Oritani Financial Corp.

Estimates have been rising for Oritani Financial Corp. (ORIT - Snapshot Report) after the company delivered better than expected results for the second quarter of its fiscal 2012.

It is a Zacks #2 Rank (Buy).

Based on current consensus estimates, analysts project strong double-digit EPS growth for the company over the next couple of years. On top of this growth, it pays a dividend that yields a solid 3.7%. Valuation is attractive too with shares trading at just 1.1x book value.

Oritani operates 24 bank branches in New Jersey.

Second Quarter Results

Oritani reported results for the second quarter of its fiscal 2012 on January 30. Earnings per share came in at 18 cents, beating the Zacks Consensus Estimate by 4 cents. It was a 39% increase over the same quarter in 2010.

Net interest income increased 9% year-over-year, driven by a 14 basis point increase in the net interest margin. Unlike some banks, Oritani continues to make loans, focusing particularly on multifamily and commercial real estate. Net loans increased 9% to $1.823 billion.

The company recorded provisions for loan losses of $2.0 million, down from $2.5 million in the same quarter last year. Net charge offs to average loans outstanding declined significantly, from 1.34% to just 0.16%. Non-performing assets to total assets did increase, however, from 0.82% to 0.89%.

Estimates Rising

Following solid Q2 results, analysts raised their estimates for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2012 is now $0.64, representing 19% growth over 2011 EPS. The 2013 consensus estimate is currently $0.74, corresponding with 16% EPS growth.

Analysts expect strong loan growth and solid profitability to continue over the next few years.

Returning Value to Shareholders

On top of double-digit EPS growth, the company pays a dividend that yields a solid 3.7%. Since the company began paying a dividend in 2009, it has raised it 3 times.

The company also continues to aggressively buyback its stock, which should also help drive EPS growth.

Valuation

Valuation looks reasonable for ORIT with shares trading at a price to book ratio of just 1.1. That's above the industry median of 0.8, but the premium seems justified given the company's above-average ROE.

The Bottom Line

With rising estimates, strong growth potential, a solid 3.7% dividend yield and reasonable valuation, Oritani Financial still offers attractive total return potential.

Read the November 14 article here.

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Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

Read the full analyst report on ORIT