1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-22228
ASTORIA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 11-3170868
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Astoria Federal Plaza, Lake Success, New York 11042-1085
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(Address of principal executive offices) (Zip Code)
(516) 327-3000
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(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
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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, July 31, 2000
- ---------------------- -------------------------------------------
.01 Par Value 50,797,880
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PART I -- FINANCIAL INFORMATION
Page
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Item 1. Financial Statements
Consolidated Statements of Financial Condition at June 30, 2000 2
and December 31, 1999.
Consolidated Statements of Income for the Three Months and Six 3
Months Ended June 30, 2000 and June 30, 1999.
Consolidated Statement of Changes in Stockholders' Equity for the 4
Six Months Ended June 30, 2000.
Consolidated Statements of Cash Flows for the Six Months Ended 5
June 30, 2000 and June 30, 1999.
Notes to Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 33
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 33
Item 2. Changes in Securities and Use of Proceeds 34
Item 3. Defaults Upon Senior Securities 34
Item 4. Submission of Matters to a Vote of Security Holders 35
Item 5. Other Information 35
Item 6. Exhibits and Reports on Form 8-K 36
(a) Exhibits
(11) Statement Regarding Computation of Per Share Earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
Signatures 36
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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT AT
JUNE 30, DECEMBER 31,
(In Thousands, Except Share Data) 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------
Assets
- ------
Cash and due from banks $ 126,028 $ 154,918
Federal funds sold and repurchase agreements 196,270 335,653
Mortgage-backed securities available-for-sale 7,429,820 8,204,977
Other securities available-for-sale 676,005 657,772
Mortgage-backed securities held-to-maturity (fair value of
$985,421 and $1,071,251, respectively) 994,518 1,082,261
Other securities held-to-maturity (fair value of
$770,893 and $772,356, respectively) 836,714 817,696
Federal Home Loan Bank of New York stock 285,250 265,250
Loans held-for-sale 10,134 11,376
Loans receivable:
Mortgage loans, net 10,663,271 10,113,216
Consumer and other loans, net 172,501 175,858
---------- ----------
10,835,772 10,289,074
Less allowance for loan losses 78,020 76,578
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Total loans receivable, net 10,757,752 10,212,496
Mortgage servicing rights, net 45,343 48,369
Accrued interest receivable 108,187 110,668
Premises and equipment, net 155,475 176,813
Goodwill 214,297 223,945
Other assets 365,206 394,342
---------- ----------
Total assets $22,200,999 $22,696,536
========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Deposits:
Savings $ 2,561,748 $ 2,581,442
Money market 1,328,380 1,165,734
NOW and money manager 954,295 877,715
Certificates of deposit 4,970,265 4,929,643
----------- -----------
Total deposits 9,814,688 9,554,534
Reverse repurchase agreements 8,101,800 9,276,800
Federal Home Loan Bank of New York advances 2,010,000 1,610,058
Other borrowings 509,612 514,663
Mortgage escrow funds 136,694 120,350
Accrued expenses and other liabilities 224,107 298,219
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Total liabilities 20,796,901 21,374,624
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Guaranteed preferred beneficial interest in junior subordinated debentures 125,000 125,000
Stockholders' equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized:
Series A (325,000 shares authorized and -0- shares issued and outstanding) - -
Series B (2,000,000 shares authorized, issued and outstanding) 2,000 2,000
Common stock, $.01 par value; (200,000,000 shares authorized; 55,498,296
shares issued; and 50,857,880 and 51,730,959 shares
outstanding, respectively) 555 555
Additional paid-in capital 802,467 800,414
Retained earnings 988,776 908,236
Treasury stock (4,640,416 and 3,767,337 shares, at cost, respectively) (157,989) (137,071)
Accumulated other comprehensive income:
Net unrealized loss on securities, net of taxes (325,310) (344,198)
Unallocated common stock held by ESOPs (31,376) (32,955)
Unearned common stock held by RRP (25) (69)
---------- ----------
Total stockholders' equity 1,279,098 1,196,912
---------- ----------
Total liabilities and stockholders' equity $22,200,999 $22,696,536
========== ==========
See accompanying notes to consolidated financial statements.
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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- -----------------------
(In Thousands, Except Share Data) 2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
Interest income:
Mortgage loans $ 188,001 $ 167,919 $ 371,713 $ 329,806
Consumer and other loans 4,274 4,794 8,568 10,071
Mortgage-backed securities 148,001 170,988 302,025 329,865
Other securities 32,710 31,985 65,100 65,017
Federal funds sold and repurchase agreements 4,570 1,527 8,669 3,349
------- ------- ------- -------
Total interest income 377,556 377,213 756,075 738,108
------- ------- ------- -------
Interest expense:
Deposits 100,229 90,041 196,327 179,607
Borrowed funds 149,395 150,382 299,614 285,916
------- ------- ------- -------
Total interest expense 249,624 240,423 495,941 465,523
------- ------- ------- -------
Net interest income 127,932 136,790 260,134 272,585
Provision for loan losses 1,005 1,032 2,005 2,093
------- ------- ------- -------
Net interest income after provision for loan losses 126,927 135,758 258,129 270,492
------- ------- ------- -------
Non-interest income:
Customer service and other loan fees 12,022 9,447 23,231 18,875
Loan servicing fees 2,426 4,073 5,542 9,322
Net gain on sales of securities - 839 - 714
Net gain on sales of loans 178 773 295 3,046
Net gain (loss) on disposition of banking and loan production offices 2,794 - 3,976 (1,241)
Other 861 1,234 2,160 2,365
------- ------- ------- -------
Total non-interest income 18,281 16,366 35,204 33,081
------- ------- ------- -------
Non-interest expense:
General and administrative:
Compensation and benefits 19,504 23,352 39,796 48,044
Employee stock plans amortization 1,626 2,869 3,513 5,841
Occupancy, equipment and systems 13,081 13,068 27,312 27,141
Federal deposit insurance premiums 523 1,068 1,040 2,397
Advertising 2,190 2,623 4,236 3,853
Other 6,832 7,401 14,235 15,082
------- ------- ------- -------
Total general and administrative 43,756 50,381 90,132 102,358
Real estate operations and provision for losses, net (194) (175) (289) (176)
Goodwill litigation 1,774 1,798 4,287 2,947
Capital trust securities 3,104 - 6,216 -
Amortization of goodwill 4,824 4,843 9,648 9,749
------- ------- ------- -------
Total non-interest expense 53,264 56,847 109,994 114,878
------- ------- ------- -------
Income before income tax expense 91,944 95,277 183,339 188,695
Income tax expense 36,084 39,555 71,982 79,519
------- ------- ------- -------
Net income $ 55,860 $ 55,722 $ 111,357 $ 109,176
======== ======== ======= ========
Net income available to common shareholders $ 54,360 $ 54,222 $ 108,357 $ 106,176
======== ======== ======= =======
Basic earnings per common share $ 1.13 $ 1.04 $ 2.23 $ 2.05
==== ==== ==== ====
Diluted earnings per common share $ 1.11 $ 1.02 $ 2.20 $ 1.99
==== ==== ==== ====
Dividends per common share $ 0.26 $ 0.24 $ 0.50 $ 0.48
==== ==== ==== ====
Basic weighted average common shares 48,273,799 51,968,462 48,489,519 51,898,459
Diluted weighted average common and common equivalent shares 48,946,209 53,225,914 49,166,931 53,296,848
See accompanying notes to consolidated financial statements.
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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
Additional
Preferred Common Paid-In Retained Treasury
(In Thousands, Except Share Data) Total Stock Stock Capital Earnings Stock
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $1,196,912 $2,000 $555 $800,414 $908,236 $(137,071)
Comprehensive income:
Net income 111,357 - - - 111,357 -
Other comprehensive income, net of tax:
Net unrealized gain on securities,
net of reclassification adjustment 18,888 - - - - -
---------
Total comprehensive income 130,245
---------
Common stock repurchased
(1,027,946 shares) (26,382) - - - - (26,382)
Dividends on common and preferred
stock and amortization of purchase
premium (27,923) - - (652) (27,271) -
Exercise of stock options and
related tax benefit 2,693 - - 775 (3,546) 5,464
Amortization relating to allocation
of ESOP stock and earned portion
of RRP stock and related tax benefit 3,553 - - 1,930 - -
--------- ----- --- ------- ------- ---------
Balance at June 30, 2000 $1,279,098 $2,000 $555 $802,467 $988,776 $(157,989)
========= ===== === ======= ======= =========
Unallocated Unearned
Accumulated Common Common
Other Stock Stock
Comprehensive Held Held
(In Thousands, Except Share Data) Income by ESOPs by RRP
- -----------------------------------------------------------------------------
Balance at December 31, 1999 $(344,198) $(32,955) $(69)
Comprehensive income:
Net income - - -
Other comprehensive income, net of tax:
Net unrealized gain on securities,
net of reclassification adjustment 18,888 - -
Total comprehensive income
Common stock repurchased
(1,027,946 shares) - -
Dividends on common and preferred
stock and amortization of purchase
premium - - -
Exercise of stock options and
related tax benefit - - -
Amortization relating to allocation
of ESOP stock and earned portion
of RRP stock and related tax benefit - 1,579 44
--------- -------- ----
Balance at June 30, 2000 $(325,310) $(31,376) $(25)
========= ======== ====
See accompanying notes to consolidated financial statements.
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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30,
---------------------------
(IN THOUSANDS) 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 111,357 $ 109,176
----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Net accretion of discounts, premiums and deferred loan fees (29,687) (27,066)
Provision for loan and real estate losses 1,900 2,085
Depreciation and amortization 6,550 7,083
Net gain on sales of securities and loans (295) (3,760)
Net gain on sales of premises and equipment - (490)
Net (gain) loss on disposition of banking and loan production offices (3,976) 1,241
Proceeds from sales of loans held-for-sale, net of originations 4,601 127,902
Amortization of goodwill 9,648 9,749
Allocated and earned shares from ESOPs and RRP 3,513 5,841
Decrease (increase) in accrued interest receivable 2,481 (13,772)
Capitalized mortgage servicing rights, net of amortization
and valuation allowance 3,026 (1,491)
Decrease (increase) in other assets 4,775 (7,498)
Decrease in accrued expenses and other liabilities (73,305) (46,630)
----------- -----------
Net cash provided by operating activities 40,588 162,370
----------- -----------
Cash flows from investing activities:
Origination of loans held-for-investment, net of principal payments (171,324) (706,508)
Loan purchases through third parties (386,352) (185,627)
Principal payments on mortgage-backed securities held-to-maturity 88,295 211,454
Principal payments on mortgage-backed securities available-for-sale 816,914 1,453,234
Purchases of mortgage-backed securities available-for-sale - (3,869,950)
Purchases of other securities available-for-sale (5,040) (158,421)
Proceeds from maturities of other securities available-for-sale 219 51,520
Proceeds from maturities of other securities held-to-maturity 548 162,457
Purchases of FHLB stock, net (20,000) (50,000)
Proceeds from sales of securities available-for-sale - 169,313
Proceeds from sales of real estate owned and investments in
real estate, net 5,621 6,032
Proceeds from disposition of banking and loan production offices 21,293 4,208
Purchases of premises and equipment, net of proceeds from sales (2,535) (23,665)
----------- -----------
Net cash provided by (used in) investing activities 347,639 (2,935,953)
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in deposits 260,073 (41,816)
Net (decrease) increase in reverse repurchase agreements (1,175,000) 2,735,000
Net increase in FHLB of New York advances 400,000 -
Net decrease in other borrowings (5,530) (32,083)
Increase in mortgage escrow funds 16,344 24,780
Costs to repurchase common stock (26,382) (44,319)
Cash dividends paid to stockholders (27,923) (28,657)
Cash received for options exercised 1,918 12,557
----------- -----------
Net cash (used in) provided by financing activities (556,500) 2,625,462
----------- -----------
Net decrease in cash and cash equivalents (168,273) (148,121)
Cash and cash equivalents at beginning of period 490,571 393,382
----------- -----------
Cash and cash equivalents at end of period $ 322,298 $ 245,261
=========== ===========
Supplemental disclosures:
Cash paid during the period:
Interest $ 507,927 $ 450,217
=========== ===========
Income taxes $ 59,973 $ 65,165
=========== ===========
Additions to real estate owned $ 5,444 $ 5,812
=========== ===========
See accompanying notes to consolidated financial statements.
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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Astoria Financial Corporation and its wholly-owned subsidiaries: 1) Astoria
Federal Savings and Loan Association and its subsidiaries, referred to as
Astoria Federal; 2) Astoria Capital Trust I; and 3) AF Insurance Agency, Inc.
As used in this quarterly report, "we," "us" and "our" refer to Astoria
Financial Corporation and its consolidated subsidiaries, including Astoria
Federal, Astoria Capital Trust I and AF Insurance Agency, Inc., depending on
the context. All significant inter-company accounts and transactions have been
eliminated in consolidation.
In our opinion, the accompanying consolidated financial statements contain
all adjustments necessary for a fair presentation of our financial condition as
of June 30, 2000 and December 31, 1999, our results of operations for the three
months and six months ended June 30, 2000 and 1999, changes in stockholders'
equity for the six months ended June 30, 2000 and cash flows for the six months
ended June 30, 2000 and 1999. In preparing the financial statements, we are
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities for the consolidated statements of financial condition
as of June 30, 2000 and December 31, 1999, and amounts of revenues and expenses
for the consolidated statements of income for the three and six month periods
ended June 30, 2000 and 1999. The results of operations for the three and six
months ended June 30, 2000 are not necessarily indicative of the results of
operations to be expected for the remainder of the year. Certain information
and note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, or GAAP, have been
condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain reclassifications have been made to prior year
amounts to conform to the current year presentation.
These consolidated financial statements should be read in conjunction with
our December 31, 1999 audited consolidated financial statements and related
notes, included in our 1999 Annual Report on Form 10-K.
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2. EARNINGS PER SHARE, OR EPS
The following table is a reconciliation of basic and diluted EPS:
For the Three Months Ended June 30,
-----------------------------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------------------------
(In Thousands, Average Per Share Average Per Share
Except Share Data) Income Shares Amount Income Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
Net income $55,860 $55,722
Less: preferred stock dividends 1,500 1,500
------- -------
Basic EPS:
Income available to common
stockholders 54,360 48,273,799 $1.13 54,222 51,968,462 $1.04
==== ====
Effect of dilutive unexercised
stock options 672,410 (1) 1,257,452 (2)
----------- -----------
Diluted EPS:
Income available to common
stockholders plus assumed
conversions $54,360 48,946,209 $1.11 $54,222 53,225,914 $1.02
====== ========== ==== ====== ========== ====
For the Six Months Ended June 30,
-----------------------------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------------------------
(In Thousands, Average Per Share Average Per Share
Except Share Data) Income Shares Amount Income Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
Net income $111,357 $109,176
Less: preferred stock dividends 3,000 3,000
-------- -------
Basic EPS:
Income available to common
stockholders 108,357 48,489,519 $2.23 106,176 51,898,459 $2.05
==== ====
Effect of dilutive unexercised
stock options 677,412 (1) 1,398,389 (2)
------------ -----------
Diluted EPS:
Income available to common
stockholders plus assumed
conversions $108,357 49,166,931 $2.20 $106,176 53,296,848 $1.99
======= ========== ==== ======= ========== ====
(1) Options to purchase 1,669,453 shares of common stock at prices between
$27.88 per share and $59.75 per share were outstanding as of June 30,
2000 but were not included in the computation of diluted EPS because
the options' exercise prices were greater than the average market
price of the common shares.
(2) Options to purchase 353,152 shares of common stock at prices between
$49.25 per share and $59.75 per share were outstanding as of June 30,
1999 but were not included in the computation of diluted EPS because
the options' exercise prices were greater than the average market
price of the common shares.
3. GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES
On October 28, 1999, our wholly-owned finance subsidiary, Astoria Capital
Trust I, issued $125.0 million aggregate liquidation amount of 9.75% Capital
Securities due November 1, 2029, Series A, referred to as the Series A Capital
Securities. Effective April 26, 2000, $120.0 million aggregate liquidation
amount of the Series A Capital Securities were exchanged for a like amount of
9.75% Capital Securities due November 1, 2029, Series B, also issued by Astoria
Capital Trust I, referred to as the Series B Capital Securities. The Series A
Capital Securities and Series B
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Capital Securities have substantially identical terms except that the Series B
Capital Securities have been registered with the Securities and Exchange
Commission. Together they are referred to as the Capital Securities. We have
fully and unconditionally guaranteed the Capital Securities along with all
obligations of Astoria Capital Trust I under the trust agreement. Astoria
Capital Trust I was formed for the exclusive purpose of issuing the Capital
Securities and common securities and using the proceeds to acquire an aggregate
principal amount of $128.9 million of our 9.75% Junior Subordinated Debentures
due November 1, 2029, referred to as Junior Subordinated Debentures. The sole
assets of Astoria Capital Trust I are the Junior Subordinated Debentures. The
Junior Subordinated Debentures are prepayable, in whole or in part, at our
option on or after November 1, 2009 at declining premiums to maturity. Proceeds
from the issuance of the Junior Subordinated Debentures totaling $31.3 million
were used to increase the capital level of Astoria Federal and the remaining
proceeds were used primarily for the repurchase of our common stock.
The balance outstanding on the Capital Securities was $125.0 million at
June 30, 2000. The costs associated with the Capital Securities issuance have
been capitalized and are being amortized using the straight-line method over a
period of ten years. Distributions on the Capital Securities are payable
semi-annually, on May 1 and November 1, and are reflected in our Consolidated
Statements of Income as a component of non-interest expense under the caption
"Capital trust securities."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q may contain certain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, and may be identified by the use of such words as "believe," "expect,"
"anticipate," "should," "planned," "estimated" and "potential." Examples of
forward-looking statements include, but are not limited to, estimates with
respect to our financial condition, results of operations and business that are
subject to various factors which could cause actual results to differ
materially from these estimates. These factors include, but are not limited to,
general economic conditions, changes in interest rates, deposit flows, loan
demand, real estate values, and competition; changes in accounting principles,
policies, or guidelines; changes in legislation or regulation; and other
economic, competitive, governmental, regulatory, and technological factors
affecting our operations, pricing, products and services.
GENERAL
We are headquartered in Lake Success, New York and our principal business
currently consists of the operation of our wholly-owned subsidiary, Astoria
Federal. Astoria Federal's primary business is attracting retail deposits from
the general public and investing those deposits, together with borrowed funds,
funds generated from operations and principal repayments, primarily in
one-to-four family residential mortgage loans, mortgage-backed securities and,
to a lesser extent, commercial real estate loans, multi-family mortgage loans
and consumer loans. Astoria Federal also invests in securities issued by the
U.S. Government and federal agencies and other securities.
Our results of operations are dependent primarily on our net interest
income, which is the difference between the interest earned on our assets,
primarily our loan and securities portfolios,
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and our cost of funds, which consists of the interest paid on our deposits and
borrowings. Our net income is also affected by our provision for loan losses as
well as non-interest income, general and administrative expense, other
non-interest expense, and income tax expense. General and administrative
expense consists of compensation and benefits, employee stock plans
amortization, occupancy, equipment and systems expense, federal deposit
insurance premiums, advertising and other operating expenses. Other
non-interest expense generally consists of real estate operations and provision
for losses, net, goodwill litigation expense, capital trust securities expense
and amortization of goodwill. Our earnings are also significantly affected by
general economic and competitive conditions, particularly changes in market
interest rates and U.S. Treasury yield curves, government policies and actions
of regulatory authorities.
On October 28, 1999, our wholly-owned subsidiary, Astoria Capital Trust I,
issued $125.0 million of Series A Capital Securities and $3.9 million of common
securities and used the proceeds to acquire $128.9 million of Junior
Subordinated Debentures issued by us. See "Notes to Consolidated Financial
Statements" for further discussion of the Capital Securities, Junior
Subordinated Debentures and use of proceeds.
On April 1, 2000 we established our wholly-owned subsidiary AF Insurance
Agency, Inc. AF Insurance Agency, Inc. is a New York licensed life insurance
and variable annuity agent and property and casualty insurance broker. Through
a contractual arrangement with Treiber Insurance and IFS Agencies, AF Insurance
Agency, Inc. provides insurance products to the customers of Astoria Federal.
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of funds is cash provided by investing activities,
which includes principal and interest payments on loans, mortgage-backed
securities and other securities. Principal payments on loans and
mortgage-backed securities and proceeds from maturities of other securities
totaled $1.62 billion for the six months ended June 30, 2000 and $3.16 billion
for the six months ended June 30, 1999. During the six months ended June 30,
1999, we received $169.3 million from the sale of securities. There were no
sales of securities for the six months ended June 30, 2000. Typically, our
other sources of funds are provided by operating and financing activities,
although for the six months ended June 30, 2000 we have decreased our
borrowings outstanding which has resulted in our use of funds in financing
activities during this period. Net cash provided from operating activities
totaled $40.6 million during the six months ended June 30, 2000 and $162.4
million during the six months ended June 30, 1999. During the six months ended
June 30, 2000, net borrowings decreased $780.5 million, while net deposits
increased $260.1 million. During the six months ended June 30, 1999, the net
increase in borrowings totaled $2.70 billion while the net decrease in deposits
totaled $41.8 million.
Our primary use of funds in our investing activities is for the
origination and purchase of mortgage loans and the purchase of mortgage-backed
and other securities, although currently our emphasis has been on the
origination and purchase of mortgage loans. During the six months ended June
30, 2000, our gross originations and purchases of mortgage loans totaled $1.26
billion, compared to $2.36 billion during the six months ended June 30, 1999.
This decrease was attributable to the current rising interest rate environment,
which has resulted in a significant decrease in mortgage refinance activity,
and our disposition of certain loan production offices in March 1999. Our
purchases of other securities totaled $5.0 million during the six months ended
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June 30, 2000 versus purchases of mortgage-backed and other securities of $4.03
billion during the comparable 1999 period. There were no purchases of
mortgage-backed securities during the six months ended June 30, 2000, which is
consistent with our decision to reduce the balance sheet during the current
rising interest rate environment.
Stockholders equity totaled $1.28 billion at June 30, 2000 and $1.20
billion at December 31, 1999. Increases to stockholders' equity included net
income of $111.4 million, an $18.9 million decrease in the unrealized loss on
securities available-for-sale, net of taxes, the effect of stock options
exercised and related tax benefit totaling $2.7 million and the amortization
for the allocated portion of shares held by the Employee Stock Ownership Plans,
or ESOPs, and the related tax benefit on the earned portion of the shares held
by the Recognition and Retention Plan, or RRP, totaling $3.6 million. These
increases were partially offset by repurchases of our common stock of $26.4
million and dividends declared of $27.9 million.
On April 21, 1999, our Board of Directors approved our sixth stock
repurchase plan authorizing the purchase, at management's discretion, of up to
10% of our common stock then outstanding, or 5,528,000 shares, over a two year
period in open-market or privately negotiated transactions. Under this plan,
1,027,946 shares of our common stock were repurchased during the first half of
2000 at an aggregate cost of $26.4 million. To date, 5,285,146 shares have been
repurchased under this plan at an aggregate cost of $185.7 million.
On June 1, 2000, we paid a quarterly cash dividend equal to $0.26 per
share on shares of our common stock outstanding as of the close of business on
May 15, 2000, totaling $12.9 million. On July 19, 2000, we declared a quarterly
cash dividend of $0.26 per share on shares of our common stock payable on
September 1, 2000 to stockholders of record as of the close of business on
August 15, 2000. During each of the three month periods ended June 30, 2000 and
1999, we declared cash dividends on our Series B Preferred Stock aggregating
$1.5 million.
Astoria Federal is required by the Office of Thrift Supervision, or OTS,
to maintain a minimum liquidity ratio, calculated as an average daily balance
of liquid assets as a percentage of net withdrawable deposit accounts plus
short-term borrowings, of 4.00%. Astoria Federal's liquidity ratio was 7.01% at
June 30, 2000 and 6.28% at December 31, 1999. The levels of Astoria Federal's
liquid assets are dependent on Astoria Federal's operating, investing and
financing activities during any given period.
At June 30, 2000, Astoria Federal's total capital exceeded all of its
regulatory capital requirements with a tangible ratio of 6.57%, leverage ratio
of 6.57%, and risk-based capital ratio of 16.30%. The minimum regulatory
requirements were a tangible ratio of 1.50%, leverage ratio of 4.00%, and
risk-based capital ratio of 8.00%.
On October 28, 1999, Astoria Capital Trust I issued $125.0 million of
Series A Capital Securities. For further discussion of the Capital Securities
see "Notes to Consolidated Financial Statements" and "General."
INTEREST RATE SENSITIVITY ANALYSIS
As a financial institution, the primary component of our market risk is
interest rate risk. Our net interest income, the primary component of our net
income, is subject to substantial risk due
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to changes in interest rates or changes in market yield curves, particularly if
there is a substantial variation in the timing between the repricing of our
assets and the liabilities which fund them. We seek to manage interest rate
risk by monitoring and controlling the variation in repricing intervals between
our assets and liabilities, i.e. our interest rate sensitivity gap. We also
monitor our interest rate sensitivity by analyzing the estimated changes in
market value of our assets and liabilities assuming various interest rate
scenarios, so that adjustments in the asset and liability mix, when deemed
appropriate, can be made on a timely basis.
The interest rate sensitivity gap is the difference between the amount of
interest-earning assets anticipated to mature or reprice within a specific time
period and the amount of interest-bearing liabilities anticipated to mature or
reprice within that same time period. A gap is considered positive when the
amount of interest rate sensitive assets maturing or repricing within a
specific time frame exceeds the amount of interest rate sensitive liabilities
maturing or repricing within that same time frame. Conversely, a gap is
considered negative when the amount of interest rate sensitive liabilities
maturing or repricing within a specific time frame exceeds the amount of
interest rate sensitive assets maturing or repricing within that same time
frame. In a rising interest rate environment, an institution with a positive
gap would generally be expected, absent the effects of other factors, to
experience a greater increase in the yields of its assets relative to the costs
of its liabilities and thus an increase in the institution's net interest
income, whereas an institution with a negative gap would generally be expected
to experience the opposite results. Conversely, during a period of falling
interest rates, a positive gap would tend to result in a decrease in net
interest income while a negative gap would tend to increase net interest
income.
The actual duration of mortgage loans and mortgage-backed securities can
be significantly impacted by changes in mortgage prepayments. Mortgage
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 major factors affecting prepayment rates are prevailing
interest rates and related mortgage refinancing opportunities.
The following table, referred to as the Gap Table, sets forth the amount
of interest-earning assets and interest-bearing liabilities outstanding at June
30, 2000, that we anticipate, using certain assumptions based on our historical
experience and other data available to us, to reprice or mature in each of the
future time periods shown. The Gap Table does not necessarily indicate the
impact of general interest rate movements on our net interest income because
the actual repricing dates of various assets and liabilities are subject to
customer discretion and competitive and other pressures. Callable features of
certain assets and liabilities, in addition to the foregoing, may cause actual
experience to vary from that indicated. The uncertainty and volatility of
interest rates, economic conditions and other markets which affect the value of
these call options, as well as the financial condition of the holders of the
options, increase the difficulty and uncertainty in determining if and when
they may be exercised. In our past experience, even though callable borrowings
were at or below market rates, a significant portion were not called, and
therefore, were included in the Gap Table based on their contractual maturity.
The recent increases in interest rates have resulted in a majority of the
holders of these call options exercising their rights. Therefore, in the June
30, 2000 Gap Table, callable borrowings have been classified according to their
call dates. At June 30, 2000, callable borrowings classified according to their
call dates totaled $7.09 billion, of which $3.63 billion are callable within
one year and at various times thereafter. During the quarter ended June 30,
2000, $1.09 billion in borrowings were called. Of
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the called borrowings, $385.0 million were paid off and the remaining balance
was rolled into short- and medium-term borrowings without call features. Also
included in this table are $1.30 billion of callable other securities,
classified according to their maturity dates, which are primarily within the
more than five years maturity category. Of such securities, $1.23 billion are
callable within one year and at various other times thereafter. The
classification of these securities by maturity date is based upon our
experience which, in the current rising interest rate environment, has
indicated that the issuers of these securities have not been exercising their
call options.
At June 30, 2000, our interest-bearing liabilities maturing or repricing
within one year exceeded net interest-earning assets maturing or repricing
within the same time period by $3.86 billion, representing a negative
cumulative one-year gap of 17.40% of total assets. This compares to
interest-bearing liabilities maturing or repricing within one year exceeding
net interest-earning assets maturing or repricing within the same time period
by $3.64 billion, representing a negative cumulative one-year gap of 16.04% of
total assets at December 31, 1999, as adjusted, using the same set of
assumptions which were used in the June 30, 2000 Gap Table. At December 31,
1999 with callable borrowings classified according to their contractual
maturity dates, as previously reported, our net interest-earning assets
maturing or repricing within one year exceeded interest-bearing liabilities
maturing or repricing within the same time period by $434.2 million,
representing a positive cumulative one-year gap of 1.91% of total assets.
Our June 30, 2000 and December 31, 1999 cumulative one-year gap positions,
both as adjusted and as previously reported, reflect the classification of
available-for-sale securities within repricing periods based on their
contractual maturities adjusted for estimated prepayments, if any. If those
securities at June 30, 2000 were classified within the one-year or less
maturing or repricing category, net interest-earning assets maturing or
repricing within one year would have exceeded interest-bearing liabilities
maturing or repricing within the same time period by $2.06 billion,
representing a positive cumulative one-year gap of 9.29% of total assets. Using
this method at December 31, 1999, net interest-earning assets maturing or
repricing within one year would have exceeded interest-bearing liabilities
maturing or repricing within the same time period by $2.67 billion,
representing a positive cumulative one-year gap of 11.78% of total assets, as
adjusted, using the same set of assumptions which were used in the June 30,
2000 Gap Table. Using this method at December 31, 1999 with callable borrowings
classified according to their contractual maturity dates, as previously
reported, net interest-earning assets maturing or repricing within one year
would have exceeded interest-bearing liabilities maturing or repricing within
the same time period by $6.75 billion, representing a positive cumulative
one-year gap of 29.74% of total assets. The available-for-sale securities may
or may not be sold, subject to our discretion.
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At June 30, 2000
-------------------------------------------------------------------------------------
More than More than
One Year Three Years
One Year to to More than
(Dollars in Thousands) or Less Three Years Five Years Five Years Total
- -------------------------------------------------------------------------------------------------------------------------------
Interest-earning assets:
Mortgage loans (1) $ 2,357,553 $ 2,789,980 $ 2,629,527 $ 2,794,300 $ 10,571,360
Consumer and other loans (1) 138,743 31,995 - - 170,738
Federal funds sold and
repurchase agreements 196,270 - - - 196,270
Mortgage-backed and other
securities available-for-sale 2,181,203 1,718,174 1,429,330 2,777,118 8,105,825
Mortgage-backed and other
securities held-to-maturity 370,510 219,829 144,623 1,384,930 2,119,892
-------------------------------------------------------------------------------------
Total interest-earning assets 5,244,279 4,759,978 4,203,480 6,956,348 21,164,085
Add:
Net unamortized purchase
premiums and deferred costs (2) 13,190 16,302 15,572 16,117 61,181
-------------------------------------------------------------------------------------
Net interest-earning assets $ 5,257,469 $ 4,776,280 $ 4,219,052 $ 6,972,465 $ 21,225,266
-------------------------------------------------------------------------------------
Interest-bearing liabilities:
Savings $ 141,014 $ 282,027 $ 282,027 $ 1,856,680 $ 2,561,748
NOW and money manager 25,385 50,774 50,774 420,929 547,862
Money market 1,189,060 14,665 14,665 109,990 1,328,380
Certificates of deposit 2,907,403 1,299,336 734,055 29,471 4,970,265
Borrowed funds 4,856,561 5,154,851 610,000 - 10,621,412
-------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 9,119,423 $ 6,801,653 $ 1,691,521 $ 2,417,070 $ 20,029,667
-------------------------------------------------------------------------------------
Interest sensitivity gap $ (3,861,954) $ (2,025,373) $ 2,527,531 $ 4,555,395 $ 1,195,599
-------------------------------------------------------------------------------------
Cumulative interest sensitivity gap $ (3,861,954) $ (5,887,327) $ (3,359,796) $ 1,195,599
-------------------------------------------------------------------------------------
Cumulative interest sensitivity gap
as a percentage of total assets (17.40)% (26.52)% (15.13)% 5.39%
Cumulative net interest-earning assets
as a percentage of interest-bearing
liabilities 57.65% 63.02% 80.92% 105.97%
(1) Mortgage, consumer and other loans exclude non-performing loans, but are
not reduced for the allowance for loan losses.
(2) Net unamortized purchase premiums and deferred costs are prorated.
Certain shortcomings are inherent in the method of analysis presented in
the Gap Table. For example, although certain assets and liabilities may have
similar contractual maturities or periods to repricing, they may react in
different ways to changes in market interest rates. Additionally, certain
assets, such as adjustable-rate mortgage loans, or ARM loans, have contractual
features which restrict changes in interest rates on a short-term basis and
over the life of the asset. Further, in the event of a change in interest
rates, prepayment and early withdrawal levels would likely deviate
significantly from those assumed in calculating the table. Finally, the ability
of borrowers to service their ARM loans or other loan obligations may decrease
in the event of an interest rate increase. The Gap Table reflects our estimates
as to periods to repricing at a particular point in time. Among the factors
considered, are current trends and historical repricing experience with respect
to similar products. As a result, different assumptions may be used at
different points in time.
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We also monitor Astoria Federal's interest rate sensitivity through
analysis of the change in the net portfolio value, or NPV. NPV is defined as
the net present value of the expected future cash flows of an entity's assets
and liabilities and, therefore, hypothetically represents the value of an
institution's net worth. Increases in the value of assets will increase the NPV
whereas decreases in the value of assets will decrease the NPV. Conversely,
increases in the value of liabilities will decrease the NPV whereas decreases in
the value of liabilities will increase the NPV. The changes in value of assets
and liabilities due to changes in interest rates reflect the interest
sensitivity of those assets and liabilities. The NPV ratio under any interest
rate scenario is defined as the NPV in that scenario divided by the value of
assets in the same scenario. This analysis, presented in the following table,
or the NPV Table, measures percentage changes from the value of projected NPV
in a given rate scenario, and then measures interest rate sensitivity by the
change in the NPV ratio, over a range of interest rate change scenarios. The
OTS also produces a similar analysis using its own model based upon data
submitted on Astoria Federal's quarterly Thrift Financial Reports, the results
of which may vary from our internal model primarily because of differences in
assumptions utilized between our internal model and the OTS model, including
estimated loan prepayment rates, reinvestment rates and deposit decay rates.
For purposes of the NPV Table, prepayment speeds and deposit decay rates
similar to the Gap Table were used, except for the scenarios which involve
decreases in interest rates, for which we have assumed, in the NPV Table, that
those borrowings with embedded call options will not be called at their next
available call date.
The NPV Table is based on simulations which utilize institution specific
assumptions with regard to future cash flows, including customer options such
as loan prepayments, period and lifetime caps, puts and calls, and deposit
withdrawal estimates. The NPV Table uses discount rates derived from various
sources including, but not limited to, U.S. Treasury yield curves, thrift
retail certificate of deposit curves, national and local secondary mortgage
markets, brokerage security pricing services and various alternative funding
sources. Specifically, for mortgage loans receivable, the discount rates used
were based on market rates for new loans of similar type and purpose, adjusted,
when necessary, for factors such as servicing cost, credit risk and term. The
discount rates used for certificates of deposit and borrowings were based on
rates which approximate those we would incur to replace such funding of similar
remaining maturities. Certain assets, including fixed assets and real estate
held for development, are assumed to remain at book value (net of valuation
allowance) regardless of interest rate scenario.
The following represents Astoria Federal's NPV Table as of June 30, 2000:
Net Portfolio Value ("NPV") Portfolio Value of Assets
Rates in --------------------------- -------------------------
Basis Points Dollar Dollar Percentage NPV Sensitivity
(Rate Shock) Amount Change Change Ratio Change
------------ ------ ------ ------ ----- ------
(Dollars in Thousands)
+200 $1,556,811 $(760,306) (32.81)% 7.64% (3.00)%
+100 1,977,097 (340,020) (14.67) 9.37 (1.27)
-0- 2,317,117 - - 10.64 -
-100 2,918,982 601,865 25.97 12.95 2.31
-200 2,739,227 422,110 18.22 11.93 1.29
Our NPV ratio of 10.64% in a flat rate scenario and 7.64% in the up 200
basis point rate shock, as well as the sensitivity measure of negative 3.00% in
the up 200 basis point rate shock as of June 30, 2000, have improved from the
December 31, 1999 results of 9.92% NPV ratio in a flat rate scenario, 6.24% in
the up 200 basis point rate shock and the sensitivity measure of negative 3.68%
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in the up 200 basis point rate shock. These improvements are a result of a
variety of factors including: capital increases from earnings, reduction in
total assets, stability of core deposits, emphasis on ARM products and
reduction in callable borrowings.
As with the Gap Table, certain shortcomings are inherent in the
methodology used in the NPV Table. Modeling of changes in NPV requires the
making of certain assumptions which may or may not reflect the manner in which
actual yields and costs respond to changes in market interest rates. In this
regard, the NPV model assumes that the composition of our interest sensitive
assets and liabilities existing at the beginning of a period remains constant
over the period being measured and also assumes that a particular change in
interest rates is immediate and is reflected uniformly across the yield curve
regardless of the duration to maturity or repricing of specific assets and
liabilities. In addition, prepayment estimates and other assumptions within the
NPV Table are subjective in nature, involve uncertainties and, therefore,
cannot be determined with precision. Accordingly, although the NPV
measurements, in theory, may provide an indication of our interest rate risk
exposure at a particular point in time, such measurements are not intended to
and do not provide for a precise forecast of the effect of changes in market
interest rates on Astoria Federal's NPV and will differ from actual results.
LOAN PORTFOLIO
The following table sets forth the composition of our loans receivable and
loans held-for-sale portfolios at June 30, 2000 and December 31, 1999.
At June 30, 2000 At December 31, 1999
------------------------------- ----------------------------
Percent Percent
(Dollars in Thousands) Amount of Total Amount of Total
- ----------------------------------------------------------------------------- ----------------------------
MORTGAGE LOANS (GROSS) (1):
One-to-four family...................... $ 9,453,529 87.69% $ 9,018,270 88.05%
Multi-family............................ 694,203 6.44 615,438 6.01
Commercial real estate.................. 461,856 4.28 433,035 4.23
---------- ------ ---------- -----
Total mortgage loans...................... 10,609,588 98.41 10,066,743 98.29
---------- ------ ---------- -----
CONSUMER AND OTHER LOANS (GROSS)
Home equity ............................ 120,933 1.12 116,726 1.14
Passbook ............................... 8,220 0.08 7,481 0.07
Other .................................. 42,574 0.39 50,697 0.50
---------- ------ ---------- -------
Total consumer and other loans.............. 171,727 1.59 174,904 1.71
---------- ------ ---------- -------
TOTAL LOANS................................. 10,781,315 100.00% 10,241,647 100.00%
---------- ====== ---------- ======
LESS:
Unamortized premiums, discounts ........
and deferred loan costs and
fees, net......................... 64,591 58,803
Allowance for loan losses............... (78,020) (76,578)
---------- ----------
TOTAL LOANS, NET............................ $10,767,886 $10,223,872
========== ==========
- ----------------
(1) These amounts include mortgage loans classified as held-for-sale
totaling $10.1 million at June 30, 2000 and $11.4 million at December
31, 1999.
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SECURITIES PORTFOLIO
The following tables set forth the amortized cost and estimated fair value
of mortgage-backed securities and other securities available-for-sale and
held-to-maturity at June 30, 2000 and December 31, 1999.
At June 30, 2000
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE:
Mortgage-backed securities:
GNMA pass-through certificates $ 115,715 $ 196 $ (3,151) $ 112,760
FHLMC pass-through certificates 208,761 2,098 (3,961) 206,898
FNMA pass-through certificates 407,336 4,335 (2,612) 409,059
REMICs and CMOs:
Agency issuance 5,654,081 1,871 (396,933) 5,259,019
Non agency issuance 1,508,879 392 (67,187) 1,442,084
--------- ----- --------- ---------
Total mortgage-backed securities 7,894,772 8,892 (473,844) 7,429,820
--------- ----- --------- ---------
Other securities:
Obligations of the U.S.
Government and agencies 557,733 - (65,331) 492,402
Corporate debt securities 66,296 - (10,156) 56,140
FNMA and FHLMC preferred stock 147,515 34 (21,771) 125,778
Asset-backed and other securities 1,687 - (2) 1,685
--------- ----- --------- ---------
Total other securities 773,231 34 (97,260) 676,005
--------- ----- --------- ---------
Total available-for-sale $8,668,003 $8,926 $(571,104) $8,105,825
========= ===== ========= =========
HELD-TO-MATURITY:
Mortgage-backed securities:
GNMA pass-through certificates $ 3,702 $ 135 $ (9) $ 3,828
FHLMC pass-through certificates 39,821 652 (106) 40,367
FNMA pass-through certificates 12,380 7 (522) 11,865
REMICs and CMOs:
Agency issuance 611,792 2,645 (5,360) 609,077
Non agency issuance 326,823 93 (6,632) 320,284
--------- ----- --------- ---------
Total mortgage-backed securities 994,518 3,532 (12,629) 985,421
--------- ----- --------- ---------
Other securities:
Obligations of the U.S.
Government and agencies 792,147 - (65,778) 726,369
Obligations of states and
political subdivisions 44,567 - (43) 44,524
--------- ----- --------- ---------
Total other securities 836,714 - (65,821) 770,893
--------- ----- --------- ---------
Total held-to-maturity $1,831,232 $3,532 $(78,450) $1,756,314
========= ===== ======== =========
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SECURITIES PORTFOLIO, CONTINUED
At December 31, 1999
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE:
Mortgage-backed securities:
GNMA pass-through certificates $ 129,029 $ 658 $ (3,986) $ 125,701
FHLMC pass-through certificates 228,904 917 (3,407) 226,414
FNMA pass-through certificates 443,639 6,068 (2,202) 447,505
REMICs and CMOs:
Agency issuance 6,304,417 454 (435,093) 5,869,778
Non agency issuance 1,604,335 366 (69,122) 1,535,579
--------- ----- --------- ---------
Total mortgage-backed securities 8,710,324 8,463 (513,810) 8,204,977
--------- ----- --------- ---------
Other securities:
Obligations of the U.S.
Government and agencies 547,082 - (72,878) 474,204
Corporate debt securities 61,349 - (7,168) 54,181
FNMA and FHLMC preferred stock 147,515 44 (20,080) 127,479
Asset-backed and other securities 1,907 1 - 1,908
--------- ----- --------- ---------
Total other securities 757,853 45 (100,126) 657,772
--------- ----- --------- ---------
Total available-for-sale $ 9,468,177 $ 8,508 $(613,936) $8,862,749
========= ===== ========= =========
HELD-TO-MATURITY:
Mortgage-backed securities:
GNMA pass-through certificates $ 4,247 $ 220 $ (1) $ 4,466
FHLMC pass-through certificates 45,287 719 (42) 45,964
FNMA pass-through certificates 13,083 16 (648) 12,451
REMICs and CMOs:
Agency issuance 667,249 1,308 (6,390) 662,167
Non agency issuance 352,395 121 (6,313) 346,203
--------- ----- -------- ---------
Total mortgage-backed securities 1,082,261 2,384 (13,394) 1,071,251
--------- ----- -------- ---------
Other securities:
Obligations of the U.S.
Government and agencies 772,584 17,384 (62,684) 727,284
Obligations of states and
political subdivisions 45,112 - (40) 45,072
--------- ------ -------- ---------
Total other securities 817,696 17,384 (62,724) 772,356
--------- ------ -------- ---------
Total held-to-maturity $1,899,957 $ 19,768 $ (76,118) $1,843,607
========= ====== ======== =========
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COMPARISON OF FINANCIAL CONDITION AS OF
JUNE 30, 2000 AND DECEMBER 31, 1999
AND OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
FINANCIAL CONDITION
We continue to emphasize the origination of one-to-four family mortgage
loans through our deployment of funds from mortgage loan and mortgage-backed
security repayments. We continue to sell our 15-year and 30-year fixed-rate
mortgage loan production, but retain for portfolio our ARM loan production. By
doing so, we have and are continuing to shift our asset mix towards growth in
mortgage loans, primarily ARM loans, versus growth in securities. If the
current interest rate environment continues and the opportunity for asset
growth with attractive interest rate spreads remains limited, we may limit our
asset growth or shrink the balance sheet, as we have been doing over the past
fifteen months.
Total assets decreased $495.5 million, to $22.20 billion at June 30, 2000,
from $22.70 billion at December 31, 1999. Mortgage-backed securities decreased
$862.9 million to $8.42 billion at June 30, 2000, from $9.29 billion at
December 31, 1999, due to principal payments of $905.2 million, slightly offset
by a decrease in the net unrealized loss on securities available-for-sale of
$40.4 million. Mortgage loans, net, increased $550.1 million, from $10.11
billion at December 31, 1999 to $10.66 billion at June 30, 2000. Gross mortgage
loans originated and purchased during the six months ended June 30, 2000
totaled $1.26 billion, of which $871.5 million were originations and $384.5
million were purchases. These originations and purchases consisted primarily of
one-to-four family residential mortgage loans. This compares to $2.18 billion
of originations and $184.1 million of purchases during the six months ended
June 30, 1999. The decrease in the mortgage loan originations was primarily a
result of the general increase in market interest rates during the past year,
which has significantly decreased the level of mortgage refinance activity as
well as prepayments on mortgage loans and mortgage-backed securities. There
were no purchases of mortgage-backed securities during the six months ended
June 30, 2000.
In addition to the changes noted above in the mortgage-backed securities
and mortgage loan portfolios, federal funds sold and repurchase agreements
decreased $139.4 million from $335.7 million at December 31, 1999, to $196.3
million at June 30, 2000. Other securities increased $37.3 million to $1.51
billion at June 30, 2000, from $1.48 billion at December 31, 1999, primarily
due to the accretion of discounts on our U.S. Government and agency securities
coupled with a decrease in the net unrealized loss on securities
available-for-sale. Premises and equipment, net, decreased $21.3 million from
$176.8 million at December 31, 1999 to $155.5 million at June 30, 2000,
primarily due to the completion of the sale of the former Long Island Bancorp,
Inc., or LIB, headquarters in April 2000. (See "Non-interest income.") Other
assets decreased $29.1 million to $365.2 million at June 30, 2000 from $394.3
million at December 31, 1999, primarily due to the decrease in the deferred tax
asset which resulted from the decrease in the net unrealized loss on securities
available-for-sale and the recognition of a loss for tax purposes on the sale
of the former LIB headquarters.
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Reverse repurchase agreements decreased $1.18 billion, to $8.10 billion at
June 30, 2000, from $9.28 billion at December 31, 1999. Federal Home Loan Bank
of New York advances increased $399.9 million to $2.01 billion at June 30, 2000
from $1.61 billion at December 31, 1999. The net decrease in borrowings is a
result of the repayment of a portion of the $2.96 billion in borrowings which
either matured or were called in the first half of 2000. The remaining balance
of these borrowings was rolled into short- and medium-term borrowings without
call features. Deposits increased $260.1 million from $9.55 billion at December
31, 1999 to $9.81 billion at June 30, 2000 primarily due to our current
emphasis on deposit generation through competitive rates and new product
offerings.
Stockholders' equity totaled $1.28 billion at June 30, 2000 and $1.20
billion at December 31, 1999. Increases to stockholders' equity included net
income of $111.4 million, an $18.9 million decrease in the unrealized loss on
securities available-for-sale, net of taxes, the effect of stock options
exercised and related tax benefit totaling $2.7 million and the amortization
for the allocated portion of shares held by the ESOPs and the related tax
benefit on the earned portion of the shares held by the RRP totaling $3.6
million. These increases were partially offset by repurchases of our common
stock of $26.4 million and dividends declared of $27.9 million.
RESULTS OF OPERATIONS
GENERAL
Net income for the three months ended June 30, 2000 increased $138,000 to
$55.9 million, from $55.7 million for the three months ended June 30, 1999. For
the three months ended June 30, 2000, diluted earnings per common share
increased to $1.11 per share, as compared to $1.02 per share for the three
months ended June 30, 1999. Return on average assets increased to 1.00% for the
three months ended June 30, 2000, from 0.97% for the three months ended June
30, 1999. Return on average stockholders' equity increased to 17.94% for the
three months ended June 30, 2000, from 15.74% for the three months ended June
30, 1999. Return on average tangible stockholders' equity increased to 21.73%
for the three months ended June 30, 2000, from 18.90% for the three months
ended June 30, 1999.
Net income for the six months ended June 30, 2000 increased $2.2 million
to $111.4 million, from $109.2 million for the six months ended June 30, 1999.
For the six months ended June 30, 2000, diluted earnings per common share
increased to $2.20 per share, as compared to $1.99 per share for the six months
ended June 30, 1999. Return on average assets increased to 0.99% for the six
months ended June 30, 2000, from 0.97% for the six months ended June 30, 1999.
Return on average stockholders' equity increased to 18.29% for the six months
ended June 30, 2000, from 15.27% for the six months ended June 30, 1999. Return
on average tangible stockholders' equity increased to 22.31% for the six months
ended June 30, 2000, from 18.35% for the six months ended June 30, 1999.
NET INTEREST INCOME
Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. Net
interest income depends primarily upon the volume of interest-earning assets
and interest-bearing liabilities and the corresponding interest rates earned or
paid. Our net interest income is significantly impacted by changes in interest
rates and market
19
21
yield curves. In the current rising interest rate environment, we continue to
experience compression of our net interest rate spread and net interest margin.
For the three months ended June 30, 2000, net interest income decreased
$8.9 million, or 6.5%, to $127.9 million, from $136.8 million for the three
months ended June 30, 1999. This decrease was the result of a decrease in the
net interest rate spread to 2.04% for the three months ended June 30, 2000,
from 2.24% for the three months ended June 30, 1999, partially offset by an
increase in average net interest-earning assets of $312.2 million. The change
in the net interest rate spread resulted from an increase in the average cost
of interest-bearing liabilities to 4.86% for the three months ended June 30,
2000, from 4.53% for the three months ended June 30, 1999, partially offset by
an increase in the average yield on total interest-earning assets to 6.90% for
the three months ended June 30, 2000, from 6.77% for the three months ended
June 30, 1999. The net interest margin was 2.34% for the three months ended
June 30, 2000 and 2.46% for the three months ended June 30, 1999.
For the six months ended June 30, 2000, net interest income decreased
$12.5 million, or 4.6%, to $260.1 million, from $272.6 million for the six
months ended June 30, 1999. This decrease was the result of a decrease in the
net interest rate spread to 2.08% for the six months ended June 30, 2000, from
2.31% for the six months ended June 30, 1999, partially offset by an increase
in average net interest-earning assets of $305.7 million. The change in the net
interest rate spread resulted from an increase in the average cost of
interest-bearing liabilities to 4.80% for the six months ended June 30, 2000,
from 4.50% for the six months ended June 30, 1999, partially offset by an
increase in the average yield on total interest-earning assets to 6.88% for the
six months ended June 30, 2000, from 6.81% for the six months ended June 30,
1999. The net interest margin was 2.37% for the six months ended June 30, 2000
and 2.51% for the six months ended June 30, 1999.
The increase in average net interest-earning assets for both the three and
six month periods ended June 30, 2000 over the comparable 1999 periods is the
result of the combined effect of an increase in average mortgage loans, a
decrease in average mortgage-backed securities and a decrease in average
borrowed funds. These changes are consistent with our decision to limit our
balance sheet growth during the current rising interest rate environment while
continuing to emphasize our origination of one-to-four family mortgage loans.
ANALYSIS OF NET INTEREST INCOME
The following table sets forth certain information for the three and six
months ended June 30, 2000 and 1999. Yields are derived by dividing income by
the average balance of the related assets and costs are derived by dividing
expense by the average balance of the related liabilities for the periods
shown. The average balance of loans receivable includes loans on which we have
discontinued accruing interest. The yields and costs include the amortization
of costs, fees, premiums and discounts which are considered adjustments to
interest rates.
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Three Months Ended June 30,
-------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in Thousands) Balance Interest Cost Balance Interest Cost
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS: (Annualized) (Annualized)
Interest-earning assets:
Mortgage loans (1) $10,497,498 $188,001 7.16% $ 9,397,072 $167,919 7.15%
Consumer and other loans (1) 168,476 4,274 10.15 205,607 4,794 9.33
Mortgage-backed securities (2) 9,045,349 148,001 6.54 10,728,117 170,988 6.38
Other securities (2) 1,881,543 32,710 6.95 1,824,159 31,985 7.01
Federal funds sold and
repurchase agreements 292,681 4,570 6.25 127,055 1,527 4.81
----------- ------ ----------- --------
Total interest-earning assets 21,885,547 377,556 6.90 22,282,010 377,213 6.77
------- -------
Non-interest-earning assets 431,402 812,304
----------- -----------
Total assets $22,316,949 $23,094,314
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings $ 2,568,512 $ 12,882 2.01% $ 2,729,232 $ 13,682 2.01%
Certificates of deposit 4,947,759 69,088 5.59 4,989,725 64,427 5.16
NOW and money manager 949,505 1,366 0.58 902,308 1,281 0.57
Money market 1,300,576 16,893 5.20 1,006,389 10,651 4.23
---------- ------- ---------- -------
Total deposits 9,766,352 100,229 4.11 9,627,654 90,041 3.74
Borrowed funds 10,762,595 149,395 5.55 11,609,953 150,382 5.18
---------- ------- ---------- -------
Total interest-bearing liabilities 20,528,947 249,624 4.86 21,237,607 240,423 4.53
Non-interest-bearing liabilities 542,527 ------- 440,910 -------
---------- ----------
Total liabilities 21,071,474 21,678,517
Stockholders' equity 1,245,475 1,415,797
---------- ----------
Total liabilities and stockholders'
equity $22,316,949 $23,094,314
========== ==========
Net interest income/net interest
rate spread $127,932 2.04% $136,790 2.24%
======= ==== ======= ====
Net interest-earning assets/net
interest margin $ 1,356,600 2.34% $ 1,044,403 2.46%
========== ==== =========== ====
Ratio of interest-earning assets
to interest-bearing liabilities 1.07x 1.05x
===== =====
- ---------------------------------
(1) Mortgage, consumer and other loans include non-performing loans and
exclude the allowance for loan losses.
(2) Securities available-for-sale are reported at average amortized cost.
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Six Months Ended June 30,
-------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in Thousands) Balance Interest Cost Balance Interest Cost
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS: (Annualized) (Annualized)
Interest-earning assets:
Mortgage loans (1) $10,378,924 $371,713 7.16% $ 9,197,773 $329,806 7.17%
Consumer and other loans (1) 170,990 8,568 10.02 214,272 10,071 9.40
Mortgage-backed securities (2) 9,268,270 302,025 6.52 10,282,758 329,865 6.42
Other securities (2) 1,865,379 65,100 6.98 1,857,263 65,017 7.00
Federal funds sold and
repurchase agreements 287,291 8,669 6.03 140,340 3,349 4.77
----------- -------- ----------- --------
Total interest-earning assets 21,970,854 756,075 6.88 21,692,406 738,108 6.81
------- -------
Non-interest-earning assets 428,276 852,637
----------- -----------
Total assets $22,399,130 $22,545,043
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Savings $ 2,570,726 $ 25,795 2.01% $ 2,746,304 $ 27,367 1.99%
Certificates of deposit 4,941,800 135,722 5.49 5,005,693 129,619 5.18
NOW and money manager 921,348 2,683 0.58 903,735 2,529 0.56
Money market 1,258,047 32,127 5.11 958,097 20,092 4.19
----------- ------- ------------ ---------
Total deposits 9,691,921 196,327 4.05 9,613,829 179,607 3.74
Borrowed funds 10,954,875 299,614 5.47 11,060,175 285,916 5.17
---------- ------- ---------- -------
Total interest-bearing liabilities 20,646,796 495,941 4.80 20,674,004 465,523 4.50
Non-interest-bearing liabilities 534,376 ------- 440,911 -------
---------- ----------
Total liabilities 21,181,172 21,114,915
Stockholders' equity 1,217,958 1,430,128
----------- -----------
Total liabilities and stockholders'
equity $22,399,130 $22,545,043
========== ==========
Net interest income/net interest
rate spread $260,134 2.08% $272,585 2.31%
======= ==== ======= ====
Net interest-earning assets/net
interest margin $ 1,324,058 2.37% $ 1,018,402 2.51%
========== ==== =========== ====
Ratio of interest-earning assets
to interest-bearing liabilities 1.06x 1.05x
===== =====
(1) Mortgage, consumer and other loans include non-performing loans and
exclude the allowance for loan losses.
(2) Securities available-for-sale are reported at average amortized cost.
RATE/VOLUME ANALYSIS
The following table presents the extent to which changes in interest rates
and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected our interest income and interest expense during the
periods indicated. Information is provided in each category with respect to:
(1) changes attributable to changes in volume (changes in volume multiplied by
prior rate), (2) changes attributable to changes in rate (changes in rate
multiplied by prior volume), and (3) the net change. The changes attributable
to the combined impact of volume and rate have been allocated proportionately
to the changes due to volume and the changes due to rate.
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Three Months Ended June 30, 2000 Six Months Ended June 30, 2000
Compared to Compared to
Three Months Ended June 30, 1999 Six Months Ended June 30, 1999
---------------------------------------------------------------------------
(In Thousands) Increase (Decrease) Increase (Decrease)
- --------------------------------------------------------------------------------------------------------------------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
Interest-earning assets:
Mortgage loans ........................ $ 19,845 $ 237 $ 20,082 $ 41,912 $ (5) $ 41,907
Consumer and other loans................ (916) 396 (520) (1,634) 131 (1,503)
Mortgage-backed securities.............. (27,218) 4,231 (22,987) (28,484) 644 (27,840)
Other securities........................ 1,000 (275) 725 163 (80) 83
Federal funds sold and repurchase
agreements........................... 2,475 568 3,043 4,248 1,072 5,320
------- ------ ------ ------- ----- -------
Total...................................... (4,814) 5,157 343 16,205 1,762 17,967
------- ------ ------ ------- ----- -------
Interest-bearing liabilities:
Savings ............................... (800) - (800) (1,596) 24 (1,572)
Certificates of deposit ................ (556) 5,217 4,661 (291) 6,394 6,103
NOW and money manager................... 63 22 85 55 99 154
Money market ........................... 3,498 2,744 6,242 7,073 4,962 12,035
Borrowed funds.......................... (11,354) 10,367 (987) (408) 14,106 13,698
------- ------ ------ ------- ------ -------
Total...................................... (9,149) 18,350 9,201 4,833 25,585 30,418
------- ------ ------ ------- ------ -------
Net change in net interest
income.................................. $ 4,335 $(13,193) $ (8,858) $ 11,372 $(23,823) $(12,451)
======= ====== ====== ======= ======= =======
INTEREST INCOME
Interest income for the three months ended June 30, 2000 increased $343,000
to $377.6 million, from $377.2 million for the three months ended June 30,
1999. This increase was the result of an increase in the average yield on
interest-earning assets to 6.90% for the three months ended June 30, 2000, from
6.77% for the three months ended June 30, 1999, partially offset by a $396.5
million decrease in average interest-earnings assets to $21.89 billion for the
three months ended June 30, 2000, from $22.28 billion for the three months
ended June 30, 1999. The decrease in average interest-earning assets was
primarily due to decreases in the average balance of mortgage-backed securities
resulting from principal repayments, partially offset by increases in the
average balance of mortgage loans. The net decrease and shift in assets reflect
our decision to reduce the balance sheet while continuing our emphasis on
one-to-four family mortgage lending.
Interest income on mortgage loans increased $20.1 million to $188.0
million for the three months ended June 30, 2000, from $167.9 million for the
three months ended June 30, 1999, which was the result of an increase in the
average balance of $1.10 billion, coupled with a slight increase in the average
yield on mortgage loans to 7.16% for the three months ended June 30, 2000, from
7.15% for the three months ended June 30, 1999. The increase in the average
balance of mortgage loans reflects our continued emphasis on the origination of
primarily one-to-four family residential mortgage loans. Although interest
rates have increased from the comparable 1999 period, we experienced only a
slight increase in the average yield on mortgage loans. The
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rising interest rate environment has created a shift in consumer demand from
fixed rate products to adjustable rate products which we currently offer at
rates below their fully indexed rate for an introductory period which generally
runs from three to five years. Accordingly, the impact of rising rates has not
yet been fully reflected in the overall average yield on our mortgage loan
portfolio. Interest income on consumer and other loans decreased $520,000
resulting from a decrease in the average balance of $37.1 million, partially
offset by an increase in the yield to 10.15% for the three months ended June
30, 2000, from 9.33% for the three months ended June 30, 1999.
Interest income on mortgage-backed securities decreased $23.0 million to
$148.0 million for the three months ended June 30, 2000, from $171.0 million
for the three months ended June 30, 1999. This decrease was the result of a
$1.68 billion decrease in the average balance of this portfolio, partially
offset by an increase in the average yield to 6.54% for the three months ended
June 30, 2000 from 6.38% for three months ended June 30, 1999. Interest income
on other securities increased $725,000 to $32.7 million for the three months
ended June 30, 2000, from $32.0 million for the three months ended June 30,
1999. This was the result of an increase in the average balance of this
portfolio of $57.4 million, partially offset by a decrease in the average yield
to 6.95% for the three months ended June 30, 2000, from 7.01% for the three
months ended June 30, 1999. Interest income on federal funds sold and
repurchase agreements increased $3.0 million as a result of an increase in the
average balance of $165.6 million, coupled with an increase in the average
yield to 6.25% for the three months ended June 30, 2000, from 4.81% for the
three months ended June 30, 1999. The significant increase in the average yield
on federal funds sold and repurchase agreements is the result of rising
interest rates.
For the six months ended June 30, 2000, interest income increased $18.0
million, or 2.4%, to $756.1 million, from $738.1 million for the six months
ended June 30,1999. This increase was the result of a $278.4 million increase
in average interest-earning assets to $21.97 billion for the six months ended
June 30, 2000, from $21.69 billion for the comparable period in 1999, coupled
with an increase in the average yield on interest-earning assets to 6.88% for
the six months ended June 30, 2000, from 6.81% for the six months ended June
30, 1999.
Interest income on mortgage loans increased $41.9 million to $371.7
million for the six months ended June 30, 2000, from $329.8 million for the six
months ended June 30, 1999, which was the result of an increase in the average
balance of $1.18 billion, slightly offset by a decrease in the average yield on
mortgage loans to 7.16% for the six months ended June 30, 2000, from 7.17% for
the comparable period in 1999. Interest income on consumer and other loans
decreased $1.5 million resulting from a decrease in the average balance of
$43.3 million, partially offset by an increase in the average yield to 10.02%
for the six months ended June 30, 2000, from 9.40% for the six months ended
June 30, 1999.
Interest income on mortgage-backed securities decreased $27.9 million to
$302.0 million for the six months ended June 30, 2000, from $329.9 million for
the six months ended June 30, 1999. This decrease was the result of a $1.01
billion decrease in the average balance of the portfolio, partially offset by
an increase in the average yield to 6.52% for the six months ended June 30,
2000, from 6.42% for the six months ended June 30, 1999. Interest income on
other securities increased $83,000 resulting from an increase in the average
balance of $8.1 million, partially offset by a decrease in the average yield to
6.98% for the six months ended June 30, 2000, from 7.00% for the comparable
period in 1999. Interest income on federal funds sold and repurchase
24
26
agreements increased $5.4 million to $8.7 million for the six months ended June
30, 2000, from $3.3 million for the six months ended June 30, 2000, as a result
of an increase in the average balance of $147.0 million, coupled with an
increase in the average yield to 6.03% for the six months ended June 30, 2000,
from 4.77% for the six months ended June 30, 1999.
INTEREST EXPENSE
Interest expense for the three months ended June 30, 2000 increased $9.2
million, to $249.6 million, from $240.4 million for the three months ended June
30, 1999. This increase was attributable to an increase in the average cost of
interest-bearing liabilities to 4.86% for the three months ended June 30, 2000,
from 4.53% for the three months ended June 30, 1999, partially offset by a
decrease in the average balance of interest-bearing liabilities of $708.7
million, to $20.53 billion for the three months ended June 30, 2000, from
$21.24 billion for the three months ended June 30, 1999. The decrease in
average interest-bearing liabilities was attributable to a decrease in
borrowings, partially offset by an increase in deposits. The increase in the
overall average cost of our interest-bearing liabilities reflects the higher
interest rate environment that has prevailed since the middle of 1999.
Interest expense on borrowings decreased $987,000, to $149.4 million for
the three months ended June 30, 2000, from $150.4 million for the three months
ended June 30, 1999. This decrease was attributable to a decrease in the
average balance of borrowings of $847.4 million, offset by an increase in the
average cost of borrowings to 5.55% for the three months ended June 30, 2000,
from 5.18% for the three months ended June 30, 1999. Previous asset growth was
primarily funded through callable borrowings which, in a lower interest rate
environment, was the most cost effective way to fund our growth. The rising
interest rate environment has resulted in most of our borrowings being called
upon reaching their call dates. While a portion of the called borrowings are
being repaid, which is consistent with our decision to reduce the balance sheet
during the current rising interest rate environment, the remainder are being
rolled over into short- and medium-term borrowings without call features at
higher rates.
Interest expense on deposits increased $10.2 million to $100.2 million for
the three months ended June 30, 2000, from $90.0 million for the three months
ended June 30, 1999, reflecting an increase in the average cost of deposits to
4.11% for the three months ended June 30, 2000 from 3.74% for the three months
ended June 30, 1999, coupled with an increase in the average balance of total
deposits of $138.7 million. The increases in the average balance of total
deposits and average cost of deposits were driven by increases in our money
market accounts. Interest expense on money market accounts increased $6.2
million to $16.9 million for the three months ended June 30, 2000, from $10.7
million for the three months ended June 30, 1999, as a result of an increase in
the average balance of $294.2 million, coupled with an increase in the average
cost to 5.20% for the three months ended June 30, 2000, from 4.23% for the
three months ended June 30, 1999. Interest is paid on money market accounts on
a tiered basis with 88.3% of the total balances in the highest tier (accounts
with balances of $50,000 and higher). The yield on the highest tier is priced
relative to the discount rate for the three-month U.S. Treasury bill, which
provides an attractive short-term yield for our customers.
Interest expense on savings accounts decreased $800,000 as a result of a
decrease in the average balance of $160.7 million. Interest expense on
certificates of deposit increased $4.7 million as a result of an increase in
the average cost to 5.59% for the three months ended June 30,
25
27
2000 from 5.16% for the three months ended June 30, 1999, partially offset by a
decrease in the average balance of $42.0 million. The increase in the average
cost of certificates of deposit reflects our commitment to offer competitive
rates to our customers. Interest expense on NOW and money manager accounts
increased $85,000 mainly due to an increase in the average balance of $47.2
million.
Interest expense for the six months ended June 30, 2000 increased $30.4
million, to $495.9 million, from $465.5 million for the six months ended June
30,1999. This increase was the result of an increase in the average cost of
these liabilities to 4.80% for the six months ended June 30, 2000, from 4.50%
for the six months ended June 30, 1999, coupled with changes in the average
balances of interest-bearing liabilities.
Interest expense on borrowed funds for the six months ended June 30, 2000
increased $13.7 million, to $299.6 million, from $285.9 million for the six
months ended June 30, 1999, resulting from an increase in the average cost of
borrowings to 5.47% for the six months ended June 30, 2000, from 5.17% for the
comparable 1999 period, partially offset by a decrease in the average balance
of $105.3 million.
Interest expense on deposits increased $16.7 million, to $196.3 million
for the six months ended June 30, 2000, from $179.6 million for the six months
ended June 30,1999, reflecting an increase in the average cost of deposits to
4.05% for the six months ended June 30, 2000, from 3.74% for the same period in
1999, coupled with an increase in the average balance of total deposits of
$78.1 million. Interest expense on money market accounts increased $12.0
million reflecting an increase in the average balance of $300.0 million,
coupled with an increase in the average cost to 5.11% for the six months ended
June 30, 2000, from 4.19% for the 1999 comparable period.
Interest expense on savings accounts decreased $1.6 million which was
attributable to a decrease in the average balance of $175.6 million offset
slightly by an increase in the average cost to 2.01% for the six months ended
June 30, 2000, from 1.99% for the six months ended June 30, 1999. Interest
expense on certificates of deposit increased $6.1 million resulting from an
increase in the average cost to 5.49% for the six months ended June 30, 2000,
from 5.18% for the six months ended June 30, 1999, slightly offset by a
decrease in the average balance of $63.9 million. Interest expense on NOW and
money manager accounts increased $154,000 as a result of an increase in the
average cost to 0.58% for the six months ended June 30, 2000, from 0.56% for
the same period in 1999, coupled with an increase in the average balance of
$17.6 million.
PROVISION FOR LOAN LOSSES
Provision for loan losses totaled $1.0 million for both the three months
ended June 30, 2000 and 1999. For the six months ended June 30, 2000, provision
for loan losses totaled $2.0 million compared to $2.1 million for the same
period in 1999. The allowance for loan losses increased to $78.0 million at
June 30, 2000, from $76.6 million at December 31, 1999. The increase in the
allowance for loan losses in part reflects the overall increase in our loan
portfolio despite the continued improvement of our asset quality. Net loan
charge-offs totaled $358,000 for the three months ended June 30, 2000 and
$563,000 for the six months ended June 30, 2000. Non-performing loans decreased
$14.2 million to $39.2 million at June 30, 2000, from $53.4 million
26
28
at December 31, 1999. This reduction in non-performing loans improved the
percentage of allowance for loan losses to non-performing loans to 198.96% at
June 30, 2000, from 143.49% at December 31, 1999. The allowance for loan losses
as a percentage of total loans decreased slightly from 0.75% at December 31,
1999 to 0.72% at June 30, 2000 primarily due to an increase of $539.7 million
in gross total loans from December 31, 1999 to June 30, 2000. For further
discussion of non-performing loans, see "Asset Quality."
NON-INTEREST INCOME
Non-interest income for the quarter ended June 30, 2000 increased $1.9
million to $18.3 million, from $16.4 million for the quarter ended June 30,
1999 and $2.1 million to $35.2 million for the six months ended June 30, 2000
from $33.1 million for the six months ended June 30, 1999. Customer service and
other loan fees totaled $12.0 million for the three months ended June 30, 2000
and $23.2 million for the six months ended June 30, 2000, compared to $9.4
million for the three months ended June 30, 1999 and $18.9 million for the six
months ended June 30, 1999. This increase is due in part to increases in
customer service fees during the third quarter of 1999. Loan servicing fees
totaled $2.4 million for the three months ended June 30, 2000 and $5.5 million
for the six months ended June 30, 2000, compared to $4.1 million for the three
months ended June 30, 1999 and $9.3 million for the six months ended June 30,
1999. Loan servicing fees include all contractual and ancillary servicing
revenue we receive, net of amortization of mortgage servicing rights and
valuation allowance adjustments for the impairment of mortgage servicing
rights. The decrease in loan servicing fees for the three months ended June 30,
2000 was the result of a decrease in the recovery of a portion of the valuation
allowance for mortgage servicing rights of $1.3 million and a decrease in fees
received of $950,000, partially offset by a decrease in the amortization of
mortgage servicing rights of $585,000, as compared to the corresponding period
in 1999. The decrease in loan servicing fees for the six months ended June 30,
2000 was the result of a decrease in the recovery of a portion of the valuation
allowance for mortgage servicing rights of $2.8 million and a decrease in fees
received of $2.3 million, partially offset by a decrease in the amortization of
mortgage servicing rights of $1.3 million, as compared to the six months ended
June 30, 1999. The decrease in fees received is due to a decrease in the
balance of loans serviced for others from $4.70 billion at June 30, 1999 to
$4.18 billion at June 30, 2000, and the decrease in the amortization of
mortgage servicing rights is due to the decrease in prepayments and refinance
activity which is a result of the current interest rate environment.
Net gains on sales of loans totaled $178,000 for the three months ended
June 30, 2000 and $295,000 for the six months ended June 30, 2000, compared to
$773,000 for the three months ended June 30, 1999 and $3.0 million for the six
months ended June 30, 1999. Net gain on disposition of banking and loan
production offices, or LPOs, totaled $2.8 million for the three months ended
June 30, 2000 and $4.0 million for the six months ended June 30, 2000, compared
to a net loss of $1.2 million for the six months ended June 30, 1999. We
recorded a net gain of $2.8 million during the second quarter of 2000 related
to the sale of the former LIB headquarters and a net gain of $1.2 million
during the first quarter related to the sale of a former Long Island Savings
Bank banking office. The net loss of $1.2 million in the first quarter of 1999
resulted from the closing and disposition of certain LPOs.
27
29
NON-INTEREST EXPENSE
Non-interest expense for the quarter ended June 30, 2000 was $53.3
million, a decrease of $3.5 million, from $56.8 million for the quarter ended
June 30, 1999. For the six months ended June 30, 2000, non-interest expense
decreased $4.9 million to $110.0 million, from $114.9 million for the six
months ended June 30, 1999. General and administrative expense decreased $6.6
million to $43.8 million for the second quarter of 2000, from $50.4 million for
the comparable 1999 period. For the six months ended June 30, 2000, general and
administrative expense decreased $12.3 million to $90.1 million, from $102.4
million for the comparable 1999 period.
Compensation and benefits totaled $19.5 million for the three months ended
June 30, 2000 and $39.8 million for the six months ended June 30, 2000,
compared to $23.4 million for the three months ended June 30, 1999 and $48.0
million for the six months ended June 30, 1999. These decreases are primarily
attributable to reductions in commissions expense due to decreased mortgage
origination volume. Employee stock plans amortization expense totaled $1.6
million for the three months ended June 30, 2000 and $3.5 million for the six
months ended June 30, 2000, compared to $2.9 million for the three months ended
June 30, 1999 and $5.8 million for the six months ended June 30, 1999. The
decrease in employee stock plans amortization expense is due primarily to the
effect of the lower average market value of our common stock on ESOP expense.
Goodwill litigation expense was $1.8 million for the three months ended
June 30, 2000 and 1999 and $4.3 million for the six months ended June 30, 2000,
compared to $2.9 million for the six months ended June 30, 1999. Non-interest
expense includes $3.1 million for the quarter ended June 30, 2000 and $6.2
million for the six months ended June 30, 2000 of capital trust securities
expense related to the issuance of $125.0 million of Capital Securities by our
wholly-owned subsidiary, Astoria Capital Trust I, in the fourth quarter of
1999. For further discussion of the Capital Securities, see "Notes to
Consolidated Financial Statements" and "Liquidity and Capital Resources." The
Company's percentage of general and administrative expense to average assets
improved to 0.78% for the three months ended June 30, 2000 and 0.80% for the
six months ended June 30, 2000, from 0.87% for the three months ended June 30,
1999 and 0.91% for the six months ended June 30, 1999. The efficiency ratios
also improved to 30.51% for the three months ended June 30, 2000 and 30.93% for
the six months ended June 30, 2000, from 33.08% for the three months ended June
30, 1999 and 33.48% for the six months ended June 30, 1999.
INCOME TAX EXPENSE
For the quarter ended June 30, 2000, income tax expense was $36.1 million,
representing an effective tax rate of 39.2%, as compared to $39.6 million,
representing an effective tax rate of 41.5%, for the quarter ended June 30,
1999. For the six months ended June 30, 2000, income tax expense was $72.0
million, representing an effective tax rate of 39.3%, as compared to $79.5
million, representing an effective tax rate of 42.1%, for the six months ended
June 30, 1999. The decrease in our effective tax rate was attributable to a tax
benefit derived from a 1999 corporate restructuring of certain subsidiaries of
Astoria Federal.
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CASH EARNINGS
Tangible stockholders' equity (stockholders' equity less goodwill) totaled
$1.06 billion at June 30, 2000, compared to $973.0 million at December 31,
1999. Tangible equity is a critical measure of a company's ability to
repurchase shares, pay dividends and continue to grow. Astoria Federal is
subject to various capital requirements which affect its classification for
safety and soundness purposes, as well as for deposit insurance premium
purposes. These requirements utilize, subject to further adjustments, tangible
equity as a base component, not equity as defined by GAAP.
Although reported earnings and return on equity are traditional measures
of a company's performance, we believe that the change in tangible equity, or
"cash earnings," is also a significant measure of a company's performance. Cash
earnings exclude the effects of various non-cash expenses, such as the
amortization for the allocation of ESOP and RRP stock and related tax benefit,
as well as the amortization of goodwill. In the case of tangible equity, these
items have either been previously charged to equity, as in the case of ESOP and
RRP charges, through contra-equity accounts, or do not affect tangible equity,
such as the market appreciation of allocated ESOP shares, for which the
operating charge is offset by a credit to additional paid-in capital, and
goodwill amortization for which the related intangible asset has already been
deducted in the calculation of tangible equity.
We believe that cash earnings and cash returns on average tangible equity
reflect our ability to generate tangible capital that can be leveraged for
future growth. Cash earnings totaled $62.3 million for the three months ended
June 30, 2000 and $124.5 million for the six months ended June 30, 2000. Cash
earnings for the three months ended June 30, 1999 totaled $64.4 million and for
the six months ended June 30, 1999 totaled $126.7 million. Cash return on
average tangible equity was 24.24% for the second quarter of 2000 and 21.85%
for the second quarter of 1999. Cash return on average assets was 1.12% for the
quarters ended June 30, 2000 and 1999. Cash return on average tangible equity
was 24.95% for the six months ended June 30, 2000 and 21.30% for the six months
ended June 30, 1999. Cash return on average assets was 1.11% for the period
ended June 30, 2000 and 1.12% for the same period in 1999. Additionally, the
cash general and administrative expense (general and administrative expense,
excluding non-cash amortization expense relating to certain employee stock
plans) to average assets ratio improved to 0.76% for the three months ended
June 30, 2000 as compared to 0.82% for the three months ended June 30, 1999.
The cash efficiency ratio improved to 29.38% for the second quarter of 2000
from 31.19% for the second quarter of 1999. For the six months ended June 30,
2000, the cash general and administrative expense to average assets ratio was
0.77% as compared to 0.86% for the comparable 1999 period. The cash efficiency
ratio was 29.73% for the six months ended June 30, 2000 versus 31.57% for the
six months ended June 30, 1999.
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Presented below are our Condensed Consolidated Schedules of Cash Earnings
for the three and six months ended June 30, 2000 and 1999.
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULES OF CASH EARNINGS
(In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income $55,860 $55,722 $111,357 $109,176
Add back:
Employee stock plans amortization expense 1,626 2,869 3,513 5,841
Amortization of goodwill 4,824 4,843 9,648 9,749
Income tax benefit on amortization expense of
earned portion of RRP stock 13 968 26 1,935
------- ------- -------- --------
Cash earnings 62,323 64,402 124,544 126,701
Preferred dividends declared (1,500) (1,500) (3,000) (3,000)
-------- -------- --------- ---------
Cash earnings available to common shareholders $60,823 $62,902 $121,544 $123,701
======= ======= ======== ========
Basic cash earnings per common share (1) $ 1.26 $ 1.21 $ 2.51 $ 2.38
====== ====== ======= ========
Diluted cash earnings per common share (1) $ 1.24 $ 1.18 $ 2.47 $ 2.32
====== ====== ======= ========
- --------------------
(1) Based on the weighted average shares used to calculate earnings per share
on the Consolidated Statements of Income.
ASSET QUALITY
One of our key operating objectives has been and continues to be to
maintain a high level of asset quality. Through a variety of strategies,
including but not limited to borrower workout arrangements and aggressive
marketing of foreclosed properties, we have been proactive in addressing
problem and non-performing assets which, in turn, has helped strengthen our
financial condition. Such strategies, as well as our concentration on
one-to-four family mortgage lending, maintaining sound credit standards for new
loan originations and a generally strong and stable economy and real estate
market, have resulted in a steady reduction in non-performing assets to total
assets from December 31, 1995 through June 30, 2000. Non-performing assets
decreased from $58.4 million at December 31, 1999 to $43.8 million at June 30,
2000. The ratio of non-performing assets to total assets decreased from 0.26%
at December 31, 1999 to 0.20% at June 30, 2000. The following table shows a
comparison of delinquent loans as of June 30, 2000 and December 31, 1999.
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Delinquent Loans
----------------
At June 30, 2000 At December 31, 1999
----------------------------------------------- -----------------------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
------------------ ----------------------- ---------------------- ----------------------
Number Principal Number Principal Number Principal Number Principal
of Balance of Balance of Balance of Balance
(Dollars in Thousands) Loans of Loans Loans of Loans Loans of Loans Loans of Loans
- ---------------------- ----------------- ------------------------ ---------------------- ----------------------
One-to-four family........... 25 $ 651 299 $35,293 45 $2,202 390 $48,610
Multi-family................. 1 84 2 992 - - 5 802
Commercial real estate....... 1 427 6 1,940 3 2,369 8 2,331
Consumer and other loans..... 146 849 101 989 162 1,033 148 1,626
--- ----- ---- ------ --- ----- --- ------
Total delinquent loans....... 173 $2,011 408 $39,214 210 $5,604 551 $53,369
=== ===== === ====== === ===== === ======
Delinquent loans to total
loans.................... 0.02% 0.36% 0.05% 0.52%
The following table sets forth information regarding non-performing assets
at June 30, 2000 and December 31, 1999. In addition to the non-performing
loans, we had approximately $2.0 million of potential problem loans at June 30,
2000 and $5.6 million at December 31, 1999. Such loans are 60-89 days
delinquent as shown above.
Non-Performing Assets
---------------------
At At
June 30, December 31,
2000 1999
------------ --------------
(Dollars in Thousands)
Non-accrual delinquent mortgage loans (1)................ $36,398 $48,830
Non-accrual delinquent consumer and other loans.......... 989 1,626
Mortgage loans delinquent 90 days or more and
still accruing interest (2)............................ 1,827 2,913
------- -------
Total non-performing loans.......................... 39,214 53,369
------ ------
Real estate owned, net (3)............................... 4,615 5,080
------- ------
Total non-performing assets......................... $43,829 $58,449
====== ======
Allowance for loan losses to non-performing loans............ 198.96% 143.49%
Allowance for loan losses to total loans..................... 0.72% 0.75%
- --------------------
(1) Consists primarily of loans secured by one-to-four family properties.
(2) Loans delinquent 90 days or more and still accruing interest consist
solely of loans delinquent 90 days or more as to their maturity date but
not their interest payments, and are primarily secured by multi-family and
commercial properties.
(3) Real estate we acquired as a result of foreclosure or by deed-in-lieu of
foreclosure is recorded at the lower of cost or fair value less estimated
selling costs.
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If all non-accrual loans had been performing in accordance with their
original terms, we would have recorded interest income of $1.6 million for the
six months ended June 30, 2000 and $3.8 million for the year ended December 31,
1999 on these loans. Actual payments recorded to interest income on non-accrual
loans totaled $644,000 for the six months ended June 30, 2000 and $1.9 million
for the year ended December 31, 1999.
Excluded from non-performing assets are restructured loans that have
complied with the terms of their restructure agreement for a satisfactory
period and have, therefore, been returned to performing status. Restructured
loans that are in compliance with their restructured terms totaled $5.8 million
at June 30, 2000 and $6.7 million at December 31, 1999.
The following table sets forth the change in allowance for loan losses.
(In Thousands)
Allowance for Loan Losses:
Balance at December 31, 1999............................................. $76,578
Provision charged to operations..................................... 2,005
Charge-offs:
One-to-four family........................................... (800)
Multi-family................................................. (8)
Commercial................................................... -
Consumer and other........................................... (946)
-------
Total charge-offs................................................... (1,754)
--------
Recoveries:
One-to-four family........................................... 384
Multi-family................................................. 136
Commercial................................................... 465
Consumer and other .......................................... 206
-------
Total recoveries.................................................... 1,191
-------
Total net charge-offs............................................... (563)
-------
Balance at June 30, 2000................................................. $78,020
======
IMPACT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," or SFAS No. 133. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial condition and measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative (that is, unrealized gains and losses) depends on the intended use
of the derivative and the resulting designation. In June 1999, the FASB issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," or SFAS No. 137. SFAS No.137 defers the effective date of
SFAS No. 133 from fiscal quarters of fiscal years beginning after June 15, 1999
to June 15, 2000. SFAS No. 133 does not require restatement of prior periods.
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In June 2000, the FASB issued Statement of Financial Accounting Standards
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an amendment of FASB Statement No. 133," or SFAS No. 138. SFAS
No. 138 amends the accounting and reporting standards of SFAS No. 133 for
certain derivative instruments and certain hedging activities. SFAS No. 138
will be adopted concurrently with SFAS No. 133. We believe the implementation
of SFAS No. 133 and SFAS No. 138 will not have a material impact on our
financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a description of our quantitative and qualitative disclosures about
market risk, see the information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Interest Rate Sensitivity Analysis."
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
With respect to the action entitled Ronnie Weil, also known as Ronnie
Moore, for Herself and on Behalf of All Other Persons Who Obtained Mortgage
Loans from The Long Island Savings Banks, FSB during the period January 1, 1983
through December 31, 1992 vs. The Long Island Savings Bank, FSB, et al., which
is pending in the United States District Court for the Eastern District of New
York, discovery has commenced. On February 28, 2000, Astoria Federal, as
successor to The Long Island Savings Bank, FSB, on behalf of itself and the
former directors of The Long Island Savings Bank, FSB, filed a motion to
bifurcate discovery such that discovery with respect to class certification
issues would proceed and other merit discovery would be held in abeyance until
such time as the Plaintiffs were certified as a proper class. On April 11,
2000, the Court denied such motion and ordered that discovery proceed according
to the following schedule. Defendants' depositions of the putative class
Plaintiffs were to be completed by May 15, 2000. Written responses to
Plaintiffs' discovery requests were to be provided by June 2, 2000, with
document discovery made available by June 9, 2000. Depositions of the
Defendants and discovery from non-parties would commence on the later of June
19, 2000 or two weeks after Plaintiffs transmit their class certification
moving papers to Defendants' counsels. A conference with the Court was also
ordered to be held on August 11, 2000.
The Defendants have completed depositions of the putative class
Plaintiffs, responded to Plaintiffs' discovery requests and made document
discovery available. Plaintiffs, on or about May 24, 2000, transmitted their
class certification moving papers to Defendants' counsels and the depositions
of the Defendants have commenced. We, on or about July 14, 2000, transmitted to
Plaintiffs' counsel our response to Plaintiffs' motion, among other things,
objecting to certification of Plaintiffs' putative class.
We believe that the likelihood is remote that this case will have a
material adverse impact on our consolidated financial condition or results of
operations.
With respect to the case entitled The Long Island Savings Bank, FSB et al.
vs. The United
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States, or the LISB Goodwill Litigation, which is pending in the United States
Court of Federal Claims, Chief Judge Smith, by order filed March 27, 2000,
indicated that the Court's first order of business should be the prompt
resolution of the pending partial summary judgment motions in the 26 of the 27
"first-thirty" cases in which such motions are pending, including the LISB
Goodwill Litigation, and that it will not be possible for the Court to prepare
for and conduct more than 20 damage trials in a calendar year. Judge Smith also
indicated that it was the Court's understanding that some parties in the
"first-thirty" cases may be interested in delaying trials on damages and
conserving resources until the pending appeals in the goodwill litigation cases
are resolved. Based upon this, the Court indicated that parties could request
to defer assignment to a trial judge. Based upon this invitation by the Court,
Astoria Federal requested such a deferral in the LISB Goodwill Litigation. By
motion dated April 21, 2000, the Government requested leave to respond to
Plaintiffs' requests to forego assignment, objecting to the deferral, which
leave was granted by the Court. Astoria Federal has filed a response indicating
that it requested the deferral at the Court's invitation and that if the Court
determines that the LISB Goodwill Case should be assigned to a trial judge,
Astoria Federal is prepared to proceed to trial at this time.
The Court also indicated in its order filed March 27, 2000 that resolution
of the partial summary judgment motions in the "second-thirty" cases was not a
priority of the Court at this time. The action entitled, Astoria Federal
Savings and Loan Association vs. United States, or the Astoria Goodwill
Litigation, which is also pending in the United States Court of Federal Claims
and with respect to which a partial summary judgment motion is pending, is
among the "second-thirty cases".
With respect to both the LISB Goodwill Litigation and the Astoria Goodwill
Litigation, no assurance can be given as to the results of these claims or the
timing of any proceedings in relation thereto.
In the case of Leonard Minzer, et ano. v. Gerard C. Keegan, et al. which
had been commenced on July 18, 1997 in the United States District Court for the
Eastern District of New York against The Greater New York Savings Bank,
referred to as The Greater, The Greater's directors and certain of its
executive officers, Astoria Federal and Astoria Financial Corporation, the
United States Court of Appeals for the Second Circuit on July 10, 2000 affirmed
the District Court's earlier ruling dismissing Plaintiffs' second amended
complaint. The Plaintiffs have filed a petition for rehearing and suggestion
for In Banc with the United States Court of Appeals for the Second Circuit.
That request is pending.
For further information regarding legal proceedings see Part I, Item 3 of
our Annual Report on Form 10-K for the year ended December 31, 1999.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our Annual Meeting of shareholders was held on May 17, 2000, referred to
as the Annual Meeting.
At the Annual Meeting, our shareholders elected Gerard C. Keegan, Andrew
M. Burger, Denis J. Connors, Thomas J. Donahue and Donald D. Wenk as directors
each to serve for a three year term and, in any case, until the election and
qualification of their respective successors. In addition, the shareholders
ratified our appointment of KPMG LLP as our independent auditors for our 2000
fiscal year.
The number of votes cast as to each matter acted upon the Annual Meeting
was as follows:
(a) Election of Directors:
For Withheld
--- --------
Gerard C. Keegan 43,355,752 1,575,201
Andrew M. Burger 43,479,187 1,451,766
Denis J. Connors 43,471,534 1,459,419
Thomas J. Donahue 43,477,755 1,453,198
Donald D. Wenk 43,455,364 1,475,589
There were no broker held non-voted shares represented at the meeting with
respect to this proposal.
(b) Ratification of the appointment of KPMG LLP as independent
auditors of Astoria Financial Corporation for our 2000 fiscal
year:
For: 44,509,035
Against: 323,771
Abstained: 98,147
There were no broker held non-voted shares represented at the meeting
with respect to this proposal.
ITEM 5. OTHER INFORMATION
Effective April 19, 2000, William J. Fendt retired from our Board of
Directors after reaching mandatory retirement age. Effective upon his
retirement, the Board reduced its number from fourteen directors to thirteen
directors.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Statement Regarding Computation of Per Share Earnings.
27. Financial Data Schedule.
(b) Reports on Form 8-K
1. Form 8-K dated April 12, 2000 which extended the
response date for the exchange of the Series A Capital
Securities of Astoria Capital Trust I to Series B
Capital Securities.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Astoria Financial Corporation
Dated: August 11, 2000 By: /s/ Monte N. Redman
--------------- --------------------------------
Monte N. Redman
Executive Vice President
and Chief Financial Officer
(Principal Accounting Officer)
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Exhibit Index
Exhibit No Identification of Exhibit
- ---------- -------------------------
11. Statement Regarding Computation of Per Share Earnings
27. Financial Data Schedule
37