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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, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-22228
ASTORIA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 11-3170868
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Astoria Federal Plaza, Lake Success, New York 11042-1085
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(516) 327-3000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Classes of Common Stock Number of Shares Outstanding, July 31, 2003
----------------------- -------------------------------------------
.01 Par Value 80,435,217
------------- ----------
PART I -- FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Financial Condition at June 30, 2003 2
and December 31, 2002
Consolidated Statements of Income for the Three and Six Months 3
Ended June 30, 2003 and June 30, 2002
Consolidated Statement of Changes in Stockholders' Equity for the 4
Six Months Ended June 30, 2003
Consolidated Statements of Cash Flows for the Six Months Ended 5
June 30, 2003 and June 30, 2002
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and 10
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 36
Item 4. Controls and Procedures 38
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 39
Item 2. Changes in Securities and Use of Proceeds 39
Item 3. Defaults Upon Senior Securities 39
Item 4. Submission of Matters to a Vote of Security Holders 39
Item 5. Other Information 40
Item 6. Exhibits and Reports on Form 8-K 40
Signatures 41
1
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition (Unaudited)
At At
June 30, December 31,
(In Thousands, Except Share Data) 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
ASSETS:
Cash and due from banks $ 142,361 $ 167,605
Federal funds sold and repurchase agreements 117,722 510,252
Available-for-sale securities:
Encumbered 2,201,309 2,096,619
Unencumbered 1,029,537 695,962
- -----------------------------------------------------------------------------------------------------------------------
3,230,846 2,792,581
Held-to-maturity securities, fair value of $5,684,777 and $5,100,565,
respectively:
Encumbered 4,588,927 4,059,947
Unencumbered 1,047,164 981,310
- -----------------------------------------------------------------------------------------------------------------------
5,636,091 5,041,257
Federal Home Loan Bank of New York stock, at cost 231,200 247,550
Loans held-for-sale, net 73,095 62,669
Loans receivable:
Mortgage loans, net 11,631,846 11,680,160
Consumer and other loans, net 411,804 379,201
- -----------------------------------------------------------------------------------------------------------------------
12,043,650 12,059,361
Allowance for loan losses (83,390) (83,546)
- -----------------------------------------------------------------------------------------------------------------------
Loans receivable, net 11,960,260 11,975,815
Mortgage servicing rights, net 13,844 20,411
Accrued interest receivable 85,806 88,908
Premises and equipment, net 159,456 157,297
Goodwill 185,151 185,151
Bank owned life insurance 360,580 358,898
Other assets 86,477 89,435
- -----------------------------------------------------------------------------------------------------------------------
Total assets $22,282,889 $21,697,829
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Deposits:
Savings $ 2,927,603 $ 2,832,291
Money market 1,385,165 1,698,552
NOW and demand deposit 1,510,949 1,383,315
Certificates of deposit 5,485,449 5,153,038
- -----------------------------------------------------------------------------------------------------------------------
Total deposits 11,309,166 11,067,196
Reverse repurchase agreements 6,735,000 6,285,000
Federal Home Loan Bank of New York advances 1,979,000 2,064,000
Other borrowings, net 477,039 472,180
Mortgage escrow funds 120,559 104,353
Accrued expenses and other liabilities 134,510 151,102
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 20,755,274 20,143,831
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 5,000,000 shares authorized:
Series A (1,225,000 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;
110,996,592 shares issued; and 80,672,623 and 84,805,817 shares
outstanding, respectively) 1,110 1,110
Additional paid-in capital 846,285 840,186
Retained earnings 1,431,620 1,368,062
Treasury stock (30,323,969 and 26,190,775 shares, at cost, respectively) (744,819) (639,579)
Accumulated other comprehensive income 18,075 9,800
Unallocated common stock held by ESOP (4,850,252 and 5,018,500
shares, respectively) (26,656) (27,581)
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,527,615 1,553,998
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $22,282,889 $21,697,829
- -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
2
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -------------------------
(In Thousands, Except Share Data) 2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------------
Interest income:
Mortgage loans:
One-to-four family $ 117,866 $ 163,449 $244,795 $ 329,958
Multifamily, commercial real estate and
construction 49,449 38,781 95,665 75,070
Consumer and other loans 4,960 4,117 9,732 7,919
Mortgage-backed securities 88,213 97,225 182,261 197,721
Other securities 8,280 19,449 18,129 39,105
Federal funds sold and repurchase agreements 465 3,254 1,217 7,392
- --------------------------------------------------------------------------------------------------------------------
Total interest income 269,233 326,275 551,799 657,165
- --------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 57,189 75,543 115,430 153,770
Borrowed funds 115,793 128,363 231,110 266,099
- --------------------------------------------------------------------------------------------------------------------
Total interest expense 172,982 203,906 346,540 419,869
- --------------------------------------------------------------------------------------------------------------------
Net interest income 96,251 122,369 205,259 237,296
Provision for loan losses - 1,002 - 2,006
- --------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 96,251 121,367 205,259 235,290
- --------------------------------------------------------------------------------------------------------------------
Non-interest income:
Customer service fees 15,759 15,347 30,592 29,278
Other loan fees 2,041 1,558 3,867 3,680
Net gain of sales of securities 8,029 - 10,165 -
Mortgage banking income, net (376) 600 60 4,028
Income from bank owned life insurance 5,049 5,982 10,248 10,244
Other 1,041 841 2,506 4,058
- --------------------------------------------------------------------------------------------------------------------
Total non-interest income 31,543 24,328 57,438 51,288
- --------------------------------------------------------------------------------------------------------------------
Non-interest expense:
General and administrative:
Compensation and benefits 27,604 26,289 56,368 52,357
Occupancy, equipment and systems 15,159 13,052 29,774 26,227
Federal deposit insurance premiums 468 499 960 1,004
Advertising 1,744 1,531 3,242 2,558
Other 6,865 8,904 13,462 16,258
- --------------------------------------------------------------------------------------------------------------------
Total non-interest expense 51,840 50,275 103,806 98,404
- --------------------------------------------------------------------------------------------------------------------
Income before income tax expense 75,954 95,420 158,891 188,174
Income tax expense 25,065 31,489 51,605 63,025
- --------------------------------------------------------------------------------------------------------------------
Net income 50,889 63,931 107,286 125,149
Preferred dividends declared (1,500) (1,500) (3,000) (3,000)
- --------------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $ 49,389 $ 62,431 $104,286 $ 122,149
- --------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.64 $ 0.74 $ 1.34 $ 1.44
- --------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.64 $ 0.73 $ 1.33 $ 1.41
- --------------------------------------------------------------------------------------------------------------------
Dividends per common share $ 0.22 $ 0.20 $ 0.42 $ 0.37
- --------------------------------------------------------------------------------------------------------------------
Basic weighted average common shares 76,861,759 84,216,057 77,945,438 84,843,610
Diluted weighted average common and common equivalent shares 77,470,793 85,946,408 78,620,070 86,490,683
See accompanying notes to consolidated financial statements.
3
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity (Unaudited)
For the Six Months Ended June 30, 2003
Accumu- Unallo-
lated cated
Other Common
Additional Compre- Stock
Preferred Common Paid-in Retained Treasury hensive Held
(In Thousands, Except Share Data) Total Stock Stock Capital Earnings Stock Income by ESOP
- ------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002 $1,553,998 $2,000 $1,110 $840,186 $1,368,062 $(639,579) $ 9,800 $(27,581)
Comprehensive income:
Net income 107,286 - - - 107,286 - - -
Other comprehensive income, net of tax:
Net unrealized gain on securities 7,404 - - - - - 7,404 -
Amortization of net unrealized loss
on cash flow hedging instruments 96 - - - - - 96 -
Amortization of unrealized loss
on securities transferred to
held-to-maturity 775 - - - - - 775 -
----------
Comprehensive income 115,561
----------
Common stock repurchased
(4,654,000 shares) (117,987) - - - - (117,987) - -
Dividends on common and preferred
stock and amortization of purchase
premium (35,732) - - (652) (35,080) - - -
Exercise of stock options and
related tax benefit
(520,806 shares issued) 7,494 - - 3,395 (8,648) 12,747 - -
Amortization relating to allocation
of ESOP stock 4,281 - - 3,356 - - - 925
- -----------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2003 $1,527,615 $2,000 $1,110 $846,285 $1,431,620 $(744,819) $18,075 $(26,656)
=============================================================================================================================
See accompanying notes to consolidated financial statements.
4
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended
June 30,
---------------------------------
(In Thousands) 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 107,286 $ 125,149
Adjustments to reconcile net income to net cash provided
by operating activities:
Net premium amortization on mortgage loans and mortgage-backed securities 58,845 19,419
Other net discount accretion (877) (25,068)
Net provision for loan and real estate losses 5 2,006
Depreciation and amortization 6,066 5,462
Net gain on sales of loans and securities (16,137) (2,846)
Originations of loans held-for-sale, net of proceeds from sales (4,454) 27,319
Amortization relating to allocation of ESOP stock 4,281 4,389
Decrease in accrued interest receivable 3,102 768
Mortgage servicing rights amortization and valuation
allowance, net of capitalized amounts 6,567 2,034
Income from bank owned life insurance, net of insurance proceeds received (1,682) (10,244)
Decrease (increase) in other assets 6,344 (50,084)
Decrease in accrued expenses and other liabilities (16,195) (26,805)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 153,151 71,499
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Originations of loans receivable (2,643,404) (1,891,187)
Loan purchases through third parties (705,724) (752,523)
Principal payments on loans receivable 3,337,775 2,269,757
Principal payments on mortgage-backed securities held-to-maturity 2,476,517 1,340,028
Principal payments on mortgage-backed securities available-for-sale 1,147,360 986,294
Purchases of mortgage-backed securities held-to-maturity (3,160,014) (1,912,575)
Purchases of mortgage-backed securities available-for-sale (2,535,035) -
Purchases of other securities available-for-sale (600) (502)
Proceeds from calls and maturities of other securities held-to-maturity 67,045 107,158
Proceeds from calls and maturities of other securities available-for-sale 132,693 675
Proceeds from sales of mortgage-backed securities available-for-sale 829,680 -
Net redemptions of FHLB of New York stock 16,350 24,977
Proceeds from sales of real estate owned, net 1,101 2,856
Purchases of premises and equipment, net of proceeds from sales (8,225) (8,127)
Purchase of bank owned life insurance - (100,000)
- ----------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (1,044,481) 66,831
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in deposits 241,970 333,709
Net increase (decrease) in reverse repurchase agreements 450,000 (500,000)
Net decrease in FHLB of New York advances (85,000) (249,550)
Net decrease in other borrowings - (300,000)
Net increase in mortgage escrow funds 16,206 17,082
Common stock repurchased (117,987) (84,587)
Cash dividends paid to stockholders (35,732) (34,373)
Cash received for options exercised 4,099 5,591
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 473,556 (812,128)
- ----------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (417,774) (673,798)
Cash and cash equivalents at beginning of period 677,857 1,453,858
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 260,083 $ 780,060
- ----------------------------------------------------------------------------------------------------------------------
Supplemental disclosures:
Cash paid during the period:
Interest $ 348,600 $ 430,225
- ----------------------------------------------------------------------------------------------------------------------
Income taxes $ 48,397 $ 57,246
- ----------------------------------------------------------------------------------------------------------------------
Additions to real estate owned $ 593 $ 1,068
- ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
5
ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Astoria Financial Corporation and its wholly-owned subsidiaries: Astoria Federal
Savings and Loan Association and its subsidiaries, referred to as Astoria
Federal; Astoria Capital Trust I; and 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. All significant inter-company accounts and
transactions have been eliminated in consolidation.
In our opinion, the accompanying consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of our financial condition as of June 30, 2003 and December
31, 2002, our results of operations for the three and six months ended June 30,
2003 and 2002, changes in our stockholders' equity for the six months ended June
30, 2003 and our cash flows for the six months ended June 30, 2003 and 2002. In
preparing the consolidated 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, 2003 and December 31, 2002, and amounts of revenues and expenses in the
consolidated statements of income for the three and six months ended June 30,
2003 and 2002. The results of operations for the three and six months ended June
30, 2003 are not necessarily indicative of the results of operations to be
expected for the remainder of the year or for any other interim periods. Certain
information and note disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America, or GAAP, have been condensed or omitted pursuant to
the rules and regulations of the Securities and Exchange Commission, or SEC.
Certain reclassifications have been made to prior period amounts to conform to
the current period presentation.
These consolidated financial statements should be read in conjunction with our
December 31, 2002 audited consolidated financial statements and related notes
included in our 2002 Annual Report on Form 10-K.
6
2. Earnings Per Share, or EPS
The following table is a reconciliation of basic and diluted EPS.
For the Three Months Ended June 30,
-----------------------------------------------------------------
2003 2002
-----------------------------------------------------------------
Basic Diluted Basic Diluted
(In Thousands, Except Per Share Data) EPS EPS(1) EPS EPS
- --------------------------------------------------------------------------------------------------------------------
Net income $ 50,889 $ 50,889 $ 63,931 $ 63,931
Preferred dividends declared (1,500) (1,500) (1,500) (1,500)
- --------------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $ 49,389 $ 49,389 $ 62,431 $ 62,431
- --------------------------------------------------------------------------------------------------------------------
Total weighted average basic
common shares outstanding 76,862 76,862 84,216 84,216
Effect of dilutive securities:
Options - 609 - 1,730
- --------------------------------------------------------------------------------------------------------------------
Total weighted average diluted
common shares outstanding 76,862 77,471 84,216 85,946
- --------------------------------------------------------------------------------------------------------------------
Net earnings per common share $ 0.64 $ 0.64 $ 0.74 $ 0.73
- --------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30,
-----------------------------------------------------------------
2003 2002
-----------------------------------------------------------------
Basic Diluted Basic Diluted
(In Thousands, Except Per Share Data) EPS EPS(2) EPS EPS
- --------------------------------------------------------------------------------------------------------------------
Net income $107,286 $107,286 $125,149 $125,149
Preferred dividends declared (3,000) (3,000) (3,000) (3,000)
- --------------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $104,286 $104,286 $122,149 $122,149
- --------------------------------------------------------------------------------------------------------------------
Total weighted average basic
common shares outstanding 77,945 77,945 84,844 84,844
Effect of dilutive securities:
Options - 675 - 1,647
- --------------------------------------------------------------------------------------------------------------------
Total weighted average diluted
common shares outstanding 77,945 78,620 84,844 86,491
- --------------------------------------------------------------------------------------------------------------------
Net earnings per common share $ 1.34 $ 1.33 $ 1.44 $ 1.41
- --------------------------------------------------------------------------------------------------------------------
(1) Options to purchase 1,946,484 shares of common stock at prices between
$25.44 per share and $29.88 per share were outstanding as of June 30, 2003,
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 for the three months ended June 30, 2003.
(2) Options to purchase 1,926,484 shares of common stock at prices between
$26.24 per share and $29.88 per share were outstanding as of June 30, 2003,
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 for the six months ended June 30, 2003.
3. Mortgage Servicing Rights, or MSR
MSR are carried at amortized cost, and impairment, if any, is recognized through
a valuation allowance. MSR, at amortized cost, totaled $31.2 million at June 30,
2003 and $35.1 million at December 31, 2002. The valuation allowance totaled
$17.4 million at June 30, 2003 and $14.7 million at December 31, 2002. The cost
of MSR is amortized over the estimated remaining lives of the loans serviced.
MSR amortization totaled $3.8 million for the three months ended June 30, 2003
and $1.9 million for the three months ended June 30, 2002. MSR amortization
totaled $7.6 million for the six months ended June 30, 2003 and $4.0 million for
the six months ended
7
June 30, 2002. As of June 30, 2003, estimated future MSR amortization through
2008 is as follows: $6.0 million for the remainder of 2003, $9.7 million for
2004, $5.8 million for 2005, $3.4 million for 2006, $2.1 million for 2007 and
$1.3 million for 2008. Actual results may vary depending upon the level of
repayments on the loans currently serviced.
4. Stock Option Plans
We apply the intrinsic value method of Accounting Principles Board, or APB,
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for our stock option plans. Accordingly, no
stock-based employee compensation cost is reflected in net income, as all
options granted under our stock option plans had an exercise price equal to the
market value of the underlying common stock on the date of grant.
The following table illustrates the effect on net income and earnings per share
if we had applied the fair value recognition provisions of Statement of
Financial Accounting Standards, or SFAS, No. 123, "Accounting for Stock-Based
Compensation," to stock-based employee compensation.
For the Three Months Ended June 30,
-----------------------------------
(In Thousands, Except Per Share Data) 2003 2002
- -----------------------------------------------------------------------------------------------
Net income:
As reported $50,889 $63,931
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects 1,235 1,043
------- -------
Pro forma $49,654 $62,888
======= =======
Basic earnings per common share:
As reported $0.64 $0.74
===== =====
Pro forma $0.63 $0.73
===== =====
Diluted earnings per common share:
As reported $0.64 $0.73
===== =====
Pro forma $0.62 $0.71
===== =====
For the Six Months Ended June 30,
---------------------------------
(In Thousands, Except Per Share Data) 2003 2002
- -------------------------------------------------------------------------------------------------
Net income:
As reported $107,286 $125,149
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects 2,613 2,231
-------- --------
Pro forma $104,673 $122,918
======== ========
Basic earnings per common share:
As reported $1.34 $1.44
===== =====
Pro forma $1.30 $1.41
===== =====
Diluted earnings per common share:
As reported $1.33 $1.41
===== =====
Pro forma $1.29 $1.39
===== =====
8
5. Adoption of New Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board, or FASB, issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others," or FIN 45,
which addresses the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees it
has issued. FIN 45 also requires a guarantor to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The disclosure requirements of FIN 45 were effective for
financial statements of interim or annual periods ending after December 15,
2002. The recognition and measurement provisions are applicable prospectively to
guarantees issued or modified after December 31, 2002. The adoption of the
recognition and measurement provisions of FIN 45 did not have a material impact
on our financial condition or results of operations.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51," or FIN 46. FIN 46
clarifies the application of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties (referred to as
"variable interest entities"). FIN 46 is to be applied immediately to variable
interest entities created after January 31, 2003 and to variable interest
entities in which an enterprise obtains an interest after that date. For
variable interest entities in which an enterprise held a variable interest that
it acquired before February 1, 2003, FIN 46 is to be applied in the first fiscal
year or interim period beginning after June 15, 2003, and may be applied
prospectively with a cumulative-effect adjustment as of the date on which it is
first applied or by restating previously issued financial statements for one or
more years with a cumulative-effect adjustment as of the beginning of the first
year restated. The adoption of FIN 46 did not have a material impact on our
financial condition or results of operations.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," which amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 149 is generally effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designated after
June 30, 2003, and should generally be applied prospectively. The provisions of
SFAS No. 149 that relate to SFAS No. 133 Implementation Issues that have been
effective for fiscal quarters that began prior to June 15, 2003, should continue
to be applied in accordance with their respective effective dates. In addition,
the provisions of SFAS No. 149 which relate to forward purchases or sales of
when-issued securities or other securities that do not yet exist, should be
applied to both existing contracts and new contracts entered into after June 30,
2003. The adoption of SFAS No. 149 did not have a material impact on our
financial condition or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," which requires
issuers of certain financial instruments, falling within the scope of SFAS No.
150, with characteristics of both liabilities and equity to be classified and
measured as liabilities. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
9
beginning of the first interim period beginning after June 15, 2003. For
financial instruments created before the issuance date of SFAS No. 150 and still
existing at the beginning of the interim period of adoption, SFAS No. 150 is to
be implemented by reporting the cumulative effect of a change in an accounting
principle. Restatement is not permitted. The adoption of SFAS No. 150 did not
have a material impact on our financial condition or results of operations.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-Q contains a number of forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Securities Exchange Act
of 1934, as amended, or the Exchange Act. These statements may be identified by
the use of the words "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "outlook," "plan," "potential," "predict," "project," "should,"
"will," "would" and similar terms and phrases, including references to
assumptions.
Forward-looking statements are based on various assumptions and analyses made by
us in light of our management's experience and its perception of historical
trends, current conditions and expected future developments, as well as other
factors it believes are appropriate under the circumstances. These statements
are not guarantees of future performance and are subject to risks, uncertainties
and other factors (many of which are beyond our control) that could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements. These factors include, without limitation, the
following:
o the timing and occurrence or non-occurrence of events may be subject
to circumstances beyond our control;
o there may be increases in competitive pressure among financial
institutions or from non-financial institutions;
o changes in the interest rate environment may reduce interest
margins;
o changes in deposit flows, loan demand or real estate values may
adversely affect our business;
o changes in accounting principles, policies or guidelines may cause
our financial condition to be perceived differently;
o general economic conditions, either nationally or locally in some or
all areas in which we do business, or conditions in the securities
markets or the banking industry may be less favorable than we
currently anticipate;
o legislative or regulatory changes may adversely affect our business;
o technological changes may be more difficult or expensive than we
anticipate;
o success or consummation of new business initiatives may be more
difficult or expensive than we anticipate; or
o litigation or other matters before regulatory agencies, whether
currently existing or commencing in the future, may delay the
occurrence or non-occurrence of events longer than we anticipate.
We have no obligation to update any forward-looking statements to reflect events
or circumstances after the date of this document.
10
General
We are a Delaware corporation organized as the unitary savings and loan
association holding company of Astoria Federal. We are headquartered in Lake
Success, New York and our principal business is the operation of our
wholly-owned subsidiary, Astoria Federal. Astoria Federal's principal business
is attracting retail deposits from the general public and investing those
deposits, together with funds generated from operations, principal repayments on
loans and securities, and borrowed funds, primarily in one-to-four family
mortgage loans, mortgage-backed securities, multi-family mortgage loans and
commercial real estate loans. To a smaller degree, we also invest in
construction loans and consumer and other loans. In addition, Astoria Federal
invests in U.S. Government and federal agency securities and other investments
permitted by federal laws and regulations.
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, 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, non-interest income, non-interest expense and
income tax expense. Non-interest income includes customer service fees; other
loan fees; net gain on sales of securities; mortgage banking income, net; income
from bank owned life insurance, or BOLI; and other non-interest income.
Non-interest expense consists of general and administrative expense which
includes compensation and benefits expense; occupancy, equipment and systems
expense; federal deposit insurance premiums; advertising; and other non-interest
expense. 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.
In addition to Astoria Federal, we have two other wholly-owned subsidiaries, AF
Insurance Agency, Inc. and Astoria Capital Trust I. AF Insurance Agency, Inc. is
a life insurance and property and casualty insurance agency. Through contractual
agreements with various third party marketing organizations, AF Insurance
Agency, Inc. provides insurance products primarily to the customers of Astoria
Federal. Astoria Capital Trust I was formed in 1999 for the purpose of issuing
$125.0 million aggregate liquidation amount of 9.75% Capital Securities due
November 1, 2029, or Capital Securities, which are prepayable at our option on
or after November 1, 2009.
Available Information
Our internet website address is www.astoriafederal.com. Financial information,
including our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and all amendments to those reports, can be obtained
free of charge from our investor relations website at
http://ir.astoriafederal.com. The above reports are available on our website
immediately after they are electronically filed with or furnished to the SEC.
Such reports are also available on the SEC's website at www.sec.gov.
Critical Accounting Policies
Note 1 to our Audited Consolidated Financial Statements for the year ended
December 31, 2002 included in our Annual Report on Form 10-K for the year ended
December 31, 2002, as supplemented by our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003 and
11
this report, contains a summary of our significant accounting policies. Various
elements of our accounting policies, by their nature, are inherently subject to
estimation techniques, valuation assumptions and other subjective assessments.
Certain assets are carried in our consolidated statements of financial condition
at fair value or the lower of cost or fair value. Our policies with respect to
the methodologies used to determine the allowance for loan losses, the valuation
of MSR and judgments regarding goodwill and securities impairment are our most
critical accounting policies because they are important to the presentation of
our financial condition and results of operations, involve a higher degree of
complexity and require management to make difficult and subjective judgments
which often require assumptions or estimates about highly uncertain matters. The
use of different judgments, assumptions and estimates could result in material
differences in our results of operations or financial condition.
The following is a description of our critical accounting policies and an
explanation of the methods and assumptions underlying their application. These
critical accounting policies and their application are reviewed quarterly with
the Audit Committee of our Board of Directors.
Allowance for Loan Losses
Our allowance for loan losses is established and maintained through a provision
for loan losses based on our evaluation of the risks inherent in our loan
portfolio. We evaluate the adequacy of our allowance on a quarterly basis. The
allowance is comprised of both specific valuation allowances and general
valuation allowances.
Specific valuation allowances are established in connection with individual loan
reviews and the asset classification process including the procedures for
impairment testing under SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan, an Amendment of FASB Statements No. 5 and 15," and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures, an Amendment of FASB Statement No. 114." Such evaluation, which
includes a review of loans on which full collectibility is not reasonably
assured, considers the estimated fair value of the underlying collateral, if
any, current and anticipated economic and regulatory conditions, current and
historical loss experience of similar loans and other factors that determine
risk exposure to arrive at an adequate loan loss allowance. Pursuant to our
policy, loan losses are charged-off in the period the loans, or portions
thereof, are deemed uncollectible. The determination of the loans on which full
collectibility is not reasonably assured, the estimates of the fair value of the
underlying collateral, and the assessments of economic and regulatory conditions
are subject to assumptions and judgments by management. Specific valuation
allowances could differ materially as a result of changes in these assumptions
and judgments.
General valuation allowances represent loss allowances that have been
established to recognize the inherent risks associated with our lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem loans. The determination of the adequacy of the valuation
allowance takes into consideration a variety of factors. We segment our loan
portfolio into like categories by composition and size and perform analyses
against each category. These include historical loss experience and delinquency
levels and trends. We also consider the growth in the portfolio as well as our
credit administration and asset management philosophies and procedures. In
addition, we evaluate and consider the impact that existing and projected
economic and market conditions may have on the portfolio as well as known and
inherent risks in the portfolio. Finally, we evaluate and consider the allowance
ratios and coverage percentages of both peer group and regulatory agency data.
After evaluating these variables, we determine appropriate allowance coverage
percentages for each of our portfolio segments and the appropriate level of our
allowance for loan losses.
12
These evaluations are inherently subjective because, even though they are based
on objective data, it is management's interpretation of that data that
determines the amount of the appropriate allowance. Therefore, from time to
time, we review the actual performance and charge-off history of our portfolio
and compare that to our previously determined allowance coverage percentages. In
doing so, we evaluate the impact the previously mentioned variables may have had
on the portfolio to determine which changes, if any, should be made to our
assumptions and analyses.
As indicated above, actual results could differ from our estimate as a result of
changes in economic or market conditions. Changes in estimates could result in a
material change in the allowance for loan losses. While we believe that the
allowance for loan losses has been established and maintained at levels adequate
to reflect the risks inherent in our loan portfolio, future increases may be
necessary if economic or market conditions decline substantially from the
conditions that existed at the time of the initial determinations.
For additional information regarding our allowance for loan losses, see
"Provision for Loan Losses" and "Asset Quality" in this document and under Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations," in our Annual Report on Form 10-K for the year ended December 31,
2002.
Valuation of MSR
MSR are carried at cost and amortized over the estimated remaining lives of the
loans serviced. Impairment, if any, is recognized through a valuation allowance.
The initial recognition of originated MSR is based upon an allocation of the
total cost of the related loans between the loans and the servicing rights based
on their relative estimated fair values. The estimated fair value of MSR is
based upon quoted market prices of similar loans which we sell servicing
released. Purchased MSR are recorded at cost, although we generally do not
purchase MSR. Impairment exists if the carrying value of MSR exceeds the
estimated fair value. We stratify our MSR by underlying loan type, primarily
fixed and adjustable, and further stratify the fixed rate loans by interest
rate. Individual impairment allowances for each stratum are established when
necessary and then adjusted in subsequent periods to reflect changes in
impairment. The estimated fair values of each MSR stratum are obtained through
independent third party valuations based upon an analysis of future cash flows,
incorporating numerous assumptions including servicing income, servicing costs,
market discount rates, prepayment speeds, default rates and other market driven
data. All assumptions are reviewed for reasonableness on a quarterly basis to
ensure they reflect current and anticipated market conditions.
The fair value of MSR is highly sensitive to changes in assumptions. Changes in
prepayment speed assumptions have the most significant impact on the fair value
of our MSR. Generally, as interest rates decline, mortgage loan prepayments
accelerate due to increased refinance activity, which results in a decrease in
the fair value of MSR. As interest rates rise, mortgage loan prepayments slow
down, which results in an increase in the fair value of MSR. Thus, any
measurement of the fair value of our MSR is limited by the conditions existing
and the assumptions utilized as of a particular point in time, and those
assumptions may not be appropriate if they are applied at a different point in
time.
Goodwill Impairment
Goodwill is presumed to have an indefinite useful life and is not amortized, but
rather tested, at least annually, for impairment at the reporting unit level.
Impairment exists when the carrying amount of goodwill exceeds its implied fair
value. When performing the impairment test, if the
13
fair value of a reporting unit exceeds its carrying amount, goodwill of the
reporting unit is not considered impaired. According to SFAS No. 142, "Goodwill
and Other Intangible Assets," quoted market prices in active markets are the
best evidence of fair value and are to be used as the basis for the measurement,
when available. Other acceptable valuation methods include present value
measurement or measurements based on multiples of earnings or revenue or similar
performance measures.
For purposes of our goodwill impairment testing, we identified a single
reporting unit. On September 30, 2002 we performed our annual goodwill
impairment test. We determined the fair value of our one reporting unit to be in
excess of its carrying value, using the quoted market price of our common stock
on our impairment testing date as the basis for determining the fair value. As
of our annual impairment test date, there was no indication of goodwill
impairment. Goodwill would be tested for impairment between annual tests if an
event occurs or circumstances change that would more likely than not reduce the
fair value of a reporting unit below its carrying amount. As of June 30, 2003,
there have been no such events or changes in circumstances. Differences in the
identification of reporting units and the use of valuation techniques could
result in materially different evaluations of impairment.
Securities Impairment
Our available-for-sale portfolio is carried at estimated fair value, with any
unrealized gains and losses, net of taxes, reported as accumulated other
comprehensive income in stockholders' equity. The securities which we have the
positive intent and ability to hold to maturity are classified as
held-to-maturity and are carried at amortized cost. The market values of our
securities, particularly our fixed rate mortgage-backed securities which
comprise 94.0% of our total securities portfolio at June 30, 2003, are affected
by changes in interest rates. In general, as interest rates rise, the market
value of fixed rate securities will decrease; as interest rates fall, the market
value of fixed rate securities will increase. We conduct a periodic review and
evaluation of the securities portfolio to determine if the decline in the fair
value of any security below its carrying value is other than temporary.
Estimated fair values for securities are based on published or securities
dealers' market values. If we deem such decline to be other than temporary, the
security is written down to a new cost basis and the resulting loss is charged
to earnings. There were no securities write downs during the six months ended
June 30, 2003.
Liquidity and Capital Resources
Our primary source of funds is cash provided by principal and interest payments
on loans and mortgage-backed and other securities. Principal payments on loans
and mortgage-backed securities and proceeds from calls and maturities of other
securities totaled $7.16 billion for the six months ended June 30, 2003 and
$4.70 billion for the six months ended June 30, 2002. The increase in loan and
security repayments was primarily the result of the continued high level of
mortgage loan refinance activity caused by the continued low interest rate
environment. Medium- and long-term U.S. Treasury rates (maturities of two to ten
years) declined on average approximately 155 basis points since June 30, 2002.
Additionally, the Federal Open Market Committee, or FOMC, reduced the federal
funds rate by a total of 50 basis points during the latter half of 2002 and an
additional 25 basis points in June 2003.
In addition to cash provided by principal and interest payments on loans and
securities, our other sources of funds include cash provided by operating
activities, deposits and borrowings. Net cash provided by operating activities
totaled $153.2 million during the six months ended June 30, 2003 and $71.5
million during the six months ended June 30, 2002. During the six months ended
June 30, 2003, net borrowings increased $369.9 million and net deposits
increased $242.0
14
million. While we have reduced our borrowings to deposit ratio as well as our
overall level of borrowings over the past several years, during the first
quarter of 2003 we borrowed an additional $500.0 million with a weighted average
rate of 2.58% and a weighted average maturity of 3.2 years to help protect
against the impact on interest expense of future interest rate increases. During
the three months ended June 30, 2003, interest rates continued to decline, the
U.S. Treasury yield curve continued to flatten, cash flows increased and
reinvestment yields dropped significantly. As a result, we determined that
additional leverage would not be prudent at this time and, in fact, we repaid
$195.0 million of matured borrowings. We also extended $300.0 million of
borrowings at a weighted average rate of 2.29% and a weighted average maturity
of 3.7 years to help protect against potential increases in interest rates. All
other borrowings that matured during the quarter were rolled over into
short-term borrowings. During the six months ended June 30, 2002, net borrowings
decreased $1.05 billion, while net deposits increased $333.7 million. The
decrease in net borrowings was consistent with our strategy of repositioning the
balance sheet through, in part, a shift in our liability mix toward deposits,
particularly lower costing and less interest rate sensitive core deposits,
consisting of savings, money market, NOW and demand deposits. The net increases
in deposits for the six months ended June 30, 2003 and 2002 reflect our
continued emphasis on attracting customer deposits through competitive rates,
extensive product offerings and quality service. Despite continued intense local
competition for checking accounts, we have been successful in growing our NOW
and demand deposits, including our business checking deposits, due in large part
to our concerted sales and marketing efforts, including our PEAK Process which
was introduced in 2002. See page 20 for further detail regarding deposit
activity.
Typically, our primary use of funds is for the origination and purchase of
mortgage loans. However, during the six months ended June 30, 2003, despite
strong loan originations, our purchases of mortgage-backed securities exceeded
our originations and purchases of mortgage loans. During the six months ended
June 30, 2003, our gross originations and purchases of mortgage loans totaled
$3.52 billion, including originations of loans held-for-sale totaling $319.1
million, compared to $2.71 billion, including originations of loans
held-for-sale totaling $212.0 million, during the six months ended June 30,
2002. The strong levels of loan originations and purchases for both the six
months ended June 30, 2003 and 2002 are attributable to the continued low
interest rate environment which has resulted in continued high levels of
mortgage refinance activity. The decline in medium- and long-term U.S. Treasury
rates during the past twelve months resulted in a significant increase in loan
and mortgage-backed securities repayments during the six months ended June 30,
2003 compared to the six months ended June 30, 2002. We utilized our cash flows
in excess of mortgage and other loan fundings to purchase mortgage-backed
securities. Additionally, during the three months ended March 31, 2003, we
borrowed an additional $500.0 million which was also used primarily for the
purchase of mortgage-backed securities. Purchases of mortgage-backed securities
totaled $5.70 billion during the six months ended June 30, 2003 and $1.91
billion during the six months ended June 30, 2002. As previously discussed,
given the current low interest rate environment and the flattening of the U.S.
Treasury yield curve from the previous quarter, we decided not to add leverage
to the balance sheet and, during the three months ended June 30, 2003, both our
mortgage-backed securities and our borrowings portfolios decreased. We will
continue to evaluate the alternative of using cash flows in excess of mortgage
and other loan fundings to further reduce borrowings as well as to purchase
mortgage-backed securities.
We maintain liquidity levels to meet our operational needs in the normal course
of our business. The levels of our liquid assets during any given period are
dependent on our operating, investing and financing activities. Cash and due
from banks and federal funds sold and repurchase agreements, our most liquid
assets, totaled $260.1 million at June 30, 2003, compared to $677.9 million at
December 31, 2002. This decrease reflects the net effect of our operating,
investing
15
and financing activities, in particular, our use of funds for the purchase of
mortgage-backed securities and the repayment of borrowings. Borrowings maturing
over the next twelve months total $5.08 billion with a weighted average rate of
4.74%. We have the flexibility to either repay or rollover such borrowings as
they mature. Refinanced borrowings during the next twelve months should carry
lower weighted average rates than those they replace, assuming that interest
rates remain at or near their current levels. In addition, we have $2.71 billion
in certificates of deposit with a weighted average rate of 2.59% maturing over
the next twelve months. We expect to retain or replace a significant portion of
such deposits based on our competitive pricing and historical experience.
The following table details borrowing and certificate of deposit maturities over
the next twelve months and their weighted average rates:
Borrowings Certificates of Deposit
---------------------------- --------------------------
Weighted Weighted
Average Average
(Dollars in Millions) Amount Rate Amount Rate
- --------------------------------------------------------------------------- ----------------------------
Contractual Maturity:
Third quarter 2003 $ 965 2.63% $ 725 2.08%
Fourth quarter 2003 800 5.81 660 2.74
First quarter 2004 2,810 4.97 752 2.84
Second quarter 2004 500 5.80 574 2.76
------ ------
Total $5,075 4.74 $2,711 2.59
====== ======
The most significant liquidity challenge we face is the variability in cash
flows as a result of mortgage refinance activity. As mortgage interest rates
decline, customers' refinance activities tend to accelerate causing the cash
flow from both our mortgage loan portfolio and our mortgage-backed securities
portfolio to accelerate. When mortgage rates increase the opposite tends to
occur. In addition, as mortgage interest rates decrease, some customers tend to
prefer fixed rate mortgage loan products over variable rate products. Since we
generally sell our fifteen year and thirty year fixed rate loan production into
the secondary mortgage market, the origination of such products for sale does
not significantly reduce our liquidity.
Additional sources of liquidity at the holding company level have included
issuances of securities into the capital markets, including private issuances of
trust preferred securities and senior debt. We may continue to access the
capital markets in the future. We also continue to receive periodic capital
distributions from Astoria Federal, consistent with applicable laws and
regulations.
Stockholders' equity decreased to $1.53 billion at June 30, 2003, from $1.55
billion at December 31, 2002. The decrease in stockholders' equity was the
result of common stock repurchased of $118.0 million and dividends declared of
$35.7 million. These decreases were partially offset by net income of $107.3
million, an increase in accumulated other comprehensive income, net of tax, of
$8.3 million, the effect of stock options exercised and related tax benefit of
$7.5 million and the amortization of the allocated portion of shares held by the
employee stock ownership plan, or ESOP, of $4.3 million.
On June 2, 2003, we paid a quarterly cash dividend of $0.22 per share on shares
of our common stock outstanding as of the close of business on May 15, 2003
totaling $16.9 million. During the three months ended June 30, 2003, we declared
a cash dividend on our Series B Preferred Stock totaling $1.5 million. On July
16, 2003, we declared a quarterly cash dividend of $0.22 per share on shares of
our common stock payable on September 2, 2003 to stockholders of record as of
the close of business on August 15, 2003.
16
On October 16, 2002, our Board of Directors approved our ninth stock repurchase
plan authorizing the purchase, at management's discretion, of 10,000,000 shares,
or approximately 11% of our common stock then outstanding, over a two year
period in open-market or privately negotiated transactions. During the six
months ended June 30, 2003, we repurchased 4,654,000 shares of our common stock
at an aggregate cost of $118.0 million. In total, as of June 30, 2003, 4,972,000
shares of our common stock, at an aggregate cost of $126.5 million, have been
purchased under the ninth stock repurchase plan.
At June 30, 2003, Astoria Federal's capital levels exceeded all of its
regulatory capital requirements with a tangible capital ratio of 7.59%, leverage
capital ratio of 7.59% and total risk-based capital ratio of 16.13%. The minimum
regulatory requirements are a tangible capital ratio of 1.50%, leverage capital
ratio of 4.00% and total risk-based capital ratio of 8.00%.
Commitments and Contingencies
In the normal course of business, we routinely enter into various commitments,
primarily relating to the origination, purchase and sale of loans, the purchase
of securities and the leasing of certain office facilities. At June 30, 2003, we
had outstanding commitments to originate and purchase loans totaling $1.12
billion; outstanding unused lines of credit totaling $312.8 million, which
relate primarily to home equity lines of credit; outstanding commitments to sell
loans totaling $196.7 million; and outstanding commitments to purchase
securities totaling $771.3 million. We anticipate that we will have sufficient
funds available to meet our current commitments in the normal course of our
business.
Loan Portfolio
The following table sets forth the composition of our loans receivable portfolio
in dollar amounts and in percentages of the portfolio at June 30, 2003 and
December 31, 2002.
At June 30, 2003 At December 31, 2002
---------------------------------------------------------------
Percent Percent
(Dollars in Thousands) Amount of Total Amount of Total
- --------------------------------------------------------------------------------------------------------------
Mortgage loans (gross):
One-to-four family $ 8,856,003 73.97% $ 9,209,360 76.86%
Multi-family 1,874,350 15.66 1,599,985 13.35
Commercial real estate 758,317 6.33 744,623 6.21
Construction 78,732 0.66 56,475 0.47
- --------------------------------------------------------------------------------------------------------------
Total mortgage loans 11,567,402 96.62 11,610,443 96.89
- --------------------------------------------------------------------------------------------------------------
Consumer and other loans (gross):
Home equity 359,131 3.00 323,494 2.70
Passbook 6,958 0.06 7,502 0.06
Other 38,316 0.32 41,642 0.35
- --------------------------------------------------------------------------------------------------------------
Total consumer and other loans 404,405 3.38 372,638 3.11
- --------------------------------------------------------------------------------------------------------------
Total loans 11,971,807 100.00% 11,983,081 100.00%
Net unamortized premiums and
deferred loan costs 71,843 76,280
Allowance for loan losses (83,390) (83,546)
- ---------------------------------------------------------------------------------------------------------------
Total loans, net $11,960,260 $11,975,815
- ---------------------------------------------------------------------------------------------------------------
17
Securities Portfolio
The following table sets forth the amortized cost and estimated fair value of
mortgage-backed and other securities available-for-sale and held-to-maturity at
June 30, 2003 and December 31, 2002.
At June 30, 2003 At December 31, 2002
-----------------------------------------------------------------
Estimated Estimated
Amortized Fair Amortized Fair
(In Thousands) Cost Value Cost Value
- -------------------------------------------------------------------------------------------------------------------
Securities available-for-sale:
Mortgage-backed securities:
Agency pass-through certificates $ 198,370 $ 204,906 $ 241,146 $ 249,459
REMICs and CMOs:
Agency issuance 2,140,943 2,165,525 608,076 616,552
Non-agency issuance 647,154 638,848 1,581,475 1,587,622
- -------------------------------------------------------------------------------------------------------------------
Total mortgage-backed securities 2,986,467 3,009,279 2,430,697 2,453,633
- -------------------------------------------------------------------------------------------------------------------
Other securities:
Obligations of the U.S.
Government and agencies 2,241 2,307 132,011 133,448
FNMA and FHLMC preferred stock 140,015 142,964 140,015 136,682
Corporate debt and other securities 67,676 76,296 67,854 68,818
- -------------------------------------------------------------------------------------------------------------------
Total other securities 209,932 221,567 339,880 338,948
- -------------------------------------------------------------------------------------------------------------------
Total securities available-for-sale $3,196,399 $3,230,846 $2,770,577 $2,792,581
===================================================================================================================
Securities held-to-maturity:
Mortgage-backed securities:
Agency pass-through certificates $ 19,073 $ 20,346 $ 24,534 $ 26,190
REMICs and CMOs:
Agency issuance 4,689,360 4,738,626 3,595,244 3,646,023
Non-agency issuance 879,070 876,989 1,306,113 1,313,349
- -------------------------------------------------------------------------------------------------------------------
Total mortgage-backed securities 5,587,503 5,635,961 4,925,891 4,985,562
- -------------------------------------------------------------------------------------------------------------------
Other securities:
Obligations of the U.S.
Government and agencies - - 65,776 66,018
Obligations of states and
political subdivisions 38,607 38,607 39,611 39,611
Corporate debt securities 9,981 10,209 9,979 9,374
- -------------------------------------------------------------------------------------------------------------------
Total other securities 48,588 48,816 115,366 115,003
- -------------------------------------------------------------------------------------------------------------------
Total securities held-to-maturity $5,636,091 $5,684,777 $5,041,257 $5,100,565
===================================================================================================================
18
Comparison of Financial Condition as of June 30, 2003 and December 31, 2002 and
Operating Results for the Three and Six Months Ended June 30, 2003 and 2002
Financial Condition
Total assets increased $585.1 million to $22.28 billion at June 30, 2003, from
$21.70 billion at December 31, 2002. The primary reason for the increase in
total assets was the increase in mortgage-backed securities, partially offset by
decreases in federal funds sold and repurchase agreements and other securities.
This growth was funded primarily through increases in borrowings and deposits.
Mortgage loans decreased $48.3 million to $11.63 billion at June 30, 2003, from
$11.68 billion at December 31, 2002. This decrease was primarily due to the
continued extraordinarily high level of mortgage loan repayments during the six
months ended June 30, 2003, which have outpaced our levels of mortgage loan
originations and purchases. Mortgage loan repayments increased to $3.23 billion
for the six months ended June 30, 2003, from $2.19 billion for the six months
ended June 30, 2002. Gross mortgage loans originated and purchased during the
six months ended June 30, 2003 totaled $3.20 billion, excluding originations of
loans held-for-sale totaling $319.1 million, of which $2.50 billion were
originations and $698.4 million were purchases. This compares to $1.75 billion
of originations and $746.2 million of purchases for a total of $2.50 billion,
excluding originations of loans held-for-sale totaling $212.0 million, during
the six months ended June 30, 2002.
Our mortgage loan portfolio, as well as our originations and purchases, continue
to consist primarily of one-to-four family mortgage loans. Our one-to-four
family mortgage loans, which represent 74.0% of our total loan portfolio at June
30, 2003, decreased $353.4 million to $8.86 billion at June 30, 2003, from $9.21
billion at December 31, 2002. As noted above, this decrease was primarily due to
the extraordinarily high level of loan repayments as a result of refinance
activity in the prevailing interest rate environment.
While we continue to be primarily a one-to-four family mortgage lender, we have
increased our emphasis on multi-family and commercial real estate loan
originations. Our multi-family mortgage loan portfolio increased $274.4 million
to $1.87 billion at June 30, 2003, from $1.60 billion at December 31, 2002. Our
commercial real estate loan portfolio increased $13.7 million to $758.3 million
at June 30, 2003, from $744.6 million at December 31, 2002. Multi-family and
commercial real estate loan originations totaled $648.6 million for the six
months ended June 30, 2003 and $447.1 million for the six months ended June 30,
2002. Our multi-family and commercial real estate loans tend to be less
susceptible to prepayment risk than our one-to-four family loans due to the
inclusion of prepayment penalties. Our new multi-family and commercial real
estate loan originations are similar in type and have slightly larger average
balances than the loans currently in our portfolio. The average loan balance of
loans in our multi-family and commercial real estate portfolio continues to be
less than $1.0 million and we have not changed our underwriting standards with
respect to such loans. Our portfolio of consumer and other loans increased $31.8
million to $404.4 million at June 30, 2003, from $372.6 million at December 31,
2002. This increase is primarily in home equity lines of credit as a result of
the continued strong housing market and the low interest rate environment.
Mortgage-backed securities increased $1.22 billion to $8.60 billion at June 30,
2003, from $7.38 billion at December 31, 2002. This increase was primarily the
result of purchases of real estate mortgage investment conduits, or REMICs, and
collateralized mortgage obligations,
19
or CMOs, totaling $5.70 billion, partially offset by principal payments received
of $3.62 billion and sales of $819.5 million. This increase in mortgage-backed
securities reflects our use of excess cash flows, as well as cash flows from
increased deposits and borrowings, for the purchase of these securities. We will
continue to evaluate how much, if any, of our cash flows in excess of mortgage
and other loan fundings will be used to repay borrowings rather than for the
purchases of mortgage-backed securities.
Other securities decreased $184.1 million to $270.2 million at June 30, 2003,
from $454.3 million at December 31, 2002, primarily due to $199.7 million in
securities which were called or matured, partially offset by a decrease in the
net unrealized loss on securities available-for-sale of $12.6 million. The
continued low interest rate environment during the six months ended June 30,
2003 has resulted in a significant portion of our callable investment securities
being called, primarily in the first quarter of 2003.
Federal funds sold and repurchase agreements decreased $392.6 million to $117.7
million at June 30, 2003, from $510.3 million at December 31, 2002, primarily
due to our use of funds for the purchase of mortgage-backed securities and the
repayment of borrowings. Federal Home Loan Bank of New York, or FHLB-NY, stock
decreased $16.4 million to $231.2 million at June 30, 2003, from $247.6 million
at December 31, 2002 as a result of decreased levels of FHLB-NY borrowings.
Deposits increased $242.0 million to $11.31 billion at June 30, 2003, from
$11.07 billion at December 31, 2002. The increase in deposits was primarily due
to an increase of $332.4 million in certificates of deposit to $5.49 billion at
June 30, 2003, from $5.15 billion at December 31, 2002, partially offset by a
decrease of $313.4 million in our money market accounts to $1.39 billion at June
30, 2003, from $1.70 billion at December 31, 2002. The decrease in our money
market accounts is attributable to intense competition for money market and
checking accounts. Certain local competitors, as well as recent entrants into
the local market, have continued to offer well above market rates for these
types of deposits. We have not increased the rates we offer on these accounts
because we do not consider it a cost effective strategy. Partially offsetting
this decrease in our money market accounts were increases in NOW and demand
deposit accounts of $127.6 million and savings accounts of $95.3 million.
Despite continued local competition for checking accounts, we have been
successful in growing our NOW and demand deposits, including our business
checking deposits, due in large part to our concerted sales and marketing
efforts, including our PEAK Process which was introduced in 2002.
Reverse repurchase agreements increased $450.0 million to $6.74 billion at June
30, 2003, from $6.29 billion at December 31, 2002. FHLB-NY advances decreased
$85.0 million to $1.98 billion at June 30, 2003, from $2.06 billion at December
31, 2002. As previously discussed, the increase in borrowings reflects
management's decision during the first quarter of 2003 to help protect against
the impact on interest expense of future interest rate increases by borrowing
$500.0 million with a weighted average rate of 2.58% and a weighted average
maturity of 3.2 years. During the three months ended June 30, 2003, we had $1.11
billion in primarily short-term borrowings mature of which we repaid $195.0
million of borrowings, extended $300.0 million of borrowings at a weighted
average rate of 2.29% and a weighted average maturity of 3.7 years and rolled
over the remaining borrowings that matured during the period into short-term
borrowings.
20
Stockholders' equity decreased to $1.53 billion at June 30, 2003, from $1.55
billion at December 31, 2002. The decrease in stockholders' equity was the
result of common stock repurchased of $118.0 million and dividends declared of
$35.7 million. These decreases were partially offset by net income of $107.3
million, an increase in accumulated other comprehensive income, net of tax, of
$8.3 million, the effect of stock options exercised and related tax benefit of
$7.5 million and the amortization of the allocated portion of shares held by the
ESOP of $4.3 million.
Results of Operations
General
Net income for the three months ended June 30, 2003 decreased $13.0 million to
$50.9 million, from $63.9 million for the three months ended June 30, 2002.
Diluted earnings per common share totaled $0.64 per share for the three months
ended June 30, 2003 and $0.73 per share for the three months ended June 30,
2002. Return on average assets decreased to 0.88% for the three months ended
June 30, 2003, from 1.16% for the three months ended June 30, 2002. Return on
average stockholders' equity decreased to 13.27% for the three months ended June
30, 2003, from 16.32% for the three months ended June 30, 2002. Return on
average tangible stockholders' equity, which represents average stockholders'
equity less average goodwill, decreased to 15.09% for the three months ended
June 30, 2003, from 18.50% for the three months ended June 30, 2002.
Net income for the six months ended June 30, 2003 decreased $17.8 million to
$107.3 million, from $125.1 million for the six months ended June 30, 2002.
Diluted earnings per common share totaled $1.33 per share for the six months
ended June 30, 2003 and $1.41 per share for the six months ended June 30, 2002.
Return on average assets decreased to 0.94% for the six months ended June 30,
2003, from 1.12% for the six months ended June 30, 2002. Return on average
stockholders' equity decreased to 13.94% for the six months ended June 30, 2003,
from 16.01% for the six months ended June 30, 2002. Return on average tangible
stockholders' equity decreased to 15.84% for the six months ended June 30, 2003,
from 18.16% for the six months ended June 30, 2002. The decreases in net income
for the three and six months ended June 30, 2003 are primarily the result of
decreases in net interest income which is discussed further below.
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 yield curves. See Item 3, "Quantitative and Qualitative Disclosures About
Market Risk," for further discussion of the potential impact of changes in
interest rates on our results of operations.
For the three months ended June 30, 2003, net interest income decreased $26.1
million to $96.3 million, from $122.4 million for the three months ended June
30, 2002. For the six months ended June 30, 2003, net interest income decreased
$32.0 million to $205.3 million, from $237.3 million for the six months ended
June 30, 2002. The net interest margin decreased to 1.78% for the three months
ended June 30, 2003, from 2.34% for the three
21
months ended June 30, 2002. The net interest margin decreased to 1.93% for the
six months ended June 30, 2003, from 2.25% for the six months ended June 30,
2002. The decreases in net interest income were the result of decreases in
interest income, partially offset by decreases in interest expense. The
decreases in interest income and the net interest margin for both the three and
six months ended June 30, 2003 were due, in part, to the more rapid decline in
the yields on interest-earning assets than the decline in the costs of
interest-bearing liabilities and the repurchases of our common stock over the
past year. The decrease in the yields on interest-earning assets is primarily
the result of the high level of mortgage loan and mortgage-backed securities
repayments as a result of the continued low interest rate environment,
particularly for medium- and long-term instruments for which rates continued to
decline throughout 2002 and the first half of 2003, resulting in reinvestment in
those assets at lower rates. These high levels of repayments have also resulted
in accelerated premium amortization which has further contributed to the decline
in the yields on these portfolios. Net premium amortization on our
mortgage-backed securities and mortgage loan portfolios increased $24.4 million
to $33.8 million for the three months ended June 30, 2003, from $9.4 million for
the three months ended June 30, 2002. Net premium amortization on our
mortgage-backed securities and mortgage loan portfolios increased $39.4 million
to $58.8 million for the six months ended June 30, 2003, from $19.4 million for
the six months ended June 30, 2002. The decrease in interest expense was
primarily attributable to the decrease in our cost of funds, which is due to the
downward repricing of deposits, along with the repayment and refinancing of
various higher cost borrowings.
The average balance of net interest-earning assets decreased $380.8 million to
$378.1 million for the three months ended June 30, 2003, from $758.9 million for
the three months ended June 30, 2002. The decrease in the average balance of net
interest-earning assets was the result of an increase of $1.10 billion in the
average balance of total interest-bearing liabilities to $21.28 billion for the
three months ended June 30, 2003, from $20.18 billion for the three months ended
June 30, 2002, partially offset by an increase of $718.5 million in the average
balance of total interest-earning assets to $21.65 billion for the three months
ended June 30, 2003, from $20.94 billion for the three months ended June 30,
2002. The net interest rate spread decreased to 1.72% for the three months ended
June 30, 2003, from 2.19% for the three months ended June 30, 2002. The average
yield on interest-earning assets decreased to 4.97% for the three months ended
June 30, 2003, from 6.23% for the three months ended June 30, 2002. The average
cost of interest-bearing liabilities decreased to 3.25% for the three months
ended June 30, 2003, from 4.04% for the three months ended June 30, 2002.
The average balance of net interest-earning assets decreased $342.5 million to
$399.5 million for the six months ended June 30, 2003, from $742.0 million for
the six months ended June 30, 2002. The decrease in the average balance of net
interest-earning assets was the result of an increase of $521.0 million in the
average balance of total interest-bearing liabilities to $20.88 billion for the
six months ended June 30, 2003, from $20.36 billion for the six months ended
June 30, 2002, partially offset by an increase of $178.5 million in the average
balance of total interest-earning assets to $21.28 billion for the six months
ended June 30, 2003, from $21.10 billion for the six months ended June 30, 2002.
The net interest rate spread decreased to 1.87% for the six months ended June
30, 2003, from 2.11% for the six months ended June 30, 2002. The average yield
on interest-earning assets decreased to 5.19% for the six months ended June 30,
2003, from 6.23% for the six months ended June 30, 2002. The average cost of
interest-bearing liabilities decreased to 3.32% for the six months ended June
30, 2003, from 4.12% for the six months ended June 30, 2002.
22
The primary reasons for the decreases in net interest-earning assets are the
repurchases of our common stock over the past year and an increase in the
monthly mortgage-backed securities principal payments receivable, due to the
accelerated mortgage-backed securities cash flow, and the $100.0 million premium
paid in the first quarter of 2002 to purchase additional BOLI. The changes in
the yields on interest-earning assets and the costs of interest-bearing
liabilities for both the three and six months ended June 30, 2003 were a result
of the lower interest rate environment previously discussed. The changes in
average interest-earning assets and interest-bearing liabilities and their
related yields and costs are discussed in greater detail under "Interest Income"
and "Interest Expense."
Analysis of Net Interest Income
The following tables set forth certain information about the average balances of
our assets and liabilities and their related yields and costs for the three and
six months ended June 30, 2003 and 2002. Average yields are derived by dividing
income by the average balance of the related assets and average costs are
derived by dividing expense by the average balance of the related liabilities,
for the periods shown. Average balances are derived from average daily balances.
The yields and costs include amortization of fees, costs, premiums and discounts
which are considered adjustments to interest rates.
23
For the Three Months Ended June 30,
-------------------------------------------------------------------------------------
2003 2002
-------------------------------------------------------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in Thousands) Balance Interest Cost Balance Interest Cost
- ------------------------------------------------------------------------------------------------------------------------------
(Annualized) (Annualized)
Assets:
Interest-earning assets:
Mortgage loans (1):
One-to-four family $ 8,970,109 $117,866 5.26% $10,259,961 $163,449 6.37%
Multi-family, commercial
real estate and construction 2,601,732 49,449 7.60 1,967,805 38,781 7.88
Consumer and other loans (1) 406,785 4,960 4.88 282,510 4,117 5.83
----------- -------- ----------- --------
Total loans 11,978,626 172,275 5.75 12,510,276 206,347 6.60
Mortgage-backed securities (2) 8,952,753 88,213 3.94 6,508,577 97,225 5.98
Other securities (2) (3) 562,161 8,280 5.89 1,163,408 19,449 6.69
Federal funds sold and
repurchase agreements 160,646 465 1.16 753,410 3,254 1.73
----------- -------- ----------- --------
Total interest-earning assets 21,654,186 269,233 4.97 20,935,671 326,275 6.23
-------- --------
Goodwill 185,151 185,151
Other non-interest-earning assets 1,280,248 1,007,121
----------- -----------
Total assets $23,119,585 $22,127,943
=========== ===========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Savings $ 2,914,416 3,627 0.50 $ 2,751,167 8,566 1.25
Money market 1,433,396 2,736 0.76 1,935,305 9,495 1.96
NOW and demand deposit 1,491,341 522 0.14 1,252,742 894 0.29
Certificates of deposit 5,409,226 50,304 3.72 5,224,909 56,588 4.33
----------- -------- ----------- --------
Total deposits 11,248,379 57,189 2.03 11,164,123 75,543 2.71
Borrowed funds 10,027,713 115,793 4.62 9,012,673 128,363 5.70
----------- -------- ----------- --------
Total interest-bearing liabilities 21,276,092 172,982 3.25 20,176,796 203,906 4.04
-------- --------
Non-interest-bearing liabilities 309,757 384,027
----------- -----------
Total liabilities 21,585,849 20,560,823
Stockholders' equity 1,533,736 1,567,120
----------- -----------
Total liabilities and stockholders'
equity $23,119,585 $22,127,943
=========== ===========
Net interest income/net interest
rate spread (4) $ 96,251 1.72% $122,369 2.19%
======== ==== ======== ====
Net interest-earning assets/net
interest margin (5) $ 378,094 1.78% $ 758,875 2.34%
=========== ==== =========== ====
Ratio of interest-earning assets
to interest-bearing liabilities 1.02x 1.04x
==== ====
- --------------------------------
(1) Mortgage and consumer and other loans include loans held-for-sale and
non-performing loans and exclude the allowance for loan losses.
(2) Securities available-for-sale are reported at average amortized cost.
(3) Other securities include Federal Home Loan Bank of New York stock.
(4) Net interest rate spread represents the difference between the average
yield on average interest-earning assets and the average cost of average
interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average
interest-earning assets.
24
For the Six Months Ended June 30,
---------------------------------------------------------------------------------
2003 2002
---------------------------------------------------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in Thousands) Balance Interest Cost Balance Interest Cost
- ------------------------------------------------------------------------------------------------------------------------------
(Annualized) (Annualized)
Assets:
Interest-earning assets:
Mortgage loans (1):
One-to-four family $ 9,019,861 $244,795 5.43% $ 10,328,441 $329,958 6.39%
Multi-family, commercial
real estate and construction 2,520,663 95,665 7.59 1,889,347 75,070 7.95
Consumer and other loans (1) 398,688 9,732 4.88 268,858 7,919 5.89
------------ ------- ------------ --------
Total loans 11,939,212 350,192 5.87 12,486,646 412,947 6.61
Mortgage-backed securities (2) 8,547,489 182,261 4.26 6,567,934 197,721 6.02
Other securities (2) (3) 587,487 18,129 6.17 1,175,753 39,105 6.65
Federal funds sold and
repurchase agreements 207,267 1,217 1.17 872,582 7,392 1.69
------------ ------- ------------ --------
Total interest-earning assets 21,281,455 551,799 5.19 21,102,915 657,165 6.23
------- --------
Goodwill 185,151 185,151
Other non-interest-earning assets 1,253,126 1,015,143
------------ ------------
Total assets $ 22,719,732 $ 22,303,209
============ ============
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Savings $ 2,875,486 7,116 0.49 $ 2,692,454 16,669 1.24
Money market 1,501,755 6,212 0.83 1,945,914 19,855 2.04
NOW and demand deposit 1,438,772 1,012 0.14 1,222,915 1,719 0.28
Certificates of deposit 5,370,429 101,090 3.76 5,187,287 115,527 4.45
------------ ------- ------------ -------
Total deposits 11,186,442 115,430 2.06 11,048,570 153,770 2.78
Borrowed funds 9,695,502 231,110 4.77 9,312,348 266,099 5.71
------------ ------- ------------ --------
Total interest-bearing liabilities 20,881,944 346,540 3.32 20,360,918 419,869 4.12
------- --------
Non-interest-bearing liabilities 297,985 379,068
------------ ------------
Total liabilities 21,179,929 20,739,986
Stockholders' equity 1,539,803 1,563,223
------------ ------------
Total liabilities and stockholders'
equity $ 22,719,732 $ 22,303,209
============ ============
Net interest income/net interest
rate spread $205,259 1.87% $ 237,296 2.11%
======== ==== ========= ====
Net interest-earning assets/net
interest margin $ 399,511 1.93% $ 741,997 2.25%
============ ==== ============ ====
Ratio of interest-earning assets
to interest-bearing liabilities 1.02x 1.04x
==== ====
- --------------------------------
(1) Mortgage and consumer and other loans include loans held-for-sale and
non-performing loans and exclude the allowance for loan losses.
(2) Securities available-for-sale are reported at average amortized cost.
(3) Other securities include Federal Home Loan Bank of New York stock.
25
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)
the changes attributable to changes in volume (changes in volume multiplied by
prior rate), (2) the 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.
Three Months Ended June 30, 2003 Six Months Ended June 30, 2003
Compared to Compared to
Three Months Ended June 30, 2002 Six Months Ended June 30, 2002
------------------------------------------ ----------------------------------------
Increase (Decrease) Increase (Decrease)
------------------------------------------ ----------------------------------------
(In Thousands) Volume Rate Net Volume Rate Net
------------------------------------------ ----------------------------------------
Interest-earning assets:
Mortgage loans:
One-to-four family $ (19,104) $ (26,479) $ (45,583) $ (38,962) $ (46,201) $(85,163)
Multi-family, commercial
real estate and construction 12,089 (1,421) 10,668 24,127 (3,532) 20,595
Consumer and other loans 1,594 (751) 843 3,342 (1,529) 1,813
Mortgage-backed securities 30,065 (39,077) (9,012) 50,830 (66,290) (15,460)
Other securities (9,070) (2,099) (11,169) (18,331) (2,645) (20,976)
Federal funds sold and repurchase
agreements (1,966) (823) (2,789) (4,399) (1,776) (6,175)
- -----------------------------------------------------------------------------------------------------------------------------
Total 13,608 (70,650) (57,042) 16,607 (121,973) (105,366)
- -----------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Savings 484 (5,423) (4,939) 1,075 (10,628) (9,553)
Money market (2,011) (4,748) (6,759) (3,791) (9,852) (13,643)
NOW and demand deposit 153 (525) (372) 262 (969) (707)
Certificates of deposit 1,933 (8,217) (6,284) 3,961 (18,398) (14,437)
Borrowed funds 13,457 (26,027) (12,570) 10,507 (45,496) (34,989)
- -----------------------------------------------------------------------------------------------------------------------------
Total 14,016 (44,940) (30,924) 12,014 (85,343) (73,329)
- ---------------------------------------------------------------------------------------------------