1
Exhibit 99.2
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
September 30, December 31,
($ in thousands, except par value) 1997 1996
----------- -----------
Assets
Cash and due from banks ...................................................... $ 21,247 $ 22,396
Federal funds sold ........................................................... 8,175 5,750
Securities available-for-sale, net, at estimated fair value .................. 196,340 215,961
Securities held-to-maturity, net:
Mortgage-backed securities, net (estimated fair value
of $996,033 and $1,027,922, respectively) .............................. 992,453 1,042,843
Other bonds and notes, net (estimated fair value
of $72,469 and $131,117, respectively) ................................. 72,323 131,478
Federal Home Loan Bank of New York stock ..................................... 24,250 23,600
Loans receivable, net:
Mortgage loans on real estate ............................................. 761,970 835,600
Other loans ............................................................... 155,591 132,968
----------- -----------
Loans receivable .......................................................... 917,561 968,568
Allowance for loan losses ................................................. (40,357) (17,228)
----------- -----------
Loans receivable, net .................................................. 877,204 951,340
Accrued interest receivable .................................................. 12,840 15,343
Premises and equipment, net .................................................. 29,630 28,273
Deferred tax asset, net ...................................................... 52,966 45,365
Other assets ................................................................. 65,648 59,539
----------- -----------
Total assets ........................................................ $ 2,353,076 $ 2,541,888
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits .................................................................. $ 1,598,072 $ 1,656,702
Borrowed funds, including securities sold under agreements
to repurchase of $339,000 and $409,500, respectively ................... 507,774 640,384
Accrued expenses and other liabilities .................................... 39,209 35,154
----------- -----------
Total liabilities ................................................... 2,145,055 2,332,240
----------- -----------
Stockholders' Equity:
Preferred stock, 8.25%, cumulative, ESOP convertible Series A ($1.00 par
value, 1,800,000 shares authorized, 1,536,391 shares
issued and outstanding at December 31, 1996 ............................ -- 1,537
Preferred stock, 12%, noncumulative, perpetual Series B
($1.00 par value, 2,000,000 shares authorized, issued
and outstanding) ....................................................... 2,000 2,000
Additional paid-in capital, preferred ..................................... 45,312 63,111
ESOP debt guarantee ....................................................... (13,464) (14,230)
Common stock ($1.00 par value, 45,000,000 shares authorized, 15,669,124 and
13,534,448 shares issued and outstanding, respectively) ................ 15,669 13,534
Additional paid-in capital, common ........................................ 129,975 102,883
Surplus fund .............................................................. 22,998 22,998
Undivided profits ......................................................... 4,503 17,845
Net unrealized gain (loss) on securities available-for-sale, net of taxes . 1,028 (30)
----------- -----------
Total stockholders' equity .......................................... 208,021 209,648
----------- -----------
Total liabilities and stockholders' equity .......................... $ 2,353,076 $ 2,541,888
=========== ===========
See accompanying notes to consolidated financial statements.
5
2
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Quarter Ended
September 30,
------------------------
($ in thousands, except per share data) 1997 1996
-------- --------
Interest income:
Mortgage loans on real estate ......................... $ 14,734 $ 18,070
Other loans ........................................... 3,155 2,916
-------- --------
Total interest on loans ............................... 17,889 20,986
Securities available-for-sale ......................... 3,380 3,245
Securities held-to-maturity:
Mortgage-backed securities ......................... 17,560 17,103
Other bonds and notes .............................. 1,785 2,210
Other ................................................. 596 521
-------- --------
Total interest income ........................... 41,210 44,065
-------- --------
Interest expense:
Deposits .............................................. 15,856 16,597
Securities sold under agreements to repurchase ........ 5,880 5,795
Other borrowed funds .................................. 3,253 3,732
-------- --------
Total interest expense .......................... 24,989 26,124
-------- --------
Net interest income ...................................... 16,221 17,941
Provision for loan losses ................................ 21,000 500
-------- --------
Net interest (loss) income after provision for loan losses (4,779) 17,441
-------- --------
Non-interest income:
Income from mortgage activities ....................... 238 2,102
Customer service fees ................................. 1,029 1,125
Fees from sales of investment products ................ 533 354
Net loss on sales of securities ....................... (7,279) --
Other ................................................. 319 24
-------- --------
Total non-interest (loss) income ................ (5,160) 3,605
-------- --------
Non-interest expense:
Compensation and benefits ............................. 5,659 5,981
Occupancy, net ........................................ 2,007 1,942
Equipment and data processing services ................ 2,468 1,447
Advertising and promotion ............................. 254 583
Federal deposit insurance premiums .................... 53 129
Non-performing loan and real estate activities ........ 2,046 591
Other ................................................. 2,485 2,107
-------- --------
Total non-interest expense ...................... 14,972 12,780
-------- --------
(Loss) income before taxes ............................... (24,911) 8,266
Income tax (benefit) expense ............................. (9,314) 3,284
-------- --------
Net (loss) income ............................... $(15,597) $ 4,982
======== ========
Primary (loss) earnings per share ........................ $ (1.12) $ 0.23
Fully diluted (loss) earnings per share .................. (1.12) 0.22
Dividends declared per common share ...................... 0.05 --
See accompanying notes to consolidated financial statements.
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3
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended
September 30,
--------------------------
($ in thousands, except per share data) 1997 1996
--------- ---------
Interest income:
Mortgage loans on real estate .................. $ 49,516 $ 57,204
Other loans .................................... 8,982 8,118
--------- ---------
Total interest on loans ........................ 58,498 65,322
Securities available-for-sale .................. 10,534 9,766
Securities held-to-maturity:
Mortgage-backed securities .................. 53,746 49,549
Other bonds and notes ....................... 5,960 6,485
Other .......................................... 1,585 1,797
--------- ---------
Total interest income .................... 130,323 132,919
--------- ---------
Interest expense:
Deposits ....................................... 47,633 50,443
Securities sold under agreements to repurchase . 18,125 16,840
Other borrowed funds ........................... 10,392 11,758
--------- ---------
Total interest expense ................... 76,150 79,041
--------- ---------
Net interest income ............................... 54,173 53,878
Provision for loan losses ......................... 21,500 1,500
--------- ---------
Net interest income after provision for loan losses 32,673 52,378
--------- ---------
Non-interest income:
Income from mortgage activities ................ 1,013 3,608
Customer service fees .......................... 2,914 2,861
Fees from sales of investment products ......... 1,438 1,289
Net (loss) gain on sales of securities ......... (7,279) 20
Other .......................................... 625 405
--------- ---------
Total non-interest (loss) income ......... (1,289) 8,183
--------- ---------
Non-interest expense:
Compensation and benefits ...................... 17,132 17,827
Occupancy, net ................................. 5,882 5,881
Equipment and data processing services ......... 5,860 4,430
Advertising and promotion ...................... 851 1,282
Federal deposit insurance premiums ............. 411 383
Provision for real estate losses ............... 500 --
Non-performing loan and real estate activities . 3,535 2,430
Other .......................................... 7,029 6,463
--------- ---------
Total non-interest expense ............... 41,200 38,696
--------- ---------
(Loss) income before taxes ........................ (9,816) 21,865
Income tax (benefit) expense ...................... (3,668) 8,419
--------- ---------
Net (loss) income ........................ $ (6,148) $ 13,446
========= =========
Primary (loss) earnings per share ................. $ (0.79) $ 0.59
Fully diluted (loss) earnings per share ........... (0.79) 0.55
Dividends declared per common share ............... 0.15 --
See accompanying notes to consolidated financial statements.
7
4
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
For the Nine Months Ended
September 30,
--------------------------
($ in thousands) 1997 1996
--------- ---------
Preferred stock - Series A:
Balance at beginning of period ........................................ $ 1,537 $ 1,595
Conversion of 1,536,391 and 58,236 shares to common stock ............. (1,537) (58)
--------- ---------
Balance at end of period ........................................ -- 1,537
--------- ---------
Preferred stock - Series B:
Balance at beginning and end of period .......................... 2,000 2,000
--------- ---------
Additional paid-in capital, preferred:
Balance at beginning of period ........................................ 63,111 63,810
Conversion of 1,536,391 and 58,236 shares to common stock ............. (17,799) (699)
--------- ---------
Balance at end of period ........................................ 45,312 63,111
--------- ---------
ESOP debt guarantee:
Balance at beginning of period ........................................ (14,230) (15,670)
Payment of principal on ESOP debt ..................................... 766 705
--------- ---------
Balance at end of period ........................................ (13,464) (14,965)
--------- ---------
Common stock:
Balance at beginning of period ........................................ 13,534 13,289
Issuance of 2,134,676 and 150,907 shares of common stock .............. 2,135 151
--------- ---------
Balance at end of period ........................................ 15,669 13,440
--------- ---------
Additional paid-in capital, common:
Balance at beginning of period ........................................ 102,883 100,648
Issuance of 2,134,676 and 150,907 shares of common stock,
including applicable tax benefit ................................... 27,092 1,329
--------- ---------
Balance at end of period ........................................ 129,975 101,977
--------- ---------
Surplus fund:
Balance at beginning and end of period .......................... 22,998 22,998
--------- ---------
Undivided profits:
Balance at beginning of period ........................................ 17,845 7,231
Net (loss) income ..................................................... (6,148) 13,446
Dividends declared on preferred stock, net of applicable tax benefit .. (5,088) (5,090)
Dividends declared on common stock, net of applicable tax benefit ..... (2,106) --
--------- ---------
Balance at end of period ........................................ 4,503 15,587
--------- ---------
Net unrealized gain (loss) on securities available-for-sale, net of taxes:
Balance at beginning of period ........................................ (30) 36
Change in net unrealized gain (loss), net of taxes .................... 1,058 (882)
--------- ---------
Balance at end of period ........................................ 1,028 (846)
--------- ---------
Total stockholders' equity at end of period ..................... $ 208,021 $ 204,839
========= =========
See accompanying notes to consolidated financial statements.
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5
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
September 30,
--------------------------
($ in thousands) 1997 1996
--------- ---------
Cash flows from operating activities:
Net (loss) income ........................................................ $ (6,148) $ 13,446
--------- ---------
Items to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization ....................................... 1,657 1,718
Provisions for loan and real estate losses .......................... 22,000 1,500
Deferred tax (benefit) expense ...................................... (4,081) 8,005
Decrease in net deferred fees ....................................... (906) (782)
Amortization of premiums and accretion of discounts, net ............ 2,035 1,505
Net loss (gain) on sales of assets and loans originated for sale .... 6,857 (113)
Net gain on sale of mortgage servicing rights ....................... -- (1,504)
Sales of loans originated for sale, net ............................. 4,736 1,701
(Increase) decrease in accrued interest receivable and other assets . (433) 3,244
Decrease in accrued expenses and other liabilities .................. (591) (4,243)
--------- ---------
Net cash provided by operating activities ..................... 25,126 24,477
--------- ---------
Cash flows from investing activities:
Principal repayments of securities available-for-sale ............... 21,473 19,471
Sales of securities available-for-sale .............................. -- 4,982
Purchases of securities available-for-sale .......................... -- (7,734)
Principal repayments of mortgage-backed securities .................. 138,660 143,050
Sales of mortgage-backed securities ................................. 23,821 --
Purchases of mortgage-backed securities ............................. (121,553) (232,090)
Principal repayments of other bonds and notes ....................... 2,618 4,023
Principal repayments and sales of loans receivable .................. 149,760 148,753
Originations and purchases of loans receivable ...................... (112,761) (85,223)
Sale of mortgage servicing rights ................................... -- 450
Sales of other real estate .......................................... 5,024 9,355
(Purchases) redemptions of FHLB stock, net .......................... (650) 4,250
Purchases of premises and equipment, net ............................ (3,014) (922)
Investment in joint ventures, net ................................... (135) (196)
--------- ---------
Net cash provided by investing activities ..................... 103,243 8,169
--------- ---------
Cash flows from financing activities:
Decrease in deposits ................................................ (53,159) (20,768)
(Repayment of) proceeds from securities sold under agreements
to repurchase, maturing in 90 days or less, net .................. (70,500) 237,000
Proceeds from borrowed funds ........................................ -- 15,000
Repayment of borrowed funds ......................................... (889) (250,862)
Dividends paid on preferred stock ................................... (6,117) (6,178)
Dividends paid on common stock ...................................... (2,124) --
Proceeds from issuance of common stock .............................. 5,696 612
--------- ---------
Net cash used by financing activities ......................... (127,093) (25,196)
--------- ---------
Net increase in cash and cash equivalents ..................... 1,276 7,450
Cash and cash equivalents at beginning of period ............................ 28,146 26,502
--------- ---------
Cash and cash equivalents at end of period .................................. $ 29,422 $ 33,952
========= =========
Supplemental disclosures:
Cash paid during the period for:
Interest ............................................................ $ 78,076 $ 81,373
========= =========
Income taxes, net ................................................... 449 432
========= =========
Noncash investing activities:
Loans to finance sales of real estate ............................... 1,800 4,006
========= =========
Loans transferred to real estate acquired through foreclosure, net .. 5,155 3,542
========= =========
Noncash financing activities:
Elimination of Municipal Investment Trust Funds repurchase agreements 60,455 --
========= =========
Conversion of preferred stock to common stock ....................... 19,336 757
========= =========
Reduction in ESOP debt guarantee .................................... 766 705
========= =========
See accompanying notes to consolidated financial statements.
9
6
THE GREATER NEW YORK SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The consolidated financial statements of The Greater New York Savings
Bank and Subsidiaries (the "Greater") in this report have not been audited
except for the information derived from the audited Consolidated Statement of
Financial Condition as of December 31, 1996. These statements should be read in
conjunction with the audited consolidated financial statements and related notes
thereto included in the Greater's Annual Report to Stockholders and in the
related Annual Report on Form F-2 for the year ended December 31, 1996, which
has been filed as an exhibit to The Greater New York Bancorp's Registration
Statement on Form S-4 filed with the Commission on February 20, 1997, as amended
(File No. 333-22127) pursuant to the Securities Act, and is incorporated by
reference in this Form 8-K/A, as supplemented by its Quarterly Reports on Form
10-Q for the quarters ended March 31, 1997 and June 30, 1997. The June 30, 1997
Quarterly Report on Form 10-Q has been filed as an exhibit to Astoria Financial
Corporation's (the "Company") Current Report on Form 8-K filed with the
Commission on October 3, 1997, pursuant to the Securities Act, and is
incorporated by reference in this Form 8-K/A.
In the opinion of management, all material adjustments necessary for a
fair presentation of financial condition and results of operations for the
interim periods presented have been made. These adjustments are of a normal
recurring nature, except for certain adjustments made in connection with the
merger of the Greater into Astoria Federal Savings and Loan Association (the
"Association") (see Note 4). The results of operations for the interim periods
are not necessarily indicative of the results that may be expected for the
entire year or any other interim period. Certain reclassifications have been
made to prior period amounts. In preparing the consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses. Actual
results could differ from those estimates.
2. (LOSS) EARNINGS PER SHARE
Both primary and fully diluted loss per share are calculated by
dividing net loss plus preferred stock dividend requirements by the
weighted-average number of shares of common stock outstanding. Primary and fully
diluted earnings per share are calculated by dividing net income less preferred
stock dividend requirements by the weighted-average number of shares of common
stock and dilutive common stock equivalents outstanding. Common stock
equivalents consist of options to purchase common stock.
Prior to the actual conversion of ESOP Series A 8.25% Cumulative
Convertible Preferred Stock (the "Preferred Stock") on July 3, 1997 (see Note
3), the computation of fully diluted earnings per share also included certain
adjustments to net income and the addition of other potentially dilutive
securities outstanding. The adjustments to net income represented the
elimination of ESOP dividends and the addition of incremental expense, which
would have arose as a result of a hypothetical conversion into common stock of
the Preferred Stock. Other potentially dilutive securities represented the
shares of common stock that would have arose from such a conversion.
Preferred stock dividend requirements, adjusted net (loss) income
applicable to common stock and the average number of shares used for primary and
fully diluted (loss) earnings per share computations are summarized as follows:
10
7
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
-------------------------------- --------------------------------
($ in thousands) 1997 1996 1997 1996
------------ ------------ ------------ ------------
Preferred dividend requirements ............. $ 1,485 $ 1,803 $ 5,088 $ 5,408
Adjusted net (loss) income applicable to:
Primary (loss) earnings per share ........ $ (17,082) $ 3,179 $ (11,236) $ 8,038
Fully diluted (loss) earnings per share .. $ (17,082) $ 3,274 $ (11,236) $ 8,321
Average number of common shares outstanding . 15,193,364 13,426,146 14,169,672 13,353,802
Average number of common and dilutive
common equivalent shares outstanding for:
Primary (loss) earnings per share ..... 15,193,364 13,587,948 14,169,672 13,513,735
Fully diluted (loss) earnings per share 15,193,364 15,151,124 14,169,672 15,113,588
3. CONVERSION OF SERIES A 8.25% CUMULATIVE CONVERTIBLE PREFERRED STOCK
On July 3, 1997, the United States Trust Company of New York, the
trustee of the Greater's Employee Stock Ownership Plan ("ESOP"), converted all
the outstanding shares of the Greater's Preferred Stock into the Greater's
common stock. The Preferred Stock was converted at a rate of 0.9448 per share of
common stock for each share of the Preferred Stock. As a result, 1,396,227
shares of the Greater's common stock was issued upon the conversion of 1,477,802
shares of the Preferred Stock. The conversion had no impact on the Greater's
reported financial position at September 30, 1997 or its results of operations
for the quarter and nine months ended September 30, 1997. The conversion
resulted in a reclassification of $5.1 million of preferred equity to common
equity.
4. MERGER INTO ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION
Following the close of business on September 30, 1997, the Greater was
acquired by and merged into the Association, a wholly-owned subsidiary of the
Company, in a transaction that was accounted for as a purchase (the "Merger").
The Merger contained restrictions on the operations of the Greater
pending the completion of the Merger and also required the Greater, at the
written request of the Company, to modify and change its loan, litigation, real
estate valuation policies and practices (including loan classifications and
level of reserves) and investment and asset/liability management policies and
practices before the consummation of the Merger so as to be consistent on a
mutually satisfactory basis with those of the Association, subject to compliance
with generally accepted accounting principles, and all applicable laws and
regulations. The Greater was not obligated to take any such action until after
the date on which all required regulatory and shareholder approvals were
received, and after receipt of written confirmation from the Company that the
Greater was not aware of any fact or circumstance that would prevent completion
of the Merger.
In September 1997, the Company advised the Greater in writing to: (i)
record an incremental pre-tax provision for loan losses of $21.0 million, (ii)
transfer approximately $25 million of commercial real estate and multi-family
loans that would have been categorized as 60-89 days past due and still accruing
interest at September 30, 1997 to a nonperforming status, and (iii) record pre-
tax charges totaling $3.5 million related to the transfer of the aforementioned
loans (of which $2.0 million was recorded as expenses for nonperforming loans
and real estate activities and $1.5 million was recorded as a reversal of
interest income previously accrued).
11
8
5. LEGAL MATTERS
On April 3, 1997, a purported class action was commenced in the Supreme
Court of the State of New York (Kings County) against the Greater, its directors
and certain of its executive officers. The suit is entitled Leonard Minzer and
Harry Schipper v. Gerard C. Keegan, et al. The suit alleges, among other things,
that the directors and certain executive officers of the Greater have breached
their fiduciary duties in entering into the merger agreement and related
arrangements.
The complaint seeks, among other things, a preliminary and permanent
injunction against the Merger and the related transactions, an order to the
directors and executive officers to carry-out their fiduciary duties, and
unspecified damages and costs. The Greater believes that the allegations made in
this action are without merit. On May 16, 1997, Mr. Keegan and the Greater filed
an initial motion to dismiss the action.
On July 18, 1997, a purported class action was commenced in the U.S.
District Court for the Eastern District of New York entitled Leonard Minzer and
Harry Schipper v. Gerard C. Keegan, et al. against the Greater, its directors,
certain of its executive officers, the Company and the Association. The suit
alleges, among other things, that the Greater, its directors and certain of its
executive officers solicited proxies in violation of Section 14(a) of the
Securities Exchange Act of 1934 and Rule 14a-9, promulgated thereunder by
failing to disclose certain allegedly material facts in the proxy statement, as
amended, that was circulated to the Greater's shareholders in connection with
the merger, and that the Greater's directors and certain executive officers have
breached their fiduciary duties in entering into the merger agreement and
related arrangements. Plaintiff's also claim, among other things, that the
Company and the Association aided the Greater's officers and directors in
allegedly breaching their fiduciary duties. Plaintiffs sought, among other
things, a preliminary and permanent injunction against consummation of the
Merger and the related transactions, an order directing the directors and
executive officers of the Greater to carry-out their fiduciary duties, and
unspecified damages and costs. The Greater and the Association were served with
the complaint in the Federal Action on July 30, 1997. On July 31, 1997, the
plaintiffs made an application to the Court for expedited discovery and to set a
hearing on their prospective application for a preliminary injunction. Shortly
thereafter, all defendants filed motions to dismiss the complaint in this
action.
At a hearing on August 11, 1997, the Court permitted certain limited,
particularized discovery to be had by the plaintiffs. On September 2, 1997, the
plaintiffs filed an amended complaint and an application for a preliminary
injunction. An evidentiary hearing on the plaintiffs' application was held on
September 10, 1997. On September 22, 1997, the court issued a written decision
denying the plaintiffs' application in all respects. On or about November 18,
1997, a stipulation signed by counsel for all parties was filed withdrawing
plaintiffs claims, without prejudice, against certain of the Greater's officers
who were not also directors of the Greater, that stipulation must be so ordered
by the Court. Certain of the Greater's non-director officers also entered into
an agreement providing, among other things, that the running of time is tolled
for one year for purposes of all legal or equitable defenses which they may have
with respect to the claims asserted in the lawsuits. The Greater has indicated
that it believes that the allegations made in this action are without merit. All
defendants filed motions to dismiss the plaintiff's amended complaint on or
about November 19, 1997.
12