<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------------
Date of report (Date of earliest event reported): September 30, 1997
ASTORIA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-22228 11-3170868
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
ONE ASTORIA FEDERAL PLAZA, LAKE SUCCESS, NEW YORK 11042-1085
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (516) 327-3000
NONE
(Former name or former address, if changed since last report)
<PAGE>
<PAGE>
ITEMS 1, 3-6, 8 AND 9. NOT APPLICABLE.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As of the close of business on September 30, 1997 (the "Effective
Time"), Astoria Financial Corporation, a Delaware corporation ("AFC"), acquired
The Greater New York Savings Bank, a New York State chartered savings bank
("GNYSB"), pursuant to an Agreement and Plan of Merger entered into by AFC,
Astoria Federal Savings and Loan Association, a federally chartered savings and
loan association ("AFSL"), and GNYSB on March 29, 1997, as amended, and the
related Plan of Bank Merger (together, the "Merger Agreement"), which provided
for the merger of GNYSB with and into AFSL with AFSL being the surviving
corporation (the "Merger"). The Boards of Directors of AFC and AFSL now consist
of all of the respective directors of AFC and AFSL immediately prior to the
Effective Time, and Mr. Gerard C. Keegan, the former Chairman, President and
Chief Executive Officer of GNYSB, and Mr. Peter C. Haeffner, Jr., a former
director of GNYSB, who were appointed to the Boards of Directors of AFC and AFSL
pursuant to the Merger Agreement.
Pursuant to the Merger Agreement, the aggregate consideration payable
to stockholders of GNYSB common stock, par value $1.00 per share ("GNYSB Common
Stock"), consists of 0.5 of a share of AFC common stock, par value $0.01 per
share ("AFC Common Stock"), per share of GNYSB Common Stock for 75% of the
shares of GNYSB Common Stock and $19.00 in cash per share of GNYSB Common Stock
for the remaining 25% of the shares of GNYSB Common Stock. Accordingly, each
share of GNYSB Common Stock (including shares of GNYSB Series A ESOP Convertible
Preferred Stock, which were converted into 1,376,227 shares of GNYSB Common
Stock prior to the consummation of the Merger) has been converted in the Merger
into the right to receive: (i) 0.5 of a share of AFC Common Stock, (ii) $19.00
in cash or (iii) a combination of cash and a fraction of a share of AFC Common
Stock. As of the Effective Time, shares of GNYSB Common Stock that were owned by
GNYSB as treasury stock or that were held directly or indirectly by AFC other
than in a fiduciary capacity or in satisfaction of a debt previously contracted
were canceled and retired. No payment will be made with respect thereto. AFC
will pay to each holder of an outstanding option which had been granted by GNYSB
to purchase shares of GNYSB Common Stock an amount in cash computed by
multiplying (i) any positive difference obtained by subtracting from (x) $19.00
per share (y) the per share exercise price applicable to such option, by (ii)
the number of shares of GNYSB Common Stock subject to such option. However, Mr.
Gerard C. Keegan, Mr. Michael J. Henchy and Mr. Daniel J. Harris elected to
convert a portion of the options held by them into options to purchase shares of
AFC Common Stock. A combined total of 464,610 GNYSB options were converted into
options to purchase a maximum of 232,305 shares of AFC Common Stock at an
exercise price ranging from $3.0625 to $22.25 depending on the exercise price of
the original underlying GNYSB option. As a result of the transaction,
shareholders and holders of options of GNYSB were paid approximately $73,328,839
in cash (excluding payment of fractional shares). The aggregate number of shares
of AFC Common Stock that will be issued to former stockholders of GNYSB is
approximately 5,785,921.
The Merger was consummated after satisfaction of certain conditions,
including, but not limited to (i) approval of the Merger Agreement by the
stockholders of GNYSB at a special
<PAGE>
<PAGE>
meeting of stockholders held on August 1, 1997, (ii) approval of the Merger
Agreement by the stockholders of AFC at a special meeting of stockholders held
on August 1, 1997 and (iii) the receipt of all requisite regulatory approvals.
Pursuant to the Merger Agreement, AFC appointed eight members of
GNYSB's board of directors as members of a newly-formed advisory board of AFC
(the "Advisory Board"). In connection therewith, each such director, who
otherwise will not be a director, employee or consultant of AFC, has been
granted options to purchase 4,000 shares of AFC Common Stock, for an aggregate
of 32,000 shares, at an exercise price of $50 5/16 per share. The function of
the Advisory Board is to advise AFC and its subsidiaries on deposit and lending
activities in GNYSB's former market area and to maintain and develop customer
relations.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) As of the date of this filing, it is impracticable to provide
financial statements for AFC. The required financial statements will be filed as
soon as possible and in no event later than December 15, 1997.
(b) As of the date of this filing, it is impracticable to provide pro
forma financial information required pursuant to Article 11 of Regulation S-X.
The required pro forma financial information will be filed as soon as possible
and in no event later than December 15, 1997.
(c) Exhibits. The following Exhibits are filed as part of this report:
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of
the 29th day of March, 1997, by and among
Astoria Financial Corporation, Astoria
Federal Savings and Loan Association and
The Greater New York Savings Bank, as
amended.*
13.1 Form 10-Q of The Greater New York
Savings Bank for the quarter ended June 30,
1997, previously filed with the Federal
Deposit Insurance Corporation.
99.1 Press Release issued on October 1, 1997.
*Incorporated by reference to the Registration Statement on Form S-4
(Registration No. 333- 29901) filed by AFC on June 24, 1997.
2
<PAGE>
<PAGE>
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 hereunto duly authorized.
ASTORIA FINANCIAL CORPORATION
By: /s/ Alan P. Eggleston
------------------------------------------
Alan P. Eggleston, Esq.
Senior Vice President and General Counsel
Dated: October 3, 1997
3
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger, dated as of
the 29th day of March, 1997, by and among
Astoria Financial Corporation, Astoria
Federal Savings and Loan Association and
The Greater New York Savings Bank, as
amended.*
13.1 Form 10-Q of The Greater New York Savings Bank for
the quarter ended June 30, 1997, previously filed
with the Federal Deposit Insurance Corporation.
99.1 Press Release issued on October 1, 1997
*Incorporated by reference to the Registration Statement on Form S-4
(Registration No. 333- 29901) filed by AFC on June 24, 1997.
4
<PAGE>
<PAGE>
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ___________
THE GREATER NEW YORK SAYINGS BANK
(Exact name of bank as specified in its charter)
FDIC Insurance Certificate No. 16015-6
<TABLE>
<CAPTION>
New York 11-0754650
- --------------------------------------------- ------------------------------------
<S> <C>
(State or other jurisdiction of incorporation) (I.R.S. employer identification no.)
</TABLE>
One Penn Plaza, New York, NY 10119
------------------------------------
(Address of administrative office)
(212) 613-4000
------------------------------------
(Bank's telephone number, including area code)
Indicate by check mark whether the Bank (1) has filed all 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 Bank was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES XX NO __.
Securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934:
Title of Each Class:
Common Stock, $1.00 par value per share
12% Noncumulative Perpetual Preferred Stock, Series B
(Liquidation Preference $25.00 per share; $1.00 par value per share)
Junior Participating Preferred Stock Purchase Rights
Number of shares outstanding of the Bank's Common Stock as of July 31,1997 was:
15,178,642
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
FORM 10-Q
June 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 1997 and
December 31, 1996.................................................................1
Consolidated Statements of Income for the Quarters Ended
June 30, 1997 and 1996............................................................2
Consolidated Statements of Income for the Six Months Ended
June SO, 1997 and 1996............................................................3
Consolidated Statements of Changes in Stockholders' Equity for the
Six Months Ended June 30, 1997 and 1996...........................................4
Consolidated Statements of Cash Flows for We Six Months Ended
June 30, 1997 and 1996............................................................5
Notes to Consolidated Financial Statements...........................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................12
Item 3. Quantitative and Qualitative Disclosures About Market Risk .........................33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................................34
Item 2. Changes in Securities...............................................................34
Item 3. Defaults Upon Senior Securities:....................................................34
Item 4. Submission of Matters to a Vote of Security Holders.................................34
Item 5. Other Information...................................................................35
Item 6. Exhibits and Reports on Form 8-K ...................................................35
Signatures...................................................................................36
</TABLE>
<PAGE>
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Unaudited)
JUNE 30, DECEMBER 31,
($ in thousands, except par value) 1997 1996 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks ....................................................... $ 21,588 $ 22,396 $ (808)
Federal funds sold ............................................................ 12,900 5,750 7,150
Securities available for sale, net, at estimated fair value ................... 204,087 215,961 (11,874)
Securities held to maturity, net:
Mortgage-backed securities, net (estimated fair value
of $1,068,037 and $1,027,922, respectively) ............................... 1,077,608 1,042,843 34,765
Other bonds and notes, net (estimated fair value
of $129,772 and $131,117, respectively) ................................... 129,858 131,478 (1,620)
Federal Home Loan Bank of NY stock, at cost ................................... 24,250 23,600 650
Loans receivable, net:
Mortgage loans on real estate ............................................... 812,959 835,600 (22,641)
Other loans ................................................................. 167,488 132,968 34,520
-------------------------------------------------
Loans receivable ............................................................ 980,447 968,568 11,879
Allowance for loan losses ................................................... (16,738) (17,228) 490
-------------------------------------------------
Loans receivable, net ......................................................... 963,709 951,340 12,369
Accrued interest receivable ................................................... 14,964 15,343 (379)
Premises and equipment, net ................................................... 28,788 28,273 515
Deferred tax asset, net ....................................................... 40,365 45,365 (5,000)
Other assets .................................................................. 60,981 59,539 1,442
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets .................................................................. $2,579,098 $2,541,888 $ 37,210
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits ...................................................................... $1,643,100 $1,666,674 $(23,574)
Borrowed funds, including securities sold under agreements
to repurchase of $460,000 and $409,500, respectively ........................ 689,504 640,384 49,120
Accrued expenses and other liabilities ........................................ 29,736 25,182 4,554
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities ............................................................. 2,362,340 2,332,240 30,100
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, 8.25%, cumulative, ESOP convertible Series A ($1.00 par
value, 1,800,000 shares authorized, 1,477,802 and
1,536,391 shares issued and outstanding, respectively) ...................... 1,478 1,537 (59)
Preferred stock, 12%, noncumulative, perpetual Series B ($1.00 par value,
2,000,000 shares authorized, issued and
outstanding) ................................................................ 2,000 2,000 --
Additional paid-in-capital preferred .......................................... 62,408 63,111 (703)
ESOP debt guarantee ........................................................... (13,464) (14,230) 766
Common stock ($1.00 par value, 45,000,000 shares authorized, 13,716,985 and
13,534,448 shares issued and outstanding, respectively) ..................... 13,717 13,534 183
Additional paid-in-capital common ............................................. 105,029 102,883 2,146
Surplus fund .................................................................. 22,998 22,998 --
Undivided profits ............................................................. 22,342 17,845 4,497
Net unrealized gain (loss) on securities available for sale. net of taxes ..... 250 (30) 280
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity .................................................... 216,758 209,648 7,110
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity .................................... $2,579,098 $2,541,888 $ 37,210
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter Ended
June 30,
-------------------------------
($ in thousands, except per share data) 1997 1996 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Mortgage loans on real estate ................................................ $17,307 $18,984 $(1,677)
Other loans .................................................................. 3,094 2,642 452
-------------------------------------------------
Total interest on loans ...................................................... 20,401 21,626 (1,225)
Securities available for sale ................................................ 3,566 3,254 312
Securities held to maturity:
Mortgage-backed securities ................................................. 18,472 16,447 2,025
Other bonds and notes ...................................................... 2,103 2,143 (40)
Other ........................................................................ 506 672 (166)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest and dividend income ........................................... 45,048 44,142 906
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits ..................................................................... 15,909 16,749 (840)
Securities sold under agreements to repurchase ............................... 6,485 5,477 1,008
Other borrowed funds ......................................................... 3,598 3,959 (361)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense ....................................................... 25,992 26,185 (193)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income ............................................. 19,056 17,957 1,099
Provision for loan losses .................................................... 500 500 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income after provision for loan losses ............. 18,556 17,457 1,099
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Income from mortgage activities .............................................. 380 961 (581)
Customer service fees ........................................................ 923 880 43
Fees from sales of investment products ....................................... 458 447 11
Net gain on sales of securities .............................................. -- 20 (20)
Other ........................................................................ 69 277 (208)
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest income ..................................................... 1,830 2,585 (755)
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Compensation and benefits .................................................... 5,745 5,837 (92)
Occupancy, net ............................................................... 1,906 1,967 (61)
Equipment and data processing services ....................................... 1,860 1,502 358
Advertising and promotion .................................................... 177 357 (180)
Federal deposit insurance premiums ........................................... 178 128 50
Nonperforming loan and real estate activities ................................ 497 996 (499)
Other ........................................................................ 2,441 2,310 131
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest expenses ................................................... 12,804 13,097 (293)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before taxes .......................................................... 7,582 6,945 637
Tax expense .................................................................. 2,836 2,693 143
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME ................................................................... $ 4,746 $ 4,252 $ 494
- ------------------------------------------------------------------------------------------------------------------------------------
Primary earnings per share ................................................... $ 0.21 $ 0.18 $ 0.03
Fully diluted earnings per share ............................................. 0.20 0.17 0.03
Dividends declared per common share .......................................... 0.05 -- 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
----------------------------
($ in thousands, except per share data) 1997 1996 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Mortgage loans on real estate ................................................ $34,782 $39,134 $(4,352)
Other loans .................................................................. 5,827 5,202 625
---------------------------------------------
Total interest on loans ...................................................... 40,609 44,336 (3,727)
Securities available for sale ................................................ 7,154 6,521 633
Securities held to maturity:
Mortgage-backed securities ................................................. 36,186 32,446 3,740
Other bonds and notes ...................................................... 4,175 4,275 (100)
Other ........................................................................ 989 1,276 (287)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest and dividend income ........................................... 89,113 88,854 259
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits ..................................................................... 31,777 33,846 (2,069)
Securities sold under agreements to repurchase ............................... 12,245 11,046 1,199
Other borrowed funds ......................................................... 7,139 8,025 (886)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense ....................................................... 51,161 52,917 (1,756)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income ............................................. 37,952 35,937 2,015
Provision for loan losses .................................................... 500 1,000 (500)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income after provision for loan losses ............. 37,452 34,937 2,515
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Income from mortgage activities .............................................. 775 1,506 (731)
Customer service fees ........................................................ 1,885 1,736 149
Fees from sales of investment products ....................................... 905 935 (30)
Net gain on sales of securities .............................................. -- 20 (20)
Other ........................................................................ 306 381 (75)
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest income ..................................................... 3,871 4,578 (707)
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Compensation and benefits .................................................... 11,473 11,846 (373)
Occupancy, net ............................................................... 3,875 3,939 (64)
Equipment and data processing services ....................................... 3,392 2,983 409
Advertising and promotion .................................................... 597 699 (102)
Federal deposit insurance premiums ........................................... 358 254 104
Provision for real estate losses ............................................. 500 -- 500
Nonperforming loan and real estate activities ................................ 1,489 1,839 (350)
Other ........................................................................ 4,544 4,356 188
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest expenses ................................................... 26,228 25,916 312
- ------------------------------------------------------------------------------------------------------------------------------------
Income before taxes .......................................................... 15,095 13,599 1,496
Tax expense .................................................................. 5,646 5,135 511
- ------------------------------------------------------------------------------------------------------------------------------------
Net income ................................................................... $ 9,449 $ 8,464 $ 985
- ------------------------------------------------------------------------------------------------------------------------------------
Primary earnings per share ................................................... $ 0.42 $ 0.36 $ 0.06
Fully diluted earnings per share ............................................. 0.39 0.33 0.06
Dividends declared per common share .......................................... 0.10 -- 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------
($ in thousands) 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK - SERIES A
Balance at beginning of period ........................... $ 1,537 $ 1,595
Conversion of 58,589 and 58,236 shares to common stock ... (59) (58)
- ---------------------------------------------------------------------------------------
Balance at end period .................................... 1,478 1,537
- ---------------------------------------------------------------------------------------
PREFERRED STOCK - SERIES B
- ---------------------------------------------------------------------------------------
Balance at beginning and end of period ................... 2,000 2,000
- ---------------------------------------------------------------------------------------
ADDITIONAL PAID-IN-CAPITAL, PREFERRED
Balance at beginning of period ........................... 63,111 63,810
Conversion of 58,589 and 58,236 shares to common stock ... (703) (699)
- ---------------------------------------------------------------------------------------
Balance at end of period ................................. 62,408 63,111
- ---------------------------------------------------------------------------------------
ESOP DEBT GUARANTEE
Balance at beginning of period ........................... (14,230) (15,670)
Payment of principal on ESOP debt ........................ 766 705
- ---------------------------------------------------------------------------------------
Balance at end of period ................................. (13,464) (14,965)
- ---------------------------------------------------------------------------------------
COMMON STOCK
Balance at beginning of period ........................... 13,534 13,289
Issuance of 182,537 and 98,684 shares of common stock .... 183 99
- ---------------------------------------------------------------------------------------
Balance at end of period ................................. 13,717 13,388
- ---------------------------------------------------------------------------------------
ADDITIONAL PAID-IN-CAPITAL, COMMON
Balance at beginning of period ........................... 102,883 100,648
Issuance of 182,537 and 98,684 shares of common stock,
including tax benefit .................................. 2,146 869
- ---------------------------------------------------------------------------------------
Balance at end of period ................................. 105,029 101,517
- ---------------------------------------------------------------------------------------
SURPLUS FUND
- ---------------------------------------------------------------------------------------
Balance at beginning and end of period ................... 22,998 22,998
- ---------------------------------------------------------------------------------------
UNDIVIDED PROFITS
Balance at beginning of period ........................... 17,845 7,231
Net income ............................................... 9,449 8,464
Dividends declared on preferred stock, net of tax benefit (3,588) (3,590)
Dividends declared on common stock ....................... (1,364) -
- ---------------------------------------------------------------------------------------
Balance at end of period ................................. 22,342 12,105
- ---------------------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE
FOR SALE, NET OF TAXES
Balance at beginning of period ........................... (30) 36
Change in net unrealized gain (loss), net of taxes ....... 280 (1,055)
- ---------------------------------------------------------------------------------------
Balance at end of period ................................. 250 (1,019)
- ---------------------------------------------------------------------------------------
Total stockholders' equity at end of period .............. $216,758 $ 200,672
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------
$ in thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................................. $ 9,449 $ 8,464
Items to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .............................................. 1,108 1,139
Provisions for loan and real estate losses ................................. 1,000 1,000
Deferred tax expense ....................................................... 5,370 4,859
Decrease in net deferred fees .............................................. (871) (536)
Amortization of premiums and accretion of discounts, net ................... 1,200 1,083
Net gain on sales of assets and loans originated for sale .................. (98) (44)
(Originations) and sales of loans originated for sale, net ................. (6,907) 1,971
(Increase) decrease in accrued interest receivable and other assets ........ (179) 3,963
Increase in accrued expenses and other liabilities ......................... 4,587 3,193
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities .................................. 14,659 25,092
- ---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Principal repayments of securities available for sale ...................... 12,326 14,132
Sales of securities available for sale ..................................... -- 4,982
Purchases of securities available for sale ................................. -- (6,732)
Principal repayments of mortgage-backed securities ......................... 85,335 105,527
Purchases of mortgage backed securities ..................................... (121,553) (135,725)
Principal repayments of other bonds and notes .............................. 1,612 2,456
Principal repayments and sales of loans receivable ......................... 93,124 97,952
Originations and purchases of loans receivable ............................. (101,671) (49,058)
Sales of other real estate ................................................. 2,617 4,656
Purchases of FHLB stock, net ............................................... (650) --
Purchases of premises and equipment, net ................................... (1,623) (693)
Investment in joint ventures, net ......................................... (120) (181)
- ---------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities ........................... (30,603) 37,316
- ---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Decrease in deposits ....................................................... (23,574) (5,769)
Proceeds from securities sold under agreements to repurchase,
maturing in 90 days or less, net .......................................... 50,500 132,000
Proceeds from borrowed funds ............................................... -- 15,000
Repayment of borrowed funds ................................................ (614) (190,588)
Dividends paid on preferred stock .......................................... (3,825) (3,855)
Dividends paid on common stock ............................................. (1,364) --
Proceeds from issuance of common stock ..................................... 1,163 154
- ---------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities ........................... 22,286 (53,058)
- ---------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents .................................. 6,342 9,350
Cash and cash equivalents at beginning of period ........................... 28,146 26,502
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period ................................. $ 34,488 $ 35,852
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest .................................................................. $ 51,001 $ 55,144
Income taxes, net ......................................................... 334 293
Noncash investing activities:
Loans to finance sales of real estate ..................................... 1,800 1,486
Loans Transferred to (from) real estate acquired through foreclosure, net . 3,633 (552)
Noncash financing activities:
Conversion of preferred stock to common stock ............................. 762 757
Reduction in ESOP debt guarantee .......................................... 766 705
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 1 - GENERAL
The consolidated financial statements of The Greater New York Savings
Bank and Subsidiaries (the Bank) in this report have not been audited except
for the information derived from the audited Consolidated Statement of
Financial Condition as of December 31, 1996. These statements should be read in
conjunction with the consolidated financial statements and related notes
thereto included in the Bank's Annual Report to Stockholders and in the related
Annual Report on Form F-2 for the year ended December 31, 1996.
In the opinion of management, all material adjustments necessary for a
fair presentation of financial condition and results of operations for the
interim periods presented have been made. These adjustments are of a normal
recurring nature. The results of operations for the interim periods are not
necessarily indicative of results that may be expected for the entire year or
any other interim period. Certain reclassifications have been made to prior
period amounts. In preparing the consolidated financial statements, management
is required to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses. Actual results could differ from
those estimates. Material estimates that are particularly susceptible to change
in the near term relate to the determination of the allowances for loan and
real estate losses and the valuation allowance for deferred tax assets.
On March 31, 1997, the Bank adopted early, as provided, the Federal
Deposit Insurance Corporation's revised regulations (revised on February 4,
1997) detailing registration and reporting requirements for nonmember insured
banks with securities registered under section 12 of the Securities Exchange
Act of 1934. The revised regulations incorporate through cross reference the
corresponding regulations of the Securities and Exchange Commission into the
provisions of the FDIC's securities regulations.
NOTE 2 - EARNINGS PER SHARE
Primary earnings per share is calculated by dividing net income less
preferred stock dividend requirements by the weighted-average number of shares
of common stock and dilutive common stock equivalents outstanding. Common stock
equivalents consist of options to purchase common stock. Fully diluted earnings
per share is calculated by dividing net income less preferred stock dividend
requirements and certain adjustments by the weighted-average number of shares
of common stock, dilutive common stock equivalents and other potentially
dilutive securities outstanding. The adjustments to net income represent the
elimination of ESOP dividends and the addition of incremental expense, which
would arise as a result of a hypothetical conversion into common stock of the
ESOP preferred shares. Other potentially dilutive securities represent the
shares of common stock that would arise from such a conversion. See note 7 for
a discussion on the conversion of the ESOP preferred shares, which occurred on
July 3, 1997.
6
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
-------------------------------------------------------------------------------
Preferred stock dividend requirements, adjusted net income applicable
to common stock and the average number of shares used for primary and fully
diluted earnings per share computations are summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
For the Quarter Ended For the Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
($ in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C>
Preferred dividend requirements ................................ $l,801 $l,799 $3,603 $3,605
Adjusted net income applicable to (1):
Primary earnings per share ................................... $2,945 $2,453 $5,846 $4,859
Fully diluted earnings per share ............................. $3,048 $2,545 $6,052 $5,047
Average number of common shares outstanding .................. 13,688,181 13,345,112 13,649,342 13,317,234
Average number of common and dilutive common equivalent shares
outstanding for:
Primary earnings per share ................................... 14,018,208 13,563,857 13,951,271 13,547,906
Fully diluted earnings per share ............................. 15,450,900 15,210,502 15,430,020 15,211,764
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See Exhibit 11 for a computation of adjusted net income.
NOTE 3 - ACCOUNTING DEVELOPMENTS
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities
On January 1, 1997, the Bank adopted the portions of Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," that became
effective on that date. The standard, among other things, establishes accounting
and reporting standards on the captioned subject matter based on a consistent
application of a financial components approach that focuses on control. Under
this approach, subsequent to a transfer of financial assets, a company must
recognize the financial and servicing assets it controls and liabilities it has
incurred, derecognize financial assets when control has been surrendered, and
derecognize liabilities when they have been extinguished. Criteria for
distinguishing transfers of financial assets that are sales from those that are
secured borrowings are provided in the statement.
SFAS No. 125 was amended by SFAS No. 127, "Deferral of the Effective
Date of Certain Provisions of SFAS No. 125." SFAS No. 127 postpones the
effective date of transactions occurring after December 31, 1996 by one year
for certain provisions of SFAS No. 125. Specifically, paragraph 15 of SFAS No.
125 (secured borrowings and collateral) is deferred for all transfers of
financial assets until after December 31, 1997. Likewise, paragraphs 9 to 12 of
SFAS No. 125 (accounting for transfers) are deferred until after December 31,
1997, but only for repurchase agreements, dollar-rolls, securities lending and
similar transactions. The adoption of SFAS No. 125 did not have any impact on
the Bank's consolidated financial statements. In addition, the provisions of
SFAS No. 125 that are required to be adopted by the Bank on January 1, 1998 are
not expected to have a material effect on the Bank's consolidated financial
statements.
7
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
_______________________________________________________________________________
Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings per Share." This statement establishes standards for
computing and presenting earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. The statement simplifies
the standards for computing earnings per share previously found in APB and
Opinion No. 15, "Earnings per Share," and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with
a presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing net income
applicable to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock, or resulted in the issuance of
common stock that then shared in the earnings of the entity.
Diluted EPS is computed similarly to fully diluted EPS pursuant to APB
Opinion No. 15. This statement supersedes APB Opinion No. 15 and AICPA
Accounting Interpretations 1-102 of APB Opinion No. 15. It also supersedes or
amends other various accounting pronouncements. The provisions in this
statement are substantially the same as those in International Accounting
Standard 33, "Earnings per Share," issued by the International Accounting
Standards Committee. SFAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods; earlier
application is not permitted. This statement also requires restatement of all
prior-period EPS data presented. The adoption of this standard on January 1,
1998 is not expected to have a material effect on the Bank's computation of
earnings per share.
Disclosure of Information about Capital Structure
In February 1997, SFAS No. 129, "Disclosure of Information about Capital
Structure," was issued and is effective for financial statements for periods
ending after December 15, 1997. The statement codifies the disclosure
requirements about capital structure contained in APB Opinions No. 10, "Omnibus
Opinion," and No. 15, "Earnings per Share," and SFAS No. 47, "Disclosures of
Long-Term Obligations." Since the Bank was previously subject to, and complied
with, these disclosure requirements as applicable, the adoption of this
statement will have no effect on the Bank's financial statement disclosures.
8
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
-------------------------------------------------------------------------------
Reporting Comprehensive Income
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
issued. The statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The objective of the standard is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners.
Comprehensive income is to be reported in a financial statement that is
displayed with the same prominence as other financial statements for interim
and annual periods. SFAS No. 130 permits the statement of changes in
stockholders' equity to be used to meet this requirement. Comprehensive income
is the total of net income and all other nonowner changes in equity. SFAS No.
130 does not address issues of recognition or measurement for comprehensive
income or its components. The statement is effective for fiscal years beginning
after December 15, 1997, with earlier application permitted. The adoption of
this statement will have no effect on the Bank's consolidated financial
statements.
Disclosures About Segments of an Enterprise and Related Information
In June 1997, SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information," was issued. The statement introduces a new model for
segment reporting called the "management approach." This approach is based on
the way the chief operating decision maker organizes segments within a company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any manner which management disaggregates a company. SFAS No. 131
requires disclosures for each segment that are similar to those currently
required under current accounting standards, with the addition of quarterly
disclosure requirements and a finer partitioning of geographic disclosures.
SFAS No. 131 is applicable for fiscal years beginning after December 15, 1997,
with earlier application permitted. The Bank is currently evaluating the impact
of this new standard to its financial statements.
NOTE 4 - PROPOSED MERGER AGREEMENT
On March 29, 1997, the Bank entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Astoria Financial Corporation ("Astoria
Financial"), a Delaware corporation, and Astoria Federal Savings and Loan
Association, a federally chartered savings and loan association and a
wholly-owned subsidiary of Astoria Financial (the "Association"). The Merger
Agreement provides, among other things, that the Bank will be merged with and
into the Association, with the Association being the surviving entity (the
"Merger").
9
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
------------------------------------------------------------------------------
Pursuant to the Merger Agreement, each share of common stock of the Bank
issued and outstanding at the Effective Time (as defined in the Merger
Agreement) will be converted into the right to receive either 0.50 shares of
Astoria Financial common stock or $19.00 in cash (with 75% of the Bank's
common shares being converted into Astoria Financial common stock and 25%
being exchanged for cash) subject to certain election, allocation and
proration procedures as described in the Merger Agreement. In addition, the
outstanding shares of 12% Noncumulative Perpetual Preferred Stock, Series B,
of the Bank will be converted into a newly-created series of preferred stock
of Astoria Financial with substantially identical and no less favorable terms.
Consummation of the Merger is subject to the satisfaction of certain
conditions, including approval of the stockholders and the appropriate
regulatory agencies of both Astoria Financial and the Bank. On August 1, 1997,
shareholders of both the Bank and Astoria Financial approved the merger. The
Merger Agreement contains restrictions on the operations of the Bank pending
completion of the Merger which is currently expected to occur at the end of
the third quarter of 1997.
The Bank has the right to terminate the Merger Agreement if the market
value of Astoria Financial (as defined in the Merger Agreement) falls below
$30.30 per share and such decline in value is 15% greater than the percentage
decline in the market value of a group of similar financial institutions,
unless Astoria Financial delivers to the Bank's stockholders Astoria Financial
shares having a minimum value established pursuant to a formula set forth in
the Merger Agreement.
In connection with the Merger Agreement, Astoria Financial and the Bank
also entered into a Stock Option Agreement dated March 29, 1997 (the "Option
Agreement") pursuant to which the Bank granted Astoria Financial an option to
purchase up to 2,721,536 shares of the Bank's common stock, upon the terms and
conditions stated therein. The Merger Agreement also includes a provision for a
$5 million termination fee that is payable to Astoria Financial by the Bank if
the transaction is not completed under certain circumstances. The maximum total
profit Astoria Financial can receive under the Option Agreement and the
termination fee agreement is $10 million.
NOTE 5 - LEGAL MATTERS
On April 3, 1997, a purported class action was commenced in the Supreme
Court of the State of New York (Kings County) against the Bank, its directors
and certain of its executive officers. The suit is entitled Leonard Minzer and
Harry Schipper v. Gerard C. Keegan et al. The suit alleges, among other things,
that the directors and executive officers of the Bank have breached their
fiduciary duties in entering into the Merger Agreement and related agreements.
10
<PAGE>
<PAGE>
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------------------------------------------
The complaint seeks, among other things, a preliminary and permanent
injunction against the Merger and the related transactions, an order to the
directors and executive officers to carryout their fiduciary duties, and
unspecified damages and costs. The Bank believes that the allegations made in
this action are without merit. On June 19, 1997, Mr. Keegan, the Bank and
certain other executive officers filed a motion to dismiss the action. On
July 3, 1997, the remaining defendants also moved to dismiss this action.
On July 18, 1997, a purported class action was commenced in the U.S.
District Court for the Eastern District of New York entitled Leonard Minzer
and Harry Schipper v. Gerard C. Keegan, et al. against the Bank, its
directors, certain of its executive officers, Astoria Financial Corporation
and Astoria Federal Savings and Loan Association. The suit alleges, among
other things, that the Bank, its directors and certain of its executive
officers are soliciting proxies in violation of Section 14(a) of the
Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder by
failing to disclose certain allegedly material facts in the proxy statement,
which was circulated to the Bank's stockholders in connection with the Merger,
and that the directors and executive officers of the Bank have breached their
fiduciary duties in entering into the Merger Agreement and related agreements.
The complaint seeks, among other things, a preliminary and permanent
injunction against consummation of the Merger and the related transactions,
an order to the directors and executive officers of the Bank to carryout
their fiduciary duties, and unspecified damages and costs. The Bank believes
that the allegations made in this action are without merit. On August 1, 1997,
Mr. Keegan, the Bank and certain other executive officers filed a motion to
dismiss this action. The remaining defendants also moved to dismiss the
action.
NOTE 6 - FORMATION OF A HOLDING COMPANY
At the Bank's 1997 Annual Meeting of Stockholders held in April,
shareholders approved the formation of a holding company. However, as a result
of the proposed Merger Agreement, the Bank suspended its plan to form a
holding company.
NOTE 7 - CONVERSION OF SERIES A 8.25% CUMULATIVE CONVERTIBLE PREFERRED STOCK
On July 3, 1997, United States Trust Company of New York, the trustee
of the Bank's Employee Stock Ownership Plan (ESOP), converted all the
outstanding shares of the Bank's Series A 8.25% Cumulative Convertible
Preferred Stock (the "Preferred Stock") into the Bank's common stock. The
Preferred Stock was converted at a rate of .9448 per share of common stock for
each share of the Preferred Stock. As a result, 1,396,227 shares of the Bank's
common stock was issued upon the conversion of 1,477,802 shares of the
Preferred Stock. The conversion has no impact on the Bank's reported financial
position at June 30, 1997 or its results of operations for the quarter and six
months ended June 30, 1997. The conversion will result in a third quarter
reclassification of $5.1 million of preferred equity to common equity, which
will increase the Bank's Tier 1 leverage capital ratio by approximately 20
basis points.
11
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
In the quarter ended June 30, 1997, net income for the Bank increased
to $4.7 million, or $0.20 per fully diluted common share, from $4.3 million, or
$0.17 per share, in the second quarter of 1996. For the first half of the
year, net income rose to $9.4 million, or $0.39 per share, from $8.5 million,
or $0.33 per share, for the first half of 1996. Higher net income for both
periods was primarily attributable to an increase in net interest and dividend
income and lower expenses related to nonperforming loans and real estate
activities. These improvements were partially offset by a decline in
noninterest income and a higher provision for income taxes.
Returns on average equity and assets increased to 8.87% and 0.74%,
respectively, in the second quarter of 1997, from 8.56% and 0.66% in the same
period of 1996. For the first half of the year, the return on average equity
and assets also increased to 8.90% and 0.74%, respectively, from 8.56% and
0.66% in the 1996 first half. In July, the Bank's Board of Directors declared a
quarterly cash dividend of $0.05 per common share, payable September 2, 1997 to
holders of record at the close of business on August 15, 1997.
As discussed in note 4 "Proposed Merger Agreement" in the notes to the
consolidated financial statements of this report, on March 29, 1997 the Bank
signed a definitive merger agreement with Astoria Financial Corporation
pursuant to which Astoria will acquire the Bank. The Merger Agreement was
approved on August 1, 1997 by the stockholders of both Astoria Financial
Corporation and the Bank. The consummation of the Merger, which is currently
expected to occur at the end of the third quarter of 1997, is also subject to
approval by the appropriate regulatory agencies as well as the satisfaction of
certain conditions.
The Bank's net interest margin improved to 3.14% in the second quarter
of 1997, from 2.96% in the second quarter of 1996. For the first six months of
the year, the margin increased to 3.12%, from 2.97% in the comparable period of
1996. Net interest and dividend income grew to $19.1 million and $38.0 million
in the second quarter and first six months of 1997, respectively, from $18.0
million and $35.9 million in the same periods of last year. Noninterest income
declined to $1.8 million in the 1997 second quarter, from $2.6 million the
comparable period of 1996. For the first half of 1997, noninterest income was
also lower, declining to $3.9 million, from $4.6 million in the same 1996
period.
Residential 1-4 family and cooperative loan originations for the first
half of 1997 totaled $104 million, a 77% increase from $58 million in the same
period last year, reflecting the Bank's emphasis on this type of lending.
12
<PAGE>
<PAGE>
The combined provision for loan and real estate losses amounted to $0.5
million in the second quarter of 1997 and $1.0 million in the first half of
1997, unchanged from the year-earlier periods. Nonperforming loan and real
estate activities expense declined to $0.5 million in the second quarter and
$1.5 million in the first half of 1997. In the same periods of 1996, these
expenses aggregated $1.0 million and $1.8 million, respectively. All other
noninterest expenses increased slightly to $12.3 million in the second quarter
of this year, from $12.1 million in the same quarter of 1996. For the first
half of 1997, all other noninterest expenses totalled $24.2 million, compared
to $24.1 million in the year-earlier period. The provision for income taxes
amounted to $2.8 million in the second quarter of 1997, compared to $2.7
million in the 1996 second quarter. For the first half of 1997, income
taxes totaled $5.6 million, compared to $5.1 million in the 1996 first half.
At June 30, 1997, nonperforming assets increased to $52.1 million, or
2.02% of total assets, from $38.7 million, or 1.51%, at March 31, 1997 and
$45.6 million, or 1.79%, at December 31, 1996. Loans categorized as troubled
debt restructurings amounted to $142.0 million at June 30, 1997, compared to
$155.0 million at March 31, 1997 and $155.5 million at year-end 1996.
At June 30, 1997, the combined allowance for loan and real estate
losses amounted to $20.6 million, compared to $20.5 million at year-end 1996.
Net loan and real estate chargeoffs amounted to $0.9 million in the first half
of 1997, compared to $3.1 million in the same period of 1996. In the first half
of 1997, recoveries of chargeoffs previously recorded totaled $1.6 million,
compared to $0.6 million in the 1996 first half. The combined allowance
(excluding reserves attributable to real estate held for development)
represented 36% of nonperforming assets at June 30, 1997, a decline from 42%
at December 31, 1996.
Stockholders' equity as a percentage of total assets improved to 8.40%
at June 30, 1997, from 8.25% at December 31, 1996. Book value per common share
also increased to $11.74 at quarter end, from $11.31 at December 31, 1996. The
Bank's Tier 1 leverage capital ratio continued to increase, improving to 7.39%
at June 30,1997, from 7.06% at December 31, 1996. The Bank's total risk-based
capital ratio of 15.93% was also higher at June 30, 1997, compared to 14.62% at
year-end 1996.
On July 3, 1997, United States Trust Company of New York, the trustee of
the Bank's Employee Stock Ownership Plan (ESOP), converted all the outstanding
shares of the Bank's Series A 8.25% Cumulative Convertible Preferred Stock (the
"Preferred Stock") into the Bank's common stock. The Preferred Stock was
converted at a rate of .9448 per share of common stock for each share of the
Preferred Stock. As a result, 1,396,227 shares of the Bank's common stock was
issued upon the conversion of 1,477,802 shares of the Preferred Stock. The
conversion has no impact on the Bank's reported financial position at June 30,
1997 or its results of operations for the quarter and six months ended June 30,
1997. The conversion will result in a third quarter reclassification of $5.1
million of preferred equity to common equity, which will increase the Bank's
Tier 1 leverage capital ratio by approximately 20 basis points.
13
<PAGE>
<PAGE>
FINANCIAL CONDITION
COMPARISON OF JUNE 30, 1997 AND DECEMBER 31, 1996
Total assets at June 30, 1997 amounted to $2.58 billion, compared to $2.54
billion at December 31, 1996. The slight increase was primarily due to a higher
level of mortgage-backed securities held to maturity and loans receivable,
partially offset by a decline in securities available for sale.
The Bank's balance sheet was comprised of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
At June 30, 1997 At December 31, 1996
---------------------------- ------------------------------
Carrying % of Carrying % of
($ in thousands) Value Total Assets Value Total Assets
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents ............ $ 34,488 1.3% $ 28,146 1.1%
Securities available for sale, net.... 204,087 7.9 215,961 8.5
Securities held to maturity, net...... 1,207,466 46.8 1,174,321 46.2
Loans receivable, net ................ 963,709 37.4 951,340 37.4
All other assets ..................... 169,348 6.6 172,120 6.8
Deposits ............................. 1,643,100 63.7 1,666,674 65.6
Borrowed funds ....................... 689,504 26.7 640,384 25.2
All other liabilities ................ 29,736 1.2 25,182 1.0
Stockholders' equity ................. 216,758 8.4 209,648 8.2
- ----------------------------------------------------------------------------------------------------
</TABLE>
Securities
Securities available for sale and held to maturity are summarized as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
At June 30, 1997 At December 31, 1996
---------------------------- ------------------------------
Carrying Estimated Carrying Estimated
($ in thousands) Value Fair Value Value Fair Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
Mortgage-backed--variable rate ..... $ 86,077 $ 86,077 $ 91,465 $ 91,465
Mortgage-backed--fixed rate ........ 73,566 73,566 80,068 80,068
Corporate notes--variable rate ..... 44,444 44,444 44,428 44,428
- ----------------------------------------------------------------------------------------------------
204,087 204,087 215,961 215,961
- ----------------------------------------------------------------------------------------------------
Securities held to maturity:
Mortgage-backed--variable rate ..... 806,093 803,283 750,195 743,404
Mortgage-backed--fixed rate ........ 271,515 264,754 292,648 284,518
States and municipals--fixed rate... 56,701 56,705 57,278 57,139
Corporate notes--variable rate ..... 54,005 53,707 54,007 53,614
Asset-backed notes--variable rate... 19,103 19,310 20,144 20,314
U.S. Treasury--fixed rate .......... 49 50 49 50
- ----------------------------------------------------------------------------------------------------
1,207,466 1,197,809 1,174,321 1,159,039
- ----------------------------------------------------------------------------------------------------
$1,411,553 $l,401,896 $1,390,282 $l,375,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
Securities available for sale decreased by $11.9 million due to principal
repayments. The available-for-sale portfolio is carried at estimated fair value,
which was slightly above the portfolio's amortized cost of $203.6 million at
June 30, 1997. Securities held to maturity
14
<PAGE>
<PAGE>
increased by $33.1 million due to purchases of $121.6 million of
adjustable-rate, mortgage-backed securities, partially offset by principal
repayments. Securities held to maturity are carried at amortized cost.
The credit quality and related carrying and estimated fair values of the
securities in the held-to-maturity and available-for-sale portfolios are
summarized in the aggregate as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
At June 30, 1997 At December 31, 1996
-------------------------------------------------------------------------------------
Carrying % of Estimated Carrying % of Estimated
($ in thousands) Value Total Fair Value Value Total Fair Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. government/agencies...... $ 855,812 61% $ 854,453 $ 789,538 57% $ 784,148
States and municipals ....... 56,506 4 56,506 57,084 4 56,939
AAA rated securities ........ 297,878 21 295,223 329,757 24 326,279
AA rated securities ......... 79,710 6 80,232 89,734 6 90,035
A rated securities .......... 89,629 6 85,497 92,099 7 87,487
BBB rated securities ........ 32,018 2 29,985 32,070 2 30,112
- --------------------------------------------------------------------------------------------------------------------
$1,411,553 100% $1,401,896 $1,390,282 100% $1,375,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Loans Receivable
The loan portfolio, before the allowance for loan losses, increased by
$11.9 million from year-end 1996 to $980.4 million due to an increase in 1-4
family and cooperative loans. Total loan originations aggregated $123.6 million
and were largely offset by the following: normal amortization, prepayments and
satisfactions aggregating $94.4 million; sales of fixed-rate loans into the
secondary market of $13.3 million; transfers to real estate acquired through
foreclosure of $3.6 million; and chargeoffs of $2.4 million. The prepayments
and satisfactions were comprised mainly of multi-family and commercial real
estate loans.
The loan portfolio is summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
At June 30, 1997 At December 31, 1996
------------------------------------- ---------------------------------------
No. of % of No. of % of
($ in thousands) Loans Amount Total Loans Amount Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Residential 1-4 family:
Conventional adjustable rate.... 1,457 $192,929 20% 1,412 $164,708 17%
Conventional fixed rate ........ 246 18,684 2 249 14,442 2
FHA and VA ..................... 4,052 18,968 2 4,860 21,027 2
- -----------------------------------------------------------------------------------------------------------------
5,755 230,581 24 6,521 200,177 21
- -----------------------------------------------------------------------------------------------------------------
Residential multi-family:
Conventional ................... 160 197,472 20 163 216,348 22
FHA project .................... 7 12,144 1 7 12,283 1
- -----------------------------------------------------------------------------------------------------------------
167 209,616 21 170 228,631 23
- -----------------------------------------------------------------------------------------------------------------
Commercial real estate ........... 234 373,403 38 254 409,218 42
Cooperative ...................... 1,481 150,265 15 1,302 117,799 12
Student .......................... 2,130 8,914 1 2,058 6,673 1
Other consumer ................... 1,917 8,203 1 1,994 8,604 1
Unearned discount and fees........ -- (535) -- -- (2,534) --
- -----------------------------------------------------------------------------------------------------------------
11,684 $980,447 100% 12,299 $968,568 100%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<PAGE>
Loans originated and purchased are summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
For the Quarter Ended For the Six Months Ended
June 30, June 30,
---------------------- ------------------------
($ in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For portfolio:
1-4 family originated ........................ $28,453 $14,740 $ 45,690 $19,069
1-4 family purchased ......................... -- 55 -- 125
Multi-family originated ...................... 4,847 750 10,047 3,050
Commercial real estate originated ............ 5 394 1,805 394
Cooperative originated ....................... 23,788 11,790 41,327 16,986
Student originated ........................... -- 2,504 -- 5,560
Other consumer originated .................... 2,320 2,975 4,602 5,360
For sale:
1-4 family originated ........................ 7,504 6,780 12,902 16,868
Cooperative originated ....................... 2,787 2,837 3,726 5,502
Student originated ........................... 902 -- 3,462 --
- ---------------------------------------------------------------------------------------------------
$70,606 $42,825 $123,561 $72,914
- ---------------------------------------------------------------------------------------------------
</TABLE>
Loans Modified in Troubled Debt Restructurings (TDRs) and Impaired Loans
At June 30, 1997, $142.0 million, or 26%, of the Bank's performing
commercial real estate and multi-family loans were categorized as TDRs under the
criteria of SFAS No. 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructurings," compared to $155.5 million, or 26%, at year-end 1996. The
decline was primarily due to three loans aggregating $11.7 million that were
transferred to a nonperforming status upon becoming ninety days past due. The
remainder was the result of repayments and satisfactions. The Bank expects $10.8
million, or two loans, to return to an interest-earning status in the third
quarter of 1997.
TDRs are loans on which the Bank has granted certain concessions in light
of the borrowers' financial difficulties. These concessions, which are
individually negotiated, generally provide for interest rates that are lower
than the original contractual rate and may also relate to maturity dates and
payment terms. The objective of these concessions is to maximize the recovery of
the Bank's investment. TDRs have a higher degree of credit risk than the
remainder of the performing loan portfolio. The Bank has no commitments to lend
additional funds to borrowers with mortgages whose terms have been modified in a
TDR.
Loans classified as TDRs are summarized as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
At June 30, 1997 At December 31, 1996
----------------------------------- --------------------------------------
Current Original Current Original
($ in thousands) No. Amount Rate(1) Rate(1) No. Amount Rate(1) Rate(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multi-family............... 12 $ 32,022 8.32% 9.83% 17 $ 37,892 8.13% 9.73%
Commercial real estate..... 46 110,024 7.56 9.29 45 117,646 7.50 9.17
- -----------------------------------------------------------------------------------------------------------
Total(2) 58 $142,046 7.73% 9.41% 62 $155,538 7.66% 9.31%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents weighted-average rate.
(2) Includes $82.2 million and $83.0 million of loans at June 30, 1997 and
December 31, 1996, respectively, that are considered impaired under the
criteria of SFAS No. 114.
16
<PAGE>
<PAGE>
A nonperforming loan that is restructured is normally accounted for as a
cash basis TDR. After it develops a satisfactory payment history, the loan is
placed on an accrual basis but remains classified as a TDR. At June 30, 1997 and
December 31, 1996, one loan in the amount of $9.0 million was classified as a
TDR and maintained on a cash basis of accounting.
An accruing TDR that yields a market rate of interest is considered for
recategorization to a fully performing status after it has performed for an
appropriate period. Loans that are recategorized are done so no earlier than the
year following the restructuring and thereafter, are no longer classified as
TDRs and, if applicable, impaired loans.
Under the criteria of SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan" a loan is normally deemed impaired when it is probable the
Bank will be unable to collect both principal and interest due according to the
contractual terms. Loans that were restructured prior to January 1, 1995 and
performing in accordance with their restructured terms are not considered
impaired loans under SFAS No. 114. Loans restructured and classified as TDRs
after December 31, 1994 are considered impaired. A valuation allowance is
established (with a corresponding charge to the provision for loan losses) when
the fair value of the property that collateralizes the impaired loan is less
than the recorded investment in the loan. However, the Bank typically records a
chargeoff for this difference, which results in little or no valuation allowance
being maintained. The valuation allowance, if any, is part of the overall
allowance for loan losses. The Bank's process of identifying impaired loans is
conducted in conjunction with its review of the adequacy of the allowance for
loan losses. Impaired loans at a minimum include all nonperforming loans and
loans restructured after December 31, 1994.
The following tables summarize information related to impaired loans:
<TABLE>
<CAPTION>
====================================================================================================================================
At June 30, At December 31,
($ in thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Principal balance of impaired loans outstanding:
Nonperforming loans ...................................................... $ 38,964 $ 31,821
Troubled debt restructurings (post SFAS No. 114) ......................... 82,180 82,964
Other performing loans ................................................... 4,181 878
- ------------------------------------------------------------------------------------------------------------------------------------
$125,325 $115,663
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation allowance for impaired loans ..................................... $ 202 $ 1,650
Balance of impaired loans with a valuation allowance ....................... 902 4,389
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
For the Quarter Ended For the Six Months Ended
June 30, June 30,
----------------------- ---------------------------
($ in thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average balance of impaired loans .................. $124,818 $126,769 $121,814 $126,300
Chargeoffs of impaired loans ....................... 543 2,185 2,364 3,011
====================================================================================================================================
</TABLE>
17
<PAGE>
<PAGE>
The increase in other performing impaired loans represents two
commercial real estate loans that became impaired in the first quarter of 1997.
The Bank is currently evaluating various alternatives to resolving these loans,
including entering into restructure agreements.
Foregone interest income on TDRs and impaired loans is summarized as
follows:
<TABLE>
<CAPTION>
====================================================================================================================================
For the Quarter Ended For the Six Months Ended
June 30, June 30,
---------------------- -------------------------
($ in thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest that would have been accrued
at original contract rates:
Nonperforming loans .............................................. $l,068 $l,704 $ 1,774 $ 3,000
Troubled debt restructurings (pre SFAS No. 114) .................. 1,538 2,670 3,249 5,696
Troubled debt restructurings (post SFAS No. 114) ................. 1,851 2,160 3,950 4,102
Other performing impaired loans .................................. 121 164 214 377
- ------------------------------------------------------------------------------------------------------------------------------------
4,578 6,698 9,187 13,175
- ------------------------------------------------------------------------------------------------------------------------------------
Amount recognized as interest income:
Nonperforming loans .............................................. 68 157 79 169
Troubled debt restructurings (pre SFAS No. 114) .................. 1,405 2,093 2,793 4,494
Troubled debt restructurings (post SFAS No. 114) ................. 1,624 1,659 3,154 3,120
Other performing impaired loans .................................. 106 164 175 377
- ------------------------------------------------------------------------------------------------------------------------------------
3,203 4,073 6,201 8,160
- ------------------------------------------------------------------------------------------------------------------------------------
Foregone interest income .......................................... $l,375 $ 2,625 $ 2,986 $ 5,015
- ------------------------------------------------------------------------------------------------------------------------------------
Cash basis interest income ........................................ $ 286 $ 205 $ 387 $ 252
====================================================================================================================================
</TABLE>
Many of the restructuring agreements call for a portion of the foregone
interest income to be paid to the Bank at a later date. Since receipt of these
payments is not assured, income is not currently recognized. Many restructured
loans also provide for increases in the interest rate over the life of the loan,
although payment of such increases are not assured. In the first half of 1997,
the Bank received a significant amount of interest income that was deferred
under the aforementioned restructure agreements.
NONPERFORMING ASSETS
Nonperforming assets, which consist of nonperforming loans and real
estate acquired through foreclosure, increased to $52.1 million, or 2.02% of
total assets, at June 30, 1997, from $45.6 million, or 1.79%, at December
31, 1996 and $38.7 million, or 1.51% at March 31, 1997.
The bulk of the increase in nonperforming assets from March 31, 1997 was
due to three loans totaling $11.7 million that were reclassified from a troubled
debt restructuring status upon becoming ninety days past due. The Bank expects
$10.8 million, or two loans, to return to an interest-earning status in the
third quarter of 1997.
18
<PAGE>
<PAGE>
The change in nonperforming assets is summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
For the Quarter Ended For the Six Months Ended
June 30, June 30,
-------------------------- ----------------------------
($ in thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance ..................................... $ 38,723 $ 57,862 $ 45,561 $ 55,769
New nonperforming loans ............................... 14,865 20,254 16,002 28,800
Loans restructured .................................... -- (4,919) -- (4,919)
Loans sold, satisfied or reinstated ................... (1,159) (3,290) (3,350) (5,651)
Chargeoffs ............................................ (87) (1,959) (1,876) (2,478)
Sales of other real estate ............................ (287) (2,210) (4,282) (5,783)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending balance ........................................ $ 52,055 $ 65,738 $ 52,055 $ 65,738
====================================================================================================================================
</TABLE>
The components of nonperforming assets is summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
At June 30,1997 At December 31, 1996
------------------- --------------------
($ in thousands) No. Amount No. Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonperforming loans:
1-4 family, cooperative and other ................................. 16 $ 1,746 21 $ 2,082
Multi-family ...................................................... 12 24,353 11 21,428
Commercial real estate ............................................ 4 12,865 5 8,311
- ------------------------------------------------------------------------------------------------------------------------------------
32 38,964 37 31,821
- ------------------------------------------------------------------------------------------------------------------------------------
Other real estate:
1-4 family, cooperative and other ................................. 9 306 4 54
Multi-family ...................................................... 1 3,395 1 3,512
Commercial real estate ............................................ 8 9,390 10 10,174
- ------------------------------------------------------------------------------------------------------------------------------------
18 13,091 15 13,740
- ------------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets ........................................ 50 $52,055 52 $45,561
- ------------------------------------------------------------------------------------------------------------------------------------
Nonperforming assets as a percentage of total assets .............. 2.02% 1.79%
====================================================================================================================================
</TABLE>
In addition to the above, loans delinquent for 90 days or more upon
which the Bank was still accruing interest amounted to $1.0 million at June 30,
1997, compared to $2.1 million at December 31, 1996. These loans, which are
government guaranteed, were considered both well secured and in the process of
collection. Loans delinquent for 30 days or more but less than 90 days amounted
to $52.0 million at June 30, 1997, compared to $30.6 million at December 31,
1996. A large number of these past-due loans are TDRs.
REAL ESTATE HELD FOR DEVELOPMENT AND ACQUIRED THROUGH FORECLOSURE
Real estate held for development and acquired through foreclosure is
summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
At June 30, At December 31,
($ in thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real estate acquired through foreclosure .................................... $ 13,091 $ 13,740
Real estate held for development ............................................ 23,294 23,174
- ------------------------------------------------------------------------------------------------------------------------------------
36,385 36,914
Allowance for real estate losses ............................................ (3,905) (3,270)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 32,480 $ 33,644
====================================================================================================================================
</TABLE>
19
<PAGE>
<PAGE>
Real estate acquired through foreclosure declined by $0.6 million in the
first half of 1997 due to sales of $4.3 million, partially offset by transfers
of $3.6 million from nonperforming loans upon foreclosure. Real estate held for
development increased slightly from year-end 1996 due to the investment of $0.1
million in two joint venture projects. Real estate held for development consists
of equity investments in five real estate joint venture projects. The Bank
expects one project to be sold to a third party developer on an as is basis for
$1.3 million in the third quarter of 1997. The project is a 77 lot subdivision
on a 41 acre parcel of land located in Coram, NY with a carrying value of $2.0
million. The sale would result in a $0.7 million loss, which has been provided
for in the allowance for real estate losses. For additional information on joint
venture projects, see the Bank's 1996 Annual Report to Stockholders (page 32)
and the Bank's 1996 Annual Report on Form F-2 (pages 12 and 13). Also, see the
section "Stockholders' Equity and Regulatory Capital" in this report for a
discussion regarding The Federal Deposit Insurance Corporation Improvement Act
of 1991, which restricts the ability of the Bank to continue its real estate
joint venture activities.
Allowances for Loan and Real Estate Losses
The Bank monitors its loan and real estate portfolios to determine the
level of the related loss allowances based upon various factors. These factors
are discussed on page 33 of the Bank's 1996 Annual Report to Stockholders. At
June 30, 1997, the combined allowance for loan and real estate losses amounted
to $20.6 million, compared to $20.5 million at year-end 1996. The allowances for
loan and real estate losses substantially related to commercial real estate and
multi-family loans and properties. The combined allowance (exclusive of $1.9
million at June 30, 1997 and $1.4 million at December 31, 1996 attributable to
real estate held for development) represented 36% of nonperforming assets at
June 30, 1997, compared to 42% at December 31, 1996.
The table below summarizes the activity in the allowance for loan losses:
<TABLE>
<CAPTION>
====================================================================================================================================
For the Quarter Ended For the Six Months Ended
June 30, June 30,
------------------------- ---------------------------
($ in thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period .............................. $16,579 $23,450 $17,228 $23,993
Provision for loan losses charged to operations ............. 500 500 500 1,000
Chargeoffs:
Residential 1-4 family .................................... (31) (62) (145) (151)
Residential multi-family .................................. -- (106) -- (442)
Commercial real estate .................................... (515) (2,062) (2,224) (3,015)
-------------------------- -------------------------
Total chargeoffs ............................................ (546) (2,230) (2,369) (3,608)
-------------------------- -------------------------
Recoveries:
Residential 1-4 family .................................... 1 -- 1 2
Residential multi-family .................................. -- 16 1,174 179
Commercial real estate .................................... 204 94 204 264
-------------------------- -------------------------
Total recoveries ............................................ 205 110 1,379 445
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of period .................................... $16,738 $21,830 $16,738 $21,830
====================================================================================================================================
</TABLE>
20
<PAGE>
<PAGE>
In the first quarter of this year, a performing multi-family loan (which
was acquired by the Bank in 1995 at a significant discount) with a carrying
value of $11.9 million was satisfied for proceeds of $14.8 million. This loan
represented the first mortgage on one of the Bank's nonperforming assets (a
second mortgage) that had a carrying value of $1.7 million at year-end 1996. A
portion of the excess proceeds was used to satisfy the second mortgage and the
remainder ($1.2 million), was reflected as a recovery of chargeoffs previously
recorded on the second mortgage.
The table below summarizes the activity in the allowance for real estate
losses:
<TABLE>
<CAPTION>
====================================================================================================================================
For the Quarter Ended For the Six Months Ended
June 30, June 30,
--------------------------- -------------------------
($ in thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period .................................... $3,923 $3,400 $3,270 $3,276
Provision for real estate losses charged to operations ............ -- -- 500 --
Chargeoffs:
Residential 1-4 family .......................................... -- -- -- (1)
Commercial real estate .......................................... (68) -- (68) --
Construction and land development ............................... -- (55) -- (55)
------------------------- -----------------------
Total chargeoffs .................................................. (68) (55) (68) (56)
------------------------- -----------------------
Recoveries:
Residential 1-4 family .......................................... -- 19 -- 19
Residential multi-family ........................................ -- -- -- 13
Commercial real estate .......................................... 50 14 203 126
------------------------- -----------------------
Total recoveries .................................................. 50 33 203 158
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of period .......................................... $3,905 $3,378 $3,905 $3,378
====================================================================================================================================
</TABLE>
As previously disclosed in the Joint Proxy Statement/Prospectus dated June
24, 1997, the Merger Agreement requires the Bank, at the written request of
Astoria Financial Corporation ("Astoria Financial"), to modify and change
certain of its policies and practices, including loan policies and practices,
before the consummation of the Merger so as to be consistent on a mutually
satisfactory basis with those of Astoria Federal Savings and Loan Association,
subject to compliance with generally accepted accounting principles and all
applicable laws and regulations. The Bank is not obligated to take any such
action until after the date on which all required regulatory and stockholder
approvals are received, and after receipt of written confirmation from Astoria
Financial that it is not aware of any fact or circumstance that would prevent
completion of the Merger. (Stockholder approvals were received at a Special
Stockholders' Meeting on August 1, 1997.) Astoria Financial has advised the Bank
that it expects to make such a request and that it currently expects compliance
with such requirement will result in the Bank recording an additional provision
for loan losses of $19.5 million and a corresponding deferred tax benefit of
approximately $8.5 million in the third quarter of 1997.
Deferred Tax Asset
At June 30, 1997, the Bank's net deferred tax asset amounted to $40.4
million, compared to $45.4 million at December 31, 1996. The asset represents
the unrealized benefit related to the following: net temporary differences
between the financial statement carrying amounts of
21
<PAGE>
<PAGE>
existing assets and liabilities and their respective tax bases that will result
in future tax deductions; unused operating loss carryforwards; and tax credit
carryforwards.
The net temporary differences substantially relate to credit losses and
related expenses recognized in prior years for financial statement purposes but
not yet deducted for tax purposes. The decline in the net asset from year end
reflected the utilization of a portion of these deductions, partially offset by
a $1.2 million reduction in the related valuation allowance for deferred tax
assets. At June 30, 1997, the Bank's remaining valuation allowance for deferred
tax assets amounted to $8.0 million.
The determination of the need for a valuation allowance is based on whether
the Bank can conclude that the asset is more likely than not to be realized in
the future in accordance with the criteria of SFAS No. 109, "Accounting for
Income Taxes." This evaluation is predicated on whether the Bank will have
sufficient future taxable income to realize the asset, and whether the net tax
deductible items represented by the asset will reverse in future periods in
which the Bank generates such income. Consistent with the reductions of
nonperforming assets and related expenses over the past several years, the Bank
believes that the level and predictability of its future taxable income has and
will continue to increase. In addition, the Bank believes the net deductible
differences represented by the asset will reverse during periods in which the
Bank generates taxable income.
The valuation allowance at June 30, 1997 relates to that portion of the
asset that will result in tax deductions beyond the timeframe in which the
Bank can estimate, with a high degree of predictability, a similar amount of
taxable income. The Bank will continue to evaluate whether the maintenance or
magnitude of its remaining valuation allowance is appropriate in light of future
facts and circumstances. As a result, the allowance will be subject to ongoing
adjustments in connection with reassessments of future levels of taxable income.
Deposits
Deposit liabilities amounted to $1.64 billion at June 30, 1997, compared to
$1.67 billion at December 31, 1996. The decrease was due to net outflows of
$14.0 million in certificate of deposit accounts and $9.6 million in low-cost
savings and checking accounts.
Borrowed Funds
Borrowed funds at June 30, 1997 increased to $689.5 million, from $640.4
million at December 31, 1996. The increase was due to an additional $50.5
million of short-term reverse repurchase agreements outstanding. These borrowed
funds were substantially invested in mortgage-backed securities and used to fund
deposit outflow.
22
<PAGE>
<PAGE>
Stockholders' Equity and Regulatory Capital
Stockholders' equity increased by $7.1 million from December 31, 1996, to
$216.8 million at June 30, 1997. The increase was primarily due to net income of
$9.4 million and the issuance of common stock of $1.6 million (in connection
with the exercise of stock options as well as the purchase of common stock by
the Bank's ESOP for participants' accounts in connection with the reinvestment
of their allocated preferred stock dividends). This increase was partially
offset by preferred and common dividends, net of applicable tax benefits,
aggregating $5.0 million.
On July 3, 1997, the trustee of the Bank's ESOP converted the Bank's Series
A Preferred Stock outstanding into the Bank's common stock. As a result,
1,396,227 shares of the Bank's common stock was issued upon the conversion of
1,477,802 shares of the Series A Preferred Stock. The conversion will result in
a third quarter reclassification of $5.1 million of preferred equity to common
equity, which will increase the Bank's Tier 1 leverage capital ratio by
approximately 20 basis points.
The table below sets forth information regarding stockholders' equity,
regulatory capital and related ratios.
<TABLE>
<CAPTION>
====================================================================================================================================
At June 30, At December 31,
($ in thousands) 1997 1996 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stockholders' equity:
Preferred equity .............................................................. $ 52,422 $ 52,418 $ 4
Common equity ................................................................. 164,336 157,230 7,106
- ------------------------------------------------------------------------------------------------------------------------------------
$ 216,758 $ 209,648 $ 7,110
- ------------------------------------------------------------------------------------------------------------------------------------
Tier I capital:
Common stockholders' equity ................................................... $ 164,336 $ 157,230 $ 7,106
Net unrealized (gain) loss on securities available for sale,
net of taxes ................................................................ (250) 30 (280)
Excess deferred tax asset (1) ................................................. (22,478) (27,640) 5,162
Qualifying preferred stock (Series B) ......................................... 47,312 47,312 --
- ------------------------------------------------------------------------------------------------------------------------------------
188,920 176,932 11,988
- ------------------------------------------------------------------------------------------------------------------------------------
Tier 2 capital:
Allowable portion of the allowance for loan losses ............................ 16,519 17,027 (508)
Nonqualifying preferred stock (Series A) ...................................... 5,110 5,106 4
- ------------------------------------------------------------------------------------------------------------------------------------
21,629 22,133 (504)
- ------------------------------------------------------------------------------------------------------------------------------------
Total risk-based capital .................................................... $ 210,549 $ 199,065 $ 11,484
- ------------------------------------------------------------------------------------------------------------------------------------
Risk-adjusted assets .......................................................... $1,321,327 $1,361,941 $(40,614)
Average assets for regulatory purposes ........................................ $2,556,678 $2,506,503 $ 50,175
Tier I risk-based capital ratio ............................................... 14.30% 12.99% 1.31%
Total risk-based capital ratio ............................................... 15.93% 14.62% 1.31%
Tier I leverage capital ratio ................................................. 7.39% 7.06% 0.33%
Stockholders' equity to total assets ratio .................................... 8.40% 8.25% 0.15%
====================================================================================================================================
</TABLE>
(1) Represents the portion of the Bank's net deferred tax asset which was not
includable in regulatory capital.
23
<PAGE>
<PAGE>
The Federal Deposit Insurance Corporation Improvement Act of 1991 restricts
the ability of state-chartered institutions to engage in activities that are not
permissible for national banks or their subsidiaries. With regard to this
restriction, the FDIC has approved a phase-out plan that permits the Bank to
continue its real estate joint venture activities through December 31, 2000,
subject to certain conditions. The conditions include a requirement that the
Bank perform supplemental quarterly capital adequacy calculations which deduct
all such real estate joint venture investments. The Bank has performed these
supplemental calculations and continues to be well capitalized under applicable
FDIC regulations.
Solely for purposes of these calculations, the Bank's Tier 1 leverage, Tier
1 risk-based and total risk-based capital ratios (as calculated by deducting the
net carrying value of joint venture investments, inclusive of commitments to
invest) would have been 6.60%, 12.87% and 14.52%, respectively, at June 30,
1997. If the Bank's capital (calculated as described above) falls below the
level required for well-capitalized institutions pursuant to FDIC regulations,
the Bank must submit a plan to restore its capital to such a level. There can be
no assurance, absent an extension by the FDIC, that any of the Bank's joint
ventures can be completed or disposed of by December 31, 2000, without
significant loss to the Bank. For purposes of the FDIC's determination of
deposit insurance assessment rates and of prompt corrective action in accordance
with FDIC regulations, the Bank's capital ratios are computed after deducting
its joint venture investments, as calculated above.
Results of Operations
Comparison of the Quarters Ended June 30, 1997 and 1996
Net income for the quarter ended June 30, 1997 increased to $4.7 million,
or $0.20 per fully diluted common share, from $4.3 million, or $0.17 per share,
for the same quarter of 1996. Higher net income was due to a $1.1 million
increase in net interest and dividend income and a $0.5 million reduction in
expenses for nonperforming loan and real estate activities. These improvements
were largely offset by a $0.8 million decline in noninterest income, a $0.4
million increase in equipment and data processing services expense and a $0.1
million increase in the provision for income taxes.
Net Interest and Dividend Income
Net interest and dividend income is the Bank's primary source of earnings
and is influenced primarily by the amount, distribution and repricing
characteristics of the Bank's interest-earning assets and interest-bearing
liabilities as well as by the relative levels and movements of interest rates.
The table that follows sets forth information on average assets,
liabilities and stockholders' equity; yields earned on interest-earning assets;
and rates paid on interest-bearing liabilities for the periods indicated. The
yields and rates shown are based on a computation of
24
<PAGE>
<PAGE>
annualized income/expense for each period divided by average interest-earning
assets/interest-bearing liabilities during each period. Certain yields and rates
shown are adjusted for related fee income or expense. Average balances are
derived from daily balances. Net interest margin is computed by dividing
annualized net interest and dividend income by the average of total
interest-earning assets during each period.
<TABLE>
<CAPTION>
====================================================================================================================================
For the Quarter Ended
--------------------------------------------------------------------------
June 30, 1997 June 30, 1996
------------------------------------- ----------------------------------
Average Interest Yield/ Average Interest Yield/
($ in thousands) Balance Inc./Exp. Rate Balance Inc./Exp. Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Mortgage loans ................................ $ 816,340 $17,307 8.48% $ 926,816 $18,984 8.20%
Other loans ................................... 156,528 3,094 7.91 131,417 2,642 8.05
-------------------------------------------------------------------------------
Total loans (1) ............................... 972,868 20,401 8.39 1,058,233 21,626 8.18
Securities available for sale ................. 205,881 3,566 6.93 192,077 3,254 6.78
Mortgage-backed securities .................... 1,082,640 18,472 6.82 975,561 16,447 6.74
Other bonds and notes ......................... 130,117 2,103 6.48 136,705 2,143 6.29
Other interest-earning assets ................. 33,521 506 6.07 46,990 672 5.76
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ................... 2,425,027 $45,048 7.43% 2,409,566 $44,142 7.33%
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets ...................... 153,935 159,977
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets .................................... $2,578,962 $2,569,543
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings and other deposits .................... $ 565,106 $ 3,552 2.52% $ 591,929 $ 3,712 2.52%
Money market deposits ......................... 93,321 586 2.51 106,360 668 2.52
Negotiable order of withdrawal deposits ....... 51,695 171 1.25 58,752 183 1.25
Escrow deposits ............................... 14,164 20 0.57 14,667 27 0.73
Certificates of deposit ....................... 861,693 11,580 5.39 891,048 12,159 5.49
-------------------------------------------------------------------------------
Total deposits accounts ....................... 1,588,979 15,909 4.01 1,662,756 16,749 4.05
-------------------------------------------------------------------------------
Reverse repurchase agreements ................. 458,912 6,485 5.67 375,714 5,477 5.86
FHLB advances ................................. 155,000 2,330 6.03 172,472 2,533 5.91
Other borrowed funds .......................... 75,378 1,268 6.73 79,882 1,426 7.14
-------------------------------------------------------------------------------
Total borrowed funds .......................... 689,290 10,083 5.87 628,068 9,436 6.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ............ 2,278,269 $25,992 4.57% 2,290,824 $26,185 4.60%
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities ............... 86,681 79,929
Stockholders' equity .......................... 214,012 198,790
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity .... $2,578,962 $2,569,543
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread ....... $19,056 2.86% $17,957 2.73%
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin ............ $ 146,758 3.14% $ 118,742 2.96%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities ....... 1.06x 1.05x
====================================================================================================================================
</TABLE>
1) Loan balances include average nonperforming loans of $37.8 million and
$51.9 million for 1997 and 1996, respectively.
Net interest and dividend income increased to $19.1 million, from $18.0
million in the 1996 second quarter. The increase reflected an improved net
interest margin resulting from growth in net interest-earning assets and a
higher interest rate spread. Average net interest-earning assets increased by
$28.0 million due to the partial investment of funds generated from operations
and sales of nonperforming assets. The higher spread resulted from an increase
in the yield earned on assets and a decline in the Bank's cost of funds.
25
<PAGE>
<PAGE>
The yield on earning assets increased by 10 basis points to 7.43%,
primarily due to the following: the receipt of deferred income on various
commercial real estate and multi-family loans; a decline in nonperforming
loans; and upward rate resets on security investments. The deferred income, a
significant portion of which related to TDRs, amounted to approximately $0.7
million. The effect of these factors was partially offset by: the prepayment of
higher-yielding, multi-family and commercial real estate loans; the replacement
thereof with investments in securities with a lower rate; an increase in
adjustable-rate, 1-4 family and cooperative loan originations with low
introductory rates; and the sale of higher-yielding student loans.
The cost of funds declined by 0.3 basis points to 4.57%, primarily due to a
decline in the cost of time deposits and lower amortization of premiums paid for
interest rate cap agreements (which are designated as hedges of interest rates
on reverse repurchase agreements). This was largely offset by an outflow of
deposits and the replacement thereof with borrowed funds (which normally are
the most expensive source of funds for the Bank).
The following table presents the dollar amount of changes in interest and
dividend income and interest expense attributable to changes in volume and
changes in rate for the periods indicated. The changes in interest due to both
rate and volume have been allocated between such categories in proportion to the
absolute amounts of the change in each. Nonperforming loans have been included
in total loans for this analysis.
<TABLE>
<CAPTION>
====================================================================================================================================
Increase or (Decrease)
Due to Change in:
($ in thousands) ------------------------------
For the Quarter Ended June 30, 1997 versus 1996 Volume Rate Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and dividend income:
Mortgage loans ................................................... $(2,309) $ 632 $(l,677)
Other loans ...................................................... 499 (47) 452
--------------------------------------------------
Total loans ...................................................... (1,810) 585 (1,225)
Securities available for sale .................................... 239 73 312
Mortgage-backed securities ....................................... 1,828 197 2,025
Other bonds and notes ............................................ (104) 64 (40)
Other interest-earning assets .................................... (201) 35 (166)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in interest and dividend income ............................. (48) 954 906
- ------------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Savings and other deposits ....................................... (160) -- (160)
Money market deposits ............................................ (79) (3) (82)
Negotiable order of withdrawal deposits .......................... (12) -- (12)
Escrow deposits .................................................. (1) (6) (7)
Certificates of deposit .......................................... (358) (221) (579)
--------------------------------------------------
Total deposit accounts ........................................... (610) (230) (840)
--------------------------------------------------
Reverse repurchase agreements .................................... 1,192 (184) 1,008
FHLB advances .................................................... (254) 51 (203)
Other borrowed funds ............................................. (79) (79) (158)
--------------------------------------------------
Total borrowed funds ............................................. 859 (212) 647
- ------------------------------------------------------------------------------------------------------------------------------------
Change in interest expense ......................................... 249 (442) (193)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net interest and dividend income ......................... $ (297) $ 1,396 $ 1,099
====================================================================================================================================
</TABLE>
26
<PAGE>
<PAGE>
PROVISIONS FOR LOAN AND REAL ESTATE LOSSES
Provisions for loan and real estate losses are based on management's
ongoing assessment of the adequacy of the allowances for loan and real estate
losses, which considers the factors discussed in the section "Allowances for
Loan and Real Estate Losses" on page 33 of the Bank's 1996 Annual Report to
Stockholders. The combined provision amounted to $0.5 million in the second
quarter of 1997, unchanged from the same quarter of 1996. The Bank currently
expects to record an additional provision of $19.5 million in the third quarter
of 1997 in connection with the Merger Agreement, as discussed on page 21 of this
report.
NONINTEREST INCOME
Total noninterest income declined to $1.8 million in the second quarter of
1997, from $2.6 million in the second quarter of 1996. The decline was
substantially due to a lower level of income from mortgage activities.
Income from Mortgage Activities. Income from mortgage activities declined
to $0.4 million in the second quarter of 1997, from $1.0 million in the same
period of last year. The decline was substantially due to a lower level of fee
income from the prepayment of commercial real estate and multi-family loans, as
well as a decline in income from servicing loans owned by investors. The decline
in servicing income was due to the sale of a substantial portion of the
servicing portfolio in September 1996.
NONINTEREST EXPENSES
Total noninterest expenses declined to $12.8 million in the second quarter
of 1997, from $13.1 million in the same period last year. The largest components
of the change from last year were declines in nonperforming loan and real estate
activities expense and advertising and promotion expense. These reductions were
partially offset by an increase in expenses for equipment and data processing
services.
Equipment and Data Processing Services Expense. Equipment and data
processing services expense increased to $1.9 million, from $1.5 million in the
second quarter a year ago. The increase was primarily the result of higher
processing costs apportioned to the Bank by its affiliate, Institutional Group
Information Corp., which provides data processing services to the Bank and one
other savings institution.
Advertising and Promotion Expense. Advertising and promotion expense
declined to $0.2 million in the 1997 second quarter, from $0.4 million in the
same quarter of 1996. The reduction was due to a general decrease in promotional
activities.
27
<PAGE>
<PAGE>
Nonperforming Loan and Real Estate Activities Expense. Nonperforming loan
and real estate activities expense declined to $0.5 million in the second
quarter of 1997, from $1.0 million in the same period of 1996, reflecting
reductions in nonperforming assets over the past year. These expenditures are
comprised primarily of real estate taxes, insurance, utilities, maintenance,
professional fees and other charges required to protect the Bank's interest in
its foreclosed properties, properties which collateralize nonperforming loans
and its joint venture investments. The remainder represents compensation expense
attributable to specific departments established within the Bank to resolve
problem assets.
TAX EXPENSE
Net tax expense amounted to $2.8 million in the second quarter of 1997,
compared to $2.7 million in the 1996 second quarter. The increase was due to
higher pre-tax earnings. The Bank's effective tax rate (inclusive of state and
local taxes) amounted 37.4% in the second quarter of 1997, compared to 38.8% in
the same quarter of 1996. Net tax expense included a reduction in the Bank's
valuation allowance for deferred tax assets of $0.6 million and $0.5 million for
the 1997 and 1996 periods, respectively.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Net income for the six months ended June 30, 1997 increased to $9.4
million, or $0.39 per fully diluted common share, from $8.5 million, or $0.33
per share, for the same period of 1996. The improvement was due to a $2.0
million increase in net interest and dividend income and a $0.4 million
reduction in expenses for nonperfonning loan and real estate activities. These
improvements were partially offset by a $0.7 million decline in noninterest
income, a $0.4 million increase in equipment and data processing services
expense and a $0.5 million increase in the provision for income taxes.
NET INTEREST AND DIVIDEND INCOME
Net interest and dividend income is the Bank's primary source of earnings
and is influenced primarily by the amount, distribution and repricing
characteristics of the Bank's interest-earning assets and interest-bearing
liabilities as well as by the relative levels and movements of interest rates.
The table that follows sets forth information on average assets,
liabilities and stockholders' equity; yields earned on interest-earning assets;
and rates paid on interest-bearing liabilities for the periods indicated. For a
description of how the amounts in the table were computed, see the same caption
in the Comparison of Results of Operations for the Quarters Ended June 30, 1997
and 1996.
28
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended
-------------------------------------------------------------------------------------
June 30, 1997 June 30, 1996
----------------------------------------- -----------------------------------------
Average Interest Yield/ Average Interest Yield/
($ in thousands) Balance Inc./Exp. Rate Balance Inc./Exp. Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest earning assets:
Mortgage loans ........................ $ 825,447 $34,782 8.43% $ 945,180 $39,134 8.28%
Other loans ........................... 148,038 5,827 7.88 129,068 5,202 8.07
-------------------------------------------------------------------------------------
Total loans(1) ........................ 973,485 40,609 8.35 1,074,248 44,336 8.25
Securities available for sale ......... 208,897 7,154 6.85 195,283 6,521 6.68
Mortgage-backed securities ............ 1,064,325 36,186 6.80 959,175 32,446 6.76
Other bonds and notes ................. 130,504 4,175 6.42 137,226 4,275 6.25
Other interest earning assets ......... 32,277 989 6.19 43,021 1,276 5.97
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 2,409,488 $89,113 7.40% 2,408,953 $88,854 7.38%
- ----------------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets 154,434 162,845
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $2,563,922 $2,571,798
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings and other deposits ............ $ 565,065 $ 7,067 2.52% $ 591.369 $ 7,421 2.52%
Money market deposits ................. 95,001 1,187 2.51 107,742 1,353 2.52
Negotiable order of withdrawal deposits 55,111 342 1.25 59,747 373 1.25
Escrow deposits ....................... 13,052 40 0.62 13,573 53 0.78
Certificates of deposit ............... 865,440 23,141 5.39 892,475 24,646 5.56
-------------------------------------------------------------------------------------
Total deposits accounts ............... 1,593,669 31,777 4.02 1,664,906 33,846 4.09
-------------------------------------------------------------------------------------
Reverse repurchase agreements ......... 442,133 12,245 5.59 375,105 11.046 5.92
FHLB advances ......................... 155,000 4,609 6.00 175,714 5,168 5.92
Other borrowed funds .................. 75,540 2,530 6.69 80.086 2.857 7.13
-------------------------------------------------------------------------------------
Total borrowed funds .................. 672,673 19,384 5.81 630,905 19,071 6.07
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 2,266,342 $51,161 4.55% 2,295,811 $52,917 4.63%
- ----------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities .......... 85,126 78,231
Stockholders' equity ..................... 212,454 197,756
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,563,922 $2,571,798
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread $37,952 2.85% $35,937 2.75%
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $ 143.146 3.12% $ 113,142 2.97%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.06x 1.05x
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Loan balances include average nonperforming loans of S33.8 million and
$48.5 million for 1997 and 1996, respectively.
Net interest and dividend income increased to $38.0 million in the first
half of 1997, from $35.9 million in the same period of 1996. The increase
reflected an improved net interest margin resulting from a $30.0 million
increase in net interest-earning assets and a 10 basis point increase in the
interest rate spread. The yield on earning assets increased by 2 basis points to
7.40%, while the Bank's cost of funds declined by 8 basis points to 4.55%.
The reasons for these changes are substantially the same as those discussed
under the same caption in the Comparison of Results of Operations for the
Quarters Ended June 30, 1997 and 1996.
29
<PAGE>
<PAGE>
The following table presents the dollar amount of changes in interest
and dividend income and interest expense attributable to changes in volume and
changes in rate for the periods indicated. For a description of how the amounts
in the table were computed, see the same caption in the Comparison of Results
of Operations for the Quarters Ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Increase or (Decrease)
($ in thousands) Due to Change in:
----------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1997 VERSUS 1996 Volume Rate Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and dividend income:
Mortgage loans...................................................... $(5,05O) $ 698 $(4,352)
Other loans......................................................... 750 (125) 625
--- ---- ---
Total loans......................................................... (4,300) 573 (3,727)
Securities available for sale....................................... 464 169 633
Mortgage-backed securities.......................................... 3,595 145 3,740
Other bonds and notes............................................... (215) 115 (100)
Other interest earning assets....................................... (333) 46 (287)
- -------------------------------------------------------------------------------------------------------------
Change in interest and dividend income (789) 1,048 259
- -------------------------------------------------------------------------------------------------------------
Interest expense:
Savings and other deposits.......................................... (354) - (354)
Money market deposits............................................... (160) (6) (166)
Negotiable order of withdrawal deposits............................. (31) - (31)
Escrow deposits..................................................... (3) (10) (13)
Certificates of deposit............................................. (758) (747) (1,505)
---- ---- ------
Total deposit accounts............................................. (1,306) (763) (2,069)
------ ---- ------
Reverse repurchase agreements...................................... 1,844 (645) 1,199
FHLB advances...................................................... (629) 70 (559)
Other borrowed funds............................................... (156) (171) (327)
---- ---- ----
Total borrowed funds............................................... 1,059 (746) 313
- -------------------------------------------------------------------------------------------------------------
Change in interest expense (247) (1,509) (1,756)
- -------------------------------------------------------------------------------------------------------------
Change in net interest and dividend income $ (542) $2,557 $2,015
- -------------------------------------------------------------------------------------------------------------
</TABLE>
PROVISIONS FOR LOAN AND REAL ESTATE LOSSES
Provisions for loan and real estate losses are based on management's
ongoing assessment of the adequacy of the allowances for loan and real estate
losses, which considers the factors discussed in the section "Allowances for
Loan and Real Estate Losses" on page 33 of the Bank's 1996 Annual Report to
Stockholders. The combined provision amounted to $1.0 million in the first half
of 1997, unchanged frown the first half of 1996. The Bank currently expects to
record an additional provision of $19.5 1nillion in the third quarter of 1997
in connection with the Merger Agreement, as discussed on page 21 of this
report.
30
<PAGE>
<PAGE>
NONINTEREST INCOME
Total noninterest income amounted to $3.9 million in the first half of
1997, compared to $4.6 million in the first half of 1996. The decline was
almost all due to a lower level of income from mortgage activities of $0.7
million. The reasons for the decline are identical to those discussed under the
same caption in the Comparison of Results of Operations for the Quarters Ended
June 30,1997 and 1996.
NONINTEREST EXPENSES
Total noninterest expenses (excluding the provision for real estate
losses) amounted to $25.7 million in the first half of 1997, compared to $25.9
million in the same period last year. The largest components of the change from
last year were declines in expenses for compensation and benefits, and
nonperfonning loan and real estate activities. These declines were partially
offset by an increase in equipment arid data processing services expense.
Compensation and Benefits Expense. Compensation and benefits expense
declined to $11.5 million in the first half of 1997, from $11.8 million in the
1996 period. The decline was primarily due to reduced staff and lower expenses
associated with medical benefits, partially offset by normal merit increases.
Equipment and Data Processing Services Expense. Equipment and data
processing services expense increased from $3.0 million in the first half of
1996, to $3.4 million in the 1997 first half. The increase was primarily the
result of higher processing costs apportioned to the Bank by its affiliate,
Institutional Group Information Corp., which provides data processing services
to the Bank and one other savings institution.
Nonperforming Loan and Real Estate Activities Expense. Nonperforming
loan and real estate activities expense declined to $1.5 million in the first
half of 1997, from $1.8 million in the same period of 1996, reflecting a
reduction in nonperforming assets over the past year. The expenses for the
first half of 1997 included $0.4 million attributable to two loan
relationships, a portion of which is expected to be recovered by the Bank over
time.
TAX EXPENSE
Net tax expense amounted to $5.6 million in the first half of 1997,
compared to $5.1 million in the 1996 period. The increase was due to higher
pre-tax earnings. The Bank's effective tax rate (inclusive of state and local
taxes) amounted 37.4% in the first half of 1997, compared to 37.8% in the same
period of 1996. Net tax expense included a reduction in the Bank's valuation
allowance for deferred tax assets of $1.2 million and $1.1 million for the 1997
and 1996 periods, respectively.
31
<PAGE>
<PAGE>
INTEREST RATE SENSITIVITY
The Bank manages its interest rate risk through the use of "income
simulation analysis" and "gap analysis." Interest rate risk arises from
mismatches in the repricing of assets and liabilities within a given time
period. For a further discussion of interest rate risk and income simulation
and gap analysis, see the Bank's 1996 Annual Report to Stockholders, pages 42
through 44.
From time-to-time, the Bank uses interest rate cap and floor agreements
as hedges to reduce its exposure to unfavorable fluctuations in the repricing
of certain liabilities and assets (generally borrowed funds and securities).
The agreements limit the interest rate on such assets and liabilities to a
predetermined level, while still allowing the Bank to benefit if rates decline
in the case of liabilities, or if rates increase in the case of assets. The
agreements provide for the payment of a specified sum to the Bank when the
underlying rate index (generally one-month LIBOR) exceeds (in the case of caps)
or falls below (in the case of floors) the agreements' contractual rate. The
Bank pays a premium at the inception date of each of the agreements and no
future payments to the third parties are required. Premiums are recorded as
other assets and are amortized over the contractual terms of the agreements as
a component of interest expense or income, net of contractual payments received
from third parties.
As of June 30, 1997, $20.0 million and $60.0 million (notional
principal) of interest rate caps and floors, respectively, were outstanding.
The agreements have weighted-average cap and Door rates of 6.94% and 6.08%,
respectively, and expire at various times through February 2000. The
amortization of premiums paid, net of contrachual amounts received, for cap and
floor agreements reduced net interest and dividend income by $0.3 million in
the second quarter of 1996 and $0.7 million in the 1996 first half. For the
corresponding periods of 1997, net interest and dividend income was increased
by $21,000 and $37,000, respectively.
The Bank's one-year gap was a negative 4.5% at June 30, 1997, compared
to a negative 0.2% at December 31, 1996. The increase was primarily due to FHLB
advances and time deposits cycling into the within one-year repricing category
and the recatergorization of certain available-for-sale securities from the
witlun one-year to the over 1-3 and 3-5 year repricing categories. The Bank
currently believes that, in the normal course of events, its net interest and
dividend income would not be materially affected by changes in interest rates.
However, a rapidly rising interest rate environment, as well as other factors,
may have a significant negative impact (particularly as it relates to the
Bank's assumptions concerning the predicted behavior of depositors) on the
Bank's level of net interest and dividend income.
32
<PAGE>
<PAGE>
The following table is an analysis of flee Bank's gap position at June
30, 1997:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Within Over 1-3 Over 3-5 Over
($ in thousands) One Year Years Years 5 Years Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Mortgage loans.......................... $237,707 $323,761 $136,802 $ 76,834 $ 775,104
Other loans ............................ 58,624 47,258 18,656 42,815 167,353
------- -------- -------- -------- ---------
Total loans............................. 296,331 371,019 155,458 119,649 942,457
Securities available for sale........... 106,919 41,402 22,448 32,170 202,939
Mortgage-backed securities.............. 810,793 63,277 45,709 149,709 1,069,488
Other bonds and notes................... 74,082 2,264 2,064 51,427 129,837
Other interest-earning assets........... 12,900 - - 24,250 37,150
- -------------------------------------------------------------------------------------------------------------
Total interest-earning assets $l,301,025 $477,962 $225,679 $377,205 $2,381,871
- -------------------------------------------------------------------------------------------------------------
Interest bearing liabilities:
Savings and other deposits............. $ 251,796 $266,090 $ 45,604 $ - $ 563,490
Money market deposits ................ 90,948 - - - 90,948
Negotiable order of withdrawal deposits..... - 17,634 35,269 - 52,903
Escrow deposits ........................ - - - 10,226 10,226
Certificates of deposit................... 577,118 205,988 74,121 - 857,227
------- ------- ------ -------- ---------
Total deposit accounts ................. 919,862 489,712 154,994 10,226 1,574.794
------- ------- ------- -------- ---------
Reverse repurchase agreements .......... 460,000 - - - 460,000
FHLB advances .......................... 55,000 100,000 - - 155,000
Other borrowed funds..................... 3,117 6,251 6,717 58,419 74,504
------- ------- ------- -------- ---------
Total borrowed funds..................... 518,117 106,251 6,717 58,419 689,504
- -------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $l,437,979 $595,963 $161,711 $ 68,645 $2,264,298
- -------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap (136,954) (118,001) 63,968 308,560 117,573
- -------------------------------------------------------------------------------------------------------------
Interest rate options-caps (1) 20,000 (20,000) - - -
- -------------------------------------------------------------------------------------------------------------
Adjusted interest-rate sensitivity gap $ (116,954) $(138,001) $63,968 $308,560 $117,573
- -------------------------------------------------------------------------------------------------------------
Cumulative ratio of gap to total assets - 4.5% 4.6%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excluding the effect of interest rate caps with a maturity of greater than
one year, the one-year gap would have been - 5.3%
The following assumptions are utilized in the gap table:
(1) adjustable-rate loans and securities are included in the period in which
their interest rates are next scheduled to reset; (2) fixed-rate loans and
mortgage-backed securities and certain other fixed-rate securities are
amortized based on historical and estimated prepayment experience; (3)
unamortized premiums and discounts on securities and loans, as well as
unrealized gains and losses, net of taxes, on securities available for sale,
are excluded from the table; (4) savings deposit accounts are amortized based
on estimated decay factors and other relevant internal analyses; (5) money
market deposit accounts (Greaterfund Savings) are assumed to reprice within one
month and negotiable order of withdrawal deposit accounts (Greaterfund
Checking) are assumed to reprice ratably over a two- to five-year period; (6)
nonperforming assets are excluded from the table; and (7) most other categories
reprice according to their actual maturities or interest rate reset dates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
33
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The information required is incorporated herein by reference to note 5 "Legal
Matters" in the notes to the consolidated financial statements of this report.
ITEM 2. Changes in Securities
(a) Not Applicable
(b) Not Applicable
(c) Securities of the Bank issued during the quarter ended June 30, 1997 that
are exempt from registration pursuant to section 3(a)(2) of the Securities
Act of 1933 are summarized as follows:
========================================================================
($ in thousands)
------------------------------------------------------------------------
Description Date Issued Shares Consideration
------------------------------------------------------------------------
Common stock(1) ....... Various 39,070 $ 539
Common stock(2)(3) .... May, 5, 1997 350 3
------------------------------------------------------------------------
39,420 $ 542
========================================================================
(1) Common stock issued to officers of the Bank on various dates upon the
exercise (at various grant prices) of common stock options granted under
stock option plans (as described on page 67 of the Bank's 1996 Annual
Report to Stockholders). The consideration includes a related tax benefit.
(2) Common stock issued to the Bank's ESOP (for participants who terminated
their employment with the Bank) upon the conversion of 275 shares of ESOP
Preferred Stock based on a conversion rate of 1.273 of a common share for
each preferred share (as described on pages 66 and 67 of the Bank's 1996
Annual Report to Stockholders).
(3) On July 3, 1997, the trustee of the Bank's ESOP converted all 1,477,802
outstanding shares of Series A ESOP Convertible Preferred Stock into
1,396,227 shares of the Bank's common stock based on a conversion rate of
.9448 of a common share for each preferred share (as described on pages 66
and 67 of the Bank's 1996 Annual Report to Stockholders). The conversion
will result in a third quarter reclassification of $5.1 million of
preferred equity to common equity.
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) A Special Meeting of Stockholders was held on August 1, 1997.
(b) Not Applicable
34
<PAGE>
<PAGE>
(c) The following table summarizes the voting results on the matter that was
submitted to the Bank's common and ESOP Series A Preferred stockholders
(voting together as a single class):
<TABLE>
<CAPTION>
===================================================================================================================
For Against or Withheld Abstained Broker Nonvotes
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
To approve a proposed agreement
and plan of merger between Astoria
Financial Corporation and
Subsidiary and The Greater New
York Savings Bank and Subsidiaries 11,826,828 284,792 68,086 Not Applicable
===================================================================================================================
</TABLE>
(d) Not Applicable
ITEM 5. Other Information
Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
11 - Statement Re: Computation of Earnings Per Share
(b) Reports on Form 8-K
A current report on Form F-3 (equivalent to Form 8-K) dated April 8, 1997
was filed during the quarter ended June 30, 1997. This report filed the
Agreement and Plan of Merger dated as of March 29, 1997 by and among
Astoria Financial Corporation, Astoria Federal Savings and Loan Association
and the Bank, and various other exhibits related to the Agreement and Plan
of Merger.
35
<PAGE>
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Bank
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
THE GREATER NEW YORK SAVINGS BANK
August 14, 1997 By: /s/ Gerard C. Keegan
---------------------------------------
Gerard C. Keegan, Chairman of the Board,
President and Chief Executive Officer
August 14, 1997 By: /s/ Philip T. Spies
---------------------------------------
Philip T. Spies, Senior Vice President
and Controller
36
<PAGE>
<PAGE>
Exhibit 11
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
===================================================================================================================================
For the Six Months Ended For the Quarter Ended
June 30, June 30,
----------------------------- -----------------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary:
Net income .................................................... $ 9,449,346 $ 8,464,415 $ 4,746,413 $ 4,252,915
Less:
Dividends on Series A preferred stock, net of tax benefit ... (602,990) (605,257) (301,495) (299,733)
Dividends on Series B preferred stock ....................... (3,000,000) (3,000,000) (1,500,000) (1,500,000)
----------------------------- -----------------------------
(3,602,990) (3,605,257) (1,801,495) (1,799,733)
----------------------------- -----------------------------
Adjusted net income for primary earnings per share
computation ................................................. $ 5,846,356 $ 4,859,158 $ 2,944,918 $ 2,453,182
============================= =============================
Weighted-average number of shares used to compute primary
earnings per share .......................................... 13,951,271 13,547,906 14,018,208 13,563,857
============================= =============================
Primary earnings per share .................................... $0.42 $0.36 $0.21 $0.18
============================= =============================
Fully Diluted:
Net income .................................................... $ 9,449,346 $ 8,464,415 $ 4,746,413 $ 4,252,915
Less:
Dividends on Series B preferred stock ....................... (3,000,000) (3,000,000) (1,500,000) (1,500,000)
Adjustment to expense due to proforma conversion of Series
A preferred stock to common stock, net of tax benefit ..... (397,595) (417,224) (198,798) (207,283)
----------------------------- -----------------------------
Adjusted net income for fully diluted earnings per share
computation ............................................... $ 6,051,751 $ 5,047,191 $ 3,047,615 $ 2,545,632
============================= =============================
Weighted-average number of shares used to compute fully
diluted earnings per share .................................. 15,430,020 15,211,764 15,450,900 15,210,502
============================= =============================
Fully diluted earnings per share .............................. $0.39 $0.33 $0.20 $0.17
============================= =============================
===================================================================================================================================
</TABLE>
37
<PAGE>
<PAGE>
[Letterhead of Astoria Financial Corporation]
Contact: Peter J. Cunningham
Vice President
Investor Relations
(516) 327-7877
FOR IMMEDIATE RELEASE
ASTORIA FINANCIAL CORPORATION COMPLETES ACQUISITION
OF THE GREATER NEW YORK SAVINGS BANK
Creates $10 Billion Financial Institution With Sixty-One Banking Offices
Lake Success, New York, October 1, 1997 - Astoria Financial Corporation
(Nasdaq: AFSC) ("Astoria") announced today the successful completion of the
acquisition of The Greater New York Savings Bank (Nasdaq: GRTR) ("The Greater")
and its merger into Astoria Federal Savings and Loan Association, Astoria's
wholly owned thrift subsidiary. According to the terms of the merger agreement,
the aggregate consideration payable to stockholders of The Greater common stock
consists of 0.5 of a share of Astoria Financial Corporation common stock per
share of The Greater common stock for 75% of the shares of The Greater common
stock and $19.00 in cash per share of The Greater common stock for the remaining
25% of the shares of The Greater common stock. Accordingly, each share of The
Greater common stock has been converted in the merger into the right to receive:
(i) 0.5 of a share of Astoria common stock, (ii) $19.00 in cash or (iii) a
combination of cash and a fraction of a share of Astoria common stock. The
actual consideration ultimately received by a stockholder for shares of The
Greater common stock will depend on certain election, allocation and proration
procedures. The transaction will be accounted for as a purchase and will be
immediately accretive to reported and cash earnings.
The outstanding shares of the 12% Noncumulative Preferred Stock,
Series B, of The Greater has been converted into a newly-created series of
preferred stock of Astoria Financial Corporation with substantially identical,
and no less favorable terms.
George L. Engelke, Jr., Chairman, President and Chief Executive
Officer of both Astoria Financial Corporation and Astoria Federal said, "We are
excited about the completion of this significant in-market acquisition. The
Greater's 14 banking office franchise, with deposits averaging $117 million per
office, represents an important complementary fit for Astoria. In addition to
immediately increasing our existing presence in Queens, Nassau and Suffolk
counties, we are making a solid entry into the Brooklyn market with nine
existing offices of The
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Greater plus two new banking offices to be opened in the Midwood and Bensonhurst
sections of Brooklyn during the week of October 6."
Mr. Engelke continued, "We are very pleased to welcome the former
customers and shareholders of The Greater to the Astoria family. We are
confident that this transaction will enhance shareholder value and provide
long-term benefits for our customers and the communities we serve. We also
welcome Gerard C. Keegan, former Chairman, President and Chief Executive Officer
of The Greater, as a director of both Astoria Financial Corporation and Astoria
Federal Savings and Loan Association and as Vice chairman and Chief
Administrative Officer. In addition, we welcome Peter C. Haeffner, Jr., a former
director of The Greater, as a director of both Astoria Financial Corporation and
Astoria Federal Savings and Loan Association."
As a result of the acquisition and the two new banking offices,
Astoria will have a market capitalization of over $1.25 billion, assets of
approximately $10.2 billion, deposits of approximately $6.2 billion and will
operate sixty-one banking offices; fifty-six in the New York metropolitan area
and five in the upstate counties of Ostego and Chenango. The combined
institution will provide retail banking, mortgage and consumer loan services to
over 375,000 customers.
NOTE: BY OCTOBER 3, 1997, ASTORIA WILL MAIL TO HOLDERS OF THE
GREATER COMMON STOCK THE ELECTION MATERIALS. THE ELECTION PROCESS WILL EXPIRE ON
OCTOBER 17, 1997. IN CONNECTION WITH THE GREATER SHAREHOLDER ELECTION PROCEDURE,
CHASEMELLON SHAREHOLDER SERVICES, INC. HAS BEEN RETAINED AS INFORMATION AGENT
FOR THE ELECTION PROCESS. A TOLL-FREE TELEPHONE NUMBER, 1-888-213-0887, HAS BEEN
ESTABLISHED TO ASSIST THE SHAREHOLDERS WITH ANY QUESTIONS THEY MAY HAVE
CONCERNING THE ELECTION PROCESS AND FOR INFORMATION CONCERNING THEIR FINAL
ALLOCATION. RESULTS OF THE FINAL ALLOCATION WILL BE AVAILABLE TO SHAREHOLDERS
BEGINNING OCTOBER 27, 1997 BY CALLING THE TOLL-FREE NUMBER.
ASTORIA FINANCIAL CORPORATION WILL ANNOUNCE ITS EARNINGS RESULTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1997 ON OR ABOUT OCTOBER 23, 1997,
SUBSEQUENT TO THE FINAL ELECTION TABULATION BY THE EXCHANGE AGENT.
