ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements may be identified by the use of the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions.
Forward-looking statements are based on various assumptions and analyses made by us in light of our management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following:
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the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control;
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there may be increases in competitive pressure among financial institutions or from non-financial institutions;
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changes in the interest rate environment may reduce interest margins or affect the value of our investments;
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changes in deposit flows, loan demand or real estate values may adversely affect our business;
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changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently;
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general economic conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate or securities markets or the banking industry may be less favorable than we currently anticipate;
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legislative or regulatory changes, including the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Reform Act, may adversely affect our business;
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technological changes may be more difficult or expensive than we anticipate;
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success or consummation of new business initiatives may be more difficult or expensive than we anticipate; or
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litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may be determined adverse to us or may delay the occurrence or non-occurrence of events longer than we anticipate.
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We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.
Executive Summary
The following overview should be read in conjunction with our MD&A in its entirety.
Astoria Financial Corporation is a Delaware corporation organized as the unitary savings and loan association holding company of Astoria Federal. Our primary business is the operation of Astoria Federal. Astoria Federal's principal business is attracting retail deposits from the general public and investing those deposits, together with funds generated from operations, principal repayments on loans and securities and borrowings, primarily in one-to-four family mortgage loans, multi-family mortgage loans, commercial real estate loans and mortgage-backed 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 the interest paid on our deposits and borrowings. 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.
As the premier Long Island community bank, our goals are to enhance shareholder value while building a solid banking franchise. We focus on growing our core businesses of mortgage portfolio lending and retail banking while maintaining strong asset quality and controlling operating expenses. We also provide returns to shareholders through dividends.
During the three months ended March 31, 2011, the national economy continued to show signs of improvement as evidenced by, among other things, a decrease in the unemployment rate from December 2010 and moderate job growth. However, softness in the housing and real estate markets persist and unemployment levels remain elevated with a national unemployment rate of 8.8% for March 2011. The Reform Act, which was passed in July 2010, is intended to address perceived weaknesses in the U.S. financial regulatory system and prevent future economic and financial crises. As described in more detail in Part II, Item 1A, “Risk Factors,” in this Form 10-Q and Part I, Item 1A, “Risk Factors,” in our 2010 Annual Report on Form 10-K, certain aspects of the Reform Act will have an impact on us, including the combination of our primary regulator, the OTS, with the Office of the Comptroller of the Currency, or OCC, the imposition of consolidated holding company capital requirements, changes to deposit insurance assessments and the roll back of federal preemption applicable to certain of our operations.
Total assets decreased during the three months ended March 31, 2011 primarily due to a decrease in our loan portfolio. The decrease in our loan portfolio was due to decreases in our one-to-four family, multi-family and commercial real estate mortgage loan portfolios resulting from repayments which outpaced our origination and purchase volume. One-to-four family mortgage loan repayments remained at elevated levels as interest rates on thirty year fixed rate conforming mortgages, which we do not retain for portfolio, remained at historic lows and as loans in our portfolio qualified under the expanded conforming loan limits were refinanced into fixed rate conforming mortgages. We decided to not aggressively compete against the thirty year fixed rate conforming mortgage market in the current low interest rate environment. However, the rise in interest rates on thirty year fixed rate mortgages at the end of the 2010 fourth quarter and throughout the 2011 first quarter led to a decrease in loan repayments which resulted in a significantly slower pace of decline in our one-to-four family mortgage loan portfolio in the 2011 first quarter compared to the 2010 fourth quarter. The securities portfolio was up slightly as a result of securities purchases which offset cash flows from repayments.
Total deposits decreased during the three months ended March 31, 2011 due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in savings, money market and NOW and demand deposit accounts. During the 2011 first quarter, we continued to allow high cost certificates of deposit to run off as total assets declined. The increases in low cost savings, money market and NOW and demand deposit accounts appear to reflect customer preference for the liquidity these types of deposits provide. However, we have achieved some success in extending the terms of our retained certificates of deposit. Cash flows from mortgage loan repayments in excess of mortgage loan originations and purchases and deposit outflows enabled us to repay a portion of our matured borrowings during the 2011 first quarter, which resulted in a decrease in our borrowings portfolio from December 31, 2010.
Net income increased for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. This increase was primarily due to a decrease in provision for loan losses, partially offset by a decrease in net interest income and an increase in income tax expense.
Net interest income decreased for the three months ended March 31, 2011 compared to the three months ended March 31, 2010, due to a decrease in interest income, partially offset by a decrease in interest expense. Interest income for the three months ended March 31, 2011 decreased compared to the three months ended March 31, 2010, primarily due to decreases in the average balances of mortgage loans and mortgage-backed and other securities, coupled with decreases in the average yields on one-to-four family mortgage loans and mortgage-backed and other securities. Interest expense for the three months ended March 31, 2011 decreased compared to the three months ended March 31, 2010, primarily due to decreases in the average balances and average costs of certificates of deposit and borrowings. The net interest rate spread and net interest margin were up slightly for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. The decline in the cost of interest-bearing liabilities was substantially offset by the decline in the yield on interest-earning assets.
The allowance for loan losses decreased from December 31, 2010 to March 31, 2011 as well as the provision for loan losses which decreased for the three months ended March 31, 2011 compared to the three months ended December 31, 2010 and the three months ended March 31, 2010. These decreases reflect the stabilizing trend in overall asset quality experienced in 2010 and into 2011, coupled with the decline in the loan portfolio over the same period. In the first quarter of 2011, we experienced improvements in both total delinquencies and non-performing loans, continuing the trend from 2010. The allowance for loan losses at March 31, 2011 reflects the levels and composition of our loan delinquencies, non-performing loans and net loan charge-offs, the size and composition of our loan portfolio and our evaluation of the housing and real estate markets and overall economy. Additionally, our loan coverage ratios remain strong.
As the national economy continues to modestly recover and job growth continues, we expect further improvement in credit costs, even while non-performing loans remain elevated as we work through the extended foreclosure process. The operating environment for residential mortgage portfolio lenders remains challenging, although we are cautiously optimistic that the recent elevated interest rate level of thirty year fixed rate conforming loans, compared to the 2010 third and fourth quarter levels, together with the anticipated reduction in the expanded conforming loan limits in October 2011, will facilitate future residential loan growth. In addition, we expect to resume multi-family and commercial real estate lending in the second half
of 2011 which will augment growth in the loan portfolio and balance sheet. For 2011, we anticipate maintaining a relatively stable net interest margin which, when coupled with lower credit costs, should mitigate the earnings impact from a smaller average balance sheet and the expected impact of significantly higher Federal Deposit Insurance Corporation, or FDIC, insurance premium expense. We expect capital levels to continue to increase which should support loan and balance sheet growth in the second half of 2011 and next year.
Available Information
Our internet website address is www.astoriafederal.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports can be obtained free of charge from our investor relations website at http://ir.astoriafederal.com. The above reports are available on our website immediately after they are electronically filed with or furnished to the SEC. Such reports are also available on the SEC’s website at www.sec.gov/edgar/searchedgar/webusers.htm.
Critical Accounting Policies
Note 1 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” of our 2010 Annual Report on Form 10-K, as supplemented by this report, contains a summary of our significant accounting policies. Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Our policies with respect to the methodologies used to determine the allowance for loan losses, the valuation of MSR and judgments regarding goodwill and securities impairment are our most critical accounting policies because they are important to the presentation of our financial condition and results of operations, involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions and estimates could result in material differences in our results of operations or financial condition. These critical accounting policies are reviewed quarterly with the Audit Committee of our Board of Directors. The following description of these policies should be read in conjunction with the corresponding section of our 2010 Annual Report on Form 10-K.
Allowance for Loan Losses
Our allowance for loan losses is established and maintained through a provision for loan losses based on our evaluation of the probable inherent losses in our loan portfolio. We evaluate the adequacy of our allowance on a quarterly basis. The allowance is comprised of both specific valuation allowances and general valuation allowances although the total allowance for loan losses is available for losses applicable to the entire portfolio.
Specific valuation allowances are established in connection with individual loan reviews and the asset classification process, including the procedures for impairment recognition under GAAP. Such evaluation, which includes a review of loans on which full collectibility is not reasonably assured, considers the current estimated fair value of the underlying collateral, if any, current and anticipated economic and regulatory conditions, current and historical loss experience of similar loans and other factors that determine risk exposure to arrive at an adequate loan loss allowance.
Loan reviews are completed quarterly for all loans individually classified by our Asset Classification Committee. Individual loan reviews are generally completed annually for multi-family, commercial real estate and construction mortgage loans with balances of $2.0 million or greater, commercial business loans with balances of $200,000 or greater and troubled debt restructurings. In addition, we generally review annually borrowing relationships whose combined outstanding balance is $2.0 million or greater. Approximately fifty percent of the outstanding principal balance of these loans to a single borrowing entity will be reviewed annually.
The primary considerations in establishing specific valuation allowances are the current estimated value of a loan’s underlying collateral and the loan’s payment history. We update our estimates of collateral value for non-performing multi-family, commercial real estate and construction mortgage loans with balances of $1.0 million or greater and one-to-four family mortgage loans which are 180 days or more delinquent, annually, and certain other loans when the Asset Classification Committee believes repayment of such loans may be dependent on the value of the underlying collateral. For one-to-four family mortgage loans, updated estimates of collateral value are obtained primarily through automated valuation models. For multi-family and commercial real estate properties, we estimate collateral value through appraisals or internal cash flow analyses, when current financial information is available, coupled with, in most cases, an inspection of the property. Other current and anticipated economic conditions on which our specific valuation allowances rely are the impact that national and/or local economic and business conditions may have on borrowers, the impact that local real estate markets may have on collateral values, the level and direction of interest rates and their combined effect on real estate values and the ability of borrowers to service debt. For multi-family and commercial real estate loans, additional factors specific to a borrower or the underlying collateral are considered. These factors include, but are not limited to, the composition of tenancy, occupancy levels for the property, location of the property, cash flow estimates and, to a lesser degree, the existence of personal guarantees. We also review all regulatory notices, bulletins and memoranda with the purpose of identifying upcoming changes in regulatory conditions which may impact our calculation of specific valuation allowances. The OTS periodically reviews our reserve methodology during regulatory examinations and any comments regarding changes to reserves or loan classifications are considered by management in determining valuation allowances.
Pursuant to our policy, loan losses are charged-off in the period the loans, or portions thereof, are deemed uncollectible, or, in the case of one-to-four family mortgage loans, at 180 days past due, and annually thereafter, for the portion of the recorded investment in the loan in excess of the estimated fair value of the underlying collateral less estimated selling costs. The determination of the loans on which full collectibility is not reasonably assured, the estimates of the fair value of the underlying collateral and the assessment of economic and regulatory conditions are subject to assumptions and judgments by management. Specific valuation allowances and charge-off amounts could differ materially as a result of changes in these assumptions and judgments.
General valuation allowances represent loss allowances that have been established to recognize the inherent risks associated with our lending activities which, unlike specific allowances, have not been allocated to particular loans. The determination of the adequacy of the general valuation allowances takes into consideration a variety of factors. We segment our one-to-four family mortgage loan portfolio by interest-only and amortizing loans, full documentation and reduced documentation loans and year of origination and analyze our historical loss experience and delinquency levels and trends of these segments. The resulting range of allowance
percentages is used as an integral part of our judgment in developing estimated loss percentages to apply to the portfolio segments. We segment our consumer and other loan portfolio by home equity lines of credit, business loans, revolving credit lines and installment loans and perform similar historical loss analyses. We monitor credit risk on interest-only hybrid adjustable rate mortgage, or ARM, loans that were underwritten at the initial note rate, which may have been a discounted rate, in the same manner that we monitor credit risk on all interest-only hybrid ARM loans. We monitor interest rate reset dates of our portfolio, in the aggregate, and the current interest rate environment and consider the impact, if any, on borrowers’ ability to continue to make timely principal and interest payments in determining our allowance for loan losses. We also consider the size, composition, risk profile, delinquency levels and cure rates of our portfolio, as well as our credit administration and asset management procedures. We monitor property value trends in our market areas by reference to various industry and market reports, economic releases and surveys, and our general and specific knowledge of the real estate markets in which we lend, in order to determine what impact, if any, such trends may have on the level of our general valuation allowances. In determining our allowance coverage percentages for non-performing loans, we consider our historical loss experience with respect to the ultimate disposition of the underlying collateral. In addition, we evaluate and consider the impact that current and anticipated economic and market conditions may have on the portfolio and known and inherent risks in the portfolio.
We use ratio analyses as a supplemental tool for evaluating the overall reasonableness of the allowance for loan losses. As such, we evaluate and consider our asset quality ratios as well as the allowance ratios and coverage percentages set forth in both peer group and regulatory agency data. We also consider any comments from the OTS resulting from their review of our general valuation allowance methodology during regulatory examinations. We consider the observed trends in our asset quality ratios in combination with our primary focus on our historical loss experience and the impact of current economic conditions. After evaluating these variables, we determine appropriate allowance coverage percentages for each of our portfolio segments and the appropriate level of our allowance for loan losses. We do not determine the appropriate level of our allowance for loan losses based exclusively on a single factor or asset quality ratio. Our evaluation of general valuation allowances is inherently subjective because, even though it is based on objective data, it is management’s interpretation of that data that determines the amount of the appropriate allowance. Therefore, we periodically review the actual performance and charge-off history of our portfolio and compare that to our previously determined allowance coverage percentages and specific valuation allowances. In doing so, we evaluate the impact the previously mentioned variables may have had on the portfolio to determine which changes, if any, should be made to our assumptions and analyses.
As a result of our updated charge-off and loss analyses, we modified certain allowance coverage percentages during the 2011 first quarter to reflect our current estimates of the amount of probable losses inherent in our loan portfolio in determining our general valuation allowances. Based on our evaluation of the housing and real estate markets and overall economy, in particular the unemployment rate, the levels and composition of our loan delinquencies, non-performing loans and net loan charge-offs and the size and composition of our loan portfolio, we determined that an allowance for loan losses of $189.5 million was required at March 31, 2011, compared to $201.5 million at December 31, 2010, resulting in a provision for loan losses of $7.0 million for the three months ended March 31, 2011. The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at the reporting dates.
Actual results could differ from our estimates as a result of changes in economic or market conditions. Changes in estimates could result in a material change in the allowance for loan losses. While we believe that the allowance for loan losses has been established and maintained at levels that reflect the risks inherent in our loan portfolio, future adjustments may be necessary if portfolio performance or economic or market conditions differ substantially from the conditions that existed at the time of the initial determinations.
For additional information regarding our allowance for loan losses, see “Provision for Loan Losses” and “Asset Quality” in this document and Part II, Item 7, “MD&A,” in our 2010 Annual Report on Form 10-K.
Valuation of MSR
The initial asset recognized for originated MSR is measured at fair value. The fair value of MSR is estimated by reference to current market values of similar loans sold servicing released. MSR are amortized in proportion to and over the period of estimated net servicing income. We apply the amortization method for measurement of our MSR. MSR are assessed for impairment based on fair value at each reporting date. Impairment exists if the carrying value of MSR exceeds the estimated fair value. The estimated fair value of MSR is obtained through independent third party valuations. MSR impairment, if any, is recognized in a valuation allowance through charges to earnings. Increases in the fair value of impaired MSR are recognized only up to the amount of the previously recognized valuation allowance.
At March 31, 2011, our MSR had an estimated fair value of $10.1 million and were valued based on expected future cash flows considering a weighted average discount rate of 10.95%, a weighted average constant prepayment rate on mortgages of 17.82% and a weighted average life of 4.2 years. At December 31, 2010, our MSR had an estimated fair value of $9.2 million and were valued based on expected future cash flows considering a weighted average discount rate of 10.96%, a weighted average constant prepayment rate on mortgages of 19.94% and a weighted average life of 3.8 years.
The fair value of MSR is highly sensitive to changes in assumptions. Changes in prepayment speed assumptions generally have the most significant impact on the fair value of our MSR. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of MSR. As interest rates rise, mortgage loan prepayments slow down, which results in an increase in the fair value of MSR. Thus, any measurement of the fair value of our MSR is limited by the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different point in time.
Goodwill Impairment
Goodwill is presumed to have an indefinite useful life and is tested, at least annually, for impairment at the reporting unit level. Impairment exists when the carrying amount of goodwill exceeds its implied fair value. For purposes of our goodwill impairment testing, we have identified a single reporting unit. We consider the quoted market price of our common stock on our impairment testing date as an initial indicator of estimating the fair value of our reporting unit. In addition, we consider our average stock price, both before and after our impairment test
date, as well as market-based control premiums in determining the estimated fair value of our reporting unit. If the estimated fair value of our reporting unit exceeds its carrying amount, further evaluation is not necessary. However, if the fair value of our reporting unit is less than its carrying amount, further evaluation is required to compare the implied fair value of the reporting unit’s goodwill to its carrying amount to determine if a write-down of goodwill is required.
At March 31, 2011, the carrying amount of our goodwill totaled $185.2 million. On September 30, 2010, we performed our annual goodwill impairment test and determined the estimated fair value of our reporting unit to be in excess of its carrying amount. Accordingly, as of our annual impairment test date, there was no indication of goodwill impairment. We would test our goodwill for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount. No events have occurred and no circumstances have changed since our annual impairment test date that would more likely than not reduce the fair value of our reporting unit below its carrying amount. The identification of additional reporting units or the use of other valuation techniques could result in materially different evaluations of impairment.
Securities Impairment
Our available-for-sale securities portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. Debt securities which we have the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost. The fair values for our securities are obtained from an independent nationally recognized pricing service.
Our investment portfolio is comprised primarily of fixed rate mortgage-backed securities guaranteed by a GSE as issuer. GSE issuance mortgage-backed securities comprised 96% of our securities portfolio at March 31, 2011. Non-GSE issuance mortgage-backed securities at March 31, 2011 comprised 2% of our securities portfolio and had an amortized cost of $48.2 million, 41% of which are classified as available-for-sale and 59% of which are classified as held-to-maturity. Substantially all of our non-GSE issuance securities have a AAA credit rating and they have performed similarly to our GSE issuance securities. Credit quality concerns have not significantly impacted the performance of our non-GSE securities or our ability to obtain reliable prices.
The fair value of our investment portfolio is primarily impacted by changes in interest rates. In general, as interest rates rise, the fair value of fixed rate securities will decrease; as interest rates fall, the fair value of fixed rate securities will increase. We conduct a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. Our evaluation of other-than-temporary impairment, or OTTI, considers the duration and severity of the impairment, our assessments of the reason for the decline in value, the likelihood of a near-term recovery and our intent and ability to not sell the securities. We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience. If such decline is deemed other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged to earnings as a component of non-interest income, except for the amount of the total OTTI for a debt security that does not represent credit losses which is recognized in other comprehensive income/loss, net of applicable taxes. At March 31, 2011, we had 51 securities with an estimated fair value totaling $581.7 million which had an unrealized loss totaling $7.5
million. Of the securities in an unrealized loss position at March 31, 2011, $18.7 million, with an unrealized loss of $429,000, have been in a continuous unrealized loss position for more than twelve months. At March 31, 2011, the impairments are deemed temporary based on (1) the direct relationship of the decline in fair value to movements in interest rates, (2) the estimated remaining life and high credit quality of the investments and (3) the fact that we do not intend to sell these securities and it is not more likely than not that we will be required to sell these securities before their anticipated recovery of the remaining amortized cost basis and we expect to recover the entire amortized cost basis of the security.
Liquidity and Capital Resources
Our primary source of funds is cash provided by principal and interest payments on loans and securities. The most significant liquidity challenge we face is the variability in cash flows as a result of changes in mortgage refinance activity. Principal payments on loans and securities totaled $1.43 billion for the three months ended March 31, 2011 and $1.25 billion for the three months ended March 31, 2010. The net increase in loan and securities repayments for the three months ended March 31, 2011, compared to the three months ended March 31, 2010, was primarily due to an increase in loan repayments. The increase in loan repayments primarily reflects an increase in multi-family and commercial real estate mortgage loan repayments. One-to-four family mortgage loan repayments increased somewhat compared to the 2010 first quarter and remained at elevated levels during the 2011 first quarter as interest rates on thirty year fixed rate conforming mortgages, which we do not retain for portfolio, remained at historic lows and as loans in our portfolio qualified under the expanded conforming loan limits were refinanced into fixed rate conforming mortgages. We decided to not aggressively compete against the thirty year fixed rate conforming mortgage market in the current low interest rate environment. However, the rise in interest rates on thirty year fixed rate mortgages at the end of the 2010 fourth quarter and throughout the 2011 first quarter led to a decrease in loan repayments in the 2011 first quarter compared to the 2010 fourth quarter.
In addition to cash provided by principal and interest payments on loans and securities, our other sources of funds include cash provided by operating activities, deposits and borrowings. However, for the three months ended March 31, 2011 and 2010, net deposit and borrowing activity resulted in a use of funds. Net cash provided by operating activities totaled $103.0 million for the three months ended March 31, 2011 and $112.4 million for the three months ended March 31, 2010. Deposits decreased $123.7 million during the three months ended March 31, 2011 and decreased $127.4 million during the three months ended March 31, 2010. The net decreases in deposits for the three months ended March 31, 2011 and 2010 were primarily due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in savings, money market and NOW and demand deposit accounts. During the three months ended March 31, 2011 and 2010, we continued to allow high cost certificates of deposit to run off as total assets declined. The increases in low cost savings, money market and NOW and demand deposit accounts during the three months ended March 31, 2011 and 2010 appear to reflect customer preference for the liquidity these types of deposits provide. However, during the 2011 first quarter we have achieved some success in extending the terms of our retained certificates of deposit.
Net borrowings decreased $291.9 million during the three months ended March 31, 2011 and decreased $115.9 million during the three months ended March 31, 2010. The decreases in net borrowings for the three months ended March 31, 2011 and March 31, 2010 were primarily due
to cash flows from mortgage loan repayments in excess of mortgage loan originations and purchases which enabled us to repay a portion of our matured borrowings.
Our primary use of funds is for the origination and purchase of mortgage loans and, to a lesser degree, for the purchase of securities. Gross mortgage loans originated and purchased for portfolio during the three months ended March 31, 2011 totaled $707.4 million, of which $495.0 million were originations and $212.4 million were purchases. This compares to gross mortgage loans originated and purchased for portfolio during the three months ended March 31, 2010 totaling $838.9 million, of which $699.6 million were originations and $139.3 million were purchases. All of our mortgage loan originations and purchases during 2010 and the 2011 first quarter were one-to-four family mortgage loans. Overall, one-to-four family mortgage loan origination and purchase volume for portfolio has been negatively affected by the historic low interest rates on thirty year fixed rate conforming mortgages, which we do not retain for portfolio, and the expanded conforming loan limits. Purchases of securities totaled $356.7 million during the three months ended March 31, 2011 and $308.7 million during the three months ended March 31, 2010.
Our policies and procedures with respect to managing funding and liquidity risk are established to ensure our safe and sound operation in compliance with applicable bank regulatory requirements. Our liquidity management process is sufficient to meet our daily funding needs and cover both expected and unexpected deviations from normal daily operations. Processes are in place to appropriately identify, measure, monitor and control liquidity and funding risk. The primary tools we use for measuring and managing liquidity risk include cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets, and a formal, well developed contingency funding plan.
We maintain liquidity levels to meet our operational needs in the normal course of our business. The levels of our liquid assets during any given period are dependent on our operating, investing and financing activities. Cash and due from banks and repurchase agreements, our most liquid assets, increased $88.8 million to $207.8 million at March 31, 2011, from $119.0 million at December 31, 2010. At March 31, 2011, we had $1.05 billion in borrowings with a weighted average rate of 3.57% maturing over the next twelve months. We have the flexibility to either repay or rollover these borrowings as they mature. Included in our borrowings are various obligations which, by their terms, may be called by the securities dealers and the FHLB-NY. We believe the potential for these borrowings to be called does not present liquidity concerns as they have various call dates and coupons and we believe we can readily obtain replacement funding, albeit at higher rates. In addition, we had $3.04 billion in certificates of deposit and Liquid CDs at March 31, 2011 with a weighted average rate of 1.46% maturing over the next twelve months. We have the ability to retain or replace a significant portion of such deposits based on our pricing and historical experience. However, should our balance sheet continue to contract, we may continue to see a reduction in borrowings and/or deposits.
The following table details our borrowing, certificate of deposit and Liquid CD maturities and their weighted average rates at March 31, 2011.
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Certificates of Deposit
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Borrowings
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and Liquid CDs
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Weighted
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Weighted
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Average
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Average
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(Dollars in Millions)
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Amount
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Rate
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Amount
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Rate
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Contractual Maturity:
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Twelve months or less
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$ |
1,049 |
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3.57 |
% |
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$ |
3,044 |
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(1) |
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1.46 |
% |
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Thirteen to thirty-six months
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1,450 |
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(2) |
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3.72 |
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2,425 |
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2.42 |
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Thirty-seven to sixty months
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200 |
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(3) |
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4.18 |
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1,069 |
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2.88 |
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Over sixty months
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1,879 |
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(4) |
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4.72 |
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- |
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- |
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Total
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$ |
4,578 |
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4.12 |
% |
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$ |
6,538 |
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2.05 |
% |
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(1)
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Includes $414.7 million of Liquid CDs with a weighted average rate of 0.25% and $2.63 billion of certificates of deposit with a weighted average rate of 1.65%.
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(2)
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Includes $650.0 million of borrowings, with a weighted average rate of 4.33%, which are callable by the counterparty within the next three months and at various times thereafter.
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(3)
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Callable by the counterparty within the next three months and at various times thereafter.
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(4)
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Includes $1.75 billion of borrowings, with a weighted average rate of 4.35%, which are callable by the counterparty within the next three months and at various times thereafter.
|
Additional sources of liquidity at the holding company level have included issuances of securities into the capital markets, including private issuances of trust preferred securities and senior debt. Holding company debt obligations are included in other borrowings. Our ability to continue to access the capital markets for additional financing at favorable terms may be limited by, among other things, market conditions, interest rates, our capital levels, Astoria Federal’s ability to pay dividends to Astoria Financial Corporation, our credit profile and ratings and our business model.
On May 19, 2010, we filed an automatic shelf registration statement on Form S-3 with the SEC, which was declared effective immediately upon filing. This shelf registration statement allows us to periodically offer and sell, from time to time, in one or more offerings, individually or in any combination, common stock, preferred stock, debt securities, capital securities, guarantees, warrants to purchase common stock or preferred stock and units consisting of one or more of the foregoing. The shelf registration statement provides us with greater capital management flexibility and enables us to more readily access the capital markets in order to pursue growth opportunities that may become available to us in the future or should there be any changes in the regulatory environment that call for increased capital requirements. Although the shelf registration statement does not limit the amount of the foregoing items that we may offer and sell pursuant to the shelf registration statement, our ability and any decision to do so is subject to market conditions and our capital needs. At this time, we do not have any immediate plans or current commitments to sell securities under the shelf registration statement.
Astoria Financial Corporation’s primary uses of funds include payment of dividends, payment of interest on its debt obligations and repurchases of common stock. On March 1, 2011, we paid a quarterly cash dividend of $0.13 per share on shares of our common stock outstanding as of the close of business on February 15, 2011 totaling $12.4 million. On April 20, 2011, we declared a quarterly cash dividend of $0.13 per share on shares of our common stock payable on June 1, 2011 to stockholders of record as of the close of business on May 16, 2011. Our twelfth stock repurchase plan, approved by our Board of Directors on April 18, 2007, authorized the purchase
of 10,000,000 shares, or approximately 10% of our common stock then outstanding, in open-market or privately negotiated transactions. At March 31, 2011, a maximum of 8,107,300 shares may yet be purchased under this plan, however, we are not currently repurchasing additional shares of our common stock and have not since the 2008 third quarter.
Our ability to pay dividends, service our debt obligations and repurchase common stock is dependent primarily upon receipt of capital distributions from Astoria Federal. Since Astoria Federal is a federally chartered savings association, there are limits on its ability to make distributions to Astoria Financial Corporation. During the three months ended March 31, 2011, Astoria Federal paid dividends to Astoria Financial Corporation totaling $26.0 million.
See “Financial Condition” for further discussion of the changes in stockholders’ equity.
At March 31, 2011, Astoria Federal’s capital levels exceeded all of its regulatory capital requirements with a tangible capital ratio of 8.17%, leverage capital ratio of 8.17% and total risk-based capital ratio of 15.18%. The minimum regulatory requirements are a tangible capital ratio of 1.50%, leverage capital ratio of 4.00% and total risk-based capital ratio of 8.00%. Astoria Federal’s Tier 1 risk-based capital ratio was 13.89% at March 31, 2011. As of March 31, 2011, Astoria Federal continues to be a well capitalized institution for all bank regulatory purposes.
Off-Balance Sheet Arrangements and Contractual Obligations
We are a party to financial instruments with off-balance sheet risk in the normal course of our business in order to meet the financing needs of our customers and in connection with our overall interest rate risk management strategy. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are either not recorded in the consolidated financial statements or are recorded in amounts that differ from the notional amounts. Such instruments primarily include lending commitments and lease commitments.
Lending commitments include commitments to originate and purchase loans and commitments to fund unused lines of credit. Additionally, in connection with our mortgage banking activities, we have commitments to fund loans held-for-sale and commitments to sell loans which are considered derivative instruments. Commitments to sell loans totaled $25.5 million at March 31, 2011. The fair values of our mortgage banking derivative instruments are immaterial to our financial condition and results of operations. We also have contractual obligations related to operating lease commitments which have not changed significantly from December 31, 2010.
The following table details our contractual obligations at March 31, 2011.
| |
Payments due by period
|
| |
|
Less than
|
One to
|
Three to
|
More than
|
|
(In Thousands)
|
Total
|
One Year
|
Three Years
|
Five Years
|
Five Years
|
|
On-balance sheet contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings with original terms greater than three months
|
|
$ |
4,447,866 |
|
|
$ |
919,000 |
|
|
$ |
1,450,000 |
|
|
$ |
200,000 |
|
|
$ |
1,878,866 |
|
|
Off-balance sheet contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to originate and purchase loans (1)
|
|
|
316,214 |
|
|
|
316,214 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Commitments to fund unused lines of credit (2)
|
|
|
264,751 |
|
|
|
264,751 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total
|
|
$ |
5,028,831 |
|
|
$ |
1,499,965 |
|
|
$ |
1,450,000 |
|
|
$ |
200,000 |
|
|
$ |
1,878,866 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Commitments to originate and purchase loans include commitments to originate loans held-for-sale of $21.7 million.
(2) Unused lines of credit relate primarily to home equity lines of credit.
|
In addition to the contractual obligations previously discussed, we have liabilities for gross unrecognized tax benefits and interest and penalties related to uncertain tax positions which have not changed significantly from December 31, 2010. For further information regarding these liabilities, see Note 11 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” in our 2010 Annual Report on Form 10-K. We also have contingent liabilities related to assets sold with recourse and standby letters of credit which have not changed significantly from December 31, 2010.
For further information regarding our off-balance sheet arrangements and contractual obligations, see Part II, Item 7, “MD&A,” in our 2010 Annual Report on Form 10-K.
Comparison of Financial Condition as of March 31, 2011 and December 31, 2010 and
Operating Results for the Three Months Ended March 31, 2011 and 2010
Financial Condition
Total assets decreased $382.1 million to $17.71 billion at March 31, 2011, from $18.09 billion at December 31, 2010. The decrease in total assets was primarily due to a decrease in loans receivable.
Loans receivable, net, decreased $426.1 million to $13.60 billion at March 31, 2011, from $14.02 billion at December 31, 2010. This decrease was primarily a result of repayments outpacing our mortgage loan origination and purchase volume during the three months ended March 31, 2011.
Mortgage loans decreased $426.9 million to $13.40 billion at March 31, 2011, from $13.83 billion at December 31, 2010. This decrease was primarily due to decreases in our one-to-four family, multi-family and commercial real estate mortgage loan portfolios. Mortgage loan repayments increased to $1.09 billion for the three months ended March 31, 2011, from $912.2 million for the three months ended March 31, 2010. This increase was primarily due to an increase in multi-family and commercial real estate mortgage loan repayments. Gross mortgage loans originated and purchased for portfolio during the three months ended March 31, 2011 totaled $707.4 million, of which $495.0 million were originations and $212.4 million were purchases. This compares to gross mortgage loans originated and purchased for portfolio totaling $838.9 million during the three months ended March 31, 2010, of which $699.6 million were originations and $139.3 million were purchases. All of our mortgage loan originations and purchases during 2010 and the 2011 first quarter were one-to-four family mortgage loans.
Our mortgage loan portfolio continues to consist primarily of one-to-four family mortgage loans. Our one-to-four family mortgage loan portfolio decreased $207.9 million to $10.65 billion at March 31, 2011, from $10.86 billion at December 31, 2010, and represented 77.7% of our total loan portfolio at March 31, 2011. The decrease was primarily the result of the levels of repayments which outpaced our originations and purchases during the three months ended March 31, 2011. One-to-four family mortgage loan repayments increased somewhat during the three months ended March 31, 2011 compared to the three months ended March 31, 2010 and remain at elevated levels. However, the rise in interest rates on thirty year fixed rate mortgages at the end of the 2010 fourth quarter and throughout the 2011 first quarter led to a decrease in loan repayments which resulted in a significantly slower pace of decline in our one-to-four family mortgage loan portfolio in the 2011 first quarter compared to the 2010 fourth quarter. One-to-
four family mortgage loan origination and purchase volume for portfolio has been negatively affected by the historic low interest rates for thirty year fixed rate conforming mortgages and the expanded conforming loan limits resulting in more borrowers opting for thirty year fixed rate conforming mortgages which we do not retain for portfolio. During the three months ended March 31, 2011, the loan-to-value ratio of our one-to-four family mortgage loan originations and purchases for portfolio, at the time of origination or purchase, averaged approximately 60% and the loan amount averaged approximately $727,000.
Our multi-family mortgage loan portfolio decreased $187.0 million to $2.00 billion at March 31, 2011, from $2.19 billion at December 31, 2010. Our commercial real estate loan portfolio decreased $32.7 million to $739.0 million at March 31, 2011, from $771.7 million at December 31, 2010. The decreases in these loan portfolios are attributable to repayments, the sale or transfer to held-for-sale of certain delinquent and non-performing loans and the absence of new multi-family and commercial real estate loan originations. We expect to resume originations in the New York City multi-family mortgage market in the latter half of 2011.
Securities increased $42.1 million to $2.61 billion at March 31, 2011, from $2.57 billion at December 31, 2010. This increase was primarily the result of purchases of $356.7 million, partially offset by principal payments received of $315.1 million. At March 31, 2011, our securities portfolio was comprised primarily of fixed rate REMIC and CMO securities which had an amortized cost of $2.49 billion, a weighted average current coupon of 3.77%, a weighted average collateral coupon of 5.64% and a weighted average life of 2.7 years. For additional information regarding our securities portfolio, see Note 2 of Notes to Consolidated Financial Statements in Item 1, “Financial Statements (Unaudited).”
Deposits decreased $123.7 million to $11.48 billion at March 31, 2011, from $11.60 billion at December 31, 2010, due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in savings, money market and NOW and demand deposit accounts. Certificates of deposit decreased $190.7 million since December 31, 2010 to $6.12 billion at March 31, 2011. Liquid CDs decreased $54.1 million since December 31, 2010 to $414.7 million at March 31, 2011. Savings accounts increased $101.2 million since December 31, 2010 to $2.77 billion at March 31, 2011. Money market accounts increased $10.4 million since December 31, 2010 to $386.7 million at March 31, 2011. NOW and demand deposit accounts increased $9.5 million since December 31, 2010 to $1.78 billion at March 31, 2011. During the 2011 first quarter, we continued to allow high cost certificates of deposit to run off as total assets declined. The increases in low cost savings, money market and NOW and demand deposit accounts during the three months ended March 31, 2011 appear to reflect customer preference for the liquidity these types of deposits provide. However, during the 2011 first quarter we have achieved some success in extending the terms of our retained certificates of deposit.
Total borrowings, net, decreased $291.9 million to $4.58 billion at March 31, 2011, from $4.87 billion at December 31, 2010. The decrease in total borrowings was primarily the result of cash flows from mortgage loan repayments exceeding mortgage loan originations and purchases which enabled us to repay a portion of our matured borrowings.
Stockholders’ equity increased $22.6 million to $1.26 billion at March 31, 2011, from $1.24 billion at December 31, 2010. The increase in stockholders’ equity was due to net income of $27.4 million, the allocation of shares held by the employee stock ownership plan, or ESOP, of $2.8 million, a decrease in accumulated other comprehensive loss of $2.6 million and stock-
based compensation of $2.2 million. These increases were partially offset by dividends declared of $12.4 million.
Results of Operations
General
Net income for the three months ended March 31, 2011 increased $14.5 million to $27.4 million, from $12.9 million for the three months ended March 31, 2010. Diluted earnings per common share increased to $0.29 per share for the three months ended March 31, 2011, from $0.14 per share for the three months ended March 31, 2010. Return on average assets increased to 0.61% for the three months ended March 31, 2011, from 0.26% for the three months ended March 31, 2010, due to the increase in net income, coupled with the decrease in average assets. Return on average stockholders’ equity increased to 8.76% for the three months ended March 31, 2011, from 4.27% for the three months ended March 31, 2010. Return on average tangible stockholders’ equity, which represents average stockholders’ equity less average goodwill, increased to 10.29% for the three months ended March 31, 2011, from 5.04% for the three months ended March 31, 2010. The increases in the returns on average stockholders’ equity and average tangible stockholders’ equity for the three months ended March 31, 2011, compared to the three months ended March 31, 2010, were due to the increase in net income, partially offset by the increase in average stockholders’ equity.
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 and their related impact on cash flows. See Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” for further discussion of the potential impact of changes in interest rates on our results of operations.
For the three months ended March 31, 2011, net interest income decreased $12.9 million to $101.5 million, from $114.4 million for the three months ended March 31, 2010, due to a decrease in interest income, partially offset by a decrease in interest expense. Interest income for the three months ended March 31, 2011 decreased, compared to the three months ended March 31, 2010, primarily due to decreases in the average balances of mortgage loans and mortgage-backed and other securities, coupled with decreases in the average yields on one-to-four family mortgage loans and mortgage-backed and other securities. Interest expense for the three months ended March 31, 2011 decreased, compared to the three months ended March 31, 2010, primarily due to decreases in the average balances and average costs of certificates of deposit and borrowings. The net interest margin increased to 2.40% for the three months ended March 31, 2011, from 2.39% for the three months ended March 31, 2010. The net interest rate spread increased to 2.34% for the three months ended March 31, 2011, from 2.32% for the three months ended March 31, 2010. The slight increases in the net interest margin and net interest rate spread reflect the decline in the cost of interest-bearing liabilities which was substantially offset by the decline in the yield on interest-earning assets. The average balance of net interest-earning assets increased $33.6 million to $584.3 million for the three months ended March 31, 2011, from $550.7 million for the three months ended March 31, 2010.
The changes in average interest-earning assets and interest-bearing liabilities and their related yields and costs are discussed in greater detail under “Interest Income” and “Interest Expense.”
Analysis of Net Interest Income
The following table sets forth certain information about the average balances of our assets and liabilities and their related yields and costs for the three months ended March 31, 2011 and 2010. Average yields are derived by dividing income by the average balance of the related assets and average costs are derived by dividing expense by the average balance of the related liabilities, for the periods shown. Average balances are derived from average daily balances. The yields and costs include amortization of fees, costs, premiums and discounts which are considered adjustments to interest rates.
| |
|
For the Three Months Ended March 31,
|
|
| |
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Yield/
Cost
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Yield/
Cost
|
|
| |
|
|
|
|
|
|
|
(Annualized)
|
|
|
|
|
|
|
|
|
(Annualized)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$ |
10,825,492 |
|
|
$ |
114,676 |
|
|
|
4.24 |
% |
|
$ |
12,003,619 |
|
|
$ |
140,954 |
|
|
|
4.70 |
% |
| Multi-family, commercial real estate and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
construction
|
|
|
2,884,963 |
|
|
|
44,492 |
|
|
|
6.17 |
|
|
|
3,426,708 |
|
|
|
51,125 |
|
|
|
5.97 |
|
|
Consumer and other loans (1)
|
|
|
307,988 |
|
|
|
2,507 |
|
|
|
3.26 |
|
|
|
332,355 |
|
|
|
2,651 |
|
|
|
3.19 |
|
|
Total loans
|
|
|
14,018,443 |
|
|
|
161,675 |
|
|
|
4.61 |
|
|
|
15,762,682 |
|
|
|
194,730 |
|
|
|
4.94 |
|
|
Mortgage-backed and other securities (2)
|
|
|
2,533,953 |
|
|
|
22,423 |
|
|
|
3.54 |
|
|
|
3,139,875 |
|
|
|
31,347 |
|
|
|
3.99 |
|
| Repurchase agreements and interest- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earning cash accounts
|
|
|
194,996 |
|
|
|
93 |
|
|
|
0.19 |
|
|
|
81,361 |
|
|
|
15 |
|
|
|
0.07 |
|
|
FHLB-NY stock
|
|
|
147,589 |
|
|
|
2,317 |
|
|
|
6.28 |
|
|
|
183,279 |
|
|
|
2,496 |
|
|
|
5.45 |
|
|
Total interest-earning assets
|
|
|
16,894,981 |
|
|
|
186,508 |
|
|
|
4.42 |
|
|
|
19,167,197 |
|
|
|
228,588 |
|
|
|
4.77 |
|
|
Goodwill
|
|
|
185,151 |
|
|
|
|
|
|
|
|
|
|
|
185,151 |
|
|
|
|
|
|
|
|
|
|
Other non-interest-earning assets
|
|
|
932,212 |
|
|
|
|
|
|
|
|
|
|
|
897,307 |
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
18,012,344 |
|
|
|
|
|
|
|
|
|
|
$ |
20,249,655 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$ |
2,704,261 |
|
|
|
2,687 |
|
|
|
0.40 |
|
|
$ |
2,236,852 |
|
|
|
2,230 |
|
|
|
0.40 |
|
|
Money market
|
|
|
382,756 |
|
|
|
429 |
|
|
|
0.45 |
|
|
|
328,994 |
|
|
|
358 |
|
|
|
0.44 |
|
|
NOW and demand deposit
|
|
|
1,750,841 |
|
|
|
281 |
|
|
|
0.06 |
|
|
|
1,615,957 |
|
|
|
257 |
|
|
|
0.06 |
|
|
Liquid CDs
|
|
|
439,009 |
|
|
|
268 |
|
|
|
0.24 |
|
|
|
672,635 |
|
|
|
823 |
|
|
|
0.49 |
|
|
Total core deposits
|
|
|
5,276,867 |
|
|
|
3,665 |
|
|
|
0.28 |
|
|
|
4,854,438 |
|
|
|
3,668 |
|
|
|
0.30 |
|
|
Certificates of deposit
|
|
|
6,207,730 |
|
|
|
33,367 |
|
|
|
2.15 |
|
|
|
7,819,654 |
|
|
|
49,874 |
|
|
|
2.55 |
|
|
Total deposits
|
|
|
11,484,597 |
|
|
|
37,032 |
|
|
|
1.29 |
|
|
|
12,674,092 |
|
|
|
53,542 |
|
|
|
1.69 |
|
|
Borrowings
|
|
|
4,826,055 |
|
|
|
47,947 |
|
|
|
3.97 |
|
|
|
5,942,452 |
|
|
|
60,694 |
|
|
|
4.09 |
|
|
Total interest-bearing liabilities
|
|
|
16,310,652 |
|
|
|
84,979 |
|
|
|
2.08 |
|
|
|
18,616,544 |
|
|
|
114,236 |
|
|
|
2.45 |
|
|
Non-interest-bearing liabilities
|
|
|
451,839 |
|
|
|
|
|
|
|
|
|
|
|
422,655 |
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
16,762,491 |
|
|
|
|
|
|
|
|
|
|
|
19,039,199 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
1,249,853 |
|
|
|
|
|
|
|
|
|
|
|
1,210,456 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$ |
18,012,344 |
|
|
|
|
|
|
|
|
|
|
$ |
20,249,655 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net interest income/net interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate spread (3)
|
|
|
|
|
|
$ |
101,529 |
|
|
|
2.34 |
% |
|
|
|
|
|
$ |
114,352 |
|
|
|
2.32 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net interest-earning assets/net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest margin (4)
|
|
$ |
584,329 |
|
|
|
|
|
|
|
2.40 |
% |
|
$ |
550,653 |
|
|
|
|
|
|
|
2.39 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ratio of interest-earning assets to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest-bearing liabilities
|
|
|
1.04 |
x |
|
|
|
|
|
|
|
|
|
|
1.03 |
x |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Mortgage loans and consumer and other loans include loans held-for-sale and non-performing loans and exclude the allowance for loan losses.
|
|
(2)
|
Securities available-for-sale are included at average amortized cost.
|
|
(3)
|
Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.
|
|
(4)
|
Net interest margin represents net interest income divided by average interest-earning assets.
|
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) the changes attributable to changes in volume (changes in volume multiplied by prior rate), (2) the 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.
| |
|
Three Months Ended March 31, 2011
Compared to
Three Months Ended March 31, 2010
|
|
| |
|
Increase (Decrease)
|
|
|
(In Thousands)
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$ |
(13,158 |
) |
|
$ |
(13,120 |
) |
|
$ |
(26,278 |
) |
|
Multi-family, commercial real estate and construction
|
|
|
(8,301 |
) |
|
|
1,668 |
|
|
|
(6,633 |
) |
|
Consumer and other loans
|
|
|
(200 |
) |
|
|
56 |
|
|
|
(144 |
) |
|
Mortgage-backed and other securities
|
|
|
(5,632 |
) |
|
|
(3,292 |
) |
|
|
(8,924 |
) |
|
Repurchase agreements and interest-earning cash accounts
|
|
|
35 |
|
|
|
43 |
|
|
|
78 |
|
|
FHLB-NY stock
|
|
|
(527 |
) |
|
|
348 |
|
|
|
(179 |
) |
|
Total
|
|
|
(27,783 |
) |
|
|
(14,297 |
) |
|
|
(42,080 |
) |
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
|
457 |
|
|
|
- |
|
|
|
457 |
|
|
Money market
|
|
|
63 |
|
|
|
8 |
|
|
|
71 |
|
|
NOW and demand deposit
|
|
|
24 |
|
|
|
- |
|
|
|
24 |
|
|
Liquid CDs
|
|
|
(225 |
) |
|
|
(330 |
) |
|
|
(555 |
) |
|
Certificates of deposit
|
|
|
(9,374 |
) |
|
|
(7,133 |
) |
|
|
(16,507 |
) |
|
Borrowings
|
|
|
(11,025 |
) |
|
|
(1,722 |
) |
|
|
(12,747 |
) |
|
|
|
|
(20,080 |
) |
|
|
(9,177 |
) |
|
|
(29,257 |
) |
|
Net change in net interest income
|
|
$ |
(7,703 |
) |
|
$ |
(5,120 |
) |
|
$ |
(12,823 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
Interest income decreased $42.1 million to $186.5 million for the three months ended March 31, 2011, from $228.6 million for the three months ended March 31, 2010, due to a decrease of $2.28 billion in the average balance of interest-earning assets to $16.89 billion for the three months ended March 31, 2011, from $19.17 billion for the three months ended March 31, 2010, coupled with a decrease in the average yield on interest-earning assets to 4.42% for the three months ended March 31, 2011, from 4.77% for the three months ended March 31, 2010. The decrease in the average balance of interest-earning assets was primarily due to decreases in the average balances of one-to-four family mortgage loans, mortgage-backed and other securities and multi-family, commercial real estate and construction loans. The decrease in the average yield on interest-earning assets was primarily due to decreases in the average yields on one-to-four family mortgage loans and mortgage-backed and other securities, partially offset by an increase in the average yield on multi-family, commercial real estate and construction loans.
Interest income on one-to-four family mortgage loans decreased $26.3 million to $114.7 million for the three months ended March 31, 2011, from $141.0 million for the three months ended
March 31, 2010, due to the combined effect of a decrease of $1.18 billion in the average balance of such loans and a decrease in the average yield to 4.24% for the three months ended March 31, 2011, from 4.70% for the three months ended March 31, 2010. The decrease in the average balance of one-to-four family mortgage loans was primarily due to the levels of prepayments over the past year which have outpaced the levels of originations and purchases. The decrease in the average yield was primarily due to new originations at lower interest rates than the rates on loans repaid over the past year and the impact of the downward repricing of our ARM loans. The lower interest rates and decrease in the average balance are attributable to the U.S. government subsidizing the residential mortgage market with programs designed to keep the interest rate for thirty year fixed rate conforming mortgage loans at historic low levels, coupled with expanded conforming loan limits. Net premium amortization on one-to-four family mortgage loans decreased $957,000 to $6.9 million for the three months ended March 31, 2011, from $7.8 million for the three months ended March 31, 2010. The decrease in net premium amortization reflects the lower average balance of one-to-four family mortgage loans, partially offset by an increase in prepayments during the three months ended March 31, 2011, compared to the three months ended March 31, 2010. However, prepayment levels declined in the 2011 first quarter compared to the 2010 fourth quarter.
Interest income on multi-family, commercial real estate and construction loans decreased $6.6 million to $44.5 million for the three months ended March 31, 2011, from $51.1 million for the three months ended March 31, 2010, due to a decrease of $541.7 million in the average balance of such loans, partially offset by an increase in the average yield to 6.17% for the three months ended March 31, 2011, from 5.97% for the three months ended March 31, 2010. The decrease in the average balance of multi-family, commercial real estate and construction loans is attributable to repayments, the sale or transfer to held-for-sale of certain delinquent and non-performing loans and the absence of new multi-family, commercial real estate and construction loan originations. The increase in the average yield on multi-family, commercial real estate and construction loans is primarily due to an increase in prepayment penalties and also reflects a decrease in non-performing loans for the 2011 first quarter compared to the 2010 first quarter, due primarily to the sale of certain delinquent and non-performing loans over the past year. Prepayment penalties increased $1.1 million to $1.7 million for the three months ended March 31, 2011, from $568,000 for the three months ended March 31, 2010.
Interest income on mortgage-backed and other securities decreased $8.9 million to $22.4 million for the three months ended March 31, 2011, from $31.3 million for the three months ended March 31, 2010, due to a decrease of $605.9 million in the average balance of the portfolio, coupled with a decrease in the average yield to 3.54% for the three months ended March 31, 2011, from 3.99% for the three months ended March 31, 2010. The decrease in the average balance of mortgage-backed and other securities was the result of repayments exceeding securities purchased over the past year. The decrease in the average yield was primarily due to repayments on higher yielding securities and purchases of new securities with lower coupons, in the prevailing lower interest rate environment, than the weighted average coupon for the portfolio.
Interest Expense
Interest expense decreased $29.2 million to $85.0 million for the three months ended March 31, 2011, from $114.2 million for the three months ended March 31, 2010, due to a decrease of $2.31 billion in the average balance of interest-bearing liabilities to $16.31 billion for the three
months ended March 31, 2011, from $18.62 billion for the three months ended March 31, 2010, coupled with a decrease in the average cost of interest-bearing liabilities to 2.08% for the three months ended March 31, 2011, from 2.45% for the three months ended March 31, 2010. The decreases in the average balance and average cost of interest-bearing liabilities was primarily due to decreases in the average balances and average costs of certificates of deposit and borrowings.
Interest expense on total deposits decreased $16.5 million to $37.0 million for the three months ended March 31, 2011, from $53.5 million for the three months ended March 31, 2010, due to a decrease of $1.19 billion in the average balance of total deposits to $11.48 billion for the three months ended March 31, 2011, from $12.67 billion for the three months ended March 31, 2010, coupled with a decrease in the average cost to 1.29% for the three months ended March 31, 2011, from 1.69% for the three months ended March 31, 2010. The decrease in the average balance of total deposits was due to decreases in the average balances of certificates of deposit and Liquid CDs, partially offset by increases in the average balances of savings, NOW and demand deposit and money market accounts. The decrease in the average cost of total deposits was primarily due to the impact of the decline in interest rates over the past year on our certificates of deposit and Liquid CDs which matured and were replaced at lower interest rates.
Interest expense on certificates of deposit decreased $16.5 million to $33.4 million for the three months ended March 31, 2011, from $49.9 million for the three months ended March 31, 2010, due to a decrease of $1.61 billion in the average balance, coupled with a decrease in the average cost to 2.15% for the three months ended March 31, 2011, from 2.55% for the three months ended March 31, 2010. The decrease in the average balance of certificates of deposit was primarily the result of our reduced focus on certificates of deposit. Throughout most of 2010 and into the 2011 first quarter, we continued to allow high cost certificates of deposit to run off as total assets declined. The decrease in the average cost of certificates of deposit reflects the impact of certificates of deposit at higher rates maturing and being replaced at lower interest rates. During the three months ended March 31, 2011, $1.06 billion of certificates of deposit, with a weighted average rate of 1.53% and a weighted average maturity at inception of fourteen months, matured and $840.7 million of certificates of deposit were issued or repriced, with a weighted average rate of 1.14% and a weighted average maturity at inception of twenty-three months reflecting our success in extending the terms of our retained certificates of deposit.
Interest expense on borrowings decreased $12.8 million to $47.9 million for the three months ended March 31, 2011, from $60.7 million for the three months ended March 31, 2010, due to a decrease of $1.12 billion in the average balance, coupled with a decrease in the average cost to 3.97% for the three months ended March 31, 2011, from 4.09% for the three months ended March 31, 2010. The decrease in the average balance of borrowings was the result of cash flows from mortgage loan and securities repayments exceeding mortgage loan originations and purchases, securities purchases and deposit outflows which enabled us to repay a portion of our matured borrowings. The decrease in the average cost of borrowings reflects the repayment of higher cost borrowings as they matured and the downward repricing of borrowings which matured and were refinanced over the past year.
Provision for Loan Losses
We review our allowance for loan losses on a quarterly basis. Material factors considered during our quarterly review are our loss experience, the composition and direction of loan delinquencies, the size and composition of our loan portfolio and the impact of current economic
conditions. We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. As a geographically diversified residential lender, we have been affected by negative consequences arising from the economic recession that continued throughout most of 2009 and, in particular, a sharp downturn in the housing industry nationally, as well as economic and housing industry weaknesses in the New York metropolitan area. We are particularly vulnerable to a job loss recession. The national economy continued to modestly recover and job growth continued during the 2011 first quarter. However, softness in the housing and real estate markets persist and unemployment levels remain elevated.
The allowance for loan losses was $189.5 million at March 31, 2011 and $201.5 million at December 31, 2010. The allowance for loan losses reflects the levels and composition of our loan delinquencies, non-performing loans and net loan charge-offs, the size and composition of our loan portfolio and our evaluation of the housing and real estate markets and overall economy, particularly the unemployment rate. The provision for loan losses decreased $38.0 million to $7.0 million for the three months ended March 31, 2011, from $45.0 million for the three months ended March 31, 2010. The decreases in the allowance for loan losses and the provision for loan losses reflect the stabilizing trend in overall asset quality we experienced in 2010 which has continued into the 2011 first quarter, coupled with the decline in the loan portfolio over the same period. The allowance for loan losses as a percentage of total loans was 1.37% at March 31, 2011 and 1.42% at December 31, 2010. The allowance for loan losses as a percentage of non-performing loans was 50.70% at March 31, 2011 and 51.57% at December 31, 2010. Non-performing loans decreased $16.9 million to $373.8 million at March 31, 2011, from $390.7 million at December 31, 2010. The changes in non-performing loans during any period are taken into account when determining the allowance for loan losses because the allowance coverage percentages we apply to our non-performing loans are higher than the allowance coverage percentages applied to our performing loans.
When analyzing our asset quality trends, consideration is given to the accounting for non-performing loans, particularly when reviewing our allowance for loan losses to non-performing loans ratio. Included in our non-performing loans are one-to-four family mortgage loans which are 180 days or more past due. We update our collateral values on one-to-four family mortgage loans which are 180 days past due and annually thereafter. If the estimated fair value of the loan collateral less estimated selling costs is less than the recorded investment in the loan, a charge-off of the difference is recorded to reduce the loan to its fair value less estimated selling costs. Therefore certain losses inherent in our non-performing one-to-four family mortgage loans are being recognized at 180 days of delinquency and annually thereafter and accordingly are charged off. The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the allowance for loan losses required on these loans. In effect, these loans have been written down to their fair value less estimated selling costs and the inherent loss has been recognized. Therefore, when reviewing the adequacy of the allowance for loan losses as a percentage of non-performing loans, the impact of these charge-offs is considered. At March 31, 2011, non-performing loans included one-to-four family mortgage loans which were 180 days or more past due totaling $257.1 million, net of $67.7 million in charge-offs related to such loans, which had a related allowance for loan losses totaling $6.9 million. Excluding these one-to-four family mortgage loans which were 180 days or more past due at March 31, 2011 and their related allowance, our ratio of the allowance for loan losses to non-performing loans would be approximately 156%, which is a non-GAAP financial measure, compared to the ratio of allowance for loan losses to non-performing loans of approximately 51%, as noted above.
We use ratio analyses as a supplemental tool for evaluating the overall reasonableness of the allowance for loan losses. The adequacy of the allowance for loan losses is ultimately determined by the actual losses and charges recognized in the portfolio. We update our loss analyses quarterly to ensure that our allowance coverage percentages are adequate and the overall allowance for loan losses is our best estimate of loss as of a particular point in time. Our 2011 first quarter analysis of loss severity on one-to-four family mortgage loans, defined as the ratio of net write-downs taken through disposition of the asset (typically the sale of REO) to the loan’s original principal balance during the twelve months ended December 31, 2010, indicated an average loss severity of approximately 26%, which remained unchanged from our analysis of loss severity in the fourth quarter of 2010. Our analysis in the 2011 first quarter primarily reviewed one-to-four family REO sales which occurred during the twelve months ended December 31, 2010 and included both full documentation and reduced documentation loans in a variety of states with varying years of origination. Our 2011 first quarter analysis of charge-offs on multi-family, commercial real estate and construction loans, primarily related to loan sales, during the twelve months ended December 31, 2010, indicated an average loss severity of approximately 30%. This compares to an average loss severity of approximately 35% in our 2010 fourth quarter analysis. We consider our average loss severity experience as a gauge in evaluating the overall adequacy of our allowance for loan losses. However, the uniqueness of each multi-family, commercial real estate and construction loan, particularly multi-family loans within New York City, many of which are rent stabilized, is also factored into our analyses. We also obtain updated estimates of collateral value on our non-performing multi-family, commercial real estate and construction loans with balances of $1.0 million or greater. We believe that using the loss experience of the past year (twelve months prior to the quarterly analysis) is reflective of the current economic and real estate environment. The ratio of the allowance for loan losses to non-performing loans was approximately 51% at March 31, 2011, which exceeds our average loss severity experience for our mortgage loan portfolios, supporting our determination that our allowance for loan losses is adequate to cover potential losses.
Net loan charge-offs totaled $19.0 million, or fifty-four basis points of average loans outstanding, annualized, for the three months ended March 31, 2011, compared to $28.3 million, or seventy-two basis points of average loans outstanding, annualized, for the three months ended March 31, 2010. The decrease in net charge-offs for the three months ended March 31, 2011, compared to the three months ended March 31, 2010, was primarily attributable to a decrease in multi-family and commercial real estate loan charge-offs. Our non-performing loans, which are comprised primarily of mortgage loans, decreased $16.9 million to $373.8 million, or 2.71% of total loans, at March 31, 2011, from $390.7 million, or 2.75% of total loans, at December 31, 2010. The decrease was primarily due to a decrease of $9.3 million in non-performing one-to-four family mortgage loans and a decrease of $7.2 million in non-performing multi-family and commercial real estate loans. We proactively manage our non-performing assets, in part, through the sale of certain delinquent and non-performing loans. If the sale and reclassification to held-for-sale of certain delinquent and non-performing loans, primarily multi-family mortgage loans, during the three months ended March 31, 2011 had not occurred, our non-performing loans would have been $9.0 million higher, which amount is gross of $3.0 million in net charge-offs and lower of cost or market write-downs taken on such loans.
We obtain updated estimates of collateral value for non-performing multi-family, commercial real estate and construction loans with balances of $1.0 million or greater and one-to-four family mortgage loans which are 180 days or more delinquent, annually, and certain other loans when
the Asset Classification Committee believes repayment of such loans may be dependent on the value of the underlying collateral. We monitor property value trends in our market areas to determine what impact, if any, such trends may have on our loan-to-value ratios and the adequacy of the allowance for loan losses.
During the 2011 first quarter, total delinquencies decreased primarily due to a decrease in non-performing loans and early stage delinquencies, continuing the trend from 2010. Net loan charge-offs decreased slightly for the 2011 first quarter compared to the 2010 fourth quarter. The national unemployment rate decreased to 8.8% for March 2011 and there were modest job gains for the quarter totaling 478,000 at the time of our analysis. We continued to update our charge-off and loss analysis during the 2011 first quarter and modified our allowance coverage percentages accordingly. As a result of these factors, our allowance for loan losses decreased compared to December 31, 2010 and totaled $189.5 million at March 31, 2011 which resulted in a provision for loan losses of $7.0 million for the 2011 first quarter.
There are no material assumptions relied on by management which have not been made apparent in our disclosures or reflected in our asset quality ratios and activity in the allowance for loan losses. We believe our allowance for loan losses has been established and maintained at levels that reflect the risks inherent in our loan portfolio, giving consideration to the composition and size of our loan portfolio, delinquencies, charge-off experience, non-accrual and non-performing loans and the current economic environment. The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at March 31, 2011 and December 31, 2010.
For further discussion of the methodology used to determine the allowance for loan losses, see “Critical Accounting Policies-Allowance for Loan Losses” and for further discussion of our loan portfolio composition and non-performing loans, see “Asset Quality” and Note 4 of Notes to Consolidated Financial Statements in Item 1, “Financial Statements (Unaudited).”
Non-Interest Income
Non-interest income decreased $649,000 to $18.0 million for the three months ended March 31, 2011, from $18.7 million for the three months ended March 31, 2010. This decrease was primarily due to a decrease in customer service fees, partially offset by an increase in mortgage banking income, net.
Customer service fees decreased $1.6 million to $11.7 million for the three months ended March 31, 2011, from $13.3 million for the three months ended March 31, 2010. This decrease was primarily due to decreases in overdraft fees related to transaction accounts and commissions on sales of annuities.
Mortgage banking income, net, which includes loan servicing fees, net gain on sales of loans, amortization of MSR and valuation allowance adjustments for the impairment of MSR, increased $876,000 to $2.4 million for the three months ended March 31, 2011, from $1.6 million for the three months ended March 31, 2010, primarily due to an increase in net gain on sales of loans and an increase in the recovery recorded in the valuation allowance for the impairment of MSR. The increase in net gain on sales of loans reflects an increase in the volume of loans sold and more favorable pricing opportunities during the three months ended March 31, 2011, compared to the three months ended March 31, 2010. We generally sell our fifteen and thirty year
conforming fixed rate one-to-four family mortgage loan production. The expanded conforming loans limits and historic low interest rates on thirty year conforming mortgages has resulted in increased consumer demand for these fixed rate products resulting in higher levels of loans sold. The increase in the recovery recorded in the valuation allowance for the impairment of MSR for the three months ended March 31, 2011, compared to the three months ended March 31, 2010, primarily reflects a greater reduction in the projected loan prepayment speeds from December 31, 2010 to March 31, 2011, than from December 31, 2009 to March 31, 2010.
Non-Interest Expense
Non-interest expense increased $1.4 million to $69.6 million for the three months ended March 31, 2011 primarily due to increases in compensation and benefits expense and other non-interest expense, partially offset by a decrease in FDIC insurance premium expense. Our percentage of general and administrative expense to average assets, annualized, increased to 1.55% for the three months ended March 31, 2011, from 1.35% for the three months ended March 31, 2010, primarily due to the decrease in average assets.
Compensation and benefits expense increased $1.2 million to $36.5 million for the three months ended March 31, 2011, from $35.3 million for the three months ended March 31, 2010, primarily due to increases in net periodic cost of pension and other postretirement benefits, stock-based compensation costs, salaries and officer incentive accruals, partially offset by a decrease in ESOP related expense. Other non-interest expense increased $1.2 million to $9.3 million for the three months ended March 31, 2011, from $8.1 million for the three months ended March 31, 2010, primarily due to an increase in REO related expense to $3.1 million for the three months ended March 31, 2011, compared to $1.8 million for the three months ended March 31, 2010.
FDIC insurance premium expense decreased $1.1 million to $5.5 million for the three months ended March 31, 2011, from $6.6 million for the three months ended March 31, 2010, primarily due to a decrease in our deposit assessment base. On February 7, 2011, the FDIC adopted a final rule that redefines the assessment base for deposit insurance assessments as average consolidated total assets minus average tangible equity, rather than on deposit bases, as required by the Reform Act, and revises the risk-based assessment system for all large insured depository institutions which will result in significantly higher FDIC insurance premium expense in the 2011 second quarter. For further discussion of the changes in FDIC insurance premiums, see “Federally Chartered Savings Association Regulation – Insurance of Deposit Accounts,” in Part I, Item 1, of our 2010 Annual Report on Form 10-K and Part II, Item 1A, “Risk Factors.”
Income Tax Expense
For the three months ended March 31, 2011, income tax expense totaled $15.6 million, representing an effective tax rate of 36.2%, compared to $6.9 million for the three months ended March 31, 2010, representing an effective tax rate of 34.7%. The increase in the effective tax rate for the three months ended March 31, 2011, compared to the three months ended March 31, 2010, reflects a significant increase in pre-tax book income without any significant change in net favorable permanent differences.
Asset Quality
One of our key operating objectives has been and continues to be to maintain a high level of asset quality. We continue to employ sound underwriting standards for new loan originations. Through a variety of strategies, including, but not limited to, collection efforts and the marketing of delinquent and non-performing loans and foreclosed properties, we have been proactive in addressing problem and non-performing assets which, in turn, has helped to maintain the strength of our financial condition.
The composition of our loan portfolio, by property type, has remained relatively consistent over the last several years. At March 31, 2011 our loan portfolio was comprised of 78% one-to-four family mortgage loans, 15% multi-family mortgage loans, 5% commercial real estate loans and 2% other loan categories. This compares to 77% one-to-four family mortgage loans, 16% multi-family mortgage loans, 5% commercial real estate loans and 2% other loan categories at December 31, 2010. At March 31, 2011 and December 31, 2010, full documentation loans comprised 84% of our one-to-four family mortgage loan portfolio and 87% of our total mortgage loan portfolio.
The following table provides further details on the composition of our one-to-four family mortgage loan portfolio in dollar amounts and percentages of the portfolio at the dates indicated.
| |
|
At March 31, 2011
|
|
At December 31, 2010
|
| |
|
|
Percent
|
|
|
Percent
|
|
(Dollars in Thousands)
|
|
Amount
|
of Total
|
|
Amount
|
of Total
|
|
One-to-four family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full documentation interest-only (1)
|
|
$
|
3,550,148
|
|
33.34
|
%
|
|
$
|
3,811,762
|
|
35.12
|
%
|
|
Full documentation amortizing
|
|
|
5,380,276
|
|
50.54
|
|
|
|
5,272,171
|
|
48.57
|
|
|
Reduced documentation interest-only (1)(2)
|
|
|
1,283,139
|
|
12.05
|
|
|
|
1,331,294
|
|
12.26
|
|
|
Reduced documentation amortizing (2)
|
|
|
433,561
|
|
4.07
|
|
|
|
439,834
|
|
4.05
|
|
|
Total one-to-four family
|
|
$
|
10,647,124
|
|
100.00
|
%
|
|
$
|
10,855,061
|
|
100.00
|
%
|
|
(1)
|
Interest-only loans require the borrower to pay interest only during the first ten years of the loan term. After the tenth anniversary of the loan, principal and interest payments are required to amortize the loan over the remaining loan term. Includes interest-only hybrid ARM loans which were underwritten at the initial note rate, which may have been a discounted rate, totaling $2.80 billion at March 31, 2011 and $2.91 billion at December 31, 2010.
|
|
(2)
|
Includes SISA loans totaling $265.7 million at March 31, 2011 and $272.7 million at December 31, 2010.
|
We continue to adhere to prudent underwriting standards. We underwrite our one-to-four family mortgage loans primarily based upon our evaluation of the borrower’s ability to pay. We do not originate negative amortization loans, payment option loans or other loans with short-term interest-only periods. Additionally, we do not originate one-year ARM loans. The ARM loans in our portfolio which currently reprice annually represent hybrid ARM loans (interest-only and amortizing) which have passed their initial fixed rate period. In 2006, we began underwriting our one-to-four family interest-only hybrid ARM loans based on a fully amortizing loan (in effect, underwriting interest-only hybrid ARM loans as if they were amortizing hybrid ARM loans). Prior to 2007, we would underwrite our one-to-four family interest-only hybrid ARM loans using the initial note rate, which may have been a discounted rate. In 2007, we began underwriting our one-to-four family interest-only hybrid ARM loans at the higher of the fully indexed rate or the initial note rate. In 2009, we began underwriting our one-to-four family interest-only and amortizing hybrid ARM loans at the higher of the fully indexed rate, the initial
note rate or 6.00%. During the 2010 second quarter, we reduced the underwriting interest rate floor from 6.00% to 5.00% to reflect the current interest rate environment. During the 2010 third quarter, we stopped offering interest-only loans. Our reduced documentation loans are comprised primarily of SIFA (stated income, full asset) loans. To a lesser extent, reduced documentation loans in our portfolio also include SISA (stated income, stated asset) loans. SIFA and SISA loans required a prospective borrower to complete a standard mortgage loan application. During the 2007 fourth quarter, we stopped offering reduced documentation loans.
The market does not apply a uniform definition of what constitutes “subprime” lending. Our reference to subprime lending relies upon the “Statement on Subprime Mortgage Lending” issued by the OTS and the other federal bank regulatory agencies, or the Agencies, on June 29, 2007, which further references the “Expanded Guidance for Subprime Lending Programs,” or the Expanded Guidance, issued by the Agencies by press release dated January 31, 2001. In the Expanded Guidance, the Agencies indicated that subprime lending does not refer to individual subprime loans originated and managed, in the ordinary course of business, as exceptions to prime risk selection standards. The Agencies recognize that many prime loan portfolios will contain such accounts. The Agencies also excluded prime loans that develop credit problems after acquisition and community development loans from the subprime arena. According to the Expanded Guidance, subprime loans are other loans to borrowers which display one or more characteristics of reduced payment capacity. Five specific criteria, which are not intended to be exhaustive and are not meant to define specific parameters for all subprime borrowers and may not match all markets or institutions’ specific subprime definitions, are set forth, including having a credit (FICO) score of 660 or below. However, we do not associate a particular FICO score with our definition of subprime loans. Consistent with the guidance provided by federal bank regulatory agencies, we consider subprime loans to be loans to borrowers with a credit history containing one or more of the following at the time of origination: (1) bankruptcy within the last four years; (2) foreclosure within the last two years; or (3) two 30 day mortgage delinquencies in the last twelve months. In addition, subprime loans generally display the risk layering of the following features: high debt-to-income ratio; low or no cash reserves; loan-to-value ratios over 90%; short-term interest-only periods or negative amortization loan products; or reduced or no documentation loans. Our current underwriting standards would generally preclude us from originating loans to borrowers with a credit history containing a bankruptcy or a foreclosure within the last five years or two 30 day mortgage delinquencies in the last twelve months. Based upon the definition and exclusions described above, we are a prime lender. Within our portfolio of one-to-four family mortgage loans, we have loans to borrowers who had FICO scores of 660 or below at the time of origination. However, as a portfolio lender we underwrite our loans considering all credit criteria, as well as collateral value, and do not base our underwriting decisions solely on FICO scores. Based on our underwriting criteria, particularly the average loan-to-value ratios at origination, we consider our loans to borrowers with FICO scores of 660 or below at origination to be prime loans.
Although FICO scores are considered as part of our underwriting process, they have not always been recorded on our mortgage loan system and are not available for all of the one-to-four family mortgage loans on our mortgage loan system. However, substantially all of our one-to-four family mortgage loans originated since March 2005 have credit scores available on our mortgage loan system. At March 31, 2011, one-to-four family mortgage loans which had FICO scores available on our mortgage loan system totaled $9.24 billion, or 87% of our total one-to-four family mortgage loan portfolio, of which $464.4 million, or 5%, had FICO scores of 660 or below at the date of origination. At December 31, 2010, one-to-four family mortgage loans
which had FICO scores available on our mortgage loan system totaled $9.39 billion, or 86% of our total one-to-four family mortgage loan portfolio, of which $473.3 million, or 5%, had FICO scores of 660 or below at the date of origination. Of our one-to-four family mortgage loans to borrowers with known FICO scores of 660 or below, 73% are interest-only hybrid ARM loans, 26% are amortizing hybrid ARM loans and 1% are amortizing fixed rate loans at March 31, 2011 and at December 31, 2010. In addition, 67% of our loans to borrowers with known FICO scores of 660 or below were full documentation loans and 33% were reduced documentation loans at March 31, 2011 and at December 31, 2010. We believe the aforementioned loans, when originated, were amply collateralized and otherwise conformed to our prime lending standards and do not present a greater risk of loss or other asset quality risk relative to comparable loans in our portfolio to other borrowers with higher credit scores. We do not have FICO scores recorded on our mortgage loan system for 13% of our one-to-four family mortgage loans at March 31, 2011 and 14% of our one-to-four family mortgage loans at December 31, 2010. Of our one-to-four family mortgage loans without a FICO score available on our mortgage loan system at March 31, 2011, 67% are amortizing hybrid ARM loans, 26% are interest-only hybrid ARM loans and 7% are amortizing fixed rate loans, and at December 31, 2010, 66% are amortizing hybrid ARM loans, 26% are interest-only hybrid ARM loans and 8% are amortizing fixed rate loans.
Non-Performing Assets
The following table sets forth information regarding non-performing assets at the dates indicated.
|
(Dollars in Thousands)
|
|
At March 31, 2011 |
|
At December 31, 2010 |
|
Non-accrual delinquent mortgage loans
|
|
$
|
368,117
|
|
|
$
|
384,291
|
|
|
Non-accrual delinquent consumer and other loans
|
|
|
5,084
|
|
|
|
5,574
|
|
|
Mortgage loans delinquent 90 days or more and
|
|
|
|
|
|
|
|
|
|
still accruing interest (1)
|
|
|
553
|
|
|
|
845
|
|
|
Total non-performing loans (2)
|
|
|
373,754
|
|
|
|
390,710
|
|
|
REO, net (3)
|
|
|
61,419
|
|
|
|
63,782
|
|
|
Total non-performing assets
|
|
$
|
435,173
|
|
|
$
|
454,492
|
|
|
Non-performing loans to total loans
|
|
|
2.71
|
%
|
|
|
2.75
|
%
|
|
Non-performing loans to total assets
|
|
|
2.11
|
|
|
|
2.16
|
|
|
Non-performing assets to total assets
|
|
|
2.46
|
|
|
|
2.51
|
|
|
Allowance for loan losses to non-performing loans
|
|
|
50.70
|
|
|
|
51.57
|
|
|
Allowance for loan losses to total loans
|
|
|
1.37
|
|
|
|
1.42
|
|
|
(1)
|
Mortgage loans delinquent 90 days or more and still accruing interest consist primarily of loans delinquent 90 days or more as to their maturity date but not their interest due.
|
|
(2)
|
Non-performing loans exclude loans which have been restructured and are accruing and performing in accordance with the restructured terms for a satisfactory period of time, generally six months. Restructured accruing loans totaled $69.7 million at March 31, 2011 and $49.2 million at December 31, 2010. Restructured loans included in non-performing loans totaled $35.3 million at March 31, 2011 and $47.5 million at December 31, 2010.
|
|
(3)
|
REO, all of which are one-to-four family properties, is net of allowance for losses totaling $1.8 million at March 31, 2011 and $1.5 million at December 31, 2010.
|
Total non-performing assets decreased $19.3 million to $435.2 million at March 31, 2011, from $454.5 million at December 31, 2010. This decrease was primarily due to a decrease in non-performing loans, the most significant component of non-performing assets, which decreased $16.9 million to $373.8 million at March 31, 2011, from $390.7 million at December 31, 2010. The decrease in non-performing loans was primarily due to a decrease of $9.3 million in non-performing one-to-four family mortgage loans and a decrease of $7.2 million in non-performing
multi-family and commercial real estate loans. Non-performing one-to-four family mortgage loans reflect a greater concentration in non-performing reduced documentation loans. Reduced documentation loans represent only 16% of the one-to-four family mortgage loan portfolio, yet represent 55% of non-performing one-to-four family mortgage loans at March 31, 2011. The ratio of non-performing loans to total loans decreased to 2.71% at March 31, 2011, from 2.75% at December 31, 2010. The ratio of non-performing assets to total assets decreased to 2.46% at March 31, 2011, from 2.51% at December 31, 2010.
We proactively manage our non-performing assets, in part, through the sale of certain delinquent and non-performing loans. During the three months ended March 31, 2011, we sold $6.6 million, net of charge-offs of $2.3 million, of delinquent and non-performing mortgage loans, primarily multi-family and one-to-four family mortgage loans. In addition, included in loans held-for-sale, net, are delinquent and non-performing loans, primarily multi-family and commercial real estate loans, totaling $9.8 million, net of charge-offs of $5.9 million and a $662,000 lower of cost or market valuation allowance, at March 31, 2011 and $10.9 million, net of charge-offs of $5.2 million and a $169,000 lower of cost or market valuation allowance, at December 31, 2010. Such loans are excluded from non-performing loans, non-performing assets and related ratios. Assuming we did not sell or reclassify to held-for-sale any delinquent and non-performing loans during the 2011 first quarter, at March 31, 2011 our non-performing loans and non-performing assets would have been $9.0 million higher and our allowance for loan losses would have been $3.0 million higher. Additionally, the ratio of non-performing loans to total loans would have been 7 basis points higher, the ratio of non-performing assets to total assets would have been 5 basis points higher and the ratio of the allowance for loan losses to non-performing loans would have been 42 basis points lower.
The following table provides further details on the composition of our non-performing one-to-four family mortgage loans in dollar amounts and percentages of the portfolio, at the dates indicated.
| |
|
At March 31, 2011
|
|
At December 31, 2010
|
| |
|
|
Percent
|
|
|
Percent
|
|
(Dollars in Thousands)
|
|
Amount
|
of Total
|
|
Amount
|
of Total
|
|
Non-performing one-to-four family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full documentation interest-only
|
|
$
|
110,944
|
|
33.31
|
%
|
|
$
|
105,982
|
|
30.96
|
%
|
|
Full documentation amortizing
|
|
|
38,930
|
|
11.69
|
|
|
|
45,720
|
|
13.36
|
|
|
Reduced documentation interest-only
|
|
|
149,876
|
|
45.01
|
|
|
|
157,464
|
|
46.00
|
|
|
Reduced documentation amortizing
|
|
|
33,279
|
|
9.99
|
|
|
|
33,149
|
|
9.68
|
|
|
Total non-performing one-to-four family
|
|
$
|
333,029
|
|
100.00
|
%
|
|
$
|
342,315
|
|
100.00
|
%
|
The following table provides details on the geographic composition of both our total and non-performing one-to-four family mortgage loans as of March 31, 2011.
| |
|
One-to-Four Family Mortgage Loans
|
| |
|
At March 31, 2011
|
| |
|
|
|
|
|
|
|
Percent of
|
|
Non-Performing
|
| |
|
|
|
|
|
Total
|
|
Total
|
|
Loans
|
| |
|
|
|
Percent of
|
|
Non-Performing
|
|
Non-Performing
|
|
as Percent of
|
|
(Dollars in Millions)
|
|
Total Loans
|
|
Total Loans
|
|
Loans
|
|
Loans
|
|
State Totals
|
|
State:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
$
|
3,004.2
|
|
|
|
28.2
|
%
|
|
$
|
42.3
|
|
|
|
12.7
|
%
|
|
|
1.41
|
%
|
|
Illinois
|
|
|
1,325.4
|
|
|
|
12.4
|
|
|
|
48.7
|
|
|
|
14.6
|
|
|
|
3.67
|
|
|
Connecticut
|
|
|
954.3
|
|
|
|
9.0
|
|
|
|
33.1
|
|
|
|
9.9
|
|
|
|
3.47
|
|
|
California
|
|
|
803.3
|
|
|
|
7.5
|
|
|
|
38.0
|
|
|
|
11.4
|
|
|
|
4.73
|
|
|
New Jersey
|
|
|
794.7
|
|
|
|
7.5
|
|
|
|
51.8
|
|
|
|
15.6
|
|
|
|
6.52
|
|
|
Massachusetts
|
|
|
736.4
|
|
|
|
6.9
|
|
|
|
8.4
|
|
|
|
2.5
|
|
|
|
1.14
|
|
|
Virginia
|
|
|
665.7
|
|
|
|
6.3
|
|
|
|
19.0
|
|
|
|
5.7
|
|
|
|
2.85
|
|
|
Maryland
|
|
|
645.5
|
|
|
|
6.1
|
|
|
|
46.2
|
|
|
|
13.9
|
|
|
|
7.16
|
|
|
Washington
|
|
|
311.7
|
|
|
|
2.9
|
|
|
|
1.1
|
|
|
|
0.3
|
|
|
|
0.35
|
|
|
Florida
|
|
|
219.0
|
|
|
|
2.1
|
|
|
|
23.3
|
|
|
|
7.0
|
|
|
|
10.64
|
|
|
All other states (1)
|
|
|
1,186.9
|
|
|
|
11.1
|
|
|
|
21.1
|
|
|
|
6.4
|
|
|
|
1.78
|
|
|
Total
|
|
$ |
10,647.1
|
|
|
|
100.0 |
%
|
|
$ |
333.0 |
|
|
|
100.0 |
%
|
|
|
3.13 |
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes 27 states and Washington, D.C.
|
At March 31, 2011, the geographic composition of our multi-family and commercial real estate mortgage loan portfolio was 93% in the New York metropolitan area, 3% in Florida, 2% in Pennsylvania and 2% in various other states and the geographic composition of non-performing multi-family and commercial real estate mortgage loans was 73% in the New York metropolitan area, 17% in Florida and 10% in Illinois.
We discontinue accruing interest on loans when they become 90 days delinquent as to their payment due date. In addition, we reverse all previously accrued and uncollected interest through a charge to interest income. While loans are in non-accrual status, interest due is monitored and income is recognized only to the extent cash is received until a return to accrual status is warranted. If all non-accrual loans at March 31, 2011 and 2010 had been performing in accordance with their original terms, we would have recorded interest income, with respect to such loans, of $5.4 million for the three months ended March 31, 2011 and $6.4 million for the three months ended March 31, 2010. This compares to actual payments recorded as interest income, with respect to such loans, of $1.1 million for the three months ended March 31, 2011 and $1.3 million for the three months ended March 31, 2010.
We may agree to modify the contractual terms of a borrower’s loan. In cases where such modifications represent a concession to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring. Loans modified in a troubled debt restructuring are placed on non-accrual status until we determine that future collection of principal and interest is reasonably assured, which requires that the borrower demonstrate performance according to the restructured terms generally for a period of six months. Loans modified in a troubled debt restructuring which are included in non-accrual loans totaled $35.3 million at March 31, 2011 and $47.5 million at December 31, 2010. Excluded from non-performing assets are restructured loans that have complied with the terms of their restructure agreement for a satisfactory period of time and have, therefore, been returned to accrual status.
Restructured accruing loans totaled $69.7 million at March 31, 2011 and $49.2 million at December 31, 2010.
In addition to non-performing loans, we had $203.1 million of potential problem loans at March 31, 2011, compared to $170.5 million at December 31, 2010. Such loans include loans which are 60-89 days delinquent as shown in the following table and certain other internally classified loans.
Delinquent Loans
The following table shows a comparison of delinquent loans at the dates indicated. Delinquent loans are reported based on the number of days the loan payments are past due.
| |
|
30-59 Days
Past Due
|
|
60-89 Days
Past Due
|
|
90 Days or More
Past Due
|
| |
|
Number
|
|
|
|
|
|
Number
|
|
|
|
|
|
Number
|
|
|
|
|
| |
|
of
|
|
|
|
|
|
of
|
|
|
|
|
|
of
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Loans
|
|
|
Amount
|
|
Loans
|
|
|
Amount
|
|
Loans
|
|
|
Amount
|
|
At March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
|
347 |
|
|
$ |
110,473 |
|
|
|
|
133 |
|
|
$ |
48,109 |
|
|
|
|
1,032 |
|
|
$ |
333,029 |
|
|
|
Multi-family
|
|
|
35 |
|
|
|
34,506 |
|
|
|
|
15 |
|
|
|
11,479 |
|
|
|
|
28 |
|
|
|
25,540 |
|
|
|
Commercial real estate
|
|
|
11 |
|
|
|
7,628 |
|
|
|
|
3 |
|
|
|
855 |
|
|
|
|
3 |
|
|
|
4,004 |
|
|
|
Construction
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
3 |
|
|
|
6,097 |
|
|
|
Consumer and other loans
|
|
|
66 |
|
|
|
2,468 |
|
|
|
|
27 |
|
|
|
1,719 |
|
|
|
|
60 |
|
|
|
5,084 |
|
|
|
Total delinquent loans
|
|
|
459 |
|
|
$ |
155,075 |
|
|
|
|
178 |
|
|
$ |
62,162 |
|
|
|
|
1,126 |
|
|
$ |
373,754 |
|
|
|
Delinquent loans to total loans
|
|
|
|
|
|
|
1.12 |
|
%
|
|
|
|
|
|
|
0.45 |
|
%
|
|
|
|
|
|
|
2.71 |
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
|
396 |
|
|
$ |
125,103 |
|
|
|
|
135 |
|
|
$ |
47,862 |
|
|
|
|
1,040 |
|
|
$ |
342,315 |
|
|
|
Multi-family
|
|
|
40 |
|
|
|
33,627 |
|
|
|
|
7 |
|
|
|
6,056 |
|
|
|
|
30 |
|
|
|
30,195 |
|
|
|
Commercial real estate
|
|
|
8 |
|
|
|
2,925 |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
3 |
|
|
|
6,529 |
|
|
|
Construction
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
3 |
|
|
|
6,097 |
|
|
|
Consumer and other loans
|
|
|
100 |
|
|
|
4,155 |
|
|
|
|
22 |
|
|
|
421 |
|
|
|
|
58 |
|
|
|
5,574 |
|
|
|
Total delinquent loans
|
|
|
544 |
|
|
$ |
165,810 |
|
|
|
|
164 |
|
|
$ |
54,339 |
|
|
|
|
1,134 |
|
|
$ |
390,710 |
|
|
|
Delinquent loans to total loans
|
|
|
|
|
|
|
1.17 |
|
%
|
|
|
|
|
|
|
0.38 |
|
%
|
|
|
|
|
|
|
2.75 |
|
%
|
Allowance for Loan Losses
Activity in the allowance for loan losses is summarized as follows:
| |
|
For the Three
Months Ended
March 31, 2011
|
|
(In Thousands)
|
|
|
Balance at January 1, 2011
|
|
$
|
201,499
|
|
|
Provision charged to operations
|
|
|
7,000
|
|
|
Charge-offs:
|
|
|
|
|
|
One-to-four family
|
|
|
(17,711
|
)
|
|
Multi-family
|
|
|
(2,944
|
)
|
|
Consumer and other loans
|
|
|
(755
|
)
|
|
Total charge-offs
|
|
|
(21,410
|
)
|
|
Recoveries:
|
|
|
|
|
|
One-to-four family
|
|
|
2,365
|
|
|
Multi-family
|
|
|
6
|
|
|
Consumer and other loans
|
|
|
26
|
|
|
Total recoveries
|
|
|
2,397
|
|
|
Net charge-offs (1)
|
|
|
(19,013
|
)
|
|
Balance at March 31, 2011
|
|
$
|
189,486
|
|
| (1) |
Includes $9.6 million of net charge-offs related to one-to-four family reduced documentation mortgage loans and $3.0 million of net charge-offs related to certain delinquent and non-performing loans transferred to held-for-sale.
|
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
As a financial institution, the primary component of our market risk is interest rate risk. The objective of our interest rate risk management policy is to maintain an appropriate mix and level of assets, liabilities and off-balance sheet items to enable us to meet our earnings and/or growth objectives, while maintaining specified minimum capital levels as required by the OTS, in the case of Astoria Federal, and as established by our Board of Directors. We use a variety of analyses to monitor, control and adjust our asset and liability positions, primarily interest rate sensitivity gap analysis, or gap analysis, and net interest income sensitivity analysis. Additional interest rate risk modeling is done by Astoria Federal in conformity with OTS requirements.
Gap Analysis
Gap analysis measures the difference between the amount of interest-earning assets anticipated to mature or reprice within specific time periods and the amount of interest-bearing liabilities anticipated to mature or reprice within the same time periods. Gap analysis does not indicate the impact of general interest rate movements on our net interest income because the actual repricing dates of various assets and liabilities will differ from our estimates and it does not give consideration to the yields and costs of the assets and liabilities or the projected yields and costs to replace or retain those assets and liabilities. Callable features of certain assets and liabilities, in addition to the foregoing, may also cause actual experience to vary from the analysis.
The following table, referred to as the Gap Table, sets forth the amount of interest-earning assets and interest-bearing liabilities outstanding at March 31, 2011 that we anticipate will reprice or mature in each of the future time periods shown using certain assumptions based on our historical experience and other market-based data available to us. The Gap Table includes $2.60 billion of callable borrowings classified according to their maturity dates, primarily in the more
than one year to three years and more than five years categories, which are callable within one year and at various times thereafter. In addition, the Gap Table includes callable securities with an amortized cost of $52.9 million classified according to their maturity dates, in the more than five years category, which are callable within one year and at various times thereafter. The classification of callable borrowings and securities according to their maturity dates is based on our experience with, and expectations of, these types of instruments and the current interest rate environment. As indicated in the Gap Table, our one-year cumulative gap at March 31, 2011 was positive 4.92% compared to positive 5.18% at December 31, 2010.
| |
|
At March 31, 2011
|
| |
|
|
|
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)
|
|
$
|
4,341,903
|
|
|
$
|
4,123,013
|
|
|
$
|
3,362,797
|
|
|
$
|
1,222,071
|
|
|
$
|
13,049,784
|
|
|
Consumer and other loans (1)
|
|
|
292,704
|
|
|
|
3,439
|
|
|
|
21
|
|
|
|
101
|
|
|
|
296,265
|
|
|
Repurchase agreements and interest-earning cash accounts
|
|
|
172,241
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
172,241
|
|
|
Securities available-for-sale
|
|
|
154,051
|
|
|
|
177,453
|
|
|
|
103,591
|
|
|
|
32,375
|
|
|
|
467,470
|
|
|
Securities held-to-maturity
|
|
|
643,808
|
|
|
|
643,321
|
|
|
|
420,222
|
|
|
|
389,692
|
|
|
|
2,097,043
|
|
|
FHLB-NY stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
136,613
|
|
|
|
136,613
|
|
|
Total interest-earning assets
|
|
|
5,604,707
|
|
|
|
4,947,226
|
|
|
|
3,886,631
|
|
|
|
1,780,852
|
|
|
|
16,219,416
|
|
|
Net unamortized purchase premiums and deferred costs (2)
|
|
|
34,211
|
|
|
|
31,310
|
|
|
|
24,399
|
|
|
|
10,652
|
|
|
|
100,572
|
|
|
Net interest-earning assets (3)
|
|
|
5,638,918
|
|
|
|
4,978,536
|
|
|
|
3,911,030
|
|
|
|
1,791,504
|
|
|
|
16,319,988
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
|
319,478
|
|
|
|
543,918
|
|
|
|
543,918
|
|
|
|
1,358,743
|
|
|
|
2,766,057
|
|
|
Money market
|
|
|
202,217
|
|
|
|
79,218
|
|
|
|
79,218
|
|
|
|
26,017
|
|
|
|
386,670
|
|
|
NOW and demand deposit
|
|
|
153,730
|
|
|
|
307,462
|
|
|
|
307,462
|
|
|
|
1,015,664
|
|
|
|
1,784,318
|
|
|
Liquid CDs
|
|
|
414,652
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
414,652
|
|
|
Certificates of deposit
|
|
|
2,629,857
|
|
|
|
2,424,958
|
|
|
|
1,068,827
|
|
|
|
-
|
|
|
|
6,123,642
|
|
|
Borrowings, net
|
|
|
1,048,628
|
|
|
|
1,449,802
|
|
|
|
200,000
|
|
|
|
1,878,866
|
|
|
|
4,577,296
|
|
|
Total interest-bearing liabilities
|
|
|
4,768,562
|
|
|
|
4,805,358
|
|
|
|
2,199,425
|
|
|
|
4,279,290
|
|
|
|
16,052,635
|
|
|
Interest sensitivity gap
|
|
|
870,356 |
|
|
|
173,178 |
|
|
|
1,711,605 |
|
|
|
(2,487,786 |
) |
|
$ |
267,353 |
|
|
Cumulative interest sensitivity gap
|
|
$
|
870,356
|
|
|
$
|
1,043,534
|
|
|
$
|
2,755,139
|
|
|
$
|
267,353
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative interest sensitivity gap as a percentage of total assets
|
|
|
4.92
|
%
|
|
|
5.89
|
%
|
|
|
15.56
|
%
|
|
|
1.51
|
%
|
|
|
|
|
|
Cumulative net interest-earning assets as a percentage of interest-bearing liabilities
|
|
|
118.25
|
%
|
|
|
110.90
|
%
|
|
|
123.40
|
%
|
|
|
101.67
|
%
|
|
|
|
|
|
(1)
|
Mortgage loans and consumer and other loans include loans held-for-sale and exclude non-performing loans and the allowance for loan losses.
|
|
(2)
|
Net unamortized purchase premiums and deferred costs are prorated.
|
|
(3)
|
Includes securities available-for-sale at amortized cost.
|
Net Interest Income Sensitivity Analysis
In managing interest rate risk, we also use an internal income simulation model for our net interest income sensitivity analyses. These analyses measure changes in projected net interest income over various time periods resulting from hypothetical changes in interest rates. The interest rate scenarios most commonly analyzed reflect gradual and reasonable changes over a specified time period, which is typically one year. The base net interest income projection
utilizes similar assumptions as those reflected in the Gap Table, assumes that cash flows are reinvested in similar assets and liabilities and that interest rates as of the reporting date remain constant over the projection period. For each alternative interest rate scenario, corresponding changes in the cash flow and repricing assumptions of each financial instrument are made to determine the impact on net interest income.
We perform analyses of interest rate increases and decreases of up to 300 basis points although changes in interest rates of 200 basis points is a more common and reasonable scenario for analytical purposes. Assuming the entire yield curve was to increase 200 basis points, through quarterly parallel increments of 50 basis points, our projected net interest income for the twelve month period beginning April 1, 2011 would increase by approximately 3.82% from the base projection. At December 31, 2010, in the up 200 basis point scenario, our projected net interest income for the twelve month period beginning January 1, 2011 would have increased by approximately 5.04% from the base projection. The current low interest rate environment prevents us from performing an income simulation for a decline in interest rates of the same magnitude and timing as our rising interest rate simulation, since certain asset yields, liability costs and related indices are below 2.00%. However, assuming the entire yield curve was to decrease 100 basis points, through quarterly parallel decrements of 25 basis points, our projected net interest income for the twelve month period beginning April 1, 2011 would decrease by approximately 3.49% from the base projection. At December 31, 2010, in the down 100 basis point scenario, our projected net interest income for the twelve month period beginning January 1, 2011 would have decreased by approximately 5.24% from the base projection. The down 100 basis point scenarios include some limitations as well since certain indices, yields and costs are already below 1.00%.
Various shortcomings are inherent in both gap analyses and net interest income sensitivity analyses. Certain assumptions may not reflect the manner in which actual yields and costs respond to market changes. Similarly, prepayment estimates and similar assumptions are subjective in nature, involve uncertainties and, therefore, cannot be determined with precision. Changes in interest rates may also affect our operating environment and operating strategies as well as those of our competitors. In addition, certain adjustable rate assets have limitations on the magnitude of rate changes over specified periods of time. Accordingly, although our net interest income sensitivity analyses may provide an indication of our interest rate risk exposure, such analyses are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and our actual results will differ. Additionally, certain assets, liabilities and items of income and expense which may be affected by changes in interest rates, albeit to a much lesser degree, and which do not affect net interest income, are excluded from this analysis. These include income from bank owned life insurance and changes in the fair value of MSR. With respect to these items alone, and assuming the entire yield curve was to increase 200 basis points, through quarterly parallel increments of 50 basis points, our projected net income for the twelve month period beginning April 1, 2011 would increase by approximately $4.9 million. Conversely, assuming the entire yield curve was to decrease 100 basis points, through quarterly parallel decrements of 25 basis points, our projected net income for the twelve month period beginning April 1, 2011 would decrease by approximately $3.2 million with respect to these items alone.
For further information regarding our market risk and the limitations of our gap analysis and net interest income sensitivity analysis, see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” included in our 2010 Annual Report on Form 10-K.
ITEM 4. Controls and Procedures
George L. Engelke, Jr., our Chairman and Chief Executive Officer, and Frank E. Fusco, our Executive Vice President, Treasurer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2011. Based upon their evaluation, they each found that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In the ordinary course of our business, we are routinely made a defendant in or a party to pending or threatened legal actions or proceedings which, in some cases, seek substantial monetary damages from or other forms of relief against us. In our opinion, after consultation with legal counsel, we believe it unlikely that such actions or proceedings will have a material adverse effect on our financial condition, results of operations or liquidity.
City of New York Notice of Determination
By “Notice of Determination” dated September 14, 2010, the City of New York has notified us of an alleged tax deficiency in the amount of $5.2 million, including interest and penalties, related to our 2006 tax year. The deficiency relates to our operation of two subsidiaries of Astoria Federal, Fidata and AF Mortgage. Fidata is a passive investment company which maintains offices in Connecticut. AF Mortgage is an operating subsidiary through which, prior to 2011, Astoria Federal engaged in lending activities outside the State of New York. We disagree with the assertion of the tax deficiency and we filed a Petition for Hearing with the City of New York on December 6, 2010 to oppose the Notice of Determination. At this time, management believes it is more likely than not that we will succeed in refuting the City of New York’s position, although defense costs may be significant. Accordingly, no liability or reserve has been recognized in our consolidated statement of financial condition at March 31, 2011 with respect to this matter.
No assurance can be given as to whether or to what extent we will be required to pay the amount of the tax deficiency asserted by the City of New York, whether additional tax will be assessed for years subsequent to 2006, that this matter will not be costly to oppose, that this matter will not have an impact on our financial condition or results of operations or that, ultimately, any such impact will not be material.
Automated Transactions LLC Litigation
On November 20, 2009, an action entitled Automated Transactions LLC v. Astoria Financial Corporation and Astoria Federal Savings and Loan Association was commenced in the Southern District Court against us by Automated Transactions LLC, alleging patent infringement involving integrated banking and transaction machines, including automated teller machines, that we utilize. We were served with the summons and complaint in such action on March 2, 2010. The plaintiff also filed a similar suit on the same day against another financial institution and its holding company. The plaintiff seeks unspecified monetary damages and an injunction preventing us from continuing to utilize the allegedly infringing machines. We are vigorously defending this lawsuit, and filed an answer and counterclaims to the plaintiff’s complaint on March 23, 2010, to which the plaintiff filed a reply on April 12, 2010.
On May 18, 2010 the plaintiff filed an amended complaint at the direction of the Southern District Court, containing substantially the same allegations as the original complaint. On May 27, 2010, we moved to dismiss the amended complaint. On March 10, 2011, the Southern District Court entered an order on the record that dismissed all claims against Astoria Financial Corporation but denied the motion to dismiss the claims against Astoria Federal for alleged direct patent infringement. The order also dismissed in part the claims against Astoria Federal for alleged inducement of our customers to violate plaintiff’s patents and for Astoria Federal’s allegedly willful violation of the plaintiff’s patents, allowing claims to continue only for alleged inducement and willful infringement after our receiving notice of the pending suit from plaintiff’s counsel. Based on the Southern District Court’s ruling, on March 31, 2011, we answered the amended complaint substantially denying the allegations of the amended complaint.
We have tendered requests for indemnification from the manufacturer and from the transaction processor utilized with respect to the integrated banking and transaction machines.
An adverse result in this lawsuit may include an award of monetary damages, on-going royalty obligations, and/or may result in a change in our business practice, which could result in a loss of revenue. We cannot at this time estimate the possible loss or range of loss, if any. No assurance can be given at this time that the litigation against us will be resolved amicably, that if this litigation results in an adverse decision that we will be successful in seeking indemnification, that this litigation will not be costly to defend, that this litigation will not have an impact on our financial condition or results of operations or that, ultimately, any such impact will not be material.
For a summary of risk factors relevant to our operations, see Part I, Item 1A, “Risk Factors,” in our 2010 Annual Report on Form 10-K. There are no other material changes in risk factors relevant to our operations since December 31, 2010 except as discussed below.
The FDIC restoration plan and related rulemaking may have a further material impact on our results of operations.
In light of the failures of a significant number of banks and thrifts over the past several years, which has resulted in substantial losses to the Deposit Insurance Fund, or DIF, in July 2010, the
Reform Act increased the minimum designated reserve ratio for the DIF from 1.15% to 1.35% of insured deposits, which must be reached by September 30, 2020, and provides that in setting the assessments necessary to meet the new requirement, the FDIC shall offset the effect of this provision on insured depository institutions with total consolidated assets of less than $10 billion, so that more of the cost of raising the reserve ratio will be borne by the institutions with more than $10 billion in assets, such as Astoria Federal. In October 2010, the FDIC adopted a new restoration plan to ensure that the DIF reserve ratio reaches 1.35% by September 30, 2020, as required by the Reform Act. The FDIC pursued further rulemaking in 2011 regarding the method that will be used to reach the reserve ratio of 1.35% so that more of the cost of raising the reserve ratio to 1.35% will be borne by institutions with more than $10 billion in assets.
On February 7, 2011, the FDIC adopted a final rule that redefines the assessment base for deposit insurance assessments as average consolidated total assets minus average tangible equity, rather than on deposit bases, as required by the Reform Act, and revises the risk-based assessment system for all large insured depository institutions by introducing a scoring system. This system involves the FDIC establishing a score for each such institution which then translates into an assessment rate. The adoption of this final rule is expected to result in higher FDIC deposit insurance assessments effective April 1, 2011, which would increase non-interest expense and have a material impact on our results of operations.
The final rule allows the FDIC to make limited adjustments to the score used to calculate an institution’s assessment rate and provides that the FDIC will not make any adjustments until new guidelines have been published for comment and approved by the FDIC. On April 12, 2011, the FDIC Board of Directors authorized publication of proposed guidelines describing the process that the FDIC would follow to determine whether to make an adjustment to the score used to calculate the assessment rate for a large or highly complex institution, the size of any such adjustment, and the procedure the FDIC would follow to notify an institution of an adjustment. Pursuant to the proposed guidelines, the FDIC can make a limited adjustment, either upward or downward, to an institution’s total score based upon risks or risk mitigating factors that are not adequately captured in the institution’s scorecard. In addition, an institution can make written request to the FDIC for such an adjustment. In either case, the FDIC would consult with an institution’s primary federal regulator and appropriate state banking supervisor before making any decision to adjust an institution’s total score. Any adjustment to an institution’s score must be approved by the FDIC and there is no assurance that a request for an adjustment will result in a downward adjustment.
The recent adoption of regulatory reform legislation has created uncertainty and may have a material effect on our operations and capital requirements.
As a result of the financial crisis which occurred in the banking and financial markets commencing in the second half of 2007, the overall bank regulatory climate is now marked by caution, conservatism and a renewed focus on compliance and risk management. There are many provisions of the Reform Act which are to be implemented through regulations to be adopted by the federal bank regulatory agencies within specified time frames following the effective date of the Reform Act, which creates a risk of uncertainty as to the effect that such provisions will ultimately have. Although it is not possible for us to determine at this time whether the Reform Act will have a material effect on our business, financial condition or results of operations, we believe the following provisions of the Reform Act will have an impact on us:
|
|
·
|
The elimination of our primary federal regulator, the OTS, and the assumption by the OCC of regulatory authority over all federal savings associations, such as Astoria Federal, and the acquisition by the Board of Governors of the Federal Reserve System, or FRB, of regulatory authority over all savings and loan holding companies, such as Astoria Financial Corporation, as well as all subsidiaries of savings and loan holding companies other than depository institutions. Although the laws and regulations currently applicable to us generally will not change by virtue of the elimination of the OTS (except to the extent such laws have been modified by the Reform Act), the application of these laws and regulations may vary as administered by the OCC and the FRB.
|
|
|
·
|
The creation of the Bureau of Consumer Financial Protection, or CFPB, which will have the authority to implement and enforce a variety of existing consumer protection statutes and to issue new regulations and, with respect to institutions of our size, will have exclusive examination and enforcement authority with respect to such laws and regulations. As a new independent bureau within the FRB, it is possible that the CFPB will focus more attention on consumers and may impose requirements more severe than the previous bank regulatory agencies, which at a minimum, could increase our operating and compliance costs.
|
|
|
·
|
The significant roll back of the federal preemption of state consumer protection laws that is currently enjoyed by federal savings associations and national banks. As a result, we may now be subject to state consumer protection laws in each state where we do business, and those laws may be interpreted and enforced differently in different states.
|
|
|
·
|
The establishment of consolidated risk-based and leverage capital requirements for insured depository institutions, depository institution holding companies and systemically important nonbank financial companies, as discussed below.
|
|
|
·
|
The increase in the minimum designated reserve ratio for the DIF from 1.15% to 1.35% of insured deposits, which must be reached by September 30, 2020, and the requirement that deposit insurance assessments be based on average consolidated total assets minus average tangible equity, rather than on deposit bases. As a result of these provisions, our deposit insurance premiums are expected to increase, and the increase may be substantial, as previously discussed.
|
The Reform Act also includes provisions that create minimum standards for the origination of mortgage loans. Pursuant to the Reform Act, on April 19, 2011, the FRB requested public comment on a proposed rule under Regulation Z that would impose extensive regulations governing an institution’s obligation to evaluate a borrower’s ability to repay a mortgage loan. The rule would apply to all consumer mortgages (except home equity lines of credit, timeshare plans, reverse mortgages or temporary loans). Consistent with the Reform Act, the proposal provides four options for complying with the ability-to-repay requirement. The proposal would also implement the Reform Act’s limits on prepayment penalties. The Federal Reserve Board is soliciting comment on the proposed rule until July 22, 2011. It is possible this rule may require us to change our underwriting practices and may cause an increase in compliance costs.
As a result of the Reform Act and other proposed changes, we may become subject to more stringent capital requirements.
The Reform Act requires the federal banking agencies to establish consolidated risk-based and leverage capital requirements for insured depository institutions, depository institution holding companies and systemically important nonbank financial companies. These requirements must be no less than those to which insured depository institutions are currently subject, and the new requirements will effectively eliminate the use of trust preferred securities as a component of
Tier 1 capital for depository institution holding companies of our size. As a result, in July 2015, we will become subject to consolidated capital requirements which we have not been subject to previously, and we will not be permitted to include our Capital Securities as a component of Tier 1 capital when we become subject to these consolidated capital requirements. In addition, in December 2010, the Basel Committee on Banking Supervision announced the new “Basel III” capital rules, which set new standards for common equity, Tier 1 and total capital, determined on a risk-weighted basis. It is not yet known how these standards, which will be phased in over a period of years, will be implemented by U.S. regulators generally or how they will be applied to financial institutions of our size.
Pursuant to the Reform Act, the FRB will become responsible for the supervision of savings and loan holding companies on July 21, 2011. In accordance with this authority, on April 15, 2011, the FRB requested comment on proposed supervisory guidance pursuant to which the FRB is seeking to apply certain elements of its consolidated supervisory program, including consolidated capital requirements, for bank holding companies to savings and loan holding companies. Pursuant to the proposed supervisory guidance, the FRB is considering applying to savings and loan holding companies the same consolidated risk-based and leverage capital requirements currently applicable to bank holding companies. The FRB, together with the other federal banking agencies, expects to issue a notice of proposed rulemaking in 2011 that will outline how Basel III-based requirements will be implemented for all institutions, including savings and loan holding companies. The FRB expects that final rules establishing Basel III-based capital requirements would be finalized in 2012 and implementation would start in 2013.
The FRB’s proposed rule to repeal the prohibition against payment of interest on demand deposits may increase competition for such deposits and ultimately increase interest expense.
On April 6, 2011, the FRB requested comment on a proposed rule to repeal Regulation Q, which prohibits the payment of interest on demand deposits by institutions that are member banks of the Federal Reserve System. The proposed rule would implement Section 627 of the Reform Act, which repeals Section 19(i) of the Federal Reserve Act in its entirety effective July 21, 2011. As a result, banks and thrifts will be permitted to offer interest-bearing demand deposit accounts to commercial customers, which were previously forbidden under Regulation Q. The repeal of Regulation Q may cause increased competition from other financial institutions for these deposits.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended March 31, 2011, there were no repurchases of our common stock. Our twelfth stock repurchase plan, approved by our Board of Directors on April 18, 2007, authorized the purchase of 10,000,000 shares, or approximately 10% of our common stock then outstanding, in open-market or privately negotiated transactions. At March 31, 2011, a maximum of 8,107,300 shares may yet be purchased under this plan, however, we are not currently repurchasing additional shares of our common stock and have not since the 2008 third quarter.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
Not applicable.
See Index of Exhibits on page 63.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
|
|
|
Astoria Financial Corporation
|
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| Dated: |
May 6, 2011
|
|
By:
|
/s/ Frank E. Fusco |
|
| |
|
|
|
Frank E. Fusco
|
|
| |
|
|
|
Executive Vice President,
|
|
| |
|
|
|
Treasurer and Chief Financial Officer
|
|
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(Principal Accounting Officer)
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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX OF EXHIBITS
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Exhibit No.
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Identification of Exhibit
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10.1
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Amendment No. 1 to the 2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. (*)
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10.2
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Amendment No. 2 to the 2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. (1)
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10.3
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Change of Control Severance Agreement, entered into as of February 14, 2011, by and among Astoria Federal Savings and Loan Association, Astoria Financial Corporation and Gary M. Honstedt. (*)
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31.1
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Certifications of Chief Executive Officer. (*)
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31.2
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Certifications of Chief Financial Officer. (*)
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32.1
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Written Statement of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to SEC rules, this exhibit will not be deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. (*)
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32.2
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Written Statement of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to SEC rules, this exhibit will not be deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. (*)
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101.1
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The following financial information from Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 formatted in XBRL: (1) Consolidated Statements of Financial Condition at March 31, 2011 and December 31, 2010; (2) Consolidated Statements of Income for the three months ended March 31, 2011 and 2010; (3) Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2011; (4) Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010; and (5) Notes to Consolidated Financial Statements, tagged as blocks of text. Pursuant to SEC rules, this exhibit will not be deemed filed for purposes of Section 18 of the Exchange Act and Sections 11 and 12 of the Securities Act or otherwise subject to the liability of those sections. (*)
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(1)
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Incorporated by reference to Astoria Financial Corporation’s Schedule 14A Definitive Proxy Statement, filed with the SEC on April 11, 2011 (File number 001-11967).
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