-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hoyzv4CmQQZ62r4wsbBKltbNMqKOWKywmLiHWTmCize8zRyMJLNMxHhWVoeGssS/ kGdbzeIUiashgDxw9ofJag== 0000950123-00-005047.txt : 20000516 0000950123-00-005047.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950123-00-005047 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASTORIA FINANCIAL CORP CENTRAL INDEX KEY: 0000910322 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 113170868 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22228 FILM NUMBER: 632005 BUSINESS ADDRESS: STREET 1: ONE ASTORIA FEDERAL PLAZA CITY: LAKE SUCCESS STATE: NY ZIP: 11042-1085 BUSINESS PHONE: 5163273000 MAIL ADDRESS: STREET 1: ONE ASTORIA FEDERAL PLAZA CITY: LAKE SUCCESS STATE: NY ZIP: 11042-1085 10-Q 1 ASTORIA FINANCIAL CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 0-22228 ASTORIA FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 11-3170868 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) One Astoria Federal Plaza, Lake Success, New York 11042-1085 - ------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (516) 327-3000 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all the reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Classes of Common Stock Number of Shares Outstanding, April 28, 2000 ----------------------- -------------------------------------------- .01 Par Value 51,373,373 ------------- ---------- 2 PART I -- FINANCIAL INFORMATION
Page ---- Item 1. Financial Statements Consolidated Statements of Financial Condition at March 31, 2000 and December 31, 1999. 2 Consolidated Statements of Income for the Three Months Ended March 31, 2000 and March 31, 1999. 3 Consolidated Statement of Changes in Stockholders' Equity for the 4 Three Months Ended March 31, 2000. Consolidated Statements of Cash Flows for the Three Months Ended 5 March 31, 2000 and March 31, 1999. Notes to Consolidated Financial Statements. 6 Item 2. Management's Discussion and Analysis of Financial Condition and 7 Results of Operations. Item 3. Quantitative and Qualitative Disclosures about Market Risk. 24 PART II -- OTHER INFORMATION Item 1. Legal Proceedings 24 Item 2. Changes in Securities and Use of Proceeds 25 Item 3. Defaults Upon Senior Securities 25 Item 4. Submission of Matters to a Vote of Security Holders 25 Item 5. Other Information 25 Item 6. Exhibits and Reports on Form 8-K 26 (a) Exhibits (11) Statement Regarding Computation of Per Share Earnings (27) Financial Data Schedule (b) Reports on Form 8-K Signatures 27
1 3 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT AT MARCH 31, DECEMBER 31, (In Thousands, Except Share Data) 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Assets - ------ Cash and due from banks $ 117,972 $ 154,918 Federal funds sold and repurchase agreements 405,176 335,653 Mortgage-backed securities available-for-sale 7,851,452 8,204,977 Other securities available-for-sale 673,167 657,772 Mortgage-backed securities held-to-maturity (fair value of $1,030,987 and $1,071,251, respectively) 1,044,025 1,082,261 Other securities held-to-maturity (fair value of $767,398 and $772,356, respectively) 827,116 817,696 Federal Home Loan Bank of New York stock 275,250 265,250 Loans held-for-sale 7,047 11,376 Loans receivable: Mortgage loans, net 10,372,619 10,113,216 Consumer and other loans, net 172,309 175,858 ------------ ------------ 10,544,928 10,289,074 Less allowance for loan losses 77,373 76,578 ------------ ------------ Total loans receivable, net 10,467,555 10,212,496 Mortgage servicing rights, net 47,018 48,369 Accrued interest receivable 113,414 110,668 Premises and equipment, net 174,399 176,813 Goodwill 219,121 223,945 Other assets 367,057 394,342 ------------ ------------ Total assets $ 22,589,769 $ 22,696,536 ============ ============ Liabilities and Stockholders' Equity - ------------------------------------ Liabilities: Deposits: Savings $ 2,576,481 $ 2,581,442 Money market 1,273,041 1,165,734 NOW and money manager 945,212 877,715 Certificates of deposit 4,986,167 4,929,643 ------------ ------------ Total deposits 9,780,901 9,554,534 Reverse repurchase agreements 8,786,800 9,276,800 Federal Home Loan Bank of New York advances 1,710,029 1,610,058 Other borrowings 513,019 514,663 Mortgage escrow funds 165,550 120,350 Accrued expenses and other liabilities 254,136 298,219 ------------ ------------ Total liabilities 21,210,435 21,374,624 ------------ ------------ Guaranteed preferred beneficial interest in junior subordinated debentures 125,000 125,000 Stockholders' Equity: Preferred stock, $1.00 par value; 5,000,000 shares authorized: Series A (325,000 shares authorized and -0- shares issued and outstanding) - - Series B (2,000,000 shares authorized, issued and outstanding) 2,000 2,000 Common stock, $.01 par value; (200,000,000 shares authorized; 55,498,296 shares issued; and 51,332,117 and 51,730,959 shares outstanding, respectively) 555 555 Additional paid-in capital 801,776 800,414 Retained earnings 948,396 908,236 Treasury stock (4,166,179 and 3,767,337 shares, at cost, respectively) (145,240) (137,071) Accumulated other comprehensive income: Net unrealized loss on securities, net of taxes (320,801) (344,198) Unallocated common stock held by ESOP (32,300) (32,955) Unearned common stock held by RRP (52) (69) ------------ ------------ Total stockholders' equity 1,254,334 1,196,912 ------------ ------------ Total liabilities and stockholders' equity $ 22,589,769 $ 22,696,536 ============ ============
See accompanying notes to consolidated financial statements. 2 4 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, --------------------------------- (In Thousands, Except Share Data) 2000 1999 - ---------------------------------------------------------------------------------------------------------------- Interest income: Mortgage loans $ 183,712 $ 161,887 Consumer and other loans 4,294 5,277 Mortgage-backed securities 154,024 158,877 Other securities 32,390 33,032 Federal funds sold and repurchase agreements 4,099 1,822 ------------ ------------ Total interest income 378,519 360,895 ------------ ------------ Interest expense: Deposits 96,098 89,566 Borrowed funds 150,219 135,534 ------------ ------------ Total interest expense 246,317 225,100 ------------ ------------ Net interest income 132,202 135,795 Provision for loan losses 1,000 1,061 ------------ ------------ Net interest income after provision for loan losses 131,202 134,734 ------------ ------------ Non-interest income: Customer service and other loan fees 11,209 9,428 Loan servicing fees 3,116 5,249 Loss on sales of securities - (125) Net gain on sales of loans 117 2,273 Net gain (loss) on disposition of banking and loan production offices 1,182 (1,241) Other 1,299 1,131 ------------ ------------ Total non-interest income 16,923 16,715 ------------ ------------ Non-interest expense: General and administrative: Compensation and benefits 20,292 24,692 Employee stock plans amortization 1,887 2,972 Occupancy, equipment and systems 14,231 14,073 Federal deposit insurance premiums 517 1,329 Advertising 2,046 1,230 Other 7,403 7,681 ------------ ------------ Total general and administrative 46,376 51,977 Real estate operations and provision for losses, net (95) (1) Goodwill litigation 2,513 1,149 Capital trust securities 3,112 - Amortization of goodwill 4,824 4,906 ------------ ------------ Total non-interest expense 56,730 58,031 ------------ ------------ Income before income tax expense 91,395 93,418 Income tax expense 35,898 39,964 ------------ ------------ Net income $ 55,497 $ 53,454 ============ ============ Net income available to common shareholders $ 53,997 $ 51,954 ============ ============ Basic earnings per common share $ 1.11 $ 1.00 ============ ============ Diluted earnings per common share $ 1.09 $ 0.97 ============ ============ Dividends per common share $ 0.24 $ 0.24 ============ ============ Basic weighted average common shares 48,705,240 51,827,679 Diluted weighted average common and common equivalent shares 49,387,654 53,367,006
See accompanying notes to consolidated financial statements. 3 5 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2000
Additional Preferred Common Paid-In Retained (In Thousands, Except Share Data) Total Stock Stock Capital Earnings - ---------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 $ 1,196,912 $ 2,000 $ 555 $ 800,414 $ 908,236 Comprehensive income: Net income 55,497 - - - 55,497 Other comprehensive income, net of tax: Net unrealized gain on securities, net of reclassification adjustment 23,397 - - - - ----------- Total comprehensive income 78,894 Common stock repurchased (489,500 shares) (11,401) - - - - Dividends on common and preferred stock and amortization of purchase premium (13,511) - - (326) (13,185) Exercise of stock options and related tax benefit 1,540 - - 460 (2,152) Amortization relating to allocation of ESOP stock and earned portion of RRP stock and related tax benefit 1,900 - - 1,228 - ----------- ----------- ----------- ----------- ----------- Balance at March 31, 2000 $ 1,254,334 $ 2,000 $ 555 $ 801,776 $ 948,396 =========== =========== =========== =========== ===========
Unallocated Unearned Accumulated Common Common Other Stock Stock Treasury Comprehensive Held Held (In Thousands, Except Share Data) Stock Income by ESOP by RRP - -------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 $ (137,071) $ (344,198) $ (32,955) $ (69) Comprehensive income: Net income - - - - Other comprehensive income, net of tax: Net unrealized gain on securities, net of reclassification adjustment - 23,397 - - Total comprehensive income Common stock repurchased (489,500 shares) (11,401) - - - Dividends on common and preferred stock and amortization of purchase premium - - - - Exercise of stock options and related tax benefit 3,232 - - - Amortization relating to allocation of ESOP stock and earned portion of RRP stock and related tax benefit - - 655 17 ----------- ----------- ----------- ----------- Balance at March 31, 2000 $ (145,240) $ (320,801) $ (32,300) $ (52) =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. 4 6 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------- (IN THOUSANDS) 2000 1999 - ------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 55,497 $ 53,454 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Net accretion of discounts, premiums and deferred loan fees (15,246) (13,238) Provision for loan and real estate losses 930 1,119 Depreciation and amortization 3,239 3,498 Net gain on sales of securities and loans (117) (2,148) Net gain on sales of premises and equipment - (489) Net (gain) loss on disposition of banking and loan production offices (1,182) 1,241 Proceeds from sales of loans held-for-sale, net of originations 1,923 63,563 Amortization of goodwill 4,824 4,906 Allocated and earned shares from ESOP and RRP 1,887 2,972 Increase in accrued interest receivable (2,746) (15,767) Capitalized mortgage servicing rights, net of amortization and valuation allowance 1,351 (1,188) Decrease (increase) in other assets 863 (27,550) Decrease in accrued expenses and other liabilities (43,610) (50,259) ----------- ----------- Net cash provided by operating activities 7,613 20,114 ----------- ----------- Cash flows from investing activities: Origination of loans held-for-investment, net of principal payments (83,789) (371,369) Loan purchases through third parties (173,764) (123,669) Principal payments on mortgage-backed securities held-to-maturity 38,469 114,081 Principal payments on mortgage-backed securities available-for-sale 395,014 761,400 Purchases of mortgage-backed securities available-for-sale - (3,103,969) Purchases of other securities available-for-sale (40) (106,276) Proceeds from maturities of other securities available-for-sale 131 51,382 Proceeds from maturities of other securities held-to-maturity 270 36,958 Purchases of FHLB stock, net (10,000) (50,000) Proceeds from sales of securities available-for-sale - 162,378 Proceeds from sales of real estate owned and investments in real estate, net 2,449 2,593 Proceeds from disposition of banking and loan production offices 1,308 4,208 Purchases of premises and equipment, net of proceeds from sales (951) (20,487) ----------- ----------- Net cash provided by (used in) investing activities 169,097 (2,642,770) ----------- ----------- Cash flows from financing activities: Net increase in deposits 226,383 1,246 Net (decrease) increase in reverse repurchase agreements (490,000) 2,535,000 Net increase (decrease) in FHLB of New York advances 100,000 (100,000) Net decrease in other borrowings (1,884) (17,391) Increase in mortgage escrow funds 45,200 48,004 Costs to repurchase common stock (11,401) - Cash dividends paid to stockholders (13,511) (14,311) Cash received for options exercised 1,080 7,956 ----------- ----------- Net cash (used in) provided by financing activities (144,133) 2,460,504 ----------- ----------- Net increase (decrease) in cash and cash equivalents 32,577 (162,152) Cash and cash equivalents at beginning of period 490,571 393,382 =========== =========== Cash and cash equivalents at end of period $ 523,148 $ 231,230 =========== =========== Supplemental disclosures: Cash paid during the period: Interest $ 250,314 $ 225,317 =========== =========== Income taxes $ 4,034 $ 39,776 =========== =========== Additions to real estate owned $ 3,328 $ 3,026 =========== ===========
See accompanying notes to consolidated financial statements. 5 7 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Astoria Financial Corporation and its wholly-owned subsidiaries, Astoria Federal Savings and Loan Association, and its subsidiaries, or Astoria Federal, and Astoria Capital Trust I. As used in this quarterly report, "we," "us" and "our" refer to Astoria Financial Corporation and its consolidated subsidiaries, including Astoria Federal and Astoria Capital Trust I, depending on the context. All significant inter-company accounts and transactions have been eliminated in consolidation. In our opinion, the accompanying consolidated financial statements contain all adjustments necessary for a fair presentation of our financial condition as of March 31, 2000 and December 31, 1999, and our results of operations for the three months ended March 31, 2000 and 1999, changes in stockholders' equity for the three months ended March 31, 2000 and cash flows for the three months ended March 31, 2000 and 1999. In preparing the financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities for the consolidated statements of financial condition as of March 31, 2000 and December 31, 1999, and amounts of revenues and expenses for the consolidated statements of income for the three months ended March 31, 2000 and 1999. The results of operations for the three months ended March 31, 2000 are not necessarily indicative of the results of operations to be expected for the remainder of the year. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles, or GAAP, have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. These consolidated financial statements should be read in conjunction with our December 31, 1999 audited consolidated financial statements and related notes, included in our 1999 Annual Report on Form 10-K. 2. EARNINGS PER SHARE, OR EPS The following table is a reconciliation of basic and diluted EPS:
For the Three Months Ended March 31, -------------------------------------------------------------------------------------- 2000 1999 -------------------------------------------------------------------------------------- (In Thousands, Average Per Share Average Per Share Except Share Data) Income Shares Amount Income Shares Amount - ---------------------------------------------------------------------------------------------------------------------------- Net income $55,497 $53,454 Less: preferred stock dividends 1,500 1,500 ------ ------ Basic EPS: Income available to common stockholders 53,997 48,705,240 $1.11 51,954 51,827,679 $1.00 ===== ==== Effect of dilutive unexercised stock options 682,414 (1) 1,539,327 (2) ---------- ---------- Diluted EPS: Income available to common stockholders plus assumed conversions $ 53,997 49,387,654 $ 1.09 $51,954 53,367,006 $0.97 ======= ========== ===== ====== ========== ====
(1) Options to purchase 1,683,698 shares of common stock at prices between $27.88 per share and $59.75 per share were outstanding as of March 31, 2000 but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares. (2) Options to purchase 356,152 shares of common stock at prices between $49.25 per share and $59.75 per share were outstanding as of March 31, 1999 but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares. 6 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated" and "potential." Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services. GENERAL We are headquartered in Lake Success, New York and our principal business currently consists of the operation of our wholly-owned subsidiary, Astoria Federal. Astoria Federal's primary business is attracting retail deposits from the general public and investing those deposits, together with borrowed funds, funds generated from operations and principal repayments, primarily in one-to-four family residential mortgage loans, mortgage-backed securities and, to a lesser extent, commercial real estate loans, multi-family mortgage loans and consumer loans. Astoria Federal also invests in securities issued by the U.S. Government and federal agencies and other securities. Our results of operations are dependent primarily on our net interest income, which is the difference between the interest earned on our assets, primarily our loan and securities portfolios, and our cost of funds, which consists of the interest paid on our deposits and borrowings. Our net income is also affected by our provision for loan losses as well as non-interest income, general and administrative expense, other non-interest expense, and income tax expense. General and administrative expense consists of compensation and benefits, employee stock plans amortization, occupancy, equipment and systems expense, federal deposit insurance premiums, advertising and other operating expenses. Other non-interest expense generally consists of real estate operations and provision for losses, net, goodwill litigation expense, capital trust securities expense and amortization of goodwill. Our earnings are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates and U.S. Treasury yield curves, government policies and actions of regulatory authorities. LIQUIDITY AND CAPITAL RESOURCES Our primary source of funds is cash provided by investing activities, which includes principal and interest payments on loans, mortgage-backed securities and other securities. Principal payments on loans and mortgage-backed securities and proceeds from maturities of other securities totaled $752.8 million for the three months ended March 31, 2000 and $1.66 billion for the three months ended March 31, 1999. During the three months ended March 31, 2000, we received $2.4 million of funds from the sale of real estate versus $165.0 million from the sale of securities and real estate during the three months ended March 31, 1999. There were no sales of securities for the three months ended March 31, 2000. Our other sources of funds are provided by operating and financing activities. Net cash provided from operating activities totaled $7.6 million during the three months ended March 31, 2000, and $20.1 million during the three months ended March 31, 1999. During the three months ended March 31, 2000, net borrowings decreased $391.9 billion, whereas the net increase in deposits totaled $226.4 million. During the three months ended March 31, 1999, the net increase in borrowings totaled $2.42 billion while deposits remained constant at $9.67 billion. The increase in borrowings for the quarter ended March 31, 1999 was used to fund our asset growth during that period. Our primary use of funds in our investing activities is for the origination and purchase of mortgage loans and the purchase of mortgage-backed and other securities, although currently our emphasis has been on the origination and purchase of mortgage loans. During the three months ended March 31, 2000, our gross originations and purchases of mortgage loans totaled $570.7 million, compared to $1.32 billion during the three months ended March 31, 1999. This decrease was attributable to the current rising interest rate environment, which has resulted in a significant decrease in mortgage refinance activity, and the disposition of certain loan production offices in March 1999. Our purchases of other securities totaled $40,000 during the three months ended March 31, 2000 versus purchases of mortgage-backed and other securities of $3.21 billion during the comparable 1999 period. There were no purchases of mortgage-backed securities during the three months ended March 31, 2000. Stockholders equity totaled $1.25 billion at March 31, 2000 and $1.20 billion at December 31, 1999. Increases to 7 9 stockholders' equity included net income of $55.5 million, a $23.4 million decrease in the unrealized loss on securities available-for-sale, net of taxes, the effect of stock options exercised and related tax benefit totaling $1.5 million and the amortization for the allocated portion of shares held by the Employee Stock Ownership Plans, or ESOP, and the related tax benefit on the earned portion of the shares held by the Recognition and Retention Plan, or RRP, totaling $1.9 million. These increases were partially offset by repurchases of our common stock of $11.4 million and dividends declared of $13.5 million. On April 21, 1999, our Board of Directors approved our sixth stock repurchase plan authorizing the purchase, at management's discretion, of up to 10% of our common stock then outstanding, or 5,528,000 shares, over a two year period in open-market or privately negotiated transactions. Under this plan, 489,500 shares of our common stock were repurchased during the first quarter of 2000 at an aggregate cost of $11.4 million. To date, 4,746,700 shares have been repurchased under this plan at an aggregate cost of $170.8 million. On March 1, 2000, we paid a quarterly cash dividend equal to $0.24 per share on shares of our common stock outstanding as of the close of business on February 15, 2000, totaling $12.0 million. On April 19, 2000, we declared a quarterly cash dividend of $0.26 per share on shares of our common stock payable on June 1, 2000 to stockholders of record as of the close of business on May 15, 2000. During each of the three month periods ended March 31, 2000 and 1999, we declared cash dividends on our Series B Preferred Stock aggregating $1.5 million. Astoria Federal is required by the OTS to maintain a minimum liquidity ratio, calculated as an average daily balance of liquid assets as a percentage of net withdrawable deposit accounts plus short-term borrowings of 4.00%. Astoria Federal's liquidity ratios were 5.27% at March 31, 2000 and 6.28% at December 31, 1999. The levels of Astoria Federal's liquid assets are dependent on Astoria Federal's operating, investing and financing activities during any given period. At March 31, 2000, Astoria Federal's total capital exceeded all of its regulatory capital requirements with a tangible ratio of 6.28%, leverage ratio of 6.28%, and risk-based capital ratio of 15.86%. The minimum regulatory requirements were a tangible ratio of 1.50%, leverage ratio of 4.00%, and risk-based capital ratio of 8.00%. On October 28, 1999, our wholly-owned subsidiary, Astoria Capital Trust I, issued $125.0 million aggregate liquidation amount of 9.75% Capital Securities due November 1, 2029, Series A, referred to as Series A Capital Securities. Astoria Capital Trust I was formed for the exclusive purpose of issuing the Series A Capital Securities and $3.9 million of 9.75% Common Securities, Series A, purchased by us, and using the proceeds to acquire Junior Subordinated Debentures, Series A, issued by us. The Junior Subordinated Debentures totaled $128.9 million, have an interest rate of 9.75%, mature on November 1, 2029 and are the sole assets of Astoria Capital Trust I. We have fully and unconditionally guaranteed the Series A Capital Securities along with all obligations of Astoria Capital Trust I under the trust agreements pursuant to which it was organized. On March 10, 2000, we commenced an exchange offer, which expired on April 21, 2000, providing for the exchange of any and all of the Series A Capital Securities for $125.0 million aggregate liquidation amount of 9.75% Capital Securities due November 1, 2029, Series B, referred to as Series B Capital Securities. The terms of the Series B Capital Securities are identical in all material respects to the Series A Capital Securities, except that the Series B Capital Securities have been registered pursuant to the Securities Act of 1933, as amended. INTEREST RATE SENSITIVITY ANALYSIS As a financial institution, our primary component of market risk is interest rate risk. Our net interest income, the primary component of our net income, is subject to substantial risk due to changes in interest rates or changes in market yield curves, particularly if there is a substantial variation in the timing between the repricing of our assets and the liabilities which fund them. We seek to manage interest rate risk by monitoring and controlling the variation in repricing intervals between our assets and liabilities. We also monitor our interest rate sensitivity by analyzing the estimated changes in market value of our assets and liabilities assuming various interest rate scenarios, so that adjustments in the asset and liability mix, when deemed appropriate, can be made on a timely basis. The interest rate sensitivity gap is the difference between the amount of interest-earning assets anticipated to mature or reprice within a specific time period and the amount of interest-bearing liabilities anticipated to mature or reprice within that same time period. A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing within a specific time frame exceeds the amount of interest rate sensitive liabilities maturing or repricing within that same 8 10 time frame. Conversely, a gap is considered negative when the amount of interest rate sensitive liabilities maturing or repricing within a specific time frame exceeds the amount of interest rate sensitive assets maturing or repricing within that same time frame. In a rising interest rate environment, an institution with a positive gap would generally be expected, absent the effects of other factors, to experience a greater increase in the yields of its assets relative to the costs of its liabilities and thus an increase in the institution's net interest income, whereas an institution with a negative gap would generally be expected to experience the opposite results. Conversely, during a period of falling interest rates, a positive gap would tend to result in a decrease in net interest income while a negative gap would tend to increase net interest income. The actual duration of mortgage loans and mortgage-backed securities can be significantly impacted by changes in mortgage prepayments. Mortgage prepayment rates will vary due to a number of factors, including the regional economy in the area where the underlying mortgages were originated, seasonal factors, demographic variables and the assumability of the underlying mortgages. However, the major factors affecting prepayment rates are prevailing interest rates and related mortgage refinancing opportunities. At March 31, 2000, our net interest-earning assets maturing or repricing within one year exceeded interest-bearing liabilities maturing or repricing within the same time period by $169.1 million, representing a positive cumulative one-year gap of 0.75% of total assets. This compares to net interest-earning assets maturing or repricing within one year exceeding interest-bearing liabilities maturing or repricing within the same time period by $434.2 million, representing a positive cumulative one-year gap of 1.91% of total assets at December 31, 1999. Our March 31, 2000 and December 31, 1999 cumulative one-year gap positions reflect the classification of available-for-sale securities within repricing periods based on their contractual maturities adjusted for estimated prepayments, if any. If those securities at March 31, 2000 were classified within the one-year or less maturing or repricing category, net interest-earning assets maturing or repricing within one year would have exceeded interest-bearing liabilities maturing or repricing within the same time period by $6.50 billion, representing a positive cumulative one-year gap of 28.80% of total assets. Using this method at December 31, 1999, net interest-earning assets maturing or repricing within one year would have exceeded interest-bearing liabilities maturing or repricing within the same time period by $6.75 billion, representing a positive cumulative one-year gap of 29.74% of total assets. The available-for-sale securities may or may not be sold, subject to our discretion. The following table, referred to as the Gap Table, sets forth the amount of interest-earning assets and interest-bearing liabilities outstanding at March 31, 2000, that we anticipate, using certain assumptions based on our historical experience and other data available to us, to reprice or mature in each of the future time periods shown. The Gap Table does not necessarily indicate the impact of general interest rate movements on our net interest income because the actual repricing dates of various assets and liabilities are subject to customer discretion and competitive and other pressures. Callable features of certain assets and liabilities, in addition to the foregoing, may cause actual experience to vary from that indicated. Included in this table are $1.36 billion of callable other securities at their amortized cost, classified according to their maturity dates, which are primarily within the more than five years maturity category. Of such securities, $1.14 billion are callable within one year and at various other times thereafter. Also included in this table are $7.64 billion of callable borrowings, classified according to their maturity dates, which are primarily within the more than three years to five years category and the more than five years category. Of such borrowings, $3.74 billion are callable within one year and at various other times thereafter. If those borrowings had been categorized according to their call dates, our cumulative one-year gap would have been a negative 15.79% at March 31, 2000. During the quarter ended March 31, 2000, $1.34 billion in borrowings were called. Of the called borrowings, $390.0 million were paid off and the remaining balance was rolled into short- and medium-term borrowings without call features. In our past experience, even though callable borrowings were at below market rates and callable, a significant portion were not called, and therefore, were included in the Gap Table based on their contractual maturity. The recent increases in interest rates have resulted in a majority of the holders of these call options exercising their rights. However, the uncertainty and volatility of interest rates, economic conditions and other markets which affect the value of these call options, as well as the financial condition of the holders of the options, increase the difficulty and uncertainty, going forward, in determining if and when they may be exercised. Should the holders of these call options continue exercising their rights, the assumption in this regard embedded in the Gap Table may need to be adjusted in the future. 9 11
At March 31, 2000 --------------------------------------------------------------------------------- More than More than One Year Three Years One Year to to More than (Dollars in Thousands) or Less Three Years Five Years Five Years Total - -------------------------------------------------------------------------------------------------------------------------- Interest-earning assets: Mortgage loans (1) $ 2,237,551 $ 2,676,375 $ 2,483,549 $ 2,875,757 $10,273,232 Consumer and other loans (1) 155,412 14,751 - - 170,163 Federal funds sold and repurchase agreements 405,176 - - - 405,176 Mortgage-backed and other securities available-for-sale 2,189,006 1,887,859 1,576,531 2,871,223 8,524,619 Mortgage-backed and other securities held-to-maturity 340,340 216,014 172,779 1,420,990 2,150,123 --------------------------------------------------------------------------------- Total interest-earning assets 5,327,485 4,794,999 4,232,859 7,167,970 21,523,313 Add: Net unamortized purchase premiums and deferred costs (2) 12,161 15,287 14,227 15,992 57,667 --------------------------------------------------------------------------------- Net interest-earning assets $ 5,339,646 $ 4,810,286 $ 4,247,086 $ 7,183,962 $21,580,980 --------------------------------------------------------------------------------- Interest-bearing liabilities: Savings $ 154,589 $ 309,178 $ 309,178 $ 1,803,536 $ 2,576,481 NOW and money manager 27,610 55,222 55,222 414,162 552,216 Money market 1,134,083 14,627 14,627 109,704 1,273,041 Certificates of deposit 2,924,197 1,412,647 649,323 - 4,986,167 Borrowed funds 930,034 2,229,814 5,165,000 2,685,000 11,009,848 --------------------------------------------------------------------------------- Total interest-bearing liabilities $ 5,170,513 $ 4,021,488 $ 6,193,350 $ 5,012,402 $20,397,753 --------------------------------------------------------------------------------- Interest sensitivity gap $ 169,133 $ 788,798 $(1,946,264) $ 2,171,560 $ 1,183,227 --------------------------------------------------------------------------------- Cumulative interest sensitivity gap $ 169,133 $ 957,931 $ (988,333) $ 1,183,227 --------------------------------------------------------------------------------- Cumulative interest sensitivity gap as a percentage of total assets 0.75% 4.24% (4.38)% 5.24% Cumulative net interest-earning assets as a percentage of interest-bearing liabilities 103.27% 110.42% 93.58% 105.80%
(1) Mortgage, consumer and other loans exclude non-performing loans, but are not reduced for the allowance for loan losses. (2) Net unamortized purchase premiums and deferred costs are prorated. Certain shortcomings are inherent in the method of analysis presented in the Gap Table. For example, although certain assets and liabilities may have similar contractual maturities or periods to repricing, they may react in different ways to changes in market interest rates. Additionally, certain assets, such as adjustable-rate mortgage loans, or ARM loans, have contractual features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of borrowers to service their ARM loans or other loan obligations may decrease in the event of an interest rate increase. The Gap Table reflects our estimates as to periods to repricing at a particular point in time. Among the factors considered, are current trends and historical repricing experience with respect to similar products. As a result, different assumptions may be used at different points in time. We also monitor Astoria Federal's interest rate sensitivity through analysis of the change in the net portfolio value, or NPV. NPV is defined as the net present value of the expected future cash flows of an entity's assets and liabilities and, therefore, hypothetically represents the value of an institution's net worth. Increases in the value of assets will increase the NPV whereas decreases in the value of assets will decrease the NPV. Conversely, increases in the value of liabilities will decrease NPV whereas decreases in the value of liabilities will increase the NPV. The changes in value of assets and liabilities due to changes in interest rates reflect the interest sensitivity of those assets 10 12 and liabilities. The NPV ratio under any interest rate scenario is defined as the NPV in that scenario divided by the value of assets in the same scenario. This analysis, presented in the following table, or the NPV Table, measures percentage changes from the value of projected NPV in a given rate scenario, and then measures interest rate sensitivity by the change in the NPV ratio, over a range of interest rate change scenarios. The OTS also produces a similar analysis using its own model based upon data submitted on Astoria Federal's quarterly Thrift Financial Reports, the results of which may vary from our internal model primarily because of differences in assumptions utilized between our internal model and the OTS model, including estimated loan prepayment rates, reinvestment rates and deposit decay rates. For purposes of the NPV Table, prepayment speeds and deposit decay rates similar to the Gap Table were used. However, we have utilized different assumptions with respect to the borrowings with imbedded call features for the NPV Table. Specifically, for the scenarios involving no change or an increase in interest rates, we have assumed that those borrowings with imbedded call options will be called at their next available call date. Since the NPV Table reflects a hypothetical value of net assets based on present value of cash flows, utilizing the shorter life by call date instead of maturity date would result in the most conservative value of Astoria Federal's borrowings and, therefore, the most conservative view of its NPV ratio. The NPV Table is based on simulations which utilize institution specific assumptions with regard to future cash flows, including customer options such as loan prepayments, period and lifetime caps, puts and calls, and deposit withdrawal estimates. The NPV Table uses discount rates derived from various sources including, but not limited to, U.S. Treasury yield curves, thrift retail certificate of deposit curves, national and local secondary mortgage markets, brokerage security pricing services and various alternative funding sources. Specifically, for mortgage loans receivable, the discount rates used were based on market rates for new loans of similar type and purpose, adjusted, when necessary, for factors such as servicing cost, credit risk and term. The discount rates used for certificates of deposit and borrowings were based on rates which approximate those we would incur to replace such funding of similar remaining maturities. The NPV Table calculates the NPV at a flat rate scenario by computing the present value of cash flows of interest-earning assets less the present value of interest-bearing liabilities. Certain assets, including fixed assets and real estate held for development, are assumed to remain at book value (net of valuation allowance) regardless of interest rate scenario. The following represents Astoria Federal's NPV Table as of March 31, 2000:
Net Portfolio Value ("NPV") Portfolio Value of Assets Rates in --------------------------- ------------------------- Basis Points Dollar Dollar Percentage NPV Sensitivity (Rate Shock) Amount Change Change Ratio Change - ------------ ------ ------ ------ ----- ------ (Dollars in Thousands) +200 $1,445,790 $(770,925) (34.78)% 7.01% (3.04)% +100 1,872,231 (344,484) (15.54) 8.76 (1.29) -0- 2,216,715 - - 10.05 - -100 2,297,501 580,786 26.20 12.27 2.22 -200 2,566,434 349,719 15.78 11.04 0.99
As with the Gap Table, certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling of changes in NPV requires the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NPV model 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 also assumes that a particular change in interest rates is immediate and is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. In addition, prepayment estimates and other assumptions within the NPV Table are subjective in nature, involve uncertainties and, therefore, cannot be determined with precision. Accordingly, although the NPV measurements, in theory, may provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide for a precise forecast of the effect of changes in market interest rates on Astoria Federal's NPV and will differ from actual results. 11 13 LOAN PORTFOLIO The following table sets forth the composition of our loans receivable and loans held-for-sale portfolios at March 31, 2000 and December 31, 1999.
At March 31, 2000 At December 31, 1999 -------------------------- ---------------------------- Percent Percent of of (Dollars in Thousands) Amount Total Amount Total - ----------------------------------------------------------------------------------------------------------------- MORTGAGE LOANS (GROSS) (1): One-to-four family ...................... $ 9,218,462 87.87% $ 9,018,270 88.05% Multi-family ............................ 644,828 6.15 615,438 6.01 Commercial real estate .................. 455,849 4.35 433,035 4.23 ---------- ------ ---------- ------ Total mortgage loans ................. 10,319,139 98.37 10,066,743 98.29 ---------- ------ ---------- ------ CONSUMER AND OTHER LOANS (GROSS): Home equity ............................. 115,278 1.10 116,726 1.14 Passbook ................................ 7,840 0.07 7,481 0.07 Other ................................... 48,319 0.46 50,697 0.50 ---------- ------ ---------- ------ Total consumer and other loans ....... 171,437 1.63 174,904 1.71 ---------- ------ ---------- ------ TOTAL LOANS ................................. 10,490,576 100.00% 10,241,647 100.00% ---------- ====== ---------- ====== LESS: Unamortized premiums, discounts and deferred loan costs and fees, net .... 61,399 58,803 Allowance for loan losses ............... (77,373) (76,578) ---------- ---------- TOTAL LOANS, NET ............................ $10,474,602 $10,223,872 ========== ==========
- ------------------- (1) These amounts include $7.0 million and $11.4 million of mortgage loans classified as held-for-sale at March 31, 2000 and December 31, 1999, respectively. 12 14 SECURITIES PORTFOLIO The following tables set forth the amortized cost and estimated fair value of mortgage-backed securities and other securities available-for-sale and held-to-maturity at March 31, 2000 and December 31, 1999.
At March 31, 2000 --------------------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair (In Thousands) Cost Gains Losses Value - ------------------------------------------------------------------------------------------------------------------------------- AVAILABLE-FOR-SALE: Mortgage-backed securities: GNMA pass-through certificates $ 124,044 $ 535 $ (3,225) $ 121,354 FHLMC pass-through certificates 219,509 1,527 (3,450) 217,586 FNMA pass-through certificates 427,211 4,879 (2,644) 429,446 REMICs and CMOs: Agency issuance 5,982,565 320 (384,431) 5,598,454 Non agency issuance 1,562,706 527 (78,621) 1,484,612 --------- ----- --------- --------- Total mortgage-backed securities 8,316,035 7,788 (472,371) 7,851,452 --------- ----- --------- --------- Other securities: Obligations of the U.S. Government and agencies 552,359 - (62,727) 489,632 Corporate debt securities 61,321 - (7,692) 53,629 FNMA and FHLMC preferred stock 147,515 314 (19,698) 128,131 Asset-backed and other securities 1,776 - (1) 1,775 --------- ----- --------- --------- Total other securities 762,971 314 (90,118) 673,167 --------- ----- --------- --------- Total available-for-sale $9,079,006 $8,102 $(562,489) $8,524,619 ========= ===== ========= ========= HELD-TO-MATURITY: Mortgage-backed securities: GNMA pass-through certificates $ 3,972 $ 160 $ (7) $ 4,125 FHLMC pass-through certificates 42,414 299 (81) 42,632 FNMA pass-through certificates 12,760 17 (773) 12,004 REMICs and CMOs: Agency issuance 643,982 2,154 (7,156) 638,980 Non agency issuance 340,897 68 (7,719) 333,246 --------- ----- --------- --------- Total mortgage-backed securities 1,044,025 2,698 (15,736) 1,030,987 --------- ------ --------- --------- Other securities: Obligations of the U.S. Government and agencies 782,273 - (59,675) 722,598 Obligations of states and political subdivisions 44,843 - (43) 44,800 --------- ----- --------- --------- Total other securities 827,116 - (59,718) 767,398 --------- ----- --------- --------- Total held-to-maturity $1,871,141 $2,698 $ (75,454) $1,798,385 ========= ===== ========= =========
13 15 SECURITIES PORTFOLIO, CONTINUED
At December 31, 1999 -------------------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair (In Thousands) Cost Gains Losses Value - ------------------------------------------------------------------------------------------------------------------------------- AVAILABLE-FOR-SALE: Mortgage-backed securities: GNMA pass-through certificates $ 129,029 $ 658 $ (3,986) $ 125,701 FHLMC pass-through certificates 228,904 917 (3,407) 226,414 FNMA pass-through certificates 443,639 6,068 (2,202) 447,505 REMICs and CMOs: Agency issuance 6,304,417 454 (435,093) 5,869,778 Non agency issuance 1,604,335 366 (69,122) 1,535,579 --------- ------ -------- --------- Total mortgage-backed securities 8,710,324 8,463 (513,810) 8,204,977 --------- ------ -------- --------- Other securities: Obligations of the U.S. Government and agencies 547,082 - (72,878) 474,204 Corporate debt securities 61,349 - (7,168) 54,181 FNMA and FHLMC preferred stock 147,515 44 (20,080) 127,479 Asset-backed and other securities 1,907 1 - 1,908 --------- ------ -------- --------- Total other securities 757,853 45 (100,126) 657,772 --------- ------ -------- --------- Total available-for-sale $9,468,177 $ 8,508 $(613,936) $8,862,749 ========= ====== ======== ========= HELD-TO-MATURITY: Mortgage-backed securities: GNMA pass-through certificates $ 4,247 $ 220 $ (1) $ 4,466 FHLMC pass-through certificates 45,287 719 (42) 45,964 FNMA pass-through certificates 13,083 16 (648) 12,451 REMICs and CMOs: Agency issuance 667,249 1,308 (6,390) 662,167 Non agency issuance 352,395 121 (6,313) 346,203 --------- ------ -------- --------- Total mortgage-backed securities 1,082,261 2,384 (13,394) 1,071,251 --------- ------ -------- --------- Other securities: Obligations of the U.S. Government and agencies 772,584 17,384 (62,684) 727,284 Obligations of states and political subdivisions 45,112 - (40) 45,072 --------- ------ -------- --------- Total other securities 817,696 17,384 (62,724) 772,356 --------- ------ -------- --------- Total held-to-maturity $1,899,957 $19,768 $ (76,118) $1,843,607 ========= ====== ======== =========
14 16 COMPARISON OF FINANCIAL CONDITION AS OF MARCH 31, 2000 AND DECEMBER 31, 1999 AND OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 FINANCIAL CONDITION We believe that we were successful in achieving our strategy of growth through deployment of our excess capital, and as such we have de-emphasized growth and have been focused on maintaining or growing our capital ratio levels, which are currently at "well capitalized" levels for all regulatory purposes. We expect to continue to emphasize the origination of one-to-four family mortgage loans in an effort to utilize funds from anticipated mortgage loan and mortgage-backed security repayments. We continue to sell our 15-year and 30-year fixed-rate mortgage loan production, but retain for portfolio our ARM loan production. By doing so, we are shifting our asset mix towards growth in mortgage loans, primarily ARM loans, versus growth in securities. Total assets decreased $106.8 million, to $22.59 billion at March 31, 2000, from $22.70 billion at December 31, 1999. Mortgage-backed securities decreased $391.8 million to $8.90 billion at March 31, 2000, from $9.29 billion at December 31, 1999, due to principal payments of $433.5 million, slightly offset by a decrease in the net unrealized loss on securities available-for-sale of $40.8 million. Mortgage loans, net, increased $259.4 million, from $10.11 billion at December 31, 1999 to $10.37 billion at March 31, 2000. Gross mortgage loans originated and purchased during the three months ended March 31, 2000 totaled $570.7 million, of which $397.4 million were originations and $173.3 million were purchases. These originations and purchases consisted primarily of one-to-four family residential mortgage loans. This compares to $1.20 billion of originations and $122.7 million of purchases for a total of $1.32 billion during the three months ended March 31, 1999. The decrease in the mortgage loan originations was primarily a result of the general increase in market interest rates during the past year, which has significantly decreased the level of mortgage refinance activity as well as prepayments on mortgage loans and mortgage-backed securities. Additionally, the closing and disposition of certain LPOs in March 1999 contributed to the significant reduction in our volume of loan originations. There were no purchases of mortgage-backed securities during the three months ended March 31, 2000. In addition to the changes noted above in the mortgage-backed securities and mortgage loan portfolios, federal funds sold and repurchase agreements increased $69.5 million from $335.7 million at December 31, 1999, to $405.2 million at March 31, 2000. Other securities also increased $24.8 million to $1.50 billion at March 31, 2000, from $1.48 billion at December 31, 1999, primarily due to the accretion of discounts on our U.S. Government and agency securities coupled with a decrease in the net unrealized loss on securities available-for-sale. Other assets decreased $27.2 million to $367.1 million at March 31, 2000 from $394.3 million at December 31, 1999, primarily due to the decrease in the deferred tax asset which was directly related to the decrease in the net unrealized loss on securities available-for-sale. Reverse repurchase agreements decreased $490.0 million, to $8.79 billion at March 31, 2000, from $9.28 billion at December 31, 1999. Federal Home Loan Bank of New York advances increased $100.0 million to $1.71 billion at March 31, 2000 from $1.61 billion at December 31, 1999. The net decrease in borrowings is a result of the repayment of a portion of the $1.34 billion in borrowings which were called in the first quarter of 2000. The remaining balance of the called borrowings was rolled into short- and medium-term borrowings without call features. Deposits increased $226.4 million from $9.55 billion at December 31, 1999 to $9.78 billion at March 31, 2000 primarily due to our current emphasis on deposit generation through competitive rates and new product offerings such as business checking. Stockholders' equity totaled $1.25 billion at March 31, 2000 and $1.20 billion at December 31, 1999. Increases to stockholders' equity included net income of $55.5 million, a $23.4 million decrease in the unrealized loss on securities available-for-sale, net of taxes, the effect of stock options exercised and related tax benefit totaling $1.5 million and the amortization for the allocated portion of shares held by the ESOP and the related tax benefit on the earned portion of the shares held by the RRP totaling $1.9 million. These increases were partially offset by repurchases of our common stock of $11.4 million and dividends declared of $13.5 million. 15 17 RESULTS OF OPERATIONS GENERAL Net income for the three months ended March 31, 2000 increased $2.0 million to $55.5 million, from $53.5 million for the three months ended March 31, 1999. For the three months ended March 31, 2000, diluted earnings per common share increased to $1.09 per share, as compared to $0.97 per share for the three months ended March 31, 1999. Return on average assets increased to 0.99% for the three months ended March 31, 2000, from 0.97% for the three months ended March 31, 1999. Return on average stockholders' equity increased to 18.51% for the three months ended March 31, 2000, from 14.72% for the three months ended March 31, 1999. Return on average tangible stockholders' equity increased to 22.71% for the three months ended March 31, 2000, from 17.69% for the three months ended March 31, 1999. NET INTEREST INCOME Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends primarily upon the volume of interest-earning assets and interest-bearing liabilities and the corresponding interest rates earned or paid. Our net interest income is significantly impacted by changes in interest rates and market yield curves. In the current rising interest rate environment, we continue to experience compression on our net interest rate spread and net interest margin. For the three months ended March 31, 2000, net interest income decreased $3.6 million, or 2.6%, to $132.2 million, from $135.8 million for the three months ended March 31, 1999. This decrease was the result of a decrease in the net interest rate spread to 2.03% for the three months ended March 31, 2000, from 2.27% for the three months ended March 31, 1999, partially offset by the growth in average interest-earning assets of $954.9 million and the growth in average interest-bearing liabilities of $695.1 million. The change in the net interest rate spread resulted from an increase in the average cost of interest-bearing liabilities to 4.83% for the three months ended March 31, 2000, from 4.57% for the three months ended March 31, 1999, slightly offset by an increase in the average yield on total interest-earning assets to 6.86% for the three months ended March 31, 2000, from 6.84% for the three months ended March 31, 1999. The net interest margin was 2.40% for the three months ended March 31, 2000 and 2.57% for the three months ended March 31, 1999. ANALYSIS OF NET INTEREST INCOME The following table sets forth certain information for the three months ended March 31, 2000 and 1999. Yields are derived by dividing income by the average daily balance of the related assets and costs are derived by dividing expense by the average daily balance of the related liabilities, for the periods shown, except where otherwise noted. The average balance of loans receivable includes loans on which we have discontinued accruing interest. The yields and costs include fees, premiums and discounts which are considered adjustments to interest rates. 16 18
Quarter Ended March 31, ----------------------------------------------------------------------------------- 2000 1999 ----------------------------------------------------------------------------------- Average Average Average Yield/ Average Yield/ (Dollars in Thousands) Balance Interest Cost Balance Interest Cost - -------------------------------------------------------------------------------------------------------------------------------- ASSETS: (Annualized) (Annualized) Interest-earning assets: Mortgage loans (1) $10,260,349 $183,712 7.16% $ 9,002,736 $161,887 7.19% Consumer and other loans (1) 173,505 4,294 9.90 223,038 5,277 9.46 Mortgage-backed securities (2) 9,491,191 154,024 6.49 9,832,450 158,877 6.46 Other securities (2) 1,849,215 32,390 7.01 1,889,222 33,032 6.99 Federal funds sold and repurchase agreements 281,900 4,099 5.82 153,772 1,822 4.74 ---------- ------- ---------- ------- Total interest-earning assets 22,056,160 378,519 6.86 21,101,218 360,895 6.84 ------- ------- Non-interest-earning assets 438,466 896,291 ---------- ---------- Total assets $22,494,626 $21,997,509 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Interest-bearing liabilities: Savings $ 2,573,434 $ 12,913 2.01% $ 2,763,565 $ 13,685 1.98% Certificates of deposit 4,935,841 66,634 5.40 5,021,838 65,192 5.19 NOW and money manager 533,609 1,317 0.99 511,526 1,248 0.98 Money market 1,215,519 15,234 5.01 909,269 9,441 4.15 ---------- ------- ---------- ------- Total deposits 9,258,403 96,098 4.15 9,206,198 89,566 3.89 Borrowed funds 11,147,156 150,219 5.39 10,504,289 135,534 5.16 ---------- ------- ---------- ------- Total interest-bearing liabilities 20,405,559 246,317 4.83 19,710,487 225,100 4.57 ------- ------- Non-interest-bearing liabilities 889,532 834,562 ---------- ---------- Total liabilities 21,295,091 20,545,049 Stockholders' equity 1,199,535 1,452,460 ---------- ---------- Total liabilities and stockholders' equity $22,494,626 $21,997,509 ========== ========== Net interest income/net interest rate spread $132,202 2.03% $135,795 2.27% ======= ==== ======= ==== Net interest-earning assets/net interest margin $ 1,650,601 2.40% $ 1,390,731 2.57% ========== ==== ========= ==== Ratio of interest-earning assets to interest-bearing liabilities 1.08x 1.07x ===== =====
- -------------------- (1) Mortgage, consumer and other loans include non-performing loans and exclude the allowance for loan losses. (2) Securities available-for-sale are reported at average amortized cost. 17 19 RATE/VOLUME ANALYSIS The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (1) changes attributable to changes in volume (changes in volume multiplied by prior rate), (2) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (3) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999 ------------------------------------------------- (In Thousands) Increase (Decrease) - --------------------------------------------------------------------------------------------------- Volume Rate Net ------ ---- --- Interest-earning assets: Mortgage loans .......................... $22,503 $ (678) $21,825 Consumer and other loans ................ (1,219) 236 (983) Mortgage-backed securities .............. (5,581) 728 (4,853) Other securities ........................ (732) 90 (642) Federal funds sold and repurchase agreements .......................... 1,788 489 2,277 ------ ---- ------ Total ...................................... 16,759 865 17,624 ------ ---- ------ Interest-bearing liabilities: Savings ................................. (972) 200 (772) Certificates of deposit ................. (1,139) 2,581 1,442 NOW and money manager ................... 56 13 69 Money market ............................ 3,586 2,207 5,793 Borrowed funds .......................... 8,497 6,188 14,685 ------ ------ ------ Total ...................................... 10,028 11,189 21,217 ------ ------ ------ Net change in net interest income .................................. $ 6,731 $(10,324) $(3,593) ====== ======= ======
INTEREST INCOME Interest income for the three months ended March 31, 2000 increased $17.6 million, or 4.9%, to $378.5 million, from $360.9 million for the three months ended March 31, 1999. This increase was the result of a $954.9 million increase in average interest-earning assets to $22.06 billion for the three months ended March 31, 2000, from $21.10 billion for the three months ended March 31, 1999, coupled with an increase in the average yield of interest-earning assets to 6.86% for the three months ended March 31, 2000, from 6.84% for the three months ended March 31, 1999. The increase in average interest-earning assets was primarily due to increases in the average balance of mortgage loans partially offset by decreases in the average balance of mortgage-backed securities resulting from principal repayments. Interest income on mortgage loans increased $21.8 million to $183.7 million for the three months ended March 31, 2000, from $161.9 million for the three months ended March 31, 1999, which was the result of an increase in the average balance of $1.26 billion, partially offset by a decrease in the average yield on mortgage loans to 7.16% for the three months ended March 31, 2000, from 7.19% for the three months March 31, 1999. The increase in the average balance of mortgage loans reflects our continued emphasis on the origination of primarily one-to-four family residential mortgage loans. Although interest rates have increased from the comparable 1999 period, we experienced a slight decrease in the average yield on mortgage loans. The rising interest rate environment has created a shift in consumer demand from fixed rate products to adjustable rate products which we currently offer at rates below their fully indexed rate for an introductory period which generally runs from three to five years. Accordingly, the impact of rising rates has not yet been fully reflected in the overall average yield on our mortgage 18 20 loan portfolio. Interest income on consumer and other loans decreased $983,000 resulting from a decrease in the average balance of $49.5 million, partially offset by an increase in the yield to 9.90% for the three months ended March 31, 2000, from 9.46% for the three months ended March 31, 1999. Interest income on mortgage-backed securities decreased $4.9 million to $154.0 million for the three months ended March 31, 2000, from $158.9 million for the three months ended March 31, 1999. This decrease was the result of a $341.3 million decrease in the average balance of this portfolio, partially offset by an increase in the average yield to 6.49% for the three months ended March 31, 2000 from 6.46% for three months ended March 31, 1999. Interest income on other securities decreased $642,000 to $32.4 million for the three months ended March 31, 2000, from $33.0 million for the three months ended March 31, 1999. This was the result of a decrease in the average balance of this portfolio of $40.0 million, partially offset by an increase in the average yield to 7.01% for the three months ended March 31, 2000, from 6.99% for the three months ended March 31, 1999. Interest income on federal funds sold and repurchase agreements increased $2.3 million as a result of an increase in the average balance of $128.1 million coupled with an increase in the average yield to 5.82% for the three months ended March 31, 2000, from 4.74% for the three months ended March 31, 1999. The significant increase in the average yield on federal funds sold and repurchase agreements is a direct result of the rising interest rate environment. INTEREST EXPENSE Interest expense for the three months ended March 31, 2000 increased $21.2 million, to $246.3 million, from $225.1 million for the three months ended March 31, 1999. This increase was attributable to an increase in the average cost of interest-bearing liabilities to 4.83% for the three months ended March 31, 2000, from 4.57% for the three months ended March 31, 1999, coupled with an increase in the average balance of interest-bearing liabilities of $695.1 million, to $20.41 billion for the three months ended March 31, 2000, from $19.71 billion for the three months ended March 31, 1999. The increase in average interest-bearing liabilities was primarily attributable to increases in borrowings. The increase in the overall average cost of our interest-bearing liabilities reflects the higher interest rate environment that has prevailed since the middle of 1999. Interest expense on borrowings increased $14.7 million, to $150.2 million for the three months ended March 31, 2000, from $135.5 million for the three months ended March 31, 1999. This increase was attributable to an increase in the average balance of borrowings of $642.9 million, coupled with an increase in the average cost of borrowings to 5.39% for the three months ended March 31, 2000, from 5.16% for the three months ended March 31, 1999. Previous asset growth was primarily funded through callable borrowings which, in a lower interest rate environment, was the most cost effective way to fund our growth. The rising interest rate environment has resulted in most of our borrowings being called upon reaching their call dates. While a portion of the called borrowings are being repaid, the remainder are being rolled over into short-and medium-term borrowings without call features at higher rates. Interest expense on deposits increased $6.5 million to $96.1 million for the three months ended March 31, 2000, from $89.6 million for the three months ended March 31, 1999, reflecting an increase in the average cost of interest-bearing deposits to 4.15% for the three months ended March 31, 2000 from 3.89% for the three months ended March 31, 1999, coupled with an increase in the average balance of interest-bearing deposits of $52.2 million. Interest expense on savings accounts decreased $772,000 as a result of a decrease in the average balance of $190.1 million slightly offset by an increase in the average cost to 2.01% for the three months ended March 31, 2000, from 1.98% for the three months ended March 31, 1999. Interest expense on certificates of deposit increased $1.4 million as a result of an increase in the average cost to 5.40% for the three months ended March 31, 2000 from 5.19% for the three months ended March 31, 1999, slightly offset by a decrease in the average balance of $86.0 million. The increase in the average cost of certificates of deposit reflects our commitment to offer competitive rates to our customers. Interest expense on money market accounts increased $5.8 million to $15.2 million for the three months ended March 31, 2000, from $9.4 million for the three months ended March 31, 1999, as a result of an increase in the average balance of $306.3 million coupled with an increase in the average cost to 5.01% for the three months ended March 31, 2000, from 4.15% for the three months ended March 31, 1999. Interest is paid on money market accounts on a tiered basis with 87.8% of the total balances in the highest tier (accounts with balances of $50,000 and higher). The yield on the highest tier is priced relative to the discount rate for the three-month U.S. Treasury bill, which provides an attractive short-term yield for our customers. Interest expense on NOW and money manager accounts decreased $69,000. 19 21 PROVISION FOR LOAN LOSSES Provision for loan losses decreased $61,000, to $1.0 million for the three months ended March 31, 2000, from $1.1 million for the three months ended March 31, 1999. The allowance for loan losses increased to $77.4 million at March 31, 2000, from $76.6 million at December 31, 1999. Net loan charge-offs totaled $205,000 for the three months ended March 31, 2000 compared to $230,000 for the three months ended March 31, 1999. Non-performing loans decreased $6.2 million to $47.2 million at March 31, 2000, from $53.4 million at December 31, 1999. This reduction in non-performing loans improved the percentage of allowance for loan losses to non-performing loans to 163.99% at March 31, 2000, from 143.49% at December 31, 1999. The allowance for loan losses as a percentage of total loans decreased slightly from 0.75% at December 31, 1999 to 0.74% at March 31, 2000 primarily due to the increase of $248.9 million in gross total loans from December 31, 1999 to March 31, 2000. For further discussion of non-performing loans and allowance for loan losses, see "Asset Quality." NON-INTEREST INCOME Non-interest income for the quarter ended March 31, 2000 increased $208,000 to $16.9 million, from $16.7 million for the quarter ended March 31, 1999. Customer service and other loan fees increased $1.8 million to $11.2 million for the first quarter of 2000, from $9.4 million for the first quarter of 1999. This increase is due in part to increases in customer service fees during the third quarter of 1999. Loan servicing fees decreased $2.1 million to $3.1 million for the quarter ended March 31, 2000, from $5.2 million for the quarter ended March 31, 1999. Loan servicing fees include all contractual and ancillary servicing revenue we receive, net of amortization of mortgage servicing rights and valuation allowance adjustments for the impairment of mortgage servicing rights. The decrease in loan servicing fees was the result of a decrease in the recovery of a portion of the valuation allowance for mortgage servicing rights of $1.5 million and a decrease in fees received of $1.4 million, partially offset by a decrease in the amortization of mortgage servicing rights of $736,000. Net gains on sales of loans decreased $2.2 million to $117,000 for the quarter ended March 31, 2000, from $2.3 million for the quarter ended March 31, 1999. Net gain (loss) on disposition of banking and loan production offices, or LPOs, for the three months ended March 31, 2000 increased $2.4 million, from the three months ended March 31, 1999. The $1.2 million loss during the first quarter of 1999 resulted from the closing and disposition of certain LPOs, and the $1.2 million gain during the first quarter of 2000 resulted from the sale of a former Long Island Savings Bank banking office. NON-INTEREST EXPENSE Non-interest expense for the quarter ended March 31, 2000 was $56.7 million, a decrease of $1.3 million, from $58.0 million for the quarter ended March 31, 1999. General and administrative expense decreased $5.6 million to $46.4 million for the first quarter of 2000, from $52.0 million for the comparable 1999 period. The decrease in general and administrative expense was primarily the result of a decrease in compensation and benefits of $4.4 million to $20.3 million for the quarter March 31, 2000, from $24.7 million for the quarter ended March 31, 1999. This decrease was primarily attributable to the cost savings attained following the acquisition of Long Island Bancorp, Inc., coupled with reductions in commissions expense due to decreased mortgage origination volume. Employee stock plans amortization expense decreased to $1.9 million for the first quarter of 2000, from $3.0 million for the first quarter of 1999 due primarily to the effect of the lower average market value of our common stock on ESOP expense. Goodwill litigation expense increased $1.4 million to $2.5 million for the first quarter of 2000, from $1.1 million for the first quarter of 1999. For further discussion on the goodwill litigation proceedings, see "Part II - Item 1 - - Legal Proceedings." For the quarter ended March 31, 2000, non-interest expense includes $3.1 million of capital trust securities expense related to the issuance of $125.0 million of Series A Capital Securities by our wholly owned subsidiary, Astoria Capital Trust I, in the fourth quarter of 1999. For further discussion of the Series A Capital Securities, see "Liquidity and Capital Resources." Our percentage of general and administrative expense to average assets improved to 0.82% for the quarter ended March 31, 2000, from 0.95% for the quarter ended March 31, 1999. The efficiency ratio also improved to 31.35% for the quarter ended March 31, 2000, from 33.89% for the quarter ended March 31, 1999. 20 22 INCOME TAX EXPENSE For the quarter ended March 31, 2000, income tax expense was $35.9 million, representing an effective tax rate of 39.3%, as compared to $40.0 million, representing an effective tax rate of 42.8%, for the quarter ended March 31, 1999. The decrease in our effective tax rate was attributable to a tax benefit derived from a 1999 corporate restructuring of certain subsidiaries of Astoria Federal. CASH EARNINGS Tangible stockholders' equity (stockholders' equity less goodwill) totaled $1.04 billion at March 31, 2000, compared to $973.0 million at December 31, 1999. Tangible equity is a critical measure of a company's ability to repurchase shares, pay dividends and continue to grow. Astoria Federal is subject to various capital requirements which affect its classification for safety and soundness purposes, as well as for deposit insurance premium purposes. These requirements utilize, subject to further adjustments, tangible equity as a base component, not equity as defined by GAAP. Although reported earnings and return on equity are traditional measures of a company's performance, we believe that the change in tangible equity, or "cash earnings," is also a significant measure of a company's performance. Cash earnings exclude the effects of various non-cash expenses, such as the amortization for the allocation of ESOP and RRP stock and related tax benefit, as well as the amortization of goodwill. In the case of tangible equity, these items have either been previously charged to equity, as in the case of ESOP and RRP charges, through contra-equity accounts, or do not affect tangible equity, such as the market appreciation of allocated ESOP shares, for which the operating charge is offset by a credit to additional paid-in capital, and goodwill amortization for which the related intangible asset has already been deducted in the calculation of tangible equity. We believe that cash earnings and cash returns on average tangible equity reflect our ability to generate tangible capital that can be leveraged for future growth. For the quarter ended March 31, 2000, cash earnings totaled $62.2 million, or $6.7 million more than net income, representing a cash return on average tangible equity of 25.46%. For the quarter ended March 31, 1999, cash earnings totaled $62.3 million, or $8.8 million more than net income, representing a cash return on average tangible equity of 20.62%. We believe that various other performance measures should also be analyzed utilizing cash earnings. The cash return on average assets was 1.11% for the quarter ended March 31, 2000 and 1.13% for the quarter ended March 31, 1999. Additionally, the cash general and administrative expense (general and administrative expense, excluding non-cash amortization expense relating to certain employee stock plans) to average assets ratio decreased to 0.79% for the quarter ended March 31, 2000, from 0.89% for the quarter ended March 31, 1999. The cash efficiency ratio was 30.07% for the quarter ended March 31, 2000 and 31.95% for the quarter ended March 31, 1999. For more details on cash earnings, see "Condensed Consolidated Schedules of Cash Earnings" on the following page. 21 23 Presented below are our Condensed Consolidated Schedules of Cash Earnings for the three months March 31, 2000 and 1999.
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED SCHEDULES OF CASH EARNINGS - ------------------------------------------------- (In Thousands, Except Per Share Data) Three Months Ended March 31, -------------------------- 2000 1999 ---- ---- Net income $55,497 $53,454 Add back: Employee stock plans amortization expense 1,887 2,972 Amortization of goodwill 4,824 4,906 Income tax benefit on amortization expense of earned portion of RRP stock 13 967 ------- -------- Cash earnings 62,221 62,299 Preferred dividends declared 1,500 1,500 ------- -------- Cash earnings available to common shareholders $60,721 $60,799 ====== ======= Basic cash earnings per common share (1) $ 1.25 $ 1.17 ====== ======= Diluted cash earnings per common share (1) $ 1.23 $ 1.14 ====== =======
- ------------------- (1) Based on the weighted average shares used to calculate earnings per share on the Consolidated Statements of Income. ASSET QUALITY One of our key operating objectives has been and continues to be to maintain a high level of asset quality. Through a variety of strategies, including, but not limited to borrower workout arrangements and aggressive marketing of foreclosed properties, we have been proactive in addressing problem and non-performing assets which, in turn, has helped strengthen our financial condition. Such strategies, as well as our concentration on one-to-four family mortgage lending, maintaining sound credit standards for new loan originations and a generally strong and stable economy and real estate market, have resulted in a steady reduction in non-performing assets to total assets from December 31, 1995 through March 31, 2000. Non-performing assets decreased from $58.4 million at December 31, 1999 to $52.9 million at March 31, 2000. The ratio of non-performing assets to total assets decreased from 0.26% at December 31, 1999 to 0.23% at March 31, 2000. The following table shows a comparison of delinquent loans as of March 31, 2000 and December 31, 1999.
Delinquent Loans ---------------- At March 31, 2000 At December 31, 1999 ---------------------------------------- ------------------------------------------ 60-89 Days 90 Days or More 60-89 Days 90 Days or More ----------------- ----------------- ------------------ ----------------- Number Principal Number Principal Number Principal Number Principal of Balance of Balance of Balance of Balance (Dollars in Thousands) Loans of Loans Loans of Loans Loans of Loans Loans of Loans - ---------------------- ---------------- ---------------- ---------------- ---------------- One-to-four family ......... 29 $ 924 373 $43,571 45 $2,202 390 $48,610 Multi-family ............... 2 478 2 635 - - 5 802 Commercial real estate ..... 1 179 5 1,701 3 2,369 8 2,331 Consumer and other loans ... 110 667 120 1,274 162 1,033 148 1,626 --- ----- --- ------ --- ----- --- ------ Total delinquent loans ..... 142 $2,248 500 $47,181 210 $5,604 551 $53,369 === ===== === ====== === ===== === ====== Delinquent loans to total loans ................... 0.02% 0.45% 0.05% 0.52%
22 24 The following table sets forth information regarding non-performing assets at March 31, 2000 and December 31, 1999. In addition to the non-performing loans, we had approximately $2.2 million of potential problem loans at March 31, 2000 and $5.6 million at December 31, 1999. Such loans are 60-89 days delinquent as shown on page 22.
Non-Performing Assets --------------------- At At March 31, December 31, 2000 1999 ----------- ------------ (Dollars in Thousands) Non-accrual delinquent mortgage loans (1) .......... $43,994 $48,830 Non-accrual delinquent consumer and other loans .... 1,274 1,626 Mortgage loans delinquent 90 days or more and still accruing interest (2) .................... 1,913 2,913 ------ ------ Total non-performing loans .................. 47,181 53,369 ------ ------ Real estate owned, net (3) ......................... 5,703 5,080 ------ ------ Total non-performing assets ................. $52,884 $58,449 ====== ====== Allowance for loan losses to non-performing loans ..... 163.99% 143.49% Allowance for loan losses to total loans .............. 0.74% 0.75%
- ---------------------- (1) Consists primarily of loans secured by one-to-four family properties. (2) Loans delinquent 90 days or more and still accruing interest consist solely of loans delinquent 90 days or more as to their maturity date but not their interest payments, and are primarily secured by multi-family and commercial properties. (3) Real estate we acquired as a result of foreclosure or by deed-in-lieu of foreclosure is recorded at the lower of cost or fair value less estimated costs to sell. If all non-accrual loans had been performing in accordance with their original terms, we would have recorded interest income of $1.0 million for the three months ended March 31, 2000 and $3.8 million for the year ended December 31, 1999. Actual payments recorded to interest income totaled $321,000 for the three months ended March 31, 2000 and $1.9 million for the year ended December 31, 1999. Excluded from non-performing assets are restructured loans that have complied with the terms of their restructure agreement for a satisfactory period and have, therefore, been returned to performing status. Restructured loans that are in compliance with their restructured terms totaled $6.4 million at March 31, 2000 and $6.7 million at December 31, 1999. 23 25 The following table sets forth the change in allowance for loan losses.
(Dollars in Thousands) Allowance for Loan Losses: Balance at December 31, 1999 ....................... $76,578 Provision charged to operations ................ 1,000 Charge-offs: One-to-four family ....................... (627) Multi-family ............................. (8) Commercial ............................... - Consumer and other ....................... (560) ------ Total charge-offs .............................. (1,195) ------ Recoveries: One-to-four family ....................... 265 Multi-family ............................. 136 Commercial ............................... 465 Consumer and other ....................... 124 ------ Total recoveries ............................... 990 ------ Total net charge-offs .......................... (205) ------ Balance at March 31, 2000 .......................... $77,373 ======
IMPACT OF NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," or SFAS No. 133. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial condition and measure those instruments at fair value. The accounting for changes in the fair value of a derivative (that is, unrealized gains and losses) depends on the intended use of the derivative and the resulting designation. In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," or SFAS No. 137. SFAS No.137 defers the effective date of SFAS No. 133 from fiscal quarters of fiscal years beginning after June 15, 1999 to June 15, 2000. SFAS No. 133 does not require restatement of prior periods. We believe the implementation of SFAS No. 133 will not have a material impact on our financial condition or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For a description of our quantitative and qualitative disclosures about market risk, see the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Sensitivity Analysis." PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS With respect to the action entitled Ronnie Weil, also known as Ronnie Moore, for Herself and on Behalf of All Other Persons Who Obtained Mortgage Loans from The Long Island Savings Banks, FSB during the period January 1, 1983 through December 31, 1992 vs. The Long Island Savings Bank, FSB, et al., which is pending in the United States District Court for the Eastern District of New York, discovery has commenced. On February 28, 2000, Astoria Federal, as successor to The Long Island Savings Bank, FSB, on behalf of itself and the former directors of The Long Island Savings Bank, FSB, filed a motion to bifurcate discovery such that discovery with respect to class certification issues would proceed and other merit discovery would be held in abeyance until such time as the Plaintiffs were certified as a proper class. On April 11, 2000, the Court denied such motion 24 26 and ordered that discovery proceed according to the following schedule. Defendants' depositions of the putative class Plaintiffs are to be completed by May 15, 2000. Written responses to Plaintiffs' discovery requests are to be provided by June 2, 2000, with document discovery made available by June 9, 2000. Depositions of the Defendants and discovery from non-parties may commence on the later of June 19, 2000 or two weeks after Plaintiffs transmit their class certification moving papers to Defendants' counsels. A conference with the Court was also ordered to be held on August 11, 2000. We believe that the likelihood is remote that this case will have a material adverse impact on our consolidated financial condition or results of operations. With respect to the case entitled The Long Island Savings Bank, FSB et al. vs. The United States, or the LISB Goodwill Litigation, which is pending in the United States Court of Federal Claims, Chief Judge Smith, by order filed March 27, 2000, indicated that the Court's first order of business should be the prompt resolution of the pending partial summary judgment motions in the 26 of the 27 "first-thirty" cases in which such motions are pending, including the LISB Goodwill Litigation, and that it will not be possible for the Court to prepare for and conduct more than 20 damage trials in a calendar year. Judge Smith also indicated that it was the Court's understanding that some parties in the "first-thirty" cases may be interested in delaying trials on damages and conserving resources until the pending appeals in the goodwill litigation cases are resolved. Based upon this, the Court indicated that parties could request to defer assignment to a trial judge. Based upon this invitation by the Court, Astoria Federal requested such a deferral in the LISB Goodwill Litigation. By motion dated April 21, 2000, the Government requested leave to respond to Plaintiffs' requests to forego assignment, objecting to the deferral, which leave was granted by the Court. Astoria Federal has filed a response indicating that it requested the deferral at the Court's invitation and that if the Court determines that the LISB Goodwill Case should be assigned to a trial judge, Astoria Federal is prepared to proceed to trial at this time. The Court also indicated in its order filed March 27, 2000 that resolution of the partial summary judgment motions in the "second-thirty" cases was not a priority of the Court at this time. The action entitled, Astoria Federal Savings and Loan Association vs. United States, or the Astoria Goodwill Litigation, which is also pending in the United States Court of Federal Claims and with respect to which a partial summary judgment motion is pending, is among the "second-thirty cases". With respect to both the LISB Goodwill Litigation and the Astoria Goodwill Litigation, no assurance can be given as to the results of these claims or the timing of any proceedings in relation thereto. For further information regarding legal proceedings see Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 1999. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5. OTHER INFORMATION Not Applicable
25 27 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11. Statement Regarding Computation of Per Share Earnings. 27. Financial Data Schedule. (b) Reports on Form 8-K 1. Form 8-K dated February 16, 2000 which includes our announcement of earnings for the quarter ended December 31, 1999. 2. Form 8-K dated April 12, 2000 which extended the response date for the exchange of the Series A Capital Securities of Astoria Capital Trust I. 26 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Astoria Financial Corporation Dated: May 15, 2000 By: /s/ Monte N. Redman -------------------- ------------------------- Monte N. Redman Executive Vice President and Chief Financial Officer (Principal Accounting Officer) 27 29 Exhibit Index
Exhibit No Identification of Exhibit - ---------- ------------------------- 11. Statement Regarding Computation of Per Share Earnings 27. Financial Data Schedule
28 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended March 31, 2000 --------------------- (In Thousands, Except Per Share Data) 1. Net Income $55,497 Less: Preferred stock dividends declared 1,500 ------ Net income available to common shareholders $53,997 ====== 2. Weighted average common shares outstanding 51,667 3. ESOP shares not committed to be released (2,962) ------ 4. Total weighted average common shares outstanding 48,705 ====== 5. Basic earnings per common share $ 1.11 ====== 6. Total weighted average common shares outstanding 48,705 7. Dilutive effect of stock options using the treasury stock method 683 ------ 8. Total average common and common equivalent shares 49,388 ====== 9. Diluted earnings per common share $ 1.09 ======
-29- EX-27 3 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the Condensed Consolidated Statement of Financial Condition as of March 31, 2000 and the Condensed Consolidated Statement of Income for the three months ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 117,972 0 405,176 0 8,524,619 1,871,141 1,798,385 10,551,975 77,373 22,589,769 9,780,901 339,673 419,686 10,670,175 0 2,000 555 1,251,779 22,589,769 188,006 190,513 0 378,519 96,098 246,317 132,202 1,000 0 7,403 91,395 55,497 0 0 55,497 1.11 1.09 2.40 45,268 1,913 0 2,248 76,578 1,195 990 77,373 77,373 0 0
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