<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-22228
ASTORIA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 11-3170868
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Astoria Federal Plaza, Lake Success, New York 11042-1085
(Address of principal executive offices) (Zip Code)
(516) 327-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Classes of Common Stock Number of Shares Outstanding, April 30, 1997
----------------------- --------------------------------------------
.01 Par Value 21,168,718
------------- ----------
<PAGE> 2
PART 1 -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Item 1. Financial Statements.
Consolidated Statements of Financial Condition at March 31, 1997 and 2
December 31, 1996.
Consolidated Statements of Operations for the Three Months Ended 3
March 31, 1997 and March 31, 1996.
Consolidated Statement of Stockholders' Equity for the Three Months 4
Ended March 31, 1997.
Consolidated Statements of Cash Flows for the Three Months Ended 5
March 31, 1997 and March 31, 1996.
Notes to Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial Condition and 7
Results of Operations.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities (Not Applicable)
Item 3. Defaults Upon Senior Securities (Not Applicable)
Item 4. Submission of Matters to a Vote of Security Holders (Not Applicable)
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
(a) Exhibits
(11) Computation of Per Share Earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
Signatures 23
</TABLE>
1
<PAGE> 3
ASTORIA FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
Assets 1997 1996
- ------ ---- ----
<S> <C> <C>
Cash and due from banks $ 22,674 $ 18,923
Federal funds sold and repurchase agreements 81,518 56,000
Mortgage-backed and mortgage-related securities
available-for-sale (at estimated fair value) 2,278,534 2,100,376
Other securities available-for-sale (at estimated fair value) 152,436 196,286
Mortgage-backed and mortgage-related securities
held-to-maturity (estimated fair value of $1,300,406
and $1,309,007, respectively) 1,324,064 1,321,613
Other securities held-to-maturity (estimated fair value
of $741,352 and $637,338, respectively) 756,675 639,402
Federal Home Loan Bank of New York stock 35,800 32,354
Loans receivable:
Mortgage loans 2,720,212 2,593,307
Consumer and other loans 57,350 58,109
----------- -----------
2,777,562 2,651,416
Less allowance for loan losses 14,024 14,089
----------- -----------
Loans receivable, net 2,763,538 2,637,327
Real estate owned and investments in real estate, net 11,768 12,129
Accrued interest receivable 44,591 43,976
Premises and equipment, net 83,433 83,424
Excess of cost over fair value of net assets acquired
and other intangibles 98,157 100,267
Other assets 36,221 30,686
----------- -----------
Total assets $ 7,689,409 $ 7,272,763
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Savings $ 1,137,065 $ 1,134,038
Money market 502,791 461,813
NOW 143,606 142,492
Certificates of deposit 2,710,768 2,774,750
----------- -----------
Total deposits 4,494,230 4,513,093
Reverse repurchase agreements 2,295,000 1,845,000
Federal Home Loan Bank of New York advances 245,477 266,514
Mortgage escrow funds 36,849 26,520
Accrued expenses and other liabilities 33,461 32,807
----------- -----------
Total liabilities 7,105,017 6,683,934
----------- -----------
Stockholders' Equity:
Preferred stock, $.01 par value; (5,000,000 shares
authorized; none issued) -- --
Common stock, $.01 par value; (70,000,000 shares authorized: 26,361,704
issued; 21,242,610 and 21,472,886 shares outstanding, respectively) 264 264
Additional paid-in capital 334,960 330,398
Retained earnings - substantially restricted 391,639 379,876
Treasury stock (5,119,094 and 4,888,818 shares, at cost, respectively) (103,795) (91,188)
Net unrealized (losses) gains on securities, net of taxes (9,471) 156
Unallocated common stock held by ESOP (23,755) (24,489)
Unearned common stock held by RRPs (5,450) (6,188)
----------- -----------
Total stockholders' equity 584,392 588,829
----------- -----------
Total liabilities and stockholders' equity $ 7,689,409 $ 7,272,763
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
ASTORIA FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1997 1996 (1)
----------- ------------
<S> <C> <C>
Interest income:
Mortgage loans $ 52,554 $ 42,524
Consumer and other loans 1,446 1,525
Mortgage-backed and mortgage-related securities 58,925 62,916
Federal funds sold and repurchase agreements 868 1,055
Other securities 15,280 7,814
----------- ------------
Total interest income 129,073 115,834
----------- ------------
Interest expense:
Deposits 47,559 46,041
Borrowed funds 32,058 25,059
----------- ------------
Total interest expense 79,617 71,100
----------- ------------
Net interest income 49,456 44,734
Provision for loan losses 500 522
----------- ------------
Net interest income after provision for loan losses 48,956 44,212
----------- ------------
Non-interest income:
Customer service and loan fees 2,444 2,081
Net gain on sales of securities and loans 378 762
Other 649 715
----------- ------------
Total non-interest income 3,471 3,558
----------- ------------
Non-interest expense:
General and administrative:
Compensation and benefits 13,372 12,429
Occupancy, equipment and systems 5,998 5,805
Federal deposit insurance premiums 810 2,464
Advertising 914 747
Other 2,665 2,482
----------- ------------
Total general and administrative 23,759 23,927
Real estate operations, net 112 (3,255)
Provision for (recovery of) real estate losses 64 (1,397)
Amortization of excess of cost over fair value of
net assets acquired 2,110 2,171
----------- ------------
Total non-interest expense 26,045 21,446
----------- ------------
Income before income tax expense 26,382 26,324
Income tax expense 10,948 11,606
----------- ------------
Net income $ 15,434 $ 14,718
=========== ============
Primary earnings per common share $ 0.72 $ 0.68
=========== ============
Fully diluted earnings per common share $ 0.72 $ 0.68
=========== ============
Dividends per common share $ 0.11 $ 0.10
=========== ============
Primary weighted average common shares and equivalents 21,314,991 21,599,362
Fully diluted weighted average common shares and equivalents 21,316,019 21,665,934
</TABLE>
See accompanying notes to consolidated financial statements.
(1) As adjusted for two-for-one stock split on June 3, 1996.
3
<PAGE> 5
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Net
Unrealized
Retained Gains (Losses) Unallocated
Additional Earnings on Common
Common Paid-In Substantially Treasury Securities, Stock Held
Stock Capital Restricted Stock Net of Taxes by ESOP
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $264 $330,398 $ 379,876 $ (91,188) $ 156 $(24,489)
Net income -- -- 15,434 -- -- --
Change in unrealized gains
on securities available-for-sale -- -- -- -- (9,627) --
Common stock repurchased
(415,497 shares) -- -- -- (16,184) -- --
Cash dividends declared and paid
on common stock -- -- (2,276) -- -- --
Exercise of stock options and
related tax benefit -- 2,175 (1,395) 3,577 -- --
Amortization relating to allocation
of ESOP stock and earned portion
of RRP stock and related tax benefit -- 2,387 -- -- -- 734
---- -------- --------- --------- ------- --------
Balance at March 31, 1997 $264 $334,960 $ 391,639 $(103,795) $(9,471) $(23,755)
==== ======== ========= ========= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Unearned
Common
Stock Held
by RRP's Total
-------------------------------
<S> <C> <C>
Balance at December 31, 1996 $(6,188) $ 588,829
Net income -- 15,434
Change in unrealized gains
on securities available-for-sale -- (9,627)
Common stock repurchased
(415,497 shares) -- (16,184)
Cash dividends declared and paid
on common stock -- (2,276)
Exercise of stock options and
related tax benefit -- 4,357
Amortization relating to allocation
of ESOP stock and earned portion
of RRP stock and related tax benefit 738 3,859
------- ---------
Balance at March 31, 1997 $(5,450) $ 584,392
======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
ASTORIA FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,434 $ 14,718
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of net deferred loan origination
fees, discounts and premiums (1,075) (1,275)
Provision for (recovery of) loan and real estate losses 564 (875)
Depreciation and amortization 1,627 1,351
Net gain on sales of securities and loans (378) (762)
Amortization of excess of cost over fair value
of net assets acquired 2,110 2,171
Allocated and earned shares from ESOP and RRPs 3,052 2,452
(Increase) decrease in accrued interest receivable (615) 1,679
Increase in mortgage escrow funds 10,329 6,759
Net changes in other assets, accrued expenses
and other liabilities 5,332 (5,488)
--------- -----------
Total adjustments 20,946 6,012
--------- -----------
Net cash provided by operating activities 36,380 20,730
--------- -----------
Cash flows from investing activities:
Loan originations (182,423) (98,205)
Loan purchases through third parties (35,967) (40,295)
Bulk loan purchases -- (54,592)
Principal repayments on loans 86,551 82,213
Principal payments on mortgage-backed and mortgage-related
securities held-to-maturity and available-for-sale 104,946 134,680
Purchases of mortgage-backed and mortgage-related securities
held-to-maturity and available-for-sale (282,190) (237,484)
Purchases of other securities (211,175) (112,379)
Proceeds from maturities of other securities
and redemption of FHLB-NY stock 115,214 50,197
Proceeds from sale of securities and loans 3,110 83,829
Proceeds from sale of real estate owned 2,740 7,387
Proceeds from sales, net of costs and advances,
related to investments in real estate (15) 799
Purchases of premises and equipment, net of proceeds from sales (1,636) (1,654)
--------- -----------
Net cash used in investing activities (400,845) (185,504)
--------- -----------
Cash flows from financing activities:
Net (decrease) increase in deposits (18,988) 43,743
Net increase in reverse repurchase agreements 450,000 136,671
Payments of FHLB of New York advances (21,000) (70,000)
Costs to repurchase common stock (16,184) (18,151)
Cash dividends paid to stockholders (2,276) (2,198)
Cash received for options exercised, net of loss on issuance
of treasury stock 2,182 216
--------- -----------
Net cash provided by financing activities 393,734 90,281
--------- -----------
Net increase (decrease) in cash and cash equivalents 29,269 (74,493)
Cash and cash equivalents at beginning of period 74,923 133,869
--------- -----------
Cash and cash equivalents at end of period $ 104,192 $ 59,376
========= =========
Supplemental disclosures:
Cash paid during the year:
Interest $ 77,409 $ 68,084
========= =========
Income taxes $ 1,189 $ 1,160
===== =====
Additions to real estate owned $ 3,141 $ 2,674
===== =====
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 7
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Astoria Financial Corporation (the Company) and its wholly-owned subsidiary,
Astoria Federal Savings and Loan Association (the Association) and the
Association's wholly-owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
condition as of March 31, 1997 and December 31, 1996 and its results of
operations and cash flows for the three months ended March 31, 1997 and 1996
and stockholders' equity for the three months ended March 31, 1997. In
preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities of
the consolidated statements of financial condition as of March 31, 1997 and
December 31, 1996 and amounts of revenues and expenses of the results of
operations for the three month periods ended March 31, 1997 and 1996. The
results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results of operations to be expected for the
remainder of the year. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission.
These consolidated financial statements should be read in conjunction with the
December 31, 1996 audited consolidated financial statements, interim financial
statements and notes thereto of the Company.
2. EARNINGS PER SHARE
Primary and fully diluted earnings per share ("EPS") are computed by dividing
net income by the weighted-average number of common stock and common stock
equivalents outstanding during this year.
For the primary EPS calculation, the weighted-average number of shares of
common stock and common stock equivalents outstanding includes the average
number of shares of common stock outstanding adjusted for the weighted average
number of unallocated shares held by the Employee Stock Ownership Plan
("ESOP") and the Recognition and Retention Plans ("RRPs") and the dilutive
effect of unexercised stock options using the treasury stock method.
For the fully diluted EPS calculation, the weighted average number of shares
of common stock and common stock equivalents includes the same components used
in the primary earnings per share calculation; however, the maximum dilutive
effect for unexercised stock options is computed using the period-end market
price of the Company's common stock if it is higher than the average market
price used in calculating primary earnings per share.
3. CASH EQUIVALENTS
For the purpose of reporting cash flows, cash and cash equivalents include
cash and due from banks and federal funds sold with original maturities of
three months or less, which in the aggregate amounted to $104,192,000 and
$59,376,000 at March 31, 1997 and 1996, respectively.
4. STOCK SPLIT
On April 17, 1996, the Company's Board of Directors approved a two-for-one
stock split, in the form of a 100% stock dividend, which was paid on June 3,
1996. Accordingly, all capital accounts, shares and per share data have been
restated for all reported periods to reflect the stock split.
6
<PAGE> 8
5. IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No. 128"). SFAS No. 128 specifies the computation, presentation, and
disclosure requirements for earnings per share ("EPS") for entities with
publicly held common stock or potential common stock. This statement
simplifies the standards for computing EPS previously found in Accounting
principles Board Opinion No. 15 ("APB No. 15"). It replaces the presentation
of primary EPS with a presentation of basic EPS and the presentation of fully
diluted EPS with a presentation of diluted EPS. Basic EPS is computed by
dividing net income 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. SFAS No. 128 is
effective for financial statements issued for periods ending after December
15, 1997 and requires restatement of all prior-period EPS data presented.
Upon adoption of SFAS No. 128, the change from primary EPS to basic EPS will
result in a modest increase in this EPS presentation, but will not result in a
material change in the EPS presentation from fully diluted to diluted EPS.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-Q may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, changes in general, economic and market, and
legislative and regulatory conditions, and the development of an interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments.
GENERAL
Astoria Financial Corporation (the "Company") was incorporated on June 14,
1993, and is holding company for Astoria Federal Savings and Loan Association
("the Association"). The Company is headquartered in Lake Success, New York and
its principal business currently consists of the operation of its wholly-owned
subsidiary, the Association. The Association's primary business is attracting
retail deposits from the general public and investing those deposits, together
with funds generated from operations, principal repayments and borrowed funds,
primarily in one-to-four family residential mortgage loans, mortgage-backed and
mortgage-related securities and, to a lesser extent, commercial real estate
loans, multi-family mortgage loans and consumer loans. In addition, the
Association invests in securities issued by the U.S. Government and federal
agencies and other securities. The Company had no operations prior to November
18, 1993, the date on which the Association completed its conversion from mutual
to stock form of ownership.
The Company's results of operations are dependent primarily on its net
interest income, which is the difference between the interest earned on its
assets, primarily its loan and securities portfolios, and its cost of funds,
which consists of the interest paid on its deposits and borrowings. The
Company's net income also is affected by its provision for loan losses as well
as non-interest income, general and administrative expense, other non-interest
expense, and income tax expense. General and administrative expense consists of
compensation and benefits, occupancy, equipment and systems expense, federal
deposit insurance premium, advertising and other operating expenses. Other
non-interest expense generally consists of real estate operations, net,
provision for real estate losses and amortization of excess of cost over fair
value of net assets acquired. The earnings of the Company are also significantly
affected by general economic and competitive conditions, particularly changes in
market interest rates and U.S. Treasury yield curves, government policies and
actions of regulatory authorities.
7
<PAGE> 9
PROPOSED ACQUISITION
On March 29, 1997 the Company entered into a definitive agreement pursuant
to which the Company agreed to acquire The Greater New York Savings Bank (the
"Greater"), with Greater ultimately merging with the Association. Greater is a
$2.5 billion New York State chartered stock savings bank. The definitive
agreement is subject to approval of the shareholders of both the Company and
Greater, approval of the appropriate regulatory authorities, and the
satisfaction of certain other conditions. Under the terms of the definitive
agreement, holders of the Greater common stock will receive either 0.50 shares
of the Company's common stock or $19.00 in cash for each share, pursuant to an
election procedure as described in the agreement, subject to 75% of the Greater
shares exchanged for the Company's common stock and 25% exchanged for cash. The
total transaction value is estimated to be $293 million. In addition, the
2,000,000 shares of the Greater 12% Noncumulative Preferred Stock, Series B will
be exchanged for shares of a newly created series of preferred stock of the
Company having substantially identical and no less favorable terms. The
transaction is expected to close in the third quarter of 1997. See Item
6-Exhibits and Reports on Form 8-K.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of funds is cash provided by investing
activities and includes principal and interest payments on loans and
mortgage-backed, mortgage-related and other securities. During the first quarter
of 1997 and 1996, principal payments on loans and mortgage-backed and
mortgage-related securities totaled $191.5 million and $216.9 million,
respectively. The Company's other sources of funds are provided by operating and
financing activities. Cash provided from operating activities during the first
quarter of 1997 and 1996 totaled $36.4 million and $20.7 million, respectively,
of which $15.4 million and $14.7 million, respectively, represented net income
of the Company. The net increases in borrowings and deposits during the first
quarter of 1997 and 1996 totaled $410.0 million and $110.4 million,
respectively. The Company's primary uses of funds in its investing activities
are for the purchase and origination of loans and the purchase of
mortgage-backed, mortgage-related and other securities. During the first quarter
of 1997 and 1996, the Company's purchases and originations of loans totaled
$218.4 million and $193.1 million, respectively, and purchases of
mortgage-backed, mortgage-related and other securities totaled $493.4 million
and $349.9 million, respectively.
The Association is required to maintain an average daily balance of liquid
assets and short-term liquid assets as a percentage of net withdrawable deposit
accounts plus short-term borrowings as defined by the regulations of the Office
of Thrift Supervision (OTS). The minimum required liquidity and short-term
liquidity ratios are currently 5% and 1%, respectively. The Association's
liquidity ratios were 6.28% and 8.60% at March 31, 1997 and December 31, 1996,
respectively, while its short-term liquidity ratios were 3.27% and 3.76% at
March 31, 1997 and December 31, 1996, respectively. In the normal course of its
business, the Association routinely enters into various commitments, primarily
relating to the origination and purchase of loans and the leasing of certain
office facilities. The Association anticipates that it will have sufficient
funds available to meet its current commitments in the normal course of its
business.
Stockholders' equity totaled $584.4 million at March 31, 1997 compared to
$588.8 million at December 31, 1996, reflecting the Company's earnings for the
quarter, the amortization of the unallocated portion of shares held by the
Employee Stock Ownership Plan (ESOP) and the unearned portion of shares held by
the Recognition and Retention Plans (RRPs) and related tax benefit, the effect
of the treasury stock purchases, the effect of exercises of stock options and
related tax benefit, dividends paid on common stock and the change in the net
unrealized (losses) gains on securities, net of taxes.
Tangible stockholders' equity (stockholders' equity less the excess of cost
over fair value of net assets acquired ("goodwill")) totaled $486.2 million at
March 31, 1997 compared to $488.5 million at December 31, 1996. This decrease
reflects the change in the Company's stockholders' equity noted above, plus the
reduction in the balance of goodwill. Tangible equity is a critical measure of a
company's ability to repurchase shares, pay dividends and continue to grow. The
Association is subject to various capital requirements which affect its
classification for safety and soundness purposes, as well as for deposit
insurance purposes. These requirements utilize tangible equity as a base
component, not equity as defined by generally accepted accounting principles
("GAAP"). Although reported earnings and return on equity are traditional
measures of a company's performance, management believes that the growth in
tangible equity, or "cash earnings" is also a significant measure of a company's
performance. Cash earnings include
8
<PAGE> 10
reported earnings plus the non-cash charges for goodwill amortization and
amortization relating to certain employee stock plans and related tax benefit.
These items have either been previously charged to equity, as in the case of
ESOP and RRP charges, through contra-equity accounts, or do not affect tangible
equity, such as the market appreciation of allocated ESOP shares, for which the
operating charge is offset by a credit to additional paid-in capital, and
goodwill amortization for which the related intangible asset has already been
deducted in the calculation of tangible equity. Management believes that cash
earnings and cash returns on average tangible equity reflect the Company's
ability to generate tangible capital that can be leveraged for future growth.
See pages 20 and 21.
On November 26, 1996, the Board of Directors of the Company approved the
Company's fifth stock repurchase plan authorizing the purchase, at the
discretion of management, of up to 2,500,000 shares of the Company's outstanding
common stock, over a two year period, in open-market or privately negotiated
transactions. During the first quarter of 1997, the Company repurchased 415,497
common shares of the Company's common stock for an aggregate cost of $16.2
million, bringing the total number of common shares purchased under this plan to
490,497 shares at an aggregate cost of $18.8 million. At March 31, 1997, the
Company's cumulative total of treasury shares was 5,119,094 at an aggregate cost
of $103.8 million.
On March 3, 1997, the Company paid a quarterly cash dividend equal to $0.11
per share on 21,335,850 shares of common stock outstanding as of the close of
business on February 15, 1997, aggregating $2.3 million. On April 16, 1997, the
Company declared a quarterly cash dividend of $0.15 per share payable on June 2,
1997 to shareholders of record as of the close of business on May 15, 1997
aggregating $3.2 million.
At the time of conversion from mutual to stock form of ownership, the
Association was required to establish a liquidation account equal to its capital
as of June 30, 1993. As part of the acquisition of Fidelity New York, F.S.B.
("Fidelity"), the Association established a similar liquidation account equal to
the remaining liquidation account balance previously maintained by Fidelity.
These liquidation accounts will be reduced to the extent that eligible account
holders reduce their qualifying deposits. In the unlikely event of a complete
liquidation of the Association, each eligible account holder will be entitled to
receive a distribution from the liquidation account. The Association is not
permitted to declare or pay dividends on its capital stock, or repurchase any of
its outstanding stock, if the effect thereof would cause its stockholder's
equity to be reduced below the amount required for the liquidation account or
applicable regulatory capital requirements. As of March 31, 1997, the
Association's total capital exceeded the amount of the combined liquidation
accounts, and also exceeded all of its regulatory capital requirements with
tangible and core ratios of 5.43% and a risk-based capital ratio of 15.78%. The
respective minimum regulatory requirements were 1.50%, 3.00% and 8.00%.
During the first quarter of 1997, the Association created a new operating
subsidiary, Astoria Preferred Funding Corporation, a real estate investment
trust, which may, among other things, be utilized by the Association to raise
capital in the future and provides certain current financial benefits. Upon
formation of Astoria Preferred Funding Corporation, the Association transferred
approximately $1.6 billion of mortgage loans to this subsidiary.
INTEREST RATE SENSITIVITY ANALYSIS
The Company's net interest income, the primary component of its net income,
is subject to substantial risk due to changes in interest rates or changes in
market yield curves, particularly if there is a substantial variation in the
timing between the repricing of its assets and the liabilities which fund them.
The Company seeks to manage this risk by monitoring and controlling the
variation in repricing intervals between its assets and liabilities.
The matching of the repricing characteristics of assets and liabilities may
be analyzed by examining the extent to which such assets and liabilities are
"interest rate sensitive" and by monitoring an institution's interest rate
sensitivity "gap." An asset or liability is said to be interest rate sensitive
within a specific time period if it will mature or reprice, either by
contractual terms or based upon certain assumptions made by management, within
that time period. The interest rate sensitivity gap is defined as the difference
between the amount of interest-earning assets anticipated to mature or reprice
within a specific time period and the amount of interest-bearing liabilities
anticipated to mature or reprice within that same time period.
9
<PAGE> 11
At March 31, 1997, the Company's net interest-earning assets maturing or
repricing within one year exceeded interest-bearing liabilities maturing or
repricing within the same time period by $1.5 billion, representing a positive
cumulative one-year gap of 19.1% of total assets. This compares to net
interest-earning assets maturing or repricing within one year exceeding
interest-bearing liabilities maturing or repricing within the same time period
by $1.3 billion, representing a positive cumulative one-year gap of 17.9% of
total assets at December 31, 1996. Included in interest-earning assets repricing
or maturing in one year or less are mortgage-backed, mortgage-related and other
securities available-for-sale. If those securities, at March 31, 1997, were
classified according to repricing periods based on their estimated prepayments
and maturities, interest-bearing liabilities maturing or repricing within one
year would have exceeded net interest-earning assets maturing or repricing
within the same time period by $101.0 million, representing a negative
cumulative one-year gap of 1.3% of total assets. Using this method, at December
31, 1996, interest-bearing liabilities maturing or repricing within one year
would have exceeded net interest-earning assets maturing or repricing within the
same time period by $31.7 million, representing a negative cumulative one-year
gap of 0.44% of total assets.
The Company, from time to time, in an attempt to further reduce volatility
in its earnings caused by changes in interest rates will enter into financial
derivative agreements with third parties. During the second quarter of 1995, the
Company entered into an interest rate swap with a notional amount of $50.0
million, the effect of which was to convert a medium term $50.0 million
borrowing, with a variable rate equal to the three month LIBOR, to a fixed rate
borrowing equal to 6.632%, by agreeing, within the interest rate swap agreement,
to pay a fixed rate of interest equal to 6.632% and receive the three month
LIBOR. The agreement matured on April 21, 1997, the same date as the borrowing.
Additionally, the Company has purchased various callable debt securities and has
entered into callable reverse repurchase agreements.
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at March 31, 1997, which are
anticipated by the Company, using certain assumptions based on its historical
experience and other data available to management, to reprice or mature in each
of the future time periods shown. The table includes $234.4 million of debt
securities and $550.0 million of borrowings, classified according to their
maturity dates, which are callable within one year. This table does not
necessarily indicate the impact of general interest rate movements on the
Company's net interest income because the actual repricing dates of various
assets and liabilities is subject to customer discretion and competitive and
other pressures. The duration of mortgage-backed and mortgage-related securities
can be significantly impacted by changes in mortgage prepayment rates.
Prepayment rates will vary due to a number of factors, including the regional
economy in the area where the underlying mortgages were originated, seasonal
factors, demographic variables, and the assumability of the underlying
mortgages. However, the largest determinant of prepayment rates are prevailing
interest rates and related mortgage refinancing opportunities. Therefore, actual
experience may vary from that indicated. In addition, the available-for-sale
securities may or may not be sold, or effectively repriced, since that activity
is subject to management's discretion.
10
<PAGE> 12
<TABLE>
<CAPTION>
At March 31, 1997
More Than More Than
One Year Three Years
One Year to to More than
or Less(1) Three Years (1) Five Years Five Years (1) Total
------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans (2) $ 840,721 $ 581,025 $ 491,293 $ 780,540 $2,693,579
Consumer and other loans (2) 43,958 12,198 -- -- 56,156
Federal funds sold and
repurchase agreements 81,518 -- -- -- 81,518
Mortgage-backed, mortgage-related
and other securities available-for-sale 2,430,970 -- -- -- 2,430,970
Mortgage-backed and mortgage-
related securities held-to-maturity 363,888 192,835 176,329 595,696 1,328,748
Other securities held-to-maturity 55,200 12,340 25,800 700,030 793,370
------------------------------------------------------------------------------
Total interest-earning assets 3,816,255 798,398 693,422 2,076,266 7,384,341
Less:
Unearned discount, premium
and deferred fees (3) 1,677 913 827 2,640 6,057
------------------------------------------------------------------------------
Net interest-earning assets 3,814,578 797,485 692,595 2,073,626 7,378,284
------------------------------------------------------------------------------
Interest-bearing liabilities:
Savings 170,400 288,000 240,000 438,666 1,137,066
NOW 20,952 13,968 10,476 24,444 69,840
Money market and money manager 150,840 150,840 100,560 100,551 502,791
Certificates of deposit 1,465,498 964,242 281,028 -- 2,710,768
Borrowed funds 540,477 1,590,000 400,000 10,000 2,540,477
------------------------------------------------------------------------------
Total interest-bearing liabilities 2,348,167 3,007,050 1,032,064 573,661 6,960,942
------------------------------------------------------------------------------
Interest sensitivity gap $1,466,411 $(2,209,565) $ (339,469) $1,499,965 $ 417,342
==============================================================================
Cumulative interest sensitivity gap $1,466,411 $ (743,154) $(1,082,623) $ 417,342 --
==============================================================================
Cumulative interest sensitivity gap
as a percentage of total assets 19.07% (9.66)% (14.08)% 5.43%
Cumulative net interest-earning assets
as a percentage of interest-bearing liabilities 162.45% 86.12% 83.05% 106.00%
</TABLE>
(1) For purposes of this analysis, $234.4 million of debt and
mortgage-related securities and $550.0 million of borrowings, which are
callable within one year, are classified above according to their
contractual maturity dates (primarily in the more than five year
category for debt and mortgage-related securities and the more than one
year to three year category for borrowings).
(2) For purposes of this analysis, mortgage, consumer and other loans
exclude non-performing loans, but are not reduced for the allowance for
loan losses.
(3) For purposes of this analysis, unearned discount, premium and deferred
fees are prorated.
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar contractual maturities or periods to repricing, they may react in
different ways to changes in market interest rates. Additionally, certain
assets, such as ARM loans, have features which restrict changes in interest
rates on a short-term basis and over the life of the asset. Further, in the
event of a change in interest rates, prepayment and early withdrawal levels
would likely deviate significantly from those assumed in calculating the table.
Finally, the ability of borrowers to service their ARM loans or other loan
obligations may decrease in the event of an interest rate increase. The table
reflects the estimates of management as to periods to repricing at a particular
point in time. Among the factors considered, are current trends and historical
repricing experience with respect to similar products. For example, the Company
has a number of deposit accounts, including savings, NOW and money market
accounts which, subject to certain regulatory exceptions not relevant here, may
be withdrawn at any time. The Company, based upon its historical experience,
assumes that while all customers in these account categories could withdraw
their funds on any given day, they will not do so, even if market interest rates
were to change. As a result, different assumptions may be used at different
points in time.
11
<PAGE> 13
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. The
following table sets forth certain information relating to the Company for the
quarters ended March 31, 1997 and 1996. Yields and costs are derived by dividing
income or expense by the average balance of related assets or liabilities,
respectively, for the periods shown, and annualized, except where noted
otherwise. This table should be analyzed in conjunction with management's
discussion of the comparison of operating results for the quarters ended March
31, 1997 and 1996.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
----------------------------------------------------------------------------
1997 1996
--------------------------------------- ----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
ASSETS: BALANCE INTEREST COST BALANCE INTEREST COST
--------------------------------------- ---------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans $2,650,825 $ 52,554 7.93% $2,056,596 $42,524 8.27%
Consumer and other loans 57,884 1,446 9.99 60,701 1,525 10.05
Mortgage-backed and mortgage-
related securities (1) 3,484,577 58,925 6.76 3,677,625 62,916 6.84
Federal funds sold and
repurchase agreements 66,054 868 5.26 77,577 1,055 5.44
Other securities (1) 881,650 15,280 6.93 492,579 7,814 6.35
---------- ------- ---------- --------
Total interest-earning assets 7,140,990 129,073 7.23 6,365,078 115,834 7.28
------- -------
Non-interest-earning assets 265,230 279,356
---------- ----------
Total assets $7,406,220 $6,644,434
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings $1,131,899 7,159 2.53% $1,151,797 7,285 2.53%
Certificates of deposit 2,732,022 36,591 5.36 2,574,340 35,325 5.49
NOW (2) 70,873 221 1.25 222,752 1,125 2.02
Money manager (2) 199,060 617 1.24 36,494 185 2.03
Money market 279,628 2,971 4.25 225,680 2,121 3.76
Borrowed funds 2,262,495 32,058 5.67 1,727,286 25,059 5.80
--------- ------ --------- ------
Total interest-bearing liabilities 6,675,977 79,617 4.77 5,938,349 71,100 4.79
------ ------
Non-interest-bearing liabilities 143,168 116,460
------- -------
Total liabilities 6,819,145 6,054,809
Stockholders' equity 587,075 589,625
------- -------
Total liabilities and stockholders' equity $7,406,220 $6,644,434
========== ==========
Net interest income/net interest rate spread (3) $49,456 2.46% $44,734 2.49%
======= ==== ======= ====
Net interest-earning assets/net interest margin (4) $ 465,013 2.77% $ 426,729 2.81%
========== ==== ========== ====
Ratio of interest-earning assets to interest-
bearing liabilities 1.07x 1.07x
==== ====
</TABLE>
(1) Securities available-for-sale are reported at average amortized cost.
(2) During March 1996, the Company implemented a program which converted
certain NOW accounts to money manager accounts. This program has no affect
on the Company's depositors, but has provided additional investable funds
to the Company by substantially reducing the reserve balances required to
be maintained at the Federal Reserve Bank of New York.
(3) Net interest rate spread represents the difference between the average
yield on average interest-earning assets and the average cost of average
interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average
interest-earning assets.
12
<PAGE> 14
RATE/VOLUME ANALYSIS
The following table presents the extent to which changes in interest rates
and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Company's interest income and interest expense
during the periods indicated. Information is provided in each category with
respect to (i) changes attributable to changes in volume (changes in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate multiplied by prior volume), and (iii) the net change. The changes
attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate.
<TABLE>
<CAPTION>
Quarter Ended March 31, 1997
Compared to
Quarter Ended March 31, 1996
----------------------------
Increase (Decrease)
-------------------
Volume Rate Net
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Interest-earning assets:
Mortgage loans .................. $ 11,841 $(1,811) $ 10,030
Consumer and other loans ........ (70) (9) (79)
Mortgage-backed and mortgage-
related securities ........... (3,264) (727) (3,991)
Federal funds sold and repurchase
agreements ................... (153) (34) (187)
Other securities ................ 6,692 774 7,466
-------- ------- --------
Total .................... 15,046 (1,807) 13,239
-------- ------- --------
Interest-bearing liabilities:
Savings ......................... (126) -- (126)
Certificates of deposit ......... 2,120 (854) 1,266
NOW ............................. (580) (324) (904)
Money manager ................... 530 (98) 432
Money market .................... 550 300 850
Borrowed funds .................. 7,573 (574) 6,999
-------- ------- --------
Total .................... 10,067 (1,550) 8,517
-------- ------- --------
Net change in net interest
income ....................... $ 4,979 $ (257) $ 4,722
======== ======= ========
</TABLE>
13
<PAGE> 15
ASSET QUALITY
One of the Company's key operating objectives has been and continues to
be to obtain and maintain a high level of asset quality. Through a variety of
strategies, including, but not limited to, borrower workout arrangements and
aggressive marketing of owned properties, the Company has been proactive in
addressing problem and non-performing assets which, in turn, has helped to build
the strength of the Company's financial condition. Such strategies, as well as
the Company's concentration on one-to-four family mortgage lending and
maintaining sound credit standards for new loan originations, have resulted in a
reduction in non-performing assets of $5.5 million, which was primarily from
non-performing loans. The following tables show a comparison of delinquent loans
and non-performing assets as of March 31, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
DELINQUENT LOANS
----------------
AT MARCH 31, 1997 AT DECEMBER 31, 1996
----------------- --------------------
60-89 DAYS 90 DAYS OR MORE 60-89 DAYS 90 DAYS OR MORE
------------------- ------------------ ---------------- --------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL
OF BALANCE OF BALANCE OF BALANCE OF BALANCE
LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS
----- -------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
One-to-four family...... 49 $2,629 242 $20,541 73 $3,901 276 $25,098
Multi-family............ 2 664 15 4,351 6 1,226 13 3,651
Commercial real estate . 2 1,230 7 1,975 2 823 13 3,301
Construction and land... - - 3 244 - - 4 251
Consumer and other loans 81 592 91 1,194 52 337 92 1,159
--- ------ ---- ------- ---- - ------- --- --------
Total delinquent loans 134 $5,115 358 $28,305 133 $6,287 398 $33,460
=== ====== ==== ======= ==== ====== ==== =======
Delinquent loans to total
loans.................. 0.18% 1.02% 0.24% 1.26%
</TABLE>
14
<PAGE> 16
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
AT AT
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
Non-accrual delinquent mortgage loans (1) ....... $21,903 $24,905
Non-accrual delinquent consumer
and other loans ............................ 1,194 1,159
Mortgage loans delinquent 90 days or more (2) ... 5,208 7,396
------- -------
Total non-performing loans ................. 28,305 33,460
------- -------
Real estate owned, net (3) ...................... 7,045 7,421
Investment in real estate, net (4) .............. 4,723 4,708
------- -------
Total real estate owned and investment
in real estate, net ...................... 11,768 12,129
------- -------
Total non-performing assets ..................... $40,073 $45,589
======= =======
Allowance for loan losses to non-performing loans 49.55% 42.11%
Allowance for loan losses to total loans ........ 0.50% 0.53%
</TABLE>
(1) Total non-accrual delinquent mortgage loans include 12.0% and 3.8% of
mortgage loans secured by other than one-to-four family properties at
March 31, 1997 and December 31, 1996, respectively.
(2) Loans delinquent 90 days or more and still accruing interest consist
solely of loans delinquent 90 days or more as to their maturity date but
not their interest payments, and are primarily secured by multi-family
and commercial loans.
(3) Real estate acquired by the Company as a result of foreclosure or by
deed-in-lieu of foreclosure is recorded at the lower of cost or fair
value less estimated costs to sell.
(4) Investment in real estate is recorded at the lower of cost or fair value.
15
<PAGE> 17
The following table sets forth the composition of the Company's loan portfolio
at March 31, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
At March 31, At December 31,
1997 1996
--------------------------- -----------------------
Percent Percent
of of
Amount Total Amount Total
------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
MORTGAGE LOANS:
One-to-four family.......................... $2,368,991 85.28% $2,259,409 85.18%
Multi-family................................ 182,106 6.55 166,836 6.29
Commercial real estate .................... 159,381 5.74 158,100 5.96
Construction and land...................... 10,212 0.37 10,129 0.38
---------- ------ ---------- -----
Total mortgage loans..................... 2,720,690 97.94 2,594,474 97.81
---------- ------ ---------- -----
CONSUMER AND OTHER LOANS:
Home equity ................................ 34,130 1.23 34,895 1.32
Passbook ................................... 3,913 0.14 4,022 0.15
Credit card ................................ 8,029 0.29 8,431 0.32
Other ...................................... 11,278 0.40 10,761 0.40
----------- ------- ------------ -------
Total consumer and other loans........... 57,350 2.06 58,109 2.19
----------- ------- ------------ -------
Total loans.............................. 2,778,040 100.00% 2,652,583 100.00%
---------- ======= ---------- =======
LESS:
Unearned discount, premium and
deferred loan fees, net.................. (478) (1,167)
Allowance for loan losses .................. (14,024) (14,089)
---------- ----------
Total loans, net......................... $2,763,538 $2,637,327
========== ==========
</TABLE>
16
<PAGE> 18
SECURITIES PORTFOLIO
The following tables set forth the amortized cost and estimated fair values of
mortgage-backed, mortgage-related and other securities available-for-sale and
held-to-maturity at March 31, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
At March 31, 1997
-----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(In Thousands)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
Mortgage-backed and mortgage-related securities:
GNMA certificates ......................... $ 228,598 $ 2,427 $ (2,823) $ 228,202
FHLMC certificates ........................ 338,198 869 (6,723) 332,344
FNMA certificates ......................... 44,240 31 (606) 43,665
REMICs:
Agency issuance ....................... 1,295,013 2,074 (19,929) 1,277,158
Private issuance ...................... 13,937 -- (282) 13,655
Residuals ............................. 1,535 608 (43) 2,100
Other mortgage-related .................... 374,924 7,096 (610) 381,410
---------- ------- -------- ----------
Total mortgage-backed and
mortgage-related securities ....... 2,296,445 13,105 (31,016) 2,278,534
---------- ------- -------- ----------
Other securities:
Obligations of the U.S. ...................
Government and agencies ................. 83,748 -- (1,922) 81,826
Equity securities ......................... 67,253 3,292 -- 70,545
Other ..................................... 66 -- (1) 65
---------- ------- -------- ----------
Total other securities ................ 151,067 3,292 (1,923) 152,436
---------- ------- -------- ----------
Total Available-for-Sale ......................... $2,447,512 $16,397 $(32,939) $2,430,970
========== ======= ======== ==========
HELD-TO-MATURITY:
Mortgage-backed and mortgage-related securities:
GNMA certificates ......................... $ 83,006 $ 2,704 $ (148) $ 85,562
FHLMC certificates ........................ 26,325 715 (167) 26,873
FNMA certificates ......................... 21,552 56 (988) 20,620
CMOs ...................................... 4,564 53 (25) 4,592
REMICs:
Agency issuance ....................... 950,774 949 (18,355) 933,368
Private issuance ...................... 237,550 -- (8,452) 229,098
Other mortgage-related .................... 293 -- -- 293
---------- ------- -------- ----------
Total mortgage-backed and
mortgage-related securities ....... 1,324,064 4,477 (28,135) 1,300,406
---------- ------- -------- ----------
Other securities:
Obligations of the U.S. ...................
Government and agencies ................. 695,747 55 (15,247) 680,555
Obligations of states and
political subdivisions .................. 50,877 -- (102) 50,775
Corporate debt securities ................. 10,051 -- (29) 10,022
---------- ------- -------- ----------
Total other securities ............ 756,675 55 (15,378) 741,352
---------- ------- -------- ----------
Total Held-to-Maturity ........................... $2,080,739 $ 4,532 $(43,513) $2,041,758
========== ======= ======== ==========
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
At December 31, 1996
--------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(In Thousands)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
Mortgage-backed and mortgage-related securities:
GNMA certificates $ 235,751 $ 2,256 $ (1,319) $ 236,688
FHLMC certificates 262,044 1,338 (1,785) 261,597
FNMA certificates 46,364 69 (319) 46,114
REMICs:
Agency issuance 1,142,349 4,225 (11,952) 1,134,622
Private issuance 14,307 -- (146) 14,161
Residuals 1,457 924 (102) 2,279
Other mortgage-related 398,014 7,340 (439) 404,915
---------- ------- -------- ----------
Total mortgage-backed and
mortgage-related securities 2,100,286 16,152 (16,062) 2,100,376
---------- ------- -------- ----------
Other securities:
Obligations of the U.S.
Government and agencies 128,999 57 (1,454) 127,602
Equity securities 66,959 1,662 (1) 68,620
Other 67 -- (3) 64
---------- ------- -------- ----------
Total other securities 196,025 1,719 (1,458) 196,286
---------- ------- -------- ----------
Total Available-for-Sale $2,296,311 $17,871 $(17,520) $2,296,662
========== ======= ======== ==========
HELD-TO-MATURITY:
Mortgage-backed and mortgage-related securities:
GNMA certificates $ 86,733 $ 3,795 $ (73) $ 90,455
FHLMC certificates 28,189 1,021 (16) 29,194
FNMA certificates 22,044 75 (611) 21,508
CMOs 6,450 61 (60) 6,451
REMICs:
Agency issuance 936,692 2,315 (12,912) 926,095
Private issuance 241,154 125 (6,326) 234,953
Other mortgage-related 351 -- -- 351
---------- ------- -------- ----------
Total mortgage-backed and
mortgage-related securities 1,321,613 7,392 (19,998) 1,309,007
---------- ------- -------- ----------
Other securities:
Obligations of the U.S.
Government and agencies 578,293 1,810 (3,813) 576,290
Obligations of states and
political subdivisions 51,063 -- (81) 50,982
Corporate debt securities 10,046 22 (2) 10,066
---------- ------- -------- ----------
Total other securities 639,402 1,832 (3,896) 637,338
---------- ------- -------- ----------
Total Held-to-Maturity $1,961,015 $ 9,224 $(23,894) $1,946,345
========== ======= ======== ==========
</TABLE>
18
<PAGE> 20
COMPARISON OF FINANCIAL CONDITION AS OF
MARCH 31, 1997 AND DECEMBER 31, 1996
AND OPERATING RESULTS FOR THE QUARTERS ENDED
MARCH 31, 1997 AND 1996
FINANCIAL CONDITION
Total assets increased $416.6 million, to $7.7 billion at March 31,1997,
from $7.3 billion at December 31, 1996. This increase was primarily due to
increases in the mortgage loan and mortgage-backed, mortgage-related and other
securities portfolios. For the first quarter of 1997, purchases of
mortgage-backed, mortgage-related and other securities totaled $493.4 million,
compared to $349.9 million for the first quarter of 1996. Gross mortgage loans
originated and purchased during the first quarter of 1997 totaled $210.1
million, of which $174.3 were originations and $35.8 million were purchases.
This compares to $91.9 million of originations and $94.1 million of purchases
for a total of $186.0 million during the first quarter of 1996. The growth in
these portfolios was funded primarily through additional medium-term reverse
repurchase agreements, which increased $450.0 million, to $2.3 billion at March
31, 1997, from $1.8 billion at December 31, 1996.
Stockholders' equity decreased to $584.4 million at March 31, 1997 from
$588.8 million at December 31, 1996, which reflects repurchases of common stock
of $16.2 million, the change in unrealized gains (losses) on securities, net of
taxes, of $9.6 million and dividends paid of $2.3 million, offset by net income
of $15.4 million, the amortization relating to the allocation of ESOP stock and
earned portion of RRP stock and related tax benefit of $3.9 million and the
effect of stock options exercised and related tax benefit of $4.4 million.
RESULTS OF OPERATIONS
GENERAL
Net income increased 4.9%, to $15.4 million, or $0.72 per share, for the
first three months of 1997, from $14.7 million, or $0.68 per share, for the
comparable period in 1996. Net income for the first quarter of 1996 includes
$2.9 million, after tax, of non-recurring recoveries relating to real estate
operations. Excluding these recoveries, net income increased $3.6 million, or
31.1%, and EPS increased from $0.55 to $0.72, or 30.9%, from the first quarter
of 1996 to the first quarter of 1997. The return on average assets decreased
from 0.89% for the three months ended March 31, 1996 to 0.83% for the three
months ended March 31, 1997. This decrease was a result of asset growth where
average assets increased $761.8 million from $6.6 billion for the first quarter
of 1996 to $7.4 billion for the first quarter of 1997. The return on average
equity for the three months ended March 31, 1997 and 1996 were 10.52% and 9.98%,
respectively. The return on average tangible equity increased to 12.65% for the
first quarter of 1997 from 12.22% for the first quarter of 1996. The increases
in both the return on average equity and the return on average tangible equity
were primarily the result of the increase in net income. Excluding the
non-recurring recoveries in 1996, the returns on average assets, average equity
and average tangible equity were 0.71%, 7.99% and 9.78%, respectively.
NET INTEREST INCOME
Net interest income increased $4.8 million, or 10.6%, from $44.7
million in the first quarter of 1996 to $49.5 million in the first quarter of
1997. The increase is due to the growth in total average interest-earning assets
of $775.9 million, concentrated in the mortgage loan portfolio, offset by an
increase in total average interest-bearing liabilities of $737.6 million. The
net interest margin decreased from 2.81% for the first quarter of 1996 to 2.77%
for the first quarter of 1997. The net interest spread also decreased slightly
from 2.49% in 1996 to 2.46% in 1997, which was the result of the decrease in the
average yield on total average interest-earning assets, from 7.28% in 1996 to
7.23% in 1997, partially offset by the decrease in the average cost of total
average interest-bearing liabilities, from 4.79% in 1996 to 4.77% in 1997.
19
<PAGE> 21
PROVISION FOR LOAN LOSSES
Provision for loan losses decreased from $522,000 for the first quarter
of 1996 to $500,000 for the comparable period in 1997. Despite continued
increases in the mortgage loan portfolio, non-performing loans decreased from
$33.5 million at December 31, 1996 to $28.3 million at March 31, 1997. The
reduction in non-performing loans continued to improve the Company's percentage
of allowance for loan losses to non-performing loans from 42.11% at December 31,
1996 to 49.55% at March 31, 1997. The allowance for loan losses decreased from
$14.1 million at December 31, 1996 to $14.0 million at March 31, 1997
reflecting, in part, net charge-offs of $565,000 during the three months ended
March 31, 1997.
NON-INTEREST INCOME
Non-interest income decreased slightly from $3.6 million for the first
quarter of 1996 to $3.5 million for the comparable period in 1997. Included in
non-interest income are net gains on sales of securities and loans which totaled
$378,000 for 1997 and $762,000 for 1996. The reduction in net gains on sales was
mostly offset by an increase of $363,000 in customer service and loan fees from
$2.1 million for the first quarter of 1996 to $2.4 million for the first quarter
of 1997.
NON-INTEREST EXPENSE
Non-interest expense increased $4.6 million, from $21.4 million for the
first quarter of 1996, to $26.0 million for the first quarter of 1997. Included
in non-interest expense for 1996 were $5.3 million, before taxes, of
non-recurring recoveries from gains on dispositions of real estate owned and
investments in real estate. Excluding these recoveries, non-interest expense
decreased $665,000. General and administrative expense decreased slightly, from
$23.9 million in 1996 to $23.8 million in 1997, primarily from the combined
effect of an increase in compensation and benefits of $943,000 and a decrease of
$1.7 million in Federal deposit insurance premium as a result of 1996
legislation to recapitalize the Savings Association Insurance Fund. The change
in compensation and benefits includes an increase of $921,000 from the
amortization relating to the allocation of ESOP stock due to a higher average
fair market value of the Company's stock.
INCOME TAX EXPENSE
Income tax expense decreased $658,000 from $11.6 million for the first
quarter of 1996 to $10.9 million for the comparable quarter in 1997. The
reduction in the Company's effective tax rate from 44.1% for the first quarter
of 1996 to 41.5% for the first quarter of 1997 is primarily attributed to
certain tax benefits associated with a wholly-owned subsidiary of the
Association.
CASH EARNINGS
Cash earnings for the first quarter of 1997 totaled $21.4 million, an
increase of $1.9 million over $19.5 million cash earnings for the first quarter
of 1996. Excluding the non-recurring recoveries in 1996, cash earnings increased
$4.8 million, or 29.2%, from $16.6 million for the first quarter of 1996.
Cash returns on average tangible equity and average assets for the
first quarter of 1997 were 17.55% and 1.16%, respectively, compared to 16.20%
and 1.17%, respectively, for the comparable 1996 period. Excluding the
non-recurring recoveries in 1996, the returns were 13.76% and 1.00%,
respectively.
Presented below are the Company's Consolidated Schedules of Cash
Earnings for the three months ended March 31, 1997 and 1996.
20
<PAGE> 22
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULES OF CASH EARNINGS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996 (4)
-------------- --------------
Reported Cash Report
Earnings (1) Adjustments Earnings Earnings (1)
-------- ----------- -------- --------
<S> <C> <C> <C> <C>
Total interest income $ 129,073 $ -- $ 129,073 $ 115,834
Total interest expense 79,617 -- 79,617 71,100
----------- ------------ --------- ---------
Net interest income 49,456 -- 49,456 44,734
Provision for loan losses 500 -- 500 522
----------- ------------ --------- ---------
Net interest income after
provision for loan losses 48,956 -- 48,956 44,212
----------- ------------ --------- ---------
Total non-interest income 3,471 -- 3,471 3,558
----------- ------------ --------- ---------
Non-interest expense:
General and administrative:
Compensation and benefits 13,372 (3,859)(2) 9,513 12,429
Other general and
administrative 10,387 -- 10,387 11,498
----------- ------------ --------- ---------
Total general and administrative 23,759 (3,859) 19,900 23,927
Real estate operations, net 112 112 (3,255)
Provision for (recovery of) real
estate losses 64 64 (1,397)
Amortization of excess of cost
over fair value of net assets
acquired 2,110 (2,110)(3) -- 2,171
----------- ------------ --------- ---------
Total non-interest expense 26,045 (5,969) 20,076 21,446
----------- ------------ --------- ---------
Income before income
tax expense 26,382 5,969 32,351 26,324
Income tax expense 10,948 - 10,948 11,606
----------- ------------ --------- ---------
Net Income $ 15,434 $ 5,969 $ 21,403 $ 14,718
=========== ============ ========= =========
Primary earnings per common share $ 0.72 $ 0.28 $ 1.00 $ 0.68
=========== ============ ========= =========
Fully diluted earnings per common
share $ 0.72 $ 0.28 $ 1.00 $ 0.68
=========== ============ ========= =========
Primary weighted average
common stock and common
stock equivalents 21,314,991 21,599,362
Fully diluted weighted average
common stock and common
stock equivalents 21,316,019 21,665,934
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996 (4)
--------------
Cash
Adjustments Earnings
----------- --------
<S> <C> <C>
Total interest income $ -- $ 115,834
Total interest expense -- 71,100
-------- ---------
Net interest income -- 44,734
Provision for loan losses -- 522
-------- ---------
Net interest income after
provision for loan losses -- 44,212
-------- ---------
Total non-interest income -- 3,558
-------- ---------
Non-interest expense:
General and administrative:
Compensation and benefits (2,621)(2) 9,808
Other general and
administrative -- 11,498
-------- ---------
Total general and administrative (2,621) 21,306
Real estate operations, net (3,255)
Provision for (recovery of) real
estate losses (1,397)
Amortization of excess of cost
over fair value of net assets
acquired (2,171)(3) --
-------- ---------
Total non-interest expense (4,792) 16,654
-------- ---------
Income before income
tax expense 4,792 31,116
Income tax expense -- 11,606
-------- ---------
Net Income $ 4,792 $ 19,510
======== =========
Primary earnings per common share $ 0.22 $ 0.90
======== =========
Fully diluted earnings per common
share $ 0.22 $ 0.90
======== =========
Primary weighted average
common stock and common
stock equivalents
Fully diluted weighted average
common stock and common
stock equivalents
</TABLE>
- --------------------------------------------------------------------------------
(1) Results of operations reported in conformity with generally accepted
accounting principles.
(2) Non-cash amortization expense relating to allocation of ESOP stock and
earned portion of RRP stock, and related tax benefit.
(3) Non-cash amortization expense of excess of cost over fair value of net
assets acquired (goodwill).
(4) As adjusted for two-for-one stock split on June 3, 1996.
21
<PAGE> 23
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material events occurred with respect to legal proceedings during
the quarter ended March 31, 1997, not previously reported.
ITEM 5. OTHER INFORMATION
Effective April 16, 1997, the Boards of Directors of the Company and
the Association elected George L. Engelke, Jr., President and Chief Executive
Officer to the position of Chairman of the Boards of Directors of the Company
and Astoria Federal Savings and Loan Association, respectively. Mr. Engelke
succeeds, as Chairman, Henry Drewitz, who retired from the Boards of Directors
after reaching mandatory retirement age.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Statement Re: Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
On March 29, 1997, the Company filed with the Securities and
Exchange Commission Form 8-K describing the definitive
agreement pursuant to which the Company proposes to acquire
Greater New York Savings Bank.
On April 8, 1997, the Company filed with the Securities and
Exchange Commission Form 8-K/A which includes the definitive
agreement pursuant to which the Company proposes to acquire
Greater New York Savings Bank.
22
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Astoria Financial Corporation
Dated: May 12, 1997 By: /s/ Monte N. Redman
--------------------- --------------------------
Monte N. Redman
Senior Vice President and Chief
Financial Officer
Dated: May 12, 1997
--------------------
By: /s/ Frank E. Fusco
--------------------------------------
Frank E. Fusco
First Vice President, Chief Accounting
Officer and Controller
23
<PAGE> 25
Exhibit Index
Exhibit No. Identification of Exhibit
11. Statement Re: Computation of Per Share Earnings
27. Financial Data Schedule
24
<PAGE> 1
(a) EXHIBIT 11. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended
March 31, 1997
(In Thousands
Except Per Share Data)
<S> <C> <C>
1. Net Income $15,434
========
2. Weighted average common
shares outstanding 21,365
3. ESOP shares not committed to be released (1,921)
4. RRP shares purchased but unallocated (26)
5. Common stock equivalents due to dilutive
effect of stock options 1,897
--------
6. Total weighted average common shares
and equivalents outstanding 21,315
========
7. Primary earnings per share: $ 0.72
=======
8. Total weighted average common shares and
equivalents outstanding 21,315
9. Additional dilutive shares using end of period market
value versus average market value for the period
when utilizing the treasury stock method regarding
stock options 1
--------
10. Total outstanding shares for fully diluted earnings
per share computation 21,316
========
11. Fully diluted earnings per share: $ 0.72
========
</TABLE>
25
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF MARCH 31, 1997
(UNAUDITED) AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 22,674
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 81,518
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,430,970
<INVESTMENTS-CARRYING> 2,080,739
<INVESTMENTS-MARKET> 2,041,758
<LOANS> 2,777,562
<ALLOWANCE> 14,024
<TOTAL-ASSETS> 7,689,409
<DEPOSITS> 4,494,230
<SHORT-TERM> 455,000
<LIABILITIES-OTHER> 70,310
<LONG-TERM> 2,085,477
0
0
<COMMON> 264
<OTHER-SE> 584,128
<TOTAL-LIABILITIES-AND-EQUITY> 7,689,409
<INTEREST-LOAN> 54,000
<INTEREST-INVEST> 75,073
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 129,073
<INTEREST-DEPOSIT> 47,559
<INTEREST-EXPENSE> 79,617
<INTEREST-INCOME-NET> 49,456
<LOAN-LOSSES> 500
<SECURITIES-GAINS> 378
<EXPENSE-OTHER> 25,869
<INCOME-PRETAX> 26,382
<INCOME-PRE-EXTRAORDINARY> 15,434
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,434
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
<YIELD-ACTUAL> 2.77
<LOANS-NON> 23,097
<LOANS-PAST> 5,208
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,115
<ALLOWANCE-OPEN> 14,089
<CHARGE-OFFS> 1,194
<RECOVERIES> 629
<ALLOWANCE-CLOSE> 14,024
<ALLOWANCE-DOMESTIC> 14,024
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
