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5 Lean and Mean Bank Stocks

1. Oritani Financial

Shares of Oritani Financial (ORIT) closed at $16.28 Friday, returning 10% this year.

The shares trade for 1.4 times tangible book value, according to Thomson Reuters Bank Insight, and for 17.1 times the consensus fiscal 2015 EPS estimate of 95 cents. The consensus fiscal 2014 EPS estimate is 86 cents. Oritani's Fiscal 2013 ended on June 30.

Based on a quarterly payout of 17.5 cents, the shares have an attractive dividend yield of 4.30%.

Oritani Financial has been the most efficient of actively traded U.S. banks, with an efficiency ratio of 36.68% for the 12-month period ended June 30. The company's ROA for the same period was 1.43% and its ROTCE was 7.71%. That last figure may seem low, but it reflects a very strong tangible common equity ratio of 18.32% as of June 30, according to Thomson Reuters Bank Insight.

The company reported net income for the quarter ended June 30 of $11.7 million, or 27 cents a share, increasing from $9.9 million, or 23 cents a share the previous quarter, and $8.3 million, or 19 cents a share, a year earlier. Earnings were boosted, in part, by a decline in the provision for loan losses to $250,000 in the most recent quarter from $1.5 million a year earlier.

Another major factor in the earnings improvement was income from bank-owned life insurance, which increased to $1.9 million in the quarter ended June 30 from $460,000 the previous quarter and $399,000 a year earlier.

FIG Partners analyst Christopher Marinac on Aug. 9 initiated his firm's coverage of Oritani with a "market perform" rating and a price target of $17.50, and discussed the company's "different (but successful) operating model" in a note to clients.

"The company utilizes a different business model than most community banks with a high Loans-to-Deposits ratio and larger-than-average use of Borrowings to fund its balance sheet," Marinac wrote, adding that the high level of borrowings is offset with the high tangible common equity ratio, "which is worth over $5.80 per share (i.e., amount above a 9% TCE ratio)."

Oritani's management "has numerous options with this excess capital to benefit shareholders," according to Marinac, who also wrote that "A special dividend or an accretive acquisition could be considered in the future."

ORIT Chart ORIT data by YCharts

Interested in more on Oritani Financial? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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