XNYS:AF Astoria Financial Corporation Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

 

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, 2012

 

OR

 

o

 

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 001-11967

 

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 o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as these items are defined in Rule 12b-2 of the Exchange Act).

 

Large accelerated filer x

 

Accelerated filer o

 

Non-accelerated filer o

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o NO x

 

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 27, 2012

$.01 Par Value

 

98,417,939

 

 

 



Table of Contents

 

 

 

Page

 

 

 

PART I — FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited):

 

 

 

 

 

Consolidated Statements of Financial Condition at June 30, 2012 and December 31, 2011

2

 

 

 

 

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2012 and 2011

3

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2012 and 2011

4

 

 

 

 

Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2012

5

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011

6

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

70

 

 

 

Item 4.

Controls and Procedures

73

 

 

 

PART II — OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

73

 

 

 

Item 1A.

Risk Factors

75

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

77

 

 

 

Item 3.

Defaults Upon Senior Securities

77

 

 

 

Item 4.

Mine Safety Disclosures

77

 

 

 

Item 5.

Other Information

77

 

 

 

Item 6.

Exhibits

77

 

 

 

Signatures

 

78

 

1



Table of Contents

 

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

 

 

 

(Unaudited)

 

 

 

(In Thousands, Except Share Data)

 

At June 30, 2012

 

At December 31, 2011

 

Assets:

 

 

 

 

 

Cash and due from banks

 

$

379,122

 

$

132,704

 

Available-for-sale securities:

 

 

 

 

 

Encumbered

 

137,993

 

268,725

 

Unencumbered

 

227,568

 

75,462

 

Total available-for-sale securities

 

365,561

 

344,187

 

Held-to-maturity securities, fair value of $2,043,488 and $2,176,925, respectively:

 

 

 

 

 

Encumbered

 

1,396,328

 

1,601,003

 

Unencumbered

 

609,795

 

529,801

 

Total held-to-maturity securities

 

2,006,123

 

2,130,804

 

Federal Home Loan Bank of New York stock, at cost

 

181,476

 

131,667

 

Loans held-for-sale, net

 

20,660

 

32,394

 

Loans receivable

 

13,721,125

 

13,274,604

 

Allowance for loan losses

 

(148,102)

 

(157,185)

 

Loans receivable, net

 

13,573,023

 

13,117,419

 

Mortgage servicing rights, net

 

7,592

 

8,136

 

Accrued interest receivable

 

44,973

 

46,528

 

Premises and equipment, net

 

118,254

 

119,946

 

Goodwill

 

185,151

 

185,151

 

Bank owned life insurance

 

413,342

 

409,637

 

Real estate owned, net

 

31,803

 

48,059

 

Other assets

 

246,332

 

315,423

 

Total assets

 

$

17,573,412

 

$

17,022,055

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

Savings

 

$

2,862,175

 

$

2,750,715

 

Money market

 

1,340,616

 

1,114,404

 

NOW and demand deposit

 

1,962,537

 

1,861,488

 

Certificates of deposit

 

4,548,851

 

5,519,007

 

Total deposits

 

10,714,179

 

11,245,614

 

Reverse repurchase agreements

 

1,400,000

 

1,700,000

 

Federal Home Loan Bank of New York advances

 

3,147,000

 

2,043,000

 

Other borrowings, net

 

626,305

 

378,573

 

Mortgage escrow funds

 

128,717

 

110,841

 

Accrued expenses and other liabilities

 

271,600

 

292,829

 

Total liabilities

 

16,287,801

 

15,770,857

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock, $1.00 par value (5,000,000 shares authorized; none issued and outstanding)

 

 

 

Common stock, $.01 par value (200,000,000 shares authorized; 166,494,888 shares issued; and 98,280,939 and 98,537,715 shares outstanding, respectively)

 

1,665

 

1,665

 

Additional paid-in capital

 

882,168

 

875,395

 

Retained earnings

 

1,869,967

 

1,861,592

 

Treasury stock (68,213,949 and 67,957,173 shares, at cost, respectively)

 

(1,409,615)

 

(1,404,311)

 

Accumulated other comprehensive loss

 

(53,155)

 

(75,661)

 

Unallocated common stock held by ESOP (1,479,271 and 2,042,367 shares, respectively)

 

(5,419)

 

(7,482)

 

Total stockholders’ equity

 

1,285,611

 

1,251,198

 

Total liabilities and stockholders’ equity

 

$

17,573,412

 

$

17,022,055

 

 

See accompanying Notes to Consolidated Financial Statements.

 

2



Table of Contents

 

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)

 

2012

 

2011

 

2012

 

2011

 

Interest income:

 

 

 

 

 

 

 

 

 

One-to-four family mortgage loans

 

$

95,454

 

$

111,869

 

$

194,746

 

$

226,545

 

Multi-family and commercial real estate mortgage loans

 

36,491

 

41,085

 

72,961

 

85,577

 

Consumer and other loans

 

2,294

 

2,509

 

4,635

 

5,016

 

Mortgage-backed and other securities

 

16,971

 

21,339

 

34,992

 

43,762

 

Repurchase agreements and interest-earning cash accounts

 

47

 

74

 

100

 

167

 

Federal Home Loan Bank of New York stock

 

1,553

 

1,637

 

3,155

 

3,954

 

Total interest income

 

152,810

 

178,513

 

310,589

 

365,021

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

26,933

 

35,638

 

56,360

 

72,670

 

Borrowings

 

39,208

 

47,153

 

79,364

 

95,100

 

Total interest expense

 

66,141

 

82,791

 

135,724

 

167,770

 

Net interest income

 

86,669

 

95,722

 

174,865

 

197,251

 

Provision for loan losses

 

10,000

 

10,000

 

20,000

 

17,000

 

Net interest income after provision for loan losses

 

76,669

 

85,722

 

154,865

 

180,251

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Customer service fees

 

9,511

 

12,107

 

19,993

 

23,829

 

Other loan fees

 

505

 

805

 

1,392

 

1,737

 

Gain on sales of securities

 

 

 

2,477

 

 

Mortgage banking income, net

 

1,777

 

370

 

3,132

 

2,803

 

Income from bank owned life insurance

 

2,204

 

2,629

 

4,627

 

4,864

 

Other

 

1,454

 

1,129

 

3,397

 

1,850

 

Total non-interest income

 

15,451

 

17,040

 

35,018

 

35,083

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

General and administrative:

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

32,142

 

37,168

 

74,302

 

73,701

 

Occupancy, equipment and systems

 

16,510

 

15,923

 

33,234

 

32,489

 

Federal deposit insurance premiums

 

11,864

 

11,178

 

23,067

 

16,692

 

Advertising

 

1,979

 

2,049

 

3,813

 

3,733

 

Other

 

9,604

 

9,636

 

19,884

 

18,958

 

Total non-interest expense

 

72,099

 

75,954

 

154,300

 

145,573

 

Income before income tax expense

 

20,021

 

26,808

 

35,583

 

69,761

 

Income tax expense

 

7,197

 

9,963

 

12,763

 

25,532

 

Net income

 

$

12,824

 

$

16,845

 

$

22,820

 

$

44,229

 

Basic earnings per common share

 

$

0.13

 

$

0.18

 

$

0.24

 

$

0.46

 

Diluted earnings per common share

 

$

0.13

 

$

0.18

 

$

0.24

 

$

0.46

 

Basic weighted average common shares

 

95,332,904

 

92,949,206

 

95,175,886

 

92,842,398

 

Diluted weighted average common and common equivalent shares

 

95,332,904

 

92,949,206

 

95,175,886

 

92,842,398

 

 

See accompanying Notes to Consolidated Financial Statements.

 

3



Table of Contents

 

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

For the

 

For the

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

(In Thousands)

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

12,824

 

$

16,845

 

$

22,820

 

$

44,229

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

Net unrealized gain (loss) on securities available-for-sale:

 

 

 

 

 

 

 

 

 

Net unrealized holding gains on securities arising during the period

 

1,416

 

2,713

 

602

 

3,876

 

Reclassification adjustment for gains included in net income

 

 

 

(1,604)

 

 

Net unrealized gain (loss) on securities available-for-sale

 

1,416

 

2,713

 

(1,002)

 

3,876

 

 

 

 

 

 

 

 

 

 

 

Net actuarial loss adjustment on pension plans and other postretirement benefits:

 

 

 

 

 

 

 

 

 

Net actuarial loss adjustment arising during the period

 

 

 

24,286

 

 

Reclassification adjustment for net actuarial loss included in net income

 

428

 

1,420

 

2,629

 

2,782

 

Net actuarial loss adjustment on pension plans and other postretirement benefits

 

428

 

1,420

 

26,915

 

2,782

 

 

 

 

 

 

 

 

 

 

 

Prior service cost adjustment on pension plans and other postretirement benefits:

 

 

 

 

 

 

 

 

 

Prior service cost adjustment arising during the period

 

 

 

(3,537)

 

 

Reclassification adjustment for prior service cost included in net income

 

33

 

15

 

35

 

30

 

Prior service cost adjustment on pension plans and other postretirement benefits

 

33

 

15

 

(3,502)

 

30

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for loss on cash flow hedge included in net income

 

47

 

47

 

95

 

95

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income, net of tax

 

1,924

 

4,195

 

22,506

 

6,783

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

14,748

 

$

21,040

 

$

45,326

 

$

51,012

 

 

See accompanying Notes to Consolidated Financial Statements.

 

4



Table of Contents

 

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

For the Six Months Ended June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

Unallocated

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

Common

 

 

 

 

 

Common

 

Paid-in

 

Retained

 

Treasury

 

Comprehensive

 

Stock Held

 

(In Thousands, Except Share Data)

 

Total

 

Stock

 

Capital

 

Earnings

 

Stock

 

Loss

 

by ESOP

 

Balance at December 31, 2011

 

$1,251,198

 

$1,665

 

$875,395

 

 

$1,861,592

 

 

$(1,404,311

)

$(75,661

)

 

$  (7,482

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

22,820

 

 

 

 

22,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax

 

22,506

 

 

 

 

 

 

 

22,506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on common stock ($0.17 per share)

 

(16,394

)

 

 

 

(16,394

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock grants (12,000 shares)

 

 

 

(104

)

 

(144

)

 

248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeitures of restricted stock (268,776 shares)

 

 

 

3,828

 

 

1,724

 

 

(5,552

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

2,216

 

 

1,847

 

 

369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net tax benefit shortfall from stock-based compensation

 

(1,893

)

 

(1,893

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ESOP stock

 

5,158

 

 

3,095

 

 

 

 

 

 

 

2,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2012

 

$1,285,611

 

$1,665

 

$882,168

 

 

$1,869,967

 

 

$(1,409,615

)

$(53,155

)

 

$  (5,419

)

 

 

See accompanying Notes to Consolidated Financial Statements.

 

5



Table of Contents

 

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

For the Six Months Ended

 

 

 

June 30,

 

(In Thousands)

 

2012

 

2011

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

   $

22,820

 

  $

44,229

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Net amortization on loans

 

13,591

 

13,217

 

Net amortization on securities and borrowings

 

7,069

 

3,070

 

Net provision for loan and real estate losses

 

21,821

 

18,626

 

Depreciation and amortization

 

5,942

 

5,795

 

Net gain on sales of loans and securities

 

(7,382

)

(1,814

)

Net loss on dispositions of premises and equipment

 

58

 

270

 

Other asset impairment charges

 

223

 

441

 

Originations of loans held-for-sale

 

(175,628

)

(88,947

)

Proceeds from sales and principal repayments of loans held-for-sale

 

171,886

 

119,055

 

Stock-based compensation and allocation of ESOP stock

 

7,374

 

10,379

 

Decrease in accrued interest receivable

 

1,555

 

2,422

 

Mortgage servicing rights amortization and valuation allowance adjustments, net

 

2,515

 

1,120

 

Bank owned life insurance income and insurance proceeds received, net

 

(3,705

)

4,543

 

Decrease in other assets

 

58,705

 

33,295

 

Increase (decrease) in accrued expenses and other liabilities

 

13,980

 

(39,689

)

Net cash provided by operating activities

 

140,824

 

126,012

 

Cash flows from investing activities:

 

 

 

 

 

Originations of loans receivable

 

(2,051,521

)

(966,649

)

Loan purchases through third parties

 

(666,513

)

(420,750

)

Principal payments on loans receivable

 

2,204,650

 

1,991,150

 

Proceeds from sales of delinquent and non-performing loans

 

19,734

 

16,319

 

Purchases of securities held-to-maturity

 

(339,611

)

(356,744

)

Purchases of securities available-for-sale

 

(157,480

)

 

Principal payments on securities held-to-maturity

 

457,657

 

390,802

 

Principal payments on securities available-for-sale

 

81,953

 

119,294

 

Proceeds from sales of securities available-for-sale

 

54,318

 

 

Net (purchases) redemptions of Federal Home Loan Bank of New York stock

 

(49,809

)

20,149

 

Proceeds from sales of real estate owned, net

 

35,918

 

47,612

 

Purchases of premises and equipment

 

(4,308

)

(6,148

)

Proceeds from sales of premises and equipment

 

 

14,396

 

Net cash (used in) provided by investing activities

 

(415,012

)

849,431

 

Cash flows from financing activities:

 

 

 

 

 

Net decrease in deposits

 

(531,435

)

(388,380

)

Net increase in borrowings with original terms of three months or less

 

698,000

 

58,000

 

Proceeds from borrowings with original terms greater than three months

 

850,000

 

 

Repayments of borrowings with original terms greater than three months

 

(494,000

)

(641,000

)

Cash payments for debt issuance costs

 

(1,548

)

 

Net increase in mortgage escrow funds

 

17,876

 

9,541

 

Cash dividends paid to stockholders

 

(16,394

)

(24,707

)

Net tax benefit (shortfall) excess from stock-based compensation

 

(1,893

)

67

 

Net cash provided by (used in) financing activities

 

520,606

 

(986,479

)

Net increase (decrease) in cash and cash equivalents

 

246,418

 

(11,036

)

Cash and cash equivalents at beginning of period

 

132,704

 

119,016

 

Cash and cash equivalents at end of period

 

    $

379,122

 

   $

107,980

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

Interest paid

 

    $

137,480

 

   $

169,147

 

Income taxes paid

 

    $

1,694

 

   $

34,920

 

Additions to real estate owned

 

    $

21,483

 

   $

44,779

 

Loans transferred to held-for-sale

 

    $

1,547

 

   $

17,397

 

 

See accompanying Notes to Consolidated Financial Statements.

 

6



Table of Contents

 

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, and AF Insurance Agency, Inc.  As used in this quarterly report, “we,” “us” and “our” refer to Astoria Financial Corporation and its consolidated subsidiaries.  All significant inter-company accounts and transactions have been eliminated in consolidation.

 

In addition to Astoria Federal and AF Insurance Agency, Inc., we have another subsidiary, Astoria Capital Trust I, which is not consolidated with Astoria Financial Corporation for financial reporting purposes.  Astoria Capital Trust I was formed for the purpose of issuing $125.0 million aggregate liquidation amount of 9.75% Capital Securities due November 1, 2029, or Capital Securities, and $3.9 million of common securities, which are owned by Astoria Financial Corporation, and used the proceeds to acquire Junior Subordinated Debentures issued by Astoria Financial Corporation.  The Junior Subordinated Debentures total $128.9 million, have an interest rate of 9.75%, mature on November 1, 2029 and are the sole assets of Astoria Capital Trust I.  The Junior Subordinated Debentures are prepayable, in whole or in part, at our option at declining premiums to November 1, 2019, after which the Junior Subordinated Debentures are prepayable at par value.  The Capital Securities have the same prepayment provisions as the Junior Subordinated Debentures.  Astoria Financial Corporation has fully and unconditionally guaranteed the Capital Securities along with all obligations of Astoria Capital Trust I under the trust agreement relating to the Capital Securities.  See Note 9 of Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” of our 2011 Annual Report on Form 10-K for restrictions on our subsidiaries’ ability to pay dividends to us.

 

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, 2012 and December 31, 2011, our results of operations and other comprehensive income for the three and six months ended June 30, 2012 and 2011, changes in our stockholders’ equity for the six months ended June 30, 2012 and our cash flows for the six months ended June 30, 2012 and 2011.  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, 2012 and December 31, 2011, and amounts of revenues, expenses and other comprehensive income/loss in the consolidated statements of income and comprehensive income for the three and six months ended June 30, 2012 and 2011.  The results of operations and other comprehensive income/loss for the three and six months ended June 30, 2012 are not necessarily indicative of the results of operations and other comprehensive income/loss to be expected for the remainder of the year.  Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, 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 year amounts to conform to the current year presentation.

 

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These consolidated financial statements should be read in conjunction with our December 31, 2011 audited consolidated financial statements and related notes included in our 2011 Annual Report on Form 10-K.

 

2.              Securities

 

The following tables set forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at the dates indicated.

 

 

 

At June 30, 2012

 

(In Thousands)

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

GSE (1) issuance REMICs and CMOs (2)

 

$

239,941

 

 $

7,149

 

 $

 

 

$

247,090

 

 

Non-GSE issuance REMICs and CMOs

 

13,558

 

1

 

(112

)

 

13,447

 

 

GSE pass-through certificates

 

22,326

 

1,044

 

(2

)

 

23,368

 

 

Total residential mortgage-backed securities

 

275,825

 

8,194

 

(114

)

 

283,905

 

 

Obligations of GSEs

 

74,915

 

131

 

(50

)

 

74,996

 

 

Freddie Mac and Fannie Mae stock

 

15

 

6,660

 

(15

)

 

6,660

 

 

Total securities available-for-sale

 

$

350,755

 

 $

14,985

 

 $

(179

)

 

$

365,561

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

GSE issuance REMICs and CMOs

 

$

1,995,791

 

 $

37,996

 

 $

(870

)

 

$

2,032,917

 

 

Non-GSE issuance REMICs and CMOs

 

7,201

 

148

 

 

 

7,349

 

 

GSE pass-through certificates

 

332

 

10

 

 

 

342

 

 

Total residential mortgage-backed securities

 

2,003,324

 

38,154

 

(870

)

 

2,040,608

 

 

Obligations of states and political subdivisions

 

2,799

 

81

 

 

 

2,880

 

 

Total securities held-to-maturity

 

$

2,006,123

 

 $

38,235

 

 $

(870

)

 

$

2,043,488

 

 

 

(1)    Government-sponsored enterprise

(2)    Real estate mortgage investment conduits and collateralized mortgage obligations

 

 

 

 

 

At December 31, 2011

(In Thousands)

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

GSE issuance REMICs and CMOs

 

$

286,862

 

 $

11,759

 

 $

(1

)

 

$

298,620

 

 

Non-GSE issuance REMICs and CMOs

 

16,092

 

 

(297

)

 

15,795

 

 

GSE pass-through certificates

 

24,168

 

1,026

 

(2

)

 

25,192

 

 

Total residential mortgage-backed securities

 

327,122

 

12,785

 

(300

)

 

339,607

 

 

Freddie Mac and Fannie Mae stock

 

15

 

4,580

 

(15

)

 

4,580

 

 

Total securities available-for-sale

 

$

327,137

 

 $

17,365

 

 $

(315

)

 

$

344,187

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

GSE issuance REMICs and CMOs

 

$

2,054,380

 

 $

45,929

 

 $

(146

)

 

$

2,100,163

 

 

Non-GSE issuance REMICs and CMOs

 

15,105

 

92

 

(1

)

 

15,196

 

 

GSE pass-through certificates

 

475

 

24

 

 

 

499

 

 

Total residential mortgage-backed securities

 

2,069,960

 

46,045

 

(147

)

 

2,115,858

 

 

Obligations of GSEs

 

57,868

 

140

 

 

 

58,008

 

 

Obligations of states and political subdivisions

 

2,976

 

83

 

 

 

3,059

 

 

Total securities held-to-maturity

 

$

2,130,804

 

 $

46,268

 

 $

(147

)

 

$

2,176,925

 

 

 

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The following tables set forth the estimated fair values of securities with gross unrealized losses at the dates indicated, segregated between securities that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve months or longer at the dates indicated.

 

 

 

At June 30, 2012

 

 

Less Than Twelve Months

 

Twelve Months or Longer

 

Total

(In Thousands)

 

Estimated
Fair Value

 

Gross
Unrealized
Losses

 

Estimated
Fair Value

 

Gross
Unrealized
Losses

 

Estimated
Fair Value

 

Gross
Unrealized
Losses

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GSE issuance REMICs and CMOs

 

   $

 —

 

    $

 —

 

  $

 13,129

 

   $

 (112

)

 

$

 13,129

 

    $

 (112

)

GSE pass-through certificates

 

609

 

(1

)

22

 

(1

)

 

631

 

(2

)

Obligations of GSEs

 

24,924

 

(50

)

 

 

 

24,924

 

(50

)

Freddie Mac and Fannie Mae stock

 

 

 

 

(15

)

 

 

(15

)

Total temporarily impaired securities available-for-sale

 

  $

 25,533

 

    $

 (51

)

  $

 13,151

 

   $

 (128

)

 

$

 38,684

 

    $

 (179

)

Total temporarily impaired securities held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSE issuance REMICs and CMOs

 

  $

 199,201

 

    $

 (870

)

  $

 —

 

   $

 —

 

 

$

 199,201

 

    $

 (870

)

 

 

 

 

 

At December 31, 2011

 

 

Less Than Twelve Months

 

Twelve Months or Longer

 

Total

(In Thousands)

 

Estimated
Fair Value

 

Gross
Unrealized
Losses

 

Estimated
Fair Value

 

Gross
Unrealized
Losses

 

Estimated
Fair Value

 

Gross
Unrealized
Losses

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSE issuance REMICs and CMOs

 

  $

 360

 

    $

 (1

)

  $

 —

 

   $

 —

 

 

$

 360

 

    $

 (1

)

Non-GSE issuance REMICs and CMOs

 

495

 

(21

)

15,261

 

(276

)

 

15,756

 

(297

)

GSE pass-through certificates

 

623

 

(2

)

 

 

 

623

 

(2

)

Freddie Mac and Fannie Mae stock

 

 

 

 

(15

)

 

 

(15

)

Total temporarily impaired securities available-for-sale

 

  $

 1,478

 

    $

 (24

)

  $

 15,261

 

   $

 (291

)

 

$

 16,739

 

    $

 (315

)

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSE issuance REMICs and CMOs

 

  $

 53,347

 

    $

 (146

)

  $

 —

 

   $

 —

 

 

$

 53,347

 

    $

 (146

)

Non-GSE issuance REMICs and CMOs

 

1,247

 

(1

)

 

 

 

1,247

 

(1

)

Total temporarily impaired securities held-to-maturity

 

  $

 54,594

 

    $

 (147

)

  $

 —

 

   $

 —

 

 

$

 54,594

 

    $

 (147

)

 

We held 34 securities which had an unrealized loss at June 30, 2012 and 36 at December 31, 2011.  At June 30, 2012 and December 31, 2011, substantially all of the securities in an unrealized loss position had a fixed interest rate and the cause of the temporary impairment is directly related to the change in interest rates.  In general, as interest rates rise, the fair value of fixed rate securities will decrease; as interest rates fall, the fair value of fixed rate securities will increase.  We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience.  None of the unrealized losses are related to credit losses.  Therefore, at June 30, 2012 and December 31, 2011, the impairments are deemed temporary based on (1) the direct relationship of the decline in fair value to movements in interest rates, (2) the estimated remaining life and high credit quality of the investments and (3) the fact that we do not intend to sell these securities and it is not more likely than not that we will be required to sell these securities before their anticipated recovery of the remaining amortized cost basis and we expect to recover the entire amortized cost basis of the security.

 

During the six months ended June 30, 2012, proceeds from sales of securities from the available-for-sale portfolio totaled $54.3 million, resulting in gross realized gains totaling $2.5 million. 

 

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Table of Contents

 

There were no sales of securities from the available-for-sale portfolio during the six months ended June 30, 2011.

 

At June 30, 2012, available-for-sale debt securities excluding mortgage-backed securities had an amortized cost of $74.9 million, a fair value of $75.0 million and contractual maturities between 2021 and 2022.  At June 30, 2012, held-to-maturity debt securities excluding mortgage-backed securities had an amortized cost of $2.8 million, a fair value of $2.9 million and contractual maturities between 2017 and 2018.  Actual maturities will differ from contractual maturities because issuers may have the right to prepay or call obligations with or without prepayment penalties.

 

The balance of accrued interest receivable for securities totaled $6.8 million at June 30, 2012 and $7.5 million at December 31, 2011.

 

At June 30, 2012, we held securities with an amortized cost of $74.9 million which are callable within one year and at various times thereafter.

 

3.              Loans Held-for-Sale

 

Loans held-for-sale, net, includes fifteen and thirty year fixed rate one-to-four family mortgage loans originated for sale that conform to GSE guidelines (conforming loans), as well as certain delinquent and non-performing loans.  Upon our decision to sell certain delinquent and non-performing loans held in portfolio, we reclassify them to held-for-sale at the lower of cost or fair value, less estimated selling costs.  Non-performing loans held-for-sale, included in loans held-for-sale, net, totaled $2.5 million, net of a valuation allowance of $171,000, at June 30, 2012, consisting primarily of multi-family mortgage loans, and $19.7 million, net of a valuation allowance of $63,000, at December 31, 2011, consisting primarily of multi-family and commercial real estate mortgage loans.

 

We sold certain delinquent and non-performing mortgage loans totaling $18.5 million, net of charge-offs of $10.0 million, during the six months ended June 30, 2012, primarily multi-family and commercial real estate loans, and $16.4 million, net of charge-offs of $7.9 million, during the six months ended June 30, 2011, primarily multi-family loans.  Net gain on sales of non-performing loans totaled $329,000 for the three months ended June 30, 2012 and $1.3 million for the six months ended June 30, 2012.  Net gain on sales of non-performing loans totaled $48,000 for the three months ended June 30, 2011 and net loss on sales of non-performing loans totaled $52,000 for the six months ended June 30, 2011.

 

We recorded net lower of cost or market write-downs on non-performing loans held-for-sale totaling $169,000 for the three months ended June 30, 2012 and $223,000 for the six months ended June 30, 2012.  Lower of cost or market recoveries on non-performing loans held-for-sale totaled $82,000 for the three months ended June 30, 2011 and net lower of cost or market write-downs on non-performing loans held-for-sale totaled $441,000 for the six months ended June 30, 2011.  Lower of cost or market write-downs and recoveries on non-performing loans held-for-sale and gains and losses recognized on sales of such loans are included in other non-interest income in the consolidated statements of income.

 

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4.              Loans Receivable and Allowance for Loan Losses

 

The following tables set forth the composition of our loans receivable portfolio in dollar amounts and percentages of the portfolio and an aging analysis by segment and class at the dates indicated.

 

 

 

At June 30, 2012

 

 

 

30-59 Days

 

60-89 Days

 

90 Days or More Past Due

 

Total

 

 

 

 

 

Percent

 

(Dollars in Thousands)

 

Past Due

 

Past Due

 

Accruing

 

Non-Accrual

 

Past Due

 

Current

 

Total

 

of Total

 

Mortgage loans (gross):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four family:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full documentation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only

 

$

33,322

 

$

10,474

 

$

 

$

98,926

 

$

 142,722

 

$

2,129,138

 

$

2,271,860

 

16.65%

 

Amortizing

 

24,011

 

5,313

 

 

41,247

 

70,571

 

6,702,244

 

6,772,815

 

49.63

 

Reduced documentation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only

 

29,315

 

6,181

 

 

120,481

 

155,977

 

919,125

 

1,075,102

 

7.88

 

Amortizing

 

11,544

 

3,098

 

 

34,115

 

48,757

 

363,566

 

412,323

 

3.02

 

Total one-to-four family

 

98,192

 

25,066

 

 

294,769

 

418,027

 

10,114,073

 

10,532,100

 

77.18

 

Multi-family

 

21,562

 

5,458

 

435

 

35,521

 

62,976

 

2,134,894

 

2,197,870

 

16.11

 

Commercial real estate

 

8,028

 

2,236

 

 

5,701

 

15,965

 

630,486

 

646,451

 

4.74

 

Total mortgage loans

 

127,782

 

32,760

 

435

 

335,991

 

496,968

 

12,879,453

 

13,376,421

 

98.03

 

Consumer and other loans (gross):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines of credit

 

2,175

 

993

 

 

6,414

 

9,582

 

235,290

 

244,872

 

1.79

 

Other

 

141

 

70

 

 

491

 

702

 

23,588

 

24,290

 

0.18

 

Total consumer and other loans

 

2,316

 

1,063

 

 

6,905

 

10,284

 

258,878

 

269,162

 

1.97

 

Total loans

 

$

130,098

 

$

33,823

 

$

435

 

$

342,896

 

$

 507,252

 

$

13,138,331

 

$

13,645,583

 

100.00%

 

Net unamortized premiums and deferred loan origination costs

 

 

 

 

 

 

 

 

 

 

 

 

 

75,542

 

 

 

Loans receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

13,721,125

 

 

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

(148,102

)

 

 

Loans receivable, net

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,573,023

 

 

 

 

 

 

 

 

 

At December 31, 2011

 

 

 

30-59 Days

 

60-89 Days

 

90 Days or More Past Due

 

Total

 

 

 

 

 

Percent

 

(Dollars in Thousands)

 

Past Due

 

Past Due

 

Accruing

 

Non-Accrual

 

Past Due

 

Current

 

Total

 

of Total

 

Mortgage loans (gross):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four family:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full documentation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only

 

$

40,582

 

$

9,047

 

$

 —

 

$

107,503

 

$

 157,132

 

$

2,538,808

 

$

2,695,940

 

20.43%

 

Amortizing

 

33,376

 

7,056

 

14

 

43,923

 

84,369

 

6,223,678

 

6,308,047

 

47.79

 

Reduced documentation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only

 

38,570

 

9,695

 

 

131,301

 

179,566

 

965,774

 

1,145,340

 

8.68

 

Amortizing

 

16,034

 

5,455

 

 

35,126

 

56,615

 

355,597

 

412,212

 

3.12

 

Total one-to-four family

 

128,562

 

31,253

 

14

 

317,853

 

477,682

 

10,083,857

 

10,561,539

 

80.02

 

Multi-family

 

29,109

 

14,915

 

148

 

7,874

 

52,046

 

1,641,825

 

1,693,871

 

12.84

 

Commercial real estate

 

4,882

 

1,060

 

 

900

 

6,842

 

652,864

 

659,706

 

5.00

 

Total mortgage loans

 

162,553

 

47,228

 

162

 

326,627

 

536,570

 

12,378,546

 

12,915,116

 

97.86

 

Consumer and other loans (gross):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity lines of credit

 

3,975

 

1,391

 

 

5,995

 

11,361

 

247,675

 

259,036

 

1.96

 

Other

 

212

 

196

 

 

73

 

481

 

22,927

 

23,408

 

0.18

 

Total consumer and other loans

 

4,187

 

1,587

 

 

6,068

 

11,842

 

270,602

 

282,444

 

2.14

 

Total loans

 

$

166,740

 

$

48,815

 

$

 162

 

$

332,695

 

$

 548,412

 

$

12,649,148