-----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, Vq58hN809WXkfOxWVSlyLc3EkChfYLWVuG7gZTy8hfebVI6/6evggFQhcVIQlGQ+ LkvWiqnTPVNMqDkW9qFrng== /in/edgar/work/0000950123-00-010407/0000950123-00-010407.txt : 20001114 0000950123-00-010407.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950123-00-010407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASTORIA FINANCIAL CORP CENTRAL INDEX KEY: 0000910322 STANDARD INDUSTRIAL CLASSIFICATION: [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: 760642 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 y42270e10-q.txt 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 September 30, 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, October 31, 2000 ----------------------- ---------------------------------------------- .01 Par Value 49,881,861 ------------- ----------
2 PART I -- FINANCIAL INFORMATION
Page ---- Item 1. Financial Statements Consolidated Statements of Financial Condition at September 30, 2000 2 and December 31, 1999. Consolidated Statements of Income for the Three Months and 3 Nine Months Ended September 30, 2000 and September 30, 1999. Consolidated Statement of Changes in Stockholders' Equity for the 4 Nine Months Ended September 30, 2000. Consolidated Statements of Cash Flows for the Nine Months 5 Ended September 30, 2000 and September 30, 1999. Notes to Consolidated Financial Statements. 6 Item 2. Management's Discussion and Analysis of Financial Condition and 8 Results of Operations. Item 3. Quantitative and Qualitative Disclosures about Market Risk. 35
PART II -- OTHER INFORMATION Item 1. Legal Proceedings 35 Item 2. Changes in Securities and Use of Proceeds 36 Item 3. Defaults Upon Senior Securities 36 Item 4. Submission of Matters to a Vote of Security Holders 36 Item 5. Other Information 36 Item 6. Exhibits and Reports on Form 8-K 36 (a) Exhibits (11) Statement Regarding Computation of Per Share Earnings (27) Financial Data Schedule (b) Reports on Form 8-K Signatures 37
1 3 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT AT SEPTEMBER 30, DECEMBER 31, (In Thousands, Except Share Data) 2000 1999 - ---------------------------------------------------------------------------------------------------------------- Assets - ------ Cash and due from banks $ 127,678 $ 154,918 Federal funds sold and repurchase agreements 368,476 335,653 Mortgage-backed securities available-for-sale 7,106,229 8,204,977 Other securities available-for-sale 693,279 657,772 Mortgage-backed securities held-to-maturity (fair value of $926,240 and $1,071,251, respectively) 930,435 1,082,261 Other securities held-to-maturity (fair value of $783,586 and $772,356, respectively) 838,790 817,696 Federal Home Loan Bank of New York stock 285,250 265,250 Loans held-for-sale 10,131 11,376 Loans receivable: Mortgage loans, net 10,905,182 10,113,216 Consumer and other loans, net 180,581 175,858 ------------ ------------ 11,085,763 10,289,074 Less allowance for loan losses 78,957 76,578 ------------ ------------ Total loans receivable, net 11,006,806 10,212,496 Mortgage servicing rights, net 43,730 48,369 Accrued interest receivable 116,098 110,668 Premises and equipment, net 155,061 176,813 Goodwill 209,473 223,945 Other assets 310,362 394,342 ------------ ------------ Total assets $ 22,201,798 $ 22,696,536 ============ ============ Liabilities and Stockholders' Equity - ------------------------------------ Liabilities: Deposits: Savings $ 2,497,295 $ 2,581,442 Money market 1,421,439 1,165,734 NOW and money manager 956,942 877,715 Certificates of deposit 4,975,838 4,929,643 ------------ ------------ Total deposits 9,851,514 9,554,534 Reverse repurchase agreements 7,935,000 9,276,800 Federal Home Loan Bank of New York advances 2,010,000 1,610,058 Other borrowings 506,638 514,663 Mortgage escrow funds 143,980 120,350 Accrued expenses and other liabilities 264,585 298,219 ------------ ------------ Total liabilities 20,711,717 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 50,131,861 and 51,730,959 shares outstanding, respectively) 555 555 Additional paid-in capital 803,589 800,414 Retained earnings 1,027,799 908,236 Treasury stock (5,366,435 and 3,767,337 shares, at cost, respectively) (182,865) (137,071) Accumulated other comprehensive income: Net unrealized loss on securities, net of taxes (255,282) (344,198) Unallocated common stock held by ESOPs (30,702) (32,955) Unearned common stock held by RRP (13) (69) ------------ ------------ Total stockholders' equity 1,365,081 1,196,912 ------------ ------------ Total liabilities and stockholders' equity $ 22,201,798 $ 22,696,536 ============ ============
See accompanying notes to consolidated financial statements. 2 4 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- ----------------------- (In Thousands, Except Share Data) 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Interest income: Mortgage loans $ 194,874 $ 172,208 $ 566,587 $ 502,014 Consumer and other loans 4,817 4,726 13,385 14,797 Mortgage-backed securities 141,394 167,422 443,419 497,287 Other securities 33,663 31,854 98,763 96,871 Federal funds sold and repurchase agreements 5,251 2,237 13,920 5,586 ------------ ------------ ------------ ------------ Total interest income 379,999 378,447 1,136,074 1,116,555 ------------ ------------ ------------ ------------ Interest expense: Deposits 104,889 91,496 301,216 271,103 Borrowed funds 150,550 153,714 450,164 439,630 ------------ ------------ ------------ ------------ Total interest expense 255,439 245,210 751,380 710,733 ------------ ------------ ------------ ------------ Net interest income 124,560 133,237 384,694 405,822 Provision for loan losses 1,003 1,026 3,008 3,119 ------------ ------------ ------------ ------------ Net interest income after provision for loan losses 123,557 132,211 381,686 402,703 ------------ ------------ ------------ ------------ Non-interest income: Customer service and other loan fees 12,933 10,435 36,164 29,310 Loan servicing fees 2,161 2,813 7,703 12,135 Net gain on sales of securities -- -- -- 714 Net gain on sales of loans 273 209 568 3,255 Net gain on disposition of banking and loan production offices -- 20,447 3,976 19,206 Other 951 2,874 3,111 5,239 ------------ ------------ ------------ ------------ Total non-interest income 16,318 36,778 51,522 69,859 ------------ ------------ ------------ ------------ Non-interest expense: General and administrative: Compensation and benefits 18,493 22,542 58,289 70,586 Employee stock plans amortization 1,826 2,234 5,339 8,075 Occupancy, equipment and systems 12,451 13,215 39,763 40,356 Federal deposit insurance premiums 528 1,055 1,568 3,452 Advertising 2,756 2,085 6,992 5,938 Other 7,461 6,862 21,696 21,944 ------------ ------------ ------------ ------------ Total general and administrative 43,515 47,993 133,647 150,351 Real estate operations and provision for losses, net 32 116 (257) (60) Goodwill litigation 2,149 1,094 6,436 4,041 Capital trust securities 3,108 -- 9,324 -- Amortization of goodwill 4,824 4,843 14,472 14,592 ------------ ------------ ------------ ------------ Total non-interest expense 53,628 54,046 163,622 168,924 ------------ ------------ ------------ ------------ Income before income tax expense 86,247 114,943 269,586 303,638 Income tax expense 32,558 47,995 104,540 127,514 ------------ ------------ ------------ ------------ Net income $ 53,689 $ 66,948 $ 165,046 $ 176,124 ============ ============ ============ ============ Net income available to common shareholders $ 52,189 $ 65,448 $ 160,546 $ 171,624 ============ ============ ============ ============ Basic earnings per common share $ 1.09 $ 1.27 $ 3.33 $ 3.32 ==== ==== ==== ==== Diluted earnings per common share $ 1.07 $ 1.25 $ 3.28 $ 3.24 ==== ==== ==== ==== Dividends per common share $ 0.26 $ 0.24 $ 0.76 $ 0.72 ==== ==== ==== ==== Basic weighted average common shares 47,784,283 51,417,820 48,252,725 51,736,485 Diluted weighted average common and common equivalent shares 48,573,327 52,376,642 48,967,347 52,988,352
See accompanying notes to consolidated financial statements. 3 5 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
Additional Preferred Common Paid-In Retained Treasury (In Thousands, Except Share Data) Total Stock Stock Capital Earnings Stock - ----------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 $1,196,912 $2,000 $555 $800,414 $908,236 $(137,071) Comprehensive income: Net income 165,046 - - - 165,046 - Other comprehensive income, net of tax: Net unrealized gain on securities 88,916 - - - - - --------- Total comprehensive income 253,962 --------- Common stock repurchased (1,790,446 shares) (52,493) - - - - (52,493) Dividends on common and preferred stock and amortization of purchase premium (42,143) - - (978) (41,165) - Exercise of stock options and related tax benefit 3,451 - - 1,070 (4,318) 6,699 Amortization relating to allocation of ESOP stock and earned portion of RRP stock and related tax benefit 5,392 - - 3,083 - - --------- ------- ----- -------- -------- -------- Balance at September 30, 2000 $ 1,365,081 $ 2,000 $ 555 $ 803,589 $ 1,027,799 $ (182,865) ========== ====== ==== ======== ========== ==========
Unallocated Unearned Accumulated Common Common Other Stock Stock Comprehensive Held Held (In Thousands, Except Share Data) Income by ESOPs by RRP - ---------------------------------------------------------------------------- Balance at December 31, 1999 $(344,198) $(32,955) $(69) Comprehensive income: Net income - - - Other comprehensive income, net of tax: Net unrealized gain on securities 88,916 - - Total comprehensive income Common stock repurchased (1,790,446 shares) - - - Dividends on common and preferred stock and amortization of purchase premium - - - Exercise of stock options and related tax benefit - - - Amortization relating to allocation of ESOP stock and earned portion of RRP stock and related tax benefit - 2,253 56 -------- ------- --- Balance at September 30, 2000 $ (255,282) $ (30,702) $ (13) ========== ========= =====
See accompanying notes to consolidated financial statements. 4 6 ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, -------------------------- (IN THOUSANDS) 2000 1999 - ---------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 165,046 $ 176,124 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Net accretion of discounts, premiums and deferred loan fees (44,305) (41,718) Provision for loan and real estate losses 2,917 3,164 Depreciation and amortization 9,656 10,471 Net gain on sales of securities and loans (568) (3,969) Net gain on sales of premises and equipment -- (487) Net gain on disposition of banking and loan production offices (3,976) (19,206) Proceeds from sales of loans held-for-sale, net of originations 6,916 126,503 Amortization of goodwill 14,472 14,592 Allocated and earned shares from ESOPs and RRP 5,339 8,075 Increase in accrued interest receivable (5,430) (13,275) Capitalized mortgage servicing rights, net of amortization and valuation allowance 4,639 280 Decrease in other assets 8,320 12,505 Decrease in accrued expenses and other liabilities (32,519) (51,540) ----------- ----------- Net cash provided by operating activities 130,507 221,519 ----------- ----------- Cash flows from investing activities: Origination of loans held-for-investment, net of principal payments (241,479) (876,658) Loan purchases through third parties (571,653) (279,792) Principal payments on mortgage-backed securities held-to-maturity 152,710 287,604 Principal payments on mortgage-backed securities available-for-sale 1,250,463 2,091,974 Purchases of mortgage-backed securities held-to-maturity -- (281,165) Purchases of mortgage-backed securities available-for-sale -- (3,869,950) Purchases of other securities held-to-maturity -- (42,078) Purchases of other securities available-for-sale (5,040) (158,421) Proceeds from maturities of other securities available-for-sale 302 58,884 Proceeds from maturities of other securities held-to-maturity 8,772 212,660 Purchases of FHLB stock, net (20,000) (51,750) Proceeds from sales of securities available-for-sale -- 176,362 Proceeds from sales of real estate owned and investments in real estate, net 7,156 11,989 Proceeds from disposition of banking and loan production offices 21,293 4,208 Purchases of premises and equipment, net of proceeds from sales (5,227) (22,780) ----------- ----------- Net cash provided by (used in) investing activities 597,297 (2,738,913) ----------- ----------- Cash flows from financing activities: Net increase (decrease) in deposits 296,902 (208,584) Net (decrease) increase in reverse repurchase agreements (1,341,800) 2,485,000 Net increase in FHLB of New York advances 400,000 200,000 Net decrease in other borrowings (8,698) (43,261) Increase in mortgage escrow funds 23,630 26,895 Costs to repurchase common stock (52,493) (66,729) Cash dividends paid to stockholders (42,143) (42,791) Cash received for options exercised 2,381 15,019 ----------- ----------- Net cash (used in) provided by financing activities (722,221) 2,365,549 ----------- ----------- Net increase (decrease) in cash and cash equivalents 5,583 (151,845) Cash and cash equivalents at beginning of period 490,571 393,382 ----------- ----------- Cash and cash equivalents at end of period $ 496,154 $ 241,537 =========== =========== Supplemental disclosures: Cash paid during the period: Interest $ 758,863 $ 698,569 =========== =========== Income taxes $ 73,009 $ 83,447 =========== =========== Additions to real estate owned $ 6,826 $ 9,372 =========== ===========
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: 1) Astoria Federal Savings and Loan Association and its subsidiaries, referred to as Astoria Federal; 2) Astoria Capital Trust I; and 3) AF Insurance Agency, Inc. As used in this quarterly report, "we," "us" and "our" refer to Astoria Financial Corporation and its consolidated subsidiaries, including Astoria Federal, Astoria Capital Trust I and AF Insurance Agency, Inc., 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 September 30, 2000 and December 31, 1999, our results of operations for the three and nine months ended September 30, 2000 and 1999, changes in our stockholders' equity for the nine months ended September 30, 2000 and our cash flows for the nine months ended September 30, 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 September 30, 2000 and December 31, 1999, and amounts of revenues and expenses for the consolidated statements of income for the three and nine month periods ended September 30, 2000 and 1999. The results of operations for the three and nine months ended September 30, 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. 6 8 2. EARNINGS PER SHARE, OR EPS The following table is a reconciliation of basic and diluted EPS:
For the Three Months Ended September 30, ------------------------------------------------------------------------------------- 2000 1999 ------------------------------------------------------------------------------------- (In Thousands, Average Per Share Average Per Share Except Share Data) Income Shares Amount Income Shares Amount - ---------------------------------------------------------------------------------------------------------------------------- Net income $ 53,689 $66,948 Less: preferred stock dividends 1,500 1,500 ----- ----- Basic EPS: Income available to common stockholders 52,189 47,784,283 $1.09 65,448 51,417,820 $1.27 ==== ==== Effect of dilutive unexercised stock options 789,044 (1) 958,822 (2) ------- ----------- Diluted EPS: Income available to common stockholders plus assumed conversions $52,189 48,573,327 $1.07 $65,448 52,376,642 $1.25 ====== ========== ==== ====== ========== ====
For the Nine Months Ended September 30, ------------------------------------------------------------------------------------- 2000 1999 ------------------------------------------------------------------------------------- (In Thousands, Average Per Share Average Per Share Except Share Data) Income Shares Amount Income Shares Amount - ---------------------------------------------------------------------------------------------------------------------------- Net income $165,046 $176,124 Less: preferred stock dividends 4,500 4,500 ----- ----- Basic EPS: Income available to common stockholders 160,546 48,252,725 $3.33 171,624 51,736,485 $3.32 ==== ==== Effect of dilutive unexercised stock options 714,622 (3) 1,251,867 (4) -------- ----------- Diluted EPS: Income available to common stockholders plus assumed conversions $160,546 48,967,347 $3.28 $171,624 52,988,352 $3.24 ======= ========== ==== ======= ========== ====
(1) Options to purchase 1,001,803 shares of common stock at prices between $36.00 per share and $59.75 per share were outstanding as of September 30, 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 for the three months ended September 30, 2000. (2) Options to purchase 1,051,708 shares of common stock at prices between $36.00 per share and $59.75 per share were outstanding as of September 30, 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 for the three months ended September 30, 1999. (3) Options to purchase 1,640,153 shares of common stock at prices between $29.24 per share and $59.75 per share were outstanding as of September 30, 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 for the nine months ended September 30, 2000. (4) Options to purchase 737,352 shares of common stock at prices between $45.06 per share and $59.75 per share were outstanding as of September 30, 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 for the nine months ended September 30, 1999. 7 9 3. GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES On October 28, 1999, our wholly-owned finance 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 the Series A Capital Securities. Effective April 26, 2000, $120.0 million aggregate liquidation amount of the Series A Capital Securities were exchanged for a like amount of 9.75% Capital Securities due November 1, 2029, Series B, also issued by Astoria Capital Trust I, referred to as the Series B Capital Securities. The Series A Capital Securities and Series B Capital Securities have substantially identical terms except that the Series B Capital Securities have been registered with the Securities and Exchange Commission. Together they are referred to as the Capital Securities. We have fully and unconditionally guaranteed the Capital Securities along with all obligations of Astoria Capital Trust I under the trust agreement. Astoria Capital Trust I was formed for the exclusive purpose of issuing the Capital Securities and common securities and using the proceeds to acquire an aggregate principal amount of $128.9 million of our 9.75% Junior Subordinated Debentures due November 1, 2029, referred to as Junior Subordinated Debentures. The sole assets of Astoria Capital Trust I are the Junior Subordinated Debentures. The Junior Subordinated Debentures are prepayable, in whole or in part, at our option on or after November 1, 2009 at declining premiums to maturity. Proceeds from the issuance of the Junior Subordinated Debentures totaling $31.3 million were used to increase the capital level of Astoria Federal and the remaining proceeds were used primarily for the repurchase of our common stock. The balance outstanding on the Capital Securities was $125.0 million at September 30, 2000. The costs associated with the Capital Securities issuance have been capitalized and are being amortized over a period of ten years. Distributions on the Capital Securities are payable semi-annually, on May 1 and November 1, and are reflected in our Consolidated Statements of Income as a component of non-interest expense under the caption "Capital trust securities." 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 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 8 10 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. On October 28, 1999, our wholly-owned subsidiary, Astoria Capital Trust I, issued $125.0 million of Series A Capital Securities and $3.9 million of common securities and used the proceeds to acquire $128.9 million of Junior Subordinated Debentures issued by us. See "Notes to Consolidated Financial Statements" for further discussion of the Capital Securities, Junior Subordinated Debentures and use of proceeds. On April 1, 2000, we established our wholly-owned subsidiary AF Insurance Agency, Inc. AF Insurance Agency, Inc. is a New York licensed life insurance and variable annuity agent and property and casualty insurance broker. Through a contractual arrangement with Treiber Insurance and IFS Agencies, AF Insurance Agency, Inc. provides insurance products to the customers of Astoria Federal. LIQUIDITY AND CAPITAL RESOURCES Our primary source of funds is cash provided by principal and interest payments on loans and mortgage-backed and other securities. Principal payments on loans and mortgage-backed securities and proceeds from maturities of other securities totaled $2.56 billion for the nine months ended September 30, 2000 and $4.39 billion for the nine months ended September 30, 1999. The reduction in loan and security repayments is a result of the higher interest rate environment that has prevailed since the middle of 1999. Our other sources of funds are provided by operating and financing activities, although for the nine months ended September 30, 2000 we have decreased our borrowings outstanding which has resulted in the net use of funds from financing activities during this period. Net cash provided from operating activities totaled $130.5 million during the nine months ended September 30, 2000 and $221.5 million during the nine months ended September 30, 1999. During the nine months ended September 30, 2000, net borrowings decreased $950.5 million, while net deposits increased $296.9 million. During the nine months ended September 30, 1999, net borrowings increased $2.64 billion, while net deposits decreased $208.6 million. The net increase in deposits for the nine months ended September 30, 2000 reflects our continued emphasis on attracting customer deposits by offering competitive rates. The net decrease in deposits during the nine months ended September 30, 1999 was primarily due to 9 11 the sale of our five upstate New York banking offices, with deposits totaling $156.4 million, in the third quarter of 1999. Our primary use of funds is for the origination and purchase of mortgage loans and the purchase of mortgage-backed and other securities, although for the past eighteen months our emphasis has been on the origination and purchase of mortgage loans. During the nine months ended September 30, 2000, our gross originations and purchases of mortgage loans totaled $1.94 billion, compared to $3.11 billion during the nine months ended September 30, 1999. This decrease was attributable to the current interest rate environment, which has resulted in a significant decrease in mortgage refinance activity, and our disposition of certain loan production offices, or LPOs, in March 1999. Our purchases of other securities totaled $5.0 million during the nine months ended September 30, 2000 versus purchases of mortgage-backed and other securities of $4.35 billion during the comparable 1999 period. There were no purchases of mortgage-backed securities during the nine months ended September 30, 2000, which is consistent with our objective to reposition our balance sheet through increases in loans and decreases in securities. Stockholders equity totaled $1.37 billion at September 30, 2000 and $1.20 billion at December 31, 1999. Increases to stockholders' equity included net income of $165.0 million, an $88.9 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 $3.5 million and the amortization for the allocated portion of shares held by the Employee Stock Ownership Plans, or ESOPs, and the related tax benefit on the earned portion of the shares held by the Recognition and Retention Plan, or RRP, totaling $5.4 million. These increases were partially offset by repurchases of our common stock of $52.5 million and dividends declared of $42.1 million. During the quarter ended September 30, 2000, we completed our sixth stock repurchase plan. On August 16, 2000, our Board of Directors approved our seventh stock repurchase plan authorizing the purchase, at management's discretion, of 5,000,000 shares, or approximately 10% of our common stock outstanding over a two year period in open-market or privately negotiated transactions. During the nine months ended September 30, 2000, 1,790,446 shares of our common stock were repurchased, of which 548,000 shares were acquired pursuant to our seventh stock repurchase plan, at an aggregate cost of $52.5 million. On September 1, 2000, we paid a quarterly cash dividend equal to $0.26 per share on shares of our common stock outstanding as of the close of business on August 15, 2000, totaling $12.7 million. On October 18, 2000, we declared a quarterly cash dividend of $0.26 per share on shares of our common stock payable on December 1, 2000 to stockholders of record as of the close of business on November 15, 2000. During each of the three month periods ended September 30, 2000 and 1999, we declared cash dividends on our Series B Preferred Stock aggregating $1.5 million. Astoria Federal is required by the Office of Thrift Supervision, or 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 ratio was 7.10% at September 30, 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. 10 12 At September 30, 2000, Astoria Federal's total capital exceeded all of its regulatory capital requirements with a tangible ratio of 6.69%, leverage ratio of 6.69%, and risk-based capital ratio of 16.44%. 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, Astoria Capital Trust I issued $125.0 million of Series A Capital Securities. For further discussion of the Capital Securities see "Notes to Consolidated Financial Statements" and "General." INTEREST RATE SENSITIVITY ANALYSIS As a financial institution, the primary component of our 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, i.e. our interest rate sensitivity gap. 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 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 result in an increase in net interest income. The actual duration of mortgage loans and mortgage-backed securities can be significantly impacted by changes in mortgage prepayments. The major factors affecting mortgage prepayment rates are prevailing interest rates and related mortgage refinancing opportunities. In addition, prepayment rates will vary due to a number of other 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. The following table, referred to as the Gap Table, sets forth the amount of interest-earning assets and interest-bearing liabilities outstanding at September 30, 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 11 13 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. 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 in determining if and when they may be exercised. In our past experience, even though callable borrowings were at or below market rates, a significant portion were not called, and therefore, were included in the Gap Table based on their contractual maturity. The previous increases in interest rates in the first half of 2000, have resulted in a majority of the holders of these call options exercising their rights. Therefore, in the June 30, 2000 Gap Table and the September 30, 2000 Gap Table, callable borrowings have been classified according to their call dates. At September 30, 2000, callable borrowings classified according to their call dates totaled $6.89 billion, of which $4.58 billion are callable within one year and at various times thereafter. During the nine months ended September 30, 2000, $2.69 billion in borrowings were called. Also included in this table are $1.31 billion of callable other securities, classified according to their maturity dates, which are primarily within the more than five years maturity category. Of such securities $1.24 billion are callable within one year and at various other times thereafter. The classification of these securities by maturity date is based upon our experience which, in the current interest rate environment, has indicated that the issuers of these securities have not been exercising their call options. At September 30, 2000, interest-bearing liabilities maturing or repricing within one year exceeded net interest-earning assets maturing or repricing within the same time period by $4.57 billion, representing a negative cumulative one-year gap of 20.59% of total assets. This compares to interest-bearing liabilities maturing or repricing within one year exceeding net interest-earning assets maturing or repricing within the same time period by $3.64 billion, representing a negative cumulative one-year gap of 16.04% of total assets at December 31, 1999, using the same set of assumptions which were used in the September 30, 2000 Gap Table. At December 31, 1999 with callable borrowings classified according to their contractual maturity dates, as previously reported, our net interest-earning assets maturing or repricing within one year exceeded 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. Our September 30, 2000 and December 31, 1999 cumulative one-year gap positions, both as adjusted and as previously reported, 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 September 30, 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 $1.12 billion, representing a positive cumulative one-year gap of 5.03% 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 $2.67 billion, representing a positive cumulative one-year gap of 11.78% of total assets, as adjusted, using the same set of assumptions which were used in the September 30, 2000 Gap Table. Using this method at December 31, 1999 with callable borrowings classified according to their contractual maturity dates, as previously reported, 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 12 14 29.74% of total assets. The available-for-sale securities may or may not be sold, subject to our discretion.
At September 30, 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) $ 2,425,603 $ 2,960,937 $ 2,708,605 $ 2,717,718 $ 10,812,863 Consumer and other loans (1) 141,136 33,029 4,719 - 178,884 Federal funds sold and repurchase agreements 368,476 - - - 368,476 Mortgage-backed and other securities available-for-sale 2,111,243 1,848,033 1,153,618 2,686,614 7,799,508 Mortgage-backed and other securities held-to-maturity 357,015 203,600 132,571 1,364,361 2,057,547 ---------------------------------------------------------------------------------------- Total interest-earning assets 5,403,473 5,045,599 3,999,513 6,768,693 21,217,278 Add: Net unamortized purchase premiums and deferred costs (2) 14,116 17,942 16,584 16,232 64,874 ---------------------------------------------------------------------------------------- Net interest-earning assets $ 5,417,589 $ 5,063,541 $ 4,016,097 $ 6,784,925 $ 21,282,152 ---------------------------------------------------------------------------------------- Interest-bearing liabilities: Savings $ 137,465 $ 274,932 $ 274,932 $ 1,809,966 $ 2,497,295 NOW and money manager 25,477 50,951 50,951 419,079 546,458 Money market 1,286,133 14,243 14,243 106,820 1,421,439 Certificates of deposit 2,903,433 1,246,902 766,977 58,526 4,975,838 Borrowed funds 5,636,751 4,204,887 610,000 - 10,451,638 ---------------------------------------------------------------------------------------- Total interest-bearing liabilities $ 9,989,259 $ 5,791,915 $ 1,717,103 $ 2,394,391 $19,892,668 ---------------------------------------------------------------------------------------- Interest sensitivity gap $ (4,571,670) $ (728,374) $ 2,298,994 $ 4,390,534 $ 1,389,484 Cumulative interest sensitivity gap ---------------------------------------------------------------------------------------- $ (4,571,670) $ (5,300,044) $ (3,001,050) $ 1,389,484 ---------------------------------------------------------------------------------------- Cumulative interest sensitivity gap as a percentage of total assets (20.59)% (23.87)% (13.52)% 6.26% Cumulative net interest-earning assets as a percentage of interest-bearing liabilities 54.23% 66.42% 82.85% 106.98%
- ------------------------- (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 13 15 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 the 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 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, except for the scenarios which involve decreases in interest rates, for which we have assumed, in the NPV Table, that those borrowings with embedded call options will not be called at their next available call date. 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. Certain assets, including fixed assets and real estate held for investment, 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 September 30, 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 $1,613,071 $(763,597) (32.13)% 7.85% (2.99)% +100 2,035,176 (341,492) (14.37) 9.57 (1.27) -0- 2,376,668 - - 10.84 - -100 2,847,763 471,095 19.82 12.59 1.75 -200 2,617,444 240,776 10.13 11.40 0.56
14 16 Our NPV ratio of 10.84% in a flat rate scenario and 7.85% in the up 200 basis point rate shock, as well as the sensitivity measure of negative 2.99% in the up 200 basis point rate shock as of September 30, 2000, have improved from the December 31, 1999 results of 9.92% NPV ratio in a flat rate scenario, 6.24% in the up 200 basis point rate shock and the sensitivity measure of negative 3.68% in the up 200 basis point rate shock. These improvements are a result of a variety of factors including: capital increases from earnings, reduction in total assets, growth of core deposits, emphasis on ARM products and a reduction in callable borrowings. As with the Gap Table, certain shortcomings are inherent in the methodology used in the NPV Table. 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. LOAN PORTFOLIO The following table sets forth the composition of our loans receivable and loans held-for-sale portfolios at September 30, 2000 and December 31, 1999.
At September 30, 2000 At December 31, 1999 -------------------------------- ---------------------------- Percent Percent (Dollars in Thousands) Amount of Total Amount of Total -------------------------------------------------------------------------- ---------------------------- MORTGAGE LOANS (GROSS) (1): One-to-four family...................... $9,608,676 87.13% $9,018,270 88.05% Multi-family............................ 750,259 6.80 615,438 6.01 Commercial real estate.................. 489,115 4.44 433,035 4.23 ----------- ----- ---------- ------- Total mortgage loans....................... 10,848,050 98.37 10,066,743 98.29 ----------- ----- ---------- ------- CONSUMER AND OTHER LOANS (GROSS): Home equity ............................ 128,002 1.16 116,726 1.14 Passbook ............................... 8,642 0.08 7,481 0.07 Other .................................. 43,254 0.39 50,697 0.50 ----------- ---- ---------- ------- Total consumer and other loans.............. 179,898 1.63 174,904 1.71 ----------- ---- ---------- ------- TOTAL LOANS................................. 11,027,948 100.00% 10,241,647 100.00% ---------- ====== ---------- ======= LESS: Unamortized premiums, discounts and deferred loan costs and fees, net......................... 67,946 58,803 Allowance for loan losses............... (78,957) (76,578) ------------- ---------- TOTAL LOANS, NET............................ $11,016,937 $10,223,872 ========== ==========
-------------- (1) These amounts include mortgage loans classified as held-for-sale totaling $10.1 million at September 30, 2000 and $11.4 million at December 31, 1999. 15 17 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 September 30, 2000 and December 31, 1999.
At September 30, 2000 ------------------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair (In Thousands) Cost Gains Losses Value - -------------------------------------------------------------------------------------------------------------------------------- AVAILABLE-FOR-SALE: Mortgage-backed securities: GNMA pass-through certificates $ 107,100 $ 560 $ (2,096) $ 105,564 FHLMC pass-through certificates 198,254 1,340 (2,387) 197,207 FNMA pass-through certificates 382,946 5,095 (1,780) 386,261 REMICs and CMOs: Agency issuance 5,312,855 1,448 (310,477) 5,003,826 Non agency issuance 1,460,926 646 (48,201) 1,413,371 ---------- ---------- ---------- ---------- Total mortgage-backed securities 7,462,081 9,089 (364,941) 7,106,229 ---------- ---------- ---------- ---------- Other securities: Obligations of the U.S. Government and agencies 563,203 -- (60,063) 503,140 Corporate debt securities 66,268 -- (9,990) 56,278 FNMA and FHLMC preferred stock 147,515 53 (15,306) 132,262 Asset-backed and other securities 1,602 -- (3) 1,599 ---------- ---------- ---------- ---------- Total other securities 778,588 53 (85,362) 693,279 ---------- ---------- ---------- ---------- Total available-for-sale $8,240,669 $ 9,142 $ (450,303) $7,799,508 ========== ========== ========== ========== HELD-TO-MATURITY: Mortgage-backed securities: GNMA pass-through certificates $ 3,467 $ 142 $ (3) $ 3,606 FHLMC pass-through certificates 37,181 661 (37) 37,805 FNMA pass-through certificates 11,933 9 (460) 11,482 REMICs and CMOs: Agency issuance 566,761 2,622 (3,508) 565,875 Non agency issuance 311,093 350 (3,971) 307,472 ---------- ---------- ---------- ---------- Total mortgage-backed securities 930,435 3,784 (7,979) 926,240 ---------- ---------- ---------- ---------- Other securities: Obligations of the U.S. Government and agencies 794,502 -- (55,170) 739,332 Obligations of states and political subdivisions 44,288 -- (34) 44,254 ---------- ---------- ---------- ---------- Total other securities 838,790 -- (55,204) 783,586 ---------- ---------- ---------- ---------- Total held-to-maturity $1,769,225 $ 3,784 $ (63,183) $1,709,826 ========== ========== ========== ==========
16 18 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 ========= ====== ========== =========
17 19 COMPARISON OF FINANCIAL CONDITION AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 AND OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 FINANCIAL CONDITION We continue to emphasize fund deployment on the origination and purchase of one-to-four family mortgage loans. We continue to sell our conforming, one-to-four family 15-year and 30- year fixed-rate mortgage loan production, but retain for portfolio our ARM and other fixed-rate loan production. Additionally, we originate for portfolio fixed- and adjustable-rate multi-family and commercial mortgage loans. We are continuing to shift our asset mix towards growth in mortgage loans, primarily ARM loans, versus growth in securities. If the current interest rate environment continues and the opportunity for asset growth with attractive interest rate spreads remains limited, we may continue to limit our asset growth or shrink the balance sheet, as we have been doing over the past eighteen months. Total assets decreased $494.7 million, to $22.20 billion at September 30, 2000, from $22.70 billion at December 31, 1999. Mortgage-backed securities decreased $1.25 billion to $8.04 billion at September 30, 2000, from $9.29 billion at December 31, 1999, due to principal payments of $1.40 billion, slightly offset by a decrease in the net unrealized loss on securities available-for-sale of $149.5 million. Mortgage loans, net, increased $792.0 million, from $10.11 billion at December 31, 1999 to $10.91 billion at September 30, 2000. Gross mortgage loans originated and purchased during the nine months ended September 30, 2000 totaled $1.94 billion, of which $1.37 billion were originations and $568.5 million were purchases. These originations and purchases consisted primarily of one-to-four family residential mortgage loans. This compares to $2.83 billion of originations and $280.6 million of purchases during the nine months ended September 30, 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 reduced the level of mortgage refinance activity, and the sale of certain LPOs in March 1999. There were no purchases of mortgage-backed securities during the nine months ended September 30, 2000. In addition to the changes noted above in the mortgage-backed securities and mortgage loan portfolios, federal funds sold and repurchase agreements increased $32.8 million from $335.7 million at December 31, 1999, to $368.5 million at September 30, 2000. Other securities increased $56.6 million to $1.53 billion at September 30, 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. Premises and equipment, net, decreased $21.7 million from $176.8 million at December 31, 1999 to $155.1 million at September 30, 2000, primarily due to the completion of the sale of the former Long Island Bancorp, Inc., or LIB, headquarters in April 2000. (See "Non-interest income.") Other assets decreased $83.9 million to $310.4 million at September 30, 2000 from $394.3 million at December 31, 1999, primarily due to the decrease in the deferred tax asset of which $75.4 million resulted from the decrease in the unrealized loss on securities available-for-sale. 18 20 Reverse repurchase agreements decreased $1.34 billion, to $7.94 billion at September 30, 2000, from $9.28 billion at December 31, 1999. Federal Home Loan Bank of New York advances increased $400.0 million to $2.01 billion at September 30, 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 $3.2 billion in borrowings which either matured or were called during the nine months ended September 30, 2000. The remaining balance of these borrowings was rolled into short- and medium-term borrowings without call features. Deposits increased $297.0 million from $9.55 billion at December 31, 1999 to $9.85 billion at September 30, 2000 primarily due to our current emphasis on deposit generation through competitive rates and new product offerings. Stockholders' equity totaled $1.37 billion at September 30, 2000 and $1.20 billion at December 31, 1999. Increases to stockholders' equity included net income of $165.0 million, an $88.9 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 $3.5 million and the amortization for the allocated portion of shares held by the ESOPs and the related tax benefit on the earned portion of the shares held by the RRP totaling $5.4 million. These increases were partially offset by repurchases of our common stock of $52.5 million and dividends declared of $42.1 million. RESULTS OF OPERATIONS GENERAL The results of operations include net gains on disposition of banking and loan production offices, net of taxes, totaling $2.4 million for the nine months ended September 30, 2000, $11.9 million for the three months ended September 30, 1999 and $11.1 million for the nine months ended September 30, 1999. There were no gains on disposition of banking and loan production offices for the quarter ended September 30, 2000. Net income for the three months ended September 30, 2000 decreased $13.2 million to $53.7 million, from $66.9 million for the three months ended September 30, 1999. For the three months ended September 30, 2000, diluted earnings per common share decreased to $1.07 per share, as compared to $1.25 per share for the three months ended September 30, 1999. Return on average assets decreased to 0.97% for the three months ended September 30, 2000, from 1.16% for the three months ended September 30, 1999. Return on average stockholders' equity decreased to 16.31% for the three months ended September 30, 2000, from 20.27% for the three months ended September 30, 1999. Return on average tangible stockholders' equity decreased to 19.45% for the three months ended September 30, 2000, from 24.59% for the three months ended September 30, 1999. Net income for the nine months ended September 30, 2000 decreased $11.1 million to $165.0 million, from $176.1 million for the nine months ended September 30, 1999. For the nine months ended September 30, 2000, diluted earnings per common share increased to $3.28 per share, as compared to $3.24 per share for the nine months ended September 30, 1999. Return on average assets decreased to 0.99% for the nine months ended September 30, 2000, from 1.03% for the nine months ended September 30, 1999. Return on average stockholders' equity increased to 17.59% for the nine months ended September 30, 2000, from 16.83% for the nine months ended September 30, 1999. Return on average tangible stockholders' equity increased to 21.28% for the nine months ended September 30, 2000, from 20.28% for the nine months ended September 30, 1999. 19 21 The following comparisons set forth in this paragraph exclude the net gains on disposition of banking and loan production offices. Operating income for the three months ended September 30, 2000 totaled $53.7 million and $162.6 million for the nine months ended September 30, 2000. Operating income for the three months ended September 30, 1999 totaled $55.0 million and $165.0 million for the nine months ended September 30, 1999. For the three months ended September 30, 2000, diluted operating earnings per common share totaled $1.07 per share and $3.23 per share for the nine months ended September 30, 2000. For the three months ended September 30, 1999, diluted operating earnings per common share totaled $1.02 per share and $3.03 per share for the nine months ended September 30, 1999. Return on average assets was 0.97% for the three months and nine months ended September 30, 2000, 0.96% for the three months ended September 30, 1999 and 0.97% for the nine months ended September 30, 1999. Return on average stockholders' equity was 16.31% for the three months ended September 30, 2000 and 17.33% for the nine months ended September 30, 2000. Return on average stockholders' equity was 16.66% for the three months ended September 30, 1999 and 15.76% for the nine months ended September 30, 1999. Return on average tangible stockholders' equity was 19.45% for the three months ended September 30, 2000 and 20.97% for the nine months ended September 30, 2000. Return on average tangible stockholders' equity was 20.22% for the three months ended September 30, 1999 and 19.00% for the nine months ended September 30, 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 interest rate environment, we expect to continue to experience compression of our net interest rate spread and net interest margin. For the three months ended September 30, 2000, net interest income decreased $8.6 million, to $124.6 million, from $133.2 million for the three months ended September 30, 1999. This decrease was the result of a decrease in the net interest rate spread to 1.97% for the three months ended September 30, 2000, from 2.16% for the three months ended September 30, 1999, partially offset by an increase in average net interest-earning assets of $287.9 million. The change in the net interest rate spread resulted from an increase in the average cost of interest-bearing liabilities to 5.03% for the three months ended September 30, 2000, from 4.62% for the three months ended September 30, 1999, partially offset by an increase in the average yield on total interest-earning assets to 7.00% for the three months ended September 30, 2000, from 6.78% for the three months ended September 30, 1999. The net interest margin was 2.29% for the three months ended September 30, 2000 and 2.39% for the three months ended September 30, 1999. For the nine months ended September 30, 2000, net interest income decreased $21.1 million, to $384.7 million, from $405.8 million for the nine months ended September 30, 1999. This decrease was the result of a decrease in the net interest rate spread to 2.04% for the nine months ended September 30, 2000, from 2.26% for the nine months ended September 30, 1999, partially offset by an increase in average net interest-earning assets of $301.3 million. The change in the net interest rate spread resulted from an increase in the average cost of interest-bearing liabilities to 4.88% for the nine months ended September 30, 2000, from 4.54% for the nine months ended September 30, 1999, partially offset by an increase in the average yield on total interest-earning 20 22 assets to 6.92% for the nine months ended September 30, 2000, from 6.80% for the nine months ended September 30, 1999. The net interest margin was 2.34% for the nine months ended September 30, 2000 and 2.47% for the nine months ended September 30, 1999. The increase in average net interest-earning assets for both the three and nine month periods ended September 30, 2000 over the comparable 1999 periods is the result of the combined effect of an increase in average mortgage loans, a decrease in average mortgage-backed securities and a decrease in average borrowed funds. These changes reflect our decisions to limit our balance sheet growth, emphasize our origination of one-to-four family mortgage loans and attract customer deposits. ANALYSIS OF NET INTEREST INCOME The following table sets forth certain information for the three and nine months ended September 30, 2000 and 1999. Yields are derived by dividing income by the average balance of the related assets and costs are derived by dividing expense by the average balance of the related liabilities for the periods shown. The average balance of loans receivable includes loans on which we have discontinued accruing interest. The yields and costs include the amortization of costs, fees, premiums and discounts which are considered adjustments to interest rates. 21 23
Three Months Ended September 30, ---------------------------------------------------------------------------------------- 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) $10,772,053 $194,874 7.24% $ 9,723,462 $172,208 7.08% Consumer and other loans (1) 176,353 4,817 10.93 192,741 4,726 9.81 Mortgage-backed securities (2) 8,552,747 141,394 6.61 10,434,731 167,422 6.42 Other securities (2) 1,897,138 33,663 7.10 1,809,690 31,854 7.04 Federal funds sold and repurchase agreements 315,569 5,251 6.66 171,470 2,237 5.22 ---------- -------- ---------- ------- Total interest-earning assets 21,713,860 379,999 7.00 22,332,094 378,447 6.78 -------- ------- Non-interest-earning assets 449,125 656,870 ---------- ---------- Total assets $22,162,985 $22,988,964 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Interest-bearing liabilities: Savings $ 2,530,207 $ 12,864 2.03% $ 2,688,840 $ 13,718 2.04% Certificates of deposit 4,940,325 71,739 5.81 4,883,535 64,517 5.28 NOW and money manager 947,451 1,366 0.58 873,694 1,282 0.59 Money market 1,378,638 18,920 5.49 1,096,111 11,979 4.37 ---------- -------- ---------- ------ Total deposits 9,796,621 104,889 4.28 9,542,180 91,496 3.84 Borrowed funds 10,523,713 150,550 5.72 11,684,305 153,714 5.26 ---------- -------- ---------- ------- Total interest-bearing liabilities 20,320,334 255,439 5.03 21,226,485 245,210 4.62 -------- ------- Non-interest-bearing liabilities 526,135 441,308 ---------- ---------- Total liabilities 20,846,469 21,667,793 Stockholders' equity 1,316,516 1,321,171 ---------- ---------- Total liabilities and stockholders' equity $22,162,985 $22,988,964 ========== ========== Net interest income/net interest rate spread $124,560 1.97% $133,237 2.16% ======== ==== ======= ==== Net interest-earning assets/net interest margin $ 1,393,526 2.29% $ 1,105,609 2.39% ========== ==== ========== ==== Ratio of interest-earning assets to interest-bearing liabilities 1.07x 1.05x ==== ====
- ------------------- (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. 22 24
Nine Months Ended September 30, ------------------------------------------------------------------------------------- 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) $10,510,923 $ 566,587 7.19% $ 9,374,928 $ 502,014 7.14% Consumer and other loans (1) 174,778 13,385 10.21 207,328 14,797 9.52 Mortgage-backed securities (2) 9,028,021 443,419 6.55 10,333,972 497,287 6.42 Other securities (2) 1,876,043 98,763 7.02 1,841,231 96,871 7.01 Federal funds sold and repurchase agreements 296,785 13,920 6.25 150,831 5,586 4.94 ---------- --------- ---------- --------- Total interest-earning assets 21,886,550 1,136,074 6.92 21,908,290 1,116,555 6.80 --------- --------- Non-interest-earning assets 433,497 790,341 ---------- ---------- Total assets $22,320,047 $22,698,631 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Interest-bearing liabilities: Savings $ 2,557,121 $ 38,659 2.02% $ 2,726,939 $ 41,085 2.01% Certificates of deposit 4,941,305 207,461 5.60 4,964,526 194,136 5.21 NOW and money manager 930,113 4,049 0.58 893,610 3,811 0.57 Money market 1,298,538 51,047 5.24 1,004,608 32,071 4.26 ---------- --------- ---------- -------- Total deposits 9,727,077 301,216 4.13 9,589,683 271,103 3.77 Borrowed funds 10,810,106 450,164 5.55 11,270,505 439,630 5.20 ---------- --------- ---------- -------- Total interest-bearing liabilities 20,537,183 751,380 4.88 20,860,188 710,733 4.54 --------- -------- Non-interest-bearing liabilities 531,597 442,884 ---------- ---------- Total liabilities 21,068,780 21,303,072 Stockholders' equity 1,251,267 1,395,559 ---------- ---------- Total liabilities and stockholders' equity $22,320,047 $22,698,631 ========== ========== Net interest income/net interest rate spread $ 384,694 2.04% $405,822 2.26% ========= ==== ======= ==== Net interest-earning assets/net interest margin $ 1,349,367 2.34% $ 1,048,102 2.47% ========== ==== ========== ==== Ratio of interest-earning assets to interest-bearing liabilities 1.07x 1.05x ==== ====
- ------------------------- (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. 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. 23 25
Three Months Ended September 30, 2000 Nine Months Ended September 30, 2000 Compared to Compared to Three Months Ended September 30, 1999 Nine Months Ended September 30, 1999 -------------------------------------------------------------------------------------- (In Thousands) Increase (Decrease) Increase (Decrease) - -------------------------------------------------------------------------------------------------------------------------------- Volume Rate Net Volume Rate Net ------ ---- --- ------ ---- --- Interest-earning assets: Mortgage loans...................... $18,739 $3,927 $22,666 $61,045 $3,528 $64,573 Consumer and other loans............ (422) 513 91 (2,434) 1,022 (1,412) Mortgage-backed securities.......... (30,874) 4,846 (26,028) (63,797) 9,929 (53,868) Other securities.................... 1,538 271 1,809 1,759 133 1,892 Federal funds sold and repurchase agreements....................... 2,269 745 3,014 6,541 1,793 8,334 ----- --- ----- ----- ----- ----- Total.................................. (8,750) 10,302 1,552 3,114 16,405 19,519 ----- ------ ----- ----- ------ ------ Interest-bearing liabilities: Savings............................. (789) (65) (854) (2,626) 200 (2,426) Certificates of deposit ............ 750 6,472 7,222 (924) 14,249 13,325 NOW and money manager............... 107 (23) 84 166 72 238 Money market ....................... 3,481 3,460 6,941 10,623 8,353 18,976 Borrowed funds...................... (15,974) 12,810 (3,164) (18,369) 28,903 10,534 ------ ------ ------ ------ ------ ------ Total.................................. (12,425) 22,654 10,229 (11,130) 51,777 40,647 ------ ------ ------ ------ ------ ------ Net change in net interest income.............................. $3,675 $(12,352) $(8,677) $14,244 $(35,372) $(21,128) ===== ======= ====== ====== ======= =======
INTEREST INCOME Interest income for the three months ended September 30, 2000 increased $1.6 million to $380.0 million, from $378.4 million for the three months ended September 30, 1999. This increase was the result of an increase in the average yield on interest-earning assets to 7.00% for the three months ended September 30, 2000, from 6.78% for the three months ended September 30, 1999, partially offset by a $618.2 million decrease in average interest-earnings assets to $21.71 billion for the three months ended September 30, 2000, from $22.33 billion for the three months ended September 30, 1999. The decrease in average interest-earning assets was primarily due to a decrease in the average balance of mortgage-backed securities resulting from principal repayments, partially offset by an increase in the average balance of mortgage loans. The net decrease and shift in assets reflect our decision to limit balance sheet growth while continuing to emphasize one-to-four family mortgage lending. Interest income on mortgage loans increased $22.7 million to $194.9 million for the three months ended September 30, 2000, from $172.2 million for the three months ended September 30, 1999, which was the result of a $1.05 billion increase in the average balance of mortgage loans, coupled with an increase in the average yield on mortgage loans to 7.24% for the three months ended September 30, 2000, from 7.08% for the three months ended September 30, 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 coupled with a reduction in repayments. 24 26 Interest income on mortgage-backed securities decreased $26.0 million to $141.4 million for the three months ended September 30, 2000, from $167.4 million for the three months ended September 30, 1999. This decrease was the result of a $1.88 billion decrease in the average balance of this portfolio, partially offset by an increase in the average yield to 6.61% for the three months ended September 30, 2000 from 6.42% for three months ended September 30, 1999. Interest income on other securities increased $1.8 million to $33.7 million for the three months ended September 30, 2000, from $31.9 million for the three months ended September 30, 1999. This was the result of an increase in the average balance of this portfolio of $87.4 million coupled with an increase in the average yield to 7.10% for the three months ended September 30, 2000, from 7.04% for the three months ended September 30, 1999. Interest income on federal funds sold and repurchase agreements increased $3.1 million to $5.3 million for the three months ended September 30, 2000, from $2.2 million for the three months ended September 30, 1999. This was the result of an increase in the average balance of $144.1 million, coupled with an increase in the average yield to 6.66% for the three months ended September 30, 2000, from 5.22% for the three months ended September 30, 1999. The increases in the average yields on interest-earning assets are the result of rising interest rates. For the nine months ended September 30, 2000, interest income increased $19.5 million, to $1.14 billion, from $1.12 billion for the nine months ended September 30,1999. This increase was the result of an increase in the average yield on interest-earning assets to 6.92% for the nine months ended September 30, 2000, from 6.80% for the nine months ended September 30, 1999, coupled with the repositioning of interest-earning assets, which remained stable, from securities to mortgages. Interest income on mortgage loans increased $64.6 million to $566.6 million for the nine months ended September 30, 2000, from $502.0 million for the nine months ended September 30, 1999, which was the result of a $1.14 billion increase in the average balance of mortgage loans, coupled with an increase in the average yield on mortgage loans to 7.19% for the nine months ended September 30, 2000, from 7.14% for the comparable period in 1999. Although interest rates have increased from the comparable 1999 period, we experienced only a slight increase 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 loan portfolio. Interest income on consumer and other loans decreased $1.4 million resulting from a decrease in the average balance of this portfolio of $32.6 million, partially offset by an increase in the average yield to 10.21% for the nine months ended September 30, 2000, from 9.52% for the nine months ended September 30, 1999. Interest income on mortgage-backed securities decreased $53.9 million to $443.4 million for the nine months ended September 30, 2000, from $497.3 million for the nine months ended September 30, 1999. This decrease was the result of a $1.31 billion decrease in the average balance of the portfolio, partially offset by an increase in the average yield to 6.55% for the nine months ended September 30, 2000, from 6.42% for the nine months ended September 30, 1999. Interest income on other securities increased $1.9 million resulting from an increase in the average balance of this portfolio of $34.8 million, coupled with a slight increase in the average yield to 7.02% for the nine months ended September 30, 2000, from 7.01% for the comparable period in 1999. Interest income on federal funds sold and repurchase agreements increased $8.3 million 25 27 to $13.9 million for the nine months ended September 30, 2000, from $5.6 million for the nine months ended September 30, 1999, as a result of an increase in the average balance of $146.0 million, coupled with an increase in the average yield to 6.25% for the nine months ended September 30, 2000, from 4.94% for the nine months ended September 30, 1999. As previously noted, the increases in yields on interest-earning assets reflect the increases in interest rates. INTEREST EXPENSE Interest expense for the three months ended September 30, 2000 increased $10.2 million, to $255.4 million, from $245.2 million for the three months ended September 30, 1999. This increase was attributable to an increase in the average cost of interest-bearing liabilities to 5.03% for the three months ended September 30, 2000, from 4.62% for the three months ended September 30, 1999, partially offset by a decrease in the average balance of interest-bearing liabilities of $906.2 million, to $20.32 billion for the three months ended September 30, 2000, from $21.23 billion for the three months ended September 30, 1999. The decrease in average interest-bearing liabilities was attributable to a decrease in borrowings, partially offset by an increase in deposits. 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 decreased $3.1 million to $150.6 million for the three months ended September 30, 2000, from $153.7 million for the three months ended September 30, 1999. This decrease was attributable to a decrease in the average balance of borrowings of $1.16 billion, offset by an increase in the average cost of borrowings to 5.72% for the three months ended September 30, 2000, from 5.26% for the three months ended September 30, 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 $13.4 million to $104.9 million for the three months ended September 30, 2000, from $91.5 million for the three months ended September 30, 1999, reflecting an increase in the average cost of deposits to 4.28% for the three months ended September 30, 2000 from 3.84% for the three months ended September 30, 1999, coupled with an increase in the average balance of total deposits of $254.4 million. The increases in the average balance and average cost of total deposits were primarily driven by increases in the average balances and rates on our money market accounts and increases in our certificate of deposit rates. Interest expense on money market accounts increased $6.9 million to $18.9 million for the three months ended September 30, 2000, from $12.0 million for the three months ended September 30, 1999, as a result of an increase in the average balance of $282.5 million, coupled with an increase in the average cost to 5.49% for the three months ended September 30, 2000, from 4.37% for the three months ended September 30, 1999. Interest is paid on money market accounts on a tiered basis with 89.4% 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. 26 28 Interest expense on certificates of deposit increased $7.2 million as a result of an increase in the average cost to 5.81% for the three months ended September 30, 2000 from 5.28% for the three months ended September 30, 1999, coupled with an increase in the average balance of $56.8 million. The increase in the average cost of certificates of deposit reflects the higher interest rate environment and our commitment to offer competitive rates to our customers. Interest expense on savings accounts decreased $854,000 as a result of a decrease in the average balance of $158.6 million, coupled with a slight decrease in the average cost to 2.03% for the three months ended September 30, 2000, from 2.04% for the three months ended September 30, 1999. Interest expense for the nine months ended September 30, 2000 increased $40.7 million, to $751.4 million, from $710.7 million for the nine months ended September 30,1999. This increase was the result of an increase in the average cost of these liabilities to 4.88% for the nine months ended September 30, 2000, from 4.54% for the nine months ended September 30, 1999, partially offset by a $323.0 million decrease in the average balance of interest-bearing liabilities. Interest expense on borrowed funds for the nine months ended September 30, 2000 increased $10.6 million, to $450.2 million, from $439.6 million for the nine months ended September 30, 1999, resulting from an increase in the average cost of borrowings to 5.55% for the nine months ended September 30, 2000, from 5.20% for the comparable 1999 period, partially offset by a decrease in the average balance of $460.4 million. Interest expense on deposits increased $30.1 million, to $301.2 million for the nine months ended September 30, 2000, from $271.1 million for the nine months ended September 30,1999, reflecting an increase in the average cost of deposits to 4.13% for the nine months ended September 30, 2000, from 3.77% for the same period in 1999, coupled with an increase in the average balance of total deposits of $137.4 million. Interest expense on money market accounts increased $19.0 million reflecting an increase in the average balance of $293.9 million, coupled with an increase in the average cost to 5.24% for the nine months ended September 30, 2000, from 4.26% for the 1999 comparable period. Interest expense on certificates of deposit increased $13.3 million resulting from an increase in the average cost to 5.60% for the nine months ended September 30, 2000, from 5.21% for the nine months ended September 30, 1999, slightly offset by a decrease in the average balance of $23.2 million. Interest expense on savings accounts decreased $2.4 million which was attributable to a decrease in the average balance of $169.8 million, slightly offset by an increase in the average cost to 2.02% for the nine months ended September 30, 2000, from 2.01% for the nine months ended September 30, 1999. Interest expense on NOW and money manager accounts increased $238,000 as a result of an increase in the average balance of $36.5 million, coupled with a slight increase in the average cost to 0.58% for the nine months ended September 30, 2000, from 0.57% for the same period in 1999. PROVISION FOR LOAN LOSSES Provision for loan losses totaled $1.0 million for the three months ended September 30, 2000 and 1999. For the nine months ended September 30, 2000, provision for loan losses totaled $3.0 million compared to $3.1 million for the same period in 1999. The allowance for loan losses 27 29 increased to $79.0 million at September 30, 2000, from $76.6 million at December 31, 1999. The increase in the allowance for loan losses in part reflects the overall increase in our loan portfolio despite the continued improvement of our asset quality. Net loan charge-offs totaled $66,000 for the three months ended September 30, 2000 and $629,000 for the nine months ended September 30, 2000. Non-performing loans decreased $17.2 million to $36.2 million at September 30, 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 218.12% at September 30, 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 0.72% at September 30, 2000 primarily due to an increase of $786.3 million in gross total loans from December 31, 1999 to September 30, 2000. For further discussion of non-performing loans, see "Asset Quality." NON-INTEREST INCOME Non-interest income for the quarter ended September 30, 2000 decreased to $16.3 million from $36.8 million for the quarter ended September 30, 1999. Non-interest income totaled $51.5 million for the nine months ended September 30, 2000 and $69.9 million for the nine months ended September 30, 1999. The decrease in non-interest income is primarily attributable to the $20.4 million gain on the sale of our five upstate New York banking offices in the third quarter of 1999. Excluding the net gain on disposition of banking and loan production offices, non-interest income totaled $16.3 million for both the quarter ended September 30, 2000 and 1999. Excluding the net gain on disposition of banking and loan production offices, non-interest income decreased $3.2 million to $47.5 million for the nine months ended September 30, 2000 from $50.7 million for the comparable 1999 period. Customer service and other loan fees totaled $12.9 million for the three months ended September 30, 2000 and $36.2 million for the nine months ended September 30, 2000, compared to $10.4 million for the three months ended September 30, 1999 and $29.3 million for the nine months ended September 30, 1999. The increases in customer service fees for both periods were due to several factors. The periods ended September 30, 2000 include the full recognition of fee income on debit cards, which were first issued during the third quarter of 1999; an increase in customer service fees, which became effective during the third quarter of 1999; an increase in annuity sales commissions; and an increase in checking account fees related to the increase in the number of checking accounts since September 30, 1999. Loan servicing fees totaled $2.2 million for the three months ended September 30, 2000 and $7.7 million for the nine months ended September 30, 2000, compared to $2.8 million for the three months ended September 30, 1999 and $12.1 million for the nine months ended September 30, 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 for the three months ended September 30, 2000 was primarily the result of a decrease in fees received of $765,000, partially offset by a decrease in the amortization of mortgage servicing rights as compared to the corresponding period in 1999. The decrease in loan servicing fees for the nine months ended September 30, 2000 was the result of a decrease in fees received of $3.1 million and a decrease in the recovery of a portion of the valuation allowance for mortgage servicing rights of $2.9 million, partially offset by a decrease in the amortization of mortgage servicing rights of $1.6 28 30 million, as compared to the nine months ended September 30, 1999. The decrease in fees received is due to a decrease in the balance of loans serviced for others from $4.54 billion at September 30, 1999 to $4.04 billion at September 30, 2000 and the decrease in the amortization of mortgage servicing rights is due to the decrease in prepayment speeds and refinance activity which is a result of the current interest rate environment. Net gains on sales of loans totaled $273,000 for the three months ended September 30, 2000 and $568,000 for the nine months ended September 30, 2000, compared to $209,000 for the three months ended September 30, 1999 and $3.3 million for the nine months ended September 30, 1999. Net gain on disposition of banking and loan production offices totaled $4.0 million for the nine months ended September 30, 2000, compared to a net gain of $20.4 million for the quarter ended September 30, 1999 and a net gain of $19.2 million for the nine months ended September 30, 1999. We recorded a net gain of $2.8 million during the second quarter of 2000 related to the sale of the former LIB headquarters and a net gain of $1.2 million during the first quarter of 2000 related to the sale of a former Long Island Savings Bank banking office. The net gain for the nine months ended September 30, 1999 resulted from the $20.4 million gain recognized on the sale of our five upstate New York banking offices in the third quarter of 1999 and the net loss of $1.2 million from the closing and disposition of certain LPOs in the first quarter of 1999. NON-INTEREST EXPENSE Non-interest expense for the quarter ended September 30, 2000 was $53.6 million, a decrease of $418,000 from $54.0 million for the quarter ended September 30, 1999. For the nine months ended September 30, 2000, non-interest expense decreased $5.3 million to $163.6 million, from $168.9 million for the nine months ended September 30, 1999. General and administrative expense decreased $4.5 million to $43.5 million for the third quarter of 2000, from $48.0 million for the comparable 1999 period. For the nine months ended September 30, 2000, general and administrative expense decreased $16.8 million to $133.6 million, from $150.4 million for the comparable 1999 period. Compensation and benefits totaled $18.5 million for the three months ended September 30, 2000 and $58.3 million for the nine months ended September 30, 2000, compared to $22.5 million for the three months ended September 30, 1999 and $70.6 million for the nine months ended September 30, 1999. These decreases are primarily attributable to a decrease in salary expense, which includes a decrease in overtime and incentives, and a decrease in net employee benefit plan expense. Employee stock plans amortization expense totaled $1.8 million for the three months ended September 30, 2000 and $5.3 million for the nine months ended September 30, 2000, compared to $2.2 million for the three months ended September 30, 1999 and $8.1 million for the nine months ended September 30, 1999. The decrease in employee stock plans amortization expense is due primarily to the effect of the lower average market value of our common stock on ESOP expense. Goodwill litigation expense was $2.1 million for the three months ended September 30, 2000, compared to $1.1 million for the three months ended September 30, 1999 and $6.4 million for the nine months ended September 30, 2000, compared to $4.0 million for the nine months ended September 30, 1999. Non-interest expense includes $3.1 million for the quarter ended September 30, 2000 and $9.3 million for the nine months ended September 30, 2000 of capital trust securities 29 31 expense related to the issuance of $125.0 million of Capital Securities by our wholly-owned subsidiary, Astoria Capital Trust I, in the fourth quarter of 1999. For further discussion of the Capital Securities, see "Notes to Consolidated Financial Statements" and "Liquidity and Capital Resources." The Company's percentage of general and administrative expense to average assets improved to 0.79% for the three months ended September 30, 2000 and 0.80% for the nine months ended September 30, 2000, from 0.84% for the three months ended September 30, 1999 and 0.88% for the nine months ended September 30, 1999. The efficiency ratios also improved to 30.89% for the three months ended September 30, 2000 and 30.92% for the nine months ended September 30, 2000, from 32.09% for the three months ended September 30, 1999 and 33.02% for the nine months ended September 30, 1999. INCOME TAX EXPENSE For the quarter ended September 30, 2000, income tax expense was $32.6 million, representing an effective tax rate of 37.7%, as compared to $48.0 million, representing an effective tax rate of 41.8%, for the quarter ended September 30, 1999. For the nine months ended September 30, 2000, income tax expense was $104.5 million, representing an effective tax rate of 38.8%, as compared to $127.5 million, representing an effective tax rate of 42.0%, for the nine months ended September 30, 1999. The decrease in our effective tax rate was attributable to a lower non-deductible ESOP expense as well as a tax benefit derived from a corporate restructuring during the fourth quarter of 1999 of certain subsidiaries of Astoria Federal. CASH EARNINGS Tangible stockholders' equity (stockholders' equity less goodwill) totaled $1.16 billion at September 30, 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. The following comparisons exclude the net gain on disposition of banking and loan production offices recognized during the nine months ended September 30, 2000 and during the three and nine months ended September 30, 1999. 30 32 Operating cash earnings totaled $60.4 million for the three months ended September 30, 2000 and $182.5 million for the nine months ended September 30, 2000. Operating cash earnings for the three months ended September 30, 1999 totaled $63.1 million and for the nine months ended September 30, 1999 totaled $190.6 million. Operating cash return on average tangible equity was 21.87% for the third quarter of 2000 and 23.17% for the third quarter of 1999. Operating cash return on average assets was 1.09% for the quarter ended September 30, 2000 and 1.10% for the quarter ended September 30, 1999. Operating cash return on average tangible equity was 23.53% for the nine months ended September 30, 2000 and 21.94% for the nine months ended September 30, 1999. Operating cash return on average assets was 1.09% for the nine months ended September 30, 2000 and 1.12% for the same period in 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 improved to 0.75% for the three months ended September 30, 2000 as compared to 0.80% for the three months ended September 30, 1999. The cash efficiency ratio improved to 29.59% for the third quarter of 2000 from 30.59% for the third quarter of 1999. For the nine months ended September 30, 2000, the cash general and administrative expense to average assets ratio was 0.77% as compared to 0.84% for the comparable 1999 period. The cash efficiency ratio was 29.68% for the nine months ended September 30, 2000 versus 31.25% for the nine months ended September 30, 1999. Presented below are our Condensed Consolidated Schedules of Operating Cash Earnings for the three and nine months ended September 30, 2000 and 1999. ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED SCHEDULES OF OPERATING CASH EARNINGS (In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended September 30, September 30, --------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net income $53,689 $66,948 $165,046 $176,124 Less: Net gain on disposition of banking and loan production offices, net of tax - 11,909 2,434 11,140 ------ ------ ------- ------- Operating income 53,689 55,039 162,612 164,984 Add back: Employee stock plans amortization expense 1,826 2,234 5,339 8,075 Amortization of goodwill 4,824 4,843 14,472 14,592 Income tax benefit on amortization expense of earned portion of RRP stock 13 968 39 2,903 ------ ------ ------- ------- Operating cash earnings 60,352 63,084 182,462 190,554 Preferred dividends declared (1,500) (1,500) (4,500) (4,500) ------- ------ -------- -------- Operating cash earnings available to common shareholders $58,852 $61,584 $177,962 $186,054 ====== ====== ======= ======= Basic operating cash earnings per common share (1) $ 1.23 $ 1.20 $ 3.69 $ 3.60 ====== ======= ======= ======== Diluted operating cash earnings per common share (1) $ 1.21 $ 1.18 $ 3.63 $ 3.51 ====== ======= ======= ========
- ------------------------ (1) Based on the weighted average shares used to calculate earnings per share on the Consolidated Statements of Income. 31 33 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 September 30, 2000. Non-performing assets decreased from $58.4 million at December 31, 1999 to $40.6 million at September 30, 2000 as shown on the table on page 33. The ratio of non-performing assets to total assets decreased from 0.26% at December 31, 1999 to 0.18% at September 30, 2000. The following table shows a comparison of delinquent loans as of September 30, 2000 and December 31, 1999.
Delinquent Loans ---------------- At September 30, 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.............. 26 $ 643 281 $31,776 45 $2,202 390 $48,610 Multi-family.................... - - 2 992 - - 5 802 Commercial real estate.......... 1 149 4 2,416 3 2,369 8 2,331 Consumer and other loans........ 126 743 107 1,015 162 1,033 148 1,626 --- ----- --- ------- --- ----- --- ------- Total delinquent loans.......... 153 $1,535 394 $36,199 210 $5,604 551 $53,369 === ===== === ====== === ===== === ====== Delinquent loans to total loans....................... 0.01% 0.33% 0.05% 0.52%
The following table sets forth information regarding non-performing assets at September 30, 2000 and December 31, 1999. In addition to the non-performing loans, we had approximately $1.5 million of potential problem loans at September 30, 2000 and $5.6 million at December 31, 1999. Such loans are 60-89 days delinquent as shown above. 32 34
Non-Performing Assets --------------------- At At September 30, December 31, 2000 1999 ---------------- --------------- (Dollars in Thousands) Non-accrual delinquent mortgage loans (1)................ $34,217 $48,830 Non-accrual delinquent consumer and other loans 1,015 1,626 Mortgage loans delinquent 90 days or more and still accruing interest (2)............................ 967 2,913 ------ ------ Total non-performing loans.......................... 36,199 53,369 ------ ------ Real estate owned, net (3)............................... 4,404 5,080 ------ ------ Total non-performing assets......................... $40,603 $58,449 ====== ====== Allowance for loan losses to non-performing loans............ 218.12% 143.49% Allowance for loan losses to total loans..................... 0.72% 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 selling costs. If all non-accrual loans had been performing in accordance with their original terms, we would have recorded interest income of $2.2 million for the nine months ended September 30, 2000 and $3.8 million for the year ended December 31, 1999 on these loans. Actual payments recorded to interest income on non-accrual loans totaled $1.1 million for the nine months ended September 30, 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 $5.5 million at September 30, 2000 and $6.7 million at December 31, 1999. 33 35 The following table sets forth the change in allowance for loan losses. (In Thousands) Allowance for Loan Losses: Balance at December 31, 1999............................................. $76,578 Provision charged to operations..................................... 3,008 Charge-offs: One-to-four family........................................... (901) Multi-family................................................. (8) Commercial................................................... - Consumer and other........................................... (1,317) ------- Total charge-offs................................................... (2,226) ------- Recoveries: One-to-four family........................................... 674 Multi-family................................................. 136 Commercial................................................... 465 Consumer and other .......................................... 322 ------ Total recoveries.................................................... 1,597 ------ Total net charge-offs............................................... (629) ------- Balance at September 30, 2000............................................ $78,957 ======
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. In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133," or SFAS No. 138. SFAS No. 138 amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities. SFAS No. 138 will be adopted concurrently with SFAS No. 133. We believe the implementation of SFAS No. 133 and SFAS No. 138 will not have a material impact on our financial condition. In September 2000, the FASB issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities," or SFAS No. 140. SFAS No. 140 supercedes and replaces the guidance in SFAS No. 125, 34 36 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," and rescinds SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125." SFAS No. 140 provides accounting and reporting standards for securitization transactions involving financial assets, sales of financial assets such as receivables, loans and securities, factoring transactions, wash sales, servicing assets and liabilities, collateralized borrowing arrangements, securities lending transactions, repurchase agreements, loan participations, and extinguishment of liabilities. Certain provisions of this Statement including relevant disclosures are effective for fiscal years ending after December 15, 2000. The remaining provisions are effective for transfer transactions entered into after March 31, 2001. SFAS No. 140 does not require restatement of prior periods. We believe the implementation of SFAS No. 140 will not have a material impact on our financial condition. 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 cases entitled The Long Island Savings Bank FSB et al. vs. The United States, or the LISB Goodwill Litigation, and Astoria Federal Savings and Loan Association vs. The United States, or the Astoria Goodwill Litigation, both of which are pending in the United States Court of Federal Claims, Judge Smith entered an order on September 20, 2000 indicating that he was considering changes to the case management process. In the order, Judge Smith indicated that he would "within the next several weeks" distribute the remaining "first-thirty" cases, which would include the LISB Goodwill Litigation, to judges of the court. Judge Smith indicated that he believed this was necessary "for prompt rulings on liability and on to consideration of damages issues." To date, no further assignment has been made, although by order dated November 2, 2000 Judge Smith reaffirmed his intention to do so. Judge Smith, in his September 20, 2000 order, also indicated that he was considering distributing the remaining cases, which would include the Astoria Goodwill Litigation which is a "second-thirty" case, back to the judges of the United States Court of Federal Claims. He requested the coordinating committees' views on whether the operative procedural orders, particularly the Master Litigation Plan and the Master Discovery Plan, should continue to govern such cases upon their distribution. He stayed expert discovery in the "second-thirty" cases, including the Astoria Goodwill Litigation, pending further consideration of these matters by the Court. By order dated November 2, 2000, Judge Smith further stayed the commencement of expert discovery in the "second-thirty" cases, including the Astoria Goodwill Litigation, until March 1, 2001. 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 proceeding in relation thereto. 35 37 In the case of Leonard Minzer, et ano. v. Gerard C. Keegan, et al. which had been commenced in the United States District Court for the Eastern District of New York on July 18, 1997, the United States Court of Appeals for the Second Circuit on August 24, 2000 issued a revised opinion which, like its original decision dated July 10, 2000 affirmed the District Court's earlier ruling dismissing Plaintiffs' second amended complaint. On September 20, 2000, the United States Court of Appeals for the Second Circuit denied Plaintiffs' petition for rehearing and suggestion for In Banc. 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 and Part II, Item I of our Quarterly Reports on Forms 10-Q for the quarters ended March 31, 2000 and June 30, 2000. 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. 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 Not applicable. 36 38 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: November 13, 2000 By: /s/ Monte N. Redman ----------------- ----------------------------- Monte N. Redman Executive Vice President and Chief Financial Officer (Principal Accounting Officer) 37 39 Exhibit Index
Exhibit No Identification of Exhibit - ---------- ------------------------- 11. Statement Regarding Computation of Per Share Earnings 27. Financial Data Schedule
38 EX-11 2 y42270ex11.txt COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Nine Months Ended September 30, 2000 ------------------ (In Thousands, Except Per Share Data) 1. Net Income $165,046 Less: Preferred stock dividends declared 4,500 ------- Net income available to common shareholders $160,546 ======= 2. Weighted average common shares outstanding 51,145 3. ESOP shares not committed to be released (2,892) ------- 4. Total weighted average common shares outstanding 48,253 ======= 5. Basic earnings per common share $ 3.33 ======= 6. Total weighted average common shares outstanding 48,253 7. Dilutive effect of stock options using the treasury stock method 714 ------- 8. Total average common and common equivalent shares 48,967 ======= 9. Diluted earnings per common share $ 3.28 =======
39 EX-27 3 y42270ex27.txt FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the Condensed Consolidated Statement of Financial Condition as of September 30, 2000 and the Condensed Consolidated Statement of Income for the nine months ended September 30, 2000 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-2000 JAN-1-2000 SEP-30-2000 127,678 0 368,476 0 7,799,508 1,769,225 1,709,826 11,095,894 78,957 22,201,798 9,851,514 556,751 408,565 9,894,887 0 2,000 555 1,362,526 22,201,798 579,972 556,102 0 1,136,074 301,216 751,380 384,694 3,008 0 21,696 269,586 165,046 0 0 165,046 3.33 3.28 2.34 35,232 967 0 1,535 76,578 2,226 1,597 78,957 78,957 0 0
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