<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-22228
ASTORIA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 11-3170868
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE ASTORIA FEDERAL PLAZA, LAKE SUCCESS, NEW YORK 11042-1085
(Address of principal executive offices) (Zip Code)
</TABLE>
(516) 327-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASSES OF COMMON STOCK NUMBER OF SHARES OUTSTANDING, JULY 31, 1996
- ----------------------- -------------------------------------------
<S> <C>
.01 PAR VALUE 21,509,444
------------- ----------
</TABLE>
<PAGE> 2
PART 1 -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements.
Consolidated Statements of Financial Condition at June 30, 1996 and 2
December 31, 1995.
Consolidated Statements of Operations for the Three and Six Months 3
Ended June 30, 1996 and June 30, 1995.
Consolidated Statement of Stockholders' Equity for the Six Months 4
Ended June 30, 1996.
Consolidated Statements of Cash Flows for the Six Months Ended 5
June 30, 1996 and June 30, 1995.
Notes to Unaudited Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities (Not Applicable)
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
(a) Exhibits
(11) Computation of Per Share Earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K (Not Applicable)
Signatures 26
</TABLE>
1
<PAGE> 3
ASTORIA FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
Assets 1996 1995
- ------ ----------- ------------
<S> <C> <C>
Cash and due from banks $ 27,086 $ 33,869
Federal funds sold and repurchase agreements 22,200 100,000
Mortgage-backed and mortgage-related securities
available-for-sale (at estimated fair value) 2,249,216 2,332,822
Other securities available-for-sale (at estimated fair value) 208,500 183,146
Mortgage-backed and mortgage-related securities
held-to-maturity (estimated fair value of $1,331,460
and $1,340,588, respectively) 1,358,644 1,333,644
Other securities held-to-maturity (estimated fair value
of $478,566 and $280,192, respectively) 489,840 281,898
Federal Home Loan Bank of New York stock 32,354 24,975
Loans receivable:
Mortgage loans 2,348,545 1,995,475
Consumer and other loans 57,687 61,663
----------- -----------
2,406,232 2,057,138
Less allowance for loan losses 13,335 13,495
----------- -----------
Loans receivable, net 2,392,897 2,043,643
Real estate owned, net 11,781 17,677
Investments in real estate, net 5,119 5,654
Accrued interest receivable 40,241 35,931
Premises and equipment, net 82,027 80,083
Excess of cost over fair value of net assets acquired
and other intangibles 104,680 109,022
Other assets 53,798 37,738
----------- -----------
Total assets $ 7,078,383 $ 6,620,102
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Savings $ 1,155,132 $ 1,154,777
Money market 441,327 218,653
NOW 124,195 314,288
Certificates 2,757,494 2,575,703
----------- -----------
Total deposits 4,478,148 4,263,421
Reverse repurchase agreements 1,855,350 1,483,329
Federal Home Loan Bank of New York advances 141,540 221,362
Mortgage escrow funds 25,529 22,585
Accrued expenses and other liabilities 16,149 38,720
----------- -----------
Total liabilities 6,516,716 6,029,417
----------- -----------
Stockholders' Equity:
Preferred stock, $.01 par value; (5,000,000 shares
authorized; none issued) -- --
Common stock, $.01 par value; (70,000,000 shares authorized: 26,361,704
issued; 21,509,444 and 22,609,940 shares outstanding, respectively) 264 264
Additional paid-in capital 327,842 325,992
Retained earnings - substantially restricted 373,552 351,923
Treasury stock (4,852,260 and 3,751,764 shares, at cost, respectively) (89,258) (60,693)
Net unrealized (losses) gains on securities, net of taxes (16,362) 11,126
Unallocated common stock held by ESOP (25,918) (27,355)
Unearned common stock held by RRPs (8,453) (10,572)
----------- -----------
Total stockholders' equity 561,667 590,685
----------- -----------
Total liabilities and stockholders' equity $ 7,078,383 $ 6,620,102
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
ASTORIA FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Interest income:
Mortgage loans $ 44,962 $ 37,425 $ 87,486 $ 72,598
Consumer and other loans 1,516 1,722 3,041 3,282
Mortgage-backed and mortgage-related securities 62,660 58,914 125,576 110,930
Federal funds sold and repurchase agreements 893 3,977 1,948 6,924
Other securities 11,211 5,845 19,025 12,032
------------ ------------ ------------ ------------
Total interest income 121,242 107,883 237,076 205,766
------------ ------------ ------------ ------------
Interest expense:
Deposits 47,088 47,425 93,129 88,200
Borrowed funds 27,330 18,528 52,389 32,848
------------ ------------ ------------ ------------
Total interest expense 74,418 65,953 145,518 121,048
------------ ------------ ------------ ------------
Net interest income 46,824 41,930 91,558 84,718
Provision for loan losses 2,042 827 2,564 1,828
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 44,782 41,103 88,994 82,890
------------ ------------ ------------ ------------
Non-interest income:
Customer service fees 1,810 1,411 3,433 2,406
Loan fees 436 443 894 798
Net gain on sales of securities and loans 507 6 1,269 7
Other 686 765 1,401 1,400
------------ ------------ ------------ ------------
Total non-interest income 3,439 2,625 6,997 4,611
------------ ------------ ------------ ------------
Non-interest expense:
General and administrative:
Compensation and benefits 12,478 11,524 24,907 22,592
Occupancy, equipment and systems 5,892 5,454 11,697 9,988
Federal deposit insurance premiums 2,455 2,482 4,919 4,752
Advertising 1,346 1,046 2,093 2,622
Other 2,503 2,657 4,985 4,685
------------ ------------ ------------ ------------
Total general and administrative 24,674 23,163 48,601 44,639
Real estate operations, net 339 (876) (2,916) (514)
Provision for (recovery of) real estate losses 65 (681) (1,332) (737)
Amortization of excess of cost over fair value
of net assets acquired 2,171 2,232 4,342 3,843
------------ ------------ ------------ ------------
Total non-interest expense 27,249 23,838 48,695 47,231
------------ ------------ ------------ ------------
Income before income tax expense 20,972 19,890 47,296 40,270
Income tax expense 9,262 8,801 20,868 17,587
------------ ------------ ------------ ------------
Net income $ 11,710 $ 11,089 $ 26,428 $ 22,683
============ ============ ============ ============
Primary earnings per share $ 0.56 $ 0.50(1) $ 1.24 $ 1.02(1)
============ ============ ============ ============
Fully diluted earnings per share $ 0.55 $ 0.50(1) $ 1.23 $ 1.02(1)
============ ============ ============ ============
Dividends per common share $ 0.11 $ -- $ 0.21 $ --
============ ============
Primary average common shares and equivalents 21,096,987 22,257,378 21,348,175 22,197,386
Fully diluted average common shares and equivalents 21,129,049 22,326,410 21,437,997 22,269,926
</TABLE>
See accompanying notes to consolidated financial statements.
(1) As adjusted for two-for-one stock split on June 3, 1996.
3
<PAGE> 5
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Net
Unrealized
Retained Gains (Losses)
Additional Earnings on
Common Paid-In Substantially Treasury Securities,
Stock Capital Restricted Stock Net of Taxes
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 264 $ 325,992 $ 351,923 $ (60,693) $ 11,126
Net income -- -- 26,428 -- --
Change in unrealized gains (losses)
on securities available-for-sale -- -- -- -- (27,488)
Common stock repurchased
(1,130,496 shares) -- -- -- (29,055) --
Cash dividends declared
on common stock -- -- (4,525) -- --
Treasury stock issued for options
exercised (30,000 shares) -- -- -- 490 --
Loss on issuance of treasury stock
(30,000 shares) -- -- (274) -- --
Tax benefit attributable to vested
RRP shares -- 367 -- -- --
Amortization relating to allocation
of ESOP stock and earned portion
of RRP stock -- 1,483 -- -- --
--------- --------- --------- --------- ---------
Balance at June 30, 1996 $ 264 $ 327,842 $ 373,552 $ (89,258) $ (16,362)
========= ========= ========= ========= =========
<CAPTION>
Unallocated Unearned
Common Common
Stock Held Stock Held
by ESOP by RRP's Total
-------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1995 $ (27,355) $ (10,572) $ 590,685
Net income -- -- 26,428
Change in unrealized gains (losses)
on securities available-for-sale -- -- (27,488)
Common stock repurchased
(1,130,496 shares) -- -- (29,055)
Cash dividends declared
on common stock -- -- (4,525)
Treasury stock issued for options
exercised (30,000 shares) -- -- 490
Loss on issuance of treasury stock
(30,000 shares) -- -- (274)
Tax benefit attributable to vested
RRP shares -- -- 367
Amortization relating to allocation
of ESOP stock and earned portion
of RRP stock 1,437 2,119 5,039
--------- --------- ---------
Balance at June 30, 1996 $ (25,918) $ (8,453) $ 561,667
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
ASTORIA FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,428 $ 22,683
--------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of net deferred loan origination
fees, discounts and premiums (3,139) (3,672)
Provision for loan and real estate losses 1,232 1,091
Depreciation and amortization 2,757 2,452
Net gain on sales of securities and loans (1,269) (7)
Amortization of excess of cost over fair value
of net assets acquired 4,342 3,843
Amortization of allocated and earned shares from ESOP and RRPs 5,039 3,879
Increase in accrued interest receivable (3,974) (288)
Increase in mortgage escrow funds 2,944 2,333
Net changes in other assets, accrued expenses
and other liabilities (17,142) (6,827)
--------- ---------
Net cash provided by operating activities 17,218 25,487
--------- ---------
Cash flows from investing activities:
Loan originations (346,737) (53,487)
Loan purchases through third parties (132,204) (54,032)
Bulk loan purchases (59,574) (50,966)
Principal repayments on loans 179,799 107,149
Principal payments on mortgage-backed and mortgage-
related securities 272,531 134,474
Purchases of mortgage-backed and mortgage-related securities (336,711) (492,021)
Purchases of other securities (295,585) (37,825)
Proceeds from maturities of other securities
and redemption of FHLB-NY stock 50,448 23,161
Proceeds from sale of securities and loans 87,123 522,781
Proceeds from sale of real estate owned 9,923 7,018
Proceeds from sales net of costs and advances
related to investments in real estate 753 841
Purchases of premises and equipment (4,701) (3,505)
Cash paid for Fidelity net of cash and cash equivalents acquired -- (158,491)
--------- ---------
Net cash used in investing activities (574,935) (54,903)
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in deposits 214,477 (44,397)
Net increase in reverse repurchase agreements 372,021 240,874
Proceeds from FHLB-NY advances -- 50,000
Payments of FHLB of New York advances (80,000) (251,049)
Costs to repurchase common stock (29,055) (8,298)
Cash dividends paid to stockholders (4,525) --
Cash received for options exercised 216 --
--------- ---------
Net cash provided by (used in) financing activities 473,134 (12,870)
--------- ---------
Net decrease in cash and cash equivalents (84,583) (42,286)
Cash and cash equivalents at beginning of period 133,869 209,203
--------- ---------
Cash and cash equivalents at end of period $ 49,286 $ 166,917
========= =========
Supplemental disclosures:
Cash paid during the year:
Interest $ 121,393 $ 115,735
========= =========
Income taxes $ 16,343 $ 14,786
========= =========
Additions to real estate owned $ 5,341 $ 7,364
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Astoria Financial Corporation (the Company) and its wholly-owned subsidiary,
Astoria Federal Savings and Loan Association (the Association) and the
Association's wholly-owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
condition as of June 30, 1996 and December 31, 1995 and the statements of
operations for the three and six months ended June 30, 1996 and 1995, cash
flows for the six months ended June 30, 1996 and 1995 and stockholders' equity
for the six months ended June 30, 1996. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities of the consolidated statements of
financial condition as of June 30, 1996 and December 31, 1995 and amounts of
revenues and expenses of the results of operations for the three and six month
periods ended June 30, 1996 and 1995. The results of operations for the three
and six months ended June 30, 1996 are not necessarily indicative of the
results of operations to be expected for the remainder of the year. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission.
These consolidated financial statements should be read in conjunction with the
December 31, 1995 audited consolidated financial statements, interim financial
statements and notes thereto of the Company.
2. IMPACT OF NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 applies to all
transactions in which an entity acquires goods or services by issuing equity
instruments or by incurring liabilities where the payment amounts are based on
the entity's common stock price, except for employee stock ownership plans.
SFAS No. 123 established a fair value based method of accounting for
stock-based compensation arrangements with employees, rather than the
intrinsic value based method that is contained in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25").
SFAS No. 123 does not require an entity to adopt the new fair value based
method for purposes of preparing its basic financial statements. While the
SFAS No. 123 fair value based method is considered by the FASB to be
preferable to the APB No. 25 method, entities are allowed to continue to use
the APB No. 25 method for preparing its basic financial statements. Entities
not adopting the fair value based method under SFAS No. 123 are required to
present pro forma net income and earnings per share information, in the notes
to the financial statements, as if the fair value based method had been
adopted.
The accounting requirements of SFAS No. 123 are effective for transactions
entered into during fiscal years that begin after December 15, 1995, but may
also be adopted upon the issuance of SFAS No. 123. The disclosure requirements
are effective for financial statements for fiscal years beginning after
December 15, 1995, or for an earlier fiscal year for which SFAS No. 123 is
initially adopted for recognizing compensation cost. Pro forma disclosures
required for entities that elect to continue to measure compensation cost
using the APB No. 25 method must include the effects of all awards granted in
fiscal years that begin after December 15, 1994. Pro forma disclosures for
awards granted in the first fiscal year beginning after December 15, 1994 need
not be included in financial statements for that fiscal year but should be
presented subsequently whenever financial statements for that fiscal year are
presented for comparative purposes with financial statements for a later
fiscal year.
6
<PAGE> 8
In June 1996, the FASB issued Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). SFAS No. 125 establishes
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities based on consistent application of a
financial components approach that focuses on control. Under this approach, an
entity, subsequent to a transfer of financial assets, must recognize the
financial and servicing assets it controls and the liabilities it has incurred,
derecognize financial assets when control has been surrendered, and derecognize
liabilities when extinguished. Standards for distinguishing transfers of
financial assets that are sales from those that are secured borrowings are
provided in SFAS No. 125. A transfer not meeting the criteria for a sale must be
accounted for as a secured borrowing with pledge of collateral.
SFAS No. 125 requires that liabilities and derivatives incurred or obtained by
transferors as part of a transfer of financial assets be initially measured at
fair value, if practicable. It additionally requires that servicing assets and
other retained interests in transferred assets be measured by allocating the
previous carrying amount between the assets sold, if any, and retained
interests, if any, based on their relative fair values at the date of transfer.
Servicing assets and liabilities must be subsequently measured by amortization
in proportion to and over the period of estimated net servicing income or loss
and assessed for asset impairment, or increased obligation, based on their fair
value.
This Statement supersedes the FASB's Statement of Financial Accounting Standards
No. 76, "Extinguishment of Debt", and Statement of Financial Accounting
Standards No. 77, "Reporting by Transferors for Transfers of Receivables with
Recourse." SFAS No. 125 amends Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities," ("SFAS
No. 115") to prohibit the classification of a debt security as held to maturity
if it can be prepaid or otherwise settled in such a way that the holder of the
security would not recover substantially all of its recorded investment. It
further requires that loans and other assets that can be prepaid or otherwise
settled in such a way that the holder would not recover substantially all of its
recording investment shall be subsequently measured like debt securities
classified as available for sale or trading under SFAS No. 115, as amended by
SFAS No. 125. SFAS No. 125 also amends and extends to all servicing assets and
liabilities the accounting standards for mortgage servicing rights now in
Statement of Financial Accounting Standards No. 65, "Accounting for Certain
Mortgage Banking Activities," and supersedes Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights."
SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted. The
Company is currently reviewing the impact of the implementation of SFAS No. 125
on its consolidated financial statements.
3. CASH EQUIVALENTS
For the purpose of reporting cash flows, cash and cash equivalents include
cash and due from banks and federal funds sold with original maturities of
three months or less, which in the aggregate amounted to $22,200,000 and
$132,344,000 at June 30, 1996 and 1995, respectively.
4. STOCK SPLIT
On April 17, 1996, the Company's Board of Directors approved a two-for-one
stock split, in the form of a 100% stock dividend, which was paid on June 3,
1996. Accordingly, all capital accounts, share and per share data have been
restated for all reported periods to reflect the stock split.
7
<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Astoria Financial Corporation (the "Company") was incorporated on June 14,
1993, and is the holding company of Astoria Federal Savings and Loan Association
(the "Association"). On November 18, 1993, the Association completed its
conversion from a mutual savings and loan association to the stock form of
ownership at which time the Company issued 13,180,852 shares of common stock and
utilized a portion of the proceeds to acquire all of the issued shares of the
Association.
The Company is headquartered in Lake Success, New York and its principal
business currently consists of the operation of its wholly-owned subsidiary, the
Association. The Association's primary business is attracting retail deposits
from the general public and investing those deposits, together with funds
generated from operations, principal repayments and borrowings, primarily in
one-to-four family residential mortgage loans and mortgage-backed and
mortgage-related securities and, to a lesser extent, commercial real estate
loans, multi-family mortgage loans and consumer loans. In addition, the
Association invests in securities issued by the U.S. Government and agencies
thereof and other investments permitted by federal laws and regulations.
The Company's results of operations are primarily dependent on its net
interest income, which is the difference between the interest earned on its
assets, primarily its loans and securities portfolios, and its cost of funds,
which consists of the interest paid on its deposits and borrowings. The
Company's net income is also affected by its provision for loan losses as well
as non-interest income, general and administrative expense, other non-interest
expenses, and income tax expense. General and administrative expense consists
primarily of compensation and benefits, occupancy, equipment and systems
expense, federal deposit insurance premium, advertising and other operating
expenses. Other non-interest expense consists of real estate operations, net,
provision for real estate losses and amortization of excess of cost over fair
value of net assets acquired. The earnings of the Company may also significantly
be affected by general economic and competitive conditions, particularly changes
in market interest rates and yield curves, government policies and actions of
regulatory authorities.
FIDELITY ACQUISITION
After the close of business on January 31, 1995, the Company successfully
completed the acquisition of Fidelity New York F.S.B. ("Fidelity") in a
transaction which was accounted for as a purchase. The cost of the acquisition
was $157.8 million, and, in addition, the Company incurred approximately $21.3
million of acquisition-related costs, of which $3.3 million was for the buyout
of leased data processing equipment. As a result of the acquisition, after the
close of business on January 31, 1995, the Company had approximately $6.4
billion in assets and $4.3 billion in deposits. Subsequent to the acquisition,
the Company restructured the resulting investment portfolio by selling $521.1
million of securities acquired in the acquisition and utilizing the proceeds
from the sale to repay $417.0 million of borrowings. The excess of cost over the
fair value of net assets acquired generated in the transaction was $112.1
million, which is being amortized on a straight line basis over 15 years.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, borrowings and
principal and interest payments on loans, mortgage-backed and mortgage-related
securities, and other securities. The Company's primary uses of funds are
purchases and originations of mortgage loans, and the purchases of
mortgage-backed, mortgage-related and other securities. During the first six
months of 1995, the Company's primary use of funds was for the acquisition of
Fidelity. During the first six months of 1996, the Company's purchases and
originations of mortgage loans totaled $523.4 million, of which $190.7 million
and $332.7 million were purchases and originations, respectively, compared to
$147.9 million of purchases and originations during the first six months of
1995, of which $104.4 million and $43.5 million were purchases and originations,
respectively. The Company's purchases of mortgage-backed, mortgage-related and
8
<PAGE> 10
other securities during the first six months of 1996 totaled $632.3 million of
which $279.6 million are classified as available-for-sale as of June 30, 1996.
Mortgage-backed, mortgage-related and other securities purchased during the
first six months of 1995 totaled $529.8 million.
The Association is required to maintain an average daily balance of liquid
assets and short-term liquid assets as a percentage of net withdrawable deposit
accounts plus short-term borrowings as defined by the regulations of the Office
of Thrift Supervision ("OTS"). The minimum required liquidity and short-term
liquidity ratios are currently 5% and 1%, respectively. The Association's
liquidity ratios were 5.40% and 7.09% at June 30, 1996 and December 31, 1995,
respectively, while its short-term liquidity ratios were 1.58% and 2.50% at June
30, 1996 and December 31, 1995, respectively. The reduction in the Association's
liquidity ratios were primarily the result of a decrease in federal funds due to
increased loan origination volume during the six months ended June 30, 1996. In
the normal course of its business, the Association routinely enters into various
commitments, primarily relating to leasing certain of its office facilities and
lending commitments. The Association anticipates that it will have sufficient
funds available to meet its current commitments in the normal course of its
business.
Stockholders' equity totaled $561.7 million at June 30, 1996 compared to
$590.7 million at December 31, 1995, reflecting the Company's earnings for the
six months, the amortization of the unallocated portion of shares held by the
Employee Stock Ownership Plan ("ESOP") and the unearned portion of shares held
by the Recognition and Retention Plans ("RRPs") and related tax benefit, the
effect of the treasury stock purchases, dividends paid on common stock and the
change in the net unrealized (losses) gains on securities, net of taxes.
During the year ended December 31, 1995, the Company repurchased 1,471,752
of its common shares for an aggregate cost of $26.6 million, bringing the
cumulative total of common shares repurchased, through December 31, 1995, to
3,759,836 for an aggregate cost of $60.8 million. An additional five percent
stock repurchase plan was approved by the Board of Directors on December 21,
1995. During the first six months of 1996, the Company completed this fourth 5%
stock repurchase program, repurchasing during this program a total of 1,130,496
of its outstanding common shares at an aggregate cost of $29.1 million, bringing
the cumulative total of common shares repurchased through June 30, 1996 to
4,890,332 for an aggregate cost of $89.9 million.
On March 1, 1996, the Company paid its third consecutive quarterly cash
dividend equal to $.10 per share on shares of common stock outstanding as of the
close of business on February 15, 1996, aggregating $2.2 million. At its Board
of Directors meeting held on April 17, 1996, the Company increased its quarterly
cash dividend to $.11 per share and also declared a two-for-one stock split, in
the form of a 100% stock dividend. The additional shares were distributed, and
the cash dividend, aggregating $2.3 million was paid, on the total number of
shares held before the stock split, on June 3, 1996 to shareholders of record as
of the close of business on May 15, 1996. At the Board of Directors meeting held
July 17, 1996, the Company declared a cash dividend of $.11 per common share
payable on September 3, 1996 to shareholders of record as of the close of
business on August 15, 1996.
On June 3, 1996, the Association paid a cash dividend aggregating $2.3
million to the Company. At its Board of Directors meeting held on July 17, 1996,
the Association declared a cash dividend aggregating $2.4 million, to be payable
on September 3, 1996 to its shareholder of record, the Company, as of the close
of business on August 15, 1996.
While the payment of the Company's cash dividend is not subject to the
Association's payment of a dividend to the Company, the ability of the Company
to continue to fund the payment of future cash dividends is dependent, to a
degree, upon the Association continuing to declare and pay cash dividends to the
Company.
At the time of the Association's conversion to stock form, the Association
was required to establish a liquidation account equal to its capital as of June
30, 1993. The liquidation account will be reduced to the extent that eligible
account holders reduce their qualifying deposits. In the unlikely event of a
complete liquidation of the Association, each eligible account holder will be
entitled to receive a distribution from the liquidation account initially
created in connection with Fidelity's conversion to stock form. As a result of
the Fidelity acquisition, the Association assumed the obligation of Fidelity's
liquidation account. The Association is not permitted to declare or pay
dividends on its
9
<PAGE> 11
capital stock, or repurchase any of its outstanding stock, if the effect thereof
would cause its stockholder's equity to be reduced below the amount required for
the liquidation account or applicable regulatory capital requirements. As of
June 30, 1996, the Association's total capital exceeded the amount of the
combined liquidation accounts, and exceeded all of its regulatory capital
requirements with tangible and core ratios of 6.06% and a risk-based capital
ratio of 18.03%. The respective minimum regulatory requirements were 1.50%,
3.00% and 8.00%.
INTEREST RATE SENSITIVITY ANALYSIS
The Company's net interest income, the primary component of its net income,
is subject to substantial risk due to changes in interest rates or changes in
market yield curves, particularly if there is a substantial variation in the
timing between the repricing of its assets and the liabilities which fund them.
Management has established a policy to monitor interest rate sensitivity so that
adjustments to the asset and liability mix, when deemed appropriate, can be made
on a timely basis.
The matching of the repricing characteristics of assets and liabilities may
be analyzed by examining the extent to which such assets and liabilities are
"interest rate sensitive" and by monitoring an institution's interest rate
sensitivity "gap". An asset or liability is said to be interest rate sensitive
within a specific time period if it will mature or reprice within that time
period. The interest rate sensitivity gap is defined as the difference between
the amount of interest-earning assets anticipated, based upon certain
assumptions, to mature or reprice within a specific time period and the amount
of interest-bearing liabilities anticipated, based upon certain assumptions, to
mature or reprice within that same time period.
At June 30, 1996, the Company's net interest-earning assets maturing or
repricing within one year exceeded interest-bearing liabilities maturing or
repricing within the same time period by $1.1 billion, representing a positive
cumulative one-year gap of 15.9% of total assets. This compares to net
interest-earning assets maturing or repricing within one year exceeding
interest-bearing liabilities maturing or repricing within the same time period
by $1.4 billion, representing a positive cumulative one-year gap of 21.7% of
total assets at December 31, 1995. The decrease from the December 31, 1995 gap
position was due to the combined effect of a decrease of $77.8 million in
federal funds sold and repurchase agreements, the sale of $82.0 million in
mortgage-backed and mortgage-related securities classified available-for-sale,
and an increase in short term borrowings of $122.7 million. Included in
interest-earning assets repricing or maturing in one year or less are
mortgage-backed, mortgage-related and other securities classified
available-for-sale. The reclassification of these securities to
available-for-sale was made as of December 31, 1995, as permitted by a Special
Report issued by the Financial Accounting Standards Board. If the
reclassification of securities had not occurred, interest-bearing liabilities
maturing or repricing within one year, at June 30, 1996, would have exceeded net
interest-earning assets maturing or repricing within the same time period by
$367.9 million, representing a negative cumulative one-year gap of 5.2% of total
assets. If the reclassification of securities had not occurred, net
interest-earning assets maturing or repricing within one year, at December 31,
1995, would have been approximately equal to interest-bearing liabilities
maturing or repricing within the same time period. Additionally, the Company
purchased various callable debt securities and has entered into callable reverse
repurchase agreements. At June 30, 1996, $258.7 million of debt securities and
$475.0 million of reverse repurchase agreements, set forth in the following
table at their maturity dates, were callable within one year.
The Company, from time to time, in an attempt to further reduce volatility
in its earnings caused by changes in interest rates will enter into financial
agreements with third parties to hedge its position. During 1994, the Company,
as part of its overall interest rate risk management strategy, purchased an
interest rate cap with a notional amount of $105.0 million on which the Company
receives a payment, based on the notional amount, equal to the three month LIBOR
in excess of 5% on any reset date for the reset period, and simultaneously sold
an interest rate cap on the same amount pursuant to which the Company makes a
payment, based on the notional amount, equal to the three month LIBOR in excess
of 7% on any reset date for the reset period. These transactions, referred to,
in the aggregate, as a corridor, have been structured to reset quarterly on the
same dates and mature on the same date as a $105.0 million reverse repurchase
agreement bearing interest at the three month LIBOR, which matured on March 15,
1996. During the second quarter of 1995, the Company entered into an interest
rate swap with a notional amount of $50.0 million, the effect of which was to
convert a medium term $50.0 million borrowing, with a variable rate equal to the
three
10
<PAGE> 12
month LIBOR, to a fixed rate borrowing equal to 6.632%, by agreeing, within the
interest rate swap agreement, to pay a fixed rate of interest equal to 6.632%
and receive the three month LIBOR. The agreement matures on April 21, 1997, the
same date as the borrowing.
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 1996, which are anticipated
by the Company, using certain assumptions based on its historical experience and
other data available to management, to reprice or mature in each of the future
time periods shown. This table does not necessarily indicate the impact of
general interest rate movements on the Company's net interest income because the
actual repricing dates of various assets and liabilities are subject to customer
discretion and competitive and other pressures. The duration of mortgage-backed
and mortgage-related securities can be significantly impacted by changes in
mortgage prepayment rates. Prepayment rates will vary due to a number of
factors, including the regional economy in the area where the underlying
mortgages were originated, seasonal factors, demographic variables, and the
assumability of the underlying mortgages. However, the largest determinant of
prepayment rates are prevailing interest rates and related mortgage refinancing
opportunities. Therefore, actual experience may vary from that indicated. In
addition, the available-for-sale securities may or may not be sold, or
effectively repriced, since that activity is subject to management's discretion.
11
<PAGE> 13
<TABLE>
<CAPTION>
At June 30, 1996
-------------------------------------------------------------------------
More Than More Than
One Year Three Years
One Year to to More than
or Less Three Years Five Years Five Years Total
-------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans (1) $ 819,249 $ 404,616 $ 329,769 $ 760,395 $ 2,314,029
Consumer and other loans (1) 37,650 8,460 10,462 -- 56,572
Federal funds sold and
repurchase agreements 22,200 -- -- -- 22,200
Mortgage-backed, mortgage-related
and other securities available-for-sale 2,457,716 -- -- -- 2,457,716
Mortgage-backed and mortgage-
related securities held-to-maturity 362,726 214,824 169,814 617,239 1,364,603
Other securities held-to-maturity 55,200 12,340 50,800 404,212 522,552
-------------------------------------------------------------------------
Total interest-earning assets 3,754,741 640,240 560,845 1,781,846 6,737,672
Less:
Unearned discount, premium
and deferred fees (2) 3,160 1,560 1,272 2,932 8,924
-------------------------------------------------------------------------
Net interest-earning assets 3,751,581 638,680 559,573 1,778,914 6,728,748
-------------------------------------------------------------------------
Interest-bearing liabilities:
Savings 177,000 288,000 272,000 418,132 1,155,132
NOW 17,484 13,992 12,592 19,396 63,464
Money market 133,404 133,412 88,936 85,575 441,327
Certificates of deposit 1,517,217 1,061,922 180,230 121 2,759,490
Borrowed funds 781,349 1,200,541 5,000 10,000 1,996,890
-------------------------------------------------------------------------
Total interest-bearing liabilities 2,626,454 2,697,867 558,758 533,224 6,416,303
-------------------------------------------------------------------------
Interest sensitivity gap $ 1,125,127 $(2,059,187) $ 815 $ 1,245,690 $ 312,445
=========================================================================
Cumulative interest sensitivity gap $ 1,125,127 $ (934,060) $ (933,245) $ 312,445
=========================================================================
Cumulative interest sensitivity gap
as a percentage of total assets 15.90% (13.20)% (13.18)% 4.41%
Cumulative net interest-earning assets
as a percentage of interest-bearing liabilities 142.84% 82.46% 84.14% 104.87%
</TABLE>
(1) For purposes of this analysis, mortgage, consumer and other loans
exclude non-performing loans, but are not reduced for the allowance for
loan losses.
(2) For purposes of this analysis, unearned discount, premium and deferred
fees are prorated.
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar contractual maturities or periods to repricing, they may react in
different ways to changes in market interest rates. Additionally, certain
assets, such as ARM loans, have contractual features which restrict changes in
interest rates on a short-term basis and over the life of the asset. Further, in
the event of a change in interest rates, prepayment and early withdrawal levels
would likely deviate significantly from those assumed in calculating the table.
Finally, the ability of borrowers to service their ARM loans or other loan
obligations may decrease in the event of an interest rate increase. The table
reflects the estimates of management as to periods to repricing at a particular
point in time. Among the factors considered, are current trends and historical
repricing experience with respect to similar products. For example, the Company
has a number of deposit accounts, including savings, NOW and money market
accounts which, subject to certain regulatory exceptions not relevant here, may
be withdrawn at any time. The Company, based upon its historical experience,
assumes that while all customers in these account categories could withdraw
their funds on any given day, they will not do so, even if market interest rates
were to change. As a result, different assumptions may be used at different
points in time.
12
<PAGE> 14
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. The
following table sets forth certain information relating to the Company for the
quarters ended June 30, 1996 and 1995. Yields and costs are derived by dividing
income or expense by the average balance of related assets or liabilities,
respectively, for the periods shown, and annualized, except where noted
otherwise. This table should be analyzed in conjunction with management's
discussion of the comparison of operating results for the quarters ended June
30, 1996 and 1995.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
-----------------------------------------------------------------------
1996 1995
---------------------------------- -----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
ASSETS: BALANCE INTEREST COST BALANCE INTEREST COST
---------------------------------- -----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans $2,230,189 $ 44,962 8.06% $1,765,166 $ 37,425 8.48%
Consumer and other loans 58,742 1,516 10.32 63,281 1,722 10.88
Mortgage-backed and mortgage-
related securities (1) 3,656,621 62,660 6.85 3,409,519 58,914 6.91
Federal funds sold and
repurchase agreements 67,619 893 5.28 261,937 3,977 6.07
Other securities (1) 662,029 11,211 6.77 374,607 5,845 6.24
---------- ---------- ---------- ----------
Total interest-earning assets 6,675,200 121,242 7.27 5,874,510 107,883 7.35
---------- ----------
Non-interest-earning assets 255,162 330,384
---------- ----------
Total assets $6,930,362 $6,204,894
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings $1,155,189 7,299 2.53 $1,203,187 7,598 2.53
Certificates of deposit 2,673,656 36,338 5.44 2,610,258 36,591 5.61
NOW 87,129 440 2.02 248,315 1,257 2.02
Money manager accounts 185,583 937 2.02 -- -- --
Money market 221,084 2,074 3.75 201,970 1,979 3.92
Borrowed funds 1,914,593 27,330 5.71 1,265,322 18,528 5.86
---------- ---------- ---------- ----------
Total interest-bearing liabilities 6,237,234 74,418 4.77 5,529,052 65,953 4.77
---------- ----------
Non-interest-bearing liabilities 127,622 107,312
---------- ----------
Total liabilities 6,364,856 5,636,364
Stockholders' equity 565,506 568,530
---------- ----------
Total liabilities and stockholders' equity $6,930,362 $6,204,894
========== ==========
Net interest income/net interest rate spread (2) $ 46,824 2.50 $ 41,930 2.58
========== ===== ========== =====
Net interest-earning assets/net interest margin (3) $ 437,966 2.81 $ 345,458 2.86
========== ===== ========== =====
Ratio of interest-earning assets to interest-
bearing liabilities 1.07x 1.06x
========== ==========
</TABLE>
(1) Securities available-for-sale are reported at average amortized cost.
(2) 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.
(3) Net interest margin represents net interest income divided by average
interest-earning assets.
13
<PAGE> 15
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. The
following table sets forth certain information relating to the Company for the
six months ended June 30, 1996 and 1995. Yields and costs are derived by
dividing income or expense by the average balance of related assets or
liabilities, respectively, for the periods shown, and annualized, except where
noted otherwise. This table should be analyzed in conjunction with management's
discussion of the comparison of operating results for the six months ended June
30, 1996 and 1995.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------------------
1996 1995
---------------------------------- -----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
ASSETS: BALANCE INTEREST COST BALANCE INTEREST COST
---------------------------------- -----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans $2,148,986 $ 87,486 8.14% $1,727,600 $ 72,598 8.40%
Consumer and other loans 59,697 3,041 10.19 60,712 3,282 10.81
Mortgage-backed and mortgage-
related securities (1) 3,665,786 125,576 6.85 3,204,280 110,930 6.92
Federal funds sold and
repurchase agreements 72,502 1,948 5.37 215,029 6,924 6.44
Other securities (1) 581,228 19,025 6.55 383,213 12,032 6.28
---------- ---------- ---------- ----------
Total interest-earning assets 6,528,199 237,076 7.26 5,590,834 205,766 7.36
---------- ----------
Non-interest-earning assets 270,518 286,741
---------- ----------
Total assets $6,798,717 $5,877,575
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings $1,152,858 14,584 2.53 $1,187,238 15,092 2.54
Certificates of deposit 2,628,796 71,599 5.45 2,456,164 67,779 5.52
NOW 154,957 1,565 2.02 222,555 2,340 2.10
Money manager accounts 106,047 1,071 2.02 -- -- --
Money market 227,484 4,310 3.79 175,003 2,989 3.42
Borrowed funds 1,828,002 52,389 5.73 1,175,989 32,848 5.59
---------- ---------- ---------- ----------
Total interest-bearing liabilities 6,098,144 145,518 4.77 5,216,949 121,048 4.64
---------- ----------
Non-interest-bearing liabilities 122,393 98,385
---------- ----------
Total liabilities 6,220,537 5,315,334
Stockholders' equity 578,180 562,241
---------- ----------
Total liabilities and stockholders' equity $6,798,717 $5,877,575
========== ==========
Net interest income/net interest rate spread (2) $ 91,558 2.49 $ 84,718 2.72
========== ===== ========== =====
Net interest-earning assets/net interest margin (3)$ 430,055 2.81 $ 373,885 3.03
========== ===== ========== =====
Ratio of interest-earning assets to interest-
bearing liabilities 1.07x 1.07x
========== ==========
</TABLE>
(1) Securities available-for-sale are reported at average amortized cost.
(2) 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.
(3) Net interest margin represents net interest income divided by average
interest-earning assets.
14
<PAGE> 16
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 the Company's interest income and interest expense
during the periods indicated. Information is provided in each category with
respect to (i) changes attributable to changes in volume (changes in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate multiplied by prior volume), and (iii) 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.
<TABLE>
<CAPTION>
Quarter Ended June 30, 1996 Six Months Ended June 30, 1996
Compared to Compared to
Quarter Ended June 30, 1995 Six Months Ended June 30, 1995
-------------------------------- --------------------------------
Increase (Decrease) Increase (Decrease)
-------------------------------- --------------------------------
Volume Rate Net Volume Rate Net
-------- -------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans .................. $ 18,826 $(11,289) $ 7,537 $ 21,184 $ (6,296) $ 14,888
Consumer and other loans ........ (120) (86) (206) (55) (186) (241)
Mortgage-backed and mortgage-
related securities ............ 6,999 (3,253) 3,746 17,876 (3,230) 14,646
Federal funds sold and repurchase
agreements .................... (2,624) (460) (3,084) (3,979) (997) (4,976)
Other securities ................ 4,831 535 5,366 6,456 537 6,993
-------- -------- -------- -------- -------- --------
Total ....................... 27,912 (14,553) 13,359 41,482 (10,172) 31,310
-------- -------- -------- -------- -------- --------
Interest-bearing liabilities:
Savings ......................... (299) -- (299) (447) (61) (508)
Certificates of deposit ......... 3,836 (4,089) (253) 6,149 (2,329) 3,820
NOW ............................. (817) -- (817) (689) (86) (775)
Money manager accounts .......... 937 -- 937 1,071 -- 1,071
Money market .................... 536 (441) 95 971 350 1,321
Borrowed funds .................. 11,999 (3,197) 8,802 18,697 844 19,541
-------- -------- -------- -------- -------- --------
Total ....................... 16,192 (7,727) 8,465 25,752 (1,282) 24,470
-------- -------- -------- -------- -------- --------
Net change in net interest
income ........................ $ 11,720 $ (6,826) $ 4,894 $ 15,730 $ (8,890) $ 6,840
======== ======== ======== ======== ======== ========
</TABLE>
15
<PAGE> 17
ASSET QUALITY
One of the Company's key operating objectives has been and continues to be
improving asset quality. Through a variety of strategies, including borrower
workout arrangements and aggressive marketing of owned properties, the Company
has taken an active role in addressing problem and non-performing assets which,
in turn, has helped to build the strength of the Company's financial condition.
Such strategies have resulted in a reduction of non-performing assets of $12.7
million from $67.8 million at December 31, 1995 to $55.1 million at June 30,
1996. The reduction was primarily due to decreases in non-accrual mortgage loans
and real estate owned, net of $6.9 million and $5.9 million, respectively. The
following tables show a comparison of delinquent loans and non-performing assets
as of June 30, 1996 and December 31, 1995.
<TABLE>
<CAPTION>
DELINQUENT LOANS
-----------------------------------------------------------------------------------
AT JUNE 30, 1996 AT DECEMBER 31, 1995
---------------------------------------- ---------------------------------------
60-89 DAYS 90 DAYS OR MORE 60-89 DAYS 90 DAYS OR MORE
------------------- ------------------ ------------------ ------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL
OF BALANCE OF BALANCE OF BALANCE OF BALANCE
LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS
------ --------- ------ --------- ------ --------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One-to-four family ........ 76 $ 5,097 288 $28,799 118 $ 8,173 366 $33,384
Multi-family .............. 4 880 16 4,804 3 336 17 2,851
Commercial real estate .... 4 1,724 15 2,774 3 384 21 4,698
Construction and land ..... -- -- 8 744 -- -- 10 2,271
Consumer and other loans .. 40 394 73 1,117 47 622 65 1,276
------- ------- ------- ------- ------- ------- ------- -------
Total delinquent loans 124 $ 8,095 400 $38,238 171 $ 9,515 479 $44,480
======= ======= ======= ======= ======= ======= ======= =======
Delinquent loans to total
loans .............. 0.34% 1.59% 0.46% 2.16%
</TABLE>
16
<PAGE> 18
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
AT AT
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
Non-accrual delinquent mortgage loans ................. $30,502 $37,394
Non-accrual delinquent consumer
and other loans .................................. 1,117 1,276
Mortgage loans delinquent 90 days or more (1) ......... 6,619 5,810
------- -------
Total non-performing loans ....................... 38,238 44,480
------- -------
Real estate owned, net (2) ............................ 11,781 17,677
Investment in real estate, net (3) .................... 5,119 5,654
------- -------
Total real estate owned and investment
in real estate, net ............................ 16,900 23,331
------- -------
Total non-performing assets ................ $55,138 $67,811
======= =======
Allowance for loan losses to non-performing loans ..... 34.87% 30.34%
Allowance for loan losses to total loans .............. 0.55% 0.65%
</TABLE>
(1) Loans delinquent 90 days or more and still accruing interest consist solely
of loans delinquent 90 days or more as to their maturity date but not their
interest payments.
(2) Real estate acquired by the Company as a result of foreclosure or by
deed-in-lieu of foreclosure is recorded at the lower of cost or fair value
less estimated costs to sell.
(3) Investment in real estate is recorded at the lower of cost or fair value.
17
<PAGE> 19
The following table sets forth the composition of the Company's loan portfolio
at June 30, 1996 and December 31, 1995.
<TABLE>
<CAPTION>
At June 30, At December 31,
1996 1995
------------------------- --------------------------
Percent Percent
of of
Amount Total Amount Total
------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
MORTGAGE LOANS:
One-to-four family $ 2,042,726 84.80% $ 1,748,284 84.82%
Multi-family 145,353 6.03 109,944 5.34
Commercial real estate 152,692 6.35 128,668 6.24
Construction 10,379 0.43 12,598 0.61
----------- ------ ----------- ------
Total mortgage loans 2,351,150 97.61 1,999,494 97.01
----------- ------ ----------- ------
CONSUMER AND OTHER LOANS:
Home equity 35,042 1.45 38,761 1.88
Credit card 8,139 0.34 8,578 0.42
Passbook 3,448 0.14 2,915 0.14
Agency for International
Development 1,116 0.04 1,193 0.06
Education 2,858 0.12 2,415 0.11
Personal 3,827 0.16 3,708 0.18
Other 3,259 0.14 4,104 0.20
----------- ------ ----------- ------
Total consumer and other loans 57,689 2.39 61,674 2.99
----------- ------ ----------- ------
Total loans 2,408,839 100.00% 2,061,168 100.00%
----------- ====== ----------- ======
LESS:
Unearned discount, premium and
deferred loan fees, net (2,607) (4,030)
Allowance for loan losses (13,335) (13,495)
----------- -----------
Total loans, net $ 2,392,897 $ 2,043,643
=========== ===========
</TABLE>
18
<PAGE> 20
SECURITIES PORTFOLIO
The following tables set forth the amortized cost and estimated fair values of
mortgage-backed, mortgage-related and other securities available-for-sale and
held-to-maturity at June 30, 1996 and December 31, 1995.
<TABLE>
<CAPTION>
At June 30, 1996
----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------- ---------- ---------- ---------
(In Thousands)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
Mortgage-backed and mortgage-related securities:
GNMA certificates ......................... $ 246,458 $ 1,265 $ (3,134) $ 244,589
FHLMC certificates ........................ 299,519 908 (4,653) 295,774
FNMA certificates ......................... 51,527 31 (341) 51,217
REMICs:
Agency issuance ....................... 1,204,607 3,137 (27,193) 1,180,551
Private issuance ...................... 18,093 -- (369) 17,724
Other mortgage-related .................... 455,719 4,515 (873) 459,361
---------- ---------- ---------- ----------
Total mortgage-backed and
mortgage-related securities ....... 2,275,923 9,856 (36,563) 2,249,216
---------- ---------- ---------- ----------
Other securities:
Obligations of the U.S.
Government and agencies ................. 149,453 321 (2,819) 146,955
Equity and other securities ............... 60,956 1,047 (458) 61,545
---------- ---------- ---------- ----------
Total other securities ............ 210,409 1,368 (3,277) 208,500
---------- ---------- ---------- ----------
Total Available-for-Sale ......................... $2,486,332 $ 11,224 $ (39,840) $2,457,716
========== ========== ========== ==========
HELD-TO-MATURITY:
Mortgage-backed and mortgage-related securities:
GNMA certificates ......................... $ 95,680 $ 2,941 $ (267) $ 98,354
FHLMC certificates ........................ 32,267 976 (290) 32,953
FNMA certificates ......................... 23,183 60 (1,258) 21,985
CMOs ...................................... 7,822 80 (82) 7,820
REMICs:
Agency issuance ....................... 950,451 1,397 (21,006) 930,842
Private issuance ...................... 248,890 -- (9,735) 239,155
Other mortgage-related .................... 351 -- -- 351
---------- ---------- ---------- ----------
Total mortgage-backed and
mortgage-related securities ....... 1,358,644 5,454 (32,638) 1,331,460
---------- ---------- ---------- ----------
Other securities:
Obligations of the U.S.
Government and agencies ............... 428,389 -- (11,169) 417,220
Obligations of states and
political subdivisions ................ 51,416 -- (188) 51,228
Corporate debt securities ................. 10,035 83 -- 10,118
---------- ---------- ---------- ----------
Total other securities .............. 489,840 83 (11,357) 478,566
---------- ---------- ---------- ----------
Total Held-to-Maturity ........................... $1,848,484 $ 5,537 $ (43,995) $1,810,026
========== ========== ========== ==========
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
At December 31, 1995
--------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
Mortgage-backed and mortgage-related securities:
GNMA certificates $ 156,330 $ 3,082 $ -- $ 159,412
FHLMC certificates 332,109 4,363 (635) 335,837
FNMA certificates 147,016 1,425 (17) 148,424
REMICs:
Agency issuance 1,116,842 9,418 (5,584) 1,120,676
Private issuance 22,433 41 (73) 22,401
Other mortgage-related 540,565 5,900 (393) 546,072
---------- ---------- ---------- ----------
Total mortgage-backed and
mortgage-related securities 2,315,295 24,229 (6,702) 2,332,822
---------- ---------- ---------- ----------
Other securities:
Obligations of the U.S.
Government and agencies 149,990 1,023 (446) 150,567
Equity and other securities 30,961 1,719 (101) 32,579
---------- ---------- ---------- ----------
Total other securities 180,951 2,742 (547) 183,146
---------- ---------- ---------- ----------
Total Available-for-Sale $2,496,246 $ 26,971 $ (7,249) $2,515,968
========== ========== ========== ==========
HELD-TO-MATURITY:
Mortgage-backed and mortgage-related securities:
GNMA certificates $ 105,589 $ 4,566 $ (22) $ 110,133
FHLMC certificates 36,503 1,406 (16) 37,893
FNMA certificates 24,613 150 (476) 24,287
CMOs 10,638 119 (46) 10,711
REMICs:
Agency issuance 961,536 9,169 (4,396) 966,309
Private issuance 194,411 412 (3,922) 190,901
Other mortgage-related 354 -- -- 354
---------- ---------- ---------- ----------
Total mortgage-backed and
mortgage-related securities 1,333,644 15,822 (8,878) 1,340,588
---------- ---------- ---------- ----------
Other securities:
Obligations of the U.S.
Government and agencies 220,181 1,022 (2,460) 218,743
Obligations of states and
political subdivisions 51,753 2 (96) 51,659
Corporate debt securities 9,964 -- (174) 9,790
---------- ---------- ---------- ----------
Total other securities 281,898 1,024 (2,730) 280,192
---------- ---------- ---------- ----------
Total Held-to-Maturity $1,615,542 $ 16,846 $ (11,608) $1,620,780
========== ========== ========== ==========
</TABLE>
20
<PAGE> 22
COMPARISON OF FINANCIAL CONDITION AS OF
JUNE 30, 1996 AND DECEMBER 31, 1995
AND OPERATING RESULTS FOR THE QUARTERS ENDED
AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
FINANCIAL CONDITION
At June 30, 1996, the Company's total assets were $7.1 billion compared
to $6.6 billion at December 31, 1995. The increase was primarily due to growth
in the mortgage loan portfolio. Mortgage loans originated and purchased during
the first six months of 1996 totaled $523.4 million, compared to $147.9 million
in the first six months of 1995. Deposits increased $214.7 million during the
first six months of 1996, including a $181.8 million increase in certificates of
deposit, and borrowed funds increased $292.2 million, primarily in the form of
additional reverse repurchase agreements. During the first quarter of 1996, the
Company implemented a program which converted its NOW accounts to a master
account consisting of a NOW sub-account and a money market sub-account. The
result of this change was a substantial shift of deposits from NOW accounts to
money markets. While this program has no effect on the Company's depositors, it
has provided additional investable funds to the Company by substantially
reducing the reserve balances required to be maintained at the Federal Reserve
Bank of New York. Stockholders' equity decreased $29.0 million to $561.7 million
which reflects the repurchase of 1,130,496 shares of common stock, the net
change in the market valuation, net of taxes, of securities available-for-sale
and dividends declared, partially offset by net income and the amortization
relating to ESOP and RRP stock and related tax benefit.
RESULTS OF OPERATIONS
GENERAL
Net income for the three months ended June 30, 1996 increased $621,000,
or 5.6%, to $11.7 million compared to $11.1 million for the same period in 1995
and earnings per share increased 12.0% to $0.56 from $0.50, respectively. Net
income for the six months ended June 30, 1996 increased $3.7 million, or 16.5%,
to $26.4 million compared to $22.7 million for the six month period ended June
30, 1995 and earnings per share increased 21.6% to $1.24 from $1.02,
respectively. As a result of the increase in net income, coupled with a
reduction in stockholders' equity, return on average equity increased from 7.80%
for the 1995 second quarter to 8.28% for the 1996 second quarter, and also
increased from 8.07% for the six months ended June 30, 1995 to 9.14% for the six
months ended June 30, 1996. As a result of the significant increase in total
assets, return on average assets decreased from 0.71% for the 1995 second
quarter to 0.68% for the 1996 second quarter and increased slightly for the six
months ended June 30, 1996 to 0.78% versus 0.77% for the comparable 1995 period.
NET INTEREST INCOME
Net interest income increased for the three and six month periods ended
June 30, 1996 versus the comparable 1995 periods. For the three month period,
net interest income increased $4.9 million, or 11.7% to $46.8 million. For the
six month period, net interest income increased $6.9 million, or 8.1% to $91.6
million. These increases are due to the increases in average interest-earning
assets for the three and six month periods, over the comparable 1995 periods, of
13.6% and 16.8%, respectively. The increases in interest-earning assets is due
primarily to the significant increase in the mortgage loan portfolio which
resulted from record loan originations for the periods, as well as loan
purchases. In addition, the Company purchased additional higher-yielding,
agency-issued other securities. The impact of the increases in interest-earning
assets was partially offset by the reduction in interest rate spread from 2.58%
to 2.50% in the comparable three month periods and from 2.72% to 2.49% for the
six month periods. These decreases were primarily a result of using short-term
borrowed funds, to fund the aforementioned portfolio growth.
21
<PAGE> 23
PROVISION FOR LOAN LOSSES
For the second quarter of 1996, provision for loan losses increased to
$2.0 million compared to $827,000 for the second quarter of 1995. For the period
ending June 30, 1996, the provision increased to $2.6 million from $1.8 million
in 1995. The increase for both periods was primarily attributable to the
increase in the loan portfolio as a result of record loan originations and
purchases. The increased provision for loan losses was offset with charge-offs,
particularly of large commercial properties, during the six months ended June
30, 1996, which resulted in a slight reduction in the allowance for loan losses,
from $13.5 million at December 31, 1995 to $13.3 million at June 30, 1996. The
reduction in non-performing loans improved the Company's percentage of allowance
for loan losses to non-performing loans from 30.34% at December 31, 1995 to
34.87% at June 30, 1996.
NON-INTEREST INCOME
Non-interest income for the first three months of 1996 increased
$814,000, or 31.0%, to $3.4 million from $2.6 million for the comparable period
in 1995. For the six months ended June 30, 1996, non-interest income increased
$2.4 million, or 51.8%, to $7.0 million from $4.6 million in 1995. The increase
in both periods resulted from gains recognized on sales of securities coupled
with increases in customer service and loan fees as a result of additional and
increased fees on deposit products and increased loan volumes.
NON-INTEREST EXPENSE
Non-interest expense for the second quarter of 1996 increased $3.4
million, to $27.2 million, from $23.8 million for the second quarter of 1995.
General and administrative expenses increased from $23.2 million in 1995 to
$24.7 million in 1996 primarily due to an increase in compensation and benefits,
including a $590,000 increase in the amortization relating to the allocation of
ESOP stock due to a higher average fair market value of the Company's stock.
Real estate operations, net and provision for real estate losses increased from
a net recovery of $1.6 million in 1995 to a net charge of $404,000 in 1996. The
net recovery in 1995 includes the recognition of $1.1 million of previously
deferred fees on a single REO property.
Non-interest expense for the six month period ended June 30, 1996,
increased $1.5 million to $48.7 million from $47.2 million for the same period
in 1995. General and administrative expenses increased from $44.6 million in
1995 to $48.6 million in 1996. The increase is due to the full six month impact
of the Fidelity acquisition and additional compensation and benefits, including
an increase of $1.2 million in the amortization relating to the allocation of
ESOP stock due to a higher average fair market value of the Company's stock.
Real estate operations, net and recoveries for real estate losses increased from
a net recovery of $1.3 million in 1995 to a net recovery of $4.2 million in
1996. This increase resulted from gains on dispositions of real estate owned and
investment in real estate.
INCOME TAX EXPENSE
Income tax expense increased $461,000 for the second quarter of 1996,
to $9.3 million, from $8.8 million in 1995. For the six month period ended June
30, 1996, income tax expense increased $3.3 million, to $20.9 million, from
$17.6 million in 1995. The change for both periods is due to an increase in
income before taxes of $1.1 million and $7.0 million, respectively.
22
<PAGE> 24
IMPACT OF PROPOSED LEGISLATION
During the quarter ended June 30, 1996, no legislative action was taken
by Congress to recapitalize the Savings Association Insurance Fund ("SAIF"). The
Association's officers and other industry leaders have continued to work towards
passage of recapitalization legislation comparable to that which was contained
in the Balanced Budget Act of 1995, which was vetoed by the President for
reasons unrelated to the SAIF capitalization. If an 85 or 90 basis point
assessment were imposed against the Company based on its deposits as of March
31, 1995, as had been contemplated by such legislation, the aggregate SAIF
assessment payable by the Association would have been approximately $36.9
million or $39.1 million, before taxes, respectively. An assessment of 70 basis
points would have been $30.4 million, before taxes.
At this time, the Company cannot predict whether any legislative
proposals regarding SAIF recapitalization, will be adopted or, if so, in what
form. Until such time as a SAIF recapitalization is adopted, it is expected that
the Company will continue to be assessed deposit insurance assessments at rates
substantially in excess of those assessed against comparably rated Bank
Insurance Fund ("BIF") insured institutions, primarily commercial banks. Based
upon the Company's June 30, 1996 assessment base, the SAIF premium paid by the
Company on an annualized basis would equal approximately $10.3 million. A
comparably rated and sized BIF-insured institution would pay approximately
$2,000 for the same deposit insurance coverage.
Under section 593 of the Internal Revenue Code, thrift institutions
such as the Association which meet certain definitional tests, primarily
relating to their assets and the nature of their business, are permitted to
establish a tax reserve for bad debts and to make annual additions thereto,
which additions may, within specified limitations, be deducted in arriving at
their taxable income. The Association's deduction with respect to "qualifying
loans," which are generally loans secured by certain interests in real property,
may currently be computed using an amount based on the Association's actual loss
experience (the "Experience Method"), or a percentage equal to 8% of the
Association's taxable income (the "PTI Method"), computed without regard to this
deduction and with additional modifications and reduced by the amount of any
permitted addition to the non-qualifying reserve. Similar deductions for
additions to the Association's bad debt reserve are permitted under the New York
State Bank Franchise Tax and the New York City Banking Corporation Tax; however,
for purposes of these taxes, the effective allowable percentage under the PTI
method is 32% rather than 8%.
Under the Small Business Job Protection Act of 1996 (the "1996 Act") as
passed by the House and Senate on August 2, 1996, section 593 of the Code would
be amended, effective January 1, 1996, and the Association, as a "large bank"
(one with assets having an adjusted basis of more than $500 million), would be
unable to make additions to its tax bad debt reserve, would be permitted to
deduct bad debts only as they occur and would additionally be required to
recapture (that is, take into taxable income) over a multi-year period,
beginning with the Association's taxable year beginning on January 1, 1996, the
excess of the balance of its bad debt reserves (other than the supplemental
reserve) as of December 31, 1995 over the balance of such reserves as of
December 31, 1987, or over a lesser amount if the Association's loan portfolio
has decreased since December 31, 1987. Such recapture requirements would be
deferred for each of two successive taxable years beginning January 1, 1996, in
which the Association originates a minimum amount of certain residential loans
based upon the average of the principal amounts of such loans originated by the
Association during its six taxable years preceding January 1, 1996. It is
anticipated that the President will sign the 1996 Act in the near future. If
enacted, the 1996 Act will have no impact on the Company's results of operations
for Federal income tax purposes. The New York State tax law has been amended to
prevent a similar recapture of the Association's bad debt reserve, and to permit
continued future use of the bad debt reserve method for purposes of determining
the Association's New York State tax liability. The Association's officers and
industry leaders continue to seek such amendments to the New York City tax law;
however, the Company cannot predict whether such changes to New York City law
will be adopted and, if so, in what form.
23
<PAGE> 25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material events occurred with respect to legal proceedings during
the quarter ended June 30, 1996, not previously reported.
On July 1, 1996, the United States Supreme Court upheld the appellate
court ruling in the U.S. v. Winstar Corp., 116 S. Ct. 2432 (1996) Federal case,
which held that the government breached its contractual agreements with the
enactment of the Financial Institutions Reform, Recovery and Enforcement Act of
1989, by failing to honor the assistance agreements entered into in connection
with certain acquisitions of failing thrift institutions. The agreements, if
honored, would have allowed, among other things, the inclusion of supervisory
goodwill and capital credits as regulatory capital. The Association filed a
similar suit against the United States, based upon the acquisition in 1984 of
Suburbia Federal Savings and Loan Association by Fidelity New York F.S.B.
Although management believes that the Supreme Court ruling will have a positive
impact on the outcome of the Association's suit, there can be no assurance that
the Association will prevail in its suit or what effect, if any, a favorable
outcome of the suit would have on the financial condition or results of
operations of the Company.
ITEM 2. CHANGES IN SECURITIES
At its Board of Directors meeting held on April 17, 1996, the Company
declared a two-for-one stock split in the form of a 100% stock dividend. On June
3, 1996, shareholders received one additional share of the Company's common
stock for each share of common stock owned as of May 15, 1996 (the record date).
As a result of the split, the number of common shares outstanding increased to
21,509,444 as of June 30, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on May 15, 1996
(the "Annual Meeting").
At the Annual Meeting, the shareholders of the Company elected Henry
Drewitz, Harold B. Vicory and George L. Engelke, Jr. as directors of the Company
each to serve for a three year term and, in any case, until the election and
qualification of their respective successors. Pursuant to the Bylaws of the
Company, no person is eligible for election or appointment as a director who is
seventy-five (75) years of age or older, and no person shall continue to serve
as a director after the regular meeting immediately preceding his seventy-fifth
(75th) birthday. Mr. Drewitz will reach 75 years of age in May 1997 and Mr.
Vicory will reach 75 years of age in October 1996.
In addition, the shareholders of the Company approved the 1996 Stock
Option Plan For Officers and Employees of Astoria Financial Corporation and the
1996 Stock Option Plan for Outside Directors of Astoria Financial Corporation,
and ratified the appointment of KPMG Peat Marwick LLP as independent auditors of
the Company for the fiscal year ended December 31, 1996.
The number of votes cast as to each matter acted upon was as follows:
(a) Election of Directors:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Henry Drewitz 10,041,441 61,916
George L. Engelke, Jr. 10,043,025 60,332
Harold B. Vicory 10,041,943 61,414
</TABLE>
There were no broker held non-voted shares represented at the meeting
with respect to this proposal.
24
<PAGE> 26
(b) Approval of the 1996 Stock Option Plan for Officers and
Employees of Astoria Financial Corporation:
<TABLE>
<S> <C>
For: 7,517,325
Against 2,151,508
Abstained 28,671
</TABLE>
There were 405,853 broker held non-voted shares represented at the
meeting with respect to this proposal.
(c) Approval of the 1996 Stock Option Plan for Outside Directors
of Astoria Financial Corporation:
<TABLE>
<S> <C>
For 7,197,465
Against 2,513,479
Abstained 65,030
</TABLE>
There were 327,383 broker held non-voted shares represented at the
meeting with respect to this proposal.
(d) Ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors of Astoria Financial Corporation for its
1996 fiscal year:
<TABLE>
<S> <C>
For 10,024,493
Against 41,495
Abstained 37,369
</TABLE>
There were no broker held non-voted shares represented at the meeting
with respect to this proposal.
ITEM 5. OTHER INFORMATION
Effective July 17, 1996, the Board of Directors of the Company
appointed Ralph F. Palleschi to serve as a director of both the Company and the
Association. Mr. Palleschi's term as a director of the Company will expire at
the annual meeting of shareholders to be held following the close of the
Company's 1998 fiscal year.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Statement Re: Computation of Per Share Earnings
27. Financial Data Schedule
25
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Astoria Financial Corporation
Dated: August 9, 1996 By: /s/ Monte N. Redman
------------------------- --------------------------------------
Monte N. Redman
Senior Vice President and Chief
Financial Officer
Dated: August 9, 1996 By: /s/ Frank E. Fusco
------------------------- --------------------------------------
Frank E. Fusco
First Vice President, Chief Accounting
Officer and Controller
26
<PAGE> 28
Exhibit Index
Exhibit No. Identification of Exhibit
11. Statement Re: Computation of Per Share Earnings
27. Financial Data Schedule
27
<PAGE> 1
(A) EXHIBIT 11. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996
-------------
(In Thousands
Except Per Share Data)
<S> <C>
1. Net Income $ 26,428
========
2. Weighted average common
shares outstanding 22,043
3. ESOP shares not committed to be released (2,122)
4. RRP shares purchased but unallocated (36)
5. Common stock equivalents due to dilutive
effect of stock options 1,463
--------
6. Total weighted average common shares
and equivalents outstanding 21,348
========
7. Primary earnings per share: $ 1.24
========
8. Total weighted average common shares and
equivalents outstanding 21,348
9. Additional dilutive common stock equivalents due to
effect of stock options 90
--------
10. Total outstanding shares for fully diluted earnings
per share computation 21,438
========
11. Fully diluted earnings per share: $ 1.23
========
</TABLE>
28
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF JUNE 30, 1996
(UNAUDITED) AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 27,086
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 22,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,457,716
<INVESTMENTS-CARRYING> 1,848,484
<INVESTMENTS-MARKET> 1,810,026
<LOANS> 2,406,232
<ALLOWANCE> 13,335
<TOTAL-ASSETS> 7,078,383
<DEPOSITS> 4,478,148
<SHORT-TERM> 781,349
<LIABILITIES-OTHER> 41,678
<LONG-TERM> 1,215,541
264
0
<COMMON> 0
<OTHER-SE> 561,403
<TOTAL-LIABILITIES-AND-EQUITY> 7,078,383
<INTEREST-LOAN> 90,527
<INTEREST-INVEST> 146,549
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 237,076
<INTEREST-DEPOSIT> 93,129
<INTEREST-EXPENSE> 145,518
<INTEREST-INCOME-NET> 91,558
<LOAN-LOSSES> 2,564
<SECURITIES-GAINS> 1,280
<EXPENSE-OTHER> 52,943
<INCOME-PRETAX> 47,296
<INCOME-PRE-EXTRAORDINARY> 26,428
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,428
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.23
<YIELD-ACTUAL> 2.81
<LOANS-NON> 31,619
<LOANS-PAST> 6,619
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 8,095
<ALLOWANCE-OPEN> 13,495
<CHARGE-OFFS> 2,792
<RECOVERIES> 68
<ALLOWANCE-CLOSE> 13,335
<ALLOWANCE-DOMESTIC> 13,335
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
