |
|
|
$ |
6,727 |
|
|
$ |
4,897 |
|
|
$ |
4,979 |
|
60 - 89 days past due |
|
|
1,974 |
|
|
|
1,049 |
|
|
|
17,825 |
|
|
|
2,130 |
|
|
|
5,942 |
|
Nonaccrual |
|
|
51,907 |
|
|
|
52,557 |
|
|
|
52,465 |
|
|
|
52,260 |
|
|
|
44,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
63,494 |
|
|
$ |
67,924 |
|
|
$ |
77,017 |
|
|
$ |
59,287 |
|
|
$ |
54,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total delinquent loans decreased by $13.5 million during the six months ended December 31,
2009 and by $4.4 million over the three months ended December 31, 2009. While the totals decreased
over the 2009 periods, nonaccrual and total delinquent loan totals remain at elevated levels. The
nonaccrual loan total was fairly stable from September 30, 2009 to December 31, 2009. However, as
further described below, $13.9 million of this total is expected to be resolved shortly as the
underlying collateral is currently under contracts for sale. We have been utilizing all legal
remedies reasonably possible to expedite these closings, however, circumstances may occur that
could cause closings to be deferred or not occur at all. The $3.1 million property described below
was originally estimated for a March 2010 closing, but that has now been postponed until April. We
have continued our aggressive posture toward delinquent borrowers. We have 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 Companys exposure through additional principal payments
and/or additional collateral, and agrees to an additional fee if the loan is not paid in full on or
before the new maturity date. We realize that such actions contribute to the high level of
delinquencies but believe this is the most prudent path to addressing problem loans.
A discussion of the significant components of the nonaccrual loan total at December 31, 2009
follows. These loans comprise $50.2 million of total nonaccrual loans at December 31, 2009.
Two of these loans are to one borrower and totaled $15.9 million at December 31, 2009. The
loans are secured by a condominium construction project and raw land with all building approvals,
both of which are in Northern New Jersey. The borrower declared bankruptcy and Oritani Bank has
63
provided debtor in possession financing for the completion of the condominium construction
project. While significant costs and delays have been encountered in finalizing the project and
obtaining CO for the residential units, we believe that the final matters necessary to realize
these items are in the final phases of completion. Numerous residential units remain under
contract and new sales are continuing, providing a clear indicator of current value. These
contracts are not included in the $13.9 million of loans described above that are expected to be
resolved shortly through the sale of the underlying collateral. They were not included in this
total due to prior disappointments regarding the attainment of a CO and uncertainty regarding the
ultimate closing dates. Prior charge offs of the construction loan total $4.0 million. During
the quarter ended December 31, 2009, Oritani Bank charged off $661,000 of the land loan. Both
loans are classified as impaired as of December 31, 2009. In addition, specific allowances for
loan losses totaling $1.7 million have been recorded against these loans.
A $7.9 million loan secured by a retail mall in Northern New Jersey is classified as
nonaccrual and impaired at December 31, 2009. The borrower has declared bankruptcy. Foreclosure
proceedings are progressing and the bankruptcy trustee has accepted a contract for sale of this
property. In accordance with the results of the impairment analyses, no reserve was required for
this loan as it was considered to be well collateralized. Foreclosure auction date was scheduled
for February of 2010 but has been postponed until March. Management currently expects that the
current contract will close shortly after the auction date. However, an investor in the original
project is attempting to use legal remedies to postpone or cancel this sale.
Three loans to one borrower totaling $5.8 million, secured by various warehouse properties
in Rockland, Nassau and Westchester counties, New York, are classified as nonaccrual and impaired
at December 31, 2009. Oritani Bank is in litigation with the borrower and the guarantor.
Foreclosure auctions have occurred for two of the three properties and, in both instances, the
properties were sold at the auction. These two sales have closed and proceeds have been received
in the current quarter. Foreclosure proceedings are progressing on the third property and a
foreclosure date has been scheduled for April, 2010. During the quarter ended December 31, 2009,
Oritani Bank charged off $785,000 of the loans associated with the properties sold at auction. In
addition, specific allowances for loan losses totaling $355,000 have been recorded against the loan
on the remaining property.
A $14.1 million loan secured by a multi-tenant commercial property in Hudson County, New
Jersey. The borrower has experienced cash flow difficulties. Oritani Bank is in litigation with
this borrower, foreclosure proceedings are progressing and all tenant rent payments are being made
directly to Oritani Bank. The rents received were sufficient to make each of the monthly payments
during the quarter. Specific allowances for loan losses totaling $1.1 million have been recorded
against this loan.
A $3.1 million loan secured by a commercial property located in Bergen County, New Jersey.
The borrower and guarantor on this loan have declared bankruptcy. A contract for the sale of the
property has been accepted by the bankruptcy trustee. This contract was originally expected to
close in April 2010. 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.
A $1.1 million multi-family loan located in Hudson County, New Jersey. Oritani Bank and the
borrower have signed a forbearance agreement and the borrower continues to make payments in
accordance with the agreement. The loan was removed from nonaccrual classification in February as
a sufficient history of satisfactory payment under the forbearance agreement has been demonstrated.
A $2.3 million residential construction loan for two luxury homes and an improved lot
located in Essex County, New Jersey. The borrower encountered cash flow difficulties due to an
64
extended construction and marketing period. An extension request was declined, and we are now
pursuing legal remedies.
While delinquency totals have shown improvement over the past two quarters, delinquency totals
have increased significantly over the past few years. Our delinquencies as of June 30, 2007 were
less than $1.0 million and the nonaccrual total on that date was zero. Management believes that
the primary reason for the significant increase in delinquencies over the past 30 months is due to
the downturn of U.S. economic conditions and related uncertainty in the financial markets.
Securities Available for Sale (AFS). Securities AFS increased $176.0 million to $320.4 million
at December 31, 2009, from $144.4 million at June 30, 2009. As described in the discussion of
total interest income in the Comparison of Operating Results for the Six Months ended December 31,
2009 and 2008, we believe this investment option currently presents the best risk/reward profile.
Mortgage-Backed Securities (MBS) Held to Maturity (HTM). Mortgage-backed securities held to
maturity decreased $32.6 million, or 27.5%, to $86.2 million at December 31, 2009 from $118.8
million at June 30, 2009. This decrease was primarily due to principal repayments and sales. The
held to maturity securities sold were mortgage backed securities with 15% or less of their original
purchased balances remaining.
Mortgage-Backed Securities Available for Sale. Mortgage-backed securities available for sale
decreased $30.1 million, or 23.4%, to $98.5 million at December 31, 2009 from $128.6 million at
June 30, 2009. This decrease was primarily due to principal repayments received.
Deposits. Deposits increased $82.9 million, or 7.3%, to $1.21 billion at December 31, 2009 from
$1.13 million at June 30, 2009. Oritani Bank has implemented several initiatives designed to
achieve deposit growth. A new branch location opened in February 2010. Strong deposit growth
remains one of our strategic objectives.
Stockholders Equity. Stockholders equity increased $7.9 million, or 3.3%, to $248.0 million at
December 31, 2009 from $240.1 million at June 30, 2009. The increase was primarily the result of
net income of $7.4 million for the six months ended December 31, 2009. On March 18, 2009, we
announced the commencement of a fourth (967,828 shares) 10.0% repurchase program. As of December
31, 2009, we had repurchased a total of 3,669,937 shares at a total cost of $57.1 million and an
average cost of $15.57 per share.
Comparison of Operating Results for the Six Months Ended December 31, 2009 and 2008
Net Income. Net income increased $4.9 million to $7.4 million for the six months ended December
31, 2009 from net income of $2.5 million for the corresponding 2008 period. The primary cause of
the increased income in the 2009 period was increased net interest income and decreased impairment
charges related to equity investments. Our annualized return on average assets was 76 basis points
for the six months ended December 31, 2009, and 33 basis points for the corresponding 2008 period.
Our annualized return on average equity was 6.19% for the six months ended December 31, 2009, and
1.94% for the corresponding 2008 period.
Total Interest Income. Total interest income increased by $8.7 million, or 20.5%, to $51.2 million
for the six months ended December 31, 2009, from $42.5 million for the six months ended December
31, 2008. The largest increase occurred in interest on loans, which increased $7.4 million, or
21.4%, to $42.1 million for the six months ended December 31, 2009, from $34.6 million for the six
months ended
65
December 31, 2008. Over that same period, the average balance of loans increased $213.4 million
and the yield on the portfolio increased 13 basis points. Included in total interest income for
the 2009 period is $1.3 million in interest income, prepayment penalties, default interest and
deferred fee earnings recovered on the resolution of three classified loans. These recoveries
occurred during the quarter ended September 30, 2009. There were also significant changes to
income on securities AFS; MBS HTM and MBS AFS. Over the period, excess liquidity was generally
deployed in securities classified as available for sale as management felt such investments
provided the best risk/reward profile considering the current and projected cash needs of the
Company. Such investments were typically callable notes of government sponsored agencies with
limited optionality and call features that made the notes likely to be called when management
estimated we would need the liquidity. Management classified the investments as AFS so they could
be sold should unexpected liquidity needs develop. Interest on securities AFS increased by $3.1
million to $3.7 million for the six months ended December 31, 2009, from $633,000 for the six
months ended December 31, 2008. The average balance of securities AFS increased $231.3 million
over that same period. The yield on the portfolio decreased considerably due to current market
rates as well as the conservative structure of the new investments. Cash flows from other
investment categories were redeployed into securities AFS because, as described above, management
felt securities AFS provided the best risk/reward profile given current economic circumstances and
investment options. Interest on MBS HTM decreased by $1.1 million to $1.9 million for the six
months ended December 31, 2009, from $3.0 million for the six months ended December 31, 2008.
Interest on MBS AFS decreased by $955,000 to $2.7 million for the six months ended December 31,
2009, from $3.7 million for the six months ended December 31, 2008. The combined average balances
of the two MBS portfolios decreased $81.7 million over the period.
Total Interest Expense. Total interest expense increased by $1.6 million, or 7.4%, to $22.6 million
for the six months ended December 31, 2009, from $21.1 million for the six months ended December
31, 2008. Interest expense on deposits increased by $1.0 million, or 9.1%, to $12.1 million for
the six months ended December 31, 2009, from $11.1 million for the six months ended December 31,
2008. The average balance of interest bearing deposits increased $426.7 million while the average
cost of these funds decreased 88 basis points over this period. Market interest rates allowed
Oritani Bank to reprice many maturing time deposits, as well as other interest bearing deposits, at
lower rates, decreasing the cost of funds. Interest expense on borrowings increased by $554,000,
or 5.6%, to $10.5 million for the six months ended December 31, 2009, from $9.9 million for the six
months ended December 31, 2008. The average balance of borrowings increased $5.8 million and the
cost increased 17 basis points over this period. The primary reason for this increased cost was
that we had greater reliance on short term borrowings in the 2008 period. Short term borrowings
are generally lower cost.
Net Interest Income Before Provision for Loan Losses. Net interest income increased by $7.2
million, or 33.4%, to $28.6 million for the six months ended December 31, 2009, from $21.5 million
for the six months ended December 31, 2008. Our net interest rate spread increased to 2.61%
(normalized) for the six months ended December 31, 2009, from 2.42% for the six months ended
December 31, 2008. The normalized spread calculation does not include the $1.3 million in loan
interest income realized on the resolution of three classified loans in the September 30, 2009
quarter. Our actual net interest rate spread for the six months ended December 31, 2009 was 2.75%.
Our actual and normalized net interest margin for the six months ended December 31, 2009 were
3.03% and 2.89%, respectively, versus 2.90% for the six months ended December 31, 2008. Our net
interest income was reduced by $1.3 million and $1.4 million for the six months ended December 31,
2009 and 2008, respectively, due to the impact of nonaccrual loans.
Provision for Loan Losses. We recorded provisions for loan losses of $5.1 million for the six
months ended December 31, 2009 as compared to $5.4 million for the six months ended December 31,
2008. See
66
discussion of the allowance for loan losses in Comparison of Financial Condition at December 31,
2009 and June 30, 2009 and note 5 of the financial statements.
Other Income. Other income increased to $3.6 million for the six months ended December 31, 2009
from $668,000 for the six months ended December 31, 2008. The 2008 period was muted by an $1.8
million impairment charge taken regarding equity securities in our AFS portfolio. We incurred a
$202,000 other than temporary impairment charge on these securities in the 2009 period. We also
realized a net gain of $12,000 on the sale of securities in the 2009 period, resulting in the net
loss on sale and writedown of securities of $190,000 recognized in the income statement for the six
months ended December 31, 2009. In addition, in the 2009 period, we realized a $1.0 million gain
on the sale of a commercial office property that had been held and operated as a real estate
investment.
Other Expense. Other expense increased by $2.6 million or 20.8% to $15.0 million for the six
months ended December 31, 2009, from $12.4 million for the six months ended December 31, 2008. The
increase was primarily due to compensation, payroll taxes and fringe benefits, which increased $1.2
million, or 13.1%, over the period. This increase consisted of various components. There was an
increase of $550,000 directly pertaining to compensation, due to additional staff and merit
increases. Bonus expense increased $356,000 as management met all goals and the maximum bonus
level was achieved in our incentive compensation plan. Payroll taxes increased $115,000, primarily
due to social security tax on the increased pay. Expenses and accruals associated with the
Companys qualified and nonqualified benefit plans increased $67,000. There was also a $66,000
increase in health care insurance expense. Federal deposit insurance premiums increased
significantly over six months ended December 31, 2009 due to an increase in FDIC deposit insurance
rates, an increase in insurable deposits and the depletion of a credit against FDIC deposit
insurance charges. Federal deposit insurance premiums increased $1.1 million, to $1.2 million for
the six months ended December 31, 2009, from $60,000 for the six months ended December 31, 2008.
Other expenses increased by $29,000 during the six months ended December 31, 2009 as compared to
the six months ended December 31, 2008. In the 2009 period, a recovery of legal expenses in
conjunction with the resolution of three classified loans partially offset increased problem asset
expense.
Income Tax Expense. Income tax expense for the six months ended December 31, 2009, was $4.8
million, due to pre-tax income of $12.2 million, resulting in an effective tax rate of 39.2%. For
the six months ended December 31, 2008, income tax expense was $1.8 million, due to pre-tax income
of $4.3 million, resulting in an effective tax rate of 41.4%.
Comparison of Operating Results for the Years Ended June 30, 2009 and June 30, 2008
Net Income. Net income decreased $3.4 million, or 38.0%, to $5.6 million for the year ended June
30, 2009, versus $9.0 million for the corresponding 2008 period. The items primarily impacting the
twelve month period ended June 30, 2009 were provision for loan losses totaling $9.9 million, a
pre-tax charge of $2.0 million as a result of an other than temporary impairment in the value of
investment securities available for sale, and increased FDIC expense of $1.7 million. The items
primarily impacting the year ended June 30, 2008 were provision for loan losses totaling $4.7
million, a pre-tax charge of $998,000 as a result of an other than temporary impairment in the
value of investment securities available for sale, and a $1.1 million gain on the sale of a real
estate held for investment property.
Total Interest Income. For the year ended June 30, 2009, total interest income increased by $16.8
million, or 23.5%, to $88.4 million, from $71.6 million for the year ended June 30, 2008. The
largest increase was in interest on mortgage loans. Interest on mortgage loans increased by $17.1
million, or 31.1%, to $72.2 million for the year ended June 30, 2009, from $55.1 million for the
year ended June 30, 2008. The average balance of loans, net increased $323.2 million while the
yield on the portfolio
67
decreased 31 basis points. The yield on the portfolio in 2009 was
negatively impacted by interest on nonaccrual loans. On a normalized basis (inclusive of interest
in nonaccrual loans), the yield remained stable. Interest on federal funds sold and short term
investments decreased by $1.6 million to $73,000 for the year ended June 30, 2009, from $1.7
million for the year ended June 30, 2008. The decrease is related to a $20.3 million decrease in
the average balance and a decrease in yield of 347 basis points. The Federal Open Market Committee
has significantly decreased the federal funds target rate over the period. While the Company seeks
to prudently deploy cash inflows as quickly as possible, the significant growth in deposits has
increased liquidity above an optimal level. Our primary asset investment had been loans. However,
for this period, deposit growth outpaced loan growth. Excess cash flows were initially invested in
MBS AFS. Over the course of the year, as the risk/reward profiles of the investment options
changed, and our current and projected cash needs changed, the primary investment vehicle for the
excess cash became securities AFS. Interest on MBS AFS increased by $2.3 million to $7.0 million
for the year ended June 30, 2009, from $4.7 million for the year ended June 30, 2008. The average
balance increased $54.7 million while the yield decreased 34 basis points. Interest on the other
investment related captions of securities HTM, securities AFS and MBS HTM decreased by $972,000, or
9.6%, to $9.2 million for the year ended June 30, 2009, from $10.1 million for the year ended June
30, 2008. The decrease was primarily due to a decrease in the combined average balance of $10.8
million and a decreased yield.
Interest Expense. Total interest expense increased by $7.3 million, or 19.6%, to $44.5 million for
the year ended June 30, 2009, from $37.2 million for the year ended June 30, 2008. The vast
majority of the increase was due to borrowings as interest expense on deposits increased by
$397,000 while interest expense on borrowings increased by $6.9 million. The average balance of
deposits increased 27.0% to $880.8 million for the year ended June 30, 2009 from $693.3 million for
the year ended June 30, 2008. The cost of deposits decreased to 2.75% for the year ended June 30,
2009 from 3.44% for the year ended June 30, 2008. The average balance of borrowings increased to
$505.6 million for the year ended June 30, 2009 from $310.2 million for the year ended June 30,
2008. The cost of borrowings decreased to 4.00% for the year ended June 30, 2009 from 4.30% for the
year ended June 30, 2008.
Net Interest Income. Net interest income increased by $9.5 million, or 27.8%, to $43.9 million for
the year ended June 30, 2009, from $34.4 million for the year ended June 30, 2008. Our net
interest income and net interest rate spread were both negatively impacted for the year ended June
30, 2009 due to the reversal of accrued interest income on loans delinquent more than 90 days. The
total of such income reversed was $3.7 million for the year ended June 30, 2009 compared to
$521,000 for the year ended June 30, 2008. Our net interest rate spreads for the years ended June
30, 2009 and June 30, 2008 were 2.36% and 2.06%, respectively.
Provision for Loan Losses. We recorded provisions for loan losses of $9.9 million for the
year ended June 30, 2009 as compared to $4.7 million for the year ended June 30, 2008. We charged
off a total of $2.7 million in loans during the year ended June 30, 2009 related to losses deemed
probable. There were no recoveries in any of the periods. Our allowance for loan losses is
analyzed quarterly and many factors are considered. As in prior periods, loan growth was a
component of the provision for loan losses in the 2009 periods. The delinquency and nonaccrual
totals, however, were the primary contributors to the increased level of provision for loan losses.
68
Delinquency information is provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
June 30, 2008 |
|
|
June 30, 2007 |
|
Delinquency Totals |
|
|
|
|
|
(In thousands) |
|
|
|
|
|
30 - 59 days past due |
|
$ |
6,727 |
|
|
$ |
27,985 |
|
|
$ |
555 |
|
60 - 89 days past due |
|
|
17,825 |
|
|
|
18 |
|
|
|
39 |
|
Nonaccrual |
|
|
47,839 |
|
|
|
13,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
72,391 |
|
|
$ |
41,879 |
|
|
$ |
594 |
|
|
|
|
|
|
|
|
|
|
|
Other Income. Other income decreased by $2.2 million to $2.8 million for the year ended June
30, 2009, from $4.9 million for the year ended June 30, 2008, primarily due to impairment charges
during the 2009 fiscal year and gain on sale of assets recognized during the 2008 fiscal year. Net
gain on sale of assets decreased $1.1 million for the year ended June 30, 2009, due to the sale of
a multi-family property that had been held and operated as a real estate investment during fiscal
2008. Writedowns due to investment impairments increased by $1.0 million to $2.0 million for the
year ended June 30, 2009, from $1.0 million for the year ended June 30, 2008. The writedowns in
the 2009 period primarily pertain to impairment charges recorded in relation to equity securities
in our AFS portfolio.
Other Expenses. Other expenses increased by $7.8 million, or 39.8%, to $27.3 million for the year
ended June 30, 2009, from $19.5 million for the year ended June 30, 2008. Compensation, payroll
taxes and fringe benefits increased by $4.7 million to $18.7 million for the year ended June 30,
2009, from $13.9 million for the year ended June 30, 2008. In May 2008, stock and options grants
that had been approved in our 2008 Equity Incentive Plan were awarded. The amortization of the
cost of this plan began in May 2008. The increase in the amortization of the costs of Equity
Incentive Plan costs are greater as an entire 12 months worth of expense is included in the 2009
period. Such expenses totaled $3.8 million for the year ended June 30, 2009, versus $610,000 for
the year ended June 30, 2008. Compensation costs increased $1.0 million primarily due to increased
personnel to assist with implementing the organic growth strategy. Another significant component
of the increase was FDIC insurance premiums increasing $1.7 million to $1.8 million for the year
ended June 30, 2009, versus $92,000 for the year ended June 30, 2008. Other significant factors
contributing to the 2009 increase were an increase of $493,000 in office occupancy expense
primarily due to cost associated with the branch openings in October 2008 and an increase of
$668,000 in other expense primarily due to expenses associated with problem loans, such as legal
costs related to foreclosure actions.
Income Taxes. For the year ended June 30, 2009, income tax expense of $4.0 million was recognized
against pre-tax income of $9.6 million. For the year ended June 30, 2008, income tax expense of
$6.2 million was recognized against pre-tax income of $15.2 million.
Comparison of Operating Results for the Years Ended June 30, 2008 and June 30, 2007
Net Income. Net income decreased $2.1 million, or 18.8%, to $9.0 million for the year ended June
30, 2008, versus $11.0 million for the corresponding 2007 period. There were several atypical
items that affected the Companys results of operations in both periods.
The items primarily impacting the twelve month period ended June 30, 2008 were provision for loan
losses totaling $4.7 million, a pre-tax charge of $998,000 as a result of an other than temporary
impairment in the value of investment securities available for sale, and a $1.1 million gain on the
sale of a real estate held for investment property. The items primarily impacting the twelve month
period ended June 30, 2007 were the reversal of a $3.2 million valuation allowance related to
certain New Jersey State deferred tax assets, the reinvestment of the proceeds related to the stock
subscription offering, a gain of
69
$514,000 regarding the sale of our former headquarters, and a $9.1
million pre-tax charitable contribution to the OritaniBank Charitable Foundation.
Total Interest Income. For the year ended June 30, 2008, total interest income increased by $8.2
million, or 13.0%, to $71.6 million, from $63.3 million for the year ended June 30, 2007. The
largest increase was in interest on mortgage loans. Interest on mortgage loans increased by $10.8
million, or 24.3%, to $55.1 million for the year ended June 30, 2008, from $44.3 million for the
year ended June 30, 2007. The average balance of loans, net increased $164.3 million and the yield
on the portfolio increased 3 basis points. The yield on the portfolio in 2008 was negatively
impacted by interest on nonaccrual loans. On a normalized basis (inclusive of interest in
nonaccrual loans), the yield increased 10 basis points. Interest on federal funds sold and short term
investments decreased by $5.1 million to $1.7 million for the year ended June 30, 2008, from $6.8
million for the year ended June 30, 2007. The decrease is related to an $81.9 million decrease in
the average balance and a decrease in yield of 162 basis points. The federal funds rate decreased
over the year from 5.25% at June 30, 2007 to 2.00% at June 30, 2008. Partially due to this
decreased return, we shifted liquid assets into longer term assets. Interest on MBS AFS increased
by $3.9 million to $4.7 million for the year ended June 30, 2008, from $813,000 for the year ended
June 30, 2007. The average balance increased $74.9 million and the yield increased 14 basis
points. Interest on the other investment related captions of securities HTM, securities AFS and
MBS HTM decreased by $1.3 million, or 11.3%, to $10.1 million for the year ended June 30, 2008,
from $11.4 million for the year ended June 30, 2007. The decrease was primarily due to a decrease
in the combined average balance of $34.8 million.
Interest Expense. Total interest expense increased by $4.4 million, or 13.3%, to $37.2 million for
the year ended June 30, 2008, from $32.8 million for the year ended June 30, 2007. Interest
expense on deposits and stock subscription proceeds was relatively stable, increasing by $183,000
in fiscal 2008 versus fiscal 2007. Results for the 2007 period were enhanced by the lower rate of
interest paid on stock subscription proceeds. The average balance of deposits decreased $51.5
million and the cost increased 26 basis points. Interest expense on borrowings increased by $4.2
million to $13.3 million for the year ended June 30, 2008, from $9.1 million for the year ended
June 30, 2007. The average balance of borrowings increased by $99.6 million over the period while
the cost decreased 4 basis points.
Net Interest Income. Net interest income increased by $3.9 million, or 12.7%, to $34.4 million for
the year ended June 30, 2008, from $30.5 million for the year ended June 30, 2007. Our net
interest income and net interest rate spread were both negatively impacted in the three month
period ended June 30, 2008 due to the reversal of accrued interest income on loans delinquent more
than 90 days. Our net interest rate spreads for the years ended June 30, 2008 and June 30, 2007
were 2.06% and 2.23%, respectively. Our net interest rate margins for the years ended June 30,
2008 and June 30, 2007 were 2.77% and 2.73%, respectively.
Provision for Loan Losses. We recorded provisions for loan losses of $4.7 million for the
year ended June 30, 2008 as compared to $1.2 million for the year ended June 30, 2007. There were
no recoveries or charge-offs in either period. A significant component of the increased 2008
provisions was loan growth during the periods. Loans, net increased $248.5 million during the year
ended June 30, 2008, as compared to growth of $115.5 million during the year ended June 30, 2007.
Another significant component of the increased 2008 provisions was increased delinquent and
impaired loans.
70
Delinquency information is provided below:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
|
June 30, 2007 |
|
Delinquency Totals |
|
(In thousands) |
|
30 - 59 days past due |
|
$ |
27,985 |
|
|
$ |
555 |
|
60 - 89 days past due |
|
|
18 |
|
|
|
39 |
|
Nonaccrual |
|
|
13,876 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
41,879 |
|
|
$ |
594 |
|
|
|
|
|
|
|
|
Other Income. Other income decreased by $373,000, or 7.0%, to $4.9 million for the year ended
June 30, 2008, from $5.3 million for the year ended June 30, 2007. Net gain on sale of assets
increased by $582,000 to $1.1 million for the year ended June 30, 2008, from $514,000 for the year
ended June 30, 2007. The 2008 total is due to a $1.1 million gain on the sale of a multi-family
property that had been held and operated as a real estate investment. The 2007 gain pertains to
the sale of our former headquarters in Hackensack, New Jersey. Writedowns due to investment
impairments totaled $998,000 for the year ended June 30, 2008. The writedowns consisted of a
$646,000 impairment charge taken on Oritani Banks investment in a mutual fund investment as well
as a $352,000 impairment charge related to equity securities that we recorded in the March 31, 2008
period. There were no impairment charges taken in 2007. The mutual fund invests primarily in
agency and private label MBS. The market values of the funds holdings have been steadily
decreasing which has caused a corresponding decrease in the funds net asset value. Oritani Bank
has a $7.8 million investment remaining in this asset. The other caption within other income
decreased by $257,000 to $146,000 for the year ended June 30, 2008, from $403,000 for the year
ended June 30, 2007. The decrease in this caption was primarily due to float earnings on the
oversubscription funds returned to subscribers that was realized in 2007.
Other Expenses. Other expenses decreased by $5.8 million to $19.5 million for the year ended June
30, 2008, from $25.2 million for the year ended June 30, 2007. The primary reason for the decrease
was the $9.1 million contribution to the OritaniBank Charitable Foundation in the 2007 period.
Compensation, payroll taxes and fringe benefits increased by $2.7 million, or 24.2%, to $13.9
million for the year ended June 30, 2008, from $11.2 million for the year ended June 30, 2007. In
May 2008, stock and options grants that had been approved in our 2007 Equity Incentive Plan were
awarded. The amortization of the cost of this plan began in May 2008 and totaled $610,000 for the
year ended June 30, 2008. Employee stock ownership plan-related expenses increased $758,000 to
$1.4 million for the year ended June 30, 2008 from $607,000 for the twelve months June 30, 2007.
Expenses for the 2007 period were reduced due to a $492,000 refund of a prior period pension
contribution. Other significant factors contributing to the 2008 increase (versus 2007) were an
increase in Director related costs of $218,000; payroll tax expenses of $103,000 and employee
health insurance expenses of $120,000. The balance of the increase is due to increased
compensation costs as we have increased personnel to assist with implementing the organic growth
strategy. Insurance, Legal, Audit and Accounting expenses increased by $477,000 to $1.3 million
for the year ended June 30, 2008, from $779,000 for the year ended June 30, 2007. The increase is
primarily related to increased external auditing fees and costs associated with implementation and
compliance with Section 404 of the Sarbanes-Oxley Act of 2002.
Income Taxes. For the year ended June 30, 2008, income tax expense of $6.2 million was recognized
against pre-tax income of $15.2 million. For the year ended June 30, 2007, income tax benefit of
$1.7 million was recognized against pre-tax income of $9.4 million. The tax benefit was due to the
$3.2 million valuation allowance reversal as well as a decreased effective tax rate. The
contribution to OritaniBank Charitable Foundation resulted in a decrease in the effective tax rate
for 2007.
71
Average Balances and Yields. The following tables set forth average balance sheets, average
yields and costs, and certain other information for the periods indicated. No tax-equivalent yield
adjustments were made, as the effect thereof was not material. All average balances are daily
average balances. Non-accrual loans were included in the computation of average balances, but have
been reflected in the table as loans carrying a zero yield. The yields set forth below include the
effect of deferred fees, discounts and premiums that are amortized or accreted to interest income
or expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended (unaudited) |
|
|
|
|
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate at |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
December |
|
|
Outstanding |
|
|
Interest |
|
|
Yield/ |
|
|
Outstanding |
|
|
Interest |
|
|
Yield/ |
|
|
|
31, 2009 |
|
|
Balance |
|
|
Earned/Paid |
|
|
Rate |
|
|
Balance |
|
|
Earned/Paid |
|
|
Rate |
|
|
|
(Dollars in thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (1) |
|
|
6.18 |
% |
|
$ |
1,336,861 |
|
|
$ |
42,065 |
|
|
|
6.29 |
% |
|
$ |
1,123,438 |
|
|
$ |
34,645 |
|
|
|
6.17 |
% |
Securities held to maturity (2) |
|
|
5.60 |
|
|
|
25,513 |
|
|
|
717 |
|
|
|
5.62 |
|
|
|
24,646 |
|
|
|
535 |
|
|
|
4.34 |
|
Securities available for sale |
|
|
2.84 |
|
|
|
260,372 |
|
|
|
3,738 |
|
|
|
2.87 |
|
|
|
29,035 |
|
|
|
633 |
|
|
|
4.36 |
|
Mortgage-backed securities held to maturity |
|
|
3.87 |
|
|
|
103,686 |
|
|
|
1,918 |
|
|
|
3.70 |
|
|
|
153,587 |
|
|
|
3,032 |
|
|
|
3.95 |
|
Mortgage-backed securities available for sale |
|
|
4.81 |
|
|
|
117,249 |
|
|
|
2,718 |
|
|
|
4.64 |
|
|
|
149,065 |
|
|
|
3,673 |
|
|
|
4.93 |
|
Federal funds sold and short term investments |
|
|
0.39 |
|
|
|
48,471 |
|
|
|
90 |
|
|
|
0.37 |
|
|
|
258 |
|
|
|
1 |
|
|
|
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
5.38 |
% |
|
|
1,892,152 |
|
|
|
51,246 |
|
|
|
5.42 |
% |
|
|
1,480,029 |
|
|
|
42,519 |
|
|
|
5.75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-earning assets |
|
|
|
|
|
|
86,387 |
|
|
|
|
|
|
|
|
|
|
|
77,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
$ |
1,978,539 |
|
|
|
|
|
|
|
|
|
|
$ |
1,557,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts |
|
|
0.79 |
% |
|
$ |
146,313 |
|
|
|
675 |
|
|
|
0.92 |
% |
|
$ |
144,709 |
|
|
|
1,069 |
|
|
|
1.48 |
% |
Money market |
|
|
1.43 |
|
|
|
237,403 |
|
|
|
2,008 |
|
|
|
1.69 |
|
|
|
70,882 |
|
|
|
1,076 |
|
|
|
3.04 |
|
NOW accounts |
|
|
0.75 |
|
|
|
101,795 |
|
|
|
404 |
|
|
|
0.79 |
|
|
|
75,084 |
|
|
|
323 |
|
|
|
0.86 |
|
Time deposits |
|
|
2.32 |
|
|
|
702,046 |
|
|
|
9,036 |
|
|
|
2.57 |
|
|
|
470,220 |
|
|
|
8,648 |
|
|
|
3.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
1.80 |
|
|
|
1,187,557 |
|
|
|
12,123 |
|
|
|
2.04 |
|
|
|
760,895 |
|
|
|
11,116 |
|
|
|
2.92 |
|
Borrowings |
|
|
3.96 |
|
|
|
508,145 |
|
|
|
10,494 |
|
|
|
4.13 |
|
|
|
502,393 |
|
|
|
9,940 |
|
|
|
3.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
2.44 |
% |
|
|
1,695,702 |
|
|
|
22,617 |
|
|
|
2.67 |
% |
|
|
1,263,288 |
|
|
|
21,056 |
|
|
|
3.33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing liabilities |
|
|
|
|
|
|
39,125 |
|
|
|
|
|
|
|
|
|
|
|
32,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
1,734,827 |
|
|
|
|
|
|
|
|
|
|
|
1,295,339 |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
243,712 |
|
|
|
|
|
|
|
|
|
|
|
261,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
|
|
|
|
$ |
1,978,539 |
|
|
|
|
|
|
|
|
|
|
$ |
1,557,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
|
|
|
|
$ |
28,629 |
|
|
|
|
|
|
|
|
|
|
$ |
21,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread (3) |
|
|
2.94 |
% |
|
|
|
|
|
|
|
|
|
|
2.75 |
% |
|
|
|
|
|
|
|
|
|
|
2.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets(4) |
|
|
|
|
|
$ |
196,450 |
|
|
|
|
|
|
|
|
|
|
$ |
216,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (5) |
|
|
3.22 |
% |
|
|
|
|
|
|
|
|
|
|
3.03 |
% |
|
|
|
|
|
|
|
|
|
|
2.90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average of interest-earning assets to
interest-bearing liabilities |
|
|
112.57 |
% |
|
|
|
|
|
|
|
|
|
|
111.59 |
% |
|
|
|
|
|
|
|
|
|
|
117.16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes nonaccrual loans. |
|
(2) |
|
Includes FHLB Stock. |
|
(3) |
|
Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing liabilities. |
|
(4) |
|
Net interest-earning assets represents total interest-earning assets less total
interest-bearing liabilities. |
|
(5) |
|
Net interest margin represents net interest income divided by average total interest-earning
assets. |
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
|
|
|
|
Yield/ |
|
|
Outstanding |
|
|
|
|
|
|
Yield/ |
|
|
Outstanding |
|
|
|
|
|
|
Yield/ |
|
|
|
Balance |
|
|
Interest |
|
|
Rate |
|
|
Balance |
|
|
Interest |
|
|
Rate |
|
|
Balance |
|
|
Interest |
|
|
Rate |
|
|
|
(Dollars in thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net (1) |
|
$ |
1,181,385 |
|
|
$ |
72,158 |
|
|
|
6.11 |
% |
|
$ |
858,223 |
|
|
$ |
55,053 |
|
|
|
6.41 |
% |
|
$ |
693,902 |
|
|
$ |
44,278 |
|
|
|
6.38 |
% |
Securities available for sale at market value |
|
|
67,479 |
|
|
|
2,468 |
|
|
|
3.66 |
|
|
|
34,464 |
|
|
|
1,716 |
|
|
|
4.98 |
|
|
|
15,789 |
|
|
|
868 |
|
|
|
5.50 |
|
Securities held to maturity |
|
|
24,937 |
|
|
|
1,069 |
|
|
|
4.29 |
|
|
|
19,192 |
|
|
|
999 |
|
|
|
5.21 |
|
|
|
19,093 |
|
|
|
1,073 |
|
|
|
5.62 |
|
Mortgage-backed securities available for
sale at market value |
|
|
145,713 |
|
|
|
7,046 |
|
|
|
4.84 |
|
|
|
91,060 |
|
|
|
4,710 |
|
|
|
5.17 |
|
|
|
16,147 |
|
|
|
813 |
|
|
|
5.03 |
|
Mortgage-backed securities held to maturity |
|
|
142,484 |
|
|
|
5,615 |
|
|
|
3.94 |
|
|
|
192,007 |
|
|
|
7,409 |
|
|
|
3.86 |
|
|
|
245,625 |
|
|
|
9,475 |
|
|
|
3.86 |
|
Federal Funds sold and short term investments |
|
|
25,021 |
|
|
|
73 |
|
|
|
0.29 |
|
|
|
45,292 |
|
|
|
1,704 |
|
|
|
3.76 |
|
|
|
127,215 |
|
|
|
6,842 |
|
|
|
5.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
1,587,019 |
|
|
|
88,429 |
|
|
|
5.57 |
|
|
|
1,240,238 |
|
|
|
71,591 |
|
|
|
5.77 |
|
|
|
1,117,771 |
|
|
|
63,349 |
|
|
|
5.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-earning assets |
|
|
84,535 |
|
|
|
|
|
|
|
|
|
|
|
69,806 |
|
|
|
|
|
|
|
|
|
|
|
62,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,671,554 |
|
|
|
|
|
|
|
|
|
|
$ |
1,310,044 |
|
|
|
|
|
|
|
|
|
|
$ |
1,180,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts |
|
$ |
144,810 |
|
|
|
1,979 |
|
|
|
1.37 |
% |
|
$ |
151,068 |
|
|
|
2,427 |
|
|
|
1.61 |
% |
|
$ |
211,397 |
|
|
|
3,093 |
|
|
|
1.46 |
% |
Money market deposit accounts |
|
|
103,932 |
|
|
|
2,626 |
|
|
|
2.53 |
|
|
|
50,263 |
|
|
|
1,730 |
|
|
|
3.44 |
|
|
|
32,673 |
|
|
|
1,195 |
|
|
|
3.66 |
|
NOW accounts |
|
|
75,324 |
|
|
|
628 |
|
|
|
0.83 |
|
|
|
71,176 |
|
|
|
812 |
|
|
|
1.14 |
|
|
|
75,153 |
|
|
|
868 |
|
|
|
1.15 |
|
Time deposits |
|
|
556,730 |
|
|
|
19,029 |
|
|
|
3.42 |
|
|
|
420,787 |
|
|
|
18,896 |
|
|
|
4.49 |
|
|
|
425,563 |
|
|
|
18,526 |
|
|
|
4.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
880,796 |
|
|
|
24,262 |
|
|
|
2.75 |
|
|
|
693,294 |
|
|
|
23,865 |
|
|
|
3.44 |
|
|
|
744,786 |
|
|
|
23,682 |
|
|
|
3.18 |
|
Borrowings |
|
|
505,599 |
|
|
|
20,238 |
|
|
|
4.00 |
|
|
|
310,231 |
|
|
|
13,343 |
|
|
|
4.30 |
|
|
|
210,598 |
|
|
|
9,147 |
|
|
|
4.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
1,386,395 |
|
|
|
44,500 |
|
|
|
3.21 |
% |
|
|
1,003,525 |
|
|
|
37,208 |
|
|
|
3.71 |
% |
|
|
955,384 |
|
|
|
32,829 |
|
|
|
3.44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing liabilities |
|
|
33,071 |
|
|
|
|
|
|
|
|
|
|
|
27,438 |
|
|
|
|
|
|
|
|
|
|
|
23,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,419,466 |
|
|
|
|
|
|
|
|
|
|
|
1,030,963 |
|
|
|
|
|
|
|
|
|
|
|
978,703 |
|
|
|
|
|
|
|
|
|
Stockholders Equity |
|
|
252,088 |
|
|
|
|
|
|
|
|
|
|
|
279,081 |
|
|
|
|
|
|
|
|
|
|
|
201,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and Stockholders Equity |
|
$ |
1,671,554 |
|
|
|
|
|
|
|
|
|
|
$ |
1,310,044 |
|
|
|
|
|
|
|
|
|
|
$ |
1,180,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
43,929 |
|
|
|
|
|
|
|
|
|
|
$ |
34,383 |
|
|
|
|
|
|
|
|
|
|
$ |
30,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread (2) |
|
|
|
|
|
|
|
|
|
|
2.36 |
% |
|
|
|
|
|
|
|
|
|
|
2.06 |
% |
|
|
|
|
|
|
|
|
|
|
2.23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets(3) |
|
$ |
200,624 |
|
|
|
|
|
|
|
|
|
|
$ |
236,713 |
|
|
|
|
|
|
|
|
|
|
$ |
162,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (4) |
|
|
|
|
|
|
|
|
|
|
2.77 |
% |
|
|
|
|
|
|
|
|
|
|
2.77 |
% |
|
|
|
|
|
|
|
|
|
|
2.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to
interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
114.47 |
% |
|
|
|
|
|
|
|
|
|
|
123.59 |
% |
|
|
|
|
|
|
|
|
|
|
117.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes nonaccrual loans. |
|
(2) |
|
Net interest rate spread represents the difference between the weighted-average yield on
interest-earning assets and the weighted- average cost of interest-bearing liabilities for the
period. |
|
(3) |
|
Net interest-earning assets represents total interest-earning assets less interest-bearing
liabilities. |
|
(4) |
|
Net interest margin represents net interest income as a percent of average interest-earning
assets for the period. |
73
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our net interest
income for the periods indicated. The rate column shows the effects attributable to changes in
rate (changes in rate multiplied by prior volume). The volume column shows the effects
attributable to changes in volume (changes in volume multiplied by prior rate). The total increase
(decrease) column represents the sum of the prior columns. For purposes of this table, changes
attributable to both rate and volume which can not be segregated have been allocated to volume.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31, |
|
|
Years Ended June 30, |
|
|
Years Ended June 30, |
|
|
|
2009 vs. 2008 |
|
|
2009 vs. 2008 |
|
|
2008 vs. 2007 |
|
|
|
Increase (Decrease) |
|
|
Total |
|
|
Increase (Decrease) |
|
|
Total |
|
|
Increase (Decrease) Due |
|
|
Total |
|
|
|
Due to |
|
|
Increase |
|
|
Due to |
|
|
Increase |
|
|
to |
|
|
Increase |
|
|
|
Volume |
|
|
Rate |
|
|
(Decrease) |
|
|
Volume |
|
|
Rate |
|
|
(Decrease) |
|
|
Volume |
|
|
Rate |
|
|
(Decrease) |
|
|
|
(In thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net |
|
$ |
6,582 |
|
|
$ |
838 |
|
|
$ |
7,420 |
|
|
$ |
20,730 |
|
|
$ |
(3,625 |
) |
|
$ |
17,105 |
|
|
$ |
10,485 |
|
|
$ |
290 |
|
|
$ |
10,775 |
|
Securities available for sale |
|
|
5,043 |
|
|
|
(1,938 |
) |
|
|
3,105 |
|
|
|
1,644 |
|
|
|
(892 |
) |
|
|
752 |
|
|
|
1,027 |
|
|
|
(179 |
) |
|
|
848 |
|
Securities held to maturity |
|
|
19 |
|
|
|
163 |
|
|
|
182 |
|
|
|
299 |
|
|
|
(229 |
) |
|
|
70 |
|
|
|
6 |
|
|
|
(80 |
) |
|
|
(74 |
) |
Mortgage-backed securities
available for sale |
|
|
(784 |
) |
|
|
(171 |
) |
|
|
(955 |
) |
|
|
2,827 |
|
|
|
(491 |
) |
|
|
2,336 |
|
|
|
3,772 |
|
|
|
125 |
|
|
|
3,897 |
|
Mortgage-backed securities held
to maturity |
|
|
(985 |
) |
|
|
(129 |
) |
|
|
(1,114 |
) |
|
|
(1,911 |
) |
|
|
117 |
|
|
|
(1,794 |
) |
|
|
(2,068 |
) |
|
|
2 |
|
|
|
(2,066 |
) |
Federal Funds sold and short
term investments |
|
|
187 |
|
|
|
(98 |
) |
|
|
89 |
|
|
|
(763 |
) |
|
|
(868 |
) |
|
|
(1,631 |
) |
|
|
(4,406 |
) |
|
|
(732 |
) |
|
|
(5,138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
10,062 |
|
|
|
(1,335 |
) |
|
|
8,727 |
|
|
|
22,826 |
|
|
|
(5,988 |
) |
|
|
16,838 |
|
|
|
8,816 |
|
|
|
(574 |
) |
|
|
8,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts |
|
|
12 |
|
|
|
(406 |
) |
|
|
(394 |
) |
|
|
(101 |
) |
|
|
(347 |
) |
|
|
(448 |
) |
|
|
(883 |
) |
|
|
217 |
|
|
|
(666 |
) |
Money market |
|
|
2,528 |
|
|
|
(1,596 |
) |
|
|
932 |
|
|
|
1,847 |
|
|
|
(951 |
) |
|
|
896 |
|
|
|
643 |
|
|
|
(108 |
) |
|
|
535 |
|
NOW accounts |
|
|
115 |
|
|
|
(34 |
) |
|
|
81 |
|
|
|
47 |
|
|
|
(231 |
) |
|
|
(184 |
) |
|
|
(46 |
) |
|
|
(10 |
) |
|
|
(56 |
) |
Time deposits |
|
|
4,264 |
|
|
|
(3,876 |
) |
|
|
388 |
|
|
|
6,105 |
|
|
|
(5,972 |
) |
|
|
133 |
|
|
|
(208 |
) |
|
|
578 |
|
|
|
370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
6,918 |
|
|
|
(5,911 |
) |
|
|
1,007 |
|
|
|
7,898 |
|
|
|
(7,501 |
) |
|
|
397 |
|
|
|
(494 |
) |
|
|
677 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
114 |
|
|
|
440 |
|
|
|
554 |
|
|
|
8,403 |
|
|
|
(1,508 |
) |
|
|
6,895 |
|
|
|
4,327 |
|
|
|
(131 |
) |
|
|
4,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing
liabilities |
|
|
7,032 |
|
|
|
(5,471 |
) |
|
|
1,561 |
|
|
|
16,301 |
|
|
|
(9,009 |
) |
|
|
7,292 |
|
|
|
3,833 |
|
|
|
546 |
|
|
|
4,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income |
|
$ |
3,030 |
|
|
$ |
4,136 |
|
|
$ |
7,166 |
|
|
$ |
6,525 |
|
|
$ |
3,021 |
|
|
$ |
9,546 |
|
|
$ |
4,983 |
|
|
$ |
(1,120 |
) |
|
$ |
3,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
Management of Market Risk
General. The majority of our assets and liabilities are monetary in nature. Consequently,
our most significant form of market risk is interest rate risk. Our assets, consisting primarily
of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits.
As a result, a principal part of our business strategy is to manage interest rate risk and reduce
the exposure of our net interest income to changes in market interest rates. Accordingly, our
Board of Directors has the authority and responsibility for managing interest rate risk. Oritani
Bank has established an Asset/Liability Management Committee, comprised of various members of its
senior management, which is responsible for evaluating the interest rate risk inherent in our
assets and liabilities, for recommending to the Board of Directors 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 of
Directors on a monthly basis. An interest rate risk analysis is presented to the Board of
Directors on a quarterly basis.
We have sought to manage our interest rate risk in order to minimize the exposure of our
earnings and capital to changes in interest rates. As part of our ongoing asset-liability
management, we currently use the following strategies to manage our interest rate risk:
|
(i) |
|
originating multi-family and commercial real estate loans that generally tend
to have shorter interest duration and generally reset at five years; |
|
|
(ii) |
|
investing in shorter duration securities and mortgage-backed securities; and |
|
|
(iii) |
|
obtaining general financing through FHLB advances with either a fixed long
term or with call options that are considered unlikely. |
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. However, in conjunction with the growth of our net interest spread, and net
interest income, we recognize that our interest rate risk has increased. We accept the current
level of interest rate risk.
Net Portfolio Value. We compute the amounts by which our net present value of cash flow from
assets, liabilities and off balance sheet items (the institutions 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 3.0% to 4.0% would mean, for example, a 100 basis point increase in the Change
in Interest Rates column below.
The table below sets forth, as of December 31, 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.
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NPV as a Percentage of Present |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Assets (3) |
|
Change in Interest |
|
|
|
|
|
Estimated Increase (Decrease) in |
|
|
|
|
|
|
Increase |
|
Rates (basis |
|
Estimated |
|
|
NPV |
|
|
|
|
|
|
(Decrease) |
|
points) (1) |
|
NPV (2) |
|
|
Amount |
|
|
Percent |
|
|
NPV Ratio (4) |
|
|
(basis points) |
|
|
|
(Dollars in thousands) |
+200 |
|
|
203,351 |
|
|
|
(53,593 |
) |
|
|
(20.86 |
)% |
|
|
10.59 |
% |
|
|
(209 |
) |
0 |
|
|
256,944 |
|
|
|
|
|
|
|
|
|
|
|
12.68 |
|
|
|
|
|
-100 |
|
|
278,886 |
|
|
|
21,942 |
|
|
|
8.54 |
|
|
|
13.42 |
|
|
|
74 |
|
|
|
|
(1) |
|
Assumes an instantaneous uniform change in interest rates at all maturities. |
|
(2) |
|
NPV is the discounted present value of expected cash flows from assets,
liabilities and off-balance sheet contracts. |
|
(3) |
|
Present value of assets represents the discounted present value of incoming
cash flows on interest-earning assets. |
|
(4) |
|
NPV Ratio represents NPV divided by the present value of assets. |
The table above indicates that at December 31, 2009 in the event of a 100 basis point
decrease in interest rates, we would experience a 8.5% increase in net portfolio value. In the
event of a 200 basis point increase in interest rates, we would experience a 20.9% decrease in net
portfolio value. These changes in net portfolio value are within the limitations established in
our asset and liability management policies. This data does not reflect any future actions we may
take in response to changes in interest rates, such as changing the mix of our assets and
liabilities, which could change the results of the NPV and net interest income calculations.
Certain shortcomings are inherent in the methodology used in the above interest rate risk
measurement. Modeling changes in net portfolio value require making certain assumptions that may
or may not reflect the manner in which actual yields and costs respond to changes in market
interest rates. In this regard, the net portfolio value table presented assumes that the
composition of our interest-sensitive assets and liabilities existing at the beginning of a period
remains constant over the period being measured and assumes that a particular change in interest
rates is reflected uniformly across the yield curve regardless of the duration or repricing of
specific assets and liabilities. Accordingly, although the net portfolio value table provides an
indication of our interest rate risk exposure at a particular point in time, such measurements are
not intended to and do not provide a precise forecast of the effect of changes in market interest
rates on our net interest income and will differ from actual results. Differing assumptions and
measurement items are the primary causes of the difference between presumed fair market value for
net portfolio value purposes and the estimated fair market value of equity disclosed in the
financial statements. Neither of these values is comparable to the appraised value, or pro forma
market value, calculated by RP Financial, LC. The appraised value contemplates the estimated
trading value of Oritani-Delawares common stock after considering the estimated proceeds to be
raised in the conversion and offering.
Liquidity and Capital Resources
Liquidity is the ability to meet current and future financial obligations of a short-term
nature. Our primary sources of funds consist of deposit inflows, loan and mortgage-backed security
repayments, maturities and sales of securities and FHLB borrowings. While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic conditions and competition.
Our Asset/Liability Management Committee is responsible for establishing and monitoring our
liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting
the borrowing needs of our customers as well as unanticipated contingencies. Our Asset/Liability
Management Committee focuses on our level of liquid assets as well as our borrowing capacity with
the FHLB. Funds can be obtained from the FHLB on a same day basis, significantly reducing the need
to maintain excess liquid assets to address liquidity concerns.
76
We regularly adjust our investments in liquid assets based upon our assessment of:
|
|
|
expected loan demand; |
|
|
|
|
expected deposit flows; |
|
|
|
|
expected payments from the loan and investment portfolios; |
|
|
|
|
funds available through borrowings; |
|
|
|
|
yields available on interest-earning deposits and securities; |
|
|
|
|
yields and structures available on alternate investments; and |
|
|
|
|
the objectives of our asset/liability management program. |
Excess liquid assets are invested generally in interest-earning deposits and short- and
intermediate-term securities.
Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent
on our operating, financing, lending and investing activities during any given period. At December
31, 2009, cash and cash equivalents totaled $26.3 million. Securities and mortgage-backed
securities classified as available for sale, which provide additional sources of liquidity, totaled
$419.0 million at December 31, 2009.
Our cash flows are derived from operating activities, investing activities and financing
activities as reported in our Consolidated Statements of Cash Flows included in our Consolidated
Financial Statements.
In the normal course of business, we routinely enter into various commitments, primarily
relating to the origination of loans. At December 31, 2009, outstanding commitments to originate
loans totaled $47.6 million and outstanding commitments to extend credit totaled $62.3 million. We
expect to have sufficient funds available to meet current commitments in the normal course of
business. Time deposits due within one year of December 31, 2009 totaled $583.8 million, or 48.2%
of total deposits. If these deposits do not remain with us, we will be required to seek other
sources of funds, including other time deposits and FHLB advances. Depending on market conditions,
we may be required to pay higher rates on such deposits or other borrowings than we currently pay
on the time deposits. We believe, however, based on past experience, that a significant portion of
our time deposits will remain with us. We have the ability to attract and retain deposits by
adjusting the interest rates offered.
Our primary investing activity currently is the origination of loans and the purchase of loans
and securities. During the six months ended December 31, 2009, we originated $188.4 million of
loans, purchased $3.7 million of loans and purchased $251.0 million of securities. During the year
ended June 30, 2009, we originated $412.8 million of loans, purchased $37.0 million of loans, and
purchased $174.9 million of securities. During the year ended June 30, 2008, we originated $359.3
million of loans, purchased $11.83 million of loans, and purchased $141.8 million of securities.
Financing activities consist primarily of activity in deposit accounts and FHLB advances. We
experienced a net increase in total deposits of $428.7 million and $3.2 million for the fiscal
years ended June 30, 2009 and 2008, respectively. Deposit flows are affected by the overall level
of interest rates, the interest rates and products offered by us and our local competitors and
other factors.
77
Liquidity management is both a daily and long-term function of business management. If we
require funds beyond our ability to generate them internally, borrowing agreements exist with the
FHLB-NY, which provide an additional source of funds. FHLB advances reflected a net increase of
$75.3 million and a net increase of $237.0 million during the fiscal years ended June 30, 2009 and
2008, respectively. Our total borrowings at December 31, 2009, consisted of the $507.1 million in
longer term borrowings with the FHLB and minor amounts due to Oritani Financial Corp., MHC. FHLB
advances have primarily been used to fund loan demand and provide longer-term sources of funding.
At December 31, 2009, we had a commitment for an overnight line of credit with the FHLB totaling
$200.0 million, of which there were no balances. The line of credit is priced at federal funds
rate plus a spread (generally between 20 and 40 basis points) and re-prices daily. At December 31,
2009, we also had $45.0 million in discount window borrowing capacity through the Federal Reserve
Bank of New York, of which there were no balances.
On September 29, 2009, the FDIC issued a rule pursuant to which all insured depository
institutions would be required to prepay their estimated assessments for the fourth quarter of
2009, and for all of 2010, 2011 and 2012. On December 30, 2009, we paid $8.2 million in estimated
assessments, of which $7.6 million is prepaid for the 2010, 2011 and 2012 assessment periods.
Oritani Bank is subject to various regulatory capital requirements, including a risk-based
capital measure. The risk-based capital guidelines include both a definition of capital and a
framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance
sheet items to broad risk categories. As of December 31, 2009, Oritani Bank exceeded all regulatory
capital requirements as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
Required |
|
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
Total capital (to risk-weighted assets) |
|
$ |
211,236 |
|
|
|
14.75 |
% |
|
$ |
114,591 |
|
|
|
8.0 |
% |
Tier I capital (to risk-weighted assets) |
|
|
193,183 |
|
|
|
13.49 |
|
|
|
57,296 |
|
|
|
4.0 |
|
Tier I capital (to average assets) |
|
|
193,183 |
|
|
|
9.76 |
|
|
|
79,144 |
|
|
|
4.0 |
|
On October 14, 2008, the United States Department of the Treasury announced a voluntary
Capital Purchase Program under the Troubled Asset Relief Program to encourage U.S. financial
institutions to build capital and increase financing. We are not participating in this program.
We currently support very strong capital ratios and capital levels have not been, and are not
anticipated to be, a hindrance on our ability to lend. The United States Department of 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 June 30, 2010. Oritani Bank is a participant in this program.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Commitments. As a financial services provider, we routinely are a party to various financial
instruments with off-balance-sheet risks, such as commitments to extend credit, standby letters of
credit and unused lines of credit. While these contractual obligations represent our future cash
requirements, a significant portion of commitments to extend credit may expire without being drawn
upon. Such commitments are subject to the same credit policies and approval process accorded to
loans we make. We consider commitments to extend credit in determining our allowance for loan
losses.
Contractual Obligations. In the ordinary course of our operations, we enter into certain
contractual obligations. Such obligations include operating leases for premises and equipment.
78
The following table summarizes our significant fixed and determinable contractual
obligations and other funding needs by payment date at December 31, 2009. The payment amounts
represent those amounts due to the recipient and do not include any unamortized premiums or
discounts or other similar carrying amount adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
Less than |
|
|
One to Three |
|
|
Three to Five |
|
|
More than |
|
|
|
|
Contractual Obligations |
|
One Year |
|
|
Years |
|
|
Years |
|
|
Five Years |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank advances |
|
$ |
10,341 |
|
|
$ |
56,413 |
|
|
$ |
130,685 |
|
|
$ |
310,000 |
|
|
$ |
507,439 |
|
Operating leases |
|
|
289 |
|
|
|
546 |
|
|
|
375 |
|
|
|
370 |
|
|
|
1,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,630 |
|
|
$ |
56,959 |
|
|
$ |
131,060 |
|
|
$ |
310,370 |
|
|
$ |
509,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit |
|
$ |
49,888 |
|
|
$ |
|
|
|
$ |
1,700 |
|
|
$ |
|
|
|
$ |
47,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unadvanced construction loans |
|
$ |
27,722 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
27,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused lines of credit |
|
$ |
34,673 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
34,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to purchase securities |
|
$ |
15,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes our significant fixed and determinable contractual
obligations and other funding needs by payment date at June 30, 2009. The payment amounts
represent those amounts due to the recipient and do not include any unamortized premiums or
discounts or other similar carrying amount adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
Less than |
|
|
One to Three |
|
|
Three to Five |
|
|
More than |
|
|
|
|
Contractual Obligations |
|
One Year |
|
|
Years |
|
|
Years |
|
|
Five Years |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank advances |
|
$ |
10,372 |
|
|
$ |
57,934 |
|
|
$ |
110,685 |
|
|
$ |
330,000 |
|
|
$ |
508,991 |
|
Operating leases |
|
|
289 |
|
|
|
570 |
|
|
|
418 |
|
|
|
448 |
|
|
|
1,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,661 |
|
|
$ |
58,504 |
|
|
$ |
111,103 |
|
|
$ |
330,448 |
|
|
$ |
510,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit |
|
$ |
77,729 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
77,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unadvanced construction loans |
|
$ |
39,708 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
39,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused lines of credit |
|
$ |
33,800 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
33,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to purchase securities |
|
$ |
20,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Inflation and Changing Prices
Our consolidated financial statements and related notes have been prepared in accordance with
GAAP. GAAP generally requires the measurement of financial position and operating results in terms
of historical dollars without consideration for changes in the relative purchasing power of money
over time due to inflation. The impact of inflation is reflected in the increased cost of our
operations. Unlike industrial companies, our assets and liabilities are primarily monetary in
nature. As a result, changes in market interest rates have a greater impact on performance than
the effects of inflation.
79
BUSINESS OF ORITANI FINANCIAL CORP., MHC, ORITANI-FEDERAL AND ORITANI BANK
Oritani Financial Corp., MHC
Oritani Financial Corp., MHC is a federally chartered mutual holding company and currently
owns 74.2% of the outstanding shares of common stock of Oritani-Federal. Oritani Financial Corp.,
MHC has not engaged in any significant business activity other than owning the common stock of
Oritani-Federal, and does not intend to expand its business activities. So long as Oritani
Financial Corp., MHC exists, it is required to own a majority of the voting stock of
Oritani-Federal. The executive office of Oritani Financial Corp., MHC, is located at 370 Pascack
Road, in the Township of Washington, New Jersey 07676, and its telephone number is (201) 664-5400.
Oritani Financial Corp., MHC is subject to comprehensive regulation and examination by the OTS.
Oritani-Federal
Oritani-Federal is the federally chartered mid-tier stock holding company of Oritani Bank.
Oritani-Federal owns 100% of the outstanding shares of common stock of Oritani Bank. Since being
formed in 1998, Oritani-Federal has engaged primarily in the business of holding the common stock
of Oritani Bank as well as two limited liability companies that own a variety of real estate
investments. Oritani-Federals executive office is located at 370 Pascack Road, in the Township of
Washington, New Jersey 07676, and its telephone number is (201) 664-5400. Oritani-Federal is
subject to comprehensive regulation and examination by the OTS. At December 31, 2009,
Oritani-Federal had consolidated assets of $2.01 billion, consolidated deposits of $1.21 billion
and consolidated stockholders equity of $248.0 million.
Oritani Bank
General
Oritani Bank is a New Jersey-chartered savings bank headquartered in the Township of
Washington, New Jersey. Oritani Bank was originally founded in 1911, as a New Jersey building and
loan association. Over the years, Oritani Bank has expanded primarily through internal growth. In
1997, Oritani Bank converted to a mutual savings bank charter, and in March 1998, reorganized into
the two-tier mutual holding company structure. Oritani Bank conducts business from its main office
located at 370 Pascack Road, in the Township of Washington, New Jersey 07676, and its 21 branch
offices located in the New Jersey counties of Bergen, Hudson and Passaic. The telephone number at
its main office is (201) 664-5400. Oritani Bank was formerly known as Oritani Savings Bank.
Effective September 8, 2008, the name was changed to Oritani Bank.
Our principal business consists of attracting retail and commercial bank deposits from the
general public in the areas surrounding our main office in the Township of Washington, New Jersey
and our branch offices located in the New Jersey counties of Bergen (16 branches, including our
main office), Hudson (five branches) and Passaic (one branch), 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 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.
80
Our primary sources of funds are deposits, borrowings and principal and interest payments on
loans and securities.
Our website address is www.oritani.com. Information on our website should not be
considered a part of this report.
Market Area
From our headquarters in the Township of Washington, New Jersey, we operate 22 full service
branches, including our main office. We operate branches in three separate counties of New Jersey:
Bergen, Hudson and Passaic. The majority of our branches (sixteen) and deposits are located in
Bergen County. In addition, we operate five branches in Hudson County and one branch in Passaic
County. Our market area for lending is broader and includes the state of New Jersey, the broader
New York metropolitan area, eastern Pennsylvania, and southern Connecticut.
In terms of population, Bergen County ranks as the largest county in New Jersey (out of 21
counties) while Hudson County ranks fifth and Passaic County ranks ninth. The economy in our
primary market area has benefited from being varied and diverse. It is largely urban and suburban
with a broad economic base. As one of the wealthiest states in the nation, New Jersey, with a
population of 8.7 million, is considered one of the most attractive banking markets in the United
States. As of December, 2009 the unemployment rate for New Jersey increased to 10.1% which was
slightly higher than the national rate of 10.0%. Despite the recent downturn, a total of 3.9
million New Jersey residents remain employed as of December 2009. Bergen County is considered part
of the New York metropolitan area. Its county seat is Hackensack. Bergen County ranks 16th among
the highest-income counties in the United States in 2009 in terms of per-capita income. Some of
Bergen Countys major employers are: Hackensack University Medical Center; New Jersey Sports and
Expo Authority; Merck-Medco Managed Care; AT&T Wireless Services, Inc.; Becton Dickinson & Company;
Mellon Investor Services; Marcal Paper Mills; Mercedes-Benz of North America, Inc.; KPMG, LLP; and
United States Postal Service. See Risk Factors Current Market And Economic Conditions May
Significantly Affect Our Operations and Financial Condition.
Bergen County is bordered by Rockland County, New York to the north, the Hudson River to the
east, Hudson County to the south, a small border with Essex County also to the south and Passaic
County to the west.
Passaic County is bordered by Orange County, New York to the north, Rockland County, New York
to the northeast, Bergen County to the east, Essex County to the south, Morris County to the
southwest and Sussex County to the west.
Hudson Countys only land border is with Bergen County to the north and west. It is bordered
by the Hudson River and Upper New York Bay to the east; Kill van Kull (which connects Newark Bay
with Upper New York Bay) to the south and Newark Bay and the Hackensack River or the Passaic River
to the west.
Competition
We face intense competition within our market area both in making loans and attracting
deposits. Our market area has a high concentration of financial institutions including large money
center and regional banks, community banks and credit unions. Some of our competitors offer
products and services that we currently do not offer, such as trust services and private banking.
As of June 30, 2009, the latest
81
date for which statistics are available, our market share of deposits was approximately 2.6%
in Bergen County, and less than 1.0% in each of Hudson and Passaic Counties.
Our competition for loans and deposits comes principally from locally owned and out-of-state
commercial banks, savings institutions, mortgage banking firms, insurance companies and credit
unions. We face additional competition for deposits from short-term money market funds, brokerage
firms, mutual funds and insurance companies. Our primary focus is to build and develop profitable
customer relationships across all lines of business while maintaining our role as a community bank.
Lending Activities
Our principal lending activity is the origination of multi-family loans and commercial real
estate loans as well as residential real estate mortgage loans and construction loans secured by
property located primarily in our market area. Our multi-family loans consist primarily of
mortgage loans secured by apartment buildings. Our commercial real estate loans consist primarily
of mortgage loans secured by commercial offices, retail space, warehouses and mixed-use buildings.
Our residential real estate mortgage loans consist of one- to four-family residential real property
and consumer loans. Construction loans consist primarily of one- to four-family development,
condominiums and commercial development projects. We significantly curtailed construction lending
in 2009 due to current market and economic conditions and expect to maintain this posture for the
foreseeable future. Construction loans are now only approved on an exception basis and are subject
to arduous underwriting requirements. Second mortgage and equity loans consist primarily of home
equity loans and home equity lines of credit. Commercial real estate loans represented $628.5
million, or 45.5%, of our total loan portfolio at December 31, 2009. Multi-family loans represented
$296.3 million, or 21.4%, of our total loan portfolio at December 31, 2009. One- to four-family
residential real estate mortgage loans represented $260.1 million, or 18.8%, of our total loan
portfolio at December 31, 2009. We also offer second mortgages and equity loans. At December 31,
2009, such loans totaled $51.0 million, or 3.7%, of our loan portfolio. At December 31, 2009,
construction and land loans totaled $124.9 million, or 9.0%, of our loan portfolio. At December
31, 2009, other loans, which primarily consist of secured business and to a smaller extent, account
loans, totaled $21.6 million, or 1.6%, of our loan portfolio.
82
Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, by type of loan at the dates indicated.
|
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|
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|
|
|
|
|
|
|
|
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|
|
|
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|
|
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|
|
|
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|
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At December 31, |
|
|
At June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
|
|
|
2008 |
|
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|
|
2007 |
|
|
|
|
|
2006 |
|
|
|
|
|
2005 |
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|
|
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional one- to four-family |
|
$ |
260,056 |
|
|
|
18.8 |
% |
|
$ |
265,962 |
|
|
|
20.4 |
% |
|
$ |
223,087 |
|
|
|
21.8 |
% |
|
$ |
188,941 |
|
|
|
24.6 |
% |
|
$ |
165,070 |
|
|
|
25.3 |
% |
|
$ |
147,284 |
|
|
|
29.4 |
% |
Multi-family |
|
|
296,314 |
|
|
|
21.4 |
|
|
|
277,589 |
|
|
|
21.3 |
|
|
|
237,490 |
|
|
|
23.2 |
|
|
|
210,587 |
|
|
|
27.4 |
|
|
|
205,351 |
|
|
|
31.5 |
|
|
|
183,118 |
|
|
|
36.5 |
|
Commercial real estate |
|
|
628,507 |
|
|
|
45.5 |
|
|
|
562,139 |
|
|
|
43.2 |
|
|
|
359,681 |
|
|
|
35.2 |
|
|
|
240,544 |
|
|
|
31.3 |
|
|
|
173,857 |
|
|
|
26.6 |
|
|
|
88,306 |
|
|
|
17.6 |
|
Second mortgage and equity loans |
|
|
51,036 |
|
|
|
3.7 |
|
|
|
54,768 |
|
|
|
4.2 |
|
|
|
59,886 |
|
|
|
5.8 |
|
|
|
65,240 |
|
|
|
8.5 |
|
|
|
66,198 |
|
|
|
10.2 |
|
|
|
55,672 |
|
|
|
11.1 |
|
Construction and land loans |
|
|
124,898 |
|
|
|
9.0 |
|
|
|
130,831 |
|
|
|
10.0 |
|
|
|
138,195 |
|
|
|
13.5 |
|
|
|
62,704 |
|
|
|
8.1 |
|
|
|
38,722 |
|
|
|
5.9 |
|
|
|
24,629 |
|
|
|
4.9 |
|
Other loans |
|
|
21,612 |
|
|
|
1.6 |
|
|
|
10,993 |
|
|
|
0.8 |
|
|
|
4,880 |
|
|
|
0.5 |
|
|
|
1,140 |
|
|
|
0.1 |
|
|
|
3,291 |
|
|
|
0.5 |
|
|
|
2,321 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
|
1,382,423 |
|
|
|
100.0 |
% |
|
|
1,302,282 |
|
|
|
100.0 |
% |
|
|
1,023,219 |
|
|
|
100.0 |
% |
|
|
769,156 |
|
|
|
100.0 |
% |
|
|
652,489 |
|
|
|
100.0 |
% |
|
|
501,330 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred loan origination fees |
|
|
3,102 |
|
|
|
|
|
|
|
2,979 |
|
|
|
|
|
|
|
2,610 |
|
|
|
|
|
|
|
1,732 |
|
|
|
|
|
|
|
1,753 |
|
|
|
|
|
|
|
1,604 |
|
|
|
|
|
Allowance for loan losses |
|
|
22,164 |
|
|
|
|
|
|
|
20,680 |
|
|
|
|
|
|
|
13,532 |
|
|
|
|
|
|
|
8,882 |
|
|
|
|
|
|
|
7,672 |
|
|
|
|
|
|
|
6,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net |
|
$ |
1,357,157 |
|
|
|
|
|
|
$ |
1,278,623 |
|
|
|
|
|
|
$ |
1,007,077 |
|
|
|
|
|
|
$ |
758,542 |
|
|
|
|
|
|
$ |
643,064 |
|
|
|
|
|
|
$ |
493,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at June 30, 2009.
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
Multi-family |
|
|
Commercial |
|
|
Second Mortgage |
|
|
Construction and Land |
|
|
Other Loans |
|
|
Total |
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
Due During the Years Ending June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
$ |
25 |
|
|
|
6.07 |
% |
|
$ |
555 |
|
|
|
6.72 |
% |
|
$ |
5,920 |
|
|
|
6.94 |
% |
|
$ |
89 |
|
|
|
5.04 |
% |
|
$ |
103,885 |
|
|
|
7.21 |
% |
|
$ |
7,989 |
|
|
|
3.87 |
% |
|
$ |
118,463 |
|
|
|
6.97 |
% |
2011 |
|
|
964 |
|
|
|
6.11 |
|
|
|
1,116 |
|
|
|
5.95 |
|
|
|
4,060 |
|
|
|
6.81 |
|
|
|
340 |
|
|
|
5.25 |
|
|
|
24,011 |
|
|
|
5.41 |
|
|
|
1,581 |
|
|
|
6.93 |
|
|
|
32,072 |
|
|
|
5.70 |
|
2012 to 2013 |
|
|
9,184 |
|
|
|
5.51 |
|
|
|
3,206 |
|
|
|
6.47 |
|
|
|
39,462 |
|
|
|
6.21 |
|
|
|
2,215 |
|
|
|
5.70 |
|
|
|
|
|
|
|
|
|
|
|
481 |
|
|
|
7.85 |
|
|
|
54,548 |
|
|
|
6.10 |
|
2014 to 2018 |
|
|
33,808 |
|
|
|
5.22 |
|
|
|
40,957 |
|
|
|
6.21 |
|
|
|
207,801 |
|
|
|
6.42 |
|
|
|
12,172 |
|
|
|
5.35 |
|
|
|
2,406 |
|
|
|
6.52 |
|
|
|
548 |
|
|
|
6.85 |
|
|
|
297,692 |
|
|
|
6.21 |
|
2019 to 2023 |
|
|
45,108 |
|
|
|
5.19 |
|
|
|
66,236 |
|
|
|
6.15 |
|
|
|
173,259 |
|
|
|
6.35 |
|
|
|
17,741 |
|
|
|
5.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302,344 |
|
|
|
6.09 |
|
2024 and beyond |
|
|
176,873 |
|
|
|
5.89 |
|
|
|
165,518 |
|
|
|
5.99 |
|
|
|
131,636 |
|
|
|
6.59 |
|
|
|
22,211 |
|
|
|
5.89 |
|
|
|
529 |
|
|
|
5.09 |
|
|
|
394 |
|
|
|
6.28 |
|
|
|
497,163 |
|
|
|
6.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
265,962 |
|
|
|
5.67 |
% |
|
$ |
277,589 |
|
|
|
6.07 |
% |
|
$ |
562,139 |
|
|
|
6.43 |
% |
|
$ |
54,768 |
|
|
|
5.67 |
% |
|
$ |
130,831 |
|
|
|
6.86 |
% |
|
$ |
10,993 |
|
|
|
4.72 |
|
|
$ |
1,302,282 |
|
|
|
6.20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
The following table sets forth at June 30, 2009 the dollar amount of all fixed- and
adjustable-rate loans that are contractually due after June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due After June 30, 2010 |
|
|
|
Fixed |
|
|
Adjustable |
|
|
Total |
|
|
|
(In thousands) |
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
Conventional one- to four family |
|
$ |
219,743 |
|
|
$ |
46,194 |
|
|
$ |
265,937 |
|
Multi-family |
|
|
71,789 |
|
|
|
205,245 |
|
|
|
277,034 |
|
Commercial real estate |
|
|
291,122 |
|
|
|
265,096 |
|
|
|
556,218 |
|
Second mortgage and equity loans |
|
|
46,785 |
|
|
|
7,895 |
|
|
|
54,680 |
|
Construction and land loans |
|
|
3,637 |
|
|
|
23,309 |
|
|
|
26,946 |
|
Other loans |
|
|
1,626 |
|
|
|
1,378 |
|
|
|
3,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
634,702 |
|
|
$ |
549,117 |
|
|
$ |
1,183,819 |
|
|
|
|
|
|
|
|
|
|
|
First Mortgage Loans:
Conventional One- to Four-Family Residential Loans. We originate one- to four-family
residential mortgage loans substantially all of which are secured by properties located in our
primary market area. At December 31, 2009, $260.1 million, or 18.8% of our loan portfolio,
consisted of one- to four-family residential mortgage loans. We generally retain for our portfolio
substantially all of these loans that we originate. One- to four-family mortgage loan originations
are generally obtained from existing or past customers, through advertising, and through referrals
from local builders, real estate brokers, and attorneys and are underwritten pursuant to Oritani
Banks policies and standards. In 2008, we began a program where a fee is paid to a broker for a
loan referral that results in an origination or a purchase of a recently closed loan. Generally,
one- to four-family residential mortgage loans are originated in amounts up to 80% of the lesser of
the appraised value or purchase price of the property, with private mortgage insurance required on
loans with a loan-to-value ratio in excess of 80%. We generally will not make loans with a
loan-to-value ratio in excess of 90%. Fixed rate mortgage loans are originated for terms of up to
40 years. Generally, fixed rate residential mortgage loans are underwritten according to Freddie
Mac guidelines, policies and procedures, with a maximum origination amount of $2.0 million. Our
fixed rate origination volume decreased in calendar 2009. Management felt that the market rates
for such products did not provide adequate compensation for the interest rate risk associated with
the products. Consequently, the pricing of our products were higher than market, causing a
negative impact on origination volumes. This situation is expected to sustain as long as the
market rates for fixed rate residential loans remain at approximately their current levels (or
lower). We do not originate or purchase, and our loan portfolio does not include, any sub-prime
loans.
We also offer adjustable rate mortgage loans for one- to four-family properties, with an
interest rate based on the weekly average yield on U.S. Treasuries adjusted to a constant maturity
of one-year, which adjust either annually or every three years from the outset of the loan or which
adjusts annually after a five-, seven- or ten-year initial fixed rate period. Originations and
purchases of adjustable rate one- to four-family residential loans totaled $27.7 million during the
fiscal year ended June 30, 2009 as compared to total originations and purchases of $89.9 million of
one- to four-family residential loans during the same fiscal year. Our adjustable rate mortgage
loans generally provide for maximum rate adjustments of 2% per adjustment, with a lifetime maximum
adjustment up to 6%, regardless of the initial rate. Our adjustable rate mortgage loans amortize
over terms of up to 30 years.
Adjustable rate mortgage loans decrease the risk associated with changes in market interest
rates by periodically repricing, but involve other risks because, as interest rates increase, the
underlying payments by the borrower increase, thus increasing the potential for default by the
borrower. At the same time, the marketability of the underlying collateral may be adversely
affected by higher interest rates.
84
Upward adjustment of the contractual interest rate is also limited by the maximum periodic and
lifetime interest rate adjustments permitted by our loan documents and, therefore, the
effectiveness of adjustable rate mortgage loans may be limited during periods of rapidly rising
interest rates. At June 30, 2009, $46.2 million, or 17.4% of our one- to four-family residential
real estate loans, had adjustable rates of interest.
In an effort to provide financing for first-time homebuyers, we offer our own first-time
homebuyer loan program. This program offers one- to four-family residential mortgage loans to
qualified individuals. These loans are offered with terms and adjustable and fixed rates of
interest similar to our other one- to four-family mortgage loan products. With this program,
borrowers receive a discounted mortgage interest rate and do not pay certain loan origination fees.
Such loans must be secured by an owner-occupied residence. These loans are originated using
similar underwriting guidelines as our other one- to four-family mortgage loans. Such loans are
originated in amounts of up to 90% of the lower of the propertys appraised value or the sale
price. Private mortgage insurance is not required for such loans. The maximum amount of such loan
is $275,000.
We also offer our directors, officers and employees who satisfy certain criteria and our
general underwriting standards fixed or adjustable rate loan products with reduced interest rates.
Employee loans adhere to all other terms and conditions contained in the loan policy.
All residential mortgage loans that we originate include due-on-sale clauses, which give us
the right to declare a loan immediately due and payable in the event that, among other things, the
borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is
not repaid. Regulations limit the amount that a savings bank may lend relative to the appraised
value of the real estate securing the loan, as determined by an appraisal of the property at the
time the loan is originated. All borrowers are required to obtain title insurance for the benefit
of Oritani Bank. We also require homeowners insurance and fire and casualty insurance and, where
circumstances warrant, flood insurance on properties securing real estate loans.
Multi-Family and Commercial Real Estate Loans. We originate non-residential commercial real
estate mortgage loans and loans on multi-family dwellings. At December 31, 2009, $628.5 million,
or 45.5% of our loan portfolio, consisted of commercial real estate loans and $296.3 million, or
21.4% of our loan portfolio, consisted of multi-family loans. Our commercial real estate mortgage
loans are primarily permanent loans secured by improved property such as mixed-use properties,
office buildings, retail stores and commercial warehouses. Our multi-family mortgage loans are
primarily permanent loans secured by apartment buildings. The typical loan has a fixed rate of
interest for the first five years, after which the loan reprices to a market index plus a spread.
The fixed rate period is occasionally extended to as much as ten years. These loans typically
amortize over 25 years and the maximum amortization period is 30 years. We also offer such loans
on a self-amortizing basis with fixed rate terms up to 20 years. Originations with these terms are
monitored and limited. References to commercial real estate loans below refer to multi-family and
commercial real estate.
The terms and conditions of each loan are tailored to the needs of the borrower and based on
the financial strength of the project and any guarantors. In reaching a decision on whether to
make a commercial real estate loan, we consider the net operating income of the property, the
borrowers expertise and credit history and the value of the underlying property. Loan to value
ratios are a very important consideration. Generally, however, commercial real estate loans
originated by us will not exceed 80% of the appraised value or the purchase price of the property,
whichever is less. Other factors we consider, with respect to commercial real estate rental
properties, include the term of the lease(s) and the quality of the tenant(s). We generally
require that the properties securing these real estate loans have
85
debt service coverage ratios (the ratio of earnings before debt service to debt service) of at
least 1.2 times. Environmental reports are generally required for commercial real estate loans.
Commercial real estate loans made to corporations, partnerships and other business entities may
require personal guarantees by the principals as warranted. Property inspections are conducted no
less than every three years, or more frequently as warranted. Oritani Bank lending policies allow
lending up to the 80% loan to value level and 1.2 times debt service coverage ratio. Over the
course of 2009, however, we informally reduced our maximum loan to value ratios and increased our
maximum debt service coverage ratio, as well as taking a more conservative approach on other
underwriting issues. We believe these actions have resulted in originations that are more
conservative in nature than Oritani Bank policy allows. We intend to maintain this conservative
posture at least as long as we perceive a heightened economic risk in this type of lending.
A commercial borrowers financial information is monitored on an ongoing basis by requiring
periodic financial statement updates, payment history reviews and periodic face-to-face meetings
with the borrower. We require commercial borrowers to provide annually updated financial
statements and federal tax returns. These requirements also apply to the individual principals of
our commercial borrowers. We also require borrowers with rental investment property to provide an
annual report of income and expenses for the property, including a tenant list and copies of
leases, as applicable. The largest commercial real estate loan in our portfolio at December 31,
2009 was a $21.0 million loan located in Ocean County, New Jersey and secured by a shopping mall.
This loan was performing according to its terms at December 31, 2009. Our largest commercial real
estate relationship consisted of properties located mainly in our primary market area with a real
estate investor. The aggregate outstanding loan balance for this relationship is $47.6 million,
and these loans are all performing in accordance with their terms.
Loans secured by commercial real estate, including multi-family properties, generally involve
larger principal amounts and a greater degree of risk than one- to four-family residential mortgage
loans. Because payments on loans secured by commercial real estate are often dependent on
successful operation or management of the properties, repayment of such loans may be affected by
adverse conditions in the real estate market or the economy.
Second Mortgage and Equity Loans. We also offer second mortgage and equity loans and home
equity of lines of credit, each of which are secured by one- to four-family residences,
substantially all of which are located in our primary market area. At December 31, 2009, second
mortgage and equity loans totaled $51.0 million, or 3.7% of total loans. Additionally, at December
31, 2009, the unadvanced amounts of home equity lines of credit totaled $17.3 million. The
underwriting standards utilized for home equity loans and equity lines of credit include a
determination of the applicants credit history, an assessment of the applicants ability to meet
existing obligations and payments on the proposed loan and the value of the collateral securing the
loan. The combined (first and second mortgage liens) loan-to-value ratio for home equity loans and
equity lines of credit is generally limited to 80%. Home equity loans are offered with fixed and
adjustable rates of interest and with terms of up to 30 years. Our home equity lines of credit
have adjustable rates of interest which are indexed to the prime rate, as reported in The Wall
Street Journal.
Equity loans entail greater risk than do residential mortgage loans, particularly if they are
secured by an asset that has a superior security interest. In addition, equity loan collections
depend on the borrowers continuing financial stability, and thus are more likely to be adversely
affected by job loss, divorce, illness or personal bankruptcy.
86
Construction Loans. We originate construction loans for the development of one- to
four-family residential properties located in our primary market area. Residential construction
loans are generally offered to experienced local developers operating in our primary market area
and to individuals for the construction of their personal residences. At December 31, 2009,
residential construction loans amounted to $90.5 million, or 6.6% of total loans.
Our residential construction loans generally provide for the payment of interest only during
the construction phase, but in no event exceeding 24 months. Residential construction loans can be
made with a maximum loan-to-value ratio of 75% of the appraised value of the land and 100% of the
costs associated with the construction. Residential construction loans are generally made on the
same terms as our one- to four-family mortgage loans.
We also make construction loans for commercial development projects. The projects include
multi-family, apartment, retail and office buildings. We generally require that a commitment for
permanent financing be in place prior to closing the construction loan. The maximum loan-to-value
ratio limit applicable to these loans is generally 80%. At December 31, 2009, commercial
construction loans totaled $34.4 million, or 2.5% of total loans. At December 31, 2009, the
largest outstanding commercial construction loan balance was for $13.9 million and is secured by a
condominium project. This loan is one of two loans to the same borrower totaling $15.9 million
that are classified as non-accrual and considered impaired with a specific allowance for loan
losses of $1.7 million at December 31, 2009. Oritani-Federal charged off $4.5 million of the
construction loan as of December 31, 2009, as this portion has been determined to be an incurred
loss.
Before making a commitment to fund a construction loan, we require an appraisal on the
property by an independent licensed appraiser. We require title insurance and, if applicable, an
environmental survey prior to making a commitment to fund a construction loan. We generally also
review and inspect each property before disbursement of funds during the terms of the construction
loan. Loan proceeds are disbursed after inspection based on the percentage of completion method.
Construction and development financing is generally considered to involve a higher degree of
credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a
construction loan depends largely upon the accuracy of the initial estimate of the value of the
property at completion of construction compared to the estimated cost (including interest) of
construction and other assumptions. If the estimate of construction cost proves to be inaccurate,
we may be required to advance funds beyond the amount originally committed in order to protect the
value of the property. Additionally, if the estimate of value proves to be inaccurate, we may be
confronted with a project, when completed, having a value which is insufficient to assure full
repayment.
We chose to reduce our exposure to construction lending in 2009 due to current market and
economic conditions. Construction originations for the year ended June 30, 2009 were $45.1
million, compared to $99.2 million for the comparable 2008 period. Construction originations for
the six month period ended December 31, 2009 were $7.4 million.
Other Loans. Other loans totaled $21.6 million, or 1.6% of our total loan portfolio, at
December 31, 2009. Other loans primarily consist of business loans secured by cash or other
business assets, account loans, and commercial line of credit loans. Commercial line of credit
loans totaled $3.1 million at December 31, 2009. In 2009, Oritani-Federal decided to limit new
line of credit lending to well-established customers.
87
Loan Originations, Purchases, Sales, Participations and Servicing of Loans. Lending
activities are conducted primarily by our loan personnel operating at our main office. All loans
originated by us are underwritten pursuant to our policies and procedures. We originate both
adjustable rate and fixed rate loans. Our ability to originate fixed or adjustable rate loans is
dependent upon the relative customer demand for such loans, which is affected by the current and
expected future levels of market interest rates.
We retain in our portfolio substantially all loans that we originate, although we have
occasionally sold longer-term, fixed-rate one- to four-family residential mortgage loans into the
secondary market. There were no sales of residential mortgage loans in fiscal 2008 or 2009.
Occasionally, we will also participate in loans, sometimes as the lead lender. Whether we
are the lead lender or not, we underwrite our participation portion of the loan according to our
own underwriting criteria and procedures. At December 31, 2009, we had $60.5 million in loan
participation interests.
At December 31, 2009, we were servicing loans sold in the amount of $9.9 million. Loan
servicing includes collecting and remitting loan payments, accounting for principal and interest,
contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event
of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and
generally administering the loans.
During the six months ended December 31, 2009, we originated $27.0 million of fixed- and
adjustable-rate one- to four-family residential mortgage loans, all of which were retained by us.
The fixed-rate loans retained by us consisted primarily of loans with terms of 30 years or less.
Non-performing and Problem Assets
We commence collection efforts for residential loans (excluding multi-family) when a loan
becomes ten days past due with system generated reminder notices. Subsequent late charges and
delinquent notices are issued and the account is monitored on a regular basis thereafter. Personal,
direct contact with the borrower is attempted early in the collection process as a courtesy
reminder and later to determine the reason for the delinquency and to safeguard our collateral.
When a loan is more than 45 days past due, the credit file is reviewed and, if deemed necessary,
information is updated or confirmed and collateral re-evaluated. We make every effort to contact
the borrower and develop a plan of repayment to cure the delinquency. If no repayment plan is in
process and the loan is delinquent at least two payments, the file is referred to counsel for the
commencement of foreclosure or other collection efforts. A very similar process is followed for
non-residential and multi-family loans. However, the direct, personal contact begins earlier in
the process. Contact is attempted as soon as a late charge is incurred. Also, for such loans, a
plan of repayment to cure the delinquency is not necessarily the only remediation process pursued.
In such instances, counsel is consulted and an approach for resolution is determined and
aggressively pursued. A summary report of all loans 30 days or more past due is reported to the
Board of Directors. The status of each of these loans is discussed with the Board of Directors on
a monthly basis.
Loans are placed on non-accrual status when they are more than 90 days delinquent. When loans
are placed on a non-accrual status, unpaid accrued interest is fully reversed. Once the
outstanding principal balance is brought current, income is recognized to the extent it is deemed
collectible. If the deficiencies causing the delinquency are resolved, such loans may be placed on
accrual status once all
88
arrearages are resolved. See additional discussion regarding our non-performing assets at
December 31, 2009 in Management Discussion and Analysis of Financial Condition and Results of
Operations.
Non-Performing Assets. The table below sets forth the amounts and categories of our
non-performing assets at the dates indicated. At each date presented, we had no troubled debt
restructurings (loans for which a portion of interest or principal has been forgiven and loans
modified at interest rates materially less than current market rates).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December |
|
|
At June 30, |
|
|
|
31, 2009 |
|
|
2009(1) |
|
|
2008(2) |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Non-accrual loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
$ |
1,760 |
|
|
$ |
98 |
|
|
$ |
67 |
|
|
$ |
|
|
|
$ |
458 |
|
|
$ |
147 |
|
Multi-family loans |
|
|
1,076 |
|
|
|
6,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
30,871 |
|
|
|
25,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
Construction and land loans |
|
|
18,200 |
|
|
|
20,391 |
|
|
|
14,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accrual loans |
|
|
51,907 |
|
|
$ |
52,465 |
|
|
$ |
14,210 |
|
|
$ |
|
|
|
$ |
458 |
|
|
$ |
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans greater than 90 days delinquent
and still accruing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Multi-family loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans 90 days and still
accruing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing loans |
|
$ |
51,907 |
|
|
$ |
52,465 |
|
|
$ |
14,210 |
|
|
$ |
|
|
|
$ |
458 |
|
|
$ |
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate owned |
|
|
600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing assets |
|
$ |
52,507 |
|
|
$ |
52,465 |
|
|
$ |
14,210 |
|
|
$ |
|
|
|
$ |
458 |
|
|
$ |
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans to total loans |
|
|
3.75 |
% |
|
|
4.03 |
% |
|
|
1.39 |
% |
|
|
|
% |
|
|
0.07 |
% |
|
|
0.04 |
% |
Non-performing assets to total assets |
|
|
2.62 |
% |
|
|
2.74 |
% |
|
|
0.98 |
% |
|
|
|
% |
|
|
0.04 |
% |
|
|
0.02 |
% |
|
|
|
(1) |
|
Two construction loans totaling $4.2 million are less than 60 days delinquent at June 30,
2009 and are classified as non-accrual. |
|
(2) |
|
One construction loan totaling $335,000 was less than 60 days delinquent at June 30, 2008 and
was classified as non-accrual. |
As noted in the above table, there were nonaccrual loans of $51.9 million at December 31,
2009, $52.5 million at June 30, 2009 and $14.2 million at June 30, 2008. Additional interest
income of $2.1 million, $3.6 million and $521,000 would have been recorded during the six months
ended December 31, 2009 and the years ended June 30, 2009 and 2008, respectively, if the loans had
performed in accordance with their original terms.
89
Delinquent Loans. The following table sets forth our loan delinquencies by type, by
amount and by percentage of type at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Delinquent For |
|
|
|
|
|
|
60-89 Days |
|
|
90 Days and Over |
|
|
Total |
|
|
|
Number |
|
|
Amount |
|
|
Number |
|
|
Amount |
|
|
Number |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
At December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
1 |
|
|
$ |
196 |
|
|
|
3 |
|
|
$ |
1,341 |
|
|
|
4 |
|
|
$ |
1,537 |
|
Multi-family loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
|
3 |
|
|
|
704 |
|
|
|
7 |
|
|
|
31,948 |
|
|
|
10 |
|
|
|
32,652 |
|
Second mortgage and equity loans |
|
|
1 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
62 |
|
Construction and land loans |
|
|
1 |
|
|
|
1,012 |
|
|
|
4 |
|
|
|
18,618 |
|
|
|
5 |
|
|
|
19,630 |
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6 |
|
|
$ |
1,974 |
|
|
|
14 |
|
|
$ |
51,907 |
|
|
|
20 |
|
|
$ |
53,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
1 |
|
|
$ |
197 |
|
|
|
2 |
|
|
$ |
98 |
|
|
|
3 |
|
|
$ |
295 |
|
Multi-family loans |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
6,291 |
|
|
|
2 |
|
|
|
6,291 |
|
Commercial real estate loans |
|
|
3 |
|
|
|
17,209 |
|
|
|
6 |
|
|
|
25,685 |
|
|
|
9 |
|
|
|
42,894 |
|
Second mortgage and equity loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land loans |
|
|
1 |
|
|
|
419 |
|
|
|
6 |
|
|
|
20,391 |
|
|
|
7 |
|
|
|
20,810 |
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
5 |
|
|
$ |
17,825 |
|
|
|
16 |
|
|
$ |
47,839 |
|
|
|
21 |
|
|
$ |
65,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
|
|
|
$ |
|
|
|
|
2 |
|
|
$ |
68 |
|
|
|
2 |
|
|
$ |
68 |
|
Multi-family loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
1 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
18 |
|
Construction and land loans |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
13,808 |
|
|
|
2 |
|
|
|
13,808 |
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1 |
|
|
$ |
18 |
|
|
|
4 |
|
|
$ |
13,876 |
|
|
|
5 |
|
|
$ |
13,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Multi-family loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
1 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
39 |
|
Construction and land loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1 |
|
|
$ |
39 |
|
|
|
|
|
|
$ |
|
|
|
|
1 |
|
|
$ |
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
5 |
|
|
$ |
180 |
|
|
|
2 |
|
|
$ |
348 |
|
|
|
7 |
|
|
$ |
528 |
|
Multi-family loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
5 |
|
|
$ |
180 |
|
|
|
2 |
|
|
$ |
348 |
|
|
|
7 |
|
|
$ |
528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
3 |
|
|
$ |
139 |
|
|
|
3 |
|
|
$ |
140 |
|
|
|
6 |
|
|
$ |
279 |
|
Multi-family loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
1 |
|
|
|
29 |
|
|
|
1 |
|
|
|
44 |
|
|
|
2 |
|
|
|
73 |
|
Construction and land loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4 |
|
|
$ |
168 |
|
|
|
4 |
|
|
$ |
184 |
|
|
|
8 |
|
|
$ |
352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
In addition to the delinquent loans listed above, we had loans that were delinquent 90
days or more past due as to principal. Such loans had passed their maturity date but continued
making monthly payments, keeping their interest current. All such loans have subsequently been
paid in full or were extended by us, which negated their past due maturity status. These loans
totaled $2.7 million, $3.1 million, $316,000, and $3.2 million at December 31, 2009, June 30, 2009,
2008 and 2007, respectively.
Real Estate Owned. Real estate acquired by us as a result of foreclosure or by deed in lieu
of foreclosure is classified as real estate owned until sold. When property is acquired it is
recorded at the lower of cost or fair market value at the date of foreclosure, establishing a new
cost basis. Holding costs and declines in fair value result in charges to expense after
acquisition. At June 30, 2009 and 2008, we had no real estate owned. During the six months ended
December 31, 2009, Oritani Bank obtained title to a property which secured a $877,000
non-performing loan which had been classified as impaired. The property was written down to
$800,000 upon acquisition and was subsequently written down further to $600,000. The property is
currently being marketed for sale.
Classified Assets. Federal regulations provide that loans and other assets of lesser quality
should be classified as substandard, doubtful or loss assets. An asset is considered
substandard if it is inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. Substandard assets include those characterized by
the distinct possibility that we will sustain some loss if the deficiencies are not corrected.
Assets classified as doubtful have all of the weaknesses inherent in those classified
substandard, with the added characteristic that the weaknesses present make collection or
liquidation in full, on the basis of currently existing facts, conditions, and values, highly
questionable and improbable. Assets classified as loss are those considered uncollectible and
of such little value that their continuance as assets without the establishment of a specific loss
reserve is not warranted.
We are required to establish general allowances for loan losses for loans classified
substandard or doubtful, as well as for other problem loans. General allowances represent loss
allowances which have been established to recognize the inherent losses associated with lending
activities, but which, unlike specific allowances, have not been allocated to particular problem
assets. When we classify problem assets as loss, we are required either to establish a specific
allowance for losses equal to 100% of the amount of the asset so classified or to charge off such
amount. Our determination as to the classification of our assets and the amount of our valuation
allowances is subject to review by the FDIC and the New Jersey Department of Banking and Insurance
which can order the establishment of additional general or specific loss allowances. Such
examinations typically occur annually. Our last examination was as of March 31, 2009 by the FDIC.
The following table shows the aggregate amounts of our classified assets at the date indicated
for both residential real estate and non-residential real estate loans.
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified Assets At |
|
|
|
December 31, 2009 |
|
|
June 30, 2009 |
|
|
June 30, 2008 |
|
|
June 30, 2007 |
|
|
|
Number |
|
|
Amount |
|
|
Number |
|
|
Amount |
|
|
Number |
|
|
Amount |
|
|
Number |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
3 |
|
|
$ |
1,341 |
|
|
|
2 |
|
|
$ |
109 |
|
|
|
3 |
|
|
$ |
85 |
|
|
|
|
|
|
$ |
|
|
Multi-family loans |
|
|
1 |
|
|
|
1,076 |
|
|
|
5 |
|
|
|
7,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
|
9 |
|
|
|
36,199 |
|
|
|
9 |
|
|
|
28,827 |
|
|
|
4 |
|
|
|
14,375 |
|
|
|
2 |
|
|
|
238 |
|
Construction and land loans |
|
|
5 |
|
|
|
1,012 |
|
|
|
4 |
|
|
|
19,273 |
|
|
|
|
|
|
|
18,618 |
|
|
|
|
|
|
|
|
|
Other loans |
|
|
1 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
19 |
|
|
$ |
58,388 |
|
|
|
20 |
|
|
$ |
55,811 |
|
|
|
7 |
|
|
$ |
14,460 |
|
|
|
2 |
|
|
$ |
238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance allocated to total
classified assets |
|
|
|
|
|
$ |
4,460 |
|
|
|
|
|
|
$ |
3,896 |
|
|
|
|
|
|
$ |
1,497 |
|
|
|
|
|
|
$ |
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The loan portfolio is reviewed on a regular basis to determine whether any loans require
classification in accordance with applicable regulations.
We also utilize additional classification for assets that do not meet the definition of any of
the classified assets yet contain an element that warrants a rating that is less than pass. We
classify an asset as special mention if the asset has a potential weakness that warrants
managements close attention. While such assets are not impaired, management has concluded that if
the potential weakness in the asset is not addressed, the value of the asset may deteriorate,
adversely affecting the repayment of the asset. Our assets classified as special mention totaled
$9.8 million, $24.2 million, $21.7 million and $9.8 million at December 31, 2009 and June 30, 2009,
2008 and 2007, respectively. Effective September 30, 2009, we began to also utilize the
classification of watch for assets where complete current information has not been procured or a
minor weakness is indicated. Our assets classified as watch totaled $9.8 million at December 31,
2009.
Impaired Loans. In accordance with Statement of Financial Accounting Standards 114 (FAS
114), we define an impaired loan as a loan for which it is probable, based on current information,
that we will not collect all amounts due under the contractual terms of the loan agreement. We
generally classify qualifying loans as impaired if they exceed 90 days delinquency, as principal
and interest would not be being repaid under the contractual terms in such a situation. Loans we
individually classify as impaired include multi-family, commercial mortgage and construction loans.
Impaired loans are individually assessed to determine that each loans carrying value is not in
excess of the fair value of the related collateral or the present value of the expected future cash
flows. If the loans carrying value does exceed the fair value, a specific allowance for loan
losses is established to reduce the loans carrying value. For classification purposes, impaired
loans are typically classified as substandard. Residential mortgage and consumer loans are deemed
smaller balance homogeneous loans which are evaluated collectively for impairment and are therefore
excluded from the population of impaired loans.
Allowance for Loan Losses
Our allowance for loan losses is maintained at a level necessary to absorb loan losses that
are both probable and reasonably estimable. Management, in determining the allowance for loan
losses, considers the losses inherent in our loan portfolio and changes in the nature and volume of
loan activities, along with the general economic and real estate market conditions. A description
of our methodology in establishing our allowance for loan losses is set forth in the section
Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical
Accounting PoliciesAllowance for Loan Losses. The allowance for loan losses as of December 31,
2009 was maintained at a level that represents managements best estimate of losses inherent in the
loan portfolio, and such losses were both probable and reasonably estimable. However, this
analysis process is inherently subjective, as it requires
92
us to make estimates that are susceptible to revisions as more information becomes available.
Although we believe that we have established the allowance at levels to absorb probable and
estimable losses, future additions may be necessary if economic or other conditions in the future
differ from the current environment.
In addition, as an integral part of their examination process, the FDIC, OTS, and the New
Jersey Department of Banking and Insurance have authority to periodically review our allowance for
loan losses. Such agencies may require that we recognize additions to the allowance based on their
judgments of information available to them at the time of their examination.
Allowance for Loan Losses. The following table sets forth activity in our allowance for loan
losses for the fiscal years indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
|
|
|
|
|
|
December 31, |
|
|
At or For the Years Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
20,681 |
|
|
$ |
13,532 |
|
|
$ |
13,532 |
|
|
$ |
8,882 |
|
|
$ |
7,672 |
|
|
$ |
6,172 |
|
|
$ |
5,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family |
|
|
16 |
|
|
|
|
|
|
|
260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land loans |
|
|
2,726 |
|
|
|
|
|
|
|
2,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
43 |
|
|
|
|
|
|
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs |
|
|
3,570 |
|
|
|
|
|
|
|
2,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family and commercial
real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land loans |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (charge-offs) recoveries |
|
|
(3,567 |
) |
|
|
|
|
|
|
(2,732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
5,050 |
|
|
|
5,375 |
|
|
|
9,880 |
|
|
|
4,650 |
|
|
|
1,210 |
|
|
|
1,500 |
|
|
|
800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
22,164 |
|
|
$ |
18,907 |
|
|
$ |
20,680 |
|
|
$ |
13,532 |
|
|
$ |
8,882 |
|
|
$ |
7,672 |
|
|
$ |
6,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs to average loans
outstanding (annualized) |
|
|
0.53 |
% |
|
|
|
% |
|
|
0.23 |
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
Allowance for loan losses to total
loans at end of period |
|
|
1.60 |
% |
|
|
1.54 |
% |
|
|
1.59 |
% |
|
|
1.32 |
% |
|
|
1.15 |
% |
|
|
1.18 |
% |
|
|
1.23 |
% |
93
Allocation of Allowance for Loan Losses. The following table sets forth the allowance
for loan losses allocated by loan category, the total loan balances by category (including loans
held for sale), and the percent of loans in each category to total loans at the dates indicated.
The allowance for loan losses allocated to each category is not necessarily indicative of future
losses in any particular category and does not restrict the use of the allowance to absorb losses
in other categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
At June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Loans |
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
|
Percent of Loans in |
|
|
|
|
|
|
in Each |
|
|
Allowance |
|
|
Loans in Each |
|
|
Allowance |
|
|
Loans in Each |
|
|
|
Allowance for Loan |
|
|
Each Category to |
|
|
Allowance for Loan |
|
|
Category to |
|
|
for Loan |
|
|
Category to |
|
|
for Loan |
|
|
Category to |
|
|
|
Losses |
|
|
Total Loans |
|
|
Losses |
|
|
Total Loans |
|
|
Losses |
|
|
Total Loans |
|
|
Losses |
|
|
Total Loans |
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
$ |
1,167 |
|
|
|
18.8 |
% |
|
$ |
1,012 |
|
|
|
20.4 |
% |
|
$ |
845 |
|
|
|
21.8 |
% |
|
$ |
709 |
|
|
|
24.6 |
% |
Multi-family |
|
|
3,073 |
|
|
|
21.4 |
|
|
|
2,912 |
|
|
|
21.3 |
|
|
|
2,535 |
|
|
|
23.2 |
|
|
|
2,254 |
|
|
|
27.4 |
|
Commercial real estate |
|
|
11,501 |
|
|
|
45.5 |
|
|
|
9,683 |
|
|
|
43.3 |
|
|
|
5,560 |
|
|
|
35.2 |
|
|
|
3,889 |
|
|
|
31.3 |
|
Second mortgage and equity loans |
|
|
261 |
|
|
|
3.7 |
|
|
|
274 |
|
|
|
4.2 |
|
|
|
299 |
|
|
|
5.8 |
|
|
|
326 |
|
|
|
8.5 |
|
Construction and land loans |
|
|
4,889 |
|
|
|
9.0 |
|
|
|
5,791 |
|
|
|
10.0 |
|
|
|
3,883 |
|
|
|
13.5 |
|
|
|
979 |
|
|
|
8.1 |
|
Other loans |
|
|
544 |
|
|
|
1.6 |
|
|
|
268 |
|
|
|
0.8 |
|
|
|
92 |
|
|
|
0.5 |
|
|
|
15 |
|
|
|
0.1 |
|
Unallocated |
|
|
729 |
|
|
|
|
|
|
|
740 |
|
|
|
|
|
|
|
318 |
|
|
|
|
|
|
|
710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
22,164 |
|
|
|
100.0 |
% |
|
$ |
20,680 |
|
|
|
100.0 |
% |
|
$ |
13,532 |
|
|
|
100.0 |
% |
|
$ |
8,882 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
Percent of Loans |
|
|
|
|
|
|
Percent of |
|
|
|
Allowance |
|
|
in Each |
|
|
|
|
|
|
Loans in Each |
|
|
|
for Loan |
|
|
Category to |
|
|
Allowance for |
|
|
Category to |
|
|
|
Losses |
|
|
Total Loans |
|
|
Loan Losses |
|
|
Total Loans |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
First mortgage loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional |
|
$ |
749 |
|
|
|
25.3 |
% |
|
$ |
684 |
|
|
|
29.4 |
% |
Multi-family |
|
|
2,243 |
|
|
|
31.5 |
|
|
|
2,117 |
|
|
|
36.5 |
|
Commercial real estate |
|
|
2,591 |
|
|
|
26.6 |
|
|
|
1,440 |
|
|
|
17.6 |
|
Second mortgage and equity
loans |
|
|
312 |
|
|
|
10.2 |
|
|
|
512 |
|
|
|
11.1 |
|
Construction and land loans |
|
|
758 |
|
|
|
5.9 |
|
|
|
475 |
|
|
|
4.9 |
|
Other loans |
|
|
57 |
|
|
|
0.5 |
|
|
|
37 |
|
|
|
0.5 |
|
Unallocated |
|
|
962 |
|
|
|
|
|
|
|
907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,672 |
|
|
|
100.0 |
% |
|
$ |
6,172 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
94
The increase in the allowance for loan losses, and related provision, is primarily due to
the large increases in delinquent and impaired loans at December 31, 2009. Such loans are
discussed in Managements Discussion and Analysis of Financial Condition and Results of
Operations. In addition, the continued increase in the multi-family and commercial real estate
loan portfolio was also a factor. These types of loans inherently contain more credit risk than
one- to four-family residential loans.
Investments
The Board of Directors is responsible for adopting our investment policy. The investment
policy is reviewed periodically by management and any changes to the policy are recommended to and
subject to the approval of the Board of Directors. Authority to make investments under the
approved investment policy guidelines is delegated to appropriate officers. While general
investment strategies are developed and authorized by the Board of Directors, the execution of
specific actions primarily rests with Oritani Banks President, Chief Financial Officer and
Asset/Liability Committee, which have responsibility for ensuring that the guidelines and
requirements included in the investment policy are followed and that all securities are considered
prudent for investment. Each of our President, Chief Financial Officer and Asset/Liability
Committee have increasing authority to purchase various types of investments; all individual
investment purchases in excess of $20.0 million and all daily purchases in excess of $30.0 million
must be approved by our Board of Directors. All investment transactions are reviewed and ratified
or approved (as the case may be) at regularly scheduled meetings of the Board of Directors. Any
investment which, subsequent to its purchase, fails to meet the guidelines of the policy is
reported to the Board of Directors at its next meeting where the Board of Directors decides whether
to hold or sell the investment.
New Jersey chartered savings banks have authority to invest in various types of assets,
including U.S. Treasury obligations, securities of various federal agencies, mortgage-backed
securities, certain certificates of deposit of insured financial institutions, overnight and
short-term loans to other banks, corporate debt instruments, and Fannie Mae and Freddie Mac equity
securities. Oritani-Federal, as a federally chartered mid-tier stock holding company, may invest
in equity securities subject to certain limitations.
The investment policy requires that all securities transactions be conducted in a safe and
sound manner. Investment decisions must be based upon a thorough analysis of each security
instrument to determine if its quality and inherent risks fit within Oritani Banks overall
asset/liability management objectives, the effect on its risk-based capital measurement and the
prospects for yield and/or appreciation. The investment policy provides that Oritani Bank may
invest in U.S. treasury notes, U.S. and state agency securities, mortgage-backed securities, and
other conservative investment opportunities. Typical investments are currently in U.S. agency
securities and government sponsored mortgage-backed securities.
Our investment portfolio at December 31, 2009, consisted of $311.2 million in federal agency
obligations, a $5.4 million investment in a mutual fund, $2.1 million of corporate debt instruments
and $1.8 million in equity securities. We also invest in mortgage-backed securities, all of which
are guaranteed by government sponsored enterprises. At December 31, 2009, our mortgage-backed
securities portfolio totaled $184.7 million, or 9.2% of total assets, and consisted of $144.1
million in fixed-rate securities and $40.6 million in adjustable-rate securities, guaranteed by
Fannie Mae, Freddie Mac or Ginnie Mae. Securities can be classified as held to maturity or
available for sale at the date of purchase.
U.S. Government and Federal Agency Obligations. At December 31, 2009, our U.S. Government and
federal agency securities portfolio totaled $311.2 million, all of which was classified as
available for sale.
95
Corporate Bonds. At December 31, 2009, our corporate bond portfolio totaled $2.1 million,
which consisted of one security, rated BBB- and was classified as available for sale. The industry
represented by our corporate bond issuer was financial. Although corporate bonds may offer higher
yields than U.S. Treasury or agency securities of comparable duration, corporate bonds also have a
higher risk of default due to possible adverse changes in the credit-worthiness of the issuer.
Mutual Funds. At December 31, 2009, our mutual fund portfolio totaled $5.4 million, and was
classified as available for sale. The portfolio consisted of an investment in a mutual fund that
holds adjustable-rate mortgage loans and similar securities. During fiscal 2009, the portfolio was
deemed other-than-temporarily impaired and we recorded a non-cash impairment charge to earnings of
$1.7 million for the year ended June 30, 2009. No further impairment charges were required on this
investment.
Equity Securities. At December 31, 2009, our equity securities portfolio totaled $1.8
million, all of which were classified as available for sale. The portfolio consists of financial
industry common stocks. During fiscal 2009, several of these holdings were deemed
other-than-temporarily impaired and we recorded a non-cash impairment charge to earnings of
$399,000. A further impairment charge totaling $202,000 was recognized regarding these securities
during the quarter ended December 31, 2009. Equity securities are not insured or guaranteed
investments and are affected by market interest rates and stock market fluctuations. Such
investments are carried at their fair value and fluctuations in the fair value of such investments,
including temporary declines in value, directly affect our net capital position.
Mortgage-Backed Securities. We purchase mortgage-backed securities primarily insured or
guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. We invest in mortgage-backed securities to
achieve positive interest rate spreads with minimal administrative expense, to lower our credit
risk as a result of the guarantees provided by Freddie Mac, Fannie Mae or Ginnie Mae and to offset
a portion of the interest rate risk inherent in our loan portfolio. Our investment policy also
authorizes the investment in collateralized mortgage obligations (CMOs), also insured or issued
by Freddie Mac, Fannie Mae and Ginnie Mae. We limit CMO investments to those classes of CMOs
carrying the most stable cash flows and lowest prepayment risk of any class of CMOs and which pass
the Federal Financial Institutions Examination Councils average life restriction tests at the time
of purchase.
At December 31, 2009, our mortgage-backed securities totaled $184.7 million, or 9.2%, of total
assets. At December 31, 2009, 22.0% of the mortgage-backed securities were backed by adjustable
rate mortgage loans and 78.0% were backed by fixed rate mortgage loans. The mortgage-backed
securities portfolio had a weighted average yield of 4.3% at December 31, 2009. The estimated fair
value of our mortgage-backed securities at December 31, 2009 was $186.7 million, which is $5.4
million more than the amortized cost of $181.4 million. Investments in mortgage-backed securities
involve a risk that actual prepayments may differ from estimated prepayments over the life of the
security, which may require adjustments to the amortization of any premium or accretion of any
discount relating to such instruments thereby changing the net yield on such securities. There is
also reinvestment risk associated with the cash flows from such securities or if such securities
are redeemed by the issuer. In addition, the market value of such securities may be adversely
affected by changes in interest rates. All of our mortgage-backed securities are insured or
guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
96
Securities Portfolios. The following table sets forth the composition of our investment
securities portfolio at the dates indicated.
Securities and Mortgage-Backed Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
At June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
|
(In thousands) |
|
United States Government and
federal agency obligations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
5,415 |
|
|
$ |
5,347 |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac |
|
|
15,740 |
|
|
|
16,135 |
|
|
|
18,783 |
|
|
|
19,063 |
|
|
|
25,082 |
|
|
|
24,902 |
|
|
|
31,365 |
|
|
|
30,329 |
|
Ginnie Mae |
|
|
2,423 |
|
|
|
2,426 |
|
|
|
5,161 |
|
|
|
5,157 |
|
|
|
6,055 |
|
|
|
6,040 |
|
|
|
8,895 |
|
|
|
8,907 |
|
Fannie Mae |
|
|
24,589 |
|
|
|
25,301 |
|
|
|
31,329 |
|
|
|
31,943 |
|
|
|
42,066 |
|
|
|
42,094 |
|
|
|
58,479 |
|
|
|
57,314 |
|
Collateralized mortgage obligations |
|
|
43,430 |
|
|
|
44,461 |
|
|
|
63,544 |
|
|
|
64,218 |
|
|
|
90,747 |
|
|
|
89,636 |
|
|
|
118,667 |
|
|
|
113,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity |
|
$ |
86,182 |
|
|
$ |
88,223 |
|
|
$ |
118,817 |
|
|
$ |
120,381 |
|
|
$ |
163,950 |
|
|
$ |
162,672 |
|
|
$ |
222,821 |
|
|
$ |
215,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities and Mortgage-Backed Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
At June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
|
(In thousands) |
|
United States Government and
federal agency obligations |
|
$ |
310,775 |
|
|
$ |
311,194 |
|
|
$ |
134,754 |
|
|
$ |
134,837 |
|
|
$ |
10,000 |
|
|
$ |
9,865 |
|
|
$ |
25,000 |
|
|
$ |
25,007 |
|
Corporate bonds |
|
|
2,000 |
|
|
|
2,083 |
|
|
|
2,000 |
|
|
|
2,156 |
|
|
|
2,000 |
|
|
|
2,184 |
|
|
|
2,000 |
|
|
|
2,024 |
|
Mutual funds |
|
|
5,148 |
|
|
|
5,361 |
|
|
|
5,636 |
|
|
|
5,676 |
|
|
|
7,782 |
|
|
|
7,782 |
|
|
|
8,429 |
|
|
|
8,412 |
|
Equity securities |
|
|
1,763 |
|
|
|
1,801 |
|
|
|
1,965 |
|
|
|
1,750 |
|
|
|
2,364 |
|
|
|
2,454 |
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac |
|
|
22,352 |
|
|
|
23,300 |
|
|
|
26,979 |
|
|
|
27,875 |
|
|
|
28,672 |
|
|
|
28,837 |
|
|
|
1,363 |
|
|
|
1,363 |
|
Fannie Mae |
|
|
20,267 |
|
|
|
21,245 |
|
|
|
27,023 |
|
|
|
27,911 |
|
|
|
31,084 |
|
|
|
30,895 |
|
|
|
5,891 |
|
|
|
5,918 |
|
Ginnie Mae |
|
|
|
|
|
|
|
|
|
|
2,537 |
|
|
|
2,557 |
|
|
|
3,134 |
|
|
|
3,143 |
|
|
|
4,502 |
|
|
|
4,548 |
|
Collateralized mortgage
obligations |
|
|
52,566 |
|
|
|
53,968 |
|
|
|
68,571 |
|
|
|
70,260 |
|
|
|
85,351 |
|
|
|
86,334 |
|
|
|
27,024 |
|
|
|
26,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale |
|
$ |
414,871 |
|
|
$ |
418,952 |
|
|
$ |
269,465 |
|
|
$ |
273,022 |
|
|
$ |
170,387 |
|
|
$ |
171,494 |
|
|
$ |
74,209 |
|
|
$ |
74,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97
Portfolio Maturities and Yields. The composition and maturities of the investment
securities portfolio at December 31, 2009 are summarized in the following table. Maturities are
based on the final contractual payment dates, and do not reflect the impact of prepayments or early
redemptions that may occur.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More than One Year |
|
|
More than Five Years |
|
|
|
|
|
|
|
|
|
One Year or Less |
|
|
through Five Years |
|
|
through Ten Years |
|
|
More than Ten Years |
|
|
Total Securities |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
Amortized |
|
|
Average |
|
|
Amortized |
|
|
Average |
|
|
Amortized |
|
|
Average |
|
|
Amortized |
|
|
Average |
|
|
Amortized |
|
|
|
|
|
|
Average |
|
|
|
Cost |
|
|
Yield |
|
|
Cost |
|
|
Yield |
|
|
Cost |
|
|
Yield |
|
|
Cost |
|
|
Yield |
|
|
Cost |
|
|
Fair Value |
|
|
Yield |
|
|
|
(Dollars in thousands) |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac |
|
$ |
2,341 |
|
|
|
3.5 |
% |
|
$ |
3,423 |
|
|
|
4.1 |
% |
|
$ |
9,976 |
|
|
|
3.7 |
% |
|
$ |
|
|
|
|
|
% |
|
$ |
15,740 |
|
|
$ |
16,135 |
|
|
|
3.8 |
% |
Ginnie Mae |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,423 |
|
|
|
3.0 |
|
|
|
2,423 |
|
|
|
2,426 |
|
|
|
3.0 |
|
Fannie Mae |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,589 |
|
|
|
3.8 |
|
|
|
24,589 |
|
|
|
25,301 |
|
|
|
3.8 |
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
43,430 |
|
|
|
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,430 |
|
|
|
44,361 |
|
|
|
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity |
|
$ |
2,341 |
|
|
|
3.5 |
% |
|
$ |
46,853 |
|
|
|
4.0 |
% |
|
$ |
9,976 |
|
|
|
3.7 |
% |
|
$ |
27,012 |
|
|
|
3.7 |
% |
|
$ |
86,182 |
|
|
$ |
88,223 |
|
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Government and federal
agency obligations |
|
$ |
|
|
|
|
|
% |
|
$ |
310,775 |
|
|
|
2.8 |
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
310,775 |
|
|
$ |
311,194 |
|
|
|
2.8 |
% |
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
8.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
2,083 |
|
|
|
8.1 |
|
Mutual funds |
|
|
5,148 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,148 |
|
|
|
5,361 |
|
|
|
3.7 |
|
Equity securities |
|
|
1,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,763 |
|
|
|
1,801 |
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac |
|
|
2,800 |
|
|
|
3.5 |
|
|
|
12,274 |
|
|
|
4.6 |
|
|
|
|
|
|
|
|
|
|
|
7,278 |
|
|
|
4.6 |
|
|
|
22,352 |
|
|
|
23,300 |
|
|
|
4.5 |
|
Fannie Mae |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,267 |
|
|
|
4.9 |
|
|
|
20,267 |
|
|
|
21,245 |
|
|
|
4.9 |
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
52,566 |
|
|
|
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,566 |
|
|
|
53,968 |
|
|
|
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale |
|
$ |
9,711 |
|
|
|
3.0 |
% |
|
$ |
377,615 |
|
|
|
3.1 |
% |
|
$ |
|
|
|
|
% |
|
|
$ |
27,545 |
|
|
|
4.8 |
% |
|
$ |
414,871 |
|
|
$ |
418,952 |
|
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
Sources of Funds
General. Deposits have traditionally been the primary source of funds for use in lending and
investment activities. We also use borrowings, primarily FHLB advances, to supplement cash flow
needs, to lengthen the maturities of liabilities for interest rate risk management purposes and to
manage the cost of funds. In addition, funds are derived from scheduled loan payments,
mortgaged-backed securities scheduled payments and prepayments, investment maturities, loan
prepayments, retained earnings and income on other earning assets. While scheduled loan payments
and income on earning assets are relatively stable sources of funds, deposit inflows and outflows
can vary widely and are influenced by prevailing interest rates, market conditions and levels of
competition.
Deposits. Our deposits are generated primarily from residents and businesses within our
primary market area. We offer a selection of deposit accounts, including demand accounts, NOW
accounts, money market deposit accounts, savings accounts, retirement accounts and time deposits.
Deposit account terms vary, with the principal differences being the minimum balance required, the
amount of time the funds must remain on deposit and the interest rate.
Interest rates, maturity terms, service fees and other account features are established on a
periodic basis. Deposit rates and terms are based primarily on current operating strategies and
market rates, liquidity requirements, rates paid by competitors and growth goals. Personalized
customer service, attractive account features, long-standing relationships with customers,
convenient locations, competitive rates of interest and an active marketing program are relied upon
to attract and retain deposits.
The flow of deposits is influenced significantly by general economic conditions, changes in
prevailing interest rates and competition. The variety of deposit accounts offered allows us to be
competitive in obtaining funds and responding to changes in consumer demand while managing interest
rate risk and minimizing interest expense. At December 31, 2009, $685.5 million, or 56.6% of our
deposit accounts were time deposits, of which $583.8 million had maturities of one year or less.
99
The following table sets forth the distribution of total deposits by account type, at the
dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
At June 30, |
|
|
At June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
Balance |
|
|
Percent |
|
|
Average Ratio |
|
|
Balance |
|
|
Percent |
|
|
Average Ratio |
|
|
Balance |
|
|
Percent |
|
|
Average Ratio |
|
|
|
(Dollars in thousands) |
|
Deposit type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts |
|
$ |
106,968 |
|
|
|
8.82 |
% |
|
|
0.75 |
% |
|
$ |
88,759 |
|
|
|
7.87 |
% |
|
|
0.90 |
% |
|
$ |
73,949 |
|
|
|
10.58 |
% |
|
|
0.89 |
% |
Money market deposit accounts |
|
|
271,583 |
|
|
|
22.44 |
|
|
|
1.43 |
|
|
|
199,965 |
|
|
|
17.73 |
|
|
|
2.07 |
|
|
|
57,117 |
|
|
|
8.17 |
|
|
|
2.92 |
|
Savings accounts |
|
|
146,442 |
|
|
|
12.10 |
|
|
|
0.79 |
|
|
|
147,669 |
|
|
|
13.10 |
|
|
|
1.04 |
|
|
|
149,062 |
|
|
|
21.33 |
|
|
|
1.35 |
|
Time deposits |
|
|
685,514 |
|
|
|
56.64 |
|
|
|
2.32 |
|
|
|
691,237 |
|
|
|
61.30 |
|
|
|
2.84 |
|
|
|
418,804 |
|
|
|
59.92 |
|
|
|
3.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
$ |
1,210,507 |
|
|
|
100.00 |
% |
|
|
1.80 |
% |
|
$ |
1,127,630 |
|
|
|
100.00 |
% |
|
|
2.32 |
% |
|
$ |
698,932 |
|
|
|
100.00 |
% |
|
|
2.92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
Percent |
|
|
Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Deposit type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
75,510 |
|
|
|
10.85 |
% |
|
|
1.12 |
% |
Money market deposit accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,029 |
|
|
|
5.90 |
|
|
|
4.00 |
|
Savings accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,670 |
|
|
|
22.52 |
|
|
|
1.56 |
|
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
422,548 |
|
|
|
60.73 |
|
|
|
4.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
695,757 |
|
|
|
100.00 |
% |
|
|
3.59 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
As of December 31, 2009, the aggregate amount of outstanding time deposits in amounts
greater than or equal to $100,000 was approximately $240.3 million. The following table sets forth
the maturity of those deposits as of December 31, 2009.
|
|
|
|
|
|
|
At |
|
|
|
December 31, 2009 |
|
|
|
(In thousands) |
|
Three months or less |
|
$ |
99,723 |
|
Over three months through six months |
|
|
58,214 |
|
Over six months through one year |
|
|
46,990 |
|
Over one year through three years |
|
|
32,688 |
|
Over three years |
|
|
2,730 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
240,345 |
|
|
|
|
|
Borrowings. Our borrowings primarily consist of advances from the FHLB-NY. As of
December 31, 2009, we had total borrowings in the amount of $507.4 million, which represented 28.8%
of total liabilities, with an estimated weighted average maturity of 5.5 years and a weighted
average rate of 3.96%. The weighted average maturity is estimated because several of our
borrowings, under certain circumstances, can be called by the FHLB prior to the scheduled maturity.
If this were to occur, our weighted average maturity would decrease. At December 31, 2009,
advances from the FHLB constituted 99.9% of borrowings. At December 31, 2009, borrowings are
secured by mortgage-backed securities and investment securities with a book value of $352.6 million
and performing mortgage loans with an outstanding balance of $881.7 million.
The following table sets forth information concerning balances and interest rates on our FHLB
advances and other borrowings at and for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
At or For the Years Ended June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Balance at end of period |
|
$ |
507,439 |
|
|
$ |
508,991 |
|
|
$ |
433,672 |
|
|
$ |
196,661 |
|
Average balance during period |
|
$ |
508,145 |
|
|
$ |
505,599 |
|
|
$ |
310,231 |
|
|
$ |
210,598 |
|
Maximum outstanding at any month end |
|
$ |
508,708 |
|
|
$ |
544,238 |
|
|
$ |
433,672 |
|
|
$ |
233,797 |
|
Weighted average interest rate at
end of period |
|
|
3.96 |
% |
|
|
3.96 |
% |
|
|
4.00 |
% |
|
|
4.17 |
% |
Average interest rate during period |
|
|
4.13 |
% |
|
|
4.00 |
% |
|
|
4.30 |
% |
|
|
4.34 |
% |
Subsidiary Activities and Joint Venture Information
Oritani-Federal is the owner of Oritani Bank, Hampshire Financial LLC and Oritani LLC.
Hampshire Financial LLC and Oritani LLC are New Jersey limited liability companies that own real
estate and investments in real estate as described below. In addition, at December 31, 2009,
Oritani-Federal, either directly or through one of its subsidiaries, had loans with an aggregate
balance of $29.4 million on 12 of the properties in which it (either directly or through one of its
subsidiaries) had an ownership interest. All such loans are performing in accordance with their
terms.
During the year ended June 30, 2009, we invested in two new joint venture projects. We
invested in an additional project during the six months ended December 31, 2009. All of the new
projects were made through Oritani LLC. We will continue to opportunistically invest in real
estate investments and joint venture projects.
Oritani Bank has the following subsidiaries: Ormon LLC and Oritani Asset Corporation. Ormon
LLC is a New Jersey limited liability company that owns real estate investments in New Jersey as
well as
101
investments in joint ventures that own income-producing commercial and residential rental
properties in New Jersey as described below.
Oritani Asset Corporation is a real estate investment trust formed in 1998 for the sole
purpose of acquiring mortgage loans and mortgage-backed securities from Oritani Bank. Oritani
Asset Corporations primary objective is to maximize long-term returns on equity. At December 31,
2009, Oritani Asset Corporation had $351.2 million in assets. Oritani Asset Corporation is taxed
and operates in a manner that enables it to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, as amended.
Through these various subsidiaries and pursuant to regulatory authority permitting Oritani
Bank to conduct such activities on a grandfathered basis, we maintain investments in real estate
and investment in joint ventures. Detailed below is a summary of these various investments by
subsidiary and by type.
Ormon LLC
Ormon LLC is a wholly-owned subsidiary of Oritani Bank. Ormon LLC maintains the following
investments in real estate and joint ventures:
Investments in Real Estate
Park Lane Associates - Ormon LLC maintains a 50% undivided ownership interest in Park Lane
Associates. Park Lane Associates is a 142-unit apartment complex located in Little Falls, New
Jersey. Our initial investment was made in March 1980. For the year ended June 30, 2009, we
recognized net income of $396,000 on this investment and received cash distributions of $321,000
during this period. At December 31, 2009, we had a loan to Park Lane Associates totaling $1.9
million.
Park View Apartments - Ormon LLC maintains a 50% undivided ownership interest in Park View
Apartments. Park View Apartments is a 114-unit apartment complex located in White Hall,
Pennsylvania. We initially invested in Park View in December 1986. For the year ended June 30,
2009, we recognized net income of $82,000 on its investment in Park View and received cash
distributions of $39,000 during this period. At December 31, 2009, we had a loan to Park View
Apartments totaling $1.2 million.
Winstead Village - Ormon LLC maintains a 50% undivided ownership interest in Winstead Village.
Winstead Village is a 40-unit apartment complex located in Moorestown, New Jersey. We initially
invested in Winstead in December 1986. For the year ended June 30, 2009 we recognized net income
of $50,000 on its investment and also received cash distributions of $67,000 during that period.
At December 31, 2009, we had a loan to Winstead Village totaling $817,000.
Parkway East - Ormon LLC maintains a 50% undivided ownership interest in Parkway East. Parkway
East is a 43-unit apartment complex located in Caldwell, New Jersey. We initially invested in
Parkway East in July 1981. For the year ended June 30, 2009, we recognized net income of $92,000
on its investment in Parkway East and received cash distributions of $94,000 during this period.
We have no loan to this entity.
Marine View Apartments - Ormon LLC maintains a 75% undivided ownership interest in Marine View
Apartments. Marine View is an 85-unit apartment complex located in Perth Amboy, New Jersey. We
initially invested in Marine View in October 1993. For the year ended June 30, 2009, we recognized
net
102
income of $219,000 on its investment in Marine View and received cash distributions of $203,000
over that period. We have no loans to this entity.
Ormon LLC also wholly owns one property that is held and operated for investment purposes. The
property is a 54-unit mixed-use property (49 residential units and 5 store fronts) located in
Palisades Park, New Jersey. We recognized net income of $457,000 for the year ended June 30, 2009
from the operation of this property.
During the quarter ended September 30, 2009, Ormon LLC sold a 19-unit office building located in
Hillsdale, New Jersey and recognized a net gain of $1.0 million. During the fourth quarter of the
fiscal year ended June 30, 2008, Ormon LLC sold an 18-unit apartment complex located in Englewood,
New Jersey and recognized a net gain of $1.1 million.
Investments in Joint Ventures
Oaklyn Associates - Oaklyn Associates is a 50% owned joint venture on a 100-unit apartment complex
located in Oaklyn, New Jersey. We initially invested in this joint venture in February 1978. For
the year ended June 30, 2009, we recognized net income of $67,000 on this investment and received
cash distributions of $42,000 over that period. At December 31, 2009, we had a loan to Oaklyn
Associates totaling $873,000.
Madison Associates - Madison Associates is a 50% owned joint venture on 30-unit apartment complex
located in Madison, New Jersey. We initially invested in this joint venture in January 1989. For
the year ended June 30, 2009, we recognized net income of $77,000 on this investment and received
cash distribution of $80,000 over that period. We have no loans to this entity.
Brighton Court Associates - Brighton Court Associate is a 50% owned joint venture on a 47-unit
apartment complex located in Bethlehem, Pennsylvania. We initially invested in Brighton Court in
July 1996. For the year ended June 30, 2009, we recognized a net income of $9,000 on this
investment and received cash distributions totaling $37,000 over that period. At December 31,
2009, our loans to Brighton Court Associates totaled $1.5 million.
Plaza 23 Associates - Plaza 23 Associates is 50% owned joint venture on a shopping center in
Pequannock, New Jersey. We initially invested in Plaza 23 Associates in October 1983. For the
year ended June 30, 2009, we recognized net income of $816,000 related to this investment and
received cash distributions of $1.1 million during that period. We have no loans to Plaza 23
Associates but had $10.3 million loan to its partner in this joint venture, Plains Plaza Ltd. at
December 31, 2009. Plains Plaza Ltd. has pledged its equity interest in Plaza 23 Associates as
collateral for this loan.
Oritani, LLC
Oritani, LLC is a wholly-owned limited liability corporation of Oritani-Federal. The primary
business of Oritani, LLC is real estate investments.
Investments in Joint Ventures
Ridge Manor Associates - Ridge Manor Associates is a 50% owned joint venture on a 44-unit apartment
complex located in Park Ridge, New Jersey. We initially invested in Ridge Manor Associates in May
2004. For the year ended June 30, 2009, we recognized net income of $11,000 related to this
investment, and also received cash distributions of $24,000 during that period. At December 31,
2009, we had a loan to this entity that totaled $4.3 million.
103
Van Buren Apartments - Van Buren Apartments is a 50% owned joint venture on a 32-unit apartment
complex located in River Edge, New Jersey. We initially invested in Van Buren in March 2002. For
the year ended June 30, 2009, we recognized a net income on this investment of $37,000 and received
cash distributions of $49,000 during that period. At December 31, 2009, we had a loan to Van Buren
Apartments that totaled $2.3 million.
10 Landing Lane - 10 Landing Lane is a 50% owned joint venture on a 143-unit apartment complex
located in New Brunswick, New Jersey. We initially invested in 10 Landing Lane in August 1998.
For the year ended June 30, 2009, we recognized net income of $204,000 related to this investment
and received cash distributions of $62,000 during that period. We have no loans to this entity.
FAO Hasbrouck Heights - FAO Hasbrouck Heights is a 50% owned joint venture on 93 mixed-use units
(primarily residential) in Hasbrouck Heights, New Jersey. We initially invested in FAO Hasbrouck
Heights in November 2005. For the year ended June 30, 2009, we recognized a net loss of $55,000
related to this investment and received cash distributions of $365,000 over that period. In
February 2009, the loan to this entity was refinanced and the amount outstanding was increased.
This was the primary reason for the cash distribution despite the net loss. At December 31, 2009,
we had a loan to FAO Hasbrouck Heights that totaled $7.8 million.
FAO Terrace Associates- FAO Terrace Associates is a 50% owned joint venture on a 34-unit apartment
complex located in Hasbrouck Heights, New Jersey. We initially invested in FAO Terrace Associates
in January 2009. For the year ended June 30, 2009, we recognized a net income of $7,000 related to
this investment and received cash distributions of $28,000 over that period. At December 31, 2009,
we had a loan to FAO Terrace Associates that totaled $2.6 million.
FAO Gardens Associates- FAO Garden Associates is a 50% owned joint venture on a 34-unit apartment
complex located in Hackensack, New Jersey. We initially invested in FAO Garden Associates in
February 2009. For the year ended June 30, 2009, we recognized a net income of $1,000 related to
this investment and received cash distributions of $18,000 over that period. At December 31, 2009,
we had a loan to FAO Garden Associates that totaled $2.6 million.
River Villa Mews- River Villa Mews is a 50% owned joint venture on a 44-unit apartment complex
located in Palmyra, New Jersey. We initially invested in River Villa Mews in August 2009. At
December 31, 2009, we had a loan to River Villa Mews that totaled $624,000.
Hampshire Financial
Hampshire Financial is a wholly-owned subsidiary of Oritani-Federal. The primary business of
Hampshire Financial is real estate investments.
Investments in Joint Ventures
Hampshire Realty - Hampshire Realty is a 50% owned joint venture on an 81-unit apartment complex
located in Allentown, Pennsylvania. We initially invested in Hampshire in June 2002. For the year
ended June 30, 2009, we recognized a net loss of $49,000 related to this investment and received
cash distributions of $6,000 over that period. At December 31, 2009, we had a loan to Hampshire
that totaled $3.0 million.
104
The following table presents a summary of our investments in real estate and investments
in joint ventures for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
|
|
|
|
|
For the Six Months Ended December 31, 2009 |
|
|
Value at |
|
|
|
Book Value at |
|
|
Profit/ |
|
|
Distributions |
|
|
Additional |
|
|
December 31, |
|
Property Name |
|
June 30, 2009 |
|
|
(Loss) |
|
|
Received |
|
|
Investment |
|
|
2009 |
|
Real Estate Held for Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ormon, LLC Undivided Interests in Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Park Lane |
|
$ |
(428 |
) |
|
$ |
184 |
|
|
$ |
(185 |
) |
|
$ |
|
|
|
$ |
(429 |
) |
Park View |
|
|
(439 |
) |
|
|
23 |
|
|
|
(16 |
) |
|
|
|
|
|
|
(432 |
) |
Winstead Village |
|
|
(228 |
) |
|
|
46 |
|
|
|
(25 |
) |
|
|
|
|
|
|
(207 |
) |
Parkway East |
|
|
(334 |
) |
|
|
37 |
|
|
|
(45 |
) |
|
|
|
|
|
|
(342 |
) |
Marine View |
|
|
869 |
|
|
|
151 |
|
|
|
(127 |
) |
|
|
|
|
|
|
894 |
|
Ormon, LLC Wholly Owned Properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palisades Park (1) |
|
|
328 |
|
|
|
266 |
|
|
|
|
|
|
|
|
|
|
|
328 |
|
Hillsdale (1) |
|
|
140 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Held For Investment Summary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (1) |
|
$ |
1,337 |
|
|
$ |
420 |
|
|
$ |
(127 |
) |
|
$ |
|
|
|
$ |
1,222 |
|
Liabilities |
|
$ |
(1,429 |
) |
|
$ |
290 |
|
|
$ |
(271 |
) |
|
$ |
|
|
|
$ |
(1,410 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Joint Ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ormon, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oaklyn Associates |
|
$ |
(203 |
) |
|
$ |
55 |
|
|
$ |
(24 |
) |
|
$ |
|
|
|
$ |
(172 |
) |
Madison Associates |
|
|
(23 |
) |
|
|
33 |
|
|
|
(40 |
) |
|
|
|
|
|
|
(30 |
) |
Brighton Court Associates |
|
|
141 |
|
|
|
(6 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
127 |
|
Plaza 23 Associates |
|
|
3,329 |
|
|
|
375 |
|
|
|
(681 |
) |
|
|
|
|
|
|
3,023 |
|
Oritani, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ridge Manor Associates |
|
|
554 |
|
|
|
1 |
|
|
|
(32 |
) |
|
|
|
|
|
|
523 |
|
Van Buren Apartments |
|
|
167 |
|
|
|
30 |
|
|
|
(27 |
) |
|
|
|
|
|
|
170 |
|
10 Landing Lane |
|
|
18 |
|
|
|
85 |
|
|
|
(100 |
) |
|
|
|
|
|
|
3 |
|
FAO Hasbrouck Heights |
|
|
436 |
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
419 |
|
FAO Terrace Associates |
|
|
579 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
605 |
|
FAO Gardens |
|
|
443 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
453 |
|
River Villas Mews |
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
387 |
|
|
|
403 |
|
Hampshire Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hampshire Realty |
|
|
118 |
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
113 |
|
Investments in Joint Ventures Summary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
5,767 |
|
|
$ |
435 |
|
|
$ |
(753 |
) |
|
$ |
387 |
|
|
$ |
5,836 |
|
Liabilities |
|
$ |
(208 |
) |
|
$ |
173 |
|
|
$ |
(164 |
) |
|
$ |
|
|
|
$ |
(199 |
) |
|
|
|
(1) |
|
The book values for wholly owned properties represent the costs of the fixed assets
associated with the property, less accumulated depreciation. |
At December 31, 2009, the net book value of real estate held for investment is $(188,000).
The gross appraised value and equity is $42.0 million and $37.0 million, respectively. Our share
of the equity is $23.9 million, or $24.1 million in excess of the book value. At December 31, 2009,
the net book value of real estate joint ventures is $5.6 million. The gross appraised value and
equity is $96.3 million and $62.3 million, respectively. Our share of the equity is $31.2 million,
or $25.5 million in excess of the book value.
Personnel
As of December 31, 2009, we had 148 full-time employees and 54 part-time employees. Our
employees are not represented by any collective bargaining group. Management believes that we have
good relations with our employees.
Properties
Oritani Bank conducts its business from its main office at 370 Pascack Road, in the Township
of Washington, New Jersey, and its 21 full service branch offices located in Bergen, Hudson and
Passaic
105
Counties, New Jersey. The aggregate net book value of premises and equipment was $14.7
million at December 31, 2009.
Oritani Bank has entered into an agreement with Oritani-Federal and Oritani Financial Corp.,
MHC pursuant to which Oritani Bank provides the holding companies with certain administrative
support services for compensation not less than the fair market value of the services provided.
Oritani Bank will enter into a similar agreement with Oritani-Delaware upon completion of the
conversion. Similarly, Oritani Bank has entered into an agreement with Oritani-Federal and Oritani
Financial Corp., MHC pursuant to which the companies file federal consolidated income tax returns
and allocate their respective tax liability for reimbursement purposes. Oritani Bank will enter
into a similar agreement with Oritani-Delaware upon completion of the conversion.
Legal Proceedings
Oritani-Federal 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 Oritani-Federals results of operations.
ORITANIBANK CHARITABLE FOUNDATION
General
In furtherance of our commitment to our local community, our minority stock offering included
the establishment of OritaniBank Charitable Foundation (Foundation) as a non-stock, nonprofit
Delaware corporation. The Foundation was funded with $1.0 million cash and 811,037 shares of the
common stock of Oritani-Federal, representing two percent (2%) of the shares outstanding
immediately after Oritani-Federals minority stock offering, for which the Foundation paid par
value, or $0.01 per share. By further enhancing our visibility and reputation in our local
community, we believe that the Foundation enhances the long-term value of Oritani Banks community
banking franchise. The purpose of the Foundation is to provide financial support to charitable
organizations in the communities in which we operate and to enable our communities to share in our
long-term growth. The Foundation is dedicated completely to community activities and the promotion
of charitable causes.
Structure of the Foundation
The Foundation was incorporated under Delaware law on September 26, 2006 as a non-stock,
nonprofit corporation. The certificate of incorporation of the Foundation provides that the
corporation is organized exclusively for charitable purposes as set forth in Section 501(c)(3) of
the Internal Revenue Code. The Foundations certificate of incorporation also provides that no
part of the net earnings of the Foundation will inure to the benefit of, or be distributable to,
its directors or officers. The Internal Revenue Service issued the Foundation a tax-exempt opinion
letter on February 17, 2009.
As required by OTS regulations, one person serves on the Foundations board of directors who
is not an officer or director or Oritani Bank and who has experience with local charitable
organizations and grant making. As of December 31, 2009 and through the date of this prospectus,
that independent director is James M. Vandervalk. For five years after the minority stock
offering, one seat on the Foundations board of directors will be reserved for a person from our
local community who has experience with local community charitable organizations and grant making
and who is not one of our officers, directors or employees, and one seat on the Foundations board
of directors will be reserved for one of Oritani Banks directors.
106
The table below shows the Foundations officers and directors and their compensation, as of
December 31, 2009.
|
|
|
|
|
|
|
Name |
|
Title |
|
Mailing Address |
|
Compensation Amount |
Kevin J. Lynch |
|
President and Board |
|
370 Pascack Road |
|
None |
|
|
Member |
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
John M. Fields, Jr. |
|
Executive Vice President |
|
370 Pascack Road |
|
None |
|
|
and Treasurer |
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
Michael DeBernardi |
|
Executive Vice President |
|
370 Pascack Road |
|
None |
|
|
|
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
Philip M. Wyks |
|
Secretary |
|
370 Pascack Road |
|
None |
|
|
|
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
Thomas G. Guinan |
|
Executive Vice President |
|
370 Pascack Road |
|
None |
|
|
|
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
Rosanne Buscemi |
|
Corresponding |
|
370 Pascack Road |
|
None |
|
|
Secretary |
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
James J. Doyle, Jr. |
|
Board Member |
|
370 Pascack Road |
|
None |
|
|
|
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
Robert S. Hekemian, Jr. |
|
Board Member |
|
370 Pascack Road |
|
None |
|
|
|
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
John J. Skelly, Jr. |
|
Board Member |
|
370 Pascack Road |
|
None |
|
|
|
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
|
|
|
|
|
|
|
James M. Vandervalk |
|
Independent Board Member |
|
370 Pascack Road |
|
$2,000 |
|
|
|
|
Township of |
|
|
|
|
|
|
Washington, NJ 07676 |
|
|
The board of directors of the Foundation is responsible for establishing its grant and
donation policies, consistent with the purposes for which it was established. As directors of a
nonprofit corporation, directors of the Foundation are at all times bound by their fiduciary duty
to advance the Foundations charitable goals, to protect its assets and to act in a manner
consistent with the charitable
107
purposes for which the Foundation was established. The directors of the Foundation are also
responsible for directing the activities of the Foundation, including the management and voting of
the shares of common stock of Oritani-Federal held by the Foundation. However, as required by OTS
regulations, all shares of common stock held by the Foundation must be voted in the same ratio as
all other shares of the common stock on all proposals considered by stockholders of
Oritani-Federal.
The Foundations place of business is located at our administrative offices. To the extent
applicable, we comply with the affiliates restrictions set forth in Sections 23A and 23B of the
Federal Reserve Act and the OTS regulations governing transactions between Oritani Bank and the
Foundation.
The common stock of Oritani-Federal (which is currently traded under the symbol ORIT on
Nasdaq) that is currently owned by the Foundation will be converted into the common stock of
Oritani-Delaware (which will be traded under the symbol ORITD on Nasdaq for 20 days after this
stock offering) using the exchange ratio that applies to all public shareholders of OritaniFederal
for the conversion of shares using the exchange ratio, the stock offering will have no other effect
on the Foundation.
Foundation Financial Information
As of December 31, 2009, the Foundations total assets were $11,076,843, total liabilities
were $370,746, and unrestricted net assets were $10,706,097. As of December 31, 2009, the
Foundation owned 753,833 shares of Oritani-Federal common stock, which represents approximately 2%
of the Oritani-Federals outstanding common stock.
SUPERVISION AND REGULATION
General
Federal law allows a state savings bank, such as Oritani Bank, that qualifies as a qualified
thrift lender (discussed below), to elect to be treated as a savings association for purposes of
the savings and loan holding company provisions of the HOLA. Such an election results in the
savings banks holding company being regulated as savings and loan holding companies by the OTS
rather than as bank holding company regulated by the Board of Governors of the Federal Reserve
System (the FRB). At the time of its reorganization into a holding company structure, Oritani
Bank elected to be treated as a savings association under the applicable provisions of the HOLA.
Accordingly, Oritani-Federal and Oritani Financial Corp., MHC are savings and loan holding
companies and are required to file certain reports with, and are subject to examination by, and
otherwise must comply with the rules and regulations of, the OTS. Oritani-Federal is also subject
to the rules and regulations of the Securities and Exchange Commission under the federal securities
laws.
Oritani Bank is a New Jersey-chartered savings bank, and its deposit accounts are insured up
to applicable limits by the FDIC. Oritani Bank is subject to extensive regulation, examination and
supervision by the Commissioner of the New Jersey Department of Banking and Insurance (the
Commissioner) as the issuer of its charter, and by the FDIC as the deposit insurer and its
primary federal regulator. Oritani Bank must file reports with the Commissioner and the FDIC
concerning its activities and financial condition, and it must obtain regulatory approval prior to
entering into certain transactions, such as mergers with, or acquisitions of, other depository
institutions and opening or acquiring branch offices. The Commissioner and the FDIC conduct
periodic examinations to assess Oritani Banks compliance with various regulatory requirements.
This regulation and supervision establishes a comprehensive framework of activities in which a
savings bank may engage and is intended primarily for the protection of the deposit insurance fund
and depositors. The regulatory structure also
108
gives the regulatory authorities extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves for regulatory
purposes.
Any change in these laws or regulations, whether by the New Jersey Department of Banking and
Insurance, the FDIC, the OTS or the U.S. Congress, could have a material adverse impact on
Oritani-Federal, Oritani Bank and their operations.
Certain of the regulatory requirements that are or will be applicable to Oritani Bank,
Oritani-Federal and Oritani Financial Corp., MHC are described below. This description of statutes
and regulations is not intended to be a complete explanation of such statutes and regulations and
their effects on Oritani Bank, Oritani-Federal and Oritani Financial Corp., MHC and is qualified in
its entirety by reference to the actual statutes and regulations.
Proposed Federal Legislation
Legislation has been introduced in the United States Senate and House of Representatives that
would implement sweeping changes to the current bank regulatory structure. A bill passed by the
House of Representatives (H.R. 4173) would eliminate our current primary federal regulator, the
OTS, by merging the OTS into the Comptroller of the Currency (the primary federal regulator for
national banks). The House legislation would grant the FRB exclusive authority to regulate all bank
and thrift holding companies. If the House bill is enacted, Oritani-Federal would become a holding
company subject to supervision by the FRB, as opposed to the OTS, and would become subject to the
FRBs regulations, including holding company capital requirements, that Oritani-Delaware would not
be subject to as a savings and loan holding company regulated by the OTS.
Under the Senate bill, the OTS would be eliminated and supervisory authority over federal
savings associations and savings and loan holding companies with less than $50 billion in assets
would be transferred. Holding companies of national banks and federal savings associations with
assets of less than $50 billion would be supervised and examined by the Office of the Comptroller
of the Currency, and holding companies of state banks and state savings banks with assets of less
than $50 billion would be supervised and examined by the FDIC. However, under the Senate bill,
rulemaking authority with respect to savings and loan holding companies would be transferred to the
FRB. Although the Senate bill would not directly subject savings and loan holding companies to
regulation as bank holding companies, it is possible that regulations implemented in response to
the legislation could subject savings and loan holding companies to more stringent regulation,
including holding company capital requirements.
Both the House bill and the Senate proposal would establish new government entities to write
consumer protection rules and, in certain cases, to conduct examinations and implement enforcement
actions relating to consumer protection. Compliance with new regulations and being supervised by
one or more new regulatory agencies would likely increase our operating expenses.
New Jersey Banking Regulation
Activity Powers. Oritani Bank derives its lending, investment and other powers primarily from
the applicable provisions of the New Jersey Banking Act and its related regulations. Under these
laws and regulations, savings banks, such as Oritani Bank, generally may invest in:
109
|
(1) |
|
real estate mortgages; |
|
|
(2) |
|
consumer and commercial loans; |
|
|
(3) |
|
specific types of debt securities, including certain corporate debt securities
and obligations of federal, state and local governments and agencies; |
|
|
(4) |
|
certain types of corporate equity securities; and |
|
|
(5) |
|
certain other assets. |
A savings bank may also invest pursuant to a leeway power that permits investments not
otherwise permitted by the New Jersey Banking Act. Leeway investments must comply with a number
of limitations on the individual and aggregate amounts of leeway investments. Under this
leeway authority, New Jersey savings banks may exercise those powers, rights, benefits or
privileges authorized for national banks or out-of-state banks or for federal or out-of-state
savings banks or savings associations, provided that before exercising any such power, right,
benefit or privilege, prior approval by the Commissioner by regulation or by specific authorization
is required. A savings bank may also exercise trust powers upon approval of the Commissioner. The
exercise of these lending, investment and activity powers are limited by federal law and the
related regulations. See Federal Banking RegulationActivity Restrictions on State Chartered
Banks below.
Loans-to-One-Borrower Limitations. With certain specified exceptions, a New Jersey-chartered
savings bank may not make loans or extend credit to a single borrower or to entities related to the
borrower in an aggregate amount that would exceed 15% of the banks capital funds. A savings bank
may lend an additional 10% of its capital funds if the loan is secured by collateral meeting the
requirements of the New Jersey Banking Act. Oritani Bank currently complies with applicable
loans-to-one-borrower limitations.
Dividends. Under the New Jersey Banking Act, a stock savings bank may declare and pay a
dividend on its capital stock only to the extent that the payment of the dividend would not impair
the capital stock of the savings bank. In addition, a stock savings bank may not pay a dividend
unless the savings bank would, after the payment of the dividend, have a surplus of not less than
50% of its capital stock, or alternatively, the payment of the dividend would not reduce the
surplus. Federal law may also limit the amount of dividends that may be paid by Oritani Bank. See
Federal Banking RegulationPrompt Corrective Action below.
Minimum Capital Requirements. Regulations of the Commissioner impose on New Jersey-chartered
depository institutions, such as Oritani Bank, minimum capital requirements similar to those
imposed by the FDIC on insured state banks. See Federal Banking RegulationCapital Requirements
below.
Examination and Enforcement. The New Jersey Department of Banking and Insurance may examine
Oritani Bank whenever it deems an examination advisable. The New Jersey Department of Banking and
Insurance examines Oritani Bank at least every two years. The Commissioner may order any savings
bank to discontinue any violation of law or unsafe or unsound banking practice, and may direct any
director, officer, attorney or employee of a savings bank engaged in an objectionable activity,
after the Commissioner has ordered the activity to be terminated, to show cause at a hearing before
the Commissioner why such person should not be removed.
110
Federal Banking Regulation
Capital Requirements. FDIC regulations require banks to maintain minimum levels of capital.
The FDIC regulations define two tiers, or classes, of capital.
Tier 1 capital is comprised of the sum of:
|
|
|
common stockholders equity, excluding the unrealized appreciation or
depreciation, net of tax, from available for sale securities; |
|
|
|
|
non-cumulative perpetual preferred stock, including any related retained
earnings; and |
|
|
|
|
minority interests in consolidated subsidiaries minus all intangible assets,
other than qualifying servicing rights and any net unrealized loss on marketable
equity securities. |
The components of Tier 2 capital currently include:
|
|
|
cumulative perpetual preferred stock; |
|
|
|
|
certain perpetual preferred stock for which the dividend rate may be reset
periodically; |
|
|
|
|
hybrid capital instruments, including mandatory convertible securities; |
|
|
|
|
term subordinated debt; |
|
|
|
|
intermediate term preferred stock; |
|
|
|
|
allowance for loan losses; and |
|
|
|
|
up to 45% of pretax net unrealized holding gains on available for sale equity
securities with readily determinable fair market values. |
The allowance for loan losses includible in Tier 2 capital is limited to a maximum of 1.25% of
risk-weighted assets (as discussed below). Overall, the amount of Tier 2 capital that may be
included in total capital cannot exceed 100% of Tier 1 capital. The FDIC regulations establish a
minimum leverage capital requirement for banks in the strongest financial and managerial condition
of not less than a ratio of 3% of Tier 1 capital to total assets. For all other banks, the minimum
leverage capital requirement is 4%, unless a higher leverage capital ratio is warranted by the
particular circumstances or risk profile of the depository institution.
The FDIC regulations also require that banks meet a risk-based capital standard. The
risk-based capital standard requires the maintenance of a ratio of total capital, which is defined
as the sum of Tier 1 capital and Tier 2 capital, to risk-weighted assets of at least 8% and a ratio
of Tier 1 capital to risk-weighted assets of at least 4%. In determining the amount of
risk-weighted assets, all assets, plus certain off balance sheet items, are multiplied by a
risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in the type of asset
or item.
The federal banking agencies, including the FDIC, have also adopted regulations to require an
assessment of an institutions exposure to declines in the economic value of a banks capital due
to changes in interest rates when assessing the banks capital adequacy. Under such a risk
assessment, examiners evaluate a banks capital for interest rate risk on a case-by-case basis,
with consideration of
111
both quantitative and qualitative factors. Institutions with significant interest rate risk
may be required to hold additional capital. According to the agencies, applicable considerations
include:
|
|
|
the quality of the banks interest rate risk management process; |
|
|
|
|
the overall financial condition of the bank; and |
|
|
|
|
the level of other risks at the bank for which capital is needed. |
The following table shows Oritani Banks Core capital, Tier 1 risk-based capital, and Total
risk-based capital ratios at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
|
Capital |
|
|
Percent of Assets(1) |
|
|
|
(Dollars in thousands) |
|
Core capital |
|
$ |
193,183 |
|
|
|
9.76 |
% |
Tier 1 risk-based capital |
|
|
193,183 |
|
|
|
13.49 |
|
Total risk-based capital |
|
|
211,236 |
|
|
|
14.75 |
|
|
|
|
(1) |
|
For purposes of calculating Core capital, assets
are based on adjusted total leverage assets. In calculating Tier 1
risk-based capital and total risk-based capital, assets are based on
Total risk-weighted assets. |
As the table shows, as of December 31, 2009, Oritani Bank was considered well
capitalized under FDIC guidelines.
Prompt Corrective Action. Federal law requires, among other things, that the federal bank
regulatory authorities take prompt corrective action with respect to institutions that do not
meet minimum capital requirements. For these purposes, the law establishes five categories: well
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. The FDICs regulations define the five capital categories as follows:
An institution will be treated as well capitalized if:
|
|
|
its ratio of total capital to risk-weighted assets is at least 10%; |
|
|
|
|
its ratio of Tier 1 capital to risk-weighted assets is at least 6%; and |
|
|
|
|
its ratio of Tier 1 capital to total assets is at least 5%, and it is not
subject to any order or directive by the FDIC to meet a specific capital level. |
An institution will be treated as adequately capitalized if:
|
|
|
its ratio of total capital to risk-weighted assets is at least 8%; and |
|
|
|
|
its ratio of Tier 1 capital to risk-weighted assets is at least 4%; and |
|
|
|
|
its ratio of Tier 1 capital to total assets is at least 4% (3% if the bank
receives the highest rating under the Uniform Financial Institutions Rating System)
and it is not a well-capitalized institution. |
112
An institution will be treated as undercapitalized if:
|
|
|
its total risk-based capital is less than 8%; or |
|
|
|
|
its Tier 1 risk-based-capital is less than 4%; or |
|
|
|
|
its leverage ratio is less than 4% (or less than 3% if the institution receives
the highest rating under the Uniform Financial Institutions Rating System). |
An institution will be treated as significantly undercapitalized if:
|
|
|
its total risk-based capital is less than 6%; |
|
|
|
|
its Tier 1 capital is less than 3%; or |
|
|
|
|
its leverage ratio is less than 3%. |
An institution that has a tangible capital to total assets ratio equal to or less than 2%
would be deemed to be critically undercapitalized.
The FDIC is required, with some exceptions, to appoint a receiver or conservator for an
insured state bank if that bank is critically undercapitalized. For this purpose, critically
undercapitalized means having a ratio of tangible capital to total assets of less than 2%. The
FDIC may also appoint a conservator or receiver for a state bank on the basis of the institutions
financial condition or upon the occurrence of certain events, including:
|
|
|
insolvency, or when the assets of the bank are less than its liabilities to
depositors and others; |
|
|
|
|
substantial dissipation of assets or earnings through violations of law or
unsafe or unsound practices; |
|
|
|
|
existence of an unsafe or unsound condition to transact business; |
|
|
|
|
likelihood that the bank will be unable to meet the demands of its depositors or
to pay its obligations in the normal course of business; and |
|
|
|
|
insufficient capital, or the incurring or likely incurring of losses that will
deplete substantially all of the institutions capital with no reasonable prospect
of replenishment of capital without federal assistance. |
Activity Restrictions on State Chartered Banks. Federal law and FDIC regulations generally
limit the activities and investments of state chartered FDIC insured banks and their subsidiaries
to those permissible for national banks and their subsidiaries, unless such activities and
investments are specifically exempted by law or consented to by the FDIC.
Before making a new investment or engaging in a new activity that is not permissible for a
national bank or otherwise permissible under federal law or FDIC regulations, an insured bank must
seek approval from the FDIC to make such investment or engage in such activity. The FDIC will not
approve the activity unless the bank meets its minimum capital requirements and the FDIC determines
that the activity does not present a significant risk to the FDIC insurance funds. Certain
activities of subsidiaries
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that are engaged in activities permitted for national banks only through a financial
subsidiary are subject to additional restrictions.
Federal law permits a state chartered savings bank to engage, through financial subsidiaries,
in any activity in which a national bank may engage through a financial subsidiary and on
substantially the same terms and conditions. In general, the law permits a national bank that is
well-capitalized and well-managed to conduct, through a financial subsidiary, any activity
permitted for a financial holding company other than insurance underwriting, insurance investments,
real estate investment or development or merchant banking. The total assets of all such financial
subsidiaries may not exceed the lesser of 45% of the banks total assets or $50 billion. The bank
must have policies and procedures to assess the financial subsidiarys risk and protect the bank
from such risk and potential liability, must not consolidate the financial subsidiarys assets with
the banks and must exclude from its own assets and equity all equity investments, including
retained earnings, in the financial subsidiary. State chartered savings banks may retain
subsidiaries in existence as of March 11, 2000 and may engage in activities that are not authorized
under federal law. Although Oritani Bank meets all conditions necessary to establish and engage in
permitted activities through financial subsidiaries, it has not yet determined whether or the
extent to which it will seek to engage in such activities.
Insurance of Deposit Accounts. Oritani Bank is a member of the Deposit Insurance Fund
(DIF), which is administered by the FDIC. Deposit accounts at Oritani Bank are insured by the
FDIC, generally up to a maximum of $100,000 for each separately insured depositor and up to a
maximum of $250,000 for self-directed retirement accounts. However, the FDIC increased the deposit
insurance available on all deposit accounts to $250,000, effective until December 31, 2013. In
addition, certain noninterest-bearing transaction accounts maintained with financial institutions
participating in the FDICs Temporary Liquidity Guarantee Program (TLG) are fully insured
regardless of the dollar amount until June 30, 2010. Oritani Bank has opted to participate in the
FDICs TLG Program.
The FDIC imposes an assessment against all depository institutions for deposit insurance.
This assessment is based on the risk category of the institution and, prior to 2009, ranged from 5
to 43 basis points of the institutions deposits. On February 27, 2009, the FDIC published a final
rule raising the current deposit insurance assessment rates to a range from 12 to 45 basis points
beginning April 1, 2009.
On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment on
each insured depository institutions assets minus Tier 1 capital as of June 30, 2009. The amount
of the special assessment for any institution will not exceed 10 basis points times the
institutions assessment base for the second quarter 2009. Our total expense for the special
assessment was $845,000.
The deposit insurance assessment rates are in addition to the assessments for payments on the
bonds issued in the late 1980s by the Financing Corporation, or FICO, to recapitalize the now
defunct Federal Savings and Loan Insurance Corporation. The FICO payments will continue until the
FICO bonds mature in 2017 through 2019. Excluding the special assessment noted above, our expense
for the assessment of deposit insurance and the FICO payments was $928,000 for the year ended June
30, 2009 and $92,000 for the year ended June 30, 2008. The FDIC also established 1.25% of
estimated insured deposits as the designated reserve ratio of the DIF. The FDIC is authorized to
change the assessment rates as necessary, subject to the previously discussed limitations, to
maintain the required reserve ratio of 1.25%.
The FDIC also approved a One-Time Assessment Credit to institutions that were in existence on
December 31, 1996 and paid deposit insurance assessments prior to that date, or are a successor to
such an institution. The Bank received a $2.8 million One-Time Assessment Credit, all of which was
used to
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offset substantially all of our deposit insurance assessment, excluding the FICO payments, for
the period from January 1, 2007 through March 31, 2009.
Oritani-Federal is participating in the FDICs Temporary Account Guarantee (TAG) program,
which is a part of the FDICs TLG program. The purpose of the TLG is to strengthen confidence and
encourage liquidity in the banking system. Under the TAG program, funds in non-interest-bearing
accounts, in interest-bearing transaction accounts with interest rate of 0.50% or less and in
Interest on Lawyers Trust Accounts will have a temporary unlimited guarantee from the FDIC until
June 30, 2010. The coverage of the TAG progtam is in addition to and separate from coverage
available under the FDICs general deposit insurance rules, which insure accounts up to $250,000.
Federal Home Loan Bank System. Oritani Bank is a member of the Federal Home Loan Bank System,
which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides
a central credit facility primarily for member institutions. As a member of the FHLB-NY, Oritani
Bank is required to acquire and hold shares of capital stock in the FHLB in an amount at least
equal to 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, 4.5% of its borrowings from the FHLB, or 0.3% of assets,
whichever is greater. As of December 31, 2009, Oritani Bank was in compliance with this
requirement.
Enforcement. The FDIC has extensive enforcement authority over insured savings banks,
including Oritani Bank. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease and desist orders and to remove directors and
officers. In general, these enforcement actions may be initiated in response to violations of laws
and regulations and to unsafe or unsound practices.
Transactions with Affiliates of Oritani Bank. Transactions between an insured bank, such as
Oritani Bank, and any of its affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act and implementing regulations. An affiliate of a insured bank is any company or entity that
controls, is controlled by or is under common control with the bank. Generally, a subsidiary of a
bank that is not also a depository institution or financial subsidiary is not treated as an
affiliate of the bank for purposes of Sections 23A and 23B.
Section 23A:
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limits the extent to which the bank or its subsidiaries may engage in covered
transactions with any one affiliate to an amount equal to 10% of such banks
capital stock and retained earnings, and limits all such transactions with all
affiliates to an amount equal to 20% of such capital stock and retained earnings;
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requires that all such transactions be on terms that are consistent with safe
and sound banking practices. |
The term covered transaction includes the making of loans, purchase of assets, issuance of
guarantees and other similar types of transactions. Further, most loans by a bank to any of its
affiliates must be secured by collateral in amounts ranging from 100% to 130% of the loan amounts.
In addition, any covered transaction by a bank with an affiliate and any purchase of assets or
services by a bank from an affiliate must be on terms that are substantially the same, or at least
as favorable to the bank, as those that would be provided to a non-affiliate.
Prohibitions Against Tying Arrangements. Banks are subject to the prohibitions of 12 U.S.C.
Section 1972 on certain tying arrangements. A depository institution is prohibited, subject to
some
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exceptions, from extending credit to or offering any other service, or fixing or varying the
consideration for such extension of credit or service, on the condition that the customer obtain
some additional service from the institution or its affiliates or not obtain services of a
competitor of the institution.
Privacy Standards. FDIC regulations require Oritani Bank to disclose their privacy policy,
including identifying with whom they share non-public personal information, to customers at the
time of establishing the customer relationship and annually thereafter. Oritani Bank does not
share non-public personal information with third parties.
In addition, Oritani Bank is required to provide its customers with the ability to opt-out
of having Oritani Bank share their non-public personal information with unaffiliated third parties
before they can disclose such information, subject to certain exceptions.
The FDIC and other federal banking agencies adopted guidelines establishing standards for
safeguarding customer information. The guidelines describe the agencies expectations for the
creation, implementation and maintenance of an information security program, which would include
administrative, technical and physical safeguards appropriate to the size and complexity of the
institution and the nature and scope of its activities. The standards set forth in the guidelines
are intended to insure the security and confidentiality of customer records and information,
protect against any anticipated threats or hazards to the security or integrity of such records and
protect against unauthorized access to or use of such records or information that could result in
substantial harm or inconvenience to any customer.
Community Reinvestment Act and Fair Lending Laws. All FDIC insured institutions have a
responsibility under the Community Reinvestment Act and related regulations to help meet the credit
needs of their communities, including low- and moderate-income neighborhoods. In connection with
its examination of a state chartered savings bank, the FDIC is required to assess the institutions
record of compliance with the Community Reinvestment Act. Among other things, the current
Community Reinvestment Act regulations replace the prior process-based assessment factors with a
new evaluation system that rates an institution based on its actual performance in meeting
community needs. In particular, the current evaluation system focuses on three tests:
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a lending test, to evaluate the institutions record of making loans in its
service areas; |
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an investment test, to evaluate the institutions record of investing in
community development projects, affordable housing, and programs benefiting low or
moderate income individuals and businesses; and |
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a service test, to evaluate the institutions delivery of services through its
branches, ATMs and other offices. |
An institutions failure to comply with the provisions of the Community Reinvestment Act
could, at a minimum, result in regulatory restrictions on its activities. Oritani Bank received a
satisfactory Community Reinvestment Act rating in our most recently completed federal
examination, which was conducted by the FDIC in September 2008.
In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from
discriminating in their lending practices on the basis of characteristics specified in those
statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act
could result in enforcement actions by the FDIC, as well as other federal regulatory agencies and
the Department of Justice.
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Loans to a Banks Insiders
Federal Regulation. A banks loans to its executive officers, directors, any owner of more
than 10.0% or more of its stock (each, an insider) and any of certain entities affiliated with any
such persons (an insiders related interest) are subject to the conditions and limitations imposed
by Section 22(h) of the Federal Reserve Act and its implementing regulations. Under these
restrictions, the aggregate amount of the loans to any insider and the insiders related interests
may not exceed the loans-to-one-borrower limit applicable to national banks, which is comparable to
the loans-to-one-borrower limit applicable to Oritani Bank. See New Jersey Banking
Regulation-Loans-to-One Borrower Limitations. All loans by a bank to all insiders and insiders
related interests in the aggregate generally may not exceed the banks unimpaired capital and
unimpaired surplus. With certain exceptions, loans to an executive officer, other than loans for
the education of the officers children and certain loans secured by the officers primary
residence, may not exceed the lesser of (1) $100,000 or (2) the greater of $25,000 or 2.5% of the
banks unimpaired capital and surplus. Federal regulation also requires that any proposed loan to
an insider or a related interest of that insider be approved in advance by a majority of the Board
of Directors of the bank, with any interested directors not participating in the voting, if such
loan, when aggregated with any existing loans to that insider and the insiders related interests,
would exceed either (1) $500,000 or (2) the greater of $25,000 or 5% of the banks unimpaired
capital and surplus.
Generally, loans to insiders must be made on substantially the same terms as, and follow
credit underwriting procedures that are not less stringent than, those that are prevailing at the
time for comparable transactions with other persons. An exception is made for extensions of credit
made pursuant to a benefit or compensation plan of a bank that is widely available to employees of
the bank and that does not give any preference to insiders of the bank over other employees of the
bank.
In addition, federal law prohibits extensions of credit to a banks insiders and their related
interests by any other institution that has a correspondent banking relationship with the bank,
unless such extension of credit is on substantially the same terms as those prevailing at the time
for comparable transactions with other persons and does not involve more than the normal risk of
repayment or present other unfavorable features.
New Jersey Regulation. Provisions of the New Jersey Banking Act impose conditions and
limitations on the liabilities to a savings bank of its directors and executive officers and of
corporations and partnerships controlled by such persons that are comparable in many respects to
the conditions and limitations imposed on the loans and extensions of credit to insiders and their
related interests under federal law, as discussed above. The New Jersey Banking Act also provides
that a savings bank that is in compliance with federal law is deemed to be in compliance with such
provisions of the New Jersey Banking Act.
Other Regulations
Interest and other charges collected or contracted for by Oritani Bank are subject to state
usury laws and federal laws concerning interest rates. Oritani Banks operations are also subject
to federal laws applicable to credit transactions, such as the:
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Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers; |
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Home Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to determine whether
a financial institution is fulfilling its obligation to help meet the housing needs
of the community it serves; |
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Equal Credit Opportunity Act, prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending credit; |
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Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies; |
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Fair Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies; and |
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Rules and regulations of the various federal agencies charged with the
responsibility of implementing such federal laws. |
The operations of Oritani Bank also are subject to the:
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Right to Financial Privacy Act, which imposes a duty to maintain confidentiality
of consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records; |
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Electronic Funds Transfer Act and Regulation E promulgated thereunder, which
govern automatic deposits to and withdrawals from deposit accounts and customers
rights and liabilities arising from the use of automated teller machines and other
electronic banking services; |
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Check Clearing for the 21st Century Act, which gives substitute
checks, such as digital check images and copies made from that image, the same
legal standing as the original paper check; |
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Title III of The Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the
USA PATRIOT Act), which significantly expanded the responsibilities of financial
institutions, including savings banks, in preventing the use of the U.S. financial
system to fund terrorist activities. Among other provisions, the USA PATRIOT Act
and the related regulations of the OTS require savings associations operating in
the United States to develop new anti-money laundering compliance programs, due
diligence policies and controls to ensure the detection and reporting of money
laundering. Such required compliance programs are intended to supplement existing
compliance requirements, also applicable to financial institutions, under the Bank
Secrecy Act and the Office of Foreign Assets Control Regulations; and |
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The Gramm-Leach-Bliley Act, which placed limitations on the sharing of consumer
financial information by financial institutions with unaffiliated third parties.
Specifically, the Gramm-Leach-Bliley Act requires all financial institutions
offering financial products or services to retail customers to provide such
customers with the financial institutions privacy policy and provide such
customers the opportunity to opt out of the sharing of certain personal financial
information with unaffiliated third parties. |
Holding Company Regulation
General. Oritani Financial Corp., MHC and Oritani-Federal are non-diversified savings and
loan holding companies within the meaning of the HOLA. As such, Oritani Financial Corp., MHC and
Oritani-Federal are registered with the OTS and subject to OTS regulations, examinations,
supervision
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and reporting requirements. In addition, the OTS has enforcement authority over
Oritani-Federal and Oritani Financial Corp., MHC, and their subsidiaries. Among other things, this
authority permits the OTS to restrict or prohibit activities that are determined to be a serious
risk to the subsidiary savings institution. As federal corporations, Oritani-Federal and Oritani
Financial Corp., MHC are generally not subject to state business organization laws.
Permitted Activities. Pursuant to Section 10(o) of the HOLA and OTS regulations and policy, a
mutual holding company and a federally chartered mid-tier holding company such as Oritani-Federal
may engage in the following activities:
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investing in the stock of a savings bank; |
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acquiring a mutual association through the merger of such association
into a savings bank subsidiary of such holding company or an interim savings
bank subsidiary of such holding company; |
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merging with or acquiring another holding company, one of whose
subsidiaries is a savings bank; |
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investing in a corporation, the capital stock of which is available
for purchase by a savings bank under federal law or under the law of any state
where the subsidiary savings bank or associations share their home offices; |
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furnishing or performing management services for a savings bank
subsidiary of such company; |
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holding, managing or liquidating assets owned or acquired from a
savings subsidiary of such company; |
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holding or managing properties used or occupied by a savings bank
subsidiary of such company; |
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acting as trustee under deeds of trust; |
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(ix) |
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any other activity: |
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A. that the Federal Reserve Board, by regulation, has determined to be
permissible for bank holding companies under Section 4(c) of the Bank
Holding Company Act of 1956, unless the Director of the OTS, by regulation,
prohibits or limits any such activity for savings and loan holding
companies; or |
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B. in which multiple savings and loan holding companies were authorized (by
regulation) to directly engage on March 5, 1987; |
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any activity permissible for financial holding companies under Section
4(k) of the Bank Holding Company Act, including securities and insurance
underwriting; and |
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purchasing, holding, or disposing of stock acquired in connection
with a qualified stock issuance if the purchase of such stock by such savings
and loan holding company is approved by the Director. If a mutual holding
company acquires or |
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merges with another holding company, the holding company acquired or the
holding company resulting from such merger or acquisition may only invest in
assets and engage in activities listed in (i) through (x) above, and has a
period of two years to cease any nonconforming activities and divest any
nonconforming investments. |
The HOLA prohibits a savings and loan holding company, including Oritani-Federal and Oritani
Financial Corp., MHC, directly or indirectly, or through one or more subsidiaries, from acquiring
more than 5% of another savings institution or holding company thereof, without prior written
approval of the OTS. It also prohibits the acquisition or retention of, with certain exceptions,
more than 5% of a nonsubsidiary company engaged in activities other than those permitted by the
HOLA, or acquiring or retaining control of an institution that is not federally insured. In
evaluating applications by holding companies to acquire savings institutions, the OTS must consider
the financial and managerial resources, future prospects of the company and institution involved,
the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience
and needs of the community and competitive factors.
The OTS is prohibited from approving any acquisition that would result in a multiple savings
and loan holding company controlling savings institutions in more than one state, subject to two
exceptions:
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the approval of interstate supervisory acquisitions by savings and loan holding companies;
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the acquisition of a savings institution in another state if the laws of the
state of the target savings institution specifically permit such acquisitions. |
The states vary in the extent to which they permit interstate savings and loan holding company
acquisitions.
Waivers of Dividends by Oritani Financial Corp., MHC. Until the completion of the
reorganization and stock offering, OTS regulations require Oritani Financial Corp., MHC to notify
the OTS of any proposed waiver of its receipt of dividends from Oritani-Federal. The OTS reviews
dividend waiver notices on a case-by-case basis, and, in general, does not object to any such
waiver if:
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the waiver would not be detrimental to the safe and sound operation of the
subsidiary savings association; and |
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the mutual holding companys Board of Directors determines that such waiver is
consistent with such directors fiduciary duties to the mutual holding companys
members. |
Oritani Financial Corp., MHC, applied for, and was granted, permission from the OTS to waive the
dividend paid by Oritani-Federal on July 24, 2009. We anticipate that Oritani Financial Corp., MHC
will waive any additional dividends paid by Oritani-Federal. Under OTS regulations, our public
stockholders would not be diluted because of any dividends waived by Oritani Financial Corp., MHC
(and waived dividends would not be considered in determining an appropriate exchange ratio) in the
event Oritani Financial Corp., MHC converts to stock form.
Qualified Thrift Lender Test. In order for Oritani-Federal and Oritani Financial Corp., MHC
to continue to be regulated as savings and loan holding companies by the OTS (rather than as a bank
holding companies by the FRB), Oritani Bank must qualify as a qualified thrift lender under OTS
regulations or satisfy the domestic building and loan association test under the Internal Revenue
Code. Under the
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qualified thrift lender test, a savings institution is required to maintain at least 65% of
its portfolio assets (total assets less: (i) specified liquid assets up to 20% of total assets;
(ii) intangible, including goodwill; and (iii) the value of property used to conduct business) in
certain qualified thrift investments (primarily residential mortgages and related investments,
including certain mortgage-backed and related securities) in at least nine out of each 12 month
period. Oritani Bank currently maintains the majority of its portfolio assets in qualified thrift
investments and has met the qualified thrift lender test in each of the last 12 months.
Federal Securities Laws
Oritani-Federals common stock is registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended. Oritani-Federal is subject to the information,
proxy solicitation, insider trading restrictions and other requirements under the Securities
Exchange Act of 1934.
Oritani-Federal common stock held by persons who are affiliates (generally officers, directors
and principal stockholders) of Oritani-Federal may not be resold without registration or unless
sold in accordance with certain resale restrictions. If Oritani-Federal meets specified current
public information requirements, each affiliate of Oritani-Federal is able to sell in the public
market, without registration, a limited number of shares in any three-month period.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing
and accounting, executive compensation, and enhanced and timely disclosure of corporate
information. As directed by the Sarbanes-Oxley Act of 2002, our Chief Executive Officer and Chief
Financial Officer each will be required to certify that our quarterly and annual reports do not
contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange
Commission under the Sarbanes-Oxley Act of 2002 have several requirements, including having these
officers certify that: they are responsible for establishing, maintaining and regularly evaluating
the effectiveness of our internal controls; they have made certain disclosures to our auditors and
the audit committee of the Board of Directors about our internal controls; and they have included
information in our quarterly and annual reports about their evaluation and whether there have been
significant changes in our internal controls or in other factors that could significantly affect
internal controls. Oritani-Federal is required to report under Section 404 of the Sarbanes-Oxley
Act and has reported that it complies with such in all material respects.
FEDERAL AND STATE TAXATION
Federal Taxation
General. Oritani-Federal and Oritani Bank are subject to federal income taxation in the same
general manner as other corporations, with some exceptions discussed below. Neither
Oritani-Federals nor Oritani Banks federal tax returns are currently under audit, and neither
entity has been audited during the past five years. The following discussion of federal taxation
is intended only to summarize certain pertinent federal income tax matters and is not a
comprehensive description of the tax rules applicable to Oritani-Federal or Oritani Bank.
Oritani-Delaware and Oritani Bank will enter into a tax allocation agreement. Because
Oritani-Delaware will own 100% of the issued and outstanding capital stock of Oritani Bank,
Oritani-Delaware and Oritani Bank will be members of an affiliated group within the meaning of
Section 1504(a) of the Internal Revenue Code, of which group Oritani-Delaware is the common parent
corporation. As a result
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of this affiliation, Oritani Bank may be included in the filing of a consolidated federal
income tax return with Oritani-Delaware and, if a decision to file a consolidated tax return is
made, the parties agree to compensate each other for their individual share of the consolidated tax
liability and/or any tax benefits provided by them in the filing of the consolidated federal income
tax return.
Method of Accounting. For federal income tax purposes, Oritani-Federal currently reports its
income and expenses on the accrual method of accounting and uses a tax year ending December 31 for
filing its federal and state income tax returns.
Bad Debt Reserves. Historically, Oritani Bank has been subject to special provisions in the
tax law regarding allowable tax bad debt deductions and related reserves. Tax law changes were
enacted in 1996, pursuant to the Small Business Protection Act of 1996 (the 1996 Act), that
eliminated the use of the percentage of taxable income method for tax years after 1995 and required
recapture into taxable income over a six year period of all bad debt reserves accumulated after
1988. Oritani Bank recaptured its reserve balance over the six-year period ended December 31,
2003.
Currently, the Oritani Bank consolidated group uses the specific charge-off method to account
for bad debt deductions for income tax purposes.
Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt reserves created prior
to January 1, 1988 were subject to recapture into taxable income should Oritani Bank fail to meet
certain thrift asset and definitional tests.
At December 31, 2009, our total federal pre-base year reserve was approximately $15.1 million.
However, under current law, pre-base year reserves remain subject to recapture should Oritani Bank
make certain non-dividend distributions, repurchase any of its stock, pay dividends in excess of
tax earnings and profits, or cease to maintain a bank charter.
Alternative Minimum Tax. The Internal Revenue Code of 1986, as amended (the Code) imposes
an alternative minimum tax (AMT) at a rate of 20% on a base of regular taxable income plus
certain tax preferences (alternative minimum taxable income or AMTI). The AMT is payable to
the extent such AMTI is in excess of an exemption amount and the AMT exceeds the regular income
tax. Net operating losses can offset no more than 90% of AMTI. Certain payments of alternative
minimum tax may be used as credits against regular tax liabilities in future years.
Oritani-Federal and Oritani Bank have not been subject to the AMT and have no such amounts
available as credits for carryover.
Net Operating Loss Carryforwards. A financial institution may carry back net operating losses
to the preceding two taxable years and forward to the succeeding 20 taxable years. At December 31,
2009, Oritani Bank had no net operating loss carryforwards for federal income tax purposes.
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MANAGEMENT
The Board of Directors of Oritani-Delaware will consist of six individuals who currently serve
as directors of Oritani-Federal, Oritani Financial Corp., MHC and Oritani Bank. The Board of
Directors of Oritani-Delaware will be divided into three classes, as nearly equal as possible, with
one-third of the directors elected each year. The directors will be elected by the stockholders of
Oritani-Delaware for three-year terms, and until their successors are elected and have qualified.
The terms of the directors of each of Oritani-Delaware and Oritani Bank are identical. The
executive officers of Oritani-Delaware are also executive officers of Oritani-Federal. We expect
that Oritani-Delaware and Oritani Bank will continue to have common directors until there is a
business reason to establish separate management structures.
The following individuals will serve as the executive officers of Oritani-Delaware and hold
the offices set forth below opposite their name.
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Positions Held |
Kevin J. Lynch
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President and Chief Executive Officer |
Michael A. DeBernardi
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Executive Vice President and Chief Operating Officer |
John M. Fields, Jr.
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Executive Vice President and Chief Financial Officer |
Thomas Guinan
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Executive Vice President and Chief Lending Officer |
Philip M. Wyks
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Senior Vice President and Corporate Secretary |
Executive officers of Oritani-Delaware are elected annually and hold office until their
respective successors have been elected or until death, resignation or removal by the Board of
Directors.
The following table provides the positions and terms of office as applicable to our directors
and executive officers, along with the beneficial ownership of our common stock held by our
directors and executive officers, individually and as a group, as of December 31, 2009.
Percentages are based on shares outstanding as of December 31, 2009.
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Shares Owned |
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Directly and |
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Options Exercisable |
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Beneficial |
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Term to Expire |
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Indirectly |
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Within 60 Days |
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|
Ownership (1) |
|
DIRECTORS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas Antonaccio |
|
|
2010 |
|
|
|
72,150 |
|
|
|
47,689 |
|
|
|
119,839 |
|
Mike DeBernardi |
|
|
2012 |
|
|
|
122,371 |
|
|
|
71,534 |
|
|
|
193,905 |
|
Robert Hekemian, Jr. |
|
|
2012 |
|
|
|
101,904 |
|
|
|
47,689 |
|
|
|
149,593 |
|
Kevin Lynch |
|
|
2010 |
|
|
|
269,083 |
|
|
|
158,964 |
|
|
|
428,047 |
|
James J. Doyle, Jr. |
|
|
2011 |
|
|
|
82,063 |
|
|
|
47,689 |
|
|
|
129,752 |
|
John J. Skelly |
|
|
2011 |
|
|
|
119,213 |
|
|
|
47,689 |
|
|
|
166,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
766,784 |
|
|
|
421,255 |
|
|
|
1,188,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE OFFICERS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Fields |
|
|
|
|
|
|
122,227 |
|
|
|
71,534 |
|
|
|
193,761 |
|
Thomas G. Guinan |
|
|
|
|
|
|
107,394 |
|
|
|
71,534 |
|
|
|
178,928 |
|
Philip M. Wyks |
|
|
|
|
|
|
26,404 |
|
|
|
10,598 |
|
|
|
37,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
256,025 |
|
|
|
153,666 |
|
|
|
409,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Directors
and Executive
Officers |
|
|
|
|
|
|
1,022,809 |
|
|
|
574,921 |
|
|
|
1,597,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes the effect of vesting of stock options and stock awards on May 6, 2010 but does not
include the 2009 ESOP allocation as such information is not currently available. |
|
(2) |
|
Includes 5,000 shares for Mr. Guinan that will be purchased through his 401(k) and 50,000
shares that will be indirectly purchased by a company in which Mr. Skelly is a beneficial
owner. |
|
(3) |
|
Assuming an exchange ratio of 1.2022 at the minimum of the offering range, directors would
have 1,428,260 shares and executive officers would have 492,531 shares after the exchange of
such shares. |
123
The Business Background of Our Directors and Executive Officers.
The business experience for the past five years, as well as the experience, qualifications,
attributes and skills, of each of our directors and executive officers are set forth below. Unless
otherwise indicated, directors and executive officers have held their positions for the past five
years.
Directors
The principal occupation during the past five years of each of our directors is set forth
below. All directors have held their present positions for five years unless otherwise stated.
Nicholas Antonaccio, age 62, is President of CMA Enterprises LLC, a financial advisory firm
founded by Mr. Antonaccio in 2000. Previously, Mr. Antonaccio was the chief financial officer at a
variety of public and private companies, including serving for five years as senior vice president
and chief financial officer of Copelco Capital, Inc. Mr. Antonaccio has extensive financial and
public company expertise, with responsibilities that have spanned all major areas of financial
management, including financial operations and contract, tax, treasury, financial planning, credit,
information technology, human resources and risk management.
Michael A. DeBernardi, age 55, served as Lead Director until April 2008 when he was appointed
Executive Vice President and Chief Operating Officer of Oritani Bank. Mr. DeBernardi has
previously served in executive positions with AT&T Capital Corporation, Newcourt Credit Group, CIT
Global Vendor Finance, Aternus Partners, LLC, and US Express Leasing. Mr. DeBernardi is also a
trustee of Chilton Memorial Hospital in Pompton Plains, New Jersey where he serves as Vice-Chairman
of the Audit Committee and Co-Chairman of the Strategic Planning Committee. Mr. DeBernardi has
held executive positions at a variety of capital finance companies throughout his career.
James J. Doyle, Jr., age 59, served as the President and Chief Executive Officer of Chilton
Memorial Hospital from 1991 until 2004, and also as a consultant to The Chilton Memorial Hospitals
Foundation Board until 2008. Mr. Doyle has also served as Executive Vice President of Atlantic
Health System from 1994 until 1998, and Executive Vice President of the Valley Health System from
1998 until 2002. Mr. Doyle has significant executive management experience, overseeing
administrative, finance, marketing and human resources activities.
Robert S. Hekemian, Jr., age 49, has been with the 75-year-old, family-owned Hekemian & Co.,
Inc. since 1982, becoming President and Chief Operating Officer in 2004. Hekemian & Co. and its
affiliates own, manage and develop apartments, shopping centers and mixed-use projects primarily
throughout New Jersey, Maryland, Virginia, New York and Pennsylvania. Mr. Hekemian has been
involved in all aspects of real estate development and acquisitions throughout his career.
Kevin J. Lynch, age 63, has been the President and Chief Executive Officer of Oritani Bank
since 1993 and has served as President and Chief Executive Officer of Oritani-Federal since its
creation in 1998. Mr. Lynch is a director of the FHLB-NY and serves on its Executive,
Compensation, and Housing Committees. He is also a director of Pentegra Retirement Services
Financial Institutions Retirement Fund, a national provider of full-service retirement programs.
Mr. Lynch is a former Chairman of the New Jersey League of Community and Savings Bankers and served
as a member of its Board of Governors for several years, and also served on the Board of Directors
of Thrift Institutions Community Investment Corp. Mr. Lynch is a member of the Professional
Development and Education Committee of the American Bankers Association. He is a member of the
American Bar Association and a former member of the Board of Directors of Bergen County Habitat for
Humanity.
124
John J. Skelly, Jr., age 69, is the President and Chief Executive Officer of West Side
Management, which owns and manages affordable and low-income housing developments throughout New
Jersey, New York and Maryland. Mr. Skelly also served as the Deputy Commissioner of Housing for
the City of New York and was a founding Board Member for Habitat for Humanity of Greater Jersey
City. Mr. Skelly has extensive experience with real estate development and finance.
Executive Officers of the Bank Who Are Not Also Directors
John M. Fields, Jr., age 46, has been employed by Oritani-Federal since 1999 and currently
serves as Executive Vice President and Chief Financial Officer. He is also responsible for
information technology, electronic banking and deposit operations, as well as investment and
treasury functions. Prior to 1999, Mr. Fields, Jr. was chief accounting officer and controller at
a local publicly-traded financial institution. Mr. Fields, Jr. is a certified public accountant.
Thomas Guinan, age 45, has been employed by the Oritani-Federal since 2003 and currently
serves as Executive Vice President and Chief Lending Officer. Prior to that, Mr. Guinan served as
a senior vice president of commercial lending at a local financial institution. Mr. Guinan is
responsible for overseeing all aspects of the retail and commercial lending operations of Oritani
Bank, including originations, portfolio growth and developing strategies to enhance Oritani Banks
market share and profitability.
Philip M. Wyks, age 55, has been employed by Oritani-Federal since 1976 and currently serves
as Senior Vice President and Secretary. Mr. Wyks is also responsible for facilities management.
In addition, Mr. Wyks is a director of Thrift Institutions Community Investment Corporation, a
subsidiary of the New Jersey League of Community Bankers that assists League members in forming
consortia to originate loans on low to moderate income housing loans and initiate economic
development projects throughout the State of New Jersey.
Anthony V. Bilotta, Jr., age 49, began employment with Oritani-Federal in 2008 as Senior Vice
President Retail Banking. Prior to that, Mr. Bilotta served as senior vice president of retail
banking at a local financial institution. Mr. Bilotta is responsible for all aspects of retail
branch banking, sales development, and Oritani-Federals marketing program.
Rosanne P. Buscemi, age 57, has been employed by Oritani Bank since 1978 and currently serves
served as Senior Vice PresidentChief Compliance Officer. Ms. Buscemi also assists with training
as well as oversight of new branch development and renovations.
Anne Mooradian, age 48, has been employed by Oritani Bank since 1985 and currently serves as
Senior Vice President and Human Resources Officer. Ms. Mooradian has also held branch retail
positions at Oritani Bank.
Paul M. Cordero, age 54, has been employed by Oritani Bank since 1980 and currently serves as
Vice President and Chief Residential Lending Officer.
Ann Marie Jetton, age 43, has been employed by Oritani Bank since 2000 and currently serves as
Vice President and Principal Accounting Officer.
Paul C. Skinner, age 47, began employment with Oritani-Federal in 2008 as Vice President/Chief
Information Officer. Prior to that, Mr. Skinner served as senior vice president of information
technology and operations at a local financial institution. Mr. Skinner is responsible for
125
information technology, deposit operations, electronic banking and also serves as the
Companys privacy officer.
Corporate Governance, Code of Ethics and Business Conduct
Oritani-Federal is committed to maintaining sound corporate governance principles and the
highest standards of ethical conduct and is in compliance with applicable corporate governance laws
and regulations.
The Board of Directors has adopted a code of ethics for the principal executive officer,
principal financial officer, principal accounting officer and all persons performing similar
functions, and corporate governance guidelines for directors. These codes are designed to deter
wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full
and accurate disclosure and compliance with all applicable laws, rules and regulations. Both of
these documents are available on Oritani-Federals website at www.oritani.com. Amendments to and
waivers from the code of ethics and corporate governance guidelines for directors are disclosed on
Oritani-Federals website.
Director Independence
The Board of Directors has determined that, except as to Mr. Lynch and Mr. DeBernardi, each
member of the Board of Directors is an independent director within the meaning of the Nasdaq
corporate governance listing standards and Oritani-Federals corporate governance policies. Mr.
Lynch and Mr. DeBernardi are not considered independent as each is an executive officer of
Oritani-Federal.
In addition, the Board of Directors has appointed Mr. Antonaccio as Lead Director. The Lead
Director has the following functions:
|
|
|
Preside at executive session of the non-management directors. |
|
|
|
|
Facilitate communications between other members of the Board of Directors and
the Chief Executive Officer. Any director is free to communicate directly with the
Chief Executive Officer. The Lead Directors role is to attempt to improve such
communications if they are not entirely satisfactory. |
|
|
|
|
Work with the Chief Executive Officer in the preparation of the Board of
Directors meeting agenda and information to be provided to the Board of Directors. |
|
|
|
|
Chair the annual review of the performance of the Chief Executive Officer. |
|
|
|
|
Otherwise consult with the Chief Executive Officer on matters relating to
corporate governance and board performance. |
Given the duties of the Lead Director, the Board of Directors has reaffirmed its position of
allowing one individual to serve as Chairman and Chief Executive Officer. Mr. Lynch has served as
Chairman, President and Chief Executive Officer since the inception of Oritani-Federal.
During fiscal 2009, each of Directors John J. Skelly, Jr., James J. Doyle, Jr. and Kevin J.
Lynch had residential mortgage loans with Oritani Bank. Additionally, Oritani Bank had loans
outstanding to entities in which Directors Hekemian and Skelly had an ownership interest in the
amounts of $25.2 million and $8.8 million, respectively. These loans were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the time for comparable
transactions with the general
126
public. Oritani-Federal also utilizes the property management services of Hekemian & Co.,
Inc. to manage two properties owned by its subsidiaries. Director Hekemian has a partial ownership
interest in Hekemian & Co., Inc. During the fiscal year ended June 30, 2009, Oritani-Federal,
through its subsidiaries, paid $87,000 to Hekemian & Co., Inc. for these management services. In
addition, during the fiscal year ended June 30, 2009, Oritani Bank made rent payments for its
Cliffside Park branch totaling $88,080 to the landlord, Willet & Co. Director Hekemian has a
partial ownership interest in Willet & Co. The terms of these agreements were determined in the
ordinary course of business and were made on substantially the same terms by us as could have been
made with unaffiliated parties.
Board of Directors Meetings and Committees
The Board of Directors of Oritani-Federal and Oritani Bank met 12 times during the fiscal year
ended June 30, 2009. All directors attended all Board of Directors and committee meetings during
fiscal 2009, including Board and committee meetings of Oritani Bank. Executive sessions of the
independent directors are regularly scheduled. Although not required, attendance of directors at
the Annual Meeting of Stockholders is encouraged. Each of Oritani-Federals directors attended the
Oritani-Federals 2009 Annual Meeting of Stockholders.
Oritani-Federal and Oritani Bank have four standing committees of the Board of Directors:
Compensation and Corporate Governance Committee; Audit Committee; Loan Committee; and Community
Reinvestment Act and Compliance Committee.
Transactions with Certain Related Persons
Federal law and regulation generally require that all loans or extensions of credit to
executive officers and directors must be made in the ordinary course of business on substantially
the same terms, including interest rates and collateral, as those prevailing at the time for
comparable loans with persons not related to Oritani Bank or Oritani-Federal and must not involve
more than the normal risk of collectibility or present other unfavorable features. However,
applicable regulations permit executive officers and directors to receive the same terms through
loan programs that are widely available to other employees, as long as the director or executive
officer is not given preferential treatment compared to the other participating employees.
Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an issuer from: (1)
extending or maintaining credit; (2) arranging for the extension of credit; or (3) renewing an
extension of credit in the form of a personal loan for an officer or director. There are several
exceptions to this general prohibition, one of which is applicable to Oritani Bank. Sarbanes-Oxley
does not apply to loans made by a depository institution that is insured by the FDIC and is subject
to the insider lending restrictions of the Federal Reserve Act. All loans to the Companys
directors and officers are made in conformity with the Federal Reserve Act and Regulation O.
The aggregate amount of loans to our executive officers, directors and their related entities,
was $38.3 million, $36.6 million and $34.8 million at December 31, 2009 and June 30, 2009 and 2008,
respectively. For the six months ended December 31, 2009, new loans to and repayments from
executive officers, directors and their related entities totaled $2.0 million and $292,000,
respectively. These loans were performing according to their original terms at December 31, 2009.
127
Executive Compensation
Compensation and Corporate Governance Committee Interlocks and Insider Participation
Our Compensation and Corporate Governance Committee (C&CG Committee) determines the salaries
to be paid each year to the Chief Executive Officer and those executive officers who report
directly to the Chief Executive Officer. The C&CG Committee consists of Directors Doyle (Chair),
Antonaccio, Hekemian and Skelly. None of these individuals was an officer or employee of
Oritani-Federal or Oritani Bank during the fiscal year ended June 30, 2009, or is a former officer
of Oritani-Federal or Oritani Bank.
During the fiscal year ended June 30, 2009, (i) no executive of Oritani-Federal served as a
member of the compensation committee (or other Board committee performing equivalent functions or,
in the absence of any such committee, the entire Board of Directors) of another entity, one of
whose executive officers served on the C&CG Committee of Oritani-Federal; (ii) no executive officer
of Oritani-Federal served as a director of another entity, one of whose executive officers served
on the C&CG Committee of Oritani-Federal; and (iii) no executive officer of Oritani-Federal served
as a member of the compensation committee (or other board committee performing equivalent functions
or, in the absence of any such committee, the entire Board of Directors) of another entity, one of
whose executive officers served as a director of Oritani-Federal.
Compensation Discussion and Analysis
Compensation Philosophy and Objectives
The goal of the Executive Compensation Program is to enable us to attract, develop, and retain
strong executive officers capable of maximizing our performance for the benefit of its
stockholders. Our compensation philosophy is to provide competitive compensation opportunities
that are aligned with our financial performance and the generation of value for stockholders
through stock-price appreciation. Our focus is on retaining and motivating key executives,
maintaining profitability, asset quality and loan growth, while aggressively controlling expenses.
Role of the Compensation and Corporate Governance Committee
The C&CG Committee assists the Board of Directors in discharging its responsibilities
regarding the Companys compensation and benefit plans and practices. Authority granted to the
C&CG Committee is established in its charter, which is available on the Companys website at
www.oritani.com. The C&CG Committee meets as necessary. One of the responsibilities of the C&CG
Committee is to provide, on an annual basis, final approval of the significant components of the
total compensation of the named executive officers. In making these determinations, the C&CG
Committee considers the executives level of job responsibility, the compensation paid by peers for
similar levels of responsibility, industry survey data regarding executive compensation, the
financial condition and performance of the Company, and an assessment of the executives individual
performance. The C&CG Committee also strongly considers the recommendations of the CEO regarding
the other named executive officers. The actions of the C&CG Committee are presented for discussion
at meetings of the full Board of Directors.
Use of Outside Advisors and Survey Data. The C&CG Committee uses industry survey data from
independent sources and had previously engaged a consulting firm to assist it in performing its
duties. The independent sources of industry survey data utilized by the C&CG Committee are the
executive compensation reports prepared by the New Jersey League of Community Bankers and L.R.
128
Webber Associates, Inc. (Webber Survey). The Webber Survey provides timely and reliable
information on wages, salaries, employee benefits, and compensation practices and trends for
financial institutions. It is widely utilized within the industry. The C&CG Committee engaged a
compensation consulting firm, GK Partners, to prepare a compensation report and analysis in
connection with the compensation package of the named executive officers. The report they produced
is dated September 28, 2007. GK Partners is an independent, executive compensation consulting firm
with experience in, and knowledge of, the financial services industry. The data contained in their
report were still considered pertinent and appropriate for usage by the C&CG Committee in
performing its responsibilities in calendar 2008. GK Partners was not engaged specifically for
calendar 2008 data in order to save costs. They were engaged for 2009. The peers selected for the
2007 GK Partners report for purposes of compiling peer data were local publically traded banks that
were considered reasonable competitors based on size, profitability, market capitalization and
lines of business. The specific peers were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clifton Savings Bank
|
|
|
|
|
|
OceanFirst Financial Corp. |
|
|
|
|
Dime Community Bancshares
|
|
|
|
|
|
Partners Trust Financial |
|
|
|
|
Greater Community Bancorp
|
|
|
|
|
|
PennFed Financial Services, Inc. |
|
|
|
|
Investors Bancorp, Inc.
|
|
|
|
|
|
Provident Financial Services, Inc. |
|
|
|
|
Kearny Financial Corp.
|
|
|
|
|
|
Provident New York |
|
|
|
|
Lakeland Bancorp
|
|
|
|
|
|
Roma Financial Corp. |
|
|
|
|
NBT Bancorp Inc.
|
|
|
|
|
|
Synergy Financial Corp. |
The C&CG Committee communicated directly with, and received certain reports directly from, GK
Partners. In addition to the raw peer data, the C&CG Committee also considered the relative
business models, loan growth, asset quality, and profitability of the banks and thrifts in the peer
groups. The report prepared by GK Partners included a peer median and average salary and cash
incentive for each of the named executive officers based on their title and responsibilities. The
C&CG Committee considered the executives current base salary and historical annual cash incentive,
and compared these amounts to the median and average compensation detailed in the GK Partners
Report for the executives title and responsibilities. The peer median and average compensation
were strongly considered by the C&CG Committee when contemplating the executives salary and cash
incentive (described in the procedures below). The C&CG Committee decided that the acceptable
range for base salary increases was 0 20% and the acceptable range of target bonus opportunity
for annual cash incentives was 20 100% of the executives current base salary. Given these
restrictions, and considering the information provided in the GK Partners Report, the C&CG
Committee determined a preliminary range of base salary and annual cash incentive for each of the
named executive officers. A final amount for each executive was determined using the procedures
described in the paragraphs below.
129
Elements of The Compensation Package
Our 2008/2009 compensation program for named executive officers consisted of base salary,
annual cash incentives, equity incentive awards (such as stock options and restricted stock
awards), a comprehensive benefits package and perquisites.
Base Salary. Executive base salary levels are generally reviewed on an annual basis and
adjusted as appropriate. We desire to compensate executives fairly. During the fiscal year ended
June 30, 2009 the C&CG Committee considered prevailing market conditions and approved certain
salary adjustments as indicated below. The C&CG Committee also considered the overall performance
of the individual, including their achievement of individual goals as well as their contribution to
our goals in making their determinations. The C&CG Committee relied on the data contained in the
GK Partners Report, as well as the data from independent surveys, in formulating its opinion of
prevailing market conditions. The C&CG Committee viewed this information as a broad database of
the Companys peers with detailed information on Base Salary and Incentive Compensation. The
following table sets forth the base salary increases for the named executive officers approved by
the C&CG Committee during fiscal year 2009.
Base Salary History at June 30, 2009
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
Increase Date |
|
|
Increase |
|
|
% Increase |
|
|
New Base Salary |
|
Kevin J. Lynch |
|
$ |
500,000 |
|
|
|
11/10/08 |
|
|
$ |
45,000 |
|
|
|
9.00 |
% |
|
$ |
545,000 |
|
Michael A. DeBernardi |
|
$ |
250,000 |
|
|
|
11/10/08 |
|
|
$ |
22,500 |
|
|
|
9.00 |
% |
|
$ |
272,500 |
|
John M. Fields, Jr. |
|
$ |
200,000 |
|
|
|
11/10/08 |
|
|
$ |
18,000 |
|
|
|
9.00 |
% |
|
$ |
218,000 |
|
Thomas Guinan |
|
$ |
200,000 |
|
|
|
11/10/08 |
|
|
$ |
18,000 |
|
|
|
9.00 |
% |
|
$ |
218,000 |
|
Philip M. Wyks |
|
$ |
189,000 |
|
|
|
N/M |
|
|
$ |
|
|
|
|
N/M |
|
|
$ |
189,000 |
|
While the C&CG Committee considered the existing base salaries of the named executive
officers to be within a reasonable range based on their perception of existing market conditions,
it also felt that an adjustment was warranted. In general, the C&CG Committee was pleased with the
progress management made in quality balance sheet growth and capital deployment. It felt that our
growth, while adhering to strict quality and profitability standards, was exemplary. The
measurement period for this conclusion was primarily the fiscal year ended June 30, 2008. The C&CG
Committee awarded 9% base salary increases to the named executive officers that they felt were most
responsible for these achievements. In the instance of Mr. Wyks, the C&CG Committee decided that
no increase in base salary was appropriate at this time as they felt his current salary was
sufficient when considered in conjunction with his current responsibilities. The C&CG Committee
considered the ending base salaries of all of the named executive officers to be appropriate and
reasonable considering, their responsibilities, in comparison to their peers.
Annual Cash Incentives. Annual cash incentive opportunities are provided to the named
executive officers as an incentive to achieve annual goals and objectives. For fiscal 2009 the
C&CG Committee determined each named executive officers bonus based on a retrospective review of a
variety of corporate performance factors and each individuals contribution to us, taking in to
account the operating environment existing during the year. This review is in addition to our
actual performance against its operating budget, which is adopted at the beginning of the year
along with strategic objectives and projects to be accomplished during the year. At the November
21, 2008 Annual Meeting of Stockholders of Oritani-Federal, stockholders approved the Executive
Officer Annual Incentive Plan. This plan became effective at that time and formalized the process
of annual cash incentives for named
130
executive officers. Prospective annual cash incentives, if any, will be awarded in accordance
with this plan.
The payments for the named executive officers were based on the achievement of certain goals
on a Bank-wide basis as well as individual performance goals. Bank-wide goals included financial
performance of Oritani Bank measured on a return-on-assets (ROA) and Efficiency Ratio basis as
compared to a peer group. The C&CG Committee held management to a meet or beat peers standard.
The peer group selected by the C&CG Committee consisted of area banks with a mutual holding company
structure. The specific group selected was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kearny Federal Savings Bank
|
|
|
|
|
|
Roma Bank |
|
|
|
|
Investors Savings Bank
|
|
|
|
|
|
Northfield Bank |
|
|
|
|
Clifton Savings Bank |
|
|
|
|
|
|
Peer group results were determined using the FDIC Website for Statistics on Depository
Institutions. Peer data regarding ROA and Efficiency Ratio were obtained for the quarterly periods
ending September 30, 2008; June 30, 2008; March 31, 2008; and December 31, 2008. The twelve month
period ended September 30, 2008 was utilized as this was the most recent period of data available
when the cash incentives were being determined. The peer results were averaged and compared to the
average results for Oritani Bank (from the same source) for the same periods. Oritani-Delawares
ROA was 0.58%, versus the peer result of 0.53%. Oritani Banks Efficiency Ratio was 53.99%, versus
the peer result of 65.15% (a lower efficiency ratio is desired). Accordingly, the C&CG Committee
felt that management had met the goal for financial performance. The other bank-wide goals
considered were loan portfolio growth, delinquency levels, deployment of excess capital, staffing
changes, facility renovations, and new branch openings. In the opinion of the C&CG Committee, all
the bank-wide goals had been attained. In addition, the C&CG Committee also felt that the
individual performance goals were attained for all of the named executive officers. The C&CG
Committee determined that Mr. Lynch had the primary responsibility for the attainment of our
Company-wide goals. The C&CG Committee awarded Mr. Lynch an annual cash incentive equal to 50% of
his base salary in recognition of his accomplishments. A base annual cash incentive equal to 35%
of their respective base salaries was awarded to each of Messrs. DeBernardi, Fields and Guinan.
The base award for Mr. Guinan was increased to 40% due to his specific contributions regarding loan
originations and loan portfolio growth. The base award for Mr. DeBernardi was pro-rated to 26.25%
as he was not a full-time employee for the entire measurement period. The C&CG Committee awarded
Mr. Wyks an annual cash incentive equal to 20% of his base salary, primarily due to attainment of
his individual performance goals.
The C&CG Committee approved awards totaling $503,425 to our named executive officers during
the fiscal year ended June 30, 2009. The specific amount awarded to each named executive officer
for the fiscal year ended June 30, 2009 is set forth in the Bonus column of the table in the
Executive Officer CompensationSummary Compensation Table.
Equity Incentives. We did not have stock issued to the public prior to our initial public
offering which was consummated in 2007. In connection with the initial public offering,
Oritani-Federal established an employee stock ownership plan that purchased 3.92% of the total
shares issued in the offering (including shares issued to Oritani Financial Corp., MHC and to the
OritaniBank Charitable Foundation) for the benefit of employees of Oritani Bank. The employee
stock ownership plan is a qualified retirement plan. Additionally, at a special meeting of
stockholders in April 2008, our stockholders approved our 2007 Equity Incentive Plan (the Equity
Plan) which authorized the issuance of up to 2,781,878 shares of our common stock pursuant to
grants of incentive and non-statutory stock options, stock appreciation rights, and restricted
stock awards. The Equity Plan provides our officers, employees and directors with additional
incentives to promote growth and performance. The Equity Plan
131
provides that individuals may receive awards of common stock and grants of options to purchase
common stock. The C&CG Committee believes that officer stock ownership provides a significant
incentive in building stockholder value by aligning the interests of the officers, employees and
directors with those of our shareholders. In addition, stock option grants and stock awards vest
over five years, thereby aiding retention. We granted no awards to any named executive officer
under the Equity Plan during fiscal 2009. As of June 30, 2009, a total of 2,653,173 stock options
and restricted stock awards had been granted under the Equity Plan, representing 95.4% of the
shares available.
Other. Additionally, we provide certain fringe benefits, including retirement plans,
termination benefits, and perquisites. The retirement plans consist of:
|
|
|
A multi-employer defined benefit plan (a qualified plan). The plan was frozen as of
December 31, 2008. All employees who attained the age of 21 and completed one year of
service were eligible to participate in the plan. |
|
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|
|
A nonqualified savings incentive plan covering employees whose salary deferrals to the
savings incentive plan are limited. |
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A nonqualified Benefit Equalization Plan which provides benefits to employees who are
disallowed certain benefits under our qualified benefit plans. |
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A nonqualified Post Retirement Medical Plan for directors and certain eligible
employees. |
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A nonqualified Executive Supplemental Retirement Income Agreement for our President and
Chief Executive Officer. |
The C&CG Committee considered these items when contemplating the overall compensation package
awarded to the named executive officers. The C&CG Committee felt that these items were appropriate
given the level of responsibility for each named executive officer and that no changes to the
programs were warranted at the time.
Other Matters
Corporate Income Tax Considerations. Section 162(m) of the Internal Revenue Code imposes a
$1,000,000 annual limit, per executive officer, on a companys federal tax deduction for certain
types of compensation paid to executive officers. Compensation that is performance-based under
the Internal Revenue Codes definition is exempt from this limit. Stock option grants are intended
to qualify as performance-based compensation. It has been the C&CG Committees practice to
structure the compensation and benefit programs offered to the named executive officers in order to
maximize the tax deductibility of amounts paid. However, in structuring the compensation programs
and in reaching compensation decisions, the C&CG Committee considers a variety of factors,
including the Companys tax position, the materiality of the payments and tax deductions involved,
and the need for flexibility to address unforeseen circumstances. After considering these factors,
the C&CG Committee may decide to authorize compensation payments, all or part of which would be
nondeductible for federal tax purposes.
Section 4999 of the Code imposes a 20% excise tax on certain excess parachute payments made
to disqualified individuals. Under Sections 280G of the Code, such excess parachute payments are
also nondeductible to us. If payments that are contingent on a change of control to a disqualified
individual (which includes the named executive officers) exceed three times the individuals base
amount, they constitute excess parachute payments to the extent they exceed one time the
individuals base amount.
132
Severance payments to the named executive officers pursuant to their employment agreements
that are paid in connection with termination following a Change in Control are subject to reduction
in order to avoid an excess parachute payment under Section 280G of the Code.
Accounting Considerations. The C&CG Committee is informed of the financial statement
implications of the elements of the named executive officers compensation. However, the probable
contribution of a compensation element to the objectives of our named executive officers
compensation program and its projected economic cost, which may or may not be reflected on our
financial statements, are the primary determining factors of the named executive officers
compensation decisions.
133
Executive Officer Compensation
Summary Compensation Table.
The following table sets forth for the fiscal years ended June 30, 2009, 2008 and 2007 certain
information as to the total remuneration paid to Mr. Lynch, who serves as Chief Executive Officer,
Mr. Fields, who serves as Chief Financial Officer, and the three other most highly compensated
executive officers of Oritani-Federal or Oritani Bank other than Messrs. Lynch and Fields, who
received total compensation in excess of $100,000. Each of the individuals listed in the table
below is referred to as a named executive officer.
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Change in pension |
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value and non- |
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Stock |
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Option |
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qualified deferred |
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All other |
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Name and principal |
|
Fiscal |
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Salary |
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Awards |
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Awards |
|
|
compensation |
|
|
compensation |
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|
position |
|
Year |
|
|
($)(1) |
|
|
Bonus ($) |
|
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($)(2) |
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($) (3) |
|
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earnings ($) (4) |
|
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($) (5) |
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Total ($) |
|
Kevin J. Lynch |
|
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2009 |
|
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550,750 |
|
|
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250,000 |
|
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621,949 |
|
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273,419 |
|
|
|
1,648,874 |
|
|
|
110,512 |
|
|
|
3,455,504 |
|
President and Chief |
|
|
2008 |
|
|
|
530,769 |
|
|
|
250,000 |
|
|
|
103,658 |
|
|
|
45,570 |
|
|
|
919,491 |
|
|
|
111,241 |
|
|
|
1,960,730 |
|
Executive Officer |
|
|
2007 |
|
|
|
494,327 |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
702,360 |
|
|
|
63,356 |
|
|
|
1,460,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Michael A. DeBernardi |
|
|
2009 |
|
|
|
263,846 |
|
|
|
65,625 |
|
|
|
298,536 |
|
|
|
123,038 |
|
|
|
87,278 |
|
|
|
25,995 |
|
|
|
864,318 |
|
Executive Vice |
|
|
2008 |
|
|
|
57,692 |
|
|
|
|
|
|
|
49,756 |
|
|
|
20,506 |
|
|
|
22,884 |
|
|
|
8,312 |
|
|
|
159,150 |
|
President and Chief
Operating Officer |
|
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|
|
|
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|
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|
|
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John M. Fields, Jr. |
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2009 |
|
|
|
211,077 |
|
|
|
70,000 |
|
|
|
298,536 |
|
|
|
123,038 |
|
|
|
73,436 |
|
|
|
76,249 |
|
|
|
852,336 |
|
Executive Vice |
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2008 |
|
|
|
196,192 |
|
|
|
56,700 |
|
|
|
49,756 |
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|
|
20,506 |
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|
|
19,149 |
|
|
|
77,649 |
|
|
|
419,952 |
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President and Chief
Financial Officer |
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2007 |
|
|
|
189,627 |
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|
|
59,150 |
|
|
|
|
|
|
|
|
|
|
|
18,414 |
|
|
|
28,645 |
|
|
|
295,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Thomas Guinan |
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2009 |
|
|
|
211,077 |
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|
|
80,000 |
|
|
|
298,536 |
|
|
|
123,038 |
|
|
|
115,092 |
|
|
|
77,776 |
|
|
|
905,519 |
|
Executive Vice |
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2008 |
|
|
|
188,923 |
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|
|
58,800 |
|
|
|
49,756 |
|
|
|
20,506 |
|
|
|
39,735 |
|
|
|
80,826 |
|
|
|
438,546 |
|
President and Chief
Lending Officer |
|
|
2007 |
|
|
|
163,817 |
|
|
|
53,200 |
|
|
|
|
|
|
|
|
|
|
|
29,336 |
|
|
|
29,520 |
|
|
|
275,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Philip M. Wyks |
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2009 |
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|
|
191,181 |
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|
|
37,800 |
|
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46,950 |
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|
18,228 |
|
|
|
192,800 |
|
|
|
76,239 |
|
|
|
563,198 |
|
Senior Vice |
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2008 |
|
|
|
192,635 |
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|
|
47,250 |
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|
|
7,825 |
|
|
|
3,038 |
|
|
|
60,577 |
|
|
|
78,649 |
|
|
|
389,973 |
|
President and
Corporate Secretary |
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|
2007 |
|
|
|
187,270 |
|
|
|
46,000 |
|
|
|
|
|
|
|
|
|
|
|
64,599 |
|
|
|
28,098 |
|
|
|
325,967 |
|
|
|
|
(1) |
|
Includes $23,058 and $2,181 of payments made in 2009 to Messrs. Lynch and Wyks, respectively,
for unused vacation days. |
|
(2) |
|
The amounts in this column reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal years ended June 30, 2009 and 2008, in accordance with SFAS
123(R) and its successor, FASB ASC Topic 718, of restricted stock awards pursuant to the
Equity Plan. Assumptions used in the calculation of this amount are included in footnote 14 to
Oritani-Federals audited financial statements for the fiscal year ended June 30, 2009
included herein. |
|
(3) |
|
The amounts in this column reflect the dollar amount recognized for financial statement
reporting purposes, for the fiscal years ended June 30, 2009 and 2008, in accordance with SFAS
123(R) and its successor, FASB ASC Topic 718, of stock option awards pursuant to the Equity
Plan. Assumptions used in the calculation of this amount are included in footnote 14 to
Oritani-Federals audited financial statements for the fiscal year ended June 30, 2009
included herein. |
|
(4) |
|
The amounts in this column reflect the actuarial increase in the present value at June 30,
2009 compared to June 30, 2008, of the named executive officers benefits under the Defined
Benefit Plan and Benefit Equalization Plan and, in the case of Mr. Lynch, an Executive
Supplement Retirement Income Agreement and the Directors Retirement Plan maintained by
Oritani Bank, and, in the case of Mr. DeBernardi, the Directors Retirement Plan maintained by
Oritani Bank, determined using interest rate and mortality rate assumptions consistent with
those used in Oritani-Federals financial statements and includes amounts for which the named
executive officer may not currently be entitled to receive because such amounts are not
vested. This column also includes $69,874, $73, $7,435, $2,091, and $5,799 of preferential or
above-market earnings on non tax-qualified deferred compensation for non-qualified defined
contribution plans for Messrs. Lynch, DeBernardi, Fields, Guinan and Wyks, respectively, as
well as $21,025 for Mr. DeBernardi of preferential earnings on a similar plan for deferred
director fees. |
|
(5) |
|
The amounts in this column represent the total of all perquisites (non-cash benefits and
perquisites such as the use of employer-owned automobiles, membership dues and other personal
benefits), employee benefits (employer cost of life insurance and health insurance), and
employer contributions to defined contribution plans (the 401(k) Plan, the ESOP and the
Benefit Equalization Plan). Amounts are reported separately under the All Other
Compensation table below. |
134
All Other Compensation
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|
Company |
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|
Company |
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|
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|
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|
Contribution |
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|
|
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|
Contribution to |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
on Medical, |
|
|
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|
|
|
ESOP and |
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Dental, |
|
|
|
|
|
|
401(k) Plan |
|
|
Benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability and |
|
|
|
|
|
|
Match |
|
|
Equalization Plan |
|
|
Country |
|
|
|
|
|
|
Fiscal |
|
|
Insurance |
|
|
Automobile |
|
|
Contribution |
|
|
Match |
|
|
Club Dues |
|
|
|
|
Name |
|
Year |
|
|
Benefits ($) |
|
|
Allowance ($) |
|
|
($) |
|
|
Contribution ($) |
|
|
($) |
|
|
Total ($) |
|
Kevin J. Lynch |
|
|
2009 |
|
|
|
16,846 |
|
|
|
16,521 |
|
|
|
48,430 |
|
|
|
20,561 |
|
|
|
8,154 |
|
|
|
110,512 |
|
|
|
|
2008 |
|
|
|
19,885 |
|
|
|
13,073 |
|
|
|
48,480 |
|
|
|
23,423 |
|
|
|
6,380 |
|
|
|
111,241 |
|
|
|
|
2007 |
|
|
|
20,037 |
|
|
|
15,844 |
|
|
|
3,462 |
|
|
|
17,368 |
|
|
|
6,645 |
|
|
|
63,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael A. DeBernardi |
|
|
2009 |
|
|
|
14,803 |
|
|
|
9,305 |
|
|
|
|
|
|
|
1,887 |
|
|
|
|
|
|
|
25,995 |
|
|
|
|
2008 |
|
|
|
8,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Fields, Jr. |
|
|
2009 |
|
|
|
13,228 |
|
|
|
9,620 |
|
|
|
47,969 |
|
|
|
5,432 |
|
|
|
|
|
|
|
76,249 |
|
|
|
|
2008 |
|
|
|
12,102 |
|
|
|
9,581 |
|
|
|
48,815 |
|
|
|
7,151 |
|
|
|
|
|
|
|
77,649 |
|
|
|
|
2007 |
|
|
|
11,042 |
|
|
|
10,140 |
|
|
|
3,615 |
|
|
|
3,848 |
|
|
|
|
|
|
|
28,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Guinan |
|
|
2009 |
|
|
|
12,168 |
|
|
|
7,469 |
|
|
|
48,527 |
|
|
|
5,001 |
|
|
|
4,611 |
|
|
|
77,776 |
|
|
|
|
2008 |
|
|
|
11,079 |
|
|
|
7,458 |
|
|
|
53,612 |
|
|
|
2,299 |
|
|
|
6,377 |
|
|
|
80,826 |
|
|
|
|
2007 |
|
|
|
10,078 |
|
|
|
6,315 |
|
|
|
6,511 |
|
|
|
|
|
|
|
6,615 |
|
|
|
29,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip M. Wyks |
|
|
2009 |
|
|
|
16,879 |
|
|
|
7,522 |
|
|
|
49,767 |
|
|
|
2,072 |
|
|
|
|
|
|
|
76,239 |
|
|
|
|
2008 |
|
|
|
15,999 |
|
|
|
7,438 |
|
|
|
50,414 |
|
|
|
4,798 |
|
|
|
|
|
|
|
78,649 |
|
|
|
|
2007 |
|
|
|
14,515 |
|
|
|
6,585 |
|
|
|
6,998 |
|
|
|
|
|
|
|
|
|
|
|
28,098 |
|
Plan-Based Awards. The following table sets forth the threshold, target and maximum
award amounts that could be earned by the named executive officers during fiscal 2010 that were
established during fiscal 2009 under our Executive Officer Annual Incentive Plan. There were no
grants made to the named executive officers during fiscal 2009 under our Stock Based Incentive
Plan.
Grants of Plan-Based Awards for the Fiscal Year Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under |
|
|
|
Non-Equity Incentive Plan Awards (1) |
|
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
Name |
|
($) |
|
|
($) |
|
|
($) |
|
Kevin J. Lynch |
|
|
136,250 |
|
|
|
272,500 |
|
|
|
408,750 |
|
Michael A. DeBernardi |
|
|
59,950 |
|
|
|
109,00 |
|
|
|
133,525 |
|
John M. Fields, Jr. |
|
|
47,960 |
|
|
|
87,200 |
|
|
|
106,820 |
|
Thomas Guinan |
|
|
47,960 |
|
|
|
87,200 |
|
|
|
106,820 |
|
Philip M. Wyks |
|
|
30,712 |
|
|
|
37,800 |
|
|
|
47,250 |
|
|
|
|
(1) |
|
Assumes full achievement of individual component of award total. |
135
Outstanding Equity Awards at Year End. The following table sets forth information with
respect to outstanding equity awards as of June 30, 2009 for the named executive officers.
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OUTSTANDING EQUITY AWARDS AT JUNE 30, 2009 |
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Option Awards |
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Stock Awards |
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Number of |
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Number of |
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Securities |
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Securities |
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Number of |
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Market Value |
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Underlying |
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Underlying |
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Shares or Units |
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of Shares or |
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Unexercised |
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Unexercised |
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Option |
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Option |
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of Stock That |
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Units of Stock |
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Options |
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Options (#) |
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Exercise Price |
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Expiration |
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Have Not |
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That Have Not |
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Name |
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(#) Exercisable |
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Unexercisable(1) |
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($) |
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Date(2) |
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Vested(#)(3) |
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Vested ($)(4) |
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Kevin J. Lynch |
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79,482 |
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317,929 |
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15.65 |
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05/05/18 |
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158,965 |
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2,179,410 |
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Michael A. DeBernardi |
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35,767 |
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143,068 |
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15.65 |
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05/05/18 |
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76,303 |
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1,046,114 |
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John M. Fields, Jr. |
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35,767 |
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143,068 |
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15.65 |
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05/05/18 |
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76,303 |
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1,046,114 |
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Thomas Guinan |
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35,767 |
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143,068 |
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15.65 |
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05/05/18 |
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76,303 |
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1,046,114 |
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Philip M. Wyks |
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5,299 |
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21,195 |
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15.65 |
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05/05/18 |
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12,000 |
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164,520 |
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(1) |
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Represents options awarded under the 2007 Equity Incentive Plan. Such options vest ratably
over the five year period that began May 5, 2009. No eligible options have been exercised. |
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(2) |
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Stock options expire ten years after the grant date. |
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(3) |
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Represents the unvested stock grants awarded under the 2007 Equity Incentive Plan. Such
grants vest ratably over the five year period that began May 5, 2009. |
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(4) |
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This amount is based on the $13.71 closing trading price of Oritani Financial Corp.s common
stock on June 30, 2009. |
Option Exercises And Stock Vested. None of the Companys named executive officers
exercised any stock options during the fiscal year ended June 30, 2009. During fiscal 2009, 20% of
the total number of shares of each officers restricted shares vested.
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OPTION EXERCISES AND STOCK VESTED |
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Option Awards |
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Stock Awards |
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Shares |
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Acquired on |
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Value Realized |
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Number of Shares Acquired on |
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Name |
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Exercise (#) |
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on Exercise ($) |
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Vesting (#) |
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Value Realized on Vesting ($)(1) |
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Kevin J. Lynch |
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39,741 |
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567,899 |
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Michael A. DeBernardi |
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19,076 |
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272,596 |
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John M. Fields, Jr. |
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19,076 |
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272,596 |
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Thomas Guinan |
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19,076 |
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272,596 |
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Philip M. Wyks |
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3,000 |
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42,870 |
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(1) |
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This amount is based on the per share fair market value of Oritani-Federals common stock on
May 5, 2009 of $14.29. |
136
Pension Benefits. The following table sets forth information with respect to pension
benefits at and for the fiscal year ended June 30, 2009 for the named executive officers. See
Defined Benefit Plan, Directors Retirement Plan, Benefit Equalization Plan and Executive
Supplemental Retirement Income Agreement for a discussion of the plans referenced in this table.
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Pension Benefits at and for the Fiscal Year Ended June 30, 2009 |
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Present Value of |
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Number of Years |
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Accumulated Benefit |
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Payments During |
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Name |
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Plan Name |
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Credited Service (#) |
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($)(1) |
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Last Fiscal Year ($) |
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Kevin J. Lynch |
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Defined Benefit Plan |
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15.50 |
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531,000 |
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Directors Retirement Plan |
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18.67 |
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407,000 |
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Benefit Equalization Plan |
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15.50 |
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1,473,000 |
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Executive Supplemental Income Agreement |
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4.50 |
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2,314,000 |
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Michael A. DeBernardi |
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Defined Benefit Plan |
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Benefit Equalization Plan |
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Directors Retirement Plan |
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15.67 |
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170,000 |
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John M. Fields, Jr. |
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Defined Benefit Plan |
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10.67 |
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128,000 |
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Benefit Equalization Plan |
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10.67 |
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27,000 |
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Thomas Guinan |
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Defined Benefit Plan |
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21.17 |
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303,000 |
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Benefit Equalization Plan |
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5.50 |
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8,000 |
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Philip M. Wyks |
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Defined Benefit Plan |
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32.50 |
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701,000 |
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Benefit Equalization Plan |
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32.50 |
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83,000 |
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(1) |
|
The figures shown are determined as of the plans measurement date of June 30, 2009 for
purposes of Oritani-Federals audited financial statements. For mortality, discount rate and
other assumptions used for this purpose, please refer to note 13 in the audited financial
statements included herein. |
Nonqualified Deferred Compensation.
The following table sets forth information with respect to the portion of the Benefit
Equalization Plan that supplements the 401(k) Plan and the employee stock ownership plan at and for
the fiscal year ended June 30, 2009 for the named executive officers.
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|
Nonqualified Deferred Compensation at and for the Fiscal Year Ended June 30, 2009 |
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Executive |
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Registrant |
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Aggregate |
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Aggregate Balance at |
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Contributions in Last |
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Contributions in Last |
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Aggregate Earnings in |
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Withdrawals/ |
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Last Fiscal Year End |
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Name |
|
Fiscal Year |
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|
Fiscal Year(1) |
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|
Last Fiscal Year(2) |
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|
Distributions ($) |
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|
($) |
|
Kevin J. Lynch |
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|
127,199 |
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20,561 |
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106,093 |
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|
|
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1,318,161 |
|
Michael A. DeBernardi |
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12,632 |
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1,887 |
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144 |
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14,662 |
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John M. Fields, Jr. |
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33,312 |
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5,432 |
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15,470 |
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199,995 |
|
Thomas Guinan |
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26,042 |
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|
5,001 |
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4,237 |
|
|
|
|
|
|
|
61,518 |
|
Philip M. Wyks |
|
|
12,196 |
|
|
|
2,072 |
|
|
|
12,108 |
|
|
|
|
|
|
|
147,209 |
|
|
|
|
(1) |
|
The amounts reported in this column were also reported as compensation under All Other
Compensation in the Summary Compensation Table. |
|
(2) |
|
For Messrs. Lynch, DeBernardi, Fields, Guinan and Wyks, $69,874, $73, $7,436, $2,092 and
$5,800 respectively, were reported as preferential or above-market earnings for each
individual under Change in pension value and non-qualified deferred compensation earnings in
the Summary Compensation Table. |
Benefit Plans and Arrangements
Employment Agreements. Oritani Bank entered into an employment agreement with Kevin J. Lynch
effective as of January 1, 2003. The agreement had an initial term of three years. Unless notice
of non-renewal is provided, the agreement renews annually. Under the agreement, the current base
salary is $545,000. The base salary is reviewed at least annually and may be increased, but not
decreased. In addition to base salary, the agreement provides for, among other things,
participation in bonus programs and other employee pension benefit and fringe benefit plans
applicable to executive employees, use of an
137
automobile and reimbursement of expenses associated with the use of such automobile. The executive
is also entitled to reimbursement of business expenses, including fees for membership in a country
club, a health club, and such other clubs and organizations as appropriate for business purposes.
The executive is entitled to indemnification to the fullest extent permitted under applicable law
against all expenses and liabilities reasonably incurred by him in connection with any action in
which he may be involved by reason of having been an officer or director of Oritani Bank. Upon
retirement at age 70 (or at an earlier age in accordance with any retirement arrangement
established with the executives consent) the executive and his spouse would be entitled to
continuing health care insurance coverage until the death of the executive and his spouse.
The executive is entitled to severance payments and benefits in the event of his termination
of employment under specified circumstances. In the event the executives employment is terminated
for reasons other than just cause, disability, death, retirement or a change in control, or in the
event the executive resigns during the term of the agreement following (1) the failure to elect or
reelect or to appoint or reappoint executive to his executive position, (2) a material change in
the executives functions, duties, or responsibilities, which change would cause executives
position to become one of lesser responsibility, importance or scope, (3) a relocation of the
executives principal place of employment by more than 30 miles from its location at the effective
date of the employment agreement or a material reduction in the benefits and perquisites from those
being provided to the executive as of the effective date of the employment agreement, (4) the
liquidation or dissolution of Oritani Bank, or (5) a breach of the employment agreement by Oritani
Bank, the executive (or, in the event of the executives death, his beneficiary) would be entitled
to a severance payment equal to three times the sum of the executives highest base salary and
highest rate of bonus, and the executive would be entitled to the continuation of life, medical,
and dental coverage for 36 months or as provided in the Oritani Bank nonqualified senior officers
medical benefit plan. In the event of a termination following a change in control of
Oritani-Federal, the executive (or, in the event of the executives death, his beneficiary) would
be entitled to a severance payment equal to three times the sum of the executives highest base
salary and highest rate of bonus paid to him during the term of the employment agreement, plus
continuation of insurance coverage for 36 months. In the event the severance payment provisions of
the employment agreement are triggered, the executive would be entitled to a cash severance benefit
in the amount of approximately $2.4 million, which amount is subject to reduction in order to avoid
an excess parachute payment under Section 280G of the Internal Revenue Code.
Upon termination of the executives employment other than in connection with a change in
control, the executive agrees not to compete with Oritani Bank for one year following termination
of employment in any city, town or county in which Oritani Bank has an office or has filed an
application for regulatory approval to establish an office. Should the executive become disabled,
Oritani Bank would continue to pay the executive his base salary, bonuses and other cash
compensation for the longer of the remaining term of the employment agreement or one year, provided
that any amount paid to the executive pursuant to any disability insurance would reduce the
compensation he would receive. In the event the executive dies while employed by Oritani Bank, the
executives beneficiary or estate will be paid the executives base salary for the remaining term
of the employment agreement and the executives family will be entitled to continuation of medical
and dental benefits.
Oritani Bank has entered into employment agreements with Messrs. DeBernardi, Fields, Guinan
and Wyks that are substantially similar to the employment agreement of Mr. Lynch, except that each
of these agreements has a term of two years and entitles the executive to a severance payment equal
to two times the sum of the executives highest base salary and highest rate of bonus and to the
continuation of life, medical, and dental coverage for 24 months or as provided in the Oritani Bank
nonqualified senior officers medical benefit plan. In the event of a termination following a
change in control of Oritani-Federal, the executive (or, in the event of the executives death, his
beneficiary) would be entitled to a
138
severance payment equal to two times the sum of the executives highest base salary and highest
rate of bonus paid to him or her during the term of the employment agreement, plus continuation of
insurance coverage for 24 months.
Benefit Equalization Plan. Oritani Bank has adopted the 2005 Benefit Equalization Plan to
provide certain executives with benefits to which they would otherwise be entitled under Oritani
Banks Defined Benefit Pension Plan, 401(k) Plan and Employee Stock Ownership Plan, but for the
limitations imposed by the Internal Revenue Code. The 2005 Benefit Equalization Plan was adopted
to incorporate the required provisions of Code Section 409A and was amended and restated in January
2008 in order to incorporate the final Department of Treasury regulations issued under Code Section
409A. Oritani Banks prior Benefit Equalization Plan was frozen effective as of December 31, 2004.
The 2005 Benefit Equalization Plan is materially similar to the frozen Benefit Equalization Plan,
except that a participants elections regarding distributions under the tax-qualified 401(k) Plan,
the Employee Stock Ownership Plan and Defined Benefit Pension Plan control the form and timing of
distributions of a participants account in the frozen Benefit Equalization Plan. This provision
is no longer permitted with respect to deferrals or accruals subject to Code Section 409A and is
not included in the 2005 Benefit Equalization Plan. Employees who are president, executive vice
president, senior vice president and vice president of Oritani Bank are eligible to participate in
the plan. During fiscal 2009, eleven current employees and one retired employee participated in the
2005 Benefit Equalization Plan. A committee appointed by the Oritani Bank Board of Directors
administers the plan.
Under the 401(k) portion of the 2005 Benefit Equalization Plan, participants may make annual
deferrals of compensation in an amount up to the difference between the maximum amount the
participant would be permitted to contribute to Oritani Banks 401(k) plan for the given year but
for the limitations of the Internal Revenue Code and the deferrals actually made to the 401(k) plan
by the participant for the plan year. Oritani Bank will establish a supplemental 401(k) plan
account for each participant and credit the account with such contributions. In addition, the
participants account will be credited monthly with earnings at a rate equivalent to the greater of
(i) the Citibank Prime Rate, or (ii) nine percent (9%), plus matching contributions. For fiscal
2009, a total of $146,000 in interest was credited to the accounts of current employees under this
plan. Upon termination of service due to any reason other than death, the supplemental 401(k) plan
benefit will be payable either in a lump sum or in up to 5 annual installments, as elected by the
participant pursuant to his initial deferral election. Upon termination of service due to death,
the supplemental 401(k) plan benefit under the 2005 Benefit Equalization Plan will be payable to
the participants beneficiary either in a lump sum or in annual installments, pursuant to the
participants initial deferral election.
Upon termination of service due to any reason other than death, a participant will also be
entitled to a benefit equal to the difference between the actuarial present value of the
participants normal retirement benefit under Oritani Banks defined benefit plan and the actuarial
present value of his normal retirement benefit calculated pursuant to the terms of the defined
benefit plan, without the application of the limitations imposed by the Internal Revenue Code,
which amount will be reduced and offset by the corresponding benefit amount payable to the
participant under the frozen Benefit Equalization Plan. The supplemental defined benefit plan
benefit under the 2005 Benefit Equalization Plan will be payable to the participant in monthly
installments for the longer of 120 months or the remainder of the participants life. In the event
of the participants death before 120 installments have been paid, the participants beneficiary
will receive the present value of the remaining monthly installments in a lump sum. Alternatively,
the participant may also make, prior to commencement of the supplemental defined benefit plan
benefit, a one-time irrevocable election to receive his benefit under the plan in the form of a
100% joint and survivor annuity or a 50% joint and survivor annuity. Upon termination of service
due to death, the supplemental defined benefit plan benefit under the 2005 Benefit Equalization
Plan will be payable to the participants beneficiary either in a lump sum or in annual
installments, pursuant to the participants
139
initial deferral election. A participants supplemental defined benefit plan amount payable
under the 2005 Benefit Equalization Plan will be reduced and offset by the corresponding
supplemental defined benefit plan amount payable under the frozen Benefit Equalization Plan.
The supplemental employee stock ownership plan benefit under the 2005 Benefit Equalization
Plan is denominated in shares of phantom stock equal to the difference between the number of shares
of Oritani-Federal common stock that would have been allocated to the participant under the
employee stock ownership plan, but for the limitations imposed by the Internal Revenue Code, and
the actual number of shares of Oritani-Federal common stock allocated to the participant under the
Oritani Bank employee stock ownership plan for the relevant plan year, plus earnings on the phantom
shares deemed allocated to the participants supplemental employee stock ownership plan account,
based on the fair market value of Oritani-Federal stock on such date. Upon termination of service
due to any reason other than death, the supplemental employee stock ownership plan benefit will be
payable either in a lump sum or in up to five annual installments, as elected by the participant
pursuant to his initial deferral election. Upon termination of service due to death, the
supplemental employee stock ownership plan benefit under the 2005 Benefit Equalization Plan will be
payable to the participants beneficiary either in a lump sum or in annual installments, pursuant
to the participants initial deferral election.
In the event of a change in control of Oritani Bank or Oritani-Federal, the participants
supplemental 401(k) plan benefit, supplemental employee stock ownership plan benefit, and
supplemental defined benefit plan will be paid to the participants in a lump sum at the time of the
change in control, unless a participant has selected an alternative form of distribution upon a
change in control. Such an election, if made, was required to be made by a participant not later
than December 31, 2008, or with respect to new plan participants within thirty days after the
participant first becomes eligible to participate in the 2005 Benefit Equalization Plan.
Executive Supplemental Retirement Income Agreement. Oritani Bank entered into an Executive
Supplemental Retirement Income Agreement (the Agreement) for Kevin J. Lynch (the Executive)
effective as of January 1, 2005. The Agreement was amended and restated during 2008 for the final
Department of Treasury regulations issued under Code Section 409A. The Agreement provides for the
payment of a supplemental retirement income benefit equal to 70% of the Executives highest average
annual base salary and bonus (over a 36-consecutive month period within the last 120 consecutive
months of employment), reduced by the sum of the Executives annuitized value of the benefits
payable from Oritani Banks Defined Benefit Pension Plan, the annuitized value of the benefits
payable under the defined benefit portion of Oritani Banks frozen Benefit Equalization Plan and
2005 Benefit Equalization Plan and the annuitized value of one-half of the Executives Social
Security benefits attributable to Social Security taxes paid by Oritani Bank on behalf of the
Executive, reduced by the Social Security offset under the Oritani Banks Defined Benefit Pension
Plan. In the event the Executive dies prior to termination of employment or after termination of
employment but prior to the payment of any portion of the supplemental retirement income benefit,
the Executives beneficiary will be entitled to a survivors benefit, payable in 240 monthly
installments, and equal to the greater of the annual amount of $327,446 reduced by the annuitized
value of the benefit payable under the Benefit Equalization Plan, or the supplemental retirement
income benefit determined as if the Executive retired on the day before his death and commenced
receiving benefits at such time. In the event the Executive dies while receiving benefits under
the Agreement, the unpaid balance of benefits will be paid to the Executives beneficiary for the
remainder of the 240 installments. Upon the Executives retirement, the Executive will be entitled
to a supplemental retirement income benefit payable in monthly installments over the longer of 240
months or the Executives lifetime. In the event the Executive is a specified employee, payments
will commence the first day of the 7th month following the Executives retirement, but
only to the extent necessary to comply with Code Section 409A. Upon attainment of age 60, the
Executive may elect to retire and receive an early retirement benefit equal to the supplemental
retirement income benefit reduced by 5%
140
per year for each year prior to the Executives 65th birthday, payable monthly for
the longer of 240 months or the Executives lifetime. In the event the Executive becomes disabled,
he will be entitled to a supplemental disability benefit equal to the supplemental retirement
income benefit calculated as if the Executive retired on the date of his termination of employment
due to disability, reduced by 5% per year for each year that such disability occurs prior to the
Executives 65th birthday. In the event of the Executives termination of employment
within 3 years following a change in control, other than due to termination for cause, the
Executive will be entitled to a full supplemental retirement income benefit calculated as if the
Executive had retired following his normal retirement date. Payments to the Executive in the event
of a change in control generally will be made in 240 monthly installments. During 2008 the
Agreement was amended to permit the Executive to elect a lump sum distribution on a change in
control, provided that such election was made prior to December 31, 2008. Oritani Bank may
establish a rabbi trust to fund its obligations under the Agreement.
Senior Officers and Directors Post-Retirement Medical Coverage. Directors who qualify for
benefits under the Directors Retirement Plan, and senior officers designated by the Board of
Directors who have attained age 52 and have at least five years of service, are eligible to
participate in the senior officers and directors post-retirement medical coverage program. If a
participant dies after becoming eligible for coverage but prior to retirement, the individual will
be deemed to have retired on the day before the individual died. Coverage will begin at the time
of retirement and continue at the same level as before retirement. Retirees who are eligible for
Medicare benefits will have benefits under the program coordinated with Medicare benefits. The
spouse of a senior officer or director covered under the program will be entitled to medical
coverage for life. Oritani Banks contribution to the program will be limited to two times the
medical insurance premium at the time of the individuals retirement. During fiscal 2009, eight
current employees were eligible for participation in the Senior Officers and Directors
Post-Retirement Medical Coverage, and the total cost to Oritani Bank during fiscal 2009 was
$247,000.
Group Life Insurance Retirement Plan. In conjunction with its investment in Bank Owned Life
Insurance, Oritani Bank implemented this plan which provides selected employees and directors with
post-retirement life insurance. Coverage under this plan is only applicable to selected employees
and directors who retire from Oritani Bank under this plan (or if their termination is due to
disability or change in control). The coverage provided under this plan is equal to: two times
annual base salary for vice presidents and above; one time annual base salary for assistant vice
presidents and below; and $50,000 for directors. This coverage was obtained in conjunction with
Oritani-Federals purchase of Bank Owned Life Insurance. Oritani-Federal incurs no additional cost
to provide the coverage, however, there is an expense accrual associated with the benefit. This
accrual totaled $99,000 during fiscal 2009.
401(k) Plan. Oritani Bank participates in the Pentegra Defined Contribution Plan for
Financial Institutions, a multiple-employer 401(k) plan, for the benefit of its employees.
Employees who have completed 1,000 hours of service during a 12-consecutive-month period are
eligible to participate in the plan. Participants may contribute up to 50% of their plan salary to
the plan. Oritani Bank will provide matching contributions at the rate of 50% of the participants
contributions, up to 6% of each participants monthly plan salary. Employee and employer
contributions are 100% vested at all times. In general, under federal tax law limits, the annual
contributions made to the plan may not exceed the lesser of 100% of the participants total
compensation or $49,000 for calendar 2009. For this purpose, contributions include employer
contributions, participant 401(k) contributions and participant after-tax contributions.
Participants who have attained age 50 before the end of a calendar year will be eligible to make
catch-up contributions in accordance with Section 414(v) of the Internal Revenue Code. The maximum
catch-up contribution level for 2009 is $5,500. This amount is periodically adjusted for inflation.
Contributions are invested at the participants direction in one or more of the investment funds
provided under the plan. A loan program is available to plan participants. In general,
participants may make only one withdrawal from their accounts per calendar year while they are
employed, subject to certain limitations; upon
141
termination of employment, they may make withdrawals from their accounts at any time.
Participants who become disabled may withdraw from their vested account balance as if they had
terminated employment. In the event of a participants death, the participants beneficiary will
be entitled to the value of the participants account. In connection with the minority stock
offering, Oritani Bank withdrew from the Pentegra plan and established an individually designed
401(k) plan with terms substantially similar to the Pentegra plan. In addition, an employer stock
fund will be created within the 401(k) plan in order to permit participants in the 401(k) plan to
purchase shares of employer stock for their accounts.
Defined Benefit Plan. Oritani Bank participates in the Financial Institutions Retirement
Fund, a multiple-employer defined benefit plan, for the benefit of its employees. Employees of
Oritani Bank who are age 21 or older and who have completed 12 months of employment are eligible to
participate in the plan. Participants become vested in their retirement benefit upon completion of
5 years of employment, provided that participants who have reached age 65 automatically become 100%
vested, regardless of the number of completed years of employment. Payments of benefits under the
plan are made in the form of a life annuity with 120 payments guaranteed unless one of the optional
forms of distribution has been selected. Upon termination of employment at or after age 65, a
participant will be entitled to an annual normal retirement benefit equal to 1.25% multiplied by
the number of years of benefit service, multiplied by the participants average annual salary, up
to the covered compensation limits, for the 5 highest paid consecutive years of benefit service.
In addition, the participant will be entitled to an annual retirement benefit equal to 1.75%
multiplied by the number of years of benefit service, multiplied by the participants average
annual salary in excess of the covered compensation limits, for the 5 highest paid consecutive
years. The covered compensation limit is the average of the maximum wage subject to FICA taxes
(i.e., the social security wage base) for the 35-year period preceding social security retirement
age. In the event a participant has more than 35 years of service, the benefit attributable to
benefit service completed in excess of 35 years will be calculated by using a 1.75% accrual rate
for the portion of a participants high-5 year average salary below the covered compensation limit.
Participants who terminate employment prior to age 65 will be entitled to a reduced retirement
benefit calculated by applying an early retirement factor based on the participants age when
payments begin. The earliest age at which a participant may receive retirement benefits is age 55.
Normal and early retirement benefits are payable over the longer of the lifetime of the retiree or
120 monthly installments. In the event a retiree dies before 120 monthly installments have been
paid, the retirees beneficiary will be entitled to the value of such unpaid installments paid in a
lump sum. The participant or beneficiary may elect to have benefits paid in the form of
installments. In the event a participant dies while in active service, his beneficiary will be
entitled to a lump sum death benefit equal to 100% of the participants last 12 months salary,
plus an additional 10.0% of such salary for each year of benefit service until a maximum of 300% of
such salary is reached for 20 or more years, plus refund of the participants contributions, if
any, with interest.
This plan was frozen as of January 1, 2009. Existing participants remain eligible to receive
their accrued benefit as of that date, however, no new benefits will accrue under the plan.
Stock Benefit Plans
Employee Stock Ownership Plan and Trust. The employee stock ownership plan was adopted in
connection with our initial stock offering. Employees who are at least 21 years old with at least
one year of employment with Oritani Bank are eligible to participate. The employee stock ownership
plan trust borrowed funds from Oritani-Federal and used those funds to purchase a shares of our
common stock equal to 3.92% of the outstanding shares of common stock, including shares of common
stock issued to Oritani Financial Corp., MHC and to the OritaniBank Charitable Foundation.
Collateral for the loan is the common stock purchased by the employee stock ownership plan. The
loan will be repaid principally from Oritani Bank discretionary contributions to the employee stock
ownership plan over a period of not more than 20 years. The loan documents provide that the loan
may be repaid over a shorter period,
142
without penalty for prepayments. The interest rate for the loan is a floating rate equal to the
prime rate. Shares purchased by the employee stock ownership plan are held in a suspense account
for allocation among participants as the loan is repaid.
Contributions to the employee stock ownership plan and shares released from the suspense
account in an amount proportional to the repayment of the employee stock ownership plan loan are
allocated among employee stock ownership plan participants on the basis of compensation in the year
of allocation. Benefits under the plan become vested at the rate of 20% per year, starting upon
completion of two years of credited service, and are fully vested upon completion of six years of
credited service, with credit given to participants for up to three years of credited service with
Oritani Bank mutual predecessor prior to the adoption of the plan. A participants interest in his
account under the plan will also fully vest in the event of termination of service due to a
participants early or normal retirement, death, disability, or upon a change in control (as
defined in the plan). Vested benefits will be payable generally in the form of common stock, or to
the extent participants accounts contain cash, benefits will be paid in cash. Oritani Banks
contributions to the employee stock ownership plan are discretionary, subject to the loan terms and
tax law limits. Therefore, benefits payable under the employee stock ownership plan cannot be
estimated. Pursuant to SOP 93-6, we are required to record compensation expense each year in an
amount equal to the fair market value of the shares released from the suspense account. In the
event of a change in control, the employee stock ownership plan will terminate.
Stock-Based Incentive Plan. We adopted the 2007 Equity Incentive Plan to provide our
officers, employees and directors with additional incentives to promote our growth and performance.
Stockholders approved the Equity Plan on April 22, 2008. Subject to permitted adjustments for
certain corporate transactions, the Equity Plan authorizes the issuance of up to 2,781,878 shares
of our common stock pursuant to grants of incentive and non-statutory stock options, stock
appreciation rights, and restricted stock awards. No more than 794,823 shares may be issued as
restricted stock awards.
Employees and outside directors of Oritani-Federal or its subsidiaries are eligible to receive
awards under the Equity Plan, except that non-employees may not be granted incentive stock options.
Awards may be granted in a combination of incentive and non-statutory stock options, stock
appreciation rights or restricted stock awards.
143
Potential Payments Under Termination or Change in Control Agreements.
The tables below reflect the amount of compensation to each of the named executive officers
pursuant to such individuals employment agreement in the event of termination of such executives
employment. No payments are required due to a voluntary termination under the employment
agreements (prior to a change in control). The amount of compensation payable to each Named
Executive Officer upon involuntary not-for-cause termination, termination following a change of
control and in the event of disability or death is shown below. The amounts shown assume that such
termination was effective as of June 30, 2009, and thus include amounts earned through such time
and are estimates of the amounts which would be paid out to the executives upon their termination.
The actual amounts to be paid out can only be determined at the time of such executives separation
from Oritani-Federal.
Termination Payments
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
Termination after |
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
Change in Control |
|
|
Retirement |
|
|
Disability |
|
|
Death |
|
Kevin J. Lynch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement |
|
$ |
2,435,537 |
(1) |
|
$ |
1,037,789 |
(2) |
|
$ |
|
(3) |
|
$ |
1,314,719 |
(4) |
|
$ |
1,303,546 |
(5) |
Executive Supplemental
Retirement Income Agreement |
|
$ |
1,966,900 |
(6) |
|
$ |
2,314,000 |
(6) |
|
$ |
2,314,000 |
(6) |
|
$ |
1,966,900 |
(6) |
|
$ |
1,966,900 |
(6) |
Benefit Equalization Plan |
|
$ |
1,473,000 |
(7) |
|
$ |
1,473,000 |
(7) |
|
$ |
1,473,000 |
(7) |
|
$ |
1,473,000 |
(7) |
|
$ |
1,473,000 |
(7) |
2005 Directors Retirement Plan |
|
$ |
407,000 |
(8) |
|
$ |
407,000 |
(8) |
|
$ |
407,000 |
(8) |
|
$ |
407,000 |
(8) |
|
$ |
407,000 |
(8) |
2007 Equity Incentive Plan |
|
$ |
|
(9) |
|
$ |
2,179,410 |
(9) |
|
$ |
|
(9) |
|
$ |
2,179,410 |
(9) |
|
$ |
2,179,410 |
(9) |
Michael A. DeBernardi |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement |
|
$ |
705,857 |
(10) |
|
$ |
|
(11) |
|
$ |
|
(12) |
|
$ |
384,986 |
(13) |
|
$ |
382,801 |
(14) |
Benefit Equalization Plan |
|
$ |
|
(15) |
|
$ |
|
(15) |
|
$ |
|
(15) |
|
$ |
|
(15) |
|
$ |
|
(15) |
2005 Directors Retirement Plan |
|
$ |
|
(16) |
|
$ |
170,000 |
(16) |
|
$ |
|
(16) |
|
$ |
|
(16) |
|
$ |
|
(16) |
2007 Equity Incentive Plan |
|
$ |
|
(17) |
|
$ |
1,046,114 |
(17) |
|
$ |
|
(17) |
|
$ |
1,046,114 |
(17) |
|
$ |
1,046,114 |
(17) |
John M. Fields, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement |
|
$ |
602,455 |
(18) |
|
$ |
306,669 |
(19) |
|
$ |
|
(20) |
|
$ |
309,845 |
(21) |
|
$ |
308,295 |
(22) |
Benefit Equalization Plan |
|
$ |
27,000 |
(23) |
|
$ |
27,000 |
(23) |
|
$ |
27,000 |
(23) |
|
$ |
27,000 |
(23) |
|
$ |
27,000 |
(23) |
2007 Equity Incentive Plan |
|
$ |
|
(24) |
|
$ |
1,046,114 |
(24) |
|
$ |
|
(24) |
|
$ |
1,046,114 |
(24) |
|
$ |
1,046,114 |
(24) |
Thomas G. Guinan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement |
|
$ |
620,336 |
(25) |
|
$ |
272,881 |
(26) |
|
$ |
|
(27) |
|
$ |
308,425 |
(28) |
|
$ |
306,875 |
(29) |
Benefit Equalization Plan |
|
$ |
8,000 |
(30) |
|
$ |
8,000 |
(30) |
|
$ |
8,000 |
(30) |
|
$ |
8,000 |
(30) |
|
$ |
8,000 |
(30) |
2007 Equity Incentive Plan |
|
$ |
|
(31) |
|
$ |
1,046,114 |
(31) |
|
$ |
|
(31) |
|
$ |
1,046,114 |
(31) |
|
$ |
1,046,114 |
(31) |
Philip M. Wyks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement |
|
$ |
487,358 |
(32) |
|
$ |
487,358 |
(33) |
|
$ |
|
(34) |
|
$ |
275,878 |
(35) |
|
$ |
274,427 |
(36) |
Benefit Equalization Plan |
|
$ |
83,000 |
(37) |
|
$ |
83,000 |
(37) |
|
$ |
83,000 |
(37) |
|
$ |
83,000 |
(37) |
|
$ |
83,000 |
(37) |
2007 Equity Incentive Plan |
|
$ |
|
(38) |
|
$ |
164,520 |
(38) |
|
$ |
|
(38) |
|
$ |
164,520 |
(38) |
|
$ |
164,520 |
(38) |
|
|
|
(1) |
|
This amount represents 3 times the sum of (i) Mr. Lynchs highest base salary plus, (ii)
highest bonus, and (iii) Oritani Bank contributions to continued life, medical, dental and
disability insurance for 36 months following termination of employment. |
|
(2) |
|
This amount represents the maximum severance payments and other benefits to Mr. Lynch under
his employment agreement without incurring an excess parachute payment under Code Section
280G. Severance payments and other benefits provided to Mr. Lynch as a result of the change
in control are reduced by $1,397,749 in order to avoid an excess parachute payment. |
|
(3) |
|
Mr. Lynch is entitled to no payments or benefits under his employment agreement as a result
of his retirement. |
|
(4) |
|
In the event of his disability, Mr. Lynch would receive his base salary and continued health
care coverage for the longer of the remaining term of his employment agreement, or one year,
less amounts payable under any disability programs. This amount represents Mr. Lynchs base
salary and continued life, medical, dental and disability insurance for the remaining term of
the agreement, without any reduction for payments under bank sponsored disability programs. |
|
(5) |
|
In the event of his death, Mr. Lynchs beneficiary would be entitled to receive Mr. Lynchs
base salary and medical, dental, family and other benefits for the remaining term of the
employment agreement. |
|
(6) |
|
This amount represents the present value of Mr. Lynchs accumulated benefit under his
Executive Supplemental Retirement Income Agreement. Under his Executive Supplemental
Retirement Income Agreement, Mr. Lynch is entitled to receive an annual supplemental
retirement benefit commencing at age 65 equal to 70% of his highest annual base salary and
bonus over the consecutive 36 month period within the last 120 consecutive calendar months of
employment, reduced by the sum of (i) the annuitized value of his benefits under the banks
pension plan, (ii) the annuitized value of his benefits under the defined benefit portion of
the Banks Benefit Equalization Plan, and (iii) the annuitized value of one-half of his Social
Security benefits attributable to taxes paid by the bank on his behalf. Upon a change in
control, Mr. Lynch is entitled to the full supplemental retirement income benefit as if he
worked through age 65. In the event of Mr. Lynchs death, disability, or termination prior to
reaching age 65, Mr. Lynch is entitled to his early retirement benefit equal to 85% of his
supplemental retirement benefit. Mr. Lynch is fully vested in his early retirement benefit. |
(footnotes continued on next page)
144
|
|
|
(7) |
|
Following Mr. Lynchs separation from service for any reason, he will be entitled to receive
his accrued benefit under the Benefit Equalization Plan as of his date of termination. |
|
(8) |
|
This amount represents the present value of Mr. Lynchs accumulated benefit under the 2005
Directors Retirement Plan. Under the 2005 Director s Retirement Plan, Mr. Lynch is entitled
to receive an annual retirement benefit equal to 50% of the aggregate compensation paid to him
during the year of his retirement. Mr. Lynch is currently 100% vested in his annual
retirement benefit under the plan, and his benefits under the plan will commence following his
date of termination. |
|
(9) |
|
This amount represents the fair market value of the outstanding equity awards that become
exercisable as a result of Mr. Lynchs involuntary termination after a change in control,
disability, or death. In the event of Mr. Lynchs involuntary termination or retirement, his
unvested outstanding equity awards would be forfeited. |
|
(10) |
|
This amount represents 2 times the sum of (i) Mr. DeBernardis highest base salary plus, (ii)
highest bonus, and (iii) Bank contributions to continued life, medical, dental and disability
insurance for 24 months following termination of employment. |
|
(11) |
|
This amount represents the maximum severance payments and other benefits to Mr. DeBernardi
under his employment agreement without incurring an excess parachute payment under Code
Section 280G. Severance payments and other benefits provided to Mr. DeBernardi as a result of
the change in control are reduced by $705,857 in order to avoid an excess parachute payment. |
|
(12) |
|
Mr. DeBernardi is entitled to no payments or benefits under his employment agreement as a
result of his retirement. |
|
(13) |
|
In the event of his disability, Mr. DeBernardi would receive his base salary and continued
health care coverage for the longer of the remaining term of his employment agreement, or one
year, less amounts payable under any disability programs. This amount represents Mr.
DeBernardis base salary and continued life, medical, dental and disability insurance for the
remaining term of the agreement, without any reduction for payments under Bank sponsored
disability programs. |
|
(14) |
|
In the event of his death, Mr. DeBernardis beneficiary would be entitled to receive Mr.
DeBernardis base salary and medical, dental, family and other benefits for the remaining term
of the employment agreement. |
|
(15) |
|
Mr. DeBernardi has not accumulated any benefits under the Benefit Equalization Plan. |
|
(16) |
|
Under the 2005 Director s Retirement Plan, Mr. DeBernardi is entitled to receive an annual
retirement benefit equal to 50% of the aggregate compensation paid to Mr. DeBernardi during
the year of his retirement. Mr. DeBernardi is not currently vested in his annual retirement
benefit under the plan, which will occur when Mr. DeBernardi attains age 65. Upon a change in
control, Mr. DeBernardi will be entitled to receive his annual retirement benefit regardless
of his actual age. |
|
(17) |
|
This amount represents the fair market value of the outstanding equity awards that become
exercisable as a result of Mr. DeBernardis involuntary termination after a change in control,
disability, or death. In the event of Mr. DeBernardis involuntary termination or retirement,
his unvested outstanding equity awards would be forfeited. |
|
(18) |
|
This amount represents 2 times the sum of (i) Mr. Fields highest base salary plus, (ii)
highest bonus, and (iii) Bank contributions to continued life, medical, dental and disability
insurance for 24 months following termination of employment. |
|
(19) |
|
This amount represents the maximum severance payments and other benefits to Mr. Fields under
his employment agreement without incurring an excess parachute payment under Code Section
280G. Severance payments and other benefits to Mr. Fields as a result of the change in
control are reduced by $295,786 in order to avoid an excess parachute payment. |
|
(20) |
|
Mr. Fields is entitled to no payments or benefits under his employment agreement as a result
of his retirement. |
|
(21) |
|
In the event of his disability, Mr. Fields would receive his base salary and continued health
care coverage for the longer of the remaining term of his employment agreement, or one year,
less amounts payable under any disability programs. This amount represents Mr. Fields base
salary and continued life, medical, dental and disability insurance for the remaining term of
the agreement, without any reduction for payments under Bank sponsored disability programs. |
|
(22) |
|
In the event of his death, Mr. Fields beneficiary would be entitled to receive Mr. Fields
base salary and medical, dental, family and other benefits for the remaining term of the
employment agreement. |
|
(23) |
|
Following Mr. Fields separation from service for any reason, he will be entitled to receive
his accrued benefit under the Benefit Equalization Plan as of his date of termination. |
|
(24) |
|
This amount represents the fair market value of the outstanding equity awards that become
exercisable as a result of Mr. Fields involuntary termination after a change in control,
disability, or death. In the event of Mr. Fields involuntary termination or retirement, his
unvested outstanding equity awards would be forfeited. |
|
(25) |
|
This amount represents 2 times the sum of (i) Mr. Guinans highest base salary plus, (ii)
highest bonus, and (iii) Bank contributions to continued life, medical, dental and disability
insurance for 24 months following termination of employment. |
|
(26) |
|
This amount represents the maximum severance payments and other benefits to Mr. Guinan under
his employment agreement without incurring an excess parachute payment under Code Section
280G. Severance payments and other benefits to Mr. Guinan as a result of the change in
control are reduced by $347,455 in order to avoid an excess parachute payment. |
|
(27) |
|
Mr. Guinan is entitled to no payments or benefits under his employment agreement as a result
of his retirement. |
|
(28) |
|
In the event of his disability, Mr. Guinan would receive his base salary and continued health
care coverage for the longer of the remaining term of his employment agreement, or one year,
less amounts payable under any disability programs. This amount represents Mr. Guinans base
salary and continued life, medical, dental and disability insurance for the remaining term of
the agreement, without any reduction for payments under Bank sponsored disability programs. |
|
(29) |
|
In the event of his death, Mr. Guinan beneficiary would be entitled to receive Mr. Guinans
base salary and medical, dental, family and other benefits for the remaining term of the
employment agreement. |
|
(30) |
|
Following Mr. Guinans separation from service for any reason, he will be entitled to receive
his accrued benefit under the Benefit Equalization Plan as of his date of termination. |
|
(31) |
|
This amount represents the fair market value of the outstanding equity awards that become
exercisable as a result of Mr. Guinans involuntary termination after a change in control,
disability, or death. In the event of Mr. Guinans involuntary termination or retirement, his
unvested outstanding equity awards would be forfeited. |
|
(32) |
|
This amount represents 2 times the sum of (i) Mr. Wyks highest base salary plus, (ii)
highest bonus, and (iii) Bank contributions to continued life, medical, dental and disability
insurance for 24 months following termination of employment. |
|
(33) |
|
This amount represents 2 times the sum of (i) Mr. Wyks highest base salary plus (ii) highest
bonus, and (iii) Bank contributions to continued life, medical, dental and disability
insurance for 24 months following his termination of employment in connection with a change in
control. |
|
(34) |
|
Mr. Wyks is entitled to no payments or benefits under his employment agreement as a result of
his retirement. |
145
|
|
|
(35) |
|
In the event of his disability, Mr. Wyks would receive his base salary and continued health
care coverage for the longer of the remaining term of his employment agreement, or one year,
less amounts payable under any disability programs. This amount represents Mr. Wykss base
salary and continued life, medical, dental and disability insurance for the remaining term of
the agreement, without any reduction for payments under Bank sponsored disability programs. |
|
(36) |
|
In the event of his death, Mr. Wyks beneficiary would be entitled to receive Mr. Wykss base
salary and medical, dental, family and other benefits for the remaining term of the employment
agreement. |
|
(37) |
|
Following Mr. Wykss separation from service for any reason, he will be entitled to receive
his accrued benefit under the Benefit Equalization Plan as of his date of termination. |
|
(38) |
|
This amount represents the fair market value of the outstanding equity awards that become
exercisable as a result of Mr. Wykss involuntary termination after a change in control,
disability, or death. In the event of Mr. Wykss involuntary termination or retirement, his
unvested outstanding equity awards would be forfeited. |
Director Compensation
Each of the individuals who serves as a director of Oritani-Federal also serves as a director
of Oritani Bank and earns director fees in each capacity. Each non-employee director is currently
paid a fee of $1,750 for each Oritani-Federal meeting attended and a fee of $1,750 for each Oritani
Bank meeting attended. There are no separate fees paid for committee meetings attended.
Additionally, each director receives a monthly retainer of $1,750 from each of Oritani-Federal and
Oritani Bank. Additional annual retainers are paid to the Lead Director/Chairman of the Audit
Committee ($21,000) and the Chairmen of the other Board of Director committees ($11,000). The Lead
Director/Chairman of the Audit Committee is Director Antonaccio.
The following table sets forth the total fees received by the non-management directors during
fiscal year 2009. The amounts reported under the Stock Awards and Option Awards columns were
granted on May 5, 2008 pursuant to the 2007 Equity Incentive Plan approved by stockholders on April
22, 2008.
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|
Change in Pension |
|
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Value and |
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Nonqualified |
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Fees Earned |
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|
|
|
|
|
|
|
|
Deferred |
|
|
|
|
or Paid in |
|
|
|
|
|
Option |
|
Compensation |
|
|
Name |
|
Cash ($) |
|
Stock Awards ($) (1) |
|
Awards ($) (2) |
|
Earnings ($) (3) |
|
Total ($) |
Nicholas Antonaccio |
|
|
98,750 |
|
|
|
161,707 |
|
|
|
82,026 |
|
|
|
170,775 |
|
|
|
513,257 |
|
James J. Doyle |
|
|
88,750 |
|
|
|
161,707 |
|
|
|
82,026 |
|
|
|
132,554 |
|
|
|
465,036 |
|
Robert S. Hekemian |
|
|
88,750 |
|
|
|
161,707 |
|
|
|
82,026 |
|
|
|
55,885 |
|
|
|
388,377 |
|
John J. Skelly, Jr. |
|
|
88,750 |
|
|
|
161,707 |
|
|
|
82,026 |
|
|
|
134,522 |
|
|
|
467,005 |
|
|
|
|
(1) |
|
The amounts in this column reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended June 30, 2009, in accordance with FAS 123(R) and
its successor, FASB ASC Topic 718, of restricted stock awards pursuant to the Equity Plan that
were made in 2008, which vest over five years. Assumptions used in the calculation of these
amounts are included in footnote 14 to Oritani-Federals audited financial statements for the
fiscal year ended June 30, 2009 included in Oritani-Federals Annual Report on Form 10-K. |
|
(2) |
|
The amounts in this column reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended June 30, 2009, in accordance with FAS 123(R) and
its successor, FASB ASC Topic 718, of stock option awards pursuant to the Equity Plan that
were made in 2008. Stock options vest over five years. Assumptions used in the calculation
of these amounts are included in footnote 14 to Oritani-Federals audited financial statements
for the fiscal year ended June 30, 2009 included in Oritani-Federals Annual Report on Form
10-K. |
|
(3) |
|
The amounts in this column reflect the actuarial increase in the present value at June 30,
2009 compared to June 30, 2008, of the directors benefits under the Directors Retirement
Plan maintained by Oritani Bank, determined using interest rate and mortality rate assumptions
consistent with those used in Oritani-Federals financial statements and include amounts for
which the director may not currently be entitled to receive because such amounts are not
vested. Also includes $32,775, $31,554, $22,895 and $22,522 of preferential or above-market
earnings on non tax-qualified deferred compensation for Directors Antonaccio, Doyle, Hekemian
and Skelly, respectively, under the Directors Deferred Fee Plan. |
There were no grants of restricted stock or of stock options to non-executive directors
during fiscal 2009.
Directors Deferred Fee Plans. Oritani Bank adopted the 2005 Directors Deferred Fee Plan,
effective as of January 1, 2005, in order to include the provisions required by Section 409A of the
Internal
146
Revenue Code. Contributions to Oritani Banks prior Directors Deferred Fee Plan were frozen,
effective as of December 31, 2004. Each month, Oritani Bank credits a directors account under the
2005 Directors Deferred Fee Plan with the amount such director elects to defer. The directors
deferral election must generally be submitted to Oritani Bank prior to January 1 of the plan year
in which the fees to be deferred are otherwise payable to the director and is irrevocable with
respect to the fees covered by such election. Each directors account under the plans is credited
every month with interest at a rate equal to the greater of the Citibank Prime Rate or a 9%
annualized rate. A committee appointed by the Oritani Bank Board of Directors administers the
plan. The committee may in its discretion permit a director to request that his deferred fee
account(s) be invested in an alternative investment such as equity securities, fixed income
securities, money market accounts and cash. The account of a director who has selected an
alternative investment is credited with earnings or losses based on the investment selected. A
director is 100% vested at all times in his deferred fee account(s). Upon retirement, the director
will receive the value of his benefit in a lump sum or in up to 10 annual installments, as elected
by the director in his deferral election form. In the event the director becomes a specified
employee, payments under the plan will commence no earlier than the first day of the 7th month
following the directors separation from service. Following a directors cessation of service
prior to retirement or death, Oritani Bank will pay the directors benefit in a lump sum or in up
to 10 annual installments, as elected by the director in his deferral election form. A director
may elect to receive an in-service distribution, provided that such distribution will be no earlier
than the January 1st of the calendar year that is at least two years following the year
for which the deferral election is made. Payment will be made in a lump sum or in up to 10 annual
installments, as elected by the director at the time the election to defer was made. A director
may elect to receive amounts in his deferred account(s) upon his disability or upon a change in
control of Oritani Bank either in the form of a lump sum or in annual installments over a period of
up to 10 years. A director may elect to delay payment of his benefits or to change the form of
payment from a lump sum to installments within the limits of Code Section 409A requirements and
Treasury Regulations issued thereunder. In the event of a directors death prior to commencement
of benefit payments, payments will be made to the directors beneficiary, as elected by the
director in his deferral election form. In the event of a directors death after commencement of
benefit payments, the remaining balance of benefit payments will be paid to the directors
beneficiary in the manner and at the time elected by the director in his deferral election form.
In the event a director incurs a financial hardship, the director may request a financial hardship
benefit. If approved, the financial hardship payment will be made in a lump sum. During fiscal
year 2009, Oritani Bank credited $220,000 in interest to directors accounts under the Directors
Deferred Fee Plans.
Directors Retirement Plan. Oritani Bank maintains the 2005 Directors Retirement Plan that
was adopted as a restatement of the Directors Retirement Plan and is intended to comply with
section 409A of the Internal Revenue Code. Oritani Banks prior Directors Retirement Plan was
frozen, effective as of December 31, 2004. Benefits payable under the 2005 Directors Retirement
Plan are reduced by the amount of the retirement benefits payable to the director under the frozen
director retirement plan. The 2005 Directors Retirement Plan provides retirement, medical and
death benefits to directors, including directors who are also employees, who have at least five
years of service and retire after attaining age 65, or who, after attaining age 60 retire, die or
become disabled. Upon retirement on or after attaining age 65 with at least ten years of
cumulative service, an eligible directors annual retirement benefit is equal to 50% of the
directors aggregate annual compensation with respect to his final year of service, including fees
paid to the director for attendance at regular monthly meetings and annual meetings of Oritani Bank
and Oritani-Federal, monthly retainers, and any additional annual retainers paid to the director
for service as a committee chair, lead director or otherwise. If, after attaining age 60, a
director retires, dies or becomes disabled, and such director has more than five years of service
the director or his beneficiary will be entitled to the following percentage of benefit: 50% if the
director has 5 to 6 years of service, 60% if the director has 6 to 7 years of service, 70% if the
director has 7 to 8 years of service, 80% if the director has 8 to 9 years of service, 90% if the
director has 9 to 10 years of service and
147
100% if the director has more than 10 years of service. In the event of a change in control,
each director will be deemed to have 10 years of service and attained age 65 for the purpose of
calculating his benefit under the plan. A director who retires prior to age 60 for any reason
shall receive no benefit under the plan. Each director was entitled to elect prior to December 31,
2006 to receive a lump sum payment upon a change in control in an amount equal to the present value
of his plan benefits. Benefits under the plan are generally payable in monthly installments for
the directors lifetime or as a joint and survivor form of benefit depending on the directors
marital status at the time of the payment triggering event. Notwithstanding the foregoing, a
director was permitted to elect prior to December 31, 2008, to receive his plan benefits in the
form of a lump sum payment in the event of his disability prior to termination of service. In the
event a director who has served on the Board of Directors for at least five years dies while in
service, the directors spouse will be entitled to a benefit calculated as if the director had
continued service until age 65. The amount of the survivors benefit will be based on the number
of years the director would have served on the Board of Directors assuming the director served on
the Board of Directors until age 65. The benefit will be payable to the directors spouse for the
remainder of the spouses life, along with medical benefits. As also described under Senior
Officers and Directors Post-Retirement Medical Coverage, medical benefits provided to directors
and their spouses prior to the date of their retirement will continue to be provided to retired
directors and their spouses, as long as the director lives, or, in the event the director dies
while in office, the medical benefits will continue to be provided to the directors spouse for his
or her lifetime. In the event the cost of medical benefits provided under the plan exceeds 200% of
the cost of such benefits to Oritani Bank immediately prior to the directors retirement, the cost
in excess of 200% will be paid by the retired director or his or her spouse.
Benefits to be Considered Following Completion of the Conversion
Our current intention is to implement a new stock-based incentive plan no earlier than twelve
months after completion of the conversion. Stockholder approval of this plan will be required. If
implemented 12 months or more following completion of the conversion, the stock-based incentive
plan will reserve a number of shares equal to 4.0% of the shares of common stock sold in the
offering, or 2,063,100 shares of common stock at the maximum as adjusted of the offering range, for
awards of restricted stock to key employees and directors, at no cost to the recipients. If the
shares of restricted stock awarded under the stock-based incentive plan come from authorized but
unissued shares of common stock, stockholders would experience dilution of up to approximately
2.89% in their ownership interest in Oritani-Delaware. If implemented 12 months or more following
the completion of the conversion, the stock-based incentive plan will also reserve a number of
shares equal to 10.0% of the shares of common stock sold in the offering, or 5,157,750 shares of
common stock at the maximum as adjusted of the offering range, for issuance pursuant to grants of
stock options to key employees and directors.
We may fund our plans through open market purchases, as opposed to issuing common stock;
however, if any options previously granted under our existing stock option plans are exercised
during the first year following completion of the offering, they will be funded with newly-issued
shares as OTS regulations do not permit us to repurchase our shares during the first year following
the completion of this offering except to fund the grants of restricted stock under the stock-based
incentive plan or under extraordinary circumstances. The OTS has previously advised that the
exercise of outstanding options and cancellation of treasury shares in the conversion will not
constitute an extraordinary circumstance or a compelling business purpose for satisfying this test.
The stock-based incentive plan will not be established sooner than six months after the stock
offering and if adopted within one year after the stock offering would require the approval by
stockholders owning a majority of the outstanding shares of Oritani-Delaware common stock eligible
to be cast. If the stock-based incentive plan is established after one year after the stock
offering, it would require the approval of our stockholders by a majority of votes cast. The
following additional restrictions would apply to our stock-based incentive plan only if the plan is
adopted within one year after the stock offering:
148
|
|
|
non-employee directors in the aggregate may not receive more than 30% of
the options and restricted stock awards authorized under the plan; |
|
|
|
|
any one non-employee director may not receive more than 5% of the options
and restricted stock awards authorized under the plan; |
|
|
|
|
any officer or employee may not receive more than 25% of the options and
restricted stock awards authorized under the plan; |
|
|
|
|
any tax-qualified employee stock benefit plans and management stock award
plans, in the aggregate, may not hold more than 10.0% of the shares sold in the
offering, unless Oritani Bank has tangible capital of 10.0% or more, in which case any
tax-qualified employee stock benefit plans and management stock award plans, may be
increased to up to 12% of the shares sold in the offering; |
|
|
|
|
stock options and restricted stock awards may not vest more rapidly than
20% per year, beginning on the first anniversary of the grant; |
|
|
|
|
accelerated vesting is not permitted except for death, disability or upon
a change in control of Oritani Bank or Oritani-Delaware; and |
|
|
|
|
our executive officers or directors must exercise or forfeit their options
in the event that Oritani Bank becomes critically undercapitalized, is subject to
enforcement action or receives a capital directive. |
In the event either federal or state regulators change their regulations or policies regarding
stock-based incentive plans, including any regulations or policies restricting the size of awards
and vesting of benefits as described above, the restrictions described above may not be applicable.
149
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth, for each of Oritani-Delawares directors and executive officers
and for all of the directors and executive officers as a group, the following information:
|
(i) |
|
the number of exchange shares to be held upon consummation of the conversion,
based upon their beneficial ownership of Oritani-Federal common stock as of March 31,
2010; |
|
|
(ii) |
|
the proposed purchases of subscription shares, assuming sufficient shares of
common stock are available to satisfy their subscriptions; and |
|
|
(iii) |
|
the total amount of Oritani-Delaware common stock to be held upon consummation
of the conversion. |
In each case, it is assumed that subscription shares are sold at the midpoint of the offering
range. See The Conversion and OfferingAdditional Limitations on Common Stock Purchases.
Regulations of the OTS prohibit our directors and officers from selling the shares they purchase in
the offering for one year after the date of purchase. Subscriptions by management through our
401(k) plan will be counted as part of the maximum number of shares such individuals may subscribe
for in the stock offering.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed Purchases of Stock in the |
|
|
Total Common Stock to be Held |
|
|
|
Number of |
|
|
Offering (1) |
|
|
|
|
|
|
Percentage of |
|
|
|
Exchange Shares to |
|
|
Number of |
|
|
|
|
|
|
Number of |
|
|
Total |
|
Name of Beneficial Owner |
|
be Held (2) |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Outstanding (2) |
|
Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas Antonaccio |
|
|
169,453 |
|
|
|
10,000 |
|
|
$ |
100,000 |
|
|
|
179,453 |
|
|
|
* |
|
Michael A. DeBernardi |
|
|
274,182 |
|
|
|
20,000 |
|
|
|
200,000 |
|
|
|
294,182 |
|
|
|
* |
|
James J. Doyle, Jr. |
|
|
183,470 |
|
|
|
5,000 |
|
|
|
50,000 |
|
|
|
188,470 |
|
|
|
* |
|
Robert S. Hekemian, Jr. |
|
|
211,525 |
|
|
|
50,000 |
|
|
|
500,000 |
|
|
|
261,525 |
|
|
|
* |
|
Kevin J. Lynch |
|
|
605,259 |
|
|
|
20,000 |
|
|
|
200,000 |
|
|
|
802,259 |
|
|
|
1.3 |
|
John J. Skelly, Jr. |
|
|
236,000 |
|
|
|
100,000 |
|
|
|
1,000,000 |
|
|
|
336,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,679,887 |
|
|
|
205,000 |
|
|
$ |
2,050,000 |
|
|
|
1,884,887 |
|
|
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Fields, Jr. |
|
|
273,978 |
|
|
|
5,000 |
|
|
$ |
50,000 |
|
|
|
278,978 |
|
|
|
* |
|
Thomas G. Guinan |
|
|
253,004 |
|
|
|
5,000 |
|
|
|
50,000 |
|
|
|
258,004 |
|
|
|
* |
|
Philip M. Wyks |
|
|
52,320 |
|
|
|
1,500 |
|
|
|
15,000 |
|
|
|
53,820 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
579,303 |
|
|
|
11,500 |
|
|
$ |
115,000 |
|
|
|
590,803 |
|
|
|
* |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Directors and
Executive Officers |
|
|
2,259,190 |
|
|
|
216,500 |
|
|
$ |
2,165,000 |
|
|
|
2,475,690 |
|
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Includes proposed subscriptions, if any, through the director or officers 401(k) account and
by associates. |
|
(2) |
|
Assumes an exchange ratio of 1.414 shares for each share of Oritani-Federal and that
60,245,458 shares are outstanding after the conversion. Includes shares that may be acquired
upon the exercise of stock options. Assuming an exchange ratio of 1.2022 at the minimum of
the offering range, directors and executive officers would own 1,920,791 shares after the
conversion. |
150
THE CONVERSION AND OFFERING
The Board of Directors of Oritani-Federal and the board of trustees of Oritani Financial
Corp., MHC have approved the Plan of Conversion and Reorganization. The Plan of Conversion and
Reorganization must also be approved by the members of Oritani Financial Corp., MHC (depositors of
Oritani Bank) and the stockholders of Oritani-Federal. A special meeting of members and a special
meeting of stockholders have been called for this purpose. The OTS has conditionally approved the
Plan of Conversion and Reorganization; however, such approval does not constitute a recommendation
or endorsement of the Plan of Conversion and Reorganization by that agency.
General
Pursuant to the Plan of Conversion and Reorganization, our organization will convert from the
mutual holding company form of organization to the fully stock form. Oritani Financial Corp., MHC,
the mutual holding company parent of Oritani-Federal, will be merged into Oritani-Federal, and
Oritani Financial Corp., MHC will no longer exist. Oritani-Federal will merge into a new Delaware
corporation named Oritani Financial Corp. (a Delaware corporation). As part of the conversion, the
ownership interest of Oritani Financial Corp., MHC in Oritani-Federal will be offered for sale in
the offering by Oritani-Delaware. When the conversion is completed, all of the outstanding common
stock of Oritani Bank will be owned by Oritani-Delaware, and all of the outstanding common stock of
Oritani-Delaware will be owned by public stockholders. A diagram of our corporate structure before
and after the conversion is set forth in the Summary section of this prospectus.
Under the Plan of Conversion and Reorganization, at the completion of the conversion, each
share of Oritani-Federal common stock owned by persons other than Oritani Financial Corp., MHC will
be canceled and converted automatically into new shares of Oritani-Delaware common stock determined
pursuant to an exchange ratio. The exchange ratio will ensure that immediately after the exchange
of existing shares of Oritani-Federal for new shares, the public stockholders will own the same
percentage of shares of common stock of Oritani-Delaware that they owned in Oritani-Federal
immediately prior to the conversion, excluding any shares they purchased in the offering and cash
paid in lieu of fractional shares.
Oritani-Delaware intends to contribute between $159.2 million and $215.7 million of net
proceeds, or $248.2 million if the offering range is increased by 15%, to Oritani Bank and to
retain between $145.9 million and $197.8 million of the net proceeds, or $227.6 million if the
offering range is increased by 15% (excluding the portion of the net proceeds loaned to our
employee stock ownership plan). The conversion will be consummated only upon the issuance of at
least the minimum number of shares of our common stock offered pursuant to the Plan of Conversion
and Reorganization.
The Plan of Conversion and Reorganization provides that we will offer shares of common stock
in a subscription offering in the following descending order of priority:
|
(i) |
|
First, to depositors with accounts at Oritani Bank with aggregate balances of
at least $50.00 at the close of business on December 31, 2008. |
|
|
(ii) |
|
Second, to our tax-qualified employee benefit plans, including our employee
stock ownership plan and 401(k) plan, which will receive nontransferable subscription
rights to purchase in the aggregate up to 10.0% of the shares of common stock sold in
the offering. |
|
|
(iii) |
|
Third, to depositors with accounts at Oritani Bank with aggregate balances of
at least $50.00 at the close of business on March 31, 2010. |
151
|
(iv) |
|
Fourth, to depositors of Oritani Bank at the close of business on April 30,
2010. |
If all shares are not subscribed for in the subscription offering, we may, at our discretion,
offer shares of common stock for sale in a community offering, with a preference given in the
following order:
|
(i) |
|
natural persons (including trusts of natural persons) and then other persons
(including any corporation, partnership, association, joint-stock company, limited
liability company, trust, unincorporated organization, or government or political
subdivision of a government) residing in the New Jersey counties of Bergen, Passaic,
Sussex, Hudson, Essex, Morris, Warren, Union, Somerset, Hunterdon, Middlesex and
Mercer; |
|
|
(ii) |
|
Oritani Banks borrowers with an outstanding loan or line of credit as of
December 31, 2009 that are meeting all of the terms and conditions of their loan
agreements with Oritani Bank as of December 31, 2009 and the date of purchase of the
common stock (as determined solely in the discretion of Oritani Bank); and |
|
|
(iii) |
|
Oritani-Federals public stockholders as of May 5, 2010. |
We have the right to accept or reject, in whole or in part, any orders to purchase shares of
the common stock received in the community offering. The community offering, if any, may begin at
the same time as, during, or after the subscription offering and must be completed within 45 days
after the completion of the subscription offering unless otherwise extended by the OTS. See
Community Offering.
The shares of common stock not purchased in the subscription offering or community offering
may be offered to the general public on a best efforts basis by Stifel, Nicolaus & Company,
Incorporated, acting as sole book-running manager, and Sandler ONeill & Partners, L.P. and Sterne,
Agee & Leach, Inc., as co-managers, in a syndicated community offering through a syndicate of
selected dealers.
We have the right to accept or reject orders received in the syndicated community offering at
our sole discretion. The syndicated community offering may begin at any time following the
commencement of the subscription offering and must be completed within 45 days after the completion
of the subscription offering unless otherwise extended by us, with approval of the OTS.
Alternatively, we may sell any remaining shares in an underwritten public offering, which would be
conducted on a firm commitment basis. See Syndicated Community Offering.
We determined the number of shares of common stock to be offered in the offering based upon an
independent valuation of the estimated pro forma market value of Oritani-Delaware. All shares of
common stock to be sold in the offering will be sold at $10.00 per share. Investors will not be
charged a commission to purchase shares of common stock in the offering. The independent valuation
will be updated and the final number of the shares of common stock to be issued in the offering
will be determined at the completion of the offering. See Stock Pricing and Number of Shares to
be Issued for more information as to the determination of the estimated pro forma market value of
the common stock.
The following is a brief summary of the conversion and is qualified in its entirety by
reference to the provisions of the Plan of Conversion and Reorganization. A copy of the Plan of
Conversion and Reorganization is available for inspection at each banking office of Oritani Bank
and at the Northeast Regional and the Washington, D.C. offices of the OTS. The Plan of Conversion
and Reorganization is also filed as an exhibit to Oritani Financial Corp., MHCs application to
convert from mutual to stock form, of which this prospectus is a part, copies of which may be
obtained from the OTS. The Plan of Conversion and Reorganization is also an exhibit to
Oritani-Delawares Registration Statement on Form
152
S-1, which
is accessible on the Securities and Exchange Commission website,
www.sec.gov. See
Where You Can Find Additional Information.
Reasons for the Conversion and Offering
Our Board of Directors decided at this time to convert to a fully public stock form of
ownership and conduct the offering in order to increase our capital position. Completing the
offering is necessary for us to continue to grow and execute our business strategy.
Our primary reasons for converting and raising additional capital through the offering are:
|
|
|
to support internal growth through lending and deposit gathering in the
communities we serve; |
|
|
|
|
to enhance existing products and services, and support the development of
new products and services to support growth and enhanced customer service; |
|
|
|
|
to improve the liquidity of our shares of common stock and enhance
stockholder returns through higher earnings and more flexible capital management
strategies; |
|
|
|
|
to finance the acquisition of branches from other financial institutions
or build or lease new branch facilities primarily in, or adjacent to New Jersey,
although we do not currently have any agreements or understandings regarding any
specific acquisition transaction; |
|
|
|
|
to finance the acquisition of financial institutions or other financial
service companies primarily in, or adjacent to New Jersey, although we do not currently
have any understandings or agreements regarding any specific acquisition transaction; |
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to maintain our capital position during a period of significant economic
uncertainty, especially for the financial services industry (although, as of December
31, 2009, Oritani Bank was considered well capitalized for regulatory purposes and is
not subject to any directive or recommendation from the FDIC or the New Jersey
Department of Banking and Insurance to raise capital); and |
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to use the additional capital for other general corporate purposes. |
As a fully converted stock holding company, we will have greater flexibility in structuring
mergers and acquisitions, including the form of consideration that we can use to pay for an
acquisition. Our current mutual holding company structure limits our ability to offer shares of
our common stock as consideration for a merger or acquisition since Oritani Financial Corp., MHC is
required to own a majority of our shares of common stock. Potential sellers often want stock for
at least part of the purchase price. Our new stock holding company structure will enable us to
offer stock or cash consideration, or a combination of stock and cash, and will therefore enhance
our ability to compete with other bidders when acquisition opportunities arise.
Approvals Required Plan of Conversion and Reorganization
The affirmative vote of a majority of the total votes eligible to be cast by the members of
Oritani Financial Corp., MHC as of April 30, 2010 is required to approve the Plan of Conversion and
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Reorganization. By their approval of the Plan of Conversion and Reorganization, the members of
Oritani Financial Corp., MHC (comprised of depositors of Oritani Bank) will also be approving the
merger of Oritani Financial Corp., MHC into Oritani-Federal. The affirmative vote of the holders
of at least two-thirds of the outstanding shares of common stock of Oritani-Federal, including
shares held by Oritani Financial Corp., MHC, and the affirmative vote of the holders of a majority
of the outstanding shares of common stock of Oritani-Federal held by the public stockholders of
Oritani-Federal as of May 5, 2010, are also required to approve the Plan of Conversion and
Reorganization. The Plan of Conversion and Reorganization also must be approved by the OTS, which
has given its conditional approval; however, such approval does not constitute a recommendation or
endorsement of the Plan of Conversion and Reorganization by such agency.
Share Exchange Ratio for Current Stockholders
OTS regulations provide that in a conversion of a mutual holding company to fully stock form,
the public stockholders will be entitled to exchange their shares for common stock of the new
holding company, provided that the mutual holding company demonstrates to the satisfaction of the
OTS that the basis for the exchange is fair and reasonable. Each publicly held share of
Oritani-Federal common stock will be automatically converted into the right to receive a number of
shares of Oritani-Delaware common stock. The number of shares of common stock will be determined
pursuant to the exchange ratio, which ensures that the public stockholders will own the same
percentage of common stock in Oritani-Delaware after the conversion as they held in Oritani-Federal
immediately prior to the conversion, exclusive of their purchase of additional shares of common
stock in the offering and their receipt of cash in lieu of fractional exchange shares. The exchange
ratio will not be dependent on the market value of our currently outstanding Oritani-Federal common
stock. The exchange ratio is based on the percentage of Oritani-Federal common stock held by the
public, the independent valuation of Oritani-Delaware prepared by RP Financial, LC. and the number
of shares of common stock issued in the offering. The exchange ratio is expected to range from
approximately 11,379,252 exchange shares at the minimum of the offering range to 17,704,777
exchange shares at the adjusted maximum of the offering range.
If you are a stockholder of Oritani-Federal, at the conclusion of the conversion, your shares
will be exchanged for shares of Oritani-Delaware. The number of shares you receive will be based
on the number of shares of common stock you own and the final exchange ratio determined as of the
conclusion of the conversion.
The following table shows how the exchange ratio will adjust, based on the number of shares of
common stock issued in the offering and the shares of common stock issued and outstanding as of
December 31, 2009. The number of shares of common stock outstanding may change between the date of
this prospectus and the closing of the offering. The table also shows how many whole shares of
Oritani-Delaware a hypothetical owner of Oritani-Federal common stock would receive in the exchange
for 100 shares of Oritani-Federal common stock owned at the consummation of the conversion,
depending on the number of shares issued in the offering.
154
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New |
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Shares |
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Total Shares |
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Equivalent |
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Would |
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of Common |
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Equivalent |
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Pro Forma |
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be |
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Stock to be |
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Per Share |
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Book Value |
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Received |
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New Shares to be |
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Outstanding |
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Based Upon |
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per |
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for 100 |
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New Shares to be Sold in |
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Exchanged for Existing |
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After the |
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Exchange |
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Offering |
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Exchanged |
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Existing |
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This Offering |
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Shares of Oritani-Federal |
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Offering |
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Ratio |
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Price (1) |
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Share (2) |
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Shares |
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Amount |
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Percent |
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Amount |
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Percent |
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Minimum |
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33,150,000 |
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74.45 |
% |
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11,379,252 |
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25.55 |
% |
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44,529,252 |
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1.2022 |
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$ |
12.02 |
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$ |
14.58 |
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120 |
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Midpoint |
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39,000,000 |
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74.45 |
% |
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13,387,355 |
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25.55 |
% |
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52,387,355 |
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1.4143 |
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$ |
14.14 |
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$ |
15.98 |
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141 |
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Maximum |
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44,850,000 |
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74.45 |
% |
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15,395,458 |
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25.55 |
% |
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60,245,458 |
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1.6264 |
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$ |
16.26 |
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17.37 |
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Adjusted Maximum |
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51,577,500 |
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74.45 |
% |
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17,704,777 |
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25.55 |
% |
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69,282,277 |
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1.8704 |
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$ |
18.70 |
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$ |
18.98 |
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187 |
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(1) |
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Represents the value of shares of Oritani-Delaware common stock received in the conversion by
a holder of one share of Oritani-Federal at the exchange ratio, assuming the offering price of
$10.00 per share. |
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(2) |
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Represents the pro forma tangible stockholders equity per share at each level of the
offering range multiplied by the respective exchange ratio. |
Options to purchase shares of Oritani-Federal common stock which are outstanding
immediately prior to the consummation of the conversion will be converted into options to purchase
shares of Oritani-Delaware common stock, with the number of shares subject to the option and the
exercise price per share to be adjusted based upon the exchange ratio so that the aggregate
exercise price and the duration of such options remain unchanged. All such options will vest upon
completion of the conversion. We anticipate the pre-tax expense of such accelerated vesting as
well as the accelerated vesting of outstanding stock awards will be approximately $11.3 million,
which represents the remaining amortization for such accelerated options and awards with such
expense to be incurred during the fiscal quarter in which the stock offering is completed.
Exchange of Existing Stockholders Stock Certificates
The conversion of existing outstanding shares of Oritani-Federal common stock into the right
to receive shares of Oritani-Delaware common stock will occur automatically on the completion date
of the conversion. As soon as practicable after such time, our exchange agent will send a
transmittal form to each public stockholder of Oritani-Federal who holds stock certificates. The
transmittal forms will contain instructions on how to exchange stock certificates of
Oritani-Federal common stock for stock certificates of Oritani-Delaware common stock. We expect
that stock certificates evidencing shares of Oritani-Delaware common stock will be distributed
within five business days after the exchange agent receives properly executed transmittal forms,
Oritani-Federal stock certificates and other required documents. You should not forward your stock
certificates until you have received transmittal forms, which will include forwarding instructions.
Shares held by public stockholders through a brokerage or other account in street name will be
exchanged automatically upon the conclusion of the conversion; no transmittal forms will be mailed
relating to these shares.
No fractional shares of Oritani-Delaware common stock will be issued to any public stockholder
of Oritani-Federal when the conversion is completed. For each fractional share that would
otherwise be issued to a stockholder who holds a stock certificate, we will pay by check an amount
equal to the product obtained by multiplying the fractional share interest to which the holder
would otherwise be entitled by the $10.00 offering purchase price per share. Payment for
fractional shares will be made as soon as practicable after the receipt by the exchange agent of a
properly executed transmittal form, stock certificates and other required documents. If your
shares of common stock are held in street name (such
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as in a brokerage account), you will automatically receive cash in lieu of fractional shares
in your account.
After the conversion, Oritani-Federal stockholders who hold stock certificates will not
receive shares of Oritani-Delaware common stock and will not be paid dividends on the shares of
Oritani-Delaware common stock until existing certificates representing shares of Oritani-Federal
common stock are surrendered for exchange in compliance with the terms of the transmittal form.
When stockholders surrender their certificates, any unpaid dividends will be paid without interest.
For all other purposes, however, each certificate that represents shares of Oritani-Federal common
stock outstanding at the effective date of the conversion will be considered to evidence ownership
of shares of Oritani-Delaware common stock into which those shares have been converted by virtue of
the conversion.
If a certificate for Oritani-Federal common stock has been lost, stolen or destroyed, our
exchange agent will issue a new stock certificate upon receipt of appropriate evidence as to the
loss, theft or destruction of the certificate, appropriate evidence as to the ownership of the
certificate by the claimant, and appropriate and customary indemnification, which is normally
effected by the purchase of a bond from a surety company at the stockholders expense.
All shares of Oritani-Delaware common stock that we issue in exchange for existing shares of
Oritani-Federal common stock will be considered to have been issued in full satisfaction of all
rights pertaining to such shares of common stock, subject, however, to our obligation to pay any
dividends or make any other distributions with a record date prior to the effective date of the
conversion that may have been declared by us on or prior to the effective date, and which remain
unpaid at the effective date.
Effects of Conversion on Depositors, Borrowers and Members
Continuity. While the conversion is being accomplished, the normal business of Oritani Bank of
accepting deposits and making loans will continue without interruption. Oritani Bank will continue
to be a state chartered savings bank and will continue to be regulated by the FDIC and the New
Jersey Department of Banking and Insurance. After the conversion, Oritani Bank will continue to
offer existing services to depositors, borrowers and other customers. The directors serving
Oritani-Federal at the time of the conversion will be the directors of Oritani-Delaware after the
conversion.
Effect on Deposit Accounts. Pursuant to the Plan of Conversion and Reorganization, each
depositor of Oritani Bank at the time of the conversion will automatically continue as a depositor
after the conversion, and the deposit balance, interest rate and other terms of such deposit
accounts will not change as a result of the conversion. Each such account will be insured by the
FDIC to the same extent as before the conversion. Depositors will continue to hold their existing
certificates, passbooks and other evidences of their accounts.
Effect on Loans. No loan outstanding from Oritani Bank will be affected by the conversion, and
the amount, interest rate, maturity and security for each loan will remain as it was contractually
fixed prior to the conversion.
Effect on Voting Rights of Members. At present, all depositors of Oritani Bank are members of,
and have voting rights in, Oritani Financial Corp., MHC as to all matters requiring membership
action. Upon completion of the conversion, depositors will cease to be members of Oritani Financial
Corp., MHC and will no longer have voting rights, unless they purchase shares of Oritani-Delawares
common stock. Upon completion of the conversion, all voting rights in Oritani Bank will be vested
in Oritani-
Delaware as the sole stockholder of Oritani Bank. The stockholders of Oritani-Delaware will
possess exclusive voting rights with respect to Oritani-Delaware common stock.
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Tax Effects. We will receive an opinion of counsel or tax advisor with regard to the federal
and state income tax consequences of the conversion to the effect that the conversion will not be a
taxable transaction for federal or state income tax purposes to Oritani Financial Corp., MHC,
Oritani-Federal, the public stockholders of Oritani-Federal (except for cash paid for fractional
shares), members of Oritani Financial Corp., MHC, eligible account holders, supplemental eligible
account holders, or Oritani Bank. See Material Income Tax Consequences.
Effect on Liquidation Rights. Each depositor in Oritani Bank has both a deposit account in
Oritani Bank and a pro rata ownership interest in the net worth of Oritani Financial Corp., MHC
based upon the deposit balance in his or her account. This ownership interest is tied to the
depositors account and has no tangible market value separate from the deposit account. This
interest may only be realized in the event of a complete liquidation of Oritani Financial Corp.,
MHC and Oritani Bank. Any depositor who opens a deposit account obtains a pro rata ownership
interest in Oritani Financial Corp., MHC without any additional payment beyond the amount of the
deposit. A depositor who reduces or closes his or her account receives a portion or all of the
balance in the deposit account but nothing for his or her ownership interest in the net worth of
Oritani Financial Corp., MHC, which is lost to the extent that the balance in the account is
reduced or closed.
Consequently, depositors in a stock subsidiary of a mutual holding company normally have no
way of realizing the value of their ownership interest, which has realizable value only in the
unlikely event that Oritani Financial Corp., MHC and Oritani Bank are liquidated. If this occurs,
the depositors of record at that time, as owners, would share pro rata in any residual surplus and
reserves of Oritani Financial Corp., MHC after other claims, including claims of depositors to the
amounts of their deposits are paid.
Under the Plan of Conversion and Reorganization, however, depositors will receive rights in
liquidation accounts maintained by Oritani-Delaware and Oritani Bank representing the amount of (i)
Oritani Financial Corp., MHCs ownership interest in Oritani-Federals total stockholders equity
as of the date of the latest statement of financial condition used in this prospectus plus (ii) the
value of the net assets of Oritani Financial Corp., MHC as of the date of the latest statement of
financial condition of Oritani Financial Corp., MHC prior to the consummation of the conversion
(excluding its ownership of Oritani-Federal). Oritani-Delaware and Oritani Bank shall continue to
hold the liquidation accounts for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders who continue to maintain deposits in Oritani Bank. The liquidation accounts are
also designed to provide payments to depositors of their liquidation interests in the event of a
liquidation of Oritani-Delaware and Oritani Bank or solely of Oritani Bank. The liquidation
account in Oritani Bank would be used only in the event that Oritani-Delaware does not have
sufficient capital to fund its obligation under its liquidation account. The total obligation of
Oritani-Delaware and Oritani Bank under their respective liquidation accounts will never exceed the
dollar amount of the Oritani-Delaware liquidation account. Pursuant to the rules and regulations
of the OTS, a post-conversion merger, consolidation, sale of bulk assets or similar combination or
transaction with another insured savings institution or depository institution holding company
would not be considered a liquidation and, in such a transaction, the liquidation account would be
assumed by the surviving institution or company. See Liquidation Rights.
Stock Pricing and Number of Shares to be Issued
The Plan of Conversion and Reorganization and federal regulations require that the aggregate
purchase price of the common stock sold in the offering must be based on the appraised pro forma
market value of the common stock, as determined by an independent valuation. Oritani Bank and
Oritani Financial Corp., MHC have retained RP Financial, LC. to prepare an independent valuation
appraisal. For its services in preparing the initial valuation, RP Financial, LC. will receive a
fee of $125,000 and
157
$10,000 for expenses and an additional $15,000 for each valuation update, as
necessary. Oritani Bank and Oritani Financial Corp., MHC have agreed to indemnify RP Financial, LC.
and its employees and affiliates against specified losses, including any losses in connection with
claims under the federal securities laws, arising out of its services as independent appraiser,
except where such liability results from its negligence or bad faith.
The independent valuation appraisal considered the pro forma impact of the offering.
Consistent with the OTS appraisal guidelines, the appraisal applied three primary methodologies:
the pro forma price-to-book value approach applied to both reported book value and tangible book
value; the pro forma price-to-earnings approach applied to reported and core earnings; and the pro
forma price-to-assets approach. The market value ratios applied in the three methodologies were
based upon the current market valuations of the peer group companies, subject to valuation
adjustments applied by RP Financial, LC. to account for differences between Oritani-Federal and the
peer group. RP Financial, LC. placed the greatest emphasis on the price-to-earnings and
price-to-book approaches in estimating pro forma market value.
The independent valuation was prepared by RP Financial, LC. in reliance upon the information
contained in this prospectus, including the consolidated financial statements of Oritani-Federal.
RP Financial, LC. also considered the following factors, among others:
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the present results and financial condition of Oritani-Federal and the
projected results and financial condition of Oritani-Delaware; |
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the economic and demographic conditions in Oritani-Federals existing
market area; |
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certain historical, financial and other information relating to
Oritani-Federal; |
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the impact of the offering on Oritani-Delawares stockholders equity and
earnings potential; |
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the proposed dividend policy of Oritani-Delaware; and |
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the trading market for securities of comparable institutions and general
conditions in the market for such securities. |
Included in RP Financial, LC.s independent valuation were certain assumptions as to the pro
forma earnings of Oritani-Delaware after the conversion that were utilized in determining the
appraised value. These assumptions included estimated expenses, an assumed after-tax rate of
return on the net offering proceeds of 1.98% and purchases in the open market of the common stock
issued in the offering by the stock-based incentive plan at the $10.00 per share purchase price.
See Pro Forma Data for additional information concerning these assumptions. The use of different
assumptions may yield different results.
The independent valuation states that as of February 19, 2010, the estimated pro forma market
value, or valuation range, of Oritani-Delaware ranged from a minimum of $445.3 million to a maximum
of $602.5 million, with a midpoint of $523.8 million and an adjusted maximum of $692.8 million.
The Board of Directors of Oritani-Delaware decided to offer the shares of common stock for a price
of $10.00 per share. The aggregate offering price of the shares of common stock will be equal to
the valuation range multiplied by the percentage of Oritani-Federal common stock owned by Oritani
Financial Corp., MHC. The number of shares offered will be equal to the aggregate offering price
of the shares of common stock divided by the price per share. Based on the valuation range, the
Oritani-Federal common stock owned by
158
Oritani Financial Corp., MHC and the $10.00 price per share,
the minimum of the offering range will be 33,150,000 shares, the midpoint of the offering range
will be 39,000,000 shares and the maximum of the offering range will be 44,850,000 shares of common
stock, with an adjusted maximum of 51,577,500 shares.
The Board of Directors of Oritani-Delaware reviewed the independent valuation and, in
particular, considered the following:
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Oritani-Federals financial condition and results of operations; |
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comparison of financial performance ratios of Oritani-Federal to those of
other financial institutions of similar size; |
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market conditions generally and in particular for financial institutions;
and |
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the historical trading price of the publicly held shares of
Oritani-Federal common stock. |
All of these factors are set forth in the independent valuation. The Board of Directors also
reviewed the methodology and the assumptions used by RP Financial, LC. in preparing the independent
valuation and believes that such assumptions were reasonable. The offering range may be amended
with the approval of the OTS, if required, as a result of subsequent developments in the financial
condition of Oritani-Federal or Oritani Bank or market conditions generally. In the event the
independent valuation is updated to amend the pro forma market value of Oritani-Delaware to less
than $445.3 million or more than $692.8 million, the appraisal will be filed with the Securities
and Exchange Commission by a post-effective amendment to Oritani-Delawares registration statement.
The independent valuation is not intended, and must not be construed, as a recommendation of
any kind as to the advisability of purchasing our shares of common stock. RP Financial, LC. did not
independently verify our consolidated financial statements and other information that we provided
to them, nor did RP Financial, LC. independently value our assets or liabilities. The independent
valuation considers Oritani Bank as a going concern and should not be considered as an indication
of the liquidation value of Oritani Bank. Moreover, because the independent valuation is
necessarily based upon estimates and projections of a number of matters, all of which may change
from time to time, no assurance can be given that persons purchasing our common stock in the
offering will thereafter be able to sell their shares of common stock at prices at or above the
$10.00 price per share.
Following commencement of the subscription offering, the maximum of the valuation range may be
increased by up to 15%, or up to $692.8 million, without resoliciting purchasers, which will result
in a corresponding increase of up to 15% in the maximum of the offering range to up to 51,577,500
shares, to reflect changes in the market and financial conditions, demand for the shares of common
stock or
regulatory considerations. We will not decrease the minimum of the valuation range and the
minimum of the offering range without a resolicitation of purchasers. The subscription price of
$10.00 per share of common stock will remain fixed. See Additional Limitations on Common Stock
Purchases as to the method of distribution of additional shares of common stock to be issued in
the event of an increase in the offering range of up to 51,577,500 shares.
If the update to the independent valuation at the conclusion of the offering results in an
increase in the maximum of the valuation range to more than $692.8 million and a corresponding
increase in the offering range to more than 51,577,500 shares, or a decrease in the minimum of the
valuation range to less than $445.3 million and a corresponding decrease in the offering range to
fewer than 33,150,000
159
shares, then, after consulting with the OTS, we may terminate the Plan of
Conversion and Reorganization, cancel deposit account withdrawal authorizations and promptly return
by check all funds received in the subscription and community offerings, with interest at Oritani
Banks passbook savings rate. Alternatively, we may establish a new offering range, extend the
offering period and commence a resolicitation of purchasers or take other actions as permitted by
the OTS in order to complete the offering. In the event that we extend the offering and conduct a
resolicitation, purchasers in the subscription and community offerings would have the opportunity
to maintain, change or cancel their stock orders within a specified period. If a purchaser in the
subscription and community offerings does not respond during the period, his or her stock order
will be canceled and payment will be returned promptly, with interest at Oritani Banks passbook
savings rate, and deposit account withdrawal authorizations will be canceled. Any single offering
extension will not exceed 90 days; aggregate extensions may not conclude beyond June 18, 2012,
which is two years after the special meeting of members to vote on the conversion.
An increase in the number of shares of common stock to be issued in the offering would
decrease both a purchasers ownership interest and Oritani-Delawares pro forma earnings and
stockholders equity on a per share basis while increasing pro forma earnings and stockholders
equity on an aggregate basis. A decrease in the number of shares to be issued in the offering would
increase both a purchasers ownership interest and Oritani-Delawares pro forma earnings and
stockholders equity on a per share basis, while decreasing pro forma earnings and stockholders
equity on an aggregate basis. For a presentation of the effects of these changes, see Pro Forma
Data.
Copies of the independent valuation appraisal report prepared by RP Financial, LC. and the
detailed memorandum setting forth the method and assumptions used in the appraisal report are
available for inspection at the main office of Oritani Bank and as specified under Where You Can
Find Additional Information.
Subscription Offering and Subscription Rights
In accordance with the Plan of Conversion and Reorganization, rights to subscribe for shares
of common stock in the subscription offering have been granted in the following descending order of
priority. The filling of all subscriptions that we receive will depend on the availability of
common stock after satisfaction of all subscriptions of all persons having prior rights in the
subscription offering and subject to the minimum, maximum and overall purchase and ownership
limitations set forth in the Plan of Conversion and Reorganization and as described below under
Additional Limitations on Common Stock Purchases.
Priority 1: Eligible Account Holders. Each Oritani Bank depositor with aggregate deposit
account balances of $50.00 or more (a Qualifying Deposit) at the close of business on December
31, 2008 (Eligible Account Holder) will receive, without payment therefor, nontransferable
subscription
rights to purchase up to the greater of: (i) $500,000 (50,000 shares) of our common stock;
(ii) one-tenth of one percent of the total number of shares of common stock issued in the offering;
or (iii) 15 times the product, rounded down to the nearest whole number, obtained by multiplying
the total number of shares of common stock offered by a fraction, the numerator of which is the
amount of the Qualifying Deposit of the Eligible Account Holder and the denominator is the total
amount of Qualifying Deposits of all Eligible Account Holders, subject to the overall purchase and
ownership limitations. See Additional Limitations on Common Stock Purchases. If there are not
sufficient shares available to satisfy all subscriptions, shares will first be allocated so as to
permit each Eligible Account Holder to purchase a number of shares sufficient to make his or her
total allocation equal to the lesser of 100 shares or the number of shares for which he or she
subscribed. Thereafter, unallocated shares will be allocated to each Eligible Account Holder whose
subscription remains unfilled in the proportion that the amount of his or
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her Qualifying Deposit
bears to the total amount of Qualifying Deposits of all subscribing Eligible Account Holders whose
subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any
one or more Eligible Account Holders, the excess will be reallocated among those Eligible Account
Holders whose subscriptions are not fully satisfied until all available shares have been allocated.
To ensure proper allocation of our shares of common stock, each Eligible Account Holder must
list on his or her stock order form all deposit accounts in which he or she had an ownership
interest on December 31, 2008. In the event of oversubscription, failure to list an account could
result in fewer shares being allocated than if all accounts had been disclosed. In the event of an
oversubscription, the subscription rights of Eligible Account Holders who are also directors or
executive officers of Oritani-Federal or their associates will be subordinated to the subscription
rights of other Eligible Account Holders to the extent attributable to their increased deposits in
the twelve months preceding December 31, 2008.
Priority 2: Tax-Qualified Plans. Our tax-qualified employee stock benefit plans, consisting
of our employee stock ownership plan and 401(k) plan, will receive, without payment therefor,
nontransferable subscription rights to purchase up to 10.0% of the shares of common stock sold in
the offering, although our employee stock ownership plan intends to purchase up to 4.0% of the
shares of common stock sold in the offering. If market conditions warrant, in the judgment of its
trustees, the employee stock ownership plan may instead elect to purchase shares in the open market
following the completion of the conversion.
Based upon the value of total assets held in the 401(k) plan as of February 25, 2010, the
maximum number of shares that could be purchased by the 401(k) plan in the offering is 570,000
shares, which is approximately 1.0% of the shares of common stock to be sold in the offering at the
adjusted maximum. Accordingly, priority 2 purchases will not exceed 5.0%, which is less than the
10.0% permissible limit.
Priority 3: Supplemental Eligible Account Holders. To the extent that there are sufficient
shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders
and our tax-qualified employee stock benefit plans, each Oritani Bank depositor, other than
directors and executive officers of Oritani-Federal, with a Qualifying Deposit at the close of
business on March 31, 2010 who is not an Eligible Account Holder (Supplemental Eligible Account
Holder) will receive, without payment therefor, nontransferable subscription rights to purchase up
to the greater of: (i) $500,000 (50,000 shares) of common stock; (ii) one-tenth of one percent of
the total number of shares of common stock issued in the offering; or (iii) 15 times the product,
rounded down to the nearest whole number, obtained by multiplying the total number of shares of
common stock to be offered by a fraction, the numerator of which is the amount of the Qualifying
Deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all Supplemental Eligible Account
Holders, subject to the overall purchase and ownership limitations. See Additional Limitations
on Common Stock Purchases. If there are not sufficient shares available to satisfy all
subscriptions, shares will be allocated so as to permit each Supplemental Eligible Account Holder
to purchase a number of shares sufficient to make his or her total allocation equal to the lesser
of 100 shares of common stock or the number of shares for which he or she subscribed. Thereafter,
unallocated shares will be allocated to each Supplemental Eligible Account Holder whose
subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit
bears to the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders whose
subscriptions remain unfilled.
To ensure proper allocation of common stock, each Supplemental Eligible Account Holder must
list on the stock order form all deposit accounts in which he or she had an ownership interest at
March 31,
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2010. In the event of oversubscription, failure to list an account could result in fewer
shares being allocated than if all accounts had been disclosed.
Priority 4: Other Depositors. To the extent that there are shares of common stock remaining
after satisfaction of subscriptions by Eligible Account Holders, our tax-qualified employee stock
benefit plans, and Supplemental Eligible Account Holders, each depositor of Oritani Bank as of the
close of business on the voting record date of April 30, 2010 who is not an Eligible Account Holder
or Supplemental Eligible Account Holder (Other Depositors) will receive, without payment
therefor, nontransferable subscription rights to purchase up to $500,000 (50,000 shares) of common
stock or one-tenth of one percent of the total number of shares of common stock issued in the
offering, subject to the overall purchase and ownership limitations. See Additional Limitations
on Common Stock Purchases. If there are not sufficient shares available to satisfy all
subscriptions, available shares will be allocated so as to permit each Other Depositor to purchase
a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares
of common stock or the number of shares for which he or she subscribed. Any remaining shares will
be allocated among Other Depositors in the proportion that the amount of the subscription of each
Other Depositor whose subscription remains unsatisfied bears to the total amount of subscriptions
of all Other Depositors whose subscriptions remain unsatisfied. To ensure proper allocation of
common stock, each Other Depositor must list on the stock order form all deposit accounts in which
he or she had an ownership interest at April 30, 2010. In the event of oversubscription, failure
to list an account could result in fewer shares being allocated than if all accounts had been
disclosed.
Expiration Date. The subscription offering will expire at 2:00 p.m., Eastern Time, on June 9,
2010, unless extended by us for up to 45 days. Such extension may be made without notice to you,
except that extensions beyond July 24, 2010 will require the approval of the OTS and a
resolicitation of subscribers in the offering. We may decide to extend the expiration date of the
subscription offering for any reason, whether or not subscriptions have been received for shares at
the minimum, midpoint or maximum of the offering range. Subscription rights which have not been
exercised prior to the expiration date will become void. Subscription rights will expire whether
or not each eligible depositor can be located.
Community Offering
To the extent that shares of common stock remain available for purchase after satisfaction of
all subscriptions of Eligible Account Holders, our tax-qualified employee stock benefit plans,
Supplemental Eligible Account Holders and Other Depositors, we may offer shares pursuant to the
Plan of Conversion and Reorganization in a community offering. Shares will be offered with the
following preferences:
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(i) |
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natural persons (including trusts of natural persons) and then other persons
(including any corporation, partnership, association, joint-stock company, limited
liability company, trust, unincorporated organization, or government or political
subdivision of a government) residing in the counties of Bergen, Passaic, Sussex,
Hudson, Essex, Morris, Warren, Union, Somerset, Hunterdon, Middlesex and Mercer; |
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(ii) |
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Oritani Banks borrowers with an outstanding loan or line of credit as of
December 31, 2009 that are meeting all of the terms and conditions of their loan
agreements with Oritani Bank as of December 31, 2009 and the date of purchase of the
common stock (as determined solely in the discretion of Oritani Bank); and |
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(iii) |
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Oritani-Federals public stockholder as of May 5, 2010. |
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Purchasers in the community offering may purchase up to $500,000 (50,000 shares) of common
stock, subject to the overall purchase and ownership limitations. See Additional Limitations on
Common Stock Purchases. The minimum purchase is 25 shares. The opportunity to purchase shares of
common stock in the community offering category is subject to our right, in our sole discretion, to
accept or reject any such orders in whole or in part either at the time of receipt of an order or
as soon as practicable following the expiration date of the offering.
If we do not have sufficient shares of common stock available to fill the accepted orders of
natural persons residing in the listed counties, we will allocate the available shares among those
persons in a manner that permits each of them, to the extent possible, to purchase the lesser of
100 shares or the number of shares subscribed for by such person. Thereafter, unallocated shares
will be allocated among such natural persons residing in the areas listed above whose orders remain
unsatisfied on an equal number of shares basis per order. If an oversubscription occurs due to the
orders of eligible borrowers or public stockholders of Oritani-Federal as of May 5, 2010, the
allocation procedures described above will apply to the stock orders of such persons. In
connection with the allocation process, unless the OTS permits otherwise, orders received for
Oritani-Delaware common stock in the community offering will first be filled up to a maximum of two
percent of the shares sold in the offering, and thereafter any remaining shares will be allocated
on an equal number of shares basis per order until all shares have been allocated.
The term residing or resident as used in this prospectus means any person who occupies a
dwelling within the New Jersey counties of Bergen, Passaic, Sussex, Hudson, Essex, Morris, Warren,
Union, Somerset, Hunterdon, Middlesex and Mercer; has a present intent to remain within such
community for a period of time; and manifests the genuineness of that intent by establishing an
ongoing physical presence within the community, together with an indication that this presence
within the community is something other than merely transitory in nature. We may utilize deposit
or loan records or other evidence provided to us to decide whether a person is a resident. In all
cases, however, the determination shall be in our sole discretion.
Expiration Date. The community offering, if any, may begin during or after the subscription
offering, and is currently expected to terminate at the same time as the subscription offering.
Oritani-Delaware may decide to extend the community offering for any reason and is not required to
give purchasers notice of any such extension unless such period extends beyond July 24, 2010, in
which case we will resolicit purchasers in the offering.
Syndicated Community Offering
If feasible, our Board of Directors may decide to offer for sale shares of common stock not
subscribed for or purchased in the subscription and community offerings in a syndicated community
offering, subject to such terms, conditions and procedures as we may determine, in a manner that
will achieve a wide distribution of our shares of common stock. In the syndicated community
offering, any person may purchase up to $500,000 (50,000 shares) of common stock, subject to the
overall purchase and ownership limitations. We retain the right to accept or reject in whole or in
part any orders in the syndicated community offering. Unless the OTS permits otherwise, accepted
orders for Oritani-Delaware common stock in the syndicated community offering will first be filled
up to a maximum of two percent (2%) of the shares sold in the offering, and thereafter any
remaining shares will be allocated on an equal number of shares basis per order until all shares
have been allocated. Unless the syndicated community offering begins during the community
offering, the syndicated community offering will begin as soon as possible after the completion of
the subscription and community offerings.
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If a syndicated community offering is held, Stifel, Nicolaus & Company, Incorporated will
serve as sole book running manager. Sandler ONeill & Partners, L.P. and Sterne, Agee & Leach, Inc.
will serve as co-managers, and each firm will assist us in selling our common stock on a best
efforts basis. Neither Stifel, Nicolaus & Company, Incorporated nor any registered broker-dealer
will have any obligation to take or purchase any shares of the common stock in the syndicated
community offering. The syndicated community offering will be conducted in accordance with certain
Securities and Exchange Commission rules applicable to best efforts offerings. Under these rules,
Stifel, Nicolaus & Company, Incorporated or the other broker-dealers participating in the
syndicated community offering generally will accept payment for shares of common stock to be
purchased in the syndicated community offering through a sweep arrangement under which a
customers brokerage account at the applicable participating broker-dealer will be debited in the
amount of the purchase price for the shares of common stock that such customer wishes to purchase
in the syndicated community offering on the settlement date. Customers who authorize participating
broker-dealers to debit their brokerage accounts are required to have the funds for the payment in
their accounts on, but not before, the settlement date. Institutional investors will pay Stifel
Nicolaus & Company, Incorporated, in its capacity as sole book running manager, for shares
purchased in the syndicated community offering on the settlement date through the services of the
Depository Trust Company on a delivery versus payment basis. The closing of the syndicated
community offering is subject to conditions set forth in an agency agreement among
Oritani-Delaware, Oritani-Federal, Oritani Financial Corp., MHC and Oritani Bank on one hand and
Stifel, Nicolaus & Company, Incorporated on the other hand. If and when all the conditions for the
closing are met, funds for common stock sold in the syndicated community offering, less fees and
commissions payable by us, will be delivered promptly to us. If the offering is consummated, but
some or all of an interested investors funds are not accepted by us, those funds will be returned
to the interested investor promptly after closing, without interest. If the offering is not
consummated, funds in the account will be returned promptly, without interest, to the potential
investor. Normal customer ticketing will be used for order placement. In the syndicated community
offering, order forms will not be used.
In the event that we sell common stock in a stand by underwritten public offering, we have
agreed that Stifel, Nicolaus & Company, Incorporated will have the right to serve as sole
book-running manager. Any underwritten public offering will be conducted on a firm commitment
basis. In such case, the underwriters will purchase all shares of common stock not sold in the
subscription offering or the community offering, if any such shares are purchased. The aggregate
price paid to us by or through the underwriters for the shares of common stock will be the number
of shares sold multiplied by the $10.00 price per share, less the amount of an underwriting
discount as negotiated between us and the
underwriters and approved by the OTS and the Financial Industry Regulatory Authority. If we
determine to sell stock in an underwritten public offering, the terms of such offering, including
the names of the underwriters participating in such offering, will be described in a supplement to
this prospectus.
If for any reason we cannot effect a syndicated community offering or underwritten public
offering of shares of common stock not purchased in the subscription and community offerings, or in
the event that there is a significant number of shares remaining unsold after such offerings, we
will try to make other arrangements for the sale of unsubscribed shares, if possible. The OTS must
approve any such arrangements.
Additional Limitations on Common Stock Purchases
The Plan of Conversion and Reorganization includes the following limitations on the number of
shares of common stock that may be purchased in the offering:
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(i) |
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No person may purchase fewer than 25 shares of common stock; |
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(ii) |
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The maximum number of shares of common stock that may be purchased by a person,
or persons exercising subscription rights through a single qualifying deposit account
held jointly, is 50,000 shares; |
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(iii) |
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Our tax-qualified employee stock benefit plans, including our employee stock
ownership plan and 401(k) plan, may purchase in the aggregate up to 10.0% of the shares
of common stock sold in the offering, including shares sold in the event of an increase
in the offering range of up to 15%; |
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(iv) |
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Except for the tax-qualified employee stock benefit plans, including our
employee stock ownership plan and 401(k) plan, as described above, no person or entity,
together with associates or persons acting in concert with such person or entity, may
purchase more than $1.0 million (100,000 shares) of common stock in all categories of
the offering combined; |
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(v) |
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Current stockholders of Oritani-Federal are subject to an ownership limitation.
As previously described, current stockholders of Oritani-Federal will receive shares
of Oritani-Delaware common stock in exchange for their existing shares of
Oritani-Federal common stock at the conclusion of the offering. The number of shares of
common stock that a stockholder may purchase in the offering, together with associates
or persons acting in concert with such stockholder, when combined with the shares that
the stockholder and his or her associates will receive in exchange for existing
Oritani-Federal common stock, may not exceed 5% of the shares of common stock of
Oritani-Delaware to be issued and outstanding at the completion of the conversion; and |
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(vi) |
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The maximum number of shares of common stock that may be purchased in all
categories of the offering by executive officers and directors of Oritani Bank and
their associates, in the aggregate, when combined with shares of common stock issued in
exchange for existing shares, may not exceed 25% of the shares of Oritani-Delaware
common stock outstanding upon completion of the conversion. |
Depending upon market or financial conditions, our Board of Directors, with the approval of
the OTS and without further approval of members of Oritani Financial Corp., MHC, may decrease or
increase
the purchase and ownership limitations. If a purchase limitation is increased, subscribers in
the subscription offering who ordered the maximum amount and who indicate a desire to be
resolicited on their stock order form will be given, the opportunity to increase their
subscriptions up to the then applicable limit. The effect of this type of resolicitation will be
an increase in the number of shares of common stock owned by subscribers who choose to increase
their subscriptions. In the event that the maximum purchase limitation is increased to 5% of the
shares sold in the offering, such limitation may be further increased to 9.99%, provided that
orders for Oritani-Delaware common stock exceeding 5% of the shares issued in the offering shall
not exceed in the aggregate 10.0% of the total shares sold in the offering.
In the event of an increase in the offering range of up to 51,577,500 shares of common stock,
shares will be allocated in the following order of priority in accordance with the Plan of
Conversion and Reorganization:
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(i) |
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to fill subscriptions by the tax-qualified employee stock benefit plans,
including the employee stock ownership plan, for up to 10.0% of the total number of
shares of common stock sold in the offering; |
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(ii) |
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in the event that there is an oversubscription at the Eligible Account Holder,
Supplemental Eligible Account Holder or Other Depositor levels, to fill unfulfilled
subscriptions of these subscribers according to their respective priorities; and |
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(iii) |
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to fill subscriptions in the community offering, with preference given first
to persons residing in the New Jersey counties of Bergen, Passaic, Sussex, Hudson,
Essex, Morris, Warren, Union, Somerset, Hunterdon, Middlesex and Mercer; then to
Oritani Banks borrowers with an outstanding loan or line of credit as of December 31,
2009 that are meeting all of their terms and conditions of the loan agreements with
Oritani Bank (as determined solely in the discretion of Oritani Bank) as of December
31, 2009 and the date of purchase of the common stock; then to Oritani-Federals public
stockholders as of May 5, 2010. |
The term associate of a person means:
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(i) |
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any corporation or organization, other than Oritani Financial Corp., MHC,
Oritani-Federal, Oritani Bank or a majority-owned subsidiary of Oritani-Federal or
Oritani Bank, of which the person is a senior officer, partner or beneficial owner,
directly or indirectly, of 10.0% or more of any equity security; |
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(ii) |
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any trust or other estate in which the person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity; provided, however,
that for the purposes of subscriptions in the offering and restrictions on the sale of
stock after the conversion, the term associate does not include a person who has a
substantial beneficial interest in an employee stock benefit plan of Oritani Bank, or
who is a trustee or fiduciary of such plan, and for purposes of aggregating total
shares that may be held by officers, trustees and directors of Oritani Financial Corp.,
MHC, Oritani-Federal or Oritani Bank (the term associate does not include any
tax-qualified employee stock benefit plan of Oritani Bank); and |
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(iii) |
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any blood or marriage relative of the person, who either has the same home as
the person or who is a director, trustee or officer of Oritani Financial Corp., MHC,
Oritani-Federal or Oritani Bank. |
The term acting in concert means:
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(i) |
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knowing participation in a joint activity or interdependent conscious parallel
action towards a common goal whether or not pursuant to an express agreement; or |
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(ii) |
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a combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding, relationship,
agreement or other arrangement, whether written or otherwise. |
A person or company that acts in concert with another person or company shall also be deemed
to be acting in concert with any person or company who is also acting in concert with that other
party, except that any tax-qualified employee stock benefit plan will not be deemed to be acting in
concert with its trustee or a person who serves in a similar capacity solely for the purpose of
determining whether common stock held by the trustee and common stock held by the employee stock
benefit plan will be aggregated.
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We have the sole discretion to determine whether prospective purchasers are associates or
acting in concert. Persons exercising subscription rights through a single qualifying deposit
account held jointly, whether or not related, will be deemed to be acting in concert unless we
determine otherwise.
Our directors are not treated as associates of each other solely because of their membership
on the Board of Directors. Common stock purchased in the offering will be freely transferable
except for shares purchased by executive officers and directors of Oritani-Delaware or Oritani Bank
and except as described below. Any purchases made by any associate of Oritani-Delaware or Oritani
Bank for the explicit purpose of meeting the minimum number of shares of common stock required to
be sold in order to complete the offering shall be made for investment purposes only and not with a
view toward redistribution. In addition, under Financial Industry Regulatory Authority guidelines,
members of the Financial Industry Regulatory Authority and their associates are subject to certain
restrictions on transfer of securities purchased in accordance with subscription rights and to
certain reporting requirements upon purchase of these securities. For a further discussion of
limitations on purchases of our shares of common stock at the time of conversion and thereafter,
see Certain Restrictions on Purchase or Transfer of Our Shares after the Conversion and
Restrictions on Acquisition of Oritani-Delaware.
Marketing Arrangements
To assist in the marketing of our common stock, we have retained Stifel, Nicolaus & Company,
Incorporated, which is a broker-dealer registered with the Financial Industry Regulatory Authority.
Stifel, Nicolaus & Company, Incorporated will assist us on a best efforts basis in the offering by:
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acting as our financial advisor for the conversion and offering; |
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(ii) |
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providing administrative services and managing the Stock Information Center; |
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(iii) |
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educating our employees regarding the offering; |
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(iv) |
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targeting our sales efforts, including assisting in the preparation of
marketing materials; and |
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soliciting orders for common stock. |
For these services, Stifel, Nicolaus & Company, Incorporated will receive an advisory and
administrative fee of $50,000 and 1% of the dollar amount of all shares of common stock sold in the
subscription and community offering. The sales fee will be reduced by the advisory and
administrative fee. No sales fee will be payable to Stifel, Nicolaus & Company, Incorporated with
respect to shares purchased by officers, directors and employees or their immediate families and
shares purchased by our tax-qualified and non-qualified employee benefit plans. In the event that
Stifel, Nicolaus & Company, Incorporated sells common stock through a group of broker-dealers in a
syndicated community offering, it will be paid a fee equal to 1% of the dollar amount of total
shares sold in the syndicated community offering, which fee along with the fee payable to selected
dealers (which may include Stifel, Nicolaus & Company, Incorporated) shall not exceed 5% in the
aggregate. Stifel, Nicolaus & Company, Incorporated will serve as sole book running manager.
Sandler ONeill & Partners, L.P. and Sterne, Agee & Leach, Inc. will serve as co-managers.
Alternatively, in the event that Stifel, Nicolaus & Company, Incorporated sells common stock
through a group of broker-dealers in a stand-by firm commitment underwritten public offering (for
which Stifel, Nicolaus & Company, Incorporated will serve as sole book running manager), the
underwriters will be paid a fee which shall not exceed 6% of the dollar amount of total shares sold
in such offering. Stifel, Nicolaus & Company, Incorporated also will be reimbursed for allocable
expenses in amount not to exceed $20,000 for the subscription
offering and community offering
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and
$75,000 for the syndicated community offering, and for attorneys fees in an amount not to exceed
$150,000.
In the event that we are required to resolicit subscribers for shares of our common stock in
the subscription and community offerings, Stifel, Nicolaus & Company, Incorporated will be required
to provide significant additional services in connection with the resolicitation (including
repeating the services described above), and we may pay Stifel, Nicolaus & Company, Incorporated an
additional fee for those services that will not exceed $50,000. In the event of a material delay
in the offering which would require an update of the financial information in tabular form to
reflect a period later than that set forth in the original filing of this document, Stifel Nicolaus
will not incur any additional accountable reimbursable out-of-pocket expenses in excess of $10,000
or additional reimbursable legal fees in excess of $25,000, and in the aggregate, reimbursable
expenses and legal fees shall not exceed $280,000.
We will indemnify Stifel, Nicolaus & Company, Incorporated against liabilities and expenses,
including legal fees, incurred in connection with certain claims or litigation arising out of or
based upon untrue statements or omissions contained in the offering materials for the common stock,
including liabilities under the Securities Act of 1933, as amended.
Some of our directors and executive officers may participate in the solicitation of offers to
purchase common stock. These persons will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection with the solicitation. Other regular employees of Oritani Bank may assist in
the offering, but only in ministerial capacities, and may provide clerical work in effecting a
sales transaction. No offers or sales may be made by tellers or at the teller counters. No sales
activity will be conducted where banking activity is conducted. Investment-related questions of
prospective purchasers will be directed to executive officers or registered representatives of
Stifel, Nicolaus & Company, Incorporated. Our other employees have been instructed not to solicit
offers to purchase shares of common stock or provide advice regarding the purchase of common stock.
We will rely on Rule 3a4-1 under the Securities Exchange Act of 1934, as amended, and sales of
common stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers, directors and employees to participate
in the sale of common stock. None of our officers, directors or employees will be compensated in
connection with their participation in the offering.
In addition, we have engaged Stifel, Nicolaus & Company, Incorporated to act as our records
management agent in connection with the conversion and offering. In its role as records management
agent, Stifel, Nicolaus & Company, Incorporated will coordinate with our data processing contacts
and interface with the Stock Information Center to provide the records processing and the proxy and
stock order services, including but not limited to: (1) consolidation of deposit accounts and vote
calculation; (2) preparation of information for order forms and proxy cards; (3) interfacing with
our financial printer; (4) recording stock order information; and (5) tabulating proxy votes. For
these services, Stifel, Nicolaus & Company, Incorporated will receive no additional fee. We will
also reimburse Stifel, Nicolaus & Company, Incorporated for its reasonable out-of-pocket expenses
associated with its acting as records management agent in an amount not to exceed $5,000.
Lock-up Agreements
We and our directors and executive officers have agreed not to, directly or indirectly, offer,
sell, transfer, pledge, assign, hypothecate or otherwise encumber any shares of our common stock or
options, warrants or other securities exercisable, convertible or exchangeable for our common stock
during the period commencing with the filing of the registration statement for the offering and
conversion and ending 90 days after completion of the offering and conversion without the prior
written consent of Stifel, Nicolaus & Company, Incorporated. In addition, except for securities
issued pursuant to existing
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employee benefit plans in accordance with past practices or securities
issued in connection with a merger or acquisition by us, we have agreed not to issue, offer to sell
or sell any shares of our common stock or options, warrants or other securities exercisable,
convertible or exchangeable for our common stock without the prior written consent of Stifel,
Nicolaus & Company, Incorporated for a period of 90 days after completion of the offering and
conversion.
Offering Deadline
The subscription and community offerings will expire at 2:00 p.m., Eastern Time, on June 9,
2010, unless extended, without notice to you, for up to 45 days. Any extension of the subscription
and/or community offering beyond July 24, 2010 would require the OTSs approval. In such event, we
would conduct a resolicitation. Purchasers would have the opportunity to maintain, change or
cancel their stock orders within a specified period. If a purchaser does not respond during the
resolicitation period, his or her stock order will be canceled and payment will be returned
promptly, with interest calculated at Oritani Banks passbook savings rate, and deposit account
withdrawal authorizations will be canceled. We will not execute orders until at least the minimum
number of shares offered has been sold. If we have not sold the minimum by the expiration date or
any extension thereof, we will terminate the offering and cancel all orders, as described above.
Any single offering extension will not exceed 90 days; aggregate extensions may not conclude beyond
June 18, 2012, which is two years after the special meeting of members to vote on the conversion.
We reserve the right in our sole discretion to terminate the offering at any time and for any
reason, in which case we will cancel any deposit account withdrawal orders and promptly return all
funds submitted, with interest calculated at Oritani Banks passbook savings rate from the date of
processing.
Prospectus Delivery
To ensure that each purchaser receives a prospectus at least 48 hours before the expiration
date of the offering in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, we may
not mail a prospectus any later than five days prior to the expiration date or hand deliver any
later than two days prior to the expiration date. Execution of an order form will confirm receipt
of delivery in accordance with Rule 15c2-8. Order forms will only be distributed with or preceded
by a prospectus.
In the syndicated community offering or any stand by underwritten public offering, a
prospectus in electronic format may be made available on the Internet sites or through other online
services maintained by Stifel, Nicolaus & Company, Incorporated or one or more other members of the
syndicate, or by their respective affiliates. In those cases, prospective investors may view
offering terms online and, depending upon the syndicate member, prospective investors may be
allowed to place orders online. The members of the syndicate may agree with us to allocate a
specific number of shares for sale to online brokerage account holders. Any such allocation for
online distributions will be made on the same basis as other allocations.
Other than the prospectus in electronic format, the information on the Internet sites
referenced in the preceding paragraph and any information contained in any other Internet site
maintained by any member of the syndicate is not part of this prospectus or the registration
statement of which this prospectus forms a part, has not been approved and/or endorsed by us or by
Stifel, Nicolaus & Company, Incorporated or any other member of the syndicate in its capacity as
selling agent or syndicate member and should not be relied upon by investors.
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Procedure for Purchasing Shares in the Subscription and Community Offerings
Use of Stock Order Forms. In order to purchase shares of common stock in the subscription
offering and community offering, you must submit a properly completed original stock order form and
remit full payment. Incomplete stock order forms or stock order forms that are not signed are not
required to be accepted. We are not required to accept stock orders submitted on photocopied or
facsimiled stock order forms. All stock order forms must be received (not postmarked) prior to 2:00
p.m. Eastern Time, on June 9, 2010. We are not required to accept stock order forms that are not
received by that time, are executed defectively or are received without full payment or without
appropriate withdrawal instructions. We are not required to notify purchasers of incomplete or
improperly executed stock order forms. We have the right to waive or permit the correction of
incomplete or improperly executed stock order forms, but we do not represent that we will do so.
You may submit your stock order form and payment by mail using the stock order reply envelope
provided, by bringing your stock order form to our Stock Information Center, or by overnight
delivery to the indicated address on the order form. Our Stock Information Center is located at
Oritani Banks main office, 370 Pascack Road, Township of Washington, New Jersey. Stock order
forms may not be delivered to other Oritani Bank offices. Please do not mail your stock order
forms to Oritani Bank. Once tendered, a stock order form cannot be modified or revoked without our
consent. We reserve the absolute right, in our sole discretion, to reject orders received in the
community offering, in whole or in part, at the time of receipt or at any time prior to completion
of the offering.
If you are ordering shares in the subscription offering, by signing the stock order form you
are representing that you are purchasing shares for your own account and that you have no agreement
or understanding with any person for the sale or transfer of the shares. Our interpretation of the
terms and conditions of the Plan of Conversion and Reorganization and of the acceptability of the
stock order forms will be final.
By signing the stock order form, you will be acknowledging that the common stock is not a
deposit or savings account and is not federally insured or otherwise guaranteed by Oritani Bank or
any federal or state government, and that you received a copy of this prospectus. However, signing
the stock order form will not cause you to waive your rights under the Securities Act of 1933 or
the Securities Exchange Act of 1934. We have the right to reject any order submitted in the
offering by a person who we believe is making false representations or who we otherwise believe,
either alone or acting in concert with others, is violating, evading, circumventing, or intends to
violate, evade or circumvent the terms and conditions of the Plan of Conversion and Reorganization.
Payment for Shares. Payment for all shares of common stock will be required to accompany all
completed order forms for the purchase to be valid. You may not submit cash or wire transfers.
Payment for shares may be made by:
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(i) |
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personal check, bank check or money order, made payable to Oritani Financial
Corp.; or |
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(ii) |
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authorization of withdrawal from the types of Oritani Bank deposit accounts
designated on the stock order form. |
Appropriate means for designating withdrawals from deposit accounts at Oritani Bank are
provided on the order forms. The funds designated must be available in the account(s) at the time
the stock order form is received. A hold will be placed on these funds, making them unavailable to
the depositor. Funds authorized for withdrawal will continue to earn interest within the account at
the contract rate until the offering is completed, at which time the designated withdrawal will be
made. Interest
penalties for early withdrawal applicable to certificate of deposit accounts will not apply to
withdrawals
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authorized for the purchase of shares of common stock; however, if a withdrawal results
in a certificate of deposit account with a balance less than the applicable minimum balance
requirement, the certificate of deposit will be canceled at the time of withdrawal without penalty
and the remaining balance will earn interest calculated at the current passbook savings rate
subsequent to the withdrawal. In the case of payments made by personal check, these funds must be
available in the account(s). Checks and money orders will be immediately cashed and placed in a
segregated account at Oritani Bank and will earn interest calculated at Oritani Banks passbook
savings rate from the date payment is processed until the offering is completed, at which time a
subscriber will be issued a check for interest earned.
You may not remit Oritani Bank line of credit checks, and we will not accept wire transfers or
third-party checks, including those payable to you and endorsed over to Oritani Financial Corp.
You may not designate on your stock order form a direct withdrawal from an Oritani Bank retirement
account. See Using Retirement Account Funds to Purchase Shares for information on using such
funds. Additionally, you may not designate on your stock order form a direct withdrawal from
Oritani Bank deposit accounts with check-writing privileges. Please provide a check instead. If
you request direct withdrawal, we reserve the right to interpret that as your authorization to
treat those funds as if we had received a check for the designated amount, and we will immediately
withdraw the amount from your checking account(s). Once we receive your executed stock order form,
it may not be modified, amended or rescinded without our consent, unless the offering is not
completed by July 24, 2010, in which event purchasers may be given the opportunity to increase,
decrease or rescind their orders for a specified period of time.
Regulations prohibit Oritani Bank from lending funds or extending credit to any persons to
purchase shares of common stock in the offering.
We have the right, in our sole discretion, to permit institutional investors to submit
irrevocable orders, together with a legally binding commitment for payment and to thereafter pay
for the shares of common stock for which they subscribe in the community offering at any time prior
to 48 hours before the completion of the conversion. This payment may be made by wire transfer.
If our employee stock ownership plan purchases shares in the offering, it will not be required
to pay for such shares until consummation of the offering, provided that there is a loan commitment
from an unrelated financial institution or Oritani-Delaware to lend to the employee stock ownership
plan the necessary amount to fund the purchase.
Using Retirement Account Funds to Purchase Shares
Persons interested in purchasing common stock using funds currently in an individual
retirement account (IRA) or any other retirement account, whether held through Oritani Bank or
elsewhere, should contact our Stock Information Center for guidance. Please contact the Stock
Information Center as soon as possible, preferably at least two weeks prior to the June 9, 2010
offering deadline, because processing such transactions takes additional time, and whether such
funds can be used may depend on limitations imposed by the institution where the funds are
currently held. Additionally, if such funds are not currently held in a self-directed retirement
account, then before placing your stock order, you will need to establish one with an independent
trustee or custodian, such as a brokerage firm. The new trustee or custodian will hold the shares
of common stock in a self-directed account in the same manner as we now hold retirement account
funds. An annual administrative fee may be payable to the new trustee or custodian. Assistance on
how to transfer such retirement accounts can be obtained from the Stock Information Center.
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Oritani Bank cannot offer self-directed retirement accounts. If you wish to use some or all
of your funds that are currently held in an Oritani Bank IRA or other retirement account, you may
not designate on the stock order form that you wish funds to be withdrawn from the account(s) for
the purchase of common stock. Before you place your stock order, the funds you wish to use must be
transferred from those accounts to a self-directed retirement account at an independent trustee or
custodian, as described above.
Delivery of Stock Certificates
Certificates representing shares of common stock issued in the subscription and community
offerings will be mailed by first class mail to the persons entitled thereto at the certificate
registration address noted by them on the stock order form, as soon as practicable following
consummation of the conversion. Any certificates returned as undeliverable will be held by our
transfer agent until claimed by persons legally entitled thereto or otherwise disposed of in
accordance with applicable law. Until certificates for the shares of common stock are available and
delivered to purchasers, purchasers may not be able to sell the shares of common stock which they
ordered, even though the common stock will have begun trading. Your ability to sell shares of
common stock before you receive stock certificates will depend upon the arrangements you may make
with your brokerage firm.
If you are currently a stockholder of Oritani-Federal, see Exchange of Existing
Stockholders Stock Certificates.
Other Restrictions
Notwithstanding any other provision of the Plan of Conversion and Reorganization, no person is
entitled to purchase any shares of common stock to the extent the purchase would be illegal under
any federal or state law or regulation, including state blue sky regulations, or would violate
regulations or policies of the Financial Industry Regulatory Authority. We may ask for an
acceptable legal opinion from any purchaser as to the legality of his or her purchase and we may
refuse to honor any purchase order if an opinion is not timely furnished. In addition, we are not
required to offer shares of common stock to any person who resides in a foreign country, or in a
State of the United States with respect to which any of the following apply: (a) a small number of
persons otherwise eligible to subscribe for shares under the Plan of Conversion and Reorganization
reside in such state; (b) the issuance of subscription rights or the offer or sale of shares of
common stock to such persons would require us, under the securities laws of such state, to register
as a broker, dealer, salesman or agent or to register or otherwise qualify our securities for sale
in such state; or (c) such registration or qualification would be impracticable for reasons of cost
or otherwise.
Restrictions on Transfer of Subscription Rights and Shares
OTS regulations prohibit any person with subscription rights, including the Eligible Account
Holders, Supplemental Eligible Account Holders and Other Depositors, from transferring or entering
into any agreement or understanding to transfer the legal or beneficial ownership of the
subscription rights issued under the Plan of Conversion and Reorganization or the shares of common
stock to be issued upon their exercise. These rights may be exercised only by the person to whom
they are granted and only for his or her account. When registering your stock purchase on the
stock order form, you should not add the name(s) of persons who do not have subscription rights or
who qualify only in a lower purchase priority than you do. Doing so may jeopardize your
subscription rights. Each person exercising subscription rights will be required to certify that
he or she is purchasing shares solely for his or her own account and
that he or she has no agreement or understanding regarding the sale or transfer of such shares. The
regulations also prohibit any person from offering or making an announcement of an offer or intent
to
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make an offer to purchase subscription rights or shares of common stock to be issued upon
their exercise prior to completion of the offering.
We will pursue any and all legal and equitable remedies in the event we become aware of the
transfer of subscription rights, and we will not honor orders that we believe involve the transfer
of subscription rights.
Stock Information Center
Our banking office personnel may not, by law, assist with investment-related questions about
the offering. If you have any questions regarding the conversion or offering, please call or visit
our Stock Information Center, located at Oritani Banks main office, 370 Pascack Road, Township of
Washington, New Jersey. The toll-free telephone number is 1-877-615-0411. The Stock Information
Center is open Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern Time. The Stock
Information Center will be closed weekends and bank holidays. Other Oritani Bank offices will not
have offering materials and will not accept stock order forms or proxy cards.
Liquidation Rights
Liquidation prior to the conversion. In the unlikely event of a complete liquidation of
Oritani Bank and Oritani Financial Corp., MHC prior to the conversion, all claims of creditors of
Oritani Financial Corp., MHC would be paid first. Thereafter, if there were any assets of Oritani
Financial Corp., MHC remaining, these assets would be distributed to depositors of Oritani Bank.
The amount received by such depositors would be equal to their pro rata interest in the remaining
value of Oritani Financial Corp., MHC, after claims of creditors, based on the relative size of
their deposit.
Liquidation following the conversion. In the unlikely event that Oritani Bank were to
liquidate after the conversion, all claims of creditors, including those of depositors, would be
paid first. However, except with respect to the liquidation account to be established in
Oritani-Delaware as further described below, a depositors claim would be solely for the principal
amount of his or her deposit accounts plus accrued interest. Depositors would not have an interest
in the value of the assets of Oritani Bank or Oritani-Delaware above that amount.
The plan of conversion provides for the establishment, upon the completion of the conversion,
of a liquidation account by Oritani-Delaware for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders in an amount equal to (i) Oritani Financial Corp., MHCs
ownership interest in Oritani-Federals total stockholders equity as of the date of its latest
statement of financial condition contained in this prospectus plus (ii) the value of the net assets
of Oritani Financial Corp., MHC as of the date of the latest statement of financial condition of
Oritani Financial Corp., MHC prior to the consummation of the conversion (excluding its ownership
of Oritani-Delaware). The plan of conversion also provides for the establishment of a bank
liquidation account at Oritani Bank to support the Oritani-Delaware liquidation account in the
event Oritani-Delaware does not have sufficient capital resources to fund its obligation under the
Oritani-Delaware liquidation account.
The liquidation account established by Oritani-Delaware is designed to provide depositors a
liquidation interest (exchanged for the liquidation interest such persons had in Oritani Financial
Corp., MHC) after the conversion in the event of a liquidation of Oritani-Delaware and Oritani Bank
or a liquidation solely of Oritani Bank. Specifically, in the unlikely event that either (i)
Oritani Bank or (ii) Oritani-Delaware and Oritani Bank were to liquidate after the conversion, all
claims of creditors, including those of depositors, would be paid first, followed by distribution
to depositors as of December 31, 2008 and March 31, 2010 of their interests in the liquidation
account maintained by Oritani-Delaware. Also, in a complete liquidation of both entities, or of
Oritani Bank, when Oritani-Delaware has
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insufficient assets (other than the stock of Oritani Bank), to fund the liquidation account
distribution due to Eligible Account Holders and Supplemental Eligible Account Holders and Oritani
Bank has positive net worth, Oritani Bank shall immediately make a distribution to fund
Oritani-Delawares remaining obligations under the liquidation account. If Oritani-Delaware is
completely liquidated or sold apart from a sale or liquidation of Oritani Bank, then the
Oritani-Delaware liquidation account will cease to exist and Eligible Account Holders and
Supplemental Eligible Account Holders will receive an equivalent interest in the Oritani Bank
liquidation account, subject to the same rights and terms as the liquidation account. In no event
will any Eligible Account Holder or Supplemental Eligible Account Holder be entitled to a
distribution that exceeds such holders interest in the liquidation account maintained by
Oritani-Delaware.
Pursuant to the plan of conversion, after two years from the date of conversion and upon the
written request of the OTS, Oritani-Delaware will transfer the liquidation account and the
depositors interests in such account to Oritani Bank and the liquidation account shall thereupon
become the liquidation account of Oritani Bank.
Under the rules and regulations of the OTS, a post-conversion merger, consolidation, or
similar combination or transaction with another depository institution or depository institution
holding company in which Oritani-Delaware or Oritani Bank is not the surviving institution would
not be considered a liquidation. In such a transaction, the liquidation account would be assumed
by the surviving institution or company.
Each Eligible Account Holder or Supplemental Eligible Account Holder would have an initial pro
rata interest in the liquidation account for each deposit account, including savings accounts,
transaction accounts such as negotiable order of withdrawal accounts, money market deposit
accounts, and certificates of deposit, with a balance of $50.00 or more held in Oritani Bank on
December 31, 2008 or March 31, 2010 equal to the proportion that the balance of each Eligible
Account Holder and Supplemental Eligible Account Holders deposit account on December 31, 2008 or
March 31, 2010 respectively, bears to the balance of all deposit accounts of Eligible Account
Holders and Supplemental Eligible Account Holders in Oritani Bank on such dates.
If, however, on any June 30 annual closing date commencing after the effective date of the
conversion, the amount in any such deposit account is less than the amount in the deposit account
on December 31, 2008 or March 31, 2010, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced from time to time by the
proportion of any such reduction, and such interest will cease to exist if such deposit account is
closed. In addition, no interest in the liquidation account would ever be increased despite any
subsequent increase in the related deposit account. Payment pursuant to liquidation rights of
Eligible Account Holders and Supplemental Eligible Account Holders would be separate and apart from
the payment of any insured deposit accounts to such depositors. Any assets remaining after the
above liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders are
satisfied would be available for distribution to stockholders.
Material Income Tax Consequences
Completion of the conversion is subject to the prior receipt of an opinion of counsel or tax
advisor with respect to federal and state income tax consequences of the conversion to Oritani
Financial MHC, Oritani-Federal, Oritani Bank or Oritani-Delaware, Eligible Account Holders and
Supplemental Eligible Account Holders of Oritani-Delaware. Unlike private letter rulings, the
opinions of counsel or tax advisors are not binding on the Internal Revenue Service or any state
taxing authority, and such authorities may disagree with such opinions. In the event of such
disagreement, there can be no assurance that Oritani-Delaware or Oritani Bank would prevail in a
judicial proceeding.
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We have received an opinion of counsel Luse Gorman Pomerenk & Schick as to the federal tax
consequences of the conversion. We have received an opinion of KPMG LLP to the effect that, more
likely than not, the income tax consequences under New Jersey law of the offering are not
materially different than for federal income tax purposes.
Luse Gorman Pomerenk & Schick, has issued an opinion to Oritani Financial Corp., MHC,
Oritani-Federal, Oritani Bank and Oritani-Delaware that for federal income tax purposes:
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1. |
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The merger of Oritani Financial Corp., MHC with and into Oritani-Federal will
qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code. |
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2. |
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The constructive exchange of Eligible Account Holders and Supplemental
Eligible Account Holders liquidation interests in Oritani Financial Corp., MHC for
liquidation interests in Oritani-Federal will satisfy the continuity of interest
requirement of Section 1.368-1(b) of the Federal Income Tax Regulations. |
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None of Oritani Financial Corp., MHC, Oritani-Federal, Eligible Account Holders
nor Supplemental Eligible Account Holders, will recognize any gain or loss on the
transfer of the assets of Oritani Financial Corp., MHC to Oritani-Federal in
constructive exchange for liquidation interests established in Oritani-Federal for the
benefit of such persons who remain depositors of Oritani Bank. |
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4. |
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The basis of the assets of Oritani Financial Corp., MHC and the holding period
of such assets to be received by Oritani-Federal will be the same as the basis and
holding period or such assets in Oritani Financial Corp., MHC immediately before the
exchange. |
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5. |
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The merger of Oritani-Federal with and into Oritani-Delaware will constitute a
mere change in identity, form or place of organization within the meaning of Section
368(a)(1)(F) of the Code and therefore will qualify as a tax-free reorganization within
the meaning of Section 368(a)(1)(F) of the Code. Neither Oritani-Federal nor
Oritani-Delaware will recognize gain or loss as a result of such merger. |
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The basis of the assets of Oritani-Federal and the holding period of such
assets to be received by Oritani-Delaware will be the same as the basis and holding
period or such assets of Oritani-Federal immediately before the exchange. |
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7. |
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Current stockholders of Oritani-Federal will not recognize any gain or loss
upon their exchange of Oritani-Federal common stock for Oritani-Delaware common stock. |
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8. |
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Eligible Account Holders and Supplemental Eligible Account Holders will not
recognize any gain or loss upon the constructive exchange of their liquidation
interests in Oritani-Federal for interests in the liquidation account in
Oritani-Delaware. |
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9. |
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The constructive exchange of the Eligible Account Holders and Supplemental
Eligible Account Holders liquidation interests in Oritani-Federal for interests in the
liquidation account established in Oritani-Delaware will satisfy the continuity of
interest requirement of Section 1.368-1(b) of the Federal Income Tax Regulations. |
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10. |
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Each stockholders aggregate basis in shares of Oritani-Delaware common stock
(including fractional share interests) received in the exchange will be the same as the
aggregate basis of Oritani-Federal common stock surrendered in the exchange. |
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11. |
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Each stockholders holding period in his or her Oritani-Delaware common stock
received in the exchange will include the period during which the Oritani-Federal
common stock surrendered was held, provided that the Oritani-Federal common stock
surrendered is a capital asset in the hands of the stockholder on the date of the
exchange. |
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12. |
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Cash received by any current stockholder of Oritani-Federal in lieu of a
fractional share interest in shares of Oritani-Delaware common stock will be treated as
having been received as a distribution in full payment in exchange for a fractional
share interest of Oritani-Delaware common stock, which such stockholder would otherwise
be entitled to receive. Accordingly, a stockholder will recognize gain or loss equal to
the difference between the cash received and the basis of the fractional share. If the
common stock is held by the stockholder as a capital asset, the gain or loss will be
capital gain or loss. |
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13. |
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It is more likely than not that the fair market value of the nontransferable
subscription rights to purchase Oritani-Delaware common stock is zero. Accordingly, no
gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible
Account Holders or Other Members upon distribution to them of nontransferable
subscription rights to purchase shares of Oritani-Delaware common stock. Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members will not
realize any taxable income as the result of the exercise by them of the nontransferable
subscriptions rights. |
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It is more likely than not that the fair market value of the benefit provided
by the liquidation account of Oritani Bank supporting the payment of the
Oritani-Delaware liquidation account in the event Oritani-Delaware lacks sufficient net
assets is zero. Accordingly, it is more likely than not that no gain or loss will be
recognized by Eligible Account Holders and Supplemental Eligible Account Holders upon
the constructive distribution to them of such rights in the Oritani Bank liquidation
account as of the effective date of the merger of Oritani-Federal with and into
Oritani-Delaware. |
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15. |
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It is more likely than not that the basis of the shares of Oritani-Delaware
common stock purchased in the offering by the exercise of nontransferable subscription
rights will be the purchase price. The holding period of the Oritani-Delaware common
stock purchased pursuant to the exercise of nontransferable subscription rights will
commence on the date on which the right to acquire such stock was exercised. |
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16. |
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No gain or loss will be recognized by Oritani-Delaware on the receipt of money
in exchange for Oritani-Delaware common stock sold in the offering. |
We believe that the tax opinions summarized above address all material federal income tax
consequences that are generally applicable to Oritani Financial Corp., MHC, Oritani-Federal,
Oritani Bank, Oritani-Delaware and persons receiving subscription rights and shareholders of
Oritani-Federal. The tax opinion as to items 8 and 13 above is based on the position that
subscription rights to be received by Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members do not have any economic value at the time of distribution or the time
the subscription rights are exercised. In this regard, Luse Gorman Pomerenk & Schick noted that the
subscription rights will be granted at no cost to the recipients, are legally non-transferable and
of short duration, and will provide the recipient with the right only to purchase shares of common
stock at the same price to be paid by members of the general
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public in any community offering. The firm also noted that the Internal Revenue Service has
not in the past concluded that subscription rights have value. Based on the foregoing, Luse Gorman
Pomerenk & Schick believes that it is more likely than not that the nontransferable subscription
rights to purchase shares of common stock have no value. However, the issue of whether or not the
nontransferable subscription rights have value is based on all the facts and circumstances. If the
subscription rights granted to Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members are deemed to have an ascertainable value, receipt of these rights could result in
taxable gain to those Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members who exercise the subscription rights in an amount equal to the ascertainable value, and we
could recognize gain on a distribution. Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members are encouraged to consult with their own tax advisors as to the tax
consequences in the event that subscription rights are deemed to have an ascertainable value.
The opinion as to item 14 above is based on the position that Oritani-Delaware: (i) there is
no history of any holder of a liquidation account receiving any payment attributable to a
liquidation account; (ii) the interests in the liquidation accounts are not transferable; (iii) the
amounts due under the liquidation account with respect to each Eligible Account Holder and
Supplemental Eligible Account Holder will be reduced as their deposits in Oritani Bank are reduced;
and (iv) the Oritani Bank liquidation account payment obligation arises only if Oritani-Delaware
lacks sufficient assets to fund the liquidation account.
We also have received a letter from RP Financial stating its belief that the subscription
rights do not have any ascertainable fair market value and that the price at which the subscription
rights are exercisable will not be more or less than the fair market value of the shares on the
date of the exercise. This position is based on the fact that these rights are acquired by the
recipients without cost, are nontransferable and of short duration, and afford the recipients the
right only to purchase the common stock at the same price as will be paid by members of the general
public in any community offering.
In addition, we have received a letter from RP Financial stating its belief that the benefit
provided by the Oritani Bank liquidation account supporting the payment of the liquidation account
in the event Oritani-Delaware lacks sufficient net assets does not have any economic value at the
time of the merger of Oritani-Federal and Oritani-Delaware. Based on the foregoing, Luse Gorman
Pomerenk & Schick believes it is more likely than not that such rights in the Oritani Bank
liquidation account have no value. If such rights are subsequently found to have an economic value,
income may be recognized by each Eligible Account Holder or Supplemental Eligible Account Holder in
the amount of such fair market value as of the date of the merger of Oritani-Federal and
Oritani-Delaware.
We do not plan to apply for a private letter ruling from the Internal Revenue Service
concerning the transactions described herein. Unlike private letter rulings issued by the Internal
Revenue Service, opinions of counsel are not binding on the Internal Revenue Service or any state
tax authority, and such authorities may disagree with such opinions. In the event of such
disagreement, there can be no assurance that the conclusions reached in an opinion of counsel would
be sustained by a court if contested by the Internal Revenue Service.
The federal tax opinion has been filed with the Securities and Exchange Commission as an
exhibit to Oritani-Delawares registration statement. Advice regarding the New Jersey income tax
consequences consistent with the federal tax opinion is expected to be issued by KPMG LLP, tax
advisors to Oritani Financial Corp., MHC and Oritani-Federal.
Certain Restrictions on Purchase or Transfer of Our Shares after the Conversion
All shares of common stock purchased in the offering by a director or an executive officer of
Oritani Bank generally may not be sold for a period of one year following the closing of the
conversion,
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except in the event of the death of the director or executive officer. Each certificate for
restricted shares will bear a legend giving notice of this restriction on transfer, and
instructions will be issued to the effect that any transfer within this time period of any
certificate or record ownership of the shares other than as provided above is a violation of the
restriction. Any shares of common stock issued at a later date as a stock dividend, stock split, or
otherwise, with respect to the restricted stock will be similarly restricted. The directors and
executive officers of Oritani-Delaware also will be restricted by the insider trading rules
promulgated pursuant to the Securities Exchange Act of 1934.
Purchases of shares of our common stock by any of our directors, executive officers and their
associates, during the three-year period following the closing of the conversion may be made only
through a broker or dealer registered with the Securities and Exchange Commission, except with the
prior written approval of the OTS. This restriction does not apply, however, to negotiated
transactions involving more than 1% of our outstanding common stock or to purchases of our common
stock by our stock-based incentive plan or any of our tax-qualified employee stock benefit plans or
non-tax-qualified employee stock benefit plans.
OTS regulations prohibit Oritani-Delaware from repurchasing its shares of common stock during
the first year following the conversion unless compelling business reasons exist for such
repurchases. After one year, the OTS does not impose any repurchase restrictions.
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COMPARISON OF STOCKHOLDERS RIGHTS FOR EXISTING
STOCKHOLDERS OF ORITANI-FEDERAL
General. As a result of the conversion, existing stockholders of Oritani-Federal will become
stockholders of Oritani-Delaware. There are differences in the rights of stockholders of
Oritani-Federal and stockholders of Oritani-Delaware caused by differences between federal and
Delaware law and regulations and differences in Oritani-Federals federal stock charter and bylaws
and Oritani-Federals Delaware certificate of incorporation and bylaws.
This discussion is not intended to be a complete statement of the differences affecting the
rights of stockholders, but rather summarizes the material differences and similarities affecting
the rights of stockholders. See Where You Can Find Additional Information for procedures for
obtaining a copy of Oritani-Delawares certificate of incorporation and bylaws.
Authorized Capital Stock. The authorized capital stock of Oritani-Federal consists of
80,000,000 shares of common stock, $0.01 par value per share, and 10,000,000 shares of preferred
stock, par value $0.01 per share.
The authorized capital stock of Oritani-Delaware consists of 150,000,000 shares of common
stock, $0.01 par value per share, and 25,000,000 shares of preferred stock, $0.01 par value per
share.
Under the Delaware General Corporation Law and Oritani-Delawares certificate of
incorporation, the Board of Directors may increase or decrease the number of authorized shares
without stockholder approval. Stockholder approval is required to increase or decrease the number
of authorized shares of Oritani-Federal.
Oritani-Federals charter and Oritani-Federals certificate of incorporation both authorize
the Board of Directors to establish one or more series of preferred stock and, for any series of
preferred stock, to determine the terms and rights of the series, including voting rights, dividend
rights, conversion and redemption rates and liquidation preferences. As a result of the ability to
fix voting rights for a series of preferred stock, our Board of Directors has the power, to the
extent consistent with its fiduciary duty, to issue a series of preferred stock to persons friendly
to management in order to attempt to block a hostile tender offer, merger or other transaction by
which a third party seeks control. We currently have no plans for the issuance of additional
shares for such purposes.
Issuance of Capital Stock. Pursuant to applicable laws and regulations, Oritani Financial
Corp., MHC is required to own not less than a majority of the outstanding shares of Oritani-Federal
common stock. Oritani Financial Corp., MHC will no longer exist following consummation of the
conversion.
Oritani-Delawares certificate of incorporation does not contain restrictions on the issuance
of shares of capital stock to directors, officers or controlling persons, whereas Oritani-Federals
stock charter restricts such issuances to general public offerings, or to directors for qualifying
shares, unless the share issuance or the plan under which they would generally be issued has been
approved by a majority of the total votes eligible to be cast at a legal stockholders meeting.
However, stock-based compensation plans, such as stock option plans and restricted stock plans,
would have to be submitted for approval by Oritani-Delaware stockholders due to requirements of the
Nasdaq Stock Market and in order to qualify stock options for favorable federal income tax
treatment.
Voting Rights. Neither Oritani-Federals stock charter or bylaws nor Oritani-Delawares
certificate of incorporation or bylaws provide for cumulative voting for the election of directors.
For
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additional information regarding voting rights, see Limitations on Voting Rights of
Greater-than-10% Stockholders below.
Payment of Dividends. Oritani-Federals ability to pay dividends depends, to a large extent,
upon Oritani Banks ability to pay dividends to Oritani-Federal. The New Jersey Banking Code
states, in part, that dividends may be declared and paid by Oritani Bank only out of accumulated
net earnings. A dividend may not be declared or paid unless the surplus, prior to the transfer of
net earnings, would not be reduced by the payment of such dividend. Dividends may also not be
declared or paid if Oritani Bank is in default in payment of any assessment due to the FDIC.
The same restrictions will apply to Oritani Banks payment of dividends to Oritani-Delaware.
In addition, Delaware law generally provides that Oritani-Delaware is limited to paying dividends
in an amount equal to its capital surplus over payments that would be owed upon dissolution to
stockholders whose preferential rights upon dissolution are superior to those receiving the
dividend, and to an amount that would not make it insolvent.
Board of Directors. Oritani-Federals bylaws and Oritani-Delawares certificate of
incorporation and bylaws require the Board of Directors to be divided into three classes and that
the members of each class shall be elected for a term of three years and until their successors are
elected and qualified, with one class being elected annually.
Under Oritani-Federals bylaws, any vacancies on the Board of Directors of Oritani-Federal may
be filled by the affirmative vote of a majority of the remaining directors although less than a
quorum of the Board of Directors. Persons elected by the Board of Directors of Oritani-Federal to
fill vacancies may only serve until the next annual meeting of stockholders. Under
Oritani-Delawares bylaws, any vacancy occurring on the Board of Directors, including any vacancy
created by reason of an increase in the number of directors, may be filled only by a majority of
the remaining directors, and any director so chosen shall hold office for the remainder of the term
to which the director has been elected and until his or her successor is elected and qualified.
Under Oritani-Federals bylaws, any director may be removed for cause by the holders of a
majority of the outstanding voting shares. Oritani-Delawares certificate of incorporation provide
that any director may be removed for cause by the holders of at least a majority of the outstanding
voting shares of Oritani-Delaware.
Limitations on Liability. The charter and bylaws of Oritani-Federal do not limit the personal
liability of directors.
Oritani-Delawares certificate of incorporation provides that directors will not be personally
liable for monetary damages to Oritani-Delaware for certain actions as directors, except for (i)
receipt of an improper personal benefit from their positions as directors, (ii) actions or
omissions that are determined to have involved active and deliberate dishonesty, or (iii) to the
extent allowed by Delaware law. These provisions might, in certain instances, discourage or deter
stockholders or management from bringing a lawsuit against directors for a breach of their duties
even though such an action, if successful, might benefit Oritani-Delaware.
Indemnification of Directors, Officers, Employees and Agents. Under current OTS regulations,
Oritani-Federal shall indemnify its directors, officers and employees for any costs incurred in
connection with any litigation involving such persons activities as a director, officer or
employee if such person obtains a final judgment on the merits in his or her favor. In addition,
indemnification is permitted in the case of a settlement, a final judgment against such person, or
final judgment other than on the merits, if a
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majority of disinterested directors determines that such person was acting in good faith
within the scope of his or her employment as he or she could reasonably have perceived it under the
circumstances and for a purpose he or she could reasonably have believed under the circumstances
was in the best interests of Oritani-Federal or its stockholders. Oritani-Federal also is permitted
to pay ongoing expenses incurred by a director, officer or employee if a majority of disinterested
directors concludes that such person may ultimately be entitled to indemnification. Before making
any indemnification payment, Oritani-Federal is required to notify the OTS of its intention, and
such payment cannot be made if the OTS objects to such payment.
The certificate of incorporation of Oritani-Delaware provides that it shall indemnify its
current and former directors and officers to the fullest extent required or permitted by Delaware
law, including the advancement of expenses. Delaware law allows Oritani-Delaware to indemnify any
person for expenses, liabilities, settlements, judgments and fines in suits in which such person
has been made a party by reason of the fact that he or she is or was a director, officer or
employee of Oritani-Delaware. No such indemnification may be given if the acts or omissions of the
person are adjudged to be in bad faith and material to the matter giving rise to the proceeding, if
such person is liable to the corporation for an unlawful distribution, or if such person personally
received a benefit to which he or she was not entitled. The right to indemnification includes the
right to be paid the expenses incurred in advance of final disposition of a proceeding.
Special Meetings of Stockholders. Oritani-Federals bylaws provide that special meetings of
Oritani-Federals stockholders may be called by the Chairman, the president, a majority of the
members of the Board of Directors or the holders of not less than one-tenth of the outstanding
capital stock of Oritani-Federal entitled to vote at the meeting. Oritani-Delawares bylaws provide
that special meetings of the stockholders of Oritani-Delaware may be called by the president, by a
majority vote of the total authorized directors, or upon the written request of stockholders
entitled to cast at least a majority of all votes entitled to vote at the meeting.
Stockholder Nominations and Proposals. Oritani-Federals bylaws generally provide that
stockholders may submit nominations for election of directors at an annual meeting of stockholders
and may propose any new business to be taken up at such a meeting by filing the proposal in writing
with Oritani-Federal at least five days before the date of any such meeting.
Oritani-Delawares bylaws generally provide that any stockholder desiring to make a nomination
for the election of directors or a proposal for new business at a meeting of stockholders must
submit written notice to Oritani-Delaware at least 80 days prior and not earlier than 90 days prior
to such meeting. However, if less than 90 days notice or prior public disclosure of the date of
the meeting is given to stockholders, such written notice must be submitted by a stockholder not
later than the tenth day following the day on which notice of the meeting was mailed to
stockholders or such public disclosure was made.
Management believes that it is in the best interests of Oritani-Delaware and its stockholders
to provide sufficient time to enable management to disclose to stockholders information about a
dissident slate of nominations for directors. This advance notice requirement may also give
management time to solicit its own proxies in an attempt to defeat any dissident slate of
nominations, should management determine that doing so is in the best interests of stockholders
generally. Similarly, adequate advance notice of stockholder proposals will give management time to
study such proposals and to determine whether to recommend to the stockholders that such proposals
be adopted. In certain instances, such provisions could make it more difficult to oppose
managements nominees or proposals, even if stockholders believe such nominees or proposals are in
their best interests.
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Stockholder Action Without a Meeting. The bylaws of Oritani-Federal provide that any action to
be taken or which may be taken at any annual or special meeting of stockholders may be taken if a
consent in writing, setting forth the actions so taken, is given by the holders of all outstanding
shares entitled to vote. The bylaws of Oritani-Delaware do not provide for action to be taken by
stockholders without a meeting. Under Delaware law, action may be taken by stockholders without a
meeting if all stockholders entitled to vote on the action consent to taking such action without a
meeting.
Stockholders Right to Examine Books and Records. A federal regulation, which is applicable to
Oritani-Federal, provides that stockholders may inspect and copy specified books and records after
proper written notice for a proper purpose. Delaware law provides that a stockholder may inspect a
companys bylaws, stockholder minutes, annual statement of affairs and any voting trust agreements.
However, only a stockholder or group of stockholders who together, for at least six months, hold at
least 5.0% of the companys total shares, have the right to inspect a companys stock ledger, list
of stockholders and books of accounts.
Limitations on Voting Rights of Greater-than-10% Stockholders. Oritani-Delawares certificate
of incorporation provides that no beneficial owner, directly or indirectly, of more than 10.0% of
the outstanding shares of common stock will be permitted to vote any shares in excess of such 10.0%
limit. Oritani-Federals charter does not provide such a limit on voting common stock.
In addition, OTS regulations provide that for a period of three years following the date of
the completion of the offering, no person, acting singly or together with associates in a group of
persons acting in concert, may directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10.0% of a class of Oritani-Delawares equity securities without the prior
written approval of the OTS. Where any person acquires beneficial ownership of more than 10.0% of a
class of Oritani-Delawares equity securities without the prior written approval of the OTS, the
securities beneficially owned by such person in excess of 10.0% may not be voted by any person or
counted as voting shares in connection with any matter submitted to the stockholders for a vote,
and will not be counted as outstanding for purposes of determining the affirmative vote necessary
to approve any matter submitted to the stockholders for a vote.
Mergers, Consolidations and Sales of Assets. A federal regulation applicable to
Oritani-Federal generally requires the approval of two-thirds of the Board of Directors of
Oritani-Federal and the holders of two-thirds of the outstanding stock of Oritani-Federal entitled
to vote thereon for mergers, consolidations and sales of all or substantially all of
Oritani-Federals assets. Such regulation permits Oritani-Federal to merge with another corporation
without obtaining the approval of its stockholders if:
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it does not involve an interim savings institution; |
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(ii) |
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Oritani-Federals federal stock charter is not changed; |
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(iii) |
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each share of Oritani-Federals stock outstanding immediately prior to the
effective date of the transaction will be an identical outstanding share or a treasury
share of Oritani-Federal after such effective date; and |
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(iv) |
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either: |
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no shares of voting stock of Oritani-Federal and no securities
convertible into such stock are to be issued or delivered under the plan of
combination; or |
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(b) |
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the authorized but unissued shares or the treasury shares of
voting stock of Oritani-Federal to be issued or delivered under the plan of
combination, plus those initially issuable upon conversion of any securities to
be issued or delivered under such plan, do not exceed 15.0% of the total shares
of voting stock of |
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Oritani-Federal outstanding immediately prior to the effective date of the
transaction. |
Under Delaware law, business combinations between Oritani-Delaware and an interested
stockholder or an affiliate of an interested stockholder are prohibited for five years after the
most recent date on which the interested stockholder becomes an interested stockholder. These
business combinations include a merger, consolidation, statutory share exchange or, in
circumstances specified in the statute, certain transfers of assets, certain stock issuances and
transfers, liquidation plans and reclassifications involving interested stockholders and their
affiliates or issuance or reclassification of equity securities. Delaware law defines an interested
stockholder as: (i) any person who beneficially owns 10.0% or more of the voting power of
Oritani-Delawares voting stock after the date on which Oritani-Delaware had 100 or more beneficial
owners of its stock; or (ii) an affiliate or associate of Oritani-Delaware at any time after the
date on which Oritani-Delaware had 100 or more beneficial owners of its stock who, within the
two-year period prior to the date in question, was the beneficial owner of 10.0% or more of the
voting power of the then-outstanding voting stock of Oritani-Delaware. A person is not an
interested stockholder under the statute if the Board of Directors approved in advance the
transaction by which the person otherwise would have become an interested stockholder. However, in
approving a transaction, the Board of Directors may provide that its approval is subject to
compliance, at or after the time of approval, with any terms and conditions determined by the Board
of Directors.
After the five-year prohibition, any business combination between Oritani-Delaware and an
interested stockholder generally must be recommended by the Board of Directors of Oritani-Delaware
and approved by the affirmative vote of at least: (i) 80% of the votes entitled to be cast by
holders of outstanding shares of voting stock of Oritani-Delaware, and (ii) two-thirds of the votes
entitled to be cast by holders of voting stock of Oritani-Delaware other than shares held by the
interested stockholder with whom or with whose affiliate the business combination is to be effected
or held by an affiliate or associate of the interested stockholder. These super-majority vote
requirements do not apply if Oritani-Delawares common stockholders receive a minimum price, as
defined under Delaware law, for their shares in the form of cash or other consideration in the same
form as previously paid by the interested stockholder for its shares.
Evaluation of Offers. The certificate of incorporation of Oritani-Delaware provides that its
Board of Directors, when evaluating a transaction that would or may involve a change in control of
Oritani-Delaware (whether by purchases of its securities, merger, consolidation, share exchange,
dissolution, liquidation, sale of all or substantially all of its assets, proxy solicitation or
otherwise), may, in connection with the exercise of its business judgment in determining what is in
the best interests of Oritani-Delaware and its stockholders and in making any recommendation to the
stockholders, give due consideration to all relevant factors, including, but not limited to:
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the economic effect, both immediate and long-term, upon Oritani-Delawares
stockholders, including stockholders, if any, who do not participate in the
transaction; |
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the social and economic effect on the present and future employees, creditors and
customers of, and others dealing with, Oritani-Delaware and its subsidiaries and on the
communities in which Oritani-Delaware and its subsidiaries operate or are located; |
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whether the proposal is acceptable based on the historical, current or projected
future operating results or financial condition of Oritani-Delaware; |
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whether a more favorable price could be obtained for Oritani-Delawares stock or
other securities in the future;
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the reputation and business practices of the other entity to be involved in the
transaction and its management and affiliates as they would affect the employees of
Oritani-Delaware and its subsidiaries; |
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the future value of the stock or any other securities of Oritani-Delaware or the
other entity to be involved in the proposed transaction; |
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any antitrust or other legal and regulatory issues that are raised by the proposal; |
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the business and historical, current or expected future financial condition or
operating results of the other entity to be involved in the transaction, including, but
not limited to, debt service and other existing financial obligations, financial
obligations to be incurred in connection with the proposed transaction, and other
likely financial obligations of the other entity to be involved in the proposed
transaction; and |
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the ability of Oritani-Delaware to fulfill its objectives as a financial institution
holding company and on the ability of its subsidiary financial institution(s) to
fulfill the objectives of a federally insured financial institution under applicable
statutes and regulations. |
If the Board of Directors determines that any proposed transaction should be rejected, it may
take any lawful action to defeat such transaction.
Oritani-Federals charter and bylaws do not contain a similar provision.
Dissenters Rights of Appraisal. OTS regulations generally provide that a stockholder of a
federally chartered corporation that engages in a merger, consolidation or sale of all or
substantially all of its assets shall have the right to demand from such institution payment of the
fair or appraised value of his or her stock in the corporation, subject to specified procedural
requirements. The regulations also provide, however, that a stockholder of a federally chartered
corporation whose shares are listed on a national securities exchange or quoted on the Nasdaq stock
market are not entitled to dissenters rights in connection with a merger if the stockholder is
required to accept only qualified consideration for his or her stock, which is defined to include
cash, shares of stock of any institution or corporation that at the effective date of the merger
will be listed on a national securities exchange or quoted on the Nasdaq stock market, or any
combination of such shares of stock and cash.
Under Delaware law, stockholders of Oritani-Delaware will not have dissenters appraisal
rights in connection with a plan of merger or consolidation to which Oritani-Delaware is a party as
long as the common stock of Oritani-Delaware trades on the Nasdaq Global Market.
Amendment of Governing Instruments. No amendment of Oritani-Federals stock charter may be
made unless it is first proposed by the Board of Directors of Oritani-Federal, then preliminarily
approved by the OTS, and thereafter approved by the holders of a majority of the total votes
eligible to be cast at a legal meeting.
Oritani-Delawares certificate of incorporation may be amended, upon the submission of an
amendment by the Board of Directors to a vote of the stockholders, by the affirmative vote of at
least two-thirds of the outstanding shares of common stock, or by the affirmative vote of a
majority of the outstanding shares of common stock if at least two-thirds of the members of the
whole Board of Directors approves such amendment; provided, however, that approval by at least 80%
of the outstanding voting stock is generally required to amend the following provisions:
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The limitation on voting rights of persons who directly or indirectly
beneficially own more than 10.0% of the outstanding shares of common stock; |
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The division of the Board of Directors into three staggered classes; |
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The ability of the Board of Directors to fill vacancies on the board; |
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The requirement that at least a majority of the votes eligible to be cast by
stockholders must vote to remove directors, and can only remove directors for cause; |
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The ability of the Board of Directors to amend and repeal the bylaws; |
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The ability of the Board of Directors to evaluate a variety of factors in
evaluating offers to purchase or otherwise acquire Oritani-Delaware; |
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The authority of the Board of Directors to provide for the issuance of
preferred stock; |
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The validity and effectiveness of any action lawfully authorized by the affirmative
vote of the holders of a majority of the total number of outstanding shares of common
stock; |
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The number of stockholders constituting a quorum or required for stockholder
consent; |
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The indemnification of current and former directors and officers, as well as
employees and other agents, by Oritani-Delaware; |
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The limitation of liability of officers and directors to Oritani-Delaware for
money damages; |
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The inability of stockholders to cumulate their votes in the election of
directors; |
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The advance notice requirements for stockholder proposals and nominations; and |
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The provision of the certificate of incorporation requiring approval of at
least 80% of the outstanding voting stock to amend the provisions of the certificate of
incorporation provided in (i) through (xiii) of this list. |
The certificate of incorporation also provides that the bylaws may be amended by the
affirmative vote of a majority of our directors or by the stockholders by the affirmative vote of
at least 80% of the total votes eligible to be voted at a duly constituted meeting of stockholders.
Any amendment of this super-majority requirement for amendment of the bylaws would also require
the approval of 80% of the outstanding voting stock.
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RESTRICTIONS ON ACQUISITION OF ORITANI-DELAWARE
Although the Board of Directors of Oritani-Delaware is not aware of any effort that might be
made to obtain control of Oritani-Delaware after the conversion, the Board of Directors believes
that it is appropriate to include certain provisions as part of Oritani-Delawares certificate of
incorporation to protect the interests of Oritani-Delaware and its stockholders from takeovers
which our Board of Directors might conclude are not in the best interests of Oritani Bank,
Oritani-Delaware or Oritani-Delawares stockholders.
The following discussion is a general summary of the material provisions of Oritani-Delawares
certificate of incorporation and bylaws, Oritani Banks charter and bylaws and certain other
regulatory provisions that may be deemed to have an anti-takeover effect. The following
description of certain of these provisions is necessarily general and is not intended to be a
complete description of the document or regulatory provision in question. Oritani-Delawares
certificate of incorporation and bylaws are included as part of Oritani Financial Corp., MHCs
application for conversion filed with the OTS and Oritani-Delawares registration statement filed
with the Securities and Exchange Commission. See Where You Can Find Additional Information.
Certificate of Incorporation and Bylaws of Oritani-Delaware
Oritani-Delawares certificate of incorporation and bylaws contain a number of provisions
relating to corporate governance and rights of stockholders that may discourage future takeover
attempts. As a result, stockholders who might desire to participate in such transactions may not
have an opportunity to do so. In addition, these provisions will also render the removal of the
Board of Directors or management of Oritani-Delaware more difficult.
Directors. The Board of Directors will be divided into three classes. The members of each
class will be elected for a term of three years and only one class of directors will be elected
annually. Thus, it would take at least two annual elections to replace a majority of our Board of
Directors. Further, the bylaws impose notice and information requirements in connection with the
nomination by stockholders of candidates for election to the Board of Directors or the proposal by
stockholders of business to be acted upon at an annual meeting of stockholders.
Restrictions on Call of Special Meetings. The certificate of incorporation and bylaws provide
that special meetings of stockholders can be called by the President, by a majority of the whole
Board of Directors or upon the written request of stockholders entitled to cast at least a majority
of all votes entitled to vote at the meeting.
Prohibition of Cumulative Voting. The certificate of incorporation prohibits cumulative
voting for the election of directors.
Limitation of Voting Rights. The certificate of incorporation provides that in no event will
any person who beneficially owns more than 10.0% of the then-outstanding shares of common stock, be
entitled or permitted to vote any of the shares of common stock held in excess of the 10.0% limit.
Restrictions on Removing Directors from Office. The certificate of incorporation provides
that directors may be removed only for cause, and only by the affirmative vote of the holders of at
least a majority of the voting power of all of our then-outstanding common stock entitled to vote
(after giving effect to the limitation on voting rights discussed above in Limitation of Voting
Rights.)
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Authorized but Unissued Shares. After the conversion, Oritani-Delaware will have authorized
but unissued shares of common and preferred stock. See Description of Capital Stock of
Oritani-Delaware Following the Conversion. The certificate of incorporation authorizes 25,000,000
shares of serial preferred stock. Oritani-Delaware is authorized to issue preferred stock from
time to time in one or more series subject to applicable provisions of law, and the Board of
Directors is authorized to fix the designations, and relative preferences, limitations, voting
rights, if any, including without limitation, offering rights of such shares (which could be
multiple or as a separate class). In the event of a proposed merger, tender offer or other attempt
to gain control of Oritani-Delaware that the Board of Directors does not approve, it might be
possible for the Board of Directors to authorize the issuance of a series of preferred stock with
rights and preferences that would impede the completion of the transaction. An effect of the
possible issuance of preferred stock therefore may be to deter a future attempt to gain control of
Oritani-Delaware. The Board of Directors has no present plan or understanding to issue any
preferred stock.
Amendments to Certificate of Incorporation and Bylaws. Amendments to the certificate of
incorporation must be approved by our Board of Directors and also by at least a majority of the
outstanding shares of our voting stock; provided, however, that approval by at least 80% of the
outstanding voting stock is generally required to amend certain provisions. A list of these
provisions is provided under Comparison of Stockholders Rights For Existing Stockholders of
Oritani-FederalAmendment of Governing Instruments above.
The certificate of incorporation also provide that the bylaws may be amended by the
affirmative vote of a majority of Oritani-Delawares directors or by the stockholders by the
affirmative vote of at least 80% of the total votes eligible to be voted at a duly constituted
meeting of stockholders. Any amendment of this super-majority requirement for amendment of the
bylaws would also require the approval of 80% of the outstanding voting stock.
Business Combinations with Interested Stockholders. Under Delaware law, business
combinations between Oritani-Delaware and an interested stockholder or an affiliate of an
interested stockholder are prohibited for five years after the most recent date on which the
interested stockholder becomes an interested stockholder. These business combinations include a
merger, consolidation, statutory share exchange or, in circumstances specified in the statute,
certain transfers of assets, certain stock issuances and transfers, liquidation plans and
reclassifications involving interested stockholders and their affiliates or issuance or
reclassification of equity securities. Delaware law defines an interested stockholder as: (i) any
person who beneficially owns 10.0% or more of the voting power of Oritani-Delawares voting stock
after the date on which Oritani-Delaware had 100 or more beneficial owners of its stock; or (ii) an
affiliate or associate of Oritani-Delaware at any time after the date on which Oritani-Delaware had
100 or more beneficial owners of its stock who, within the two-year period prior to the date in
question, was the beneficial owner of 10.0% or more of the voting power of the then-outstanding
voting stock of Oritani-Delaware. A person is not an interested stockholder under the statute if
the Board of Directors approved in advance the transaction by which the person otherwise would have
become an interested stockholder. However, in approving a transaction, the Board of Directors may
provide that its approval is subject to compliance, at or after the time of approval, with any
terms and conditions determined by the Board of Directors.
After the five-year prohibition, any business combination between Oritani-Delaware and an
interested stockholder generally must be recommended by the Board of Directors of Oritani-Delaware
and approved by the affirmative vote of at least: (i) 80% of the votes entitled to be cast by
holders of outstanding shares of voting stock of Oritani-Delaware and (ii) two-thirds of the votes
entitled to be cast by holders of voting stock of Oritani-Delaware other than shares held by the
interested stockholder with whom or with whose affiliate the business combination is to be effected
or held by an affiliate or associate
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of the interested stockholder. These super-majority vote requirements do not apply if
Oritani-Delawares common stockholders receive a minimum price, as defined under Delaware law, for
their shares in the form of cash or other consideration in the same form as previously paid by the
interested stockholder for its shares.
Evaluation of Offers. The certificate of incorporation of Oritani-Delaware provides that its
Board of Directors, when evaluating a transaction that would or may involve a change in control of
Oritani-Delaware (whether by purchases of its securities, merger, consolidation, share exchange,
dissolution, liquidation, sale of all or substantially all of its assets, proxy solicitation or
otherwise), may, in connection with the exercise of its business judgment in determining what is in
the best interests of Oritani-Delaware and its stockholders and in making any recommendation to the
stockholders, give due consideration to all relevant factors, including, but not limited to:
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the economic effect, both immediate and long-term, upon Oritani-Delawares
stockholders, including stockholders, if any, who do not participate in the
transaction; |
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the social and economic effect on the present and future employees, creditors and
customers of, and others dealing with, Oritani-Delaware and its subsidiaries and on the
communities in which Oritani-Delaware and its subsidiaries operate or are located; |
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|
|
whether the proposal is acceptable based on the historical, current or projected
future operating results or financial condition of Oritani-Delaware; |
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|
whether a more favorable price could be obtained for Oritani-Delawares stock or
other securities in the future; |
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|
|
the reputation and business practices of the other entity to be involved in the
transaction and its management and affiliates as they would affect the employees of
Oritani-Delaware and its subsidiaries; |
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|
the future value of the stock or any other securities of Oritani-Delaware or the
other entity to be involved in the proposed transaction; |
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any antitrust or other legal and regulatory issues that are raised by the proposal; |
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the business and historical, current or expected future financial condition or
operating results of the other entity to be involved in the transaction, including, but
not limited to, debt service and other existing financial obligations, financial
obligations to be incurred in connection with the proposed transaction, and other
likely financial obligations of the other entity to be involved in the proposed
transaction; and |
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the ability of Oritani-Delaware to fulfill its objectives as a financial institution
holding company and on the ability of its subsidiary financial institution(s) to
fulfill the objectives of a federally insured financial institution under applicable
statutes and regulations. |
If the Board of Directors determines that any proposed transaction should be rejected, it may
take any lawful action to defeat such transaction.
Purpose and Anti-Takeover Effects of Oritani-Delawares Certificate of Incorporation and
Bylaws. Our Board of Directors believes that the provisions described above are prudent and will
reduce our vulnerability to takeover attempts and certain other transactions that have not been
negotiated with
188
and approved by our Board of Directors. These provisions also will assist us in the orderly
deployment of the offering proceeds into productive assets during the initial period after the
conversion. Our Board of Directors believes these provisions are in the best interests of
Oritani-Delaware and its stockholders. Our Board of Directors believes that it will be in the best
position to determine the true value of Oritani-Delaware and to negotiate more effectively for what
may be in the best interests of its stockholders. Accordingly, our Board of Directors believes that
it is in the best interests of Oritani-Delaware and its stockholders to encourage potential
acquirers to negotiate directly with the Board of Directors and that these provisions will
encourage such negotiations and discourage hostile takeover attempts. It is also the view of our
Board of Directors that these provisions should not discourage persons from proposing a merger or
other transaction at a price reflective of the true value of Oritani-Delaware and that is in the
best interests of all stockholders.
Takeover attempts that have not been negotiated with and approved by our Board of Directors
present the risk of a takeover on terms that may be less favorable than might otherwise be
available. A transaction that is negotiated and approved by our Board of Directors, on the other
hand, can be carefully planned and undertaken at an opportune time in order to obtain maximum value
of Oritani-Delaware for our stockholders, with due consideration given to matters such as the
management and business of the acquiring corporation and maximum strategic development of
Oritani-Delawares assets.
Although a tender offer or other takeover attempt may be made at a price substantially above
the current market price, such offers are sometimes made for less than all of the outstanding
shares of a target company. As a result, stockholders may be presented with the alternative of
partially liquidating their investment at a time that may be disadvantageous, or retaining their
investment in an enterprise that is under different management and whose objectives may not be
similar to those of the remaining stockholders.
Despite our belief as to the benefits to stockholders of these provisions of
Oritani-Delawares certificate of incorporation and bylaws, these provisions may also have the
effect of discouraging a future takeover attempt that would not be approved by our Board of
Directors, but pursuant to which stockholders may receive a substantial premium for their shares
over then current market prices. As a result, stockholders who might desire to participate in such
a transaction may not have any opportunity to do so. Such provisions will also make it more
difficult to remove our Board of Directors and management. Our Board of Directors, however, has
concluded that the potential benefits outweigh the possible disadvantages.
Following the conversion, pursuant to applicable law and, if required, following the approval
by stockholders, we may adopt additional anti-takeover provisions in our certificate of
incorporation or other devices regarding the acquisition of our equity securities that would be
permitted for a Delaware business corporation.
The cumulative effect of the restrictions on acquisition of Oritani-Delaware contained in our
certificate of incorporation and bylaws and in Delaware law may be to discourage potential takeover
attempts and perpetuate incumbent management, even though certain stockholders of Oritani-Delaware
may deem a potential acquisition to be in their best interests, or deem existing management not to
be acting in their best interests.
Conversion Regulations
OTS regulations prohibit any person from making an offer, announcing an intent to make an
offer or participating in any other arrangement to purchase stock or acquiring stock or
subscription rights in a converting institution or its holding company from another person prior to
completion of its conversion.
189
Further, without the prior written approval of the OTS, no person may make an offer or
announcement of an offer to purchase shares or actually acquire shares of an OTS regulated holding
company of a converted institution for a period of three years from the date of the completion of
the conversion if, upon the completion of such offer, announcement or acquisition, the person would
become the beneficial owner of more than 10.0% of the outstanding stock of the holding company. The
OTS has defined person to include any individual, group acting in concert, corporation,
partnership, association, joint stock company, trust, unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing
of securities of an insured institution. However, offers made exclusively to a bank or its holding
company, or an underwriter or member of a selling group acting on the converting institutions or
its holding companys behalf for resale to the general public are excepted. The regulation also
provides civil penalties for willful violation or assistance in any such violation of the
regulation by any person connected with the management of the converting institution or its holding
company or who controls more than 10.0% of the outstanding shares or voting rights of a converted
institution or its holding company.
Change in Control Regulations
Under the Change in Bank Control Act, no person may acquire control of an insured federal
savings bank or its parent holding company unless the OTS has been given 60 days prior written
notice and has not issued a notice disapproving the proposed acquisition. In addition, OTS
regulations provide that no company may acquire control of a savings bank without the prior
approval of the OTS. Any company that acquires such control becomes a savings and loan holding
company subject to registration, examination and regulation by the OTS.
Control, as defined under federal law, means ownership, control of or holding irrevocable
proxies representing more than 25% of any class of voting stock, control in any manner of the
election of a majority of the institutions directors, or a determination by the OTS that the
acquiror has the power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than 10.0% of any class of
a savings banks voting stock, if the acquiror is also subject to any one of eight control
factors, constitutes a rebuttable determination of control under the regulations. Such control
factors include the acquiror being one of the two largest stockholders. The determination of
control may be rebutted by submission to the OTS, prior to the acquisition of stock or the
occurrence of any other circumstances giving rise to such determination, of a statement setting
forth facts and circumstances which would support a finding that no control relationship will exist
and containing certain undertakings. The regulations provide that persons or companies which
acquire beneficial ownership exceeding 10.0% or more of any class of a savings banks stock who do
not intend to participate in or seek to exercise control over a savings banks management or
policies may qualify for a safe harbor by filing with the OTS a certification form that states,
among other things, that the holder is not in control of such institution, is not subject to a
rebuttable determination of control and will take no action which would result in a determination
or rebuttable determination of control without prior notice to or approval of the OTS, as
applicable. There are also rebuttable presumptions in the regulations concerning whether a group
acting in concert exists, including presumed action in concert among members of an immediate
family.
The OTS may prohibit an acquisition of control if it finds, among other things, that:
|
(i) |
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the acquisition would result in a monopoly or substantially lessen competition; |
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(ii) |
|
the financial condition of the acquiring person might jeopardize the financial
stability of the institution; or
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190
|
(iii) |
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the competence, experience or integrity of the acquiring person indicates that
it would not be in the interest of the depositors or the public to permit the
acquisition of control by such person. |
DESCRIPTION OF CAPITAL STOCK OF ORITANI-DELAWARE FOLLOWING THE CONVERSION
General
Oritani-Delaware is authorized to issue 150,000,000 shares of common stock, par value of $0.01
per share, and 25,000,000 shares of preferred stock, par value $0.01 per share. Oritani-Delaware
currently expects to issue in the offering up to 44,850,000 shares of common stock, subject to
adjustment in the offering, and up to 15,395,458 shares, subject to adjustment, in exchange for the
publicly held shares of Oritani-Federal. Oritani-Delaware will not issue shares of preferred stock
in the conversion. Each share of common stock will have the same relative rights as, and will be
identical in all respects to, each other share of common stock. Upon payment of the subscription
price for the common stock, in accordance with the Plan of Conversion and Reorganization, all of
the shares of common stock will be duly authorized, fully paid and nonassessable.
The shares of common stock of Oritani-Delaware will represent nonwithdrawable capital, will
not be an account of an insurable type, and will not be insured by the FDIC or any other government
agency.
Common Stock
Dividends. Oritani-Delaware may pay dividends to an amount equal to the excess of our capital
surplus over payments that would be owed upon dissolution to stockholders whose preferential rights
upon dissolution are superior to those receiving the dividend, and to an amount that would not make
us insolvent, as and when declared by our Board of Directors. The payment of dividends by
Oritani-Delaware is also subject to limitations that are imposed by law and applicable regulation,
including restrictions on payments of dividends that would reduce Oritani-Delawares capital below
the then-adjusted balance of its liquidation account. The holders of common stock of
Oritani-Delaware will be entitled to receive and share equally in dividends as may be declared by
our Board of Directors out of funds legally available therefor. If Oritani-Delaware issues shares
of preferred stock, the holders thereof may have a priority over the holders of the common stock
with respect to dividends.
Voting Rights. Upon consummation of the conversion, the holders of common stock of
Oritani-Delaware will have exclusive voting rights in Oritani-Delaware. They will elect
Oritani-Delawares Board of Directors and act on other matters as are required to be presented to
them under Delaware law or as are otherwise presented to them by the Board of Directors. Generally,
each holder of common stock will be entitled to one vote per share and will not have any right to
cumulate votes in the election of directors. Any person who beneficially owns more than 10.0% of
the then-outstanding shares of Oritani-Delawares common stock, however, will not be entitled or
permitted to vote any shares of common stock held in excess of the 10.0% limit. If
Oritani-Delaware issues shares of preferred stock, holders of the preferred stock may also possess
voting rights. Certain matters require an 80% stockholder vote.
As a New Jersey stock savings bank, corporate powers and control of Oritani Bank are vested in
its Board of Directors, who elect the officers of Oritani Bank and who fill any vacancies on the
Board of Directors. Voting rights of Oritani Bank are vested exclusively in the owners of the
shares of capital stock of Oritani Bank, which will be Oritani-Delaware, and voted at the direction
of Oritani-Delawares Board of Directors. Consequently, the holders of the common stock of
Oritani-Delaware will not have direct control of Oritani Bank.
191
Liquidation. In the event of any liquidation, dissolution or winding up of Oritani Bank,
Oritani-Delaware, as the holder of 100% of Oritani Banks capital stock, would be entitled to
receive all assets of Oritani Bank available for distribution, after payment or provision for
payment of all debts and liabilities of Oritani Bank, including all deposit accounts and accrued
interest thereon, and after distribution of the balance in the liquidation account to Eligible
Account Holders and Supplemental Eligible Account Holders. In the event of liquidation, dissolution
or winding up of Oritani-Delaware, the holders of its common stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities (including payments with
respect to the liquidation account of Oritani-Delaware), all of the assets of Oritani-Delaware
available for distribution. If preferred stock is issued, the holders thereof may have a priority
over the holders of the common stock in the event of liquidation or dissolution.
Preemptive Rights. Holders of the common stock of Oritani-Delaware will not be entitled to
preemptive rights with respect to any shares that may be issued. The common stock is not subject to
redemption.
Preferred Stock
None of the shares of Oritani-Delawares authorized preferred stock will be issued as part of
the offering or the conversion. Preferred stock may be issued with preferences and designations as
our Board of Directors may from time to time determine. Our Board of Directors may, without
stockholder approval, issue shares of preferred stock with voting, dividend, liquidation and
conversion rights that could dilute the voting strength of the holders of the common stock and may
assist management in impeding an unfriendly takeover or attempted change in control.
TRANSFER AGENT
The transfer agent and registrar for Oritani-Delawares common stock is Registrar and Transfer
Company, Cranford, New Jersey.
EXPERTS
The consolidated financial statements of Oritani-Federal and subsidiaries as of June 30, 2009
and 2008, and for each of the years in the three-year period ended June 30, 2009, have been
included herein in reliance upon the report of KPMG LLP, independent registered public accounting
firm, which is included herein and upon the authority of said firm as experts in accounting and
auditing.
The discussions related to state income taxes included under The Conversion and
OfferingMaterial Income Tax Consequences were prepared for us by KPMG LLP, independent
registered public accounting firm, and have been included herein upon the authority of said firm as
experts in tax matters.
RP Financial, LC. has consented to the publication herein of the summary of its report to
Oritani-Delaware setting forth its opinion as to the estimated pro forma market value of the shares
of common stock upon completion of the offering and its letter with respect to subscription rights.
LEGAL MATTERS
Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., counsel to Oritani-Delaware, Oritani
Financial Corp., MHC, Oritani-Federal and Oritani Bank, will issue to Oritani-Delaware its opinion
regarding the legality of the common stock and the federal income tax consequences of the
conversion. Certain legal matters will be passed upon for Stifel, Nicolaus & Company, Incorporated
by Sonnenschein Nath & Rosenthal LLP, Washington, D.C.
192
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Oritani-Delaware has filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 with respect to the shares of common stock offered
hereby. As permitted by the rules and regulations of the Securities and Exchange Commission, this
prospectus does not contain all the information set forth in the registration statement. Such
information, including the appraisal report which is an exhibit to the registration statement, can
be examined without charge at the public reference facilities of the Securities and Exchange
Commission located at 100 F Street, N.E., Washington, D.C. 20549, and copies of such material can
be obtained from the Securities and Exchange Commission at prescribed rates. The Securities and
Exchange Commission telephone number is 1-800-SEC-0330. In addition, the Securities and Exchange
Commission maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file electronically with
the Securities and Exchange Commission, including Oritani-Delaware. The statements contained in
this prospectus as to the contents of any contract or other document filed as an exhibit to the
registration statement are, of necessity, brief descriptions of the material terms of, and should
be read in conjunction with, such contract or document.
Oritani Financial Corp., MHC has filed with the OTS an Application on Form AC with respect to
the conversion. This prospectus omits certain information contained in the application. The
application may be examined at the principal office of the OTS, 1700 G Street, N.W., Washington,
D.C. 20552, and at the Northeast Regional Office of the OTS, Harborside Financial Center Plaza
Five, Suite 1600, Jersey City, New Jersey 07311. Our Plan of Conversion and Reorganization is
available, upon request, at each of our banking offices.
In connection with the offering, Oritani-Delaware will register its common stock under Section
12(b) of the Securities Exchange Act of 1934 and, upon such registration, Oritani-Delaware and the
holders of its common stock will become subject to the proxy solicitation rules, reporting
requirements and restrictions on common stock purchases and sales by directors, officers and
greater than 10% stockholders, the annual and periodic reporting and certain other requirements of
the Securities Exchange Act of 1934. Under the Plan of Conversion and Reorganization,
Oritani-Delaware has undertaken that it will not terminate such registration for a period of at
least three years following the offering.
193
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
ORITANI FINANCIAL CORP. AND ITS SUBSIDIARIES
***
All financial statement schedules have been omitted as the required information either is not
applicable or is included in the financial statements or related notes.
F-1
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Oritani Financial Corp.
Township of Washington, New Jersey:
We have audited the accompanying consolidated balance sheets of Oritani Financial Corp. and
subsidiaries (the Company) as of June 30, 2009 and 2008, and the related consolidated statements of
income, stockholders equity, and cash flows for each of the years in the three-year period ended
June 30, 2009. These consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Oritani Financial Corp. and subsidiaries as of June
30, 2009 and 2008, and the results of their operations and their cash flows for each of the years
in the three-year period ended June 30, 2009 in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Companys internal control over financial reporting as of June 30, 2009,
based on criteria established in Internal Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 11,
2009 expressed an unqualified opinion on the effectiveness of the Companys internal control over
financial reporting.
/s/ KPMG LLP
Short Hills, New Jersey
September 11, 2009
F-2
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
June 30, |
|
|
|
December 31, 2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash on hand and in banks |
|
$ |
5,479 |
|
|
$ |
7,729 |
|
|
$ |
7,332 |
|
Federal funds sold and short term investments |
|
|
20,853 |
|
|
|
127,640 |
|
|
|
1,558 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (note 3) |
|
|
26,332 |
|
|
|
135,369 |
|
|
|
8,890 |
|
|
Loans, net (notes 4 and 5) |
|
|
1,357,157 |
|
|
|
1,278,623 |
|
|
|
1,007,077 |
|
Securities available for sale, at market value (notes 7 and 12) |
|
|
320,439 |
|
|
|
144,419 |
|
|
|
22,285 |
|
Mortgage-backed securities held to maturity,
estimated market value of $88,223, $120,381 and $162,671 at
December 31, 2009, June 30, 2009 and 2008, respectively (notes 6 and 12) |
|
|
86,182 |
|
|
|
118,817 |
|
|
|
163,950 |
|
Mortgage-backed securities available for sale,
at market value (notes 7 and 12) |
|
|
98,513 |
|
|
|
128,603 |
|
|
|
149,209 |
|
Bank Owned Life Insurance (at cash surrender value) |
|
|
29,973 |
|
|
|
29,385 |
|
|
|
26,425 |
|
Federal Home Loan Bank of New York stock, at cost |
|
|
25,481 |
|
|
|
25,549 |
|
|
|
21,547 |
|
Accrued interest receivable (note 8) |
|
|
8,786 |
|
|
|
7,967 |
|
|
|
5,646 |
|
Investments in real estate joint ventures, net |
|
|
5,836 |
|
|
|
5,767 |
|
|
|
5,564 |
|
Real estate held for investment |
|
|
1,222 |
|
|
|
1,338 |
|
|
|
3,681 |
|
Real estate owned |
|
|
600 |
|
|
|
|
|
|
|
|
|
Office properties and equipment, net (note 9) |
|
|
14,730 |
|
|
|
13,777 |
|
|
|
9,287 |
|
Other assets (note 11) |
|
|
31,623 |
|
|
|
23,907 |
|
|
|
19,733 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,006,874 |
|
|
$ |
1,913,521 |
|
|
$ |
1,443,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits (note 10) |
|
$ |
1,210,507 |
|
|
$ |
1,127,630 |
|
|
$ |
698,932 |
|
Borrowings (note 12) |
|
|
507,439 |
|
|
|
508,991 |
|
|
|
433,672 |
|
Advance payments by borrowers for taxes and insurance |
|
|
9,347 |
|
|
|
8,301 |
|
|
|
7,024 |
|
Official checks outstanding |
|
|
3,884 |
|
|
|
2,699 |
|
|
|
4,143 |
|
Other liabilities (note 13) |
|
|
24,966 |
|
|
|
25,802 |
|
|
|
20,548 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,758,924 |
|
|
|
1,673,423 |
|
|
|
1,164,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity (notes 2 and 16): |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value; 10,000,000 shares
authorized-none issued or outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 80,000,000 shares authorized;
40,552,162 issued at December 31, 2009 , June 30, 2009 and 2008
37,041,184, outstanding at December 31, 2009,
37,133,684 and 40,187,062 outstanding at
June 30, 2009 and 2008, respectively. |
|
|
130 |
|
|
|
130 |
|
|
|
130 |
|
Additional paid-in capital |
|
|
132,339 |
|
|
|
130,375 |
|
|
|
128,656 |
|
Unallocated common stock held by the employee stock
ownership plan |
|
|
(13,512 |
) |
|
|
(13,909 |
) |
|
|
(14,704 |
) |
Treasury stock, at cost; 3,510,978 shares at December 31, 2009,
3,418,478 and 365,100 shares at June 30, 2009 and 2008. |
|
|
(54,649 |
) |
|
|
(53,418 |
) |
|
|
(5,926 |
) |
Retained income (note 11) |
|
|
182,528 |
|
|
|
176,199 |
|
|
|
171,160 |
|
Accumulated other comprehensive loss, net of tax |
|
|
1,114 |
|
|
|
721 |
|
|
|
(341 |
) |
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
247,950 |
|
|
|
240,098 |
|
|
|
278,975 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (notes 4 and 15) |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
2,006,874 |
|
|
$ |
1,913,521 |
|
|
$ |
1,443,294 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-3
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Consolidated Statements of Income
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
December 31, |
|
|
Years ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on mortgage loans |
|
$ |
42,065 |
|
|
$ |
34,645 |
|
|
$ |
72,158 |
|
|
$ |
55,053 |
|
|
$ |
44,278 |
|
Interest on securities held to maturity and dividends on FHLB stock |
|
|
717 |
|
|
|
535 |
|
|
|
1,069 |
|
|
|
999 |
|
|
|
1,073 |
|
Interest on securities available for sale |
|
|
3,738 |
|
|
|
633 |
|
|
|
2,468 |
|
|
|
1,716 |
|
|
|
868 |
|
Interest on mortgage-backed securities held to maturity |
|
|
1,918 |
|
|
|
3,032 |
|
|
|
5,615 |
|
|
|
7,409 |
|
|
|
9,475 |
|
Interest on mortgage-backed securities available for sale |
|
|
2,718 |
|
|
|
3,673 |
|
|
|
7,046 |
|
|
|
4,710 |
|
|
|
813 |
|
Interest on federal funds sold and short term investments |
|
|
90 |
|
|
|
1 |
|
|
|
73 |
|
|
|
1,704 |
|
|
|
6,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
51,246 |
|
|
|
42,519 |
|
|
|
88,429 |
|
|
|
71,591 |
|
|
|
63,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits and stock subscription proceeds (note 10) |
|
|
12,123 |
|
|
|
11,116 |
|
|
|
24,262 |
|
|
|
23,865 |
|
|
|
23,682 |
|
Borrowings (note 12) |
|
|
10,494 |
|
|
|
9,940 |
|
|
|
20,238 |
|
|
|
13,343 |
|
|
|
9,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
22,617 |
|
|
|
21,056 |
|
|
|
44,500 |
|
|
|
37,208 |
|
|
|
32,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income before provision for
losses on loans |
|
|
28,629 |
|
|
|
21,463 |
|
|
|
43,929 |
|
|
|
34,383 |
|
|
|
30,520 |
|
Provision for loan losses (note 5) |
|
|
5,050 |
|
|
|
5,375 |
|
|
|
9,880 |
|
|
|
4,650 |
|
|
|
1,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
23,579 |
|
|
|
16,088 |
|
|
|
34,049 |
|
|
|
29,733 |
|
|
|
29,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges |
|
|
756 |
|
|
|
608 |
|
|
|
1,122 |
|
|
|
1,126 |
|
|
|
1,119 |
|
Real estate operations, net |
|
|
710 |
|
|
|
702 |
|
|
|
1,294 |
|
|
|
1,314 |
|
|
|
1,205 |
|
Income from investments in real estate joint ventures |
|
|
608 |
|
|
|
543 |
|
|
|
1,124 |
|
|
|
1,192 |
|
|
|
1,084 |
|
BOLI income |
|
|
588 |
|
|
|
543 |
|
|
|
1,127 |
|
|
|
1,060 |
|
|
|
984 |
|
Net loss on sale and write down of securities |
|
|
(190 |
) |
|
|
(1,800 |
) |
|
|
(2,045 |
) |
|
|
(998 |
) |
|
|
|
|
Gain on sale of real estate held for investment |
|
|
1,043 |
|
|
|
|
|
|
|
|
|
|
|
1,096 |
|
|
|
|
|
Gain on sale of fixed assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
514 |
|
Other income |
|
|
98 |
|
|
|
72 |
|
|
|
158 |
|
|
|
146 |
|
|
|
403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income |
|
|
3,613 |
|
|
|
668 |
|
|
|
2,780 |
|
|
|
4,936 |
|
|
|
5,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation, payroll taxes and fringe benefits (notes 13 and 14) |
|
|
10,216 |
|
|
|
9,029 |
|
|
|
18,670 |
|
|
|
13,923 |
|
|
|
11,213 |
|
Advertising |
|
|
329 |
|
|
|
264 |
|
|
|
635 |
|
|
|
470 |
|
|
|
510 |
|
Office occupancy and equipment expense (notes 9 and 15) |
|
|
1,104 |
|
|
|
923 |
|
|
|
2,088 |
|
|
|
1,595 |
|
|
|
1,575 |
|
Data processing service fees |
|
|
546 |
|
|
|
529 |
|
|
|
1,069 |
|
|
|
1,058 |
|
|
|
1,031 |
|
Federal insurance premiums |
|
|
1,159 |
|
|
|
60 |
|
|
|
1,774 |
|
|
|
92 |
|
|
|
93 |
|
Contribution to charitable foundation (note 2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,110 |
|
Other expenses |
|
|
1,640 |
|
|
|
1,611 |
|
|
|
3,021 |
|
|
|
2,353 |
|
|
|
1,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses |
|
|
14,994 |
|
|
|
12,416 |
|
|
|
27,257 |
|
|
|
19,491 |
|
|
|
25,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
12,198 |
|
|
|
4,340 |
|
|
|
9,572 |
|
|
|
15,178 |
|
|
|
9,370 |
|
Income tax expense (benefit) (note 11) |
|
|
4,786 |
|
|
|
1,795 |
|
|
|
4,020 |
|
|
|
6,218 |
|
|
|
(1,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,412 |
|
|
$ |
2,545 |
|
|
$ |
5,552 |
|
|
$ |
8,960 |
|
|
$ |
11,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders |
|
$ |
7,206 |
|
|
$ |
2,495 |
|
|
$ |
5,459 |
|
|
$ |
8,790 |
|
|
$ |
11,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share-basic and diluted (fiscal 2007 represents
the period from January 23, 2007 to June 30, 2007)(note 21) |
|
$ |
0.20 |
|
|
$ |
0.07 |
|
|
$ |
0.15 |
|
|
$ |
0.23 |
|
|
$ |
0.15 |
|
See accompanying notes to consolidated financial statements.
F-4
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Consolidated Statements of Stockholders Equity
For the six months ended December 31, 2009 (Unaudited) and the years ended June 30, 2009, 2008 and 2007
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated |
|
|
|
|
|
|
other |
|
|
Total |
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
common |
|
|
|
|
|
|
comprehensive |
|
|
stock- |
|
|
|
Common |
|
|
paid-in |
|
|
Treasury |
|
|
stock held |
|
|
Retained |
|
|
(loss) |
|
|
holders |
|
|
|
Stock |
|
|
capital |
|
|
Stock |
|
|
by ESOP |
|
|
income |
|
|
net of tax |
|
|
equity |
|
Balance at June 30, 2006 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
150,266 |
|
|
$ |
(130 |
) |
|
$ |
150,136 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,034 |
|
|
|
|
|
|
|
11,034 |
|
Unrealized holding gain on securities available
for sale arising during year, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
Change in minimum pension liability,
net of tax of $55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132 |
|
|
|
132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 12,976,686 shares of common stock in the
initial public offering and issuance of 27,575,476
shares to the mutual holding company |
|
|
130 |
|
|
|
127,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127,630 |
|
Purchase of common stock by the ESOP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,896 |
) |
|
|
|
|
|
|
|
|
|
|
(15,896 |
) |
Cumulative adjustment for accounting change-
adoption of postretirement plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,076 |
) |
|
|
(1,076 |
) |
ESOP shares allocated or committed to be released |
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
397 |
|
|
|
|
|
|
|
|
|
|
|
607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007 |
|
$ |
130 |
|
|
$ |
127,710 |
|
|
$ |
|
|
|
$ |
(15,499 |
) |
|
$ |
161,300 |
|
|
$ |
(1,071 |
) |
|
$ |
272,570 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,960 |
|
|
|
|
|
|
|
8,960 |
|
Unrealized holding gain on securities available
for sale arising during year, net of tax $177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256 |
|
|
|
256 |
|
Reclassification adjustment for losses included in
net income, net of tax of $264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
382 |
|
|
|
382 |
|
Change in funded status of retirement
obligations, net of tax of $61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92 |
|
|
|
92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative adjustment for accounting change-
adoption of accounting for uncertainty in
income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900 |
|
|
|
|
|
|
|
900 |
|
Purchase of treasury stock (365,100 shares) |
|
|
|
|
|
|
|
|
|
|
(5,926 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,926 |
) |
Compensation cost for stock options
and restricted stock |
|
|
|
|
|
|
610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
610 |
|
ESOP shares allocated or committed
to be released |
|
|
|
|
|
|
336 |
|
|
|
|
|
|
|
795 |
|
|
|
|
|
|
|
|
|
|
|
1,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008 |
|
$ |
130 |
|
|
$ |
128,656 |
|
|
$ |
(5,926 |
) |
|
$ |
(14,704 |
) |
|
$ |
171,160 |
|
|
$ |
(341 |
) |
|
$ |
278,975 |
|
F-5
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Consolidated Statements of Stockholders Equity
For the six months ended December 31, 2009 (Unaudited) and the years ended June 30, 2009, 2008 and 2007
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated |
|
|
|
|
|
|
other |
|
|
Total |
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
common |
|
|
|
|
|
|
comprehensive |
|
|
stock- |
|
|
|
Common |
|
|
paid-in |
|
|
Treasury |
|
|
stock held |
|
|
Retained |
|
|
(loss) |
|
|
holders |
|
|
|
Stock |
|
|
capital |
|
|
Stock |
|
|
by ESOP |
|
|
income |
|
|
net of tax |
|
|
equity |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,552 |
|
|
|
|
|
|
|
5,552 |
|
Unrealized holding gain on securities available
for sale arising during year, net of tax $200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203 |
|
|
|
203 |
|
Reclassification adjustment for losses included in
net income, net of tax of $815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,231 |
|
|
|
1,231 |
|
Change in funded status of retirement
obligations, net of tax of $249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(372 |
) |
|
|
(372 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(437 |
) |
|
|
|
|
|
|
(437 |
) |
Cumulative adjustment for accounting change -
Split-dollar life insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76 |
) |
|
|
|
|
|
|
(76 |
) |
Purchase of treasury stock (3,212,337 shares) |
|
|
|
|
|
|
|
|
|
|
(49,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,989 |
) |
Treasury stock allocated to restricted
stock plan (158,959 shares) |
|
|
|
|
|
|
(2,497 |
) |
|
|
2,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation cost for stock options
and restricted stock |
|
|
|
|
|
|
3,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,804 |
|
ESOP shares allocated or committed
to be released |
|
|
|
|
|
|
412 |
|
|
|
|
|
|
|
795 |
|
|
|
|
|
|
|
|
|
|
|
1,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009 |
|
$ |
130 |
|
|
$ |
130,375 |
|
|
$ |
(53,418 |
) |
|
$ |
(13,909 |
) |
|
$ |
176,199 |
|
|
$ |
721 |
|
|
$ |
240,098 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,412 |
|
|
|
|
|
|
|
7,412 |
|
Unrealized holding gain on securities available
for sale arising during year, net of tax of $177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265 |
|
|
|
265 |
|
Reclassification adjustment for losses included in
net income, net of tax of $25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58 |
|
|
|
58 |
|
Amortization related to post-retirement
obligations, net of tax of $46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,083 |
) |
|
|
|
|
|
|
(1,083 |
) |
Purchase of treasury stock (92,500 shares) |
|
|
|
|
|
|
|
|
|
|
(1,231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,231 |
) |
Compensation cost for stock options
and restricted stock |
|
|
|
|
|
|
1,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,782 |
|
ESOP shares allocated or committed
to be released |
|
|
|
|
|
|
140 |
|
|
|
|
|
|
|
397 |
|
|
|
|
|
|
|
|
|
|
|
537 |
|
Tax benefit from stock-based compensation |
|
|
|
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
130 |
|
|
$ |
132,339 |
|
|
$ |
(54,649 |
) |
|
$ |
(13,512 |
) |
|
$ |
182,528 |
|
|
$ |
1,114 |
|
|
$ |
247,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
F-6
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
December 31, |
|
|
Years ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,412 |
|
|
$ |
2,545 |
|
|
$ |
5,552 |
|
|
$ |
8,960 |
|
|
$ |
11,034 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution of stock to charitable foundation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,110 |
|
ESOP and stock-based compensation expense |
|
|
2,319 |
|
|
|
2,409 |
|
|
|
5,011 |
|
|
|
1,741 |
|
|
|
607 |
|
Depreciation of premises and equipment |
|
|
395 |
|
|
|
321 |
|
|
|
701 |
|
|
|
540 |
|
|
|
718 |
|
Amortization and accretion (premiums and discounts), net |
|
|
1 |
|
|
|
43 |
|
|
|
62 |
|
|
|
237 |
|
|
|
463 |
|
Provision for losses on loans |
|
|
5,050 |
|
|
|
5,375 |
|
|
|
9,880 |
|
|
|
4,650 |
|
|
|
1,210 |
|
Amortization and accretion (deferred loan fees), net |
|
|
(457 |
) |
|
|
(379 |
) |
|
|
(797 |
) |
|
|
(779 |
) |
|
|
(702 |
) |
Increase in deferred taxes |
|
|
(1,135 |
) |
|
|
(3,144 |
) |
|
|
(4,487 |
) |
|
|
(1,482 |
) |
|
|
(9,159 |
) |
Impairment charge on securities |
|
|
202 |
|
|
|
1,751 |
|
|
|
2,045 |
|
|
|
998 |
|
|
|
|
|
(Gain) loss on sale of securities |
|
|
(12 |
) |
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate held for investment |
|
|
(1,043 |
) |
|
|
|
|
|
|
|
|
|
|
(1,096 |
) |
|
|
|
|
Gain on sale of fixed assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(514 |
) |
Write down of real estate owned |
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash surrender value of bank owned life insurance |
|
|
(588 |
) |
|
|
(544 |
) |
|
|
(1,127 |
) |
|
|
(1,060 |
) |
|
|
(984 |
) |
Income from real estate held for investment |
|
|
(440 |
) |
|
|
(504 |
) |
|
|
(818 |
) |
|
|
(660 |
) |
|
|
(708 |
) |
Income from real estate joint ventures |
|
|
(608 |
) |
|
|
(543 |
) |
|
|
(1,124 |
) |
|
|
(1,192 |
) |
|
|
(1,084 |
) |
Increase in accrued interest receivable |
|
|
(819 |
) |
|
|
(1,211 |
) |
|
|
(2,321 |
) |
|
|
(673 |
) |
|
|
(1,063 |
) |
(Increase) decrease in other assets |
|
|
(6,712 |
) |
|
|
1,132 |
|
|
|
(1,076 |
) |
|
|
(1,292 |
) |
|
|
(331 |
) |
Increase in other liabilities |
|
|
3,596 |
|
|
|
3,552 |
|
|
|
3,557 |
|
|
|
2,041 |
|
|
|
5,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
7,373 |
|
|
|
10,852 |
|
|
|
15,058 |
|
|
|
10,933 |
|
|
|
13,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in loans receivable |
|
|
(84,245 |
) |
|
|
(169,080 |
) |
|
|
(243,561 |
) |
|
|
(241,106 |
) |
|
|
(109,026 |
) |
Purchase of mortgage loans |
|
|
(3,694 |
) |
|
|
(32,231 |
) |
|
|
(37,068 |
) |
|
|
(11,300 |
) |
|
|
(6,960 |
) |
Proceeds from sales of mortgage loans |
|
|
4,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of securities held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,000 |
) |
Purchase of securities available for sale |
|
|
(251,027 |
) |
|
|
(25,000 |
) |
|
|
(163,679 |
) |
|
|
(17,718 |
) |
|
|
(35,000 |
) |
Purchase of mortgage-backed securities held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,886 |
) |
Purchase of mortgage-backed securities available for sale |
|
|
|
|
|
|
(10,116 |
) |
|
|
(11,257 |
) |
|
|
(124,033 |
) |
|
|
(27,023 |
) |
Redemption (purchase) of Federal Home Loan Bank of New York stock |
|
|
68 |
|
|
|
(2,603 |
) |
|
|
(4,002 |
) |
|
|
(10,928 |
) |
|
|
(1,252 |
) |
Principal payments on mortgage-backed securities held to maturity |
|
|
23,075 |
|
|
|
19,590 |
|
|
|
44,928 |
|
|
|
53,083 |
|
|
|
61,735 |
|
Principal payments on mortgage-backed securities available for sale |
|
|
24,042 |
|
|
|
11,640 |
|
|
|
34,562 |
|
|
|
14,710 |
|
|
|
5,692 |
|
Proceeds from calls and maturities of securities held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,415 |
|
|
|
13,000 |
|
Proceeds from calls and maturities of securities available for sale |
|
|
75,000 |
|
|
|
10,000 |
|
|
|
38,895 |
|
|
|
30,000 |
|
|
|
10,000 |
|
Proceeds from sales of mortgage-backed securities held to maturity |
|
|
9,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of mortgage-backed securities available for sale |
|
|
6,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of securities available for sale |
|
|
500 |
|
|
|
250 |
|
|
|
500 |
|
|
|
|
|
|
|
|
|
Purchase of Bank Owned Life Insurance |
|
|
|
|
|
|
(1,120 |
) |
|
|
(1,833 |
) |
|
|
|
|
|
|
|
|
Additional investment in real estate held for investment |
|
|
|
|
|
|
(1,290 |
) |
|
|
(1,352 |
) |
|
|
(1,378 |
) |
|
|
(238 |
) |
Distributions received from real estate held for investment |
|
|
398 |
|
|
|
348 |
|
|
|
725 |
|
|
|
552 |
|
|
|
585 |
|
Proceeds from sale of real estate held for investment |
|
|
1,182 |
|
|
|
|
|
|
|
|
|
|
|
1,159 |
|
|
|
|
|
Additional investment in real estate joint ventures |
|
|
(387 |
) |
|
|
(30 |
) |
|
|
(1,090 |
) |
|
|
|
|
|
|
(30 |
) |
Distributions received from real estate joint ventures |
|
|
917 |
|
|
|
843 |
|
|
|
1,848 |
|
|
|
1,841 |
|
|
|
1,182 |
|
Purchase of fixed assets |
|
|
(1,348 |
) |
|
|
(891 |
) |
|
|
(1,500 |
) |
|
|
(1,466 |
) |
|
|
(409 |
) |
Proceeds from sale of fixed assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing
activities |
|
|
(196,071 |
) |
|
|
(199,690 |
) |
|
|
(343,884 |
) |
|
|
(301,169 |
) |
|
|
(95,657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in deposits |
|
|
82,877 |
|
|
|
181,014 |
|
|
|
428,698 |
|
|
|
3,175 |
|
|
|
7,111 |
|
Proceeds from borrowed funds |
|
|
|
|
|
|
322,225 |
|
|
|
341,225 |
|
|
|
244,885 |
|
|
|
113,400 |
|
Repayment of borrowed funds |
|
|
(1,552 |
) |
|
|
(264,402 |
) |
|
|
(265,906 |
) |
|
|
(7,874 |
) |
|
|
(85,975 |
) |
Increase in advance payments by borrowers for taxes and insurance |
|
|
1,046 |
|
|
|
1,129 |
|
|
|
1,277 |
|
|
|
1,340 |
|
|
|
577 |
|
Net proceeds from sale of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,520 |
|
Purchase of common stock for ESOP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,896 |
) |
Dividends paid to shareholders |
|
|
(1,521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
(1,231 |
) |
|
|
(38,217 |
) |
|
|
(49,989 |
) |
|
|
(5,926 |
) |
|
|
|
|
Tax benefit from stock-based compensation |
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing
activities |
|
|
79,661 |
|
|
|
201,749 |
|
|
|
455,305 |
|
|
|
235,600 |
|
|
|
138,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash
equivalents |
|
|
(109,037 |
) |
|
|
12,911 |
|
|
|
126,479 |
|
|
|
(54,636 |
) |
|
|
56,252 |
|
Cash and cash equivalents at beginning of year |
|
|
135,369 |
|
|
|
8,890 |
|
|
|
8,890 |
|
|
|
63,526 |
|
|
|
7,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
26,332 |
|
|
$ |
21,801 |
|
|
$ |
135,369 |
|
|
$ |
8,890 |
|
|
$ |
63,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
22,766 |
|
|
$ |
20,819 |
|
|
$ |
44,262 |
|
|
$ |
36,296 |
|
|
$ |
32,589 |
|
Income taxes |
|
|
2,674 |
|
|
|
4,646 |
|
|
|
9,812 |
|
|
|
9,583 |
|
|
|
5,647 |
|
Noncash transfers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable transferred to real estate owned |
|
|
812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RE Held for Investment transferred to Office, Property and Equipment |
|
|
|
|
|
|
3,690 |
|
|
|
3,690 |
|
|
|
|
|
|
|
|
|
Non cash borrowing activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(544 |
) |
See accompanying notes to consolidated financial statements.
F-7
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements are comprised of the accounts of Oritani Financial Corp.
(the Company), and its wholly owned subsidiaries, Oritani Bank (the Bank); Hampshire
Financial, LLC, and Oritani, LLC, and the wholly owned subsidiaries of Oritani Bank, Oritani
Financial Services, Inc. (inactive), Ormon LLC (Ormon), and Oritani Holding Company
(liquidated), as well as its wholly owned subsidiary, Oritani Asset Corporation (a real estate
investment trust), collectively, the Company. All significant intercompany balances and
transactions have been eliminated in consolidation.
Business
The Company provides a wide range of banking services to individual and corporate customers in
New Jersey. The Company is subject to competition from other financial institutions and to
the regulations of certain federal and state agencies and undergoes periodic examinations by
those regulatory authorities.
The following are the significant accounting policies which were followed in preparing and
presenting these consolidated financial statements.
Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP). In June 2009, the
Financial Accounting Standards Board (FASB) issued an update to Accounting Standard
Codification 105-10, Generally Accepted Accounting Principles. This standard establishes
the FASB Accounting Standard Codification (Codification or ASC) as the source of
authoritative U.S. GAAP recognized by the FASB for nongovernmental entities. The Codification
is effective for interim and annual periods ending after September 15, 2009. The Codification
is a reorganization of existing U.S. GAAP and does not change existing U.S. GAAP. The Company
adopted this standard for our financial statements for periods ending after September 15,
2009. As a result, the Companys disclosures in its consolidated financial statements and all
future references to authoritative accounting literature will be referenced in accordance with
FASB ASC 105-10. The adoption had no impact on the Companys financial position, results of
operations, and earnings per share. In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the reported amounts of
assets and liabilities presented in the Consolidated Balance Sheets at December 31, 2009 and
June 30, 2009 and 2008, and in the Consolidated Statements of Income for the six months ended
December 31, 2009 and 2008 and the twelve months ended June 30, 2009, 2008 and 2007. Actual
results could differ significantly from those estimates.
In the opinion of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the unaudited interim consolidated financial statements
have been made. No adjustments were made other than normal recurring entries.
Material estimates that are particularly susceptible to significant change in the near term
relate to the determination of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of loans. In connection with the
determination of the
F-8
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
allowance for loan losses, management generally obtains independent appraisals for significant
properties.
A substantial portion of the Companys loans are secured by real estate in the New Jersey
market. In addition, a substantial portion of real estate joint ventures and real estate owned
are located in that same market. Accordingly, as with most financial institutions in the
market area, the ultimate collectibility of a substantial portion of the Companys loan
portfolio and the recovery of the carrying amount of real estate joint ventures and real
estate owned are susceptible to changes in market conditions.
Securities
Securities include debt, mortgage-backed and marketable equity securities. Management
determines the appropriate classification of securities as either available for sale or held
to maturity at the purchase date. Securities that may be sold in response to changing market
and interest rate conditions or as part of an overall asset/liability strategy are classified
as available for sale. Gains or losses on sales of securities available for sale are based
upon the specific-identification method. Securities classified as available for sale are
carried at fair value with unrealized gains and losses net of applicable taxes, included in
accumulated other comprehensive income (loss), a component of equity. If management has the
intent and the ability at the time of purchase to hold securities until maturity, they are
classified as held to maturity. Securities held to maturity are carried at cost, adjusted for
unamortized purchase premiums and discounts. Premiums and discounts on securities are
accreted or amortized using the level-yield method over the estimated lives of the securities,
including the effect of prepayments. Any portion of unrealized loss on an individual equity
security deemed to be other than temporary is recognized as a loss in operations in the period
in which such determination is made. For debt investment securities deemed other than
temporarily impaired, the investment is written down through current earnings by the
impairment related to the estimated credit loss and the non-credit related impairment is
recognized in other comprehensive income. In the ordinary course of business, securities are
pledged as collateral in conjunction with the Companys borrowings and lines of credit.
Loans
Mortgages on real estate and other loans are stated at the outstanding principal amount of the
loans, net of deferred loan fees/costs and the allowance for loan losses. Loan origination and
commitment fees, net of related costs, are deferred and amortized as an adjustment to the
loans yield, utilizing the level yield method, over the actual lives of the related loans.
Interest income on loans is accrued and credited to interest income as earned. Loans are
generally placed on nonaccrual status when
they become delinquent 90 days or more as to principal or interest, or when it appears that
principal or interest is uncollectible. Interest accrued prior to a loan being placed on
nonaccrual status is subsequently reversed. Interest income on nonaccrual loans is recognized
only in the period it is ultimately collected. Loans are returned to an accrual status when
factors indicating doubtful collectability no longer exist. Loans are generally charged off
after an analysis is completed which indicates collectability of principal and interest is in
doubt.
The Company defines an impaired loan as a loan for which it is probable, based on current
information, that the Company will not collect all amounts due under the contractual terms of
the loan agreement. Loans individually classified as impaired include multifamily, commercial
mortgage and construction loans. Impaired loans are individually assessed to determine that
each loans carrying value is not in excess of the fair value of the related collateral or the
present value of
F-9
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
the expected future cash flows. Residential mortgage and consumer loans are deemed smaller
balance homogeneous loans which are evaluated collectively for impairment and are therefore
excluded from the population of impaired loans.
Consumer loans and any portion of residential real estate mortgage loans not adequately
secured are generally charged off when deemed to be uncollectible unless it can be clearly
demonstrated that repayment will occur regardless of the delinquency status. Examples that
would demonstrate repayment include; a loan that is secured by collateral and is in the
process of collection; a loan supported by a valid guarantee or insurance; or a loan supported
by a valid claim against a solvent estate. Charge-offs of commercial real estate mortgage
loans are made on the basis of managements ongoing evaluation of nonperforming loans. In the
ordinary course of business, loans are pledged as collateral in conjunction with the Companys
borrowings and lines of credit.
Allowance for Loan Losses
An allowance for loan losses is charged to operations based on managements evaluation of the
probable losses inherent in its portfolio. Such evaluation includes a review of all loans for
which full collectability may not be reasonably assured and considers, among other matters,
the estimated net realizable value of the underlying collateral, economic conditions and other
matters which warrant consideration. Subsequent recoveries, if any, are credited to the
allowance.
Management believes that the allowance for loan losses is adequate. While management uses
available information to recognize losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions in the Companys market area. In addition,
various regulatory agencies, as an integral part of their examination process, periodically
review the Companys allowance for loan losses. Such agencies may require the Company to
recognize additions to the allowance based on their judgments about information available to
them at the time of their examination.
Real Estate Owned
Real estate owned acquired through foreclosure is carried at fair value, less estimated
selling costs at the time of acquisition. Fair value is derived from independent appraisals.
When a property is acquired, the excess of the loan balance over fair value is charged to the
allowance for loan losses. During the holding period, the property is periodically reviewed
and the recorded value is adjusted through operations, if necessary, if the carrying value of
the property exceeds the fair value, less estimated costs to sell.
Bank Owned Life Insurance
Bank-owned life insurance is accounted for using the cash surrender value method and is
recorded at its realizable value. The change in the cash surrender value is included in other
noninterest income.
Federal Home Loan Bank of New York Stock
The Bank, as a member of the FHLB of New York , is required to hold shares of capital stock in
the FHLB in an amount based on the Banks total investment in mortgage related assets and
advances. The requirement pertaining to mortgage related assets is a range from 0.10% to
0.25% of mortgage related assets, and is currently equal to 0.20%. The requirement pertaining
to advances is a range from 4.0% to 5.0% of total advances, and is currently equal to 4.5%.
The stock is carried at cost.
F-10
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Investments in Real Estate Joint Ventures, Net
The Company accounts for investments in joint ventures under the equity method. The balance
reflects the cost basis of investments, plus the Companys share of income earned on the joint
venture operations, less cash distributions, including excess cash distributions, and the
Companys share of losses on joint venture operations. Cash received in excess of the
Companys recorded investment in a joint venture is recorded as unearned revenue in other
liabilities.
Real Estate Held for Investment
Real estate held for investment includes the Companys undivided interest in real estate
properties accounted for under the equity method and properties held for investment purposes.
Cash received in excess of the Companys recorded investment for an undivided interest in real
estate property is recorded as unearned revenue in other liabilities. The operations of the
properties held for investment purposes are reflected in the financial results of the Company
and included in the Other Income caption in the Income Statement. Properties held for
investment purposes are carried at cost less accumulated depreciation.
Office Properties and Equipment
Office properties and equipment are carried at cost, less accumulated depreciation.
Depreciation of office properties and equipment is computed on a straight-line basis over the
estimated useful lives of the related assets. The Company uses the following estimated useful
lives for its office properties and equipment categories: land improvements 15 years;
building and major building improvements 40 years; minor building improvements 10 years
and furniture and fixtures 3 to 7 years. Leasehold improvements are amortized over the
lesser of the remaining life of the lease or the useful life of the improvement.
Employee Benefit Plans
The Bank has a defined benefit pension plan which covers all employees who satisfy the
eligibility requirements. The Bank participates in a multi-employer plan. Costs of the pension
plan are based on the contribution required to be made to the program. The Banks policy is to
fund at least the minimum contribution required by the Employee Retirement Income Security Act
of 1974, as amended. The Plan was frozen as of December 31, 2008.
The Bank has a 401(k) savings incentive plan covering substantially all employees of the Bank.
The Bank may match a percentage of the first 6% of employee contributions. The contribution
percentage is determined annually by the Board of Directors.
The employee stock ownership plan (ESOP) is accounted for in accordance with the provisions
of ASC 718, Compensation-Stock Compensation. The funds borrowed by the ESOP from the
Company to purchase the Companys common stock will be repaid from the Banks contributions
over a period of up to 20 years. The Companys common stock not yet allocated to participants
is recorded as a reduction of stockholders equity at cost. Compensation expense for the ESOP
is based on the market price of the Companys stock and is recognized as shares committed to
be released to participants.
The Bank provides several nonqualified, defined benefit plans which provides benefits to
executive officers and directors of the Company. These plans are unfunded and the costs of the
plans are recognized over the period that services are provided.
F-11
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
The Company provides several post-retirement benefit plans to directors and certain retired
employees and will provide such benefits to certain active officers that are accounted for in
accordance with ASC 715, Compensation-Retirement Benefits. This guidance requires an
employer to: (a) recognize in its statement of financial condition the overfunded or
underfunded status of a defined benefit postretirement plan measured as the difference between
the fair value of plan assets and the benefit obligation; (b) measure a plans assets and its
obligations that determine its funded status as of the date of its year-end balance sheet and
(c) recognize as a component of other comprehensive income, net of tax, the actuarial gains
and losses and the prior service costs
and credits that arise during the period. The Company accrues the cost of post-retirement
benefit plans during the employees period of active service.
The Companys equity incentive plan is accounted for in accordance with ASC 718,
Compensation-Stock Compensation. This guidance requires companies to recognize in the
statement of earnings the grant-date fair value of stock based awards issued to employees.
Compensation cost related to stock based awards is recognized on a straight-line basis over
the requisite service periods.
Income Taxes
The Company records income taxes in accordance with ASC 740, Income Taxes, using the asset
and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized
for the expected future tax consequences of events that have been recognized in the financial
statements or tax returns; (ii) are attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases;
and (iii) are measured using enacted tax rates expected to apply in the years when those
temporary differences are expected to be recovered or settled. Where applicable, deferred tax
assets are reduced by a valuation allowance for any portions determined not likely to be
realized. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income tax expense in the period of enactment. The valuation allowance is
adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances
warrant. Income taxes are allocated to the individual entities within the consolidated group
based on the effective tax rate of the entity.
Comprehensive Income
Comprehensive income is divided into net income and other comprehensive income. Other
comprehensive income includes items recorded directly to equity, such as unrealized gains and
losses on securities available for sale, change in actuarial gains and losses on other post
retirement benefits, and change in service cost on other postretirement benefits, net of
taxes. Comprehensive income is presented in the consolidated statements of changes in equity.
Earnings Per Share
Basic earnings per share, or EPS, is computed by dividing net income by the weighted average
number of shares outstanding for the period. ASC 260, Earnings Per Share, provides that
unvested share-based payment awards that contain non-forfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and shall be
included in the computation of earnings per share pursuant to the two-class method. We
determined that our outstanding non-vested restricted stock awards are participating
securities. Accordingly, earnings per common share is computed using the two-class method.
The weighted average common shares outstanding includes the average number of shares of common
stock outstanding, including shares
F-12
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
held by Oritani Financial Corp., MHC and allocated or committed to be released Employee Stock
Ownership Plan shares.
Diluted earnings per share is computed using the same method as basic earnings per share, but
reflects the potential dilution that could occur if stock options and unvested shares of
restricted stock were exercised and converted into common stock. These potentially dilutive
shares would then be included in the weighted average number of shares outstanding for the
period using the treasury stock method. When applying the treasury stock method, we add: (1)
the assumed proceeds from option exercises; (2) the tax benefit that would have been credited
to additional paid-in capital assuming exercise of non-qualified stock options and vesting of
shares of restricted stock; and (3) the average unamortized compensation costs related to
unvested shares of restricted stock and stock options. We then divide this sum by our average
stock price to calculate shares repurchased. The excess of the number of shares issuable over
the number of shares assumed to be repurchased is added to basic weighted average common
shares to calculate diluted EPS.
Reclassifications
Certain items previously reported have been reclassified to conform with the current periods
reporting format.
(2) Stock Transactions
Stock Offering
The Company completed its initial public stock offering on January 23, 2007. The Company sold
12,165,649 shares, or 30.0% of its outstanding common stock, to subscribers in the offering,
including 1,589,644 shares purchased by the Oritani Bank Employee Stock Ownership Plan
(ESOP). Oritani Financial Corp., MHC, the Companys federally chartered mutual holding
company parent holds 27,575,476 shares, or 68.0% of the Companys outstanding common stock.
Additionally, the Bank contributed $1.0 million in cash, and the Company issued 811,037 shares
of common stock, or 2.0% of the Companys outstanding common stock, to the OritaniBank
Charitable Foundation. This action resulted in a $9.1 million pre-tax expense recorded in the
quarter ended March 31, 2007. Proceeds from the offering, including the value of shares
issued to the charitable foundation but net of expenses, were $127.6 million. Net deployable
funds, after deducting for the ESOP shares and the total contribution to the charitable
foundation, were $102.6 million. The Company contributed $59.7 million of the proceeds to
Oritani Bank. Stock oversubscription proceeds of $323.4 million were returned to subscribers.
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
Companys 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 Companys
liquidity requirements and alternative uses of capital. At December 31, 2009, a total of
3,669,937
F-13
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
shares were acquired under these repurchase plans at a weighted average cost of $15.57 per
share. No additional shares have been purchased through February 27, 2010. The March 18,
2009 program has no expiration date and 596,291 shares remain eligible to be purchased under
this program. All repurchased shares are held as treasury stock. All treasury shares will
effectively be reissued in conjunction with our proposed second step transaction.
(3) Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, cash and cash equivalents include
cash on hand and in banks and federal funds sold and short term investments which are
generally sold for one-day periods.
(4) Loans
A comparative summary of loans at December 31, 2009 and June 30, 2009 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
First mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Conventional one to four family |
|
|
260,056 |
|
|
|
265,962 |
|
|
|
223,087 |
|
Multifamily |
|
|
296,314 |
|
|
|
277,589 |
|
|
|
237,490 |
|
Commercial real estate |
|
|
628,507 |
|
|
|
562,138 |
|
|
|
359,681 |
|
|
|
|
|
|
|
|
|
|
|
Total first mortgage loans |
|
|
1,184,877 |
|
|
|
1,105,689 |
|
|
|
820,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity loans |
|
|
51,036 |
|
|
|
54,769 |
|
|
|
59,886 |
|
Construction and land loans |
|
|
124,898 |
|
|
|
130,831 |
|
|
|
138,195 |
|
Other loans |
|
|
21,612 |
|
|
|
10,993 |
|
|
|
4,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,382,423 |
|
|
|
1,302,282 |
|
|
|
1,023,219 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred fees, net |
|
|
3,102 |
|
|
|
2,979 |
|
|
|
2,610 |
|
Allowance for loan losses |
|
|
22,164 |
|
|
|
20,680 |
|
|
|
13,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,357,157 |
|
|
$ |
1,278,623 |
|
|
|
1,007,077 |
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009 and June 30, 2009 and 2008, the Company had fixed-rate mortgage
commitments of $28.8 million,$42.8 million and $44.3 million, respectively, and variable-rate
mortgage commitments of $18.8, $34.9 million and $48.7 million, respectively, which are not
included in the accompanying consolidated financial statements. The rate range of the fixed
rate commitments at December 31, 2009 was 4.99% to 6.50%. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. There is no
exposure to credit loss in the event the other party does not exercise its right to borrow
under the commitment.
The Company grants residential real estate loans on single- and multifamily dwellings
principally throughout the state of New Jersey and has previously purchased out-of-state
residential mortgage pools. Multifamily and commercial real estate loan originations extend
into Eastern Pennsylvania,
F-14
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Southern New York, New York City and parts of Connecticut. Borrowers abilities to repay
their obligations are dependent upon various factors, including the borrowers income and net
worth, cash flows generated by the underlying collateral, value of the underlying collateral
and priority of the Companys lien on the property. Such factors are dependent upon various
economic conditions
and individual circumstances beyond the Companys control; the Company is therefore subject to
risk of loss. The Company believes that its lending policies and procedures adequately
minimize the potential exposure to such risks and that adequate provisions for losses are
provided for all known and inherent risks. Collateral and/or guarantees are required for all
loans.
The aggregate amount of loans to our executive officers, directors and their related entities,
was $38.3 million, $36.6 million and $34.8 million at December 31, 2009 and June 30, 2009 and
2008, respectively. For the six months ended December 31, 2009, new loans to and repayments
from executive officers, directors and their related entities totaled $2.0 million and
$292,000, respectively. These loans were performing according to their original terms at
December 31, 2009.
(5) Allowance for Loan Losses
Activity in the allowance for loan losses is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
December 31, |
|
|
Years ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
$ |
20,680 |
|
|
$ |
13,532 |
|
|
$ |
13,532 |
|
|
|
8,882 |
|
|
|
7,672 |
|
Provisions charged to operations |
|
|
5,050 |
|
|
|
5,375 |
|
|
|
9,880 |
|
|
|
4,650 |
|
|
|
1,210 |
|
Recoveries |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged off |
|
|
3,569 |
|
|
|
|
|
|
|
2,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
22,164 |
|
|
$ |
18,907 |
|
|
$ |
20,680 |
|
|
|
13,532 |
|
|
|
8,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in loans are loans for which the accrual of interest income has been discontinued due
to deterioration in the financial condition of the borrowers. The principal amount of
nonaccrual loans at December 31, 2009 and 2008 and June 30, 2009 and 2008 were $51.9 million,
$44.1 million, $52.5 million and $14.2 million, respectively. There were no nonaccrual loans
at June 30, 2007. If the nonaccrual loans had performed in accordance with their original
terms, interest income would have increased by $2.1 million, $1.4 million, $3.7 million and
$521,000 for the six months ended December 31, 2009 and 2008 and the years ended June 30,
2009, and 2008, respectively.
The Company defines an impaired loan as a loan for which it is probable, based on current
information, that the Company will not collect all amounts due under the contractual terms of
the loan agreement. Loans individually classified as impaired include multifamily, commercial
mortgage and construction loans. Impaired loans at December 31, 2009 and 2008 and June 30,
2009 and 2008 were $46.7 million, $43.6 million, $50.2 million and $13.8 million,
respectively. There were no impaired loans at June 30, 2007. The allocation in the allowance
for loan losses for impaired loans at December 31, 2009 and 2008 and June 30, 2009 and 2008
were $3.2 million on balances of $30.8 million, $4.3 million on balances of $16.3 million,
$3.3 million on balances of $26.2 million and $1.4 million on balances of $13.8 million,
respectively. Interest income recognized on these loans for the six months ended December 31,
2009 and 2008 and the years
F-15
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
ended June 30, 2009 and 2008 was $373,000, $300,000, $696,000 and $184,000, respectively. The
average balance of impaired loans was $48.8 million, $19.7 million, $34.8 million and $3.5
million during the six months ended December 31, 2009 and 2008 and the years ended June 30,
2009 and 2008, respectively.
(6) Mortgage-backed Securities Held to Maturity
The following is a comparative summary of mortgage-backed securities held to maturity as of
December 31, 2009 and June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 (unaudited) |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
unrealized |
|
|
unrealized |
|
|
fair |
|
|
|
cost |
|
|
gains |
|
|
losses |
|
|
value |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
15,740 |
|
|
|
396 |
|
|
|
1 |
|
|
|
16,135 |
|
FNMA |
|
|
24,589 |
|
|
|
712 |
|
|
|
|
|
|
|
25,301 |
|
GNMA |
|
|
2,423 |
|
|
|
5 |
|
|
|
2 |
|
|
|
2,426 |
|
CMO |
|
|
43,430 |
|
|
|
931 |
|
|
|
|
|
|
|
44,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
86,182 |
|
|
|
2,044 |
|
|
|
3 |
|
|
|
88,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
unrealized |
|
|
unrealized |
|
|
market |
|
|
|
cost |
|
|
gains |
|
|
losses |
|
|
value |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
18,783 |
|
|
|
287 |
|
|
|
7 |
|
|
|
19,063 |
|
FNMA |
|
|
31,329 |
|
|
|
616 |
|
|
|
2 |
|
|
|
31,943 |
|
GNMA |
|
|
5,161 |
|
|
|
16 |
|
|
|
20 |
|
|
|
5,157 |
|
CMO |
|
|
63,544 |
|
|
|
913 |
|
|
|
239 |
|
|
|
64,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
118,817 |
|
|
|
1,832 |
|
|
|
268 |
|
|
|
120,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
unrealized |
|
|
unrealized |
|
|
market |
|
|
|
cost |
|
|
gains |
|
|
losses |
|
|
value |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
25,082 |
|
|
|
156 |
|
|
|
336 |
|
|
|
24,902 |
|
FNMA |
|
|
42,066 |
|
|
|
223 |
|
|
|
196 |
|
|
|
42,093 |
|
GNMA |
|
|
6,055 |
|
|
|
8 |
|
|
|
23 |
|
|
|
6,040 |
|
CMO |
|
|
90,747 |
|
|
|
146 |
|
|
|
1,257 |
|
|
|
89,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
163,950 |
|
|
|
533 |
|
|
|
1,812 |
|
|
|
162,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Proceeds from the sale of mortgage-backed securities held to maturity for the six months ended
December 31, 2009 were $9.4 million, resulting in gross gains and gross losses of $41,000 and
$148,000, respectively. These mortgage-backed securities had an amortized cost of $9.5
million. The held to maturity securities sold were mortgage backed securities with 15% or
less of their original purchased balances remaining. The Company did not sell any
mortgage-backed securities held to maturity during the six months ended December 31, 2008 or
during years ended June 30, 2009, 2008 or 2007. Mortgage-backed securities with fair values
of $88.2 million, $120.4 million and $162.7 million at December 31, 2009, June 30, 2009 and
2008, respectively, were pledged to FHLB of New York (FHLBNY) as collateral for advances (see
note 12). The Company did not record other than temporary impairment charges on
mortgage-backed securities held to maturity during the six months ended December 31, 2009 or
the years ended June 30, 2009, 2008 and 2007.
The contractual maturities of mortgage-backed securities held-to-maturity generally exceed 20
years; however, the effective lives are expected to be shorter due to anticipated prepayments.
Expected maturities will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without penalties.
Gross unrealized losses on mortgage-backed securities held to maturity and the estimated
market value of the related securities, aggregated by security category and length of time
that individual securities have been in a continuous unrealized loss position at December 31,
2009 and June 30, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 (unaudited) |
|
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
|
fair value |
|
|
losses |
|
|
fair value |
|
|
losses |
|
|
fair value |
|
|
losses |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
859 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
859 |
|
|
|
2 |
|
GNMA |
|
|
1,749 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1,749 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,608 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
2,608 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
805 |
|
|
|
2 |
|
|
|
1,012 |
|
|
|
5 |
|
|
|
1,817 |
|
|
|
7 |
|
FNMA |
|
|
845 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
845 |
|
|
|
2 |
|
GNMA |
|
|
|
|
|
|
|
|
|
|
2,009 |
|
|
|
20 |
|
|
|
2,009 |
|
|
|
20 |
|
CMO |
|
|
8,214 |
|
|
|
43 |
|
|
|
2,284 |
|
|
|
196 |
|
|
|
10,498 |
|
|
|
239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,864 |
|
|
|
47 |
|
|
|
5,305 |
|
|
|
221 |
|
|
|
15,169 |
|
|
|
268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
11,191 |
|
|
|
226 |
|
|
|
3,035 |
|
|
|
110 |
|
|
|
14,226 |
|
|
|
336 |
|
FNMA |
|
|
8,068 |
|
|
|
45 |
|
|
|
17,580 |
|
|
|
151 |
|
|
|
25,648 |
|
|
|
196 |
|
GNMA |
|
|
495 |
|
|
|
1 |
|
|
|
2,286 |
|
|
|
22 |
|
|
|
2,781 |
|
|
|
23 |
|
CMO |
|
|
23,628 |
|
|
|
70 |
|
|
|
50,742 |
|
|
|
1,187 |
|
|
|
74,370 |
|
|
|
1,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,382 |
|
|
|
342 |
|
|
|
73,643 |
|
|
|
1,470 |
|
|
|
117,025 |
|
|
|
1,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses on investments in mortgage-backed securities were caused by
interest rate changes. The contractual cash flows of these securities are guaranteed by
Fannie Mae, Ginnie Mae and Freddie Mac. The majority of the contractual cash flows of the
CMOs are guaranteed by these agencies as well. Because the decline in fair value is
attributable to changes in interest rates and not credit quality, and because the Company has
no intent to sell and believes it is not more likely than not that it will be required to sell
these investments until a market price recovery or maturity, these investments are not
considered other than temporarily impaired as of December 31, 2009. The Company had one AAA
rated private label CMO investment with an amortized cost of $946,000 and a fair value of
$809,000. This security was sold during the six months ended December 31, 2009 resulting in a
loss of $137,000.
F-18
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(7) Securities and Mortgage-Backed Securities Available for Sale
The following is a comparative summary of securities and mortgage-backed securities available
for sale as of December 31, 2009 and June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 (unaudited) |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
unrealized |
|
|
unrealized |
|
|
market |
|
|
|
cost |
|
|
gains |
|
|
losses |
|
|
value |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and
federal agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year to five years |
|
$ |
310,775 |
|
|
|
1,010 |
|
|
|
591 |
|
|
|
311,194 |
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year to five years |
|
|
2,000 |
|
|
|
83 |
|
|
|
|
|
|
|
2,083 |
|
Mutual funds |
|
|
5,148 |
|
|
|
213 |
|
|
|
|
|
|
|
5,361 |
|
Equity securities |
|
|
1,763 |
|
|
|
54 |
|
|
|
16 |
|
|
|
1,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
319,686 |
|
|
|
1,360 |
|
|
|
607 |
|
|
|
320,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
22,352 |
|
|
|
993 |
|
|
|
45 |
|
|
|
23,300 |
|
FNMA |
|
|
20,267 |
|
|
|
978 |
|
|
|
|
|
|
|
21,245 |
|
CMO |
|
|
52,566 |
|
|
|
1,402 |
|
|
|
|
|
|
|
53,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
95,185 |
|
|
|
3,373 |
|
|
|
45 |
|
|
|
98,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
unrealized |
|
|
unrealized |
|
|
market |
|
|
|
cost |
|
|
gains |
|
|
losses |
|
|
value |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and
federal agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year to five years |
|
$ |
109,754 |
|
|
|
525 |
|
|
|
205 |
|
|
|
110,074 |
|
Due in five to ten years |
|
|
25,000 |
|
|
|
7 |
|
|
|
244 |
|
|
|
24,763 |
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year to five years |
|
|
2,000 |
|
|
|
156 |
|
|
|
|
|
|
|
2,156 |
|
Mutual funds |
|
|
5,636 |
|
|
|
40 |
|
|
|
|
|
|
|
5,676 |
|
Equity securities |
|
|
1,965 |
|
|
|
15 |
|
|
|
230 |
|
|
|
1,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
144,355 |
|
|
|
743 |
|
|
|
679 |
|
|
|
144,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
26,979 |
|
|
|
945 |
|
|
|
49 |
|
|
|
27,875 |
|
FNMA |
|
|
27,023 |
|
|
|
889 |
|
|
|
1 |
|
|
|
27,911 |
|
GNMA |
|
|
2,537 |
|
|
|
21 |
|
|
|
1 |
|
|
|
2,557 |
|
CMO |
|
|
68,571 |
|
|
|
1,689 |
|
|
|
|
|
|
|
70,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
125,110 |
|
|
|
3,544 |
|
|
|
51 |
|
|
|
128,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
Amortized |
|
|
unrealized |
|
|
unrealized |
|
|
market |
|
|
|
cost |
|
|
gains |
|
|
losses |
|
|
value |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and
federal agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year to five years |
|
$ |
10,000 |
|
|
|
|
|
|
|
135 |
|
|
|
9,865 |
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year to five years |
|
|
2,000 |
|
|
|
184 |
|
|
|
|
|
|
|
2,184 |
|
Mutual funds |
|
|
7,782 |
|
|
|
|
|
|
|
|
|
|
|
7,782 |
|
Equity securities |
|
|
2,364 |
|
|
|
292 |
|
|
|
202 |
|
|
|
2,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,146 |
|
|
|
476 |
|
|
|
337 |
|
|
|
22,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
28,672 |
|
|
|
263 |
|
|
|
98 |
|
|
|
28,837 |
|
FNMA |
|
|
31,084 |
|
|
|
113 |
|
|
|
302 |
|
|
|
30,895 |
|
GNMA |
|
|
3,134 |
|
|
|
13 |
|
|
|
4 |
|
|
|
3,143 |
|
CMO |
|
|
85,351 |
|
|
|
1,160 |
|
|
|
177 |
|
|
|
86,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
148,241 |
|
|
|
1,549 |
|
|
|
581 |
|
|
|
149,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected maturities of securities available for sale other than mutual funds, equity
securities and mortgage-backed securities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without penalties.
Proceeds from the sale of mortgage-backed securities available for sale for the six months
ended December 31, 2009 were $6.1 million, resulting in gross gains and gross losses of
$112,000 and $5,000, respectively. The mortgage-backed securities had an amortized cost of
$6.0 million. The Company did not sell any mortgage-backed securities available for sale
during the six months ended December 31, 2008 or during the years ended June 30, 2009, 2008 or
2007. Mortgage-backed securities available for sale with fair
values of $266.4 million, $127.5 million and $159.1 million at December 31, 2009 and June 30,
2009 and 2008, respectively, were pledged to FHLB of New York (FHLBNY) as collateral for
advances (see note 12).
The Mutual Fund caption relates to holdings of shares in an Asset Management Fund with
underlying investments in adjustable rate mortgages. During the six months ended December 31,
2008 and the years ended June 30, 2009 and 2008, the mutual fund was deemed
other-than-temporarily impaired resulting in noncash impairment charges to earnings of $1.4
million, $1.7 million and $646,000, respectively. There were no impairment charges on the
mutual fund for the six months ended December 31, 2009 or the year ended June 30, 2007.
Proceeds from the sale of the mutual fund were $500,000 resulting in a gain of $12,000,
$250,000 resulting in a loss of $49,000, and $500,000 resulting in a loss of $61,000 for the
six months ended December 31, 2009
and 2008, and the year ended June 30, 2009, respectively. The Company did not sell any mutual
fund during the years ended June 30, 2008 or 2007.
The Equity securities caption relates to holdings of shares in financial institutions common
stock. During the six months ended December 31, 2009 and 2008 and the years ended June 30,
2009 and 2008, several of these holdings were deemed other-than-temporarily impaired resulting
in noncash
F-20
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
impairment charges to earnings of $202,000, $399,000, $399,000 and $352,000, respectively.
There were no impairment charges on the equity securities for the year ended June 30, 2007.
Gross unrealized losses on securities and mortgage-backed securities available for sale and
the estimated market value of the related securities, aggregated by security category and
length of time that individual securities have been in a continuous unrealized loss position
at December 31, 2009 and June 30, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 (unaudited) |
|
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and
federal agency obligations |
|
$ |
118,733 |
|
|
|
591 |
|
|
|
|
|
|
|
|
|
|
|
118,733 |
|
|
|
591 |
|
Equity securities |
|
|
187 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
187 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
118,920 |
|
|
|
607 |
|
|
|
|
|
|
|
|
|
|
|
118,920 |
|
|
|
607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
573 |
|
|
|
2 |
|
|
|
2,757 |
|
|
|
43 |
|
|
|
3,330 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
573 |
|
|
|
2 |
|
|
|
2,757 |
|
|
|
43 |
|
|
|
3,330 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and
federal agency obligations |
|
$ |
79,202 |
|
|
|
449 |
|
|
|
|
|
|
|
|
|
|
|
79,202 |
|
|
|
449 |
|
Equity securities |
|
|
654 |
|
|
|
230 |
|
|
|
|
|
|
|
|
|
|
|
654 |
|
|
|
230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
79,856 |
|
|
|
679 |
|
|
|
|
|
|
|
|
|
|
|
79,856 |
|
|
|
679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
4,501 |
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
4,501 |
|
|
|
49 |
|
FNMA |
|
|
1,801 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1,801 |
|
|
|
1 |
|
GNMA |
|
|
501 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
501 |
|
|
|
1 |
|
CMO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,803 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
6,803 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
Estimated |
|
|
unrealized |
|
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
|
market value |
|
|
losses |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and
federal agency obligations |
|
$ |
9,865 |
|
|
|
135 |
|
|
|
|
|
|
|
|
|
|
|
9,865 |
|
|
|
135 |
|
Equity securities |
|
|
1,022 |
|
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
1,022 |
|
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,887 |
|
|
|
337 |
|
|
|
|
|
|
|
|
|
|
|
10,887 |
|
|
|
337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC |
|
$ |
14,086 |
|
|
|
95 |
|
|
|
716 |
|
|
|
3 |
|
|
|
14,802 |
|
|
|
98 |
|
FNMA |
|
|
17,677 |
|
|
|
302 |
|
|
|
|
|
|
|
|
|
|
|
17,677 |
|
|
|
302 |
|
GNMA |
|
|
344 |
|
|
|
1 |
|
|
|
474 |
|
|
|
3 |
|
|
|
818 |
|
|
|
4 |
|
CMO |
|
|
19,022 |
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
19,022 |
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
51,129 |
|
|
|
575 |
|
|
|
1,190 |
|
|
|
6 |
|
|
|
52,319 |
|
|
|
581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009, management has evaluated the securities in the above table and has
concluded that none of the securities with losses has impairments that are
other-than-temporary. The unrealized losses on debt securities were caused by interest rate
changes. The contractual terms of these investments do not permit the issuer to settle the
securities at a price less than the
amortized cost of the investment. Because the declines in market value are attributable to
changes in interest rates and not credit quality, and because the Company has no intent to
sell and believes it is not more likely than not that it will be required to sell these
investments until a market price recovery or maturity, these investments are not considered
other than temporarily impaired.
The unrealized losses on investments in mortgage-backed securities were caused by interest
rate changes. It is expected that the securities would not be settled at a price less than
the amortized cost of the investment. Because the decline in fair value is attributable to
changes in interest rates and not credit quality, and because the Company has no intent to
sell and believes it is not more than likely than not that it will be required to sell these
investments until a market price recovery or maturity, these investments are not considered
other than temporarily impaired.
At December 31, 2009, management evaluated its portfolio of equity securities and, based on
its evaluation of the financial condition and near-term prospects of the issuer, management
believes that it could recover its investment in the security.
(8) Accrued Interest Receivable
A summary of accrued interest receivable at December 31, 2009 and June 30, 2009 and 2008 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Mortgage loans |
|
$ |
5,892 |
|
|
$ |
5,796 |
|
|
|
4,269 |
|
Mortgage-backed securities |
|
|
680 |
|
|
|
934 |
|
|
|
1,214 |
|
Securities |
|
|
2,214 |
|
|
|
1,237 |
|
|
|
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,786 |
|
|
$ |
7,967 |
|
|
|
5,646 |
|
|
|
|
|
|
|
|
|
|
|
F-22
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(9) Office Properties and Equipment
At December 31, 2009 and June 30, 2009 and 2008, office properties and equipment, less
accumulated depreciation and amortization, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
$ |
4,171 |
|
|
$ |
4,171 |
|
|
|
3,431 |
|
Buildings |
|
|
8,762 |
|
|
|
8,708 |
|
|
|
5,600 |
|
Land and building improvements |
|
|
3,430 |
|
|
|
3,147 |
|
|
|
2,859 |
|
Leasehold improvements |
|
|
959 |
|
|
|
718 |
|
|
|
633 |
|
Furniture and equipment |
|
|
5,333 |
|
|
|
5,222 |
|
|
|
4,651 |
|
Construction in progress |
|
|
1,238 |
|
|
|
612 |
|
|
|
213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,893 |
|
|
|
22,578 |
|
|
|
17,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
9,163 |
|
|
|
8,801 |
|
|
|
8,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,730 |
|
|
$ |
13,777 |
|
|
|
9,287 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense for the six months ended December 31, 2009 and 2008 and
the years ended June 30, 2009, 2008 and 2007 amounted to $395,000, $321,000, $701,000,
$540,000 and $718,000, respectively.
During fiscal 2008, the Company purchased land in Bergenfield, NJ to construct a de novo
branch location which opened in February 2010 and entered into a contract to lease premises in
Jersey City, NJ, for the purpose of a de novo branch location which opened in October 2008.
During fiscal year 2006, the Company sold its branch location and former Corporate
Headquarters in Hackensack, NJ to a private investor. The asset was transferred to the
private investor in December 2005 and the Company initially accounted for the transaction as a
finance obligation due to the Companys continuing involvement with the transferred property.
The Company leased back a portion of the premises and provided the buyer with non recourse
financing. In accordance with finance obligation accounting, the asset was not removed from
the Companys books at that time. During fiscal year 2007, the non recourse note was sold to
another financial institution which permitted the Company to utilize sale/leaseback accounting
(as prescribed by ASC 840-40, Sale-Leaseback Transactions) for the transaction. As a
result, the former headquarters was removed from the books of the Company and office
properties and equipment, net decreased by $1.5 million. In accordance with this guidance, a
$514,000 gain on the sale was recognized.
F-23
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(10) Deposits
Deposits include non-interest and interest-bearing demand deposits, money market, savings and
time deposits. The Bank does not have any brokered deposits. Deposit accounts at the Bank
are insured by the FDIC up to a maximum of $250,000. In addition, the Bank is a participant
in the FDICs Temporary Liquidity Guarantee Program (TLG) which fully insures certain
noninterest-bearing transaction accounts regardless of the dollar amount until June 30, 2010.
Deposit balances at December 31, 2009 and June 30, 2009 and 2008 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
average |
|
|
|
|
|
|
average |
|
|
|
Amount |
|
|
cost |
|
|
Amount |
|
|
cost |
|
|
Amount |
|
|
cost |
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Demand accounts |
|
$ |
106,968 |
|
|
|
0.75 |
% |
|
$ |
88,759 |
|
|
|
0.90 |
% |
|
$ |
73,949 |
|
|
|
0.89 |
% |
Money market deposit accounts |
|
|
271,583 |
|
|
|
1.43 |
|
|
|
199,965 |
|
|
|
2.07 |
|
|
|
57,117 |
|
|
|
2.92 |
|
Savings accounts |
|
|
146,442 |
|
|
|
0.79 |
|
|
|
147,669 |
|
|
|
1.04 |
|
|
|
149,062 |
|
|
|
1.35 |
|
Time deposits |
|
|
685,514 |
|
|
|
2.32 |
|
|
|
691,237 |
|
|
|
2.84 |
|
|
|
418,804 |
|
|
|
3.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,210,507 |
|
|
|
1.80 |
% |
|
$ |
1,127,630 |
|
|
|
2.32 |
% |
|
$ |
698,932 |
|
|
|
2.92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on deposits for the six months ended December 31, 2009 and 2008 and the years
ended June 30, 2009, 2008 and 2007 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
December 31, |
|
|
Years ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Demand accounts |
|
$ |
404 |
|
|
$ |
323 |
|
|
$ |
628 |
|
|
|
812 |
|
|
|
868 |
|
Money market deposit accounts |
|
|
2,008 |
|
|
|
1,076 |
|
|
|
2,626 |
|
|
|
1,730 |
|
|
|
1,195 |
|
Savings accounts |
|
|
675 |
|
|
|
1,069 |
|
|
|
1,979 |
|
|
|
2,427 |
|
|
|
2,575 |
|
Time deposits |
|
|
9,036 |
|
|
|
8,648 |
|
|
|
19,029 |
|
|
|
18,896 |
|
|
|
18,526 |
|
Stock subscriptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,123 |
|
|
$ |
11,116 |
|
|
$ |
24,262 |
|
|
|
23,865 |
|
|
|
23,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
Time deposits at December 31, 2009 and June 30, 2009 mature as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2009 |
|
Due within 12 months |
|
$ |
583,794 |
|
|
$ |
601,316 |
|
Due between 12 and 24 months |
|
|
83,408 |
|
|
|
67,014 |
|
Due between 24 and 36 months |
|
|
11,191 |
|
|
|
16,295 |
|
Due between 36 and 48 months |
|
|
3,746 |
|
|
|
3,586 |
|
Due between 48 and 60 months |
|
|
3,375 |
|
|
|
3,026 |
|
|
|
|
|
|
|
|
|
|
$ |
685,514 |
|
|
$ |
691,237 |
|
|
|
|
|
|
|
|
|
|
Included in time deposits at December 31, 2009 and June 30, 2009 and 2008 is $240.3 million,
$234.9 million and $100.8 million, respectively, of deposits of $100,000 and over. |
(11) Income Taxes
|
|
Income tax expense (benefit) for the six months ended December 31, 2009 and 2008 and the years
ended June 30, 2009, 2008 and 2007 consists of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
December 31, |
|
|
Years ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
4,692 |
|
|
$ |
4,822 |
|
|
$ |
7,749 |
|
|
|
7,210 |
|
|
|
6,833 |
|
State |
|
|
1,229 |
|
|
|
117 |
|
|
|
758 |
|
|
|
490 |
|
|
|
662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current |
|
|
5,921 |
|
|
|
4,939 |
|
|
|
8,507 |
|
|
|
7,700 |
|
|
|
7,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(833 |
) |
|
|
(3,492 |
) |
|
|
(4,749 |
) |
|
|
(2,724 |
) |
|
|
(3,312 |
) |
State |
|
|
(302 |
) |
|
|
348 |
|
|
|
262 |
|
|
|
1,242 |
|
|
|
(5,847 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred |
|
|
(1,135 |
) |
|
|
(3,144 |
) |
|
|
(4,487 |
) |
|
|
(1,482 |
) |
|
|
(9,159 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit) |
|
$ |
4,786 |
|
|
$ |
1,795 |
|
|
$ |
4,020 |
|
|
|
6,218 |
|
|
|
(1,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
A reconciliation between the provision for income taxes and the expected amount (computed
by multiplying income before provision for income taxes times the applicable statutory federal
income tax rate) for the six months ended December 31, 2009 and 2008 and the years ended June
30, 2009, 2008 and 2007 is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
December 31, |
|
|
Years ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands) |
Income before provision for income taxes |
|
$ |
12,198 |
|
|
|
4,340 |
|
|
|
9,572 |
|
|
|
15,178 |
|
|
|
9,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applicable statutory federal income tax rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed expected federal income tax expense |
|
|
4,269 |
|
|
|
1,519 |
|
|
|
3,350 |
|
|
|
5,312 |
|
|
|
3,280 |
|
Increase in federal income tax expense resulting from: State income taxes, net of federal benefit |
|
|
603 |
|
|
|
302 |
|
|
|
663 |
|
|
|
1,128 |
|
|
|
(3,370 |
) |
Bank owned life insurance |
|
|
(206 |
) |
|
|
(190 |
) |
|
|
(395 |
) |
|
|
(371 |
) |
|
|
(344 |
) |
Contribution to charitable foundation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,533 |
) |
ESOP fair market value adjustment |
|
|
49 |
|
|
|
90 |
|
|
|
144 |
|
|
|
118 |
|
|
|
74 |
|
Non-deductible stock based compensation |
|
|
64 |
|
|
|
53 |
|
|
|
209 |
|
|
|
26 |
|
|
|
|
|
Other items, net |
|
|
7 |
|
|
|
21 |
|
|
|
49 |
|
|
|
5 |
|
|
|
229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,786 |
|
|
|
1,795 |
|
|
|
4,020 |
|
|
|
6,218 |
|
|
|
(1,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rates for the six months ended December 31, 2009 and 2008 and the years
ended June 30, 2009, 2008 and 2007 were 39.24%, 41.35%, 42.00%, 40.97% and (17.76)%,
respectively. |
|
|
The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31, 2009 and June 30, 2009 and
2008 are as follows: |
F-26
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
|
(In thousands) |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and real estate owned losses per books |
|
$ |
9,054 |
|
|
|
8,448 |
|
|
|
5,528 |
|
Reserve for uncollected interest |
|
|
1,619 |
|
|
|
1,456 |
|
|
|
213 |
|
Premises and equipment differences in depreciation |
|
|
253 |
|
|
|
265 |
|
|
|
291 |
|
Pension |
|
|
5,035 |
|
|
|
4,754 |
|
|
|
3,859 |
|
Accrued/deferred compensation |
|
|
2,180 |
|
|
|
2,088 |
|
|
|
1,701 |
|
ESOP shares allocated or committed to be released |
|
|
974 |
|
|
|
812 |
|
|
|
487 |
|
Stock compensation |
|
|
1,255 |
|
|
|
601 |
|
|
|
219 |
|
Capital loss carry forward |
|
|
|
|
|
|
|
|
|
|
37 |
|
Other than temporary loss on securities |
|
|
1,271 |
|
|
|
1,317 |
|
|
|
408 |
|
Charitable contribution carry forward |
|
|
2,772 |
|
|
|
3,286 |
|
|
|
4,154 |
|
Net operating loss carry forward |
|
|
|
|
|
|
|
|
|
|
1,024 |
|
Prepaid AMA |
|
|
146 |
|
|
|
146 |
|
|
|
146 |
|
Other |
|
|
217 |
|
|
|
250 |
|
|
|
265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax assets |
|
|
24,776 |
|
|
|
23,423 |
|
|
|
18,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less valuation reserve |
|
|
697 |
|
|
|
655 |
|
|
|
611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax asset |
|
|
24,079 |
|
|
|
22,768 |
|
|
|
17,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on securities available for sale |
|
|
1,667 |
|
|
|
1,465 |
|
|
|
450 |
|
Deferred loan fees |
|
|
245 |
|
|
|
280 |
|
|
|
132 |
|
Other |
|
|
590 |
|
|
|
333 |
|
|
|
170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
2,502 |
|
|
|
2,078 |
|
|
|
752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset |
|
$ |
21,577 |
|
|
|
20,690 |
|
|
|
16,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of deferred taxes for the six months ended December 31, 2009 and the years ended
June 30, 2009 and 2008 were due primarily to the difference in recognizing income and expenses
for book purposes and tax purposes for various deferred loan fees, uncollected interest on
loans, accrued benefit costs, book and tax depreciation, non-allowable reserves and charitable
contribution carryforwards. |
|
|
At June 30, 2008, the Company had state net operating loss carryforwards of approximately
$17.5 million having expiration dates ranging from December 2010 through 2013. During the
fiscal year ended June 30, 2009, the deferred tax asset was realized. |
|
|
At December 31, 2009 and June 30, 2009 and 2008, the valuation allowance was $697,000,
$655,000 and $611,000, respectively. The valuation allowance relates to the stock
contribution to the charitable foundation and impairment charges on equity securities for
which tax benefits are not |
F-27
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
more likely than not to be realized. During the 2007 fiscal year
the Company liquidated one of its subsidiaries. The liquidation of this subsidiary resulted
in New Jersey State taxable income at its Bank subsidiary. The Company had previously
established a valuation allowance for New Jersey net operating loss carryforwards and other
deferred tax assets incurred at its Bank subsidiary. Due
to the expected utilization of the loss carryforwards the related valuation allowance of $3.2
million was reversed. |
|
|
At December 31, 2009 and June 30, 2009, retained earnings includes approximately $15.1 million
for which no provision for income tax has been made. This amount represents an allocation of
income to bad debt deductions for tax purposes only. Under Statement of Financial Accounting
Standards No. 109, this amount is treated as a permanent difference and deferred taxes are not
recognized unless it appears that it will be reduced and result in taxable income in the
foreseeable future. Events that would result in taxation of these reserves include failure to
qualify as a bank for tax purposes, distributions in complete or partial liquidation, stock
redemptions and excess distributions to shareholders. At December 31, 2009 and June 30, 2009,
the Company had an unrecognized tax liability of $6.3 million with respect to this reserve. |
|
|
Effective July 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, and its
successor, ASC 740, Income Taxes, or FIN 48, which clarified the accounting for uncertainty
in income taxes recognized in an enterprises financial statements in accordance SFAS No. 109.
As a result of the adoption of FIN 48, the Company recognized a $900,000 decrease in the
liability for unrecognized tax benefits, which was accounted for as an addition to the July 1,
2007, balance of retained earnings. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits, where applicable, in income tax expense. |
|
|
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 2005. Currently, the
Company is not under examination by any taxing authority. |
(12) Borrowings
|
|
Borrowed funds are summarized as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
June 30, |
|
|
|
December 31, 2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
FHLB of NY |
|
$ |
507,098 |
|
|
|
3.96 |
% |
|
$ |
508,619 |
|
|
|
3.96 |
% |
|
$ |
433,289 |
|
|
|
4.00 |
% |
Other |
|
|
341 |
|
|
|
0.25 |
% |
|
|
372 |
|
|
|
0.25 |
% |
|
|
383 |
|
|
|
2.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
507,439 |
|
|
|
3.96 |
% |
|
$ |
508,991 |
|
|
|
3.96 |
% |
|
$ |
433,672 |
|
|
|
4.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Borrowings represent advances and repurchase agreements and mature as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
December 31, 2009 |
|
|
June 30, 2009 |
|
Due within one year |
|
$ |
10,341 |
|
|
$ |
10,372 |
|
Due between one and two years |
|
|
36,413 |
|
|
|
5,434 |
|
Due between two and three years |
|
|
20,000 |
|
|
|
52,500 |
|
Due between three and four years |
|
|
67,500 |
|
|
|
40,000 |
|
Due between four and five years |
|
|
63,185 |
|
|
|
70,685 |
|
Due between five and ten years |
|
|
310,000 |
|
|
|
330,000 |
|
|
|
|
|
|
|
|
|
|
$ |
507,439 |
|
|
$ |
508,991 |
|
|
|
|
|
|
|
|
The majority of the borrowings listed above have various put options held by the issuer, FHLB.
These put options can be exercised by the FHLB after either a certain passage of time or
certain levels of the 3 month Libor interest rate. The Company expects that some of these
advances will be put by the FHLB prior to their maturity date. At December 31, 2009, the
Company had a commitment for an overnight line of credit with the FHLB totaling $200.0
million, of which there were no balances. The line of credit is priced at federal funds rate
plus a spread (generally between 20 and 40 basis points) and re-prices daily.
At December 31, 2009 and June 30, 2009 and 2008, borrowings are secured by mortgage-backed
securities and investment securities with a book value of $352.6 million, $302.8 million and
$323.0 million and performing mortgage loans with an outstanding balance of $881.7 million,
$841.4 million and $185.6 million, respectively. The fair value of mortgage-backed securities
and investment securities pledged as collateral for borrowings were $354.6 million, $308.5
million and $321.8 million at December 31, 2009 and June 30, 2009 and 2008, respectively.
F-29
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(13) Employee Benefit Plans
The Company is a participant in the Financial Institutions Retirement Fund, a multi-employer
defined benefit plan. All employees who attain age 21 and complete one year of service are
eligible to participate in this plan. Retirement benefits are based upon a formula utilizing
years of service and average compensation, as defined. Participants are vested 100% upon the
completion of five years of service. Pension administrative expenses of $31,445, $21,000 and
$10,000 were incurred for the years ended June 30, 2009, 2008 and 2007, respectively. There
were no net contributions made for the years ended June 30, 2009, 2008 and 2007. The Plan was
frozen as of December 31, 2008.
The Financial Institutions Retirement Fund does not segregate its assets, liabilities or costs
by participating employer. Therefore, disclosure of the accumulated benefit obligations, plan
assets and the components of annual pension expense attributable to the Company cannot be
ascertained.
The Company has a savings incentive plan covering substantially all employees of the Company.
Contributions are currently made by the Company in an amount equal to 50% of the first 6% of
employee contributions. The contribution percentage is determined annually by the Board of
Directors. Company contributions for the six months ended December 31, 2009 and 2008 and the
years ended June 30, 2009, 2008 and 2007 were $63,000, $59,000, $133,000, $120,000 and
$123,000, respectively.
The Company has a nonqualified savings incentive plan covering employees whose salary
deferrals to the savings incentive plan are limited. Contributions to the nonqualified
savings incentive plan are currently made by the Company in an amount equal to 50% of the
first 6% of employee contributions to this plan. The contribution percentage is determined
annually by the Board of Directors. The deferrals and contributions are payable, with
interest, at a future date. Until these payments are made, the obligations to the employees
are a general liability of the Company. Company contributions for the six months ended
December 31, 2009 and 2008 and the years ended June 30, 2009, 2008 and 2007 were $61,000,
$38,000, $62,000, $42,000 and $21,000, respectively. The total obligation under the
nonqualified savings incentive plan that existed as of June 30, 2009 and 2008 was $1.9 million
and $1.4 million, respectively.
The Company has a nonqualified Benefit Equalization Plan (BEP Plan) which provides benefits to
employees who are disallowed certain benefits under the Companys qualified benefit plans.
The Company recorded expenses associated with the BEP Plan of $90,000, $109,000, $201,000,
$180,000 and $143,000 for the six months ended December 31, 2009 and 2008 and the years ended
June 30, 2009, 2008 and 2007, respectively. The Plan was frozen as of December 31, 2008
resulting in a curtailment of benefits of $454,000.
The Company has a nonqualified Directors Retirement Plan (the Retirement Plan). The
Retirement Plan provides eligible directors an annual retirement benefit based on the monthly
meeting fee at the time of the directors retirement. The Company recorded expenses of
$264,000, $196,000, $445,000, $420,000 and $391,000 for the six months ended December 31, 2009
and 2008 and the years ended June 30, 2009, 2008 and 2007, respectively, related to the
Retirement Plan.
During 1999, the Company adopted a Post Retirement Medical Plan (the Medical Plan) for
directors and certain eligible employees. The Medical Plan provides a medical retirement
benefit at
F-30
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
a cost to the Company limited to two times the premium at the time of the participants
retirement. Participants are required to contribute to the plan for excess premiums above the
limitation. The Company recorded expenses of $147,000, $145,000, $247,000, $300,000 and
$337,000 for the six months ended December 31, 2009 and 2008 and the years ended June 30,
2009, 2008 and 2007, respectively, related to the Medical Plan.
During 2000, the Company adopted a Deferred Directors Fee Plan (the Deferred Fee Plan) for
outside directors of the Company. Under the Deferred Fee Plan, directors may elect to defer
the receipt of their monthly and board committee fees. The fees are payable, with interest, at
a predetermined future date. Interest is calculated at the greater of 9.00% or the Wall Street
prime rate of interest. For the years ended June 30, 2009 and 2008, interest was calculated at
9.00%. Until these payments are made, the obligations to the directors are a general liability
of the Company. The total obligation under the Deferred Fee Plan that existed as of December
31, 2009 and June 30, 2009 and 2008 was $3.1 million, $2.8 million and $2.2 million,
respectively.
During 2005, the Company adopted an Executive Supplemental Retirement Income Agreement
(the SERP) for the President/CEO of the Company. The SERP provides a retirement benefit to the
executive with a minimum payment period of 20 years. The SERP benefit is equal to 70% of the
executives average annual pre-retirement income, reduced by the benefits due to the executive
through certain other benefit plans. The Company recorded expenses of $424,000, $361,000,
$806,000, $689,000 and $648,000 for the six months ended December 31, 2009 and 2008 and the
years ended June 30, 2009, 2008 and 2007, respectively, related to the SERP. The SERP is
unfunded, and an accrued liability of $3.3 million, $2.8 million and $2.0 million was recorded
for this plan as of December 31, 2009 and June 30, 2009 and 2008, respectively.
F-31
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
The following table sets forth information regarding the BEP Plan and the Retirement Plan, and
the Medical Plan at June 30, 2009 and 2008 (in thousands). As detailed above, similar
disclosures for the multi-employer defined benefit plan cannot be ascertained.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BEP Plan and Retirement Plan |
|
|
Medical Plan |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Change in benefit obligation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at
beginning of the year |
|
$ |
3,748 |
|
|
$ |
3,421 |
|
|
$ |
2,600 |
|
|
$ |
2,694 |
|
Service cost |
|
|
231 |
|
|
|
256 |
|
|
|
64 |
|
|
|
58 |
|
Interest cost |
|
|
284 |
|
|
|
221 |
|
|
|
199 |
|
|
|
163 |
|
Amendments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss |
|
|
850 |
|
|
|
135 |
|
|
|
371 |
|
|
|
(61 |
) |
Curtailment BEP plan |
|
|
(454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid |
|
|
(52 |
) |
|
|
(52 |
) |
|
|
(58 |
) |
|
|
(52 |
) |
Discount rate change |
|
|
162 |
|
|
|
(233 |
) |
|
|
256 |
|
|
|
(202 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit
obligation
at end of the year |
|
$ |
4,769 |
|
|
$ |
3,748 |
|
|
$ |
3,432 |
|
|
$ |
2,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of the year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Actual return on plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions |
|
|
52 |
|
|
|
52 |
|
|
|
58 |
|
|
|
52 |
|
Benefits paid |
|
|
(52 |
) |
|
|
(52 |
) |
|
|
(58 |
) |
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets
at end of the year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year |
|
$ |
(4,769 |
) |
|
$ |
(3,748 |
) |
|
$ |
(3,432 |
) |
|
$ |
(2,600 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The unfunded BEP and retirement benefits of $4.8 million and $3.7 million and medical
benefits of $3.4 million and $2.6 million at June 30, 2009 and 2008, respectively, are
included in other liabilities in our consolidated balance sheet. The components of
accumulated other comprehensive loss related to pension and other postretirement benefits, on
a pre-tax basis, at June 30, 2009 and 2008 are summarized in the following table (in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BEP Plan and |
|
|
|
|
|
|
Retirement Plan |
|
|
Medical Plan |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Prior service cost |
|
$ |
358 |
|
|
$ |
418 |
|
|
$ |
|
|
|
$ |
|
|
Net actuarial loss |
|
|
916 |
|
|
|
429 |
|
|
|
1,008 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts
recognized in
accumulated
other comprehensive
loss |
|
$ |
1,274 |
|
|
$ |
847 |
|
|
$ |
1,008 |
|
|
$ |
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Net periodic benefit costs for the six months ended December 31, 2009 and 2008 and the years
ended June 30, 2009, 2008 and 2007, as well as costs that are expected to be amortized into
expense in fiscal 2010, are presented in the following table (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BEP Plan and Retirement Plan |
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
December 31, |
|
|
Years ended Jun 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Service cost |
|
$ |
127 |
|
|
$ |
135 |
|
|
$ |
231 |
|
|
$ |
256 |
|
|
$ |
234 |
|
Interest cost |
|
|
158 |
|
|
|
117 |
|
|
|
284 |
|
|
|
221 |
|
|
|
195 |
|
Amortization of
unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost |
|
|
30 |
|
|
|
30 |
|
|
|
60 |
|
|
|
60 |
|
|
|
61 |
|
Net loss |
|
|
39 |
|
|
|
23 |
|
|
|
70 |
|
|
|
44 |
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
354 |
|
|
$ |
305 |
|
|
$ |
645 |
|
|
$ |
581 |
|
|
$ |
534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Plan |
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
December 31, |
|
|
Years ended Jun 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Service cost |
|
$ |
28 |
|
|
$ |
30 |
|
|
$ |
64 |
|
|
$ |
58 |
|
|
$ |
54 |
|
Interest cost |
|
|
89 |
|
|
|
86 |
|
|
|
199 |
|
|
|
163 |
|
|
|
157 |
|
Amortization of
unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
4 |
|
|
|
64 |
|
Net loss |
|
|
30 |
|
|
|
27 |
|
|
|
67 |
|
|
|
51 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
147 |
|
|
$ |
145 |
|
|
$ |
330 |
|
|
$ |
276 |
|
|
$ |
337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average actuarial assumptions used in the plan determinations at June 30,
2009, 2008 and 2007 were as follows:
`
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BEP Plan and Retirement Plan |
|
|
Medical Plan |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Discount Rate |
|
|
6.25 |
% |
|
|
6.75 |
% |
|
|
6.25 |
% |
|
|
6.25 |
% |
|
|
6.75 |
% |
|
|
6.25 |
% |
Rate of compensation
increase |
|
|
5.50 |
% |
|
|
5.50 |
% |
|
|
5.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits cost
rate of increase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.00 |
% |
|
|
7.00 |
% |
|
|
8.00 |
% |
F-33
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Estimated future benefit payments, which reflect expected future service, are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
BEP Plan and |
|
|
|
|
|
|
Retirement |
|
|
Medical |
|
|
|
Plan |
|
|
Plan |
|
2010 |
|
$ |
62 |
|
|
$ |
81 |
|
2011 |
|
|
85 |
|
|
|
104 |
|
2012 |
|
|
180 |
|
|
|
123 |
|
2013 |
|
|
222 |
|
|
|
151 |
|
2014 |
|
|
222 |
|
|
|
158 |
|
2015-2018 |
|
|
1,636 |
|
|
|
1,071 |
|
Assumed health care cost trend rates have a significant effect on the amounts reported
for health care plans. A 1% change in the assumed health care cost trend rate would have the
following effects on post-retirement benefits (in thousands):
|
|
|
|
|
|
|
|
|
|
|
1% increase |
|
|
1% decrease |
|
Effect on total service cost and interest
cost |
|
$ |
54 |
|
|
$ |
(42 |
) |
Effect on post retirement benefits
obligation |
|
$ |
644 |
|
|
$ |
(507 |
) |
The Company invests in bank owned life insurance (BOLI) to help offset the cost of
employee benefits. BOLI involves the purchasing of life insurance by the Company on a chosen
group of employees with the Company as owner and beneficiary of the policies. BOLI is
recorded at its cash surrender value and is classified as a non-interest earning asset.
Increases in the carrying value, other than purchases, are recorded as non-interest income.
At December 31, 2009 and June 30, 2009 and 2008, the Company had $30.0 million, $29.4 million
and $26.4 million, respectively, in BOLI. Income earned on BOLI was $588,000, $544,000, $1.1
million, $1.1 million and $984,000 for the six months ended December 31, 2009 and 2008 and the
years ended June 30, 2009, 2008 and 2007, respectively and is exempt from federal and state
income taxes as long as the policies are held until the death of the insured individuals.
The Company adopted ASC 715-60, Compensation: Defined Benefit Plans-Other Postretirement,
effective July 1, 2008. ASC 715-60 requires that, for split-dollar life insurance
arrangements that
provide a benefit to an employee that extends to postretirement periods, an employer should
recognize a liability for future benefits. ASC 715-60 required that recognition of the
effects of adoption should be either by (a) a change in accounting principle through a
cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption
or (b) a change in accounting principle through retrospective application to all prior
periods. Upon adoption, the Company recorded a charge to retained earnings of $76,000.
(14) Stock Based Compensation
Employee Stock Ownership Plan
During 2006, the Company adopted an Employee Stock Ownership Plan (the ESOP). The ESOP is a
tax-qualified plan designed to invest primarily in the Companys common stock. The ESOP
F-34
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
provides employees with the opportunity to receive a funded retirement benefit from the Bank,
based primarily on the value of the Companys common stock. The ESOP purchased 1,589,644
shares of the Companys common stock in the Companys initial public offering at a price of
$10.00 per share. This purchase was funded with a loan from the Company to the ESOP. The
outstanding loan balance at December 31, 2009 and June 30, 2009 was $14.5 million and $15.1
million, respectively. The shares of Companys common stock purchased in the initial public
offering are pledged as collateral for the loan. Shares will be released from the pledge for
allocation to participants as loan payments are made. At December 31, 2009, shares allocated
to participants were 238,446 since the plan inception. ESOP shares that were unallocated or
not yet committed to be released totaled 1,351,198 at December 31, 2009 and had a fair value
of $18.5 million. ESOP compensation expense for the six months ended December 31, 2009 and
2008 and the years ended June 30, 2009 and 2008 was $537,000, $654,000, $1.3 million and $1.1
million, respectively, representing the fair market value of shares allocated or committed to
be released during the year.
The Company also has established an ESOP restoration plan, which is a non-qualified plan that
provides supplemental benefits to certain executives who are prevented from receiving the full
benefits contemplated by the employee stock ownership plans benefit formula. The
supplemental benefits consist of payments representing shares that cannot be allocated to
participants under the ESOP due to legal limitations imposed on tax-qualified plans.
Compensation expense related to this plan amounts to $57,000, $60,000, $111,000 and $200,000,
for the six months ended December 31, 2009 and 2008 and the years ended June 30, 2009 and
2008, respectively. There was no expense related to this plan for the year ended June 30,
2007.
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. On
November 11, 2008, an additional 70,000 stock options were issued. The Company adopted ASC
718, Compensation: Stock Compensation upon approval of the Plan, and began to expense the
fair value of all share-based compensation granted over the requisite service periods.
ASC 718- requires the Company to report as a financing cash flow the benefits of realized tax
deductions in excess of the deferred tax benefits previously recognized for compensation
expense. There were no such excess tax benefits in fiscal 2009, 2008 and 2007. The Company
classified share-based compensation for employees and outside directors within compensation
and fringe benefits in the consolidated statements of income to correspond with the same line
item as the cash compensation paid.
Stock options vest over a five-year service period and expire ten years from issuance. The
Company recognizes compensation expense for all option grants over the awards respective
requisite service periods. Management estimated the fair values of all option grants using
the Black-Scholes option-pricing model. Since there is limited historical information on the
volatility
of the Companys stock, management considered the average volatilities of similar entities for
an appropriate period in determining the assumed volatility rate used in the estimation of
fair value. Management estimated the expected life of the options using the simplified
method. The Treasury
F-35
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
yield in effect at the time of the grant provides the risk-free rate for periods within
the contractual life of the option. The fair values of all options grants were estimated
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 recognizes compensation
expense for the fair values of these awards, which have graded vesting, on a straight-line
basis over the requisite service period of the awards.
The following is a summary of the Companys stock option activity and related information for
its option plan for the six months ended December 31, 2009 (unaudited) and the year ended June
30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
Average |
|
|
|
Number of |
|
|
Average |
|
|
Average |
|
|
Remaining |
|
|
|
Stock |
|
|
Grant Date |
|
|
Exercise |
|
|
Contractual |
|
|
|
Options |
|
|
Fair Value |
|
|
Price |
|
|
Life (years) |
|
Outstanding at June 30, 2009 |
|
|
1,848,349 |
|
|
$ |
3.44 |
|
|
$ |
15.65 |
|
|
|
9.0 |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
6,624 |
|
|
|
3.44 |
|
|
|
15.65 |
|
|
|
8.8 |
|
Expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
1,841,725 |
|
|
$ |
3.44 |
|
|
$ |
15.65 |
|
|
|
8.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009 |
|
|
368,345 |
|
|
|
|
|
|
$ |
15.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
Weighted |
|
|
Average |
|
|
|
Number of |
|
|
Grant |
|
|
Average |
|
|
Remaining |
|
|
|
Stock |
|
|
Date Fair |
|
|
Exercise |
|
|
Contractual |
|
|
|
Options |
|
|
Value |
|
|
Price |
|
|
Life |
|
Outstanding at June 30, 2008 |
|
|
1,788,349 |
|
|
$ |
3.44 |
|
|
$ |
15.65 |
|
|
|
10.0 |
|
Granted |
|
|
70,000 |
|
|
|
3.44 |
|
|
|
15.65 |
|
|
|
10.0 |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
10,000 |
|
|
|
3.44 |
|
|
|
15.65 |
|
|
|
9.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2009 |
|
|
1,848,349 |
|
|
$ |
3.44 |
|
|
$ |
15.65 |
|
|
|
9.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2009 |
|
|
355,670 |
|
|
|
|
|
|
$ |
15.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of options granted during the year ended June
30, 2009 was $3.44 per share. The Company recorded $572,000, $539,000, $1.2 million and
$205,000 of share based compensation expense related to the options granted for the six months
ended December 31, 2009 and 2008 and the years ended June 30, 2009 and 2008, respectively.
There was no share based compensation expense related to the options for the year ended June
30, 2007. Expected future expense related to the non-vested options outstanding at December
31, 2009 is $3.8 million over a weighted average period of 3.4 years.
F-36
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Restricted shares vest over a five-year service period on the anniversary date of the grant.
The product of the number of shares granted and the grant date market price of the Companys
common stock determines the fair value of restricted shares under the Companys restricted
stock plan. The Company recognizes compensation expense for the fair value of restricted
shares on a straight-line basis over the requisite service period.
The following is a summary of the Companys restricted shares and related information for its
restricted shares for the six months ended December 31, 2009 (unaudited) and the year ended
June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Number |
|
|
Grant |
|
|
Weighted |
|
|
|
of Shares |
|
|
Date Fair |
|
|
Average |
|
|
|
Awarded |
|
|
Value |
|
|
Vesting |
|
Non-vested at June 30, 2009 |
|
|
635,859 |
|
|
$ |
15.65 |
|
|
|
3.9 |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at December 31, 2009 |
|
|
635,859 |
|
|
$ |
15.65 |
|
|
|
3.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Number |
|
|
Grant |
|
|
Weighted |
|
|
|
of Shares |
|
|
Date Fair |
|
|
Average |
|
|
|
Awarded |
|
|
Value |
|
|
Vesting |
|
Non-vested at June 30, 2008 |
|
|
794,823 |
|
|
$ |
15.65 |
|
|
|
4.9 |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
158,964 |
|
|
|
15.65 |
|
|
|
3.9 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at June 30, 2009 |
|
|
635,859 |
|
|
$ |
15.65 |
|
|
|
3.9 |
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded $1.2 million, $1.2 million, $2.6 million and $405,000 of share-based
compensation expense related to restricted shares for the six months ended December 31, 2009
and 2008 and the years ended June 30, 2009 and 2008, respectively. There was no share based
compensation expense related to the restricted shares for the year ended June 30, 2007.
Expected future compensation expense relating to the non-vested restricted shares at December
31, 2009 is $8.1 million over a weighted average period of 3.3 years.
F-37
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(15) Commitments and Contingencies
In the ordinary course of our operations, we enter into certain contractual obligations. Such
obligations include operating leases for premises and equipment. Certain facilities are
occupied under long-term operating leases which expire on various dates. Certain leases also
provide for renewal options. Total rent expense was $214,000, $180,000, $388,000, $302,000 and
$304,000 for the six months ended December 31, 2009 and 2008 and the years ended June 30,
2009, 2008 and 2007, respectively. At December 31, 2009, aggregate minimum lease payments for
the remainder of the leases are as follows (in thousands):
|
|
|
|
|
Year ended December 31: (unaudited) |
|
|
|
|
2010 |
|
$ |
289 |
|
2011 |
|
|
289 |
|
2012 |
|
|
257 |
|
2013 |
|
|
217 |
|
2014 |
|
|
158 |
|
Thereafter |
|
|
370 |
|
|
|
|
|
|
|
$ |
1,580 |
|
|
|
|
|
At December 31, 2009 and June 30, 2009, the Company had outstanding commitments to purchase
when issued securities of $15.0 million and $20.0 million, respectively. At June 30, 2008,
there were no outstanding commitments to purchase securities.
In the normal course of business, the Company may be a party to various outstanding legal
proceedings and claims. In the opinion of management, the financial position of the Company
will not be materially affected by the outcome of such legal proceedings and claims.
F-38
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(16) Regulatory Capital Requirements
Deposits at the Bank are insured up to standard limits of coverage provided by the Deposit
Insurance Fund (DIF) of the FDIC. The Bank is a New Jersey state chartered savings bank and is
subject to comprehensive regulation, supervision and periodic examinations by the FDIC and by
the New Jersey State Department of Banking. The Company is regulated by the Office of Thrift
Supervision (OTS).
FDIC regulations require banks to maintain minimum levels of regulatory capital. Under the
regulations in effect at December 31, 2009, the Bank and the Company are required to maintain
(a) a minimum leverage ratio of Tier 1 capital to total adjusted assets of 4.0%, and
(b) minimum ratios of Tier 1 and total capital to risk-weighted assets of 4.0% and 8.0%,
respectively.
Under its prompt corrective action regulations, the FDIC is required to take certain
supervisory actions (and may take additional discretionary actions) with respect to an
undercapitalized institution. Such actions could have a direct material effect on the
institutions financial statements. The regulations establish a framework for the
classification of savings institutions into five categories: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized. Generally, an institution is considered well capitalized if it has a
leverage (Tier 1) capital ratio of at least 5%; a Tier 1 risk-based capital ratio of at least
6%; and a total risk-based capital ratio of at least 10%.
The foregoing capital ratios are based in part on specific quantitative measures of assets,
liabilities and certain off-balance-sheet items as calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative judgments by
the FDIC about capital components, risk weightings and other factors.
Management believes that, as of December 31, 2009, the Bank meets all capital adequacy
requirements to which it is subject. Further, the most recent FDIC notification categorized
the Bank as a well-capitalized institution under the prompt corrective action regulations.
There have been no conditions or events since that notification that management believes have
changed the Banks capital classification.
F-39
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
The following is a summary of the Companys and the Banks actual capital amounts and ratios
as of December 31, 2009 and June 30, 2009 and 2008, compared to the FDIC minimum capital
adequacy requirements and the FDIC requirements for classification as a well-capitalized
institution.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC for |
|
|
FDIC to be well capitalized |
|
|
|
|
|
|
|
|
|
|
|
capital adequacy |
|
|
under prompt |
|
|
|
Actual |
|
|
purposes |
|
|
corrective action |
|
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
|
(Dollars in thousands) |
|
|
|
|
|
Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009: (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted
assets) |
|
$ |
264,865 |
|
|
|
18.42 |
% |
|
$ |
115,053 |
|
|
|
8.00 |
% |
|
$ |
143,817 |
|
|
|
10.00 |
% |
Tier 1 capital (to risk-weighted
assets) |
|
|
246,836 |
|
|
|
17.16 |
|
|
|
57,527 |
|
|
|
4.00 |
|
|
|
86,290 |
|
|
|
6.00 |
|
Tier 1 capital (to average assets) |
|
|
246,836 |
|
|
|
12.36 |
|
|
|
79,912 |
|
|
|
4.00 |
|
|
|
99,890 |
|
|
|
5.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted
assets) |
|
$ |
255,997 |
|
|
|
19.15 |
% |
|
$ |
106,945 |
|
|
|
8.00 |
% |
|
$ |
133,681 |
|
|
|
10.00 |
% |
Tier 1 capital (to risk-weighted
assets) |
|
|
239,238 |
|
|
|
17.90 |
|
|
|
53,472 |
|
|
|
4.00 |
|
|
|
80,208 |
|
|
|
6.00 |
|
Tier 1 capital (to average assets) |
|
|
239,238 |
|
|
|
14.31 |
|
|
|
66,862 |
|
|
|
4.00 |
|
|
|
83,578 |
|
|
|
5.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted
assets) |
|
$ |
292,483 |
|
|
|
27.78 |
% |
|
$ |
84,239 |
|
|
|
8.00 |
% |
|
$ |
105,299 |
|
|
|
10.00 |
% |
Tier 1 capital (to risk-weighted
assets) |
|
|
279,316 |
|
|
|
26.53 |
|
|
|
42,120 |
|
|
|
4.00 |
|
|
|
63,179 |
|
|
|
6.00 |
|
Tier 1 capital (to average assets) |
|
|
279,316 |
|
|
|
19.71 |
|
|
|
56,680 |
|
|
|
4.00 |
|
|
|
70,851 |
|
|
|
5.00 |
|
F-40
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC for |
|
|
FDIC to be well capitalized |
|
|
|
|
|
|
|
|
|
|
|
capital adequacy |
|
|
under prompt |
|
|
|
Actual |
|
|
purposes |
|
|
corrective action |
|
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Bank: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009: (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted
assets) |
|
$ |
211,236 |
|
|
|
14.75 |
% |
|
$ |
114,591 |
|
|
|
8.00 |
% |
|
|
143,239 |
|
|
|
10.00 |
% |
Tier 1 capital (to risk-weighted
assets) |
|
|
193,183 |
|
|
|
13.49 |
|
|
|
57,296 |
|
|
|
4.00 |
|
|
|
85,943 |
|
|
|
6.00 |
|
Tier 1 capital (to average assets) |
|
|
193,183 |
|
|
|
9.76 |
|
|
|
79,144 |
|
|
|
4.00 |
|
|
|
98,930 |
|
|
|
5.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets) |
|
$ |
209,882 |
|
|
|
15.83 |
% |
|
$ |
106,101 |
|
|
|
8.00 |
% |
|
|
132,626 |
|
|
|
10.00 |
% |
Tier 1 capital (to risk-weighted
assets) |
|
|
193,248 |
|
|
|
14.57 |
|
|
|
53,050 |
|
|
|
4.00 |
|
|
|
79,575 |
|
|
|
6.00 |
|
Tier 1 capital (to average assets) |
|
|
193,248 |
|
|
|
10.59 |
|
|
|
72,963 |
|
|
|
4.00 |
|
|
|
91,204 |
|
|
|
5.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted
assets) |
|
$ |
202,862 |
|
|
|
19.76 |
% |
|
$ |
82,121 |
|
|
|
8.00 |
% |
|
$ |
102,651 |
|
|
|
10.00 |
% |
Tier 1 capital (to risk-weighted
assets) |
|
|
190,022 |
|
|
|
18.51 |
|
|
|
41,060 |
|
|
|
4.00 |
|
|
|
61,591 |
|
|
|
6.00 |
|
Tier 1 capital (to average assets) |
|
|
190,022 |
|
|
|
13.67 |
|
|
|
55,609 |
|
|
|
4.00 |
|
|
|
69,512 |
|
|
|
5.00 |
|
|
|
The following table reconciles the GAAP capital of the Company to the regulatory capital
of the Bank at December 31, 2009. |
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
(in thousands) |
|
Total consolidated GAAP equity |
|
$ |
247,950 |
|
Unconsolidated equity of Oritani-Federal |
|
|
(53,675 |
) |
|
|
|
|
Consolidated equity of Oritani Bank (1) |
|
|
194,275 |
|
Unrealized gain on available for sale securities |
|
|
(2,392 |
) |
Accumulated other comprehensive income: |
|
|
|
|
Post Retirement obligation |
|
|
1,300 |
|
|
|
|
|
Tier 1 capital |
|
|
193,183 |
|
Unrealized gains on available for sale equity
securities includable in Tier 2 capital |
|
|
96 |
|
Allowance for loan losses includable in Tier 2 capital |
|
|
17,957 |
|
|
|
|
|
Total capital |
|
$ |
211,236 |
|
|
|
|
|
|
|
|
(1) |
|
Does not include $65,000 that represents the minority ownership interest in
Oritani Asset Corporation. Such amount is included in Oritani Banks historical equity
capital. These interests are not applicable for regulatory capital purposes. |
(17) Fair Value Measurements
The Company adopted ASC 820, Fair Value Measurements and Disclosures, on July 1, 2008. ASC
820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (level 1 measurements) and the
lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair
value hierarchy under ASC 820 are described below:
Basis of Fair Value Measurement:
F-41
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
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 instruments level within the fair value hierarchy is based on the lowest level of
input that is significant to the fair value measurement.
The Companys 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 ASC 820, the
Company does not adjust the quoted price for such instruments.
The following table sets forth the Companys financial assets that were accounted for at fair
values on a recurring basis as of December 31, 2009 and June 30, 2009 by level within the fair
value hierarchy. As required by ASC 820, financial assets are classified in their entirety
based on the lowest level of input that is significant to the fair value measurements (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
|
|
|
|
(Unaudited) |
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
Fair Value as of |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
Assets: |
|
December 31, 2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Securities available for sale |
|
$ |
320,439 |
|
|
$ |
56,871 |
|
|
$ |
263,568 |
|
|
$ |
|
|
Mortgage-backed securities available for sale |
|
|
98,513 |
|
|
|
|
|
|
|
98,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
418,952 |
|
|
$ |
56,871 |
|
|
$ |
362,081 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
|
|
|
|
Fair Value as |
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
of June 30, |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
Assets: |
|
2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Securities available for sale |
|
$ |
144,419 |
|
|
|
27,102 |
|
|
$ |
117,318 |
|
|
$ |
|
|
Mortgage-backed securities
available for sale |
|
|
128,604 |
|
|
|
1,141 |
|
|
|
127,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
273,023 |
|
|
$ |
28,243 |
|
|
$ |
244,781 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
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.
Impaired Loans: The Company had impaired loans with outstanding principal balances of $30.8
million, $26.2 million and $13.8 million at December 31, 2009 and June 30, 2009 and 2008,
respectively, that were recorded at their estimated fair value (less cost to sell) of $27.6
million, $22.9 million and $12.4 million at December 31, 2009 and June 30, 2009 and 2008,
respectively. Specific allowance for loan losses for impaired loans totaled $3.2 million,
$3.3 million and $1.4 million at December 31, 2009 and June 30, 2009 and 2008, respectively.
The Company recorded impairment charges of $2.7 million, $740,000, $4.4 million and $1.4
million for the six months ended December 31, 2009 and 2008 and the years ended June 30, 2009
and 2008, respectively, utilizing Level 3 inputs. There were no impairment charges for the
year ended June 30, 2007. Impaired loans are valued utilizing current appraisals adjusted
downward by management, as necessary, for changes in relevant valuation factors subsequent to
the appraisal date.
Other Real Estate Owned: The Company had assets acquired through or deed-in-lieu of
foreclosure of $600,000 at December 31, 2009 and are valued utilizing level 3 inputs. There
were no other real estate owned at June 30, 2009 and 2008. Other real estate owned is
recorded at estimated fair value less estimated selling costs when acquired, thus establishing
a new cost basis. Fair value is generally based on independent appraisals. These appraisals
include adjustments to comparable assets based on the appraisers market knowledge and
experience, and are considered level 3 inputs. When an asset is acquired, the excess of the
loan balance over fair value, less estimated selling costs, is charged to the allowance for
loan losses. If the estimated fair value of the asset declines, a write-down is recorded
through expense. The valuation of foreclosed assets is subjective in nature and may be
adjusted in the future because of changes in the economic conditions.
(18) Fair Value of Financial Instruments
ASC
825, Financial Instruments, requires that the Company disclose estimated fair values for
its financial instruments. Fair value estimates, methods and assumptions are set forth below
for the Companys financial instruments.
Cash and Cash Equivalents
For cash on hand and due from banks and federal funds sold and short-term investments, the
carrying amount approximates fair value.
Securities
The fair value of securities is estimated based on bid quotations received from securities
dealers, if available. If a quoted market price is not available, fair value is estimated
using quoted market prices of similar instruments, adjusted for differences between the quoted
instruments and the instruments being valued.
F-43
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
FHLB of New York Stock
The fair value for FHLB stock is its carrying value, since this is the amount for which it
could be redeemed. There is no active market for this stock and the Bank is required to
maintain a minimum balance based upon the unpaid principal of home mortgage loans.
Loans
Fair values are estimated for portfolios of loans with similar financial characteristics.
Loans are segregated by type such as residential mortgage, construction, land and consumer.
Each loan category is further segmented into fixed and adjustable rate interest terms and by
performing and nonperforming categories.
Fair value of performing loans is estimated by discounting cash flows using estimated market
discount rates at which similar loans would be made to borrowers and reflect similar credit
ratings and interest rate risk for the same remaining maturities. This method of estimating
fair value does not incorporate the exit-price concept of fair value prescribed by ASC 820,
Fair Value Measurements and Disclosures.
Fair value for significant nonperforming loans is based on recent external appraisals of
collateral securing such loans, adjusted for the timing of anticipated cash flows.
Deposit Liabilities
The fair value of deposits with no stated maturity, such as noninterest-bearing demand
deposits, savings, and NOW and money market accounts, is equal to the amount payable on demand
as of December 31, 2009 and June 30, 2009 and 2008. The fair value of certificates of deposit
is based on the discounted value of contractual cash flows. The discount rate is estimated
using the rates currently offered for deposits of similar remaining maturities.
Borrowings
The fair value of borrowings due in six months or less is equal to the amount payable. The
fair value of all other borrowings is calculated based on the discounted cash flow of
contractual amounts due, using market rates currently available for borrowings of similar
amount and remaining maturity.
Commitments to Extend Credit and to Purchase or Sell Securities
The fair value of commitments to extend credit is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the agreements
and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair
value also considers the difference between current levels of interest rates and the committed
rates. The fair value of commitments to purchase or sell securities is estimated based on bid
quotations received from securities dealers.
F-44
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
The estimated fair values of the Companys financial instruments are presented in the
following table. Since the fair value of off-balance-sheet commitments approximates book
value, these disclosures are not included.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
June 30, |
|
|
|
December 30, 2009 |
|
|
2009 |
|
|
2008 |
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
|
value |
|
|
value |
|
|
value |
|
|
value |
|
|
value |
|
|
value |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
26,332 |
|
|
|
26,332 |
|
|
$ |
135,369 |
|
|
|
135,369 |
|
|
|
8,890 |
|
|
|
8,890 |
|
Securities available for sale |
|
|
320,439 |
|
|
|
320,439 |
|
|
|
144,419 |
|
|
|
144,419 |
|
|
|
22,285 |
|
|
|
22,285 |
|
Mortgage-backed securities
held to maturity |
|
|
86,182 |
|
|
|
88,223 |
|
|
|
118,817 |
|
|
|
120,381 |
|
|
|
163,950 |
|
|
|
162,671 |
|
Mortgage-backed securities
available for sale |
|
|
98,513 |
|
|
|
98,513 |
|
|
|
128,603 |
|
|
|
128,603 |
|
|
|
149,209 |
|
|
|
149,209 |
|
Federal Home Loan Bank of
New York stock |
|
|
25,481 |
|
|
|
25,481 |
|
|
|
25,549 |
|
|
|
25,549 |
|
|
|
21,547 |
|
|
|
21,547 |
|
Loans |
|
|
1,357,157 |
|
|
|
1,374,712 |
|
|
|
1,278,623 |
|
|
|
1,292,394 |
|
|
|
1,007,077 |
|
|
|
999,366 |
|
Financial liabilities deposits |
|
|
1,210,507 |
|
|
|
1,212,923 |
|
|
|
1,127,630 |
|
|
|
1,130,285 |
|
|
|
698,932 |
|
|
|
700,582 |
|
Financial liabilities borrowings |
|
|
507,439 |
|
|
|
543,451 |
|
|
|
508,991 |
|
|
|
547,202 |
|
|
|
433,672 |
|
|
|
445,162 |
|
Limitations
Fair value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates do not reflect any
premium or discount that could result from offering for sale at one time the Companys entire
holdings of a particular financial instrument. Because no market exists for a significant
portion of the Companys financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk characteristics
of various financial instruments, and other factors. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance-sheet financial instruments
without attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments. Significant assets and
liabilities that are not considered financial assets or liabilities include the mortgage
banking operation, deferred tax assets, and premises and equipment. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered in the estimates.
F-45
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(19) Parent Company Only Financial Statements
The following condensed financial information for Oritani Financial Corp. (parent company
only) reflect the investment in its wholly-owned subsidiaries, Oritani Bank, Oritani, LLC and
Hampshire Financial, LLC, using the equity method of accounting.
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
June 30, |
|
|
|
December 31, 2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash in Bank |
|
$ |
9,828 |
|
|
|
2,442 |
|
|
|
47,913 |
|
Mortgage Loans, net |
|
|
24,722 |
|
|
|
24,298 |
|
|
|
18,659 |
|
ESOP loan |
|
|
14,452 |
|
|
|
15,082 |
|
|
|
15,483 |
|
Securities available for sale, at market value |
|
|
1,801 |
|
|
|
1,750 |
|
|
|
2,453 |
|
Accrued Interest Receivable |
|
|
120 |
|
|
|
361 |
|
|
|
623 |
|
Investment in Subsidiaries |
|
|
196,964 |
|
|
|
196,427 |
|
|
|
193,777 |
|
Due from Oritani Financial Corp., MHC |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
Other assets |
|
|
37 |
|
|
|
132 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
248,024 |
|
|
|
240,592 |
|
|
|
279,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
$ |
74 |
|
|
|
494 |
|
|
|
52 |
|
Total Equity |
|
|
247,950 |
|
|
|
240,098 |
|
|
|
278,975 |
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
248,024 |
|
|
|
240,592 |
|
|
|
279,027 |
|
|
|
|
|
|
|
|
|
|
|
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended December 31, |
|
|
Years Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Interest on mortgage loans |
|
$ |
760 |
|
|
|
573 |
|
|
|
1,372 |
|
|
|
1,160 |
|
|
|
1,159 |
|
Interest on ESOP loan |
|
|
|
|
|
|
566 |
|
|
|
809 |
|
|
|
1,138 |
|
|
|
650 |
|
Interest income on fed funds |
|
|
12 |
|
|
|
249 |
|
|
|
256 |
|
|
|
2,012 |
|
|
|
1,378 |
|
Net loss on write down of securities |
|
|
(202 |
) |
|
|
(398 |
) |
|
|
(398 |
) |
|
|
(352 |
) |
|
|
|
|
Other income |
|
|
30 |
|
|
|
46 |
|
|
|
81 |
|
|
|
101 |
|
|
|
|
|
Equity in undistributed earnings of subsidiary |
|
|
7,322 |
|
|
|
2,202 |
|
|
|
4,758 |
|
|
|
6,953 |
|
|
|
13,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
7,922 |
|
|
|
3,238 |
|
|
|
6,878 |
|
|
|
11,012 |
|
|
|
16,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to charitable foundation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,110 |
|
Other expenses |
|
|
250 |
|
|
|
265 |
|
|
|
466 |
|
|
|
391 |
|
|
|
219 |
|
Income tax (benefit) expense |
|
|
260 |
|
|
|
428 |
|
|
|
860 |
|
|
|
1,661 |
|
|
|
(2,512 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
510 |
|
|
|
693 |
|
|
|
1,326 |
|
|
|
2,052 |
|
|
|
5,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,412 |
|
|
|
2,545 |
|
|
|
5,552 |
|
|
|
8,960 |
|
|
|
11,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-46
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended December 31, |
|
|
Years Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,412 |
|
|
|
2,545 |
|
|
|
5,552 |
|
|
|
8,960 |
|
|
|
11,034 |
|
Adjustments
to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution of stock to charitable foundation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,110 |
|
Impairment charge on securities |
|
|
202 |
|
|
|
398 |
|
|
|
398 |
|
|
|
352 |
|
|
|
|
|
Dividends/distributions from subsidiaries |
|
|
9,765 |
|
|
|
96 |
|
|
|
10,241 |
|
|
|
372 |
|
|
|
281 |
|
Equity in undistributed earnings of subsidiary |
|
|
(7,322 |
) |
|
|
(2,202 |
) |
|
|
(4,758 |
) |
|
|
(6,953 |
) |
|
|
(13,664 |
) |
Decrease (increase) in accrued interest receivable |
|
|
241 |
|
|
|
529 |
|
|
|
262 |
|
|
|
152 |
|
|
|
(706 |
) |
Decrease (increase) in other assets |
|
|
94 |
|
|
|
18 |
|
|
|
(113 |
) |
|
|
(19 |
) |
|
|
|
|
(Decrease) increase in other liabilities |
|
|
(73 |
) |
|
|
(16 |
) |
|
|
436 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
10,319 |
|
|
|
1,368 |
|
|
|
12,018 |
|
|
|
2,880 |
|
|
|
5,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional investments in subsidiaries |
|
|
(387 |
) |
|
|
(1,226 |
) |
|
|
(4,759 |
) |
|
|
(1,410 |
) |
|
|
(59,958 |
) |
Purchase of securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,715 |
) |
|
|
|
|
Loan to ESOP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,896 |
) |
Principal collected on ESOP loan |
|
|
630 |
|
|
|
401 |
|
|
|
401 |
|
|
|
413 |
|
|
|
|
|
(Increase) decrease in mortgage loans, net |
|
|
(424 |
) |
|
|
149 |
|
|
|
(5,639 |
) |
|
|
320 |
|
|
|
287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in provided by investing activities |
|
|
(181 |
) |
|
|
(676 |
) |
|
|
(9,997 |
) |
|
|
(3,392 |
) |
|
|
(75,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
(1,231 |
) |
|
|
(38,217 |
) |
|
|
(49,989 |
) |
|
|
(5,926 |
) |
|
|
|
|
Treasury stock issued |
|
|
|
|
|
|
|
|
|
|
2,497 |
|
|
|
|
|
|
|
|
|
Proceeds from stock offering, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,520 |
|
Dividends paid to shareholders |
|
|
(1,521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used) provided by financing activities |
|
|
(2,752 |
) |
|
|
(38,217 |
) |
|
|
(47,492 |
) |
|
|
(5,926 |
) |
|
|
119,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash in bank |
|
|
7,386 |
|
|
|
(37,525 |
) |
|
|
(45,471 |
) |
|
|
(6,438 |
) |
|
|
49,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash in bank at beginning of period |
|
|
2,442 |
|
|
|
47,913 |
|
|
|
47,913 |
|
|
|
54,351 |
|
|
|
5,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash in bank at end of period |
|
$ |
9,828 |
|
|
|
10,388 |
|
|
|
2,442 |
|
|
|
47,913 |
|
|
|
54,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
(20) Selected Quarterly Financial Data (Unaudited)
The following tables are a summary of certain quarterly financial data for the six months
ended December 31, 2009 and the years ended June 30, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010 Quarter Ended |
|
|
|
September 30 |
|
|
December 31 |
|
|
|
(Dollars in thousands) |
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
Interest income |
|
$ |
25,779 |
|
|
|
25,467 |
|
Interest expense |
|
|
11,560 |
|
|
|
11,057 |
|
|
|
|
|
|
|
|
Net interest income |
|
|
14,219 |
|
|
|
14,410 |
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
2,550 |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses |
|
|
11,669 |
|
|
|
11,910 |
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
2,546 |
|
|
|
1,067 |
|
Other expense |
|
|
6,828 |
|
|
|
8,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
7,387 |
|
|
|
4,811 |
|
Income tax expense |
|
|
2,904 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,483 |
|
|
$ |
2,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.12 |
|
|
|
0.08 |
|
Diluted earnings per common share |
|
|
0.12 |
|
|
|
0.08 |
|
F-48
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 Quarter Ended |
|
|
|
September 30 |
|
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
20,657 |
|
|
|
21,862 |
|
|
|
22,598 |
|
|
|
23,302 |
|
Interest expense |
|
|
9,887 |
|
|
|
11,169 |
|
|
|
11,798 |
|
|
|
11,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
10,770 |
|
|
|
10,693 |
|
|
|
10,800 |
|
|
|
11,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
1,875 |
|
|
|
3,500 |
|
|
|
2,400 |
|
|
|
2,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses |
|
|
8,895 |
|
|
|
7,193 |
|
|
|
8,400 |
|
|
|
9,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
1,233 |
|
|
|
(565 |
) |
|
|
822 |
|
|
|
1,290 |
|
Other expense |
|
|
5,874 |
|
|
|
6,542 |
|
|
|
6,652 |
|
|
|
8,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
4,254 |
|
|
|
86 |
|
|
|
2,570 |
|
|
|
2,662 |
|
Income tax expense |
|
|
1,748 |
|
|
|
47 |
|
|
|
1,067 |
|
|
|
1,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,506 |
|
|
$ |
39 |
|
|
|
1,503 |
|
|
|
1,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.07 |
|
|
|
|
|
|
|
0.04 |
|
|
|
0.04 |
|
Diluted earnings per common share |
|
|
0.07 |
|
|
|
|
|
|
|
0.04 |
|
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 Quarter Ended |
|
|
|
September 30 |
|
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
17,043 |
|
|
|
17,722 |
|
|
|
18,318 |
|
|
|
18,508 |
|
Interest expense |
|
|
8,758 |
|
|
|
9,325 |
|
|
|
9,594 |
|
|
|
9,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
8,285 |
|
|
|
8,397 |
|
|
|
8,724 |
|
|
|
8,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
350 |
|
|
|
950 |
|
|
|
750 |
|
|
|
2,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses |
|
|
7,935 |
|
|
|
7,447 |
|
|
|
7,974 |
|
|
|
6,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
1,329 |
|
|
|
1,174 |
|
|
|
791 |
|
|
|
1,642 |
|
Other expense |
|
|
4,218 |
|
|
|
4,922 |
|
|
|
4,751 |
|
|
|
5,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
5,046 |
|
|
|
3,699 |
|
|
|
4,014 |
|
|
|
2,419 |
|
Income tax expense |
|
|
2,073 |
|
|
|
1,504 |
|
|
|
1,649 |
|
|
|
992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,973 |
|
|
$ |
2,195 |
|
|
|
2,365 |
|
|
|
1,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.08 |
|
|
|
0.06 |
|
|
|
0.06 |
|
|
|
0.04 |
|
Diluted earnings per common share |
|
|
0.08 |
|
|
|
0.06 |
|
|
|
0.06 |
|
|
|
0.04 |
|
During the fourth quarter of fiscal year 2008, the Company changed the method of
recording FHLB of New York capital stock dividends to a cash basis from an accrual basis.
This change in methodology decreased the fourth quarter interest income by $312,000.
(21) Earnings Per Share
The following is a summary of the Companys earnings per share calculations and reconciliation
of basic to diluted earnings per share.
F-49
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
Six months ended December 31, |
|
|
Years Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands, except earnings per share data) |
|
Net income |
|
$ |
7,412 |
|
|
|
2,545 |
|
|
|
5,552 |
|
|
|
8,960 |
|
Undistributed earnings allocated to unvested
restricted awards |
|
|
(206 |
) |
|
|
(50 |
) |
|
|
(93 |
) |
|
|
(170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
|
$ |
7,206 |
|
|
$ |
2,495 |
|
|
$ |
5,459 |
|
|
$ |
8,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic |
|
|
35,687 |
|
|
|
37,515 |
|
|
|
36,738 |
|
|
|
39,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive non-vested shares and stock
options outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding diluted |
|
|
35,687 |
|
|
|
37,515 |
|
|
|
36,738 |
|
|
|
39,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share-basic and diluted |
|
$ |
0.20 |
|
|
$ |
0.07 |
|
|
$ |
0.15 |
|
|
$ |
0.23 |
|
The Company completed its initial public offering on January 24, 2007. Basic and diluted
earnings per common share for the period of January 24, 2007 to June 30, 2007 was $0.15,
calculated using net income of $5.2 million and weighted average common shares of 34,028,313
outstanding for the period. The number of shares outstanding for this purpose includes shares
held by Oritani Financial Corp., MHC, but excludes unallocated ESOP shares.
(22) Recent Accounting Pronouncements
In September 2009, the FASB issued Accounting Standards Update (ASU) 2009-12, Investments
in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent). The update
provides guidance on estimating the fair value of a companys investments in investment
companies when the investment does not have a readily determinable fair value. It amends
topic 820 to permit the use of the investments net asset value as a practical expedient to
determine fair value. This guidance also requires additional disclosure of the attributes of
these investments such as; (i) the nature of any restrictions on the reporting entitys
ability to redeem its investment; (ii) unfunded commitments; and (iii) investment strategies
of the investees. This ASU is effective for the first reporting period ending after December
15, 2009, with earlier application permitted. The adoption of the ASU did not have a
material impact on its consolidated financial statements.
In August 2009, the FASB issued ASU 2009-05, Measuring Liabilities at Fair Value, which
updates topic 820, Fair Value Measurements and Disclosures. The updated guidance clarifies
that the fair value of a liability can be measured in relation to the quoted price of the
liability when it trades as an asset in an active market, without adjusting the price for
restrictions that prevent the sale of the liability. This guidance is effective for the first
interim or annual reporting period after issuance. The adoption of this guidance did not have
a material impact on its consolidated financial statements.
F-50
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
In June 2009, the FASB issued guidance which amends the derecognition guidance in ASC 860,
Transfer and Servicing, to enhance reporting about transfers of financial assets, including
securitizations, and where companies having continuing exposure to the risks related to
transferred financial assets. The guidance eliminates the concept of qualifying
special-purpose entity, changes the requirements for derecognizing financial assets and
requires additional disclosures about all continuing involvements with transferred financial
assets including information about gains and losses resulting from transfers during the
period. This guidance is effective for financial asset transfers occurring in fiscal years
beginning after November 15, 2009. The Company does not expect the adoption of this guidance
to have a material impact on its consolidated financial statements.
In 2008, the FASB issued Staff Position No. FAS 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets (ASC Topic 715-20-65). This guidance will expand
disclosure by requiring the following new disclosures: 1) how investment allocation decisions
are made by management; 2) major categories of plan assets; and 3) significant concentrations
of risk. Additionally, ASC 715-20-65 will require an employer to disclose information about
the valuation of plan assets similar to that required in ASC topic 820 Fair Value
Measurements and Disclosures. This guidance is effective for fiscal years beginning after
December 15, 2009. The Company does not expect the adoption to have a material effect on its
consolidated financial statements.
(23) |
|
Subsequent Events Plan of Conversion and Reorganization (Unaudited) |
The Boards of Directors of Oritani Financial Corp., MHC and the Company adopted a Plan of
Conversion and Reorganization (the Plan) on February 19, 2010. Pursuant to the Plan, the
MHC will convert from the mutual holding company form of organization to the fully public
form. The MHC will be merged into the Company, and the MHC will no longer exist. The Company
will merge into a new Delaware corporation named Oritani Financial Corp. As part of the
conversion,
the MHCs ownership interest of the Company will be offered for sale in a public offering.
The existing publicly held shares of the Company, which represents the remaining ownership
interest in the Company, will be exchanged for new shares of common stock of Oritani Financial
Corp., the new Delaware corporation. The exchange ratio will ensure that immediately after
the conversion and public offering, the public shareholders of the Company will own the same
aggregate percentage of Oritani Financial Corp. common stock that they owned immediately prior
to that time. When the conversion and public offering are completed, all of the capital stock
of Oritani Bank will be owned by Oritani Financial Corp.
The Plan provides for the establishment, upon the completion of the reorganization, of special
liquidation accounts for the benefit of certain depositors of Oritani Bank in an amount
equal to the greater of the MHCs ownership interest in the retained earnings of the Company
as of the date of the latest balance sheet contained in the prospectus or the retained
earnings of Oritani Bank at the time it reorganized into the MHC. Following the completion of
the reorganization, under the rules of the Office of Thrift Supervision, Oritani Bank will not
be permitted to pay dividends on its capital stock to Oritani Financial Corp., its sole
shareholder, if Oritani Banks shareholders equity would be reduced below the amount of the
liquidation accounts.
F-51
ORITANI FINANCIAL CORP. AND SUBSIDIARIES
Township of Washington, New Jersey
Notes to Consolidated Financial Statements
December 31, 2009 and 2008 (Unaudited) and June 30, 2009, 2008 and 2007
Direct costs of the conversion and public offering will be deferred and reduce the proceeds
from the shares sold in the public offering. If the conversion and public offering are not
completed, all costs will be charged to expense in the period in which the public offering is
terminated. No costs have been incurred related to the conversion as of December 31, 2009.
F-52
No person has been authorized to give any information or to
make any representation other than as contained in this
prospectus and, if given or made, such other information or
representation must not be relied upon as having been authorized
by Oritani Financial Corp. or Oritani Bank. This prospectus does
not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby to any person in any
jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom
it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this prospectus nor any
sale hereunder shall under any circumstances create any
implication that there has been no change in the affairs of
Oritani Financial Corp. or Oritani Bank since any of the dates
as of which information is furnished herein or since the date
hereof.
Up to
44,850,000 Shares
(Subject
to Increase to up to 51,577,500 Shares)
(Proposed
Holding Company for
Oritani Bank)
COMMON
STOCK
par value $0.01 per
share
PROSPECTUS
Sole
Book-Running Manager
Stifel Nicolaus
Co-Managers
Sandler ONeill +
Partners, L.P.
Sterne Agee
The date of this prospectus is
May 10, 2010
These
securities are not deposits or savings accounts and are not
federally insured or guaranteed.
Until July 8, 2010 all dealers effecting transaction in
the registered securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in
addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.