EX-99.1 2 tv487842_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Astoria Financial Corporation

Unaudited consolidated financial statements of Astoria as of and for the three and nine months ended September 30, 2017.

 

Consolidated Statements of Financial Condition at September 30, 2017 and December 31, 2016 1
   
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and 2016 2
   
Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2017 and 2016 3
   
Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2017 and 2016 4
   
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016 5
   
Notes to Consolidated Financial Statements 6

  

 

 

  

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition (Unaudited)

 

(In Thousands, Except Share Data)  At September 30, 2017   At December 31, 2016 
Assets:          
Cash and due from banks  $275,409   $129,944 
Available-for-sale securities:          
Encumbered   33,948    35,080 
Unencumbered   209,069    244,965 
Total available-for-sale securities   243,017    280,045 
Held-to-maturity securities, fair value of $2,859,265 and $2,690,546, respectively:          
Encumbered   1,148,801    1,194,685 
Unencumbered   1,752,293    1,545,447 
Total held-to-maturity securities   2,901,094    2,740,132 
Federal Home Loan Bank of New York stock, at cost   95,693    124,807 
Loans held-for-sale, net   497    11,584 
Loans receivable   9,546,307    10,417,187 
Allowance for loan losses   (79,293)   (86,100)
Loans receivable, net   9,467,014    10,331,087 
Mortgage servicing rights, net   9,812    10,130 
Accrued interest receivable   34,094    34,994 
Premises and equipment, net   90,678    101,021 
Goodwill   185,151    185,151 
Bank owned life insurance   443,133    441,064 
Real estate owned, net   17,705    15,144 
Other assets   186,954    153,549 
Total assets  $13,950,251   $14,558,652 
Liabilities:          
Deposits:          
NOW and demand deposit  $2,533,489   $2,521,094 
Money market   2,784,560    2,706,895 
Savings   1,986,391    2,048,202 
Certificates of deposit   1,724,863    1,600,864 
Total deposits   9,029,303    8,877,055 
Federal funds purchased   —    195,000 
Securities sold under agreements to repurchase   1,100,000    1,100,000 
Federal Home Loan Bank of New York advances   1,550,000    2,090,000 
Other borrowings, net   198,044    249,752 
Mortgage escrow funds   140,267    112,975 
Accrued expenses and other liabilities   214,458    219,797 
Total liabilities   12,232,072    12,844,579 
Stockholders’ Equity:          
Preferred stock, $1.00 par value; 5,000,000 shares authorized: Series C (150,000 shares authorized; and 135,000 shares issued and outstanding)   129,796    129,796 
Common stock, $0.01 par value (200,000,000 shares authorized; 166,494,888 shares issued; and 101,719,533 and 101,210,478 shares outstanding, respectively)   1,665    1,665 
Additional paid-in capital   826,779    830,417 
Retained earnings   2,151,208    2,155,785 
Treasury stock (64,775,355 and 65,284,410 shares, at cost, respectively)   (1,336,208)   (1,346,709)
Accumulated other comprehensive loss   (55,061)   (56,881)
Total stockholders’ equity   1,718,179    1,714,073 
Total liabilities and stockholders’ equity  $13,950,251   $14,558,652 

See accompanying Notes to Consolidated Financial Statements.

 

 1 

 

 

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

 

   For the
 Three Months Ended 
 September 30,		   For the
 Nine Months Ended 
 September 30,		 
(In Thousands, Except Share Data)  2017   2016   2017   2016 
Interest income:                    
Residential mortgage loans  $41,399   $44,582   $128,019   $137,640 
Multi-family and commercial real estate mortgage loans   43,500    47,795    130,329    141,207 
Consumer and other loans   2,519    2,456    7,193    7,263 
Mortgage-backed and other securities   19,129    17,873    55,744    52,177 
Interest-earning cash accounts   263    110    604    346 
Federal Home Loan Bank of New York stock   1,428    1,526    4,662    4,434 
Total interest income   108,238    114,342    326,551    343,067 
Interest expense:                    
Deposits   6,882    6,463    19,858    20,482 
Borrowings   22,570    24,238    69,255    72,606 
Total interest expense   29,452    30,701    89,113    93,088 
Net interest income   78,786    83,641    237,438    249,979 
Provision for loan losses credited to operations   —    (995)   (4,941)   (7,128)
Net interest income after provision for loan losses   78,786    84,636    242,379    257,107 
Non-interest income:                    
Customer service fees   6,560    7,107    20,022    21,637 
Other loan fees   468    566    1,560    1,667 
Gain on sales of securities   —    —    —    86 
Mortgage banking income, net   746    916    3,033    1,034 
Income from bank owned life insurance   2,267    2,294    6,696    6,919 
Other   766    1,883    3,212    4,740 
Total non-interest income   10,807    12,766    34,523    36,083 
Non-interest expense:                    
General and administrative:                    
Compensation and benefits   41,440    37,725    114,501    112,686 
Occupancy, equipment and systems   19,244    19,713    59,072    57,944 
Federal deposit insurance premium   1,978    3,151    5,651    9,712 
Advertising   545    742    1,693    5,213 
Other   68,997    7,377    87,986    22,724 
Total non-interest expense   132,204    68,708    268,903    208,279 
(Loss) income before income tax (benefit) expense   (42,611)   28,694    7,999    84,911 
Income tax (benefit) expense   (24,776)   10,003    (6,556)   29,319 
Net (loss) income   (17,835)   18,691    14,555    55,592 
Preferred stock dividends   2,194    2,194    6,582    6,582 
Net (loss) income available to common shareholders  $(20,029)  $16,497   $7,973   $49,010 
                     
Basic (loss) earnings per common share  $(0.20)  $0.16   $0.08   $0.48 
Diluted (loss) earnings per common share  $(0.20)  $0.16   $0.08   $0.48 
                     
Basic weighted average common shares outstanding   100,597,399    100,383,631    100,592,921    100,377,618 
Diluted weighted average common shares outstanding   100,597,399    100,383,631    100,592,921    100,377,618 

 

See accompanying Notes to Consolidated Financial Statements.

 

 2 

 

 

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

 

   For the
 Three Months Ended 
 September 30,		   For the
 Nine Months Ended 
 September 30,		 
(In Thousands)  2017   2016   2017   2016 
                 
Net (loss) income  $(17,835)  $18,691   $14,555   $55,592 
                     
Other comprehensive income (loss), net of tax:                    
Net unrealized gain (loss) on securities available-for-sale:                    
Net unrealized holding gain (loss) on securities arising during the period   522    (955)   748    3,588 
Reclassification adjustment for gain on sales of securities included in net income   —    —    —    (51)
Net unrealized gain (loss) on securities available-for-sale   522    (955)   748    3,537 
                     
Reclassification adjustment for net actuarial loss on pension plans and other postretirement benefits included in net income   329    356    987    1,068 
                     
Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income   28    28    85    85 
                     
Total other comprehensive income (loss), net of tax   879    (571)   1,820    4,690 
                     
Comprehensive (loss) income  $(16,956)  $18,120   $16,375   $60,282 

 

See accompanying Notes to Consolidated Financial Statements.

 

 3 

 

 

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

For the Nine Months Ended September 30, 2017 and 2016

 

(In Thousands, Except Share Data)  Total   Preferred
Stock		   Common
Stock		   Additional
Paid-in
Capital		   Retained
Earnings		   Treasury
Stock		   Accumulated
Other
Comprehensive
Loss		 
                             
Balance at December 31, 2016  $1,714,073   $129,796   $1,665   $830,417   $2,155,785   $(1,346,709)  $(56,881)
                                    
Net income   14,555    —    —    —    14,555    —    — 
Other comprehensive income, net of tax   1,820    —    —    —    —    —    1,820 
Dividends on preferred stock ($48.75 per share)   (6,582)   —    —    —    (6,582)   —    — 
Dividends on common stock ($0.12 per share)   (12,186)   —    —    —    (12,186)   —    — 
Sales of treasury stock (5,411 shares)   103    —    —    —    (9)   112    — 
Restricted stock grants (521,784 shares)   —    —    —    (10,329)   (434)   10,763    — 
Forfeitures of restricted stock (18,140 shares)   —    —    —    298    76    (374)   — 
Stock-based compensation   6,396    —    —    6,393    3    —    — 
                                    
Balance at September 30, 2017  $1,718,179   $129,796   $1,665   $826,779   $2,151,208   $(1,336,208)  $(55,061)
                                    
Balance at December 31, 2015  $1,663,448   $129,796   $1,665   $902,349   $2,045,391   $(1,357,136)  $(58,617)
                                    
Net income   55,592    —    —    —    55,592    —    — 
Other comprehensive income, net of tax   4,690    —    —    —    —    —    4,690 
Dividends on preferred stock ($48.75 per share)   (6,582)   —    —    —    (6,582)   —    — 
Dividends on common stock ($0.12 per share)   (12,161)   —    —    —    (12,161)   —    — 
Sales of treasury stock (8,140 shares)   122    —    —    —    (46)   168    — 
Restricted stock grants (685,872 shares)   —    —    —    (10,329)   (3,823)   14,152    — 
Forfeitures of restricted stock (86,630 shares)   —    —    —    1,171    616    (1,787)   — 
Stock-based compensation   2,518    —    —    2,515    3    —    — 
Net tax benefit excess from stock-based compensation   35    —    —    35    —    —    — 
                                    
Balance at September 30, 2016  $1,707,662   $129,796   $1,665   $895,741   $2,078,990   $(1,344,603)  $(53,927)

 

See accompanying Notes to Consolidated Financial Statements.

 

 4 

 

 

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

 

   For the Nine Months Ended
September 30,		 
(In Thousands)  2017   2016 
Cash flows from operating activities:          
Net income  $14,555   $55,592 
Adjustments to reconcile net income to net cash provided by operating activities:          
Net amortization on loans   6,502    8,021 
Net amortization on securities and borrowings   4,738    6,260 
Net provision for loan and real estate losses credited to operations   (3,977)   (6,226)
Depreciation, write-downs and amortization   11,576    10,392 
Net gain on sales of loans and securities   (1,407)   (1,690)
Mortgage servicing rights amortization and valuation allowance adjustments, net   1,128    3,321 
Stock-based compensation   6,396    2,518 
Deferred income tax expense   2,588    2,753 
Originations of loans held-for-sale   (71,250)   (84,425)
Proceeds from sales and principal repayments of loans held-for-sale   83,293    87,879 
Decrease in accrued interest receivable   900    162 
Bank owned life insurance income and insurance proceeds received, net   (2,069)   (2,582)
(Increase) decrease in other assets   (34,048)   7,544 
Decrease in accrued expenses and other liabilities   (6,066)   (4,422)
Net cash provided by operating activities   12,859    85,097 
Cash flows from investing activities:          
Originations of loans receivable   (601,354)   (1,003,596)
Loan purchases through third parties   (79,448)   (247,680)
Principal payments on loans receivable   1,525,794    1,750,607 
Proceeds from sales of delinquent and non-performing loans   1,528    2,457 
Purchases of securities held-to-maturity   (837,060)   (1,155,291)
Purchases of securities available-for-sale   —    (30,000)
Principal payments on securities held-to-maturity   672,306    695,738 
Principal payments on securities available-for-sale   37,405    120,895 
Proceeds from sales of securities available-for-sale   —    23,065 
Purchases of Federal Home Loan Bank of New York stock   (28,847)   (85,363)
Redemptions of Federal Home Loan Bank of New York stock   57,961    85,680 
Proceeds from sales of real estate owned, net   11,883    14,278 
Purchases of premises and equipment, net of proceeds from sales   (1,554)   (4,605)
Proceeds from dispositions of premises and equipment   301    — 
Net cash provided by (used in) investing activities   758,915    166,185 
Cash flows from financing activities:          
Net increase (decrease) in deposits   152,248    (178,383)
Net decrease in borrowings with original terms of three months or less   (135,000)   (455,000)
Proceeds from borrowings with terms greater than three months   1,350,000    2,075,000 
Repayments of borrowings with original terms greater than three months   (2,000,000)   (1,770,000)
Cash payments for debt issuance costs   (2,184)   — 
Net increase in mortgage escrow funds   27,292    27,948 
Proceeds from sales of treasury stock   103    122 
Cash dividends paid to stockholders   (18,768)   (18,743)
Net tax benefit excess from stock-based compensation   —    35 
Net cash used in financing activities   (626,309)   (319,021)
Net decrease in cash and cash equivalents   145,465    (67,739)
Cash and cash equivalents at beginning of period   129,944    200,538 
Cash and cash equivalents at end of period  $275,409   $132,799 
Supplemental disclosures:          
Interest paid  $87,118   $88,581 
Income taxes paid  $26,671   $18,253 
Additions to real estate owned  $15,408   $9,974 
Loans transferred to held-for-sale  $1,887   $1,872 

 

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 Bank and its subsidiaries, referred to as Astoria Bank, and AF Insurance Agency, Inc.  As used in this quarterly report, “Astoria,” “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.

 

These consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles, or GAAP, for a full year presentation and certain disclosures have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).

 

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 September 30, 2017 and December 31, 2016, our results of operations and other comprehensive income for the three and nine months ended September 30, 2017 and 2016, changes in our stockholders’ equity for the nine months ended September 30, 2017 and 2016 and our cash flows for the nine months ended September 30, 2017 and 2016.  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 September 30, 2017 and December 31, 2016, and amounts of revenues, expenses and other comprehensive income in the consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2017 and 2016.

 

These consolidated financial statements should be read in conjunction with our December 31, 2016 audited consolidated financial statements and related notes included in our 2016 Annual Report on Form 10-K.

 

2.Merger with Sterling Bancorp

 

On October 2, 2017, Sterling Bancorp, or Sterling, acquired all of the outstanding common stock of Astoria for total consideration of approximately $2.2 billion and thereby acquired Astoria Bank’s 88 financial center locations across Long Island and the Greater New York metropolitan area (the “Sterling Merger”). Astoria Bank merged with and into Sterling National Bank, with Sterling National Bank as the surviving entity.

 

Each outstanding share of common stock was exchanged for 0.875 shares of common stock of Sterling. Also in the Sterling Merger, each share of Astoria 6.50% Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, with a liquidation preference of $1,000 per share, issued and outstanding immediately prior to the merger was automatically converted into the right to receive one share of Sterling 6.50% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share.

 

Direct costs related to the Sterling Merger were expensed as incurred and amounted to $60.2 million and $61.6 million in the three and nine months ended September 30, 2017.

 

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3.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 September 30, 2017 
(In Thousands) 

Amortized

Cost

  

Estimated

Fair

Value

 
Available-for-sale:          
Residential mortgage-backed securities:          
GSE (1) issuance REMICs and CMOs (2)  $206,480   $205,587 
Non-GSE issuance REMICs and CMOs   600    598 
GSE pass-through certificates   7,230    7,502 
Total residential mortgage-backed securities   214,310    213,687 
Obligations of GSEs   30,000    29,327 
Fannie Mae stock   15    3 
Total securities available-for-sale  $244,325   $243,017 
Held-to-maturity:          
Residential mortgage-backed securities:          
GSE issuance REMICs and CMOs  $1,355,628   $1,349,127 
Non-GSE issuance REMICs and CMOs   188    183 
GSE pass-through certificates   213,000    212,125 
Total residential mortgage-backed securities   1,568,816    1,561,435 
Multi-family mortgage-backed securities:          
GSE issuance REMICs   882,671    864,964 
Obligations of GSEs   369,333    356,426 
Corporate Debt securities   80,000    76,166 
Other   274    274 
Total securities held-to-maturity  $2,901,094   $2,859,265 

 

(1)Government-sponsored enterprise
(2)Real estate mortgage investment conduits and collateralized mortgage obligations

 

 7 

 

  

   At December 31, 2016 
(In Thousands) 

Amortized

Cost

  

Estimated

Fair

Value

 
Available-for-sale:          
Residential mortgage-backed securities:          
GSE issuance REMICs and CMOs  $242,172   $240,793 
Non-GSE issuance REMICs and CMOs   1,442    1,443 
GSE pass-through certificates   8,571    8,930 
Total residential mortgage-backed securities   252,185    251,166 
Obligations of GSEs   30,000    28,875 
Fannie Mae stock   15    4 
Total securities available-for-sale  $282,200   $280,045 
Held-to-maturity:          
Residential mortgage-backed securities:          
GSE issuance REMICs and CMOs  $1,119,175   $1,112,114 
Non-GSE issuance REMICs and CMOs   193    186 
GSE pass-through certificates   228,976    226,359 
Total residential mortgage-backed securities   1,348,344    1,338,659 
Multi-family mortgage-backed securities:          
GSE issuance REMICs   927,119    908,192 
Obligations of GSEs   384,325    367,869 
Corporate debt securities   80,000    75,482 
Other   344    344 
Total securities held-to-maturity  $2,740,132   $2,690,546 

 

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4.Loans Receivable and Allowance for Loan Losses

 

The following tables set forth the composition of our loans receivable portfolio, and an aging analysis by accruing and non-accrual loans, by segment and class at the dates indicated.

 

   At September 30, 2017 
   Past Due             
(In Thousands) 

30-59

Days

  

60-89

Days

  

90 Days

or More

  

Total

Past Due

   Current   Total 
Accruing loans:                              
Mortgage loans (gross):                              
Residential:                              
Full documentation interest-only  $—   $268   $—   $268   $65,288   $65,556 
Full documentation amortizing   40,025    6,593    —    46,618    3,962,010    4,008,628 
Reduced documentation interest-only   282    —    —    282    2,954    3,236 
Reduced documentation amortizing   27,954    6,371    —    34,325    519,519    553,844 
Total residential   68,261    13,232    —    81,493    4,549,771    4,631,264 
Multi-family   2,856    22    —    2,878    3,892,027    3,894,905 
Commercial real estate   2,081    —    1,595    3,676    627,089    630,765 
Total mortgage loans   73,198    13,254    1,595    88,047    9,068,887    9,156,934 
Consumer and other loans (gross):                              
Home equity and other consumer   1,222    527    —    1,749    119,026    120,775 
Commercial and industrial   128    —    —    128    98,549    98,677 
Total consumer and other loans   1,350    527    —    1,877    217,575    219,452 
Total accruing loans  $74,548   $13,781   $1,595   $89,924   $9,286,462   $9,376,386 
Non-accrual loans:                              
Mortgage loans (gross):                              
Residential:                              
Full documentation interest-only  $—   $—   $8,290   $8,290   $—   $8,290 
Full documentation amortizing   2,751    —    48,245    50,996    8,385    59,381 
Reduced documentation interest-only   —    —    6,032    6,032    —    6,032 
Reduced documentation amortizing   880    805    37,283    38,968    12,339    51,307 
Total residential   3,631    805    99,850    104,286    20,724    125,010 
Multi-family   273    —    1,152    1,425    2,068    3,493 
Commercial real estate   828    —    619    1,447    3,460    4,907 
Total mortgage loans   4,732    805    101,621    107,158    26,252    133,410 
Consumer and other loans (gross):                              
Home equity and other consumer   —    —    4,318    4,318    —    4,318 
Commercial and industrial   —    —    19    19    —    19 
Total consumer and other loans   —    —    4,337    4,337    —    4,337 
Total non-accrual loans  $4,732   $805   $105,958   $111,495   $26,252   $137,747 
Total loans:                              
Mortgage loans (gross):                              
Residential:                              
Full documentation interest-only  $—   $268   $8,290   $8,558   $65,288   $73,846 
Full documentation amortizing   42,776    6,593    48,245    97,614    3,970,395    4,068,009 
Reduced documentation interest-only   282    —    6,032    6,314    2,954    9,268 
Reduced documentation amortizing   28,834    7,176    37,283    73,293    531,858    605,151 
Total residential   71,892    14,037    99,850    185,779    4,570,495    4,756,274 
Multi-family   3,129    22    1,152    4,303    3,894,095    3,898,398 
Commercial real estate   2,909    —    2,214    5,123    630,549    635,672 
Total mortgage loans   77,930    14,059    103,216    195,205    9,095,139    9,290,344 
Consumer and other loans (gross):                              
Home equity and other consumer   1,222    527    4,318    6,067    119,026    125,093 
Commercial and industrial   128    —    19    147    98,549    98,696 
Total consumer and other loans   1,350    527    4,337    6,214    217,575    223,789 
Total loans  $79,280   $14,586   $107,553   $201,419   $9,312,714   $9,514,133 

Net unamortized premiums and deferred loan

origination costs

                            32,174 
Loans receivable                            9,546,307 
Allowance for loan losses                            (79,293)
Loans receivable, net                           $9,467,014 

 

 9 

 

  

   At December 31, 2016 
   Past Due             
(In Thousands) 

30-59

Days

  

60-89

Days

  

90 Days

or More

  

Total

Past Due

   Current   Total 
Accruing loans:                              
Mortgage loans (gross):                              
Residential:                              
Full documentation interest-only  $1,476   $3,104   $—   $4,580   $212,316   $216,896 
Full documentation amortizing   36,563    8,217    —    44,780    4,300,620    4,345,400 
Reduced documentation interest-only   2,974    779    —    3,753    80,416    84,169 
Reduced documentation amortizing   27,449    5,222    —    32,671    552,233    584,904 
Total residential   68,462    17,322    —    85,784    5,145,585    5,231,369 
Multi-family   1,060    795    —    1,855    4,040,386    4,042,241 
Commercial real estate   2,043    1,298    —    3,341    720,582    723,923 
Total mortgage loans   71,565    19,415    —    90,980    9,906,553    9,997,533 
Consumer and other loans (gross):                              
Home equity and other consumer   1,281    550    —    1,831    133,024    134,855 
Commercial and industrial   —    647    —    647    99,087    99,734 
Total consumer and other loans   1,281    1,197    —    2,478    232,111    234,589 
Total accruing loans  $72,846   $20,612   $—   $93,458   $10,138,664   $10,232,122 
Non-accrual loans:                              
Mortgage loans (gross):                              
Residential:                              
Full documentation interest-only  $437   $—   $11,605   $12,042   $2,048   $14,090 
Full documentation amortizing   2,469    —    42,983    45,452    11,753    57,205 
Reduced documentation interest-only   —    —    11,624    11,624    3,768    15,392 
Reduced documentation amortizing   1,077    992    35,351    37,420    9,887    47,307 
Total residential   3,983    992    101,563    106,538    27,456    133,994 
Multi-family   428    611    1,244    2,283    2,098    4,381 
Commercial real estate   219    —    —    219    5,117    5,336 
Total mortgage loans   4,630    1,603    102,807    109,040    34,671    143,711 
Consumer and other loans (gross):                              
Home equity and other consumer   —    —    4,483    4,483    —    4,483 
Commercial and industrial   —    —    42    42    —    42 
Total consumer and other loans   —    —    4,525    4,525    —    4,525 
Total non-accrual loans  $4,630   $1,603   $107,332   $113,565   $34,671   $148,236 
Total loans:                              
Mortgage loans (gross):                              
Residential:                              
Full documentation interest-only  $1,913   $3,104   $11,605   $16,622   $214,364   $230,986 
Full documentation amortizing   39,032    8,217    42,983    90,232    4,312,373    4,402,605 
Reduced documentation interest-only   2,974    779    11,624    15,377    84,184    99,561 
Reduced documentation amortizing   28,526    6,214    35,351    70,091    562,120    632,211 
Total residential   72,445    18,314    101,563    192,322    5,173,041    5,365,363 
Multi-family   1,488    1,406    1,244    4,138    4,042,484    4,046,622 
Commercial real estate   2,262    1,298    —    3,560    725,699    729,259 
Total mortgage loans   76,195    21,018    102,807    200,020    9,941,224    10,141,244 
Consumer and other loans (gross):                              
Home equity and other consumer   1,281    550    4,483    6,314    133,024    139,338 
Commercial and industrial   —    647    42    689    99,087    99,776 
Total consumer and other loans   1,281    1,197    4,525    7,003    232,111    239,114 
Total loans  $77,476   $22,215   $107,332   $207,023   $10,173,335   $10,380,358 

Net unamortized premiums and deferred loan

origination costs

                            36,829 
Loans receivable                            10,417,187 
Allowance for loan losses                            (86,100)
Loans receivable, net                           $10,331,087 

 

 10 

 

  

We segment our one-to-four family, or residential, mortgage loan portfolio by interest-only and amortizing loans, full documentation and reduced documentation loans, and origination time periods, and analyze our historical loss experience and delinquency levels and trends of these segments.  We analyze multi-family and commercial real estate mortgage loans by portfolio using predictive modeling techniques for loans originated after 2010 and by geographic location for loans originated prior to 2011. We analyze our consumer and other loan portfolio by home equity lines of credit, commercial and industrial loans and other consumer loans and perform similar historical loss analyses.

 

Our evaluation of loss experience factors considers trends in such factors over the prior three years, as well as an estimate of the average amount of time from an event signaling the potential inability of a borrower to continue to pay as agreed to the point at which a loss is confirmed, for substantially all of the loan portfolio, with the exception of multi-family and commercial real estate mortgage loans originated after 2010, for which our evaluation includes predictive modeling techniques. We also analyze our historical loss experience over 12, 15, 18 and 24 month periods.  The loss history used in calculating our quantitative allowance coverage percentages varies based on loan type. Also, for a particular loan type, we may not have sufficient loss history to develop a reasonable estimate of loss and in these instances we may consider our loss experience for other, similar loan types and may evaluate those losses over a longer period than two years.  Additionally, multi-family and commercial real estate loss experience may be adjusted based on the composition of the losses (loan sales, short sales and partial charge-offs). Modeling techniques utilize data inputs for each loan in the portfolio, including credit facility terms and performance to date, property details and borrower financial performance data. The model also incorporates real estate market data from an established real estate market database company to forecast future performance of the properties, and includes a loan loss predictive model based on studies of defaulted commercial real estate loans. The model then generates a probability of default, loss given default and ultimately an estimated loss for each loan quarterly over the remaining life of the loan. The appropriate timeframe from which to assign an estimated loss percentage to the pool of loans is assessed by management. We update our historical loss analyses, as well as our predictive model, quarterly and evaluate the need to modify our quantitative allowances as a result of our updated charge-off and loss analyses. We also consider qualitative factors with the purpose of assessing the adequacy of the overall allowance for loan losses as well as the allocation of the allowance for loan losses by loan category.

 

Allowance adequacy calculations are adjusted quarterly, based on the results of our quantitative and qualitative analyses, to reflect our current estimates of the amount of probable losses inherent in our loan portfolio. The portion of the allowance allocated to each loan category does not represent the total available to absorb losses which may occur within the loan category, since the total allowance for loan losses is available for losses applicable to the entire loan portfolio.

 

 11 

 

  

The following tables set forth the changes in our allowance for loan losses by loan receivable segment for the periods indicated.

 

   For the Three Months Ended September 30, 2017 
   Mortgage Loans   Consumer     
       Multi-   Commercial   and Other     
(In Thousands)  Residential   Family   Real Estate   Loans   Total 
Balance at July 1, 2017  $31,427   $34,087   $8,944   $5,042   $79,500 
Provision charged (credited) to operations   617    142    (701)   (58)   — 
Charge-offs   (2,591)   (11)   —    (475)   (3,077)
Recoveries   1,762    —    852    256    2,870 
Balance at September 30, 2017  $31,215   $34,218   $9,095   $4,765   $79,293 

  

   For the Nine Months Ended September 30, 2017 
   Mortgage Loans   Consumer     
       Multi-   Commercial   and Other     
(In Thousands)  Residential   Family   Real Estate   Loans   Total 
Balance at January 1, 2017  $36,439   $34,901   $9,299   $5,461   $86,100 
Provision credited to operations   (2,482)   (574)   (1,549)   (336)   (4,941)
Charge-offs   (6,272)   (148)   —    (740)   (7,160)
Recoveries   3,530    39    1,345    380    5,294 
Balance at September 30, 2017  $31,215   $34,218   $9,095   $4,765   $79,293 

 

   For the Three Months Ended September 30, 2016 
   Mortgage Loans   Consumer     
       Multi-   Commercial   and Other     
(In Thousands)  Residential   Family   Real Estate   Loans   Total 
Balance at July 1, 2016  $41,220   $32,131   $9,709   $6,940   $90,000 
Provision (credited) charged to operations   (505)   1,831    (887)   (1,434)   (995)
Charge-offs   (2,822)   —    (378)   (378)   (3,578)
Recoveries   469    443    981    380    2,273 
Balance at September 30, 2016  $38,362   $34,405   $9,425   $5,508   $87,700 

 

   For the Nine Months Ended September 30, 2016 
   Mortgage Loans   Consumer     
       Multi-   Commercial   and Other     
(In Thousands)  Residential   Family   Real Estate   Loans   Total 
Balance at January 1, 2016  $44,951   $35,544   $11,217   $6,288   $98,000 
Provision credited to operations   (2,025)   (2,696)   (2,332)   (75)   (7,128)
Charge-offs   (6,313)   (409)   (441)   (1,238)   (8,401)
Recoveries   1,749    1,966    981    533    5,229 
Balance at September 30, 2016  $38,362   $34,405   $9,425   $5,508   $87,700 

 

 12 

 

  

The following table sets forth the balances of our residential interest-only mortgage loans at September 30, 2017 by the period in which such loans are scheduled to enter their amortization period.

 

(In Thousands) 

Recorded

Investment

 
Amortization scheduled to begin in:     
12 months or less (1)  $63,287 
13 to 24 months   10,066 
25 to 36 months   8,261 
Over 36 months   1,500 
Total  $83,114 

 

(1)Includes $14 million of past due loans that were scheduled to enter amortization prior to September 30, 2017.

 

Pursuant to federal regulations and our policy, loans considered to be of lesser quality are rated as special mention, substandard, doubtful or loss. A loan rated as special mention has potential weaknesses, which, if uncorrected, may result in the deterioration of the repayment prospects or in our credit position at some future date. A loan rated as substandard is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Substandard loans include those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Loans rated as doubtful have all of the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full satisfaction of the loan amount, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans rated as loss are those considered uncollectable and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Those assets classified as substandard, doubtful or loss are considered adversely classified.

 

The following tables set forth the balances of our loan portfolio segments by credit quality indicator at the dates indicated.

 

   At September 30, 2017 
   Mortgage Loans   Consumer and Other Loans     
(In Thousands)  Residential   Multi-Family   Commercial
Real Estate		   Home Equity
and Other
Consumer		   Commercial
and
Industrial		   Total 
Not criticized  $4,570,911   $3,858,906   $620,411   $120,248   $97,164   $9,267,640 
Criticized:                              
Special mention   10,774    27,710    5,458    527    1,502    45,971 
Substandard   174,589    11,782    9,803    4,318    30    200,522 
Doubtful   —    —    —    —    —    — 
Total  $4,756,274   $3,898,398   $635,672   $125,093   $98,696   $9,514,133 

 

 13 

 

 

 

   At December 31, 2016 
   Mortgage Loans   Consumer and Other Loans     
(In Thousands)  Residential   Multi-Family   Commercial
Real Estate		   Home Equity
and Other
Consumer		   Commercial
and
Industrial		   Total 
Not criticized  $5,158,878   $4,005,703   $702,697   $134,305   $99,087   $10,100,670 
Criticized:                              
Special mention   14,922    24,804    9,235    550    647    50,158 
Substandard   191,563    16,115    17,327    4,483    42    229,530 
Doubtful   —    —    —    —    —    — 
Total  $5,365,363   $4,046,622   $729,259   $139,338   $99,776   $10,380,358 

 

The following tables set forth the balances of our loans receivable and the related allowance for loan loss allocation by segment and by the impairment methodology followed in determining the allowance for loan losses at the dates indicated.

 

   At September 30, 2017 
   Mortgage Loans   Consumer     
       Multi-   Commercial   and Other     
(In Thousands)  Residential   Family   Real Estate   Loans   Total 
Loans:                         
Individually evaluated for impairment  $178,928   $5,778   $4,609   $3,614   $192,929 
Collectively evaluated for impairment   4,577,346    3,892,620    631,063    220,175    9,321,204 
Total loans  $4,756,274   $3,898,398   $635,672   $223,789   $9,514,133 
Allowance for loan losses:                         
Individually evaluated for impairment  $6,457   $174   $132   $276   $7,039 
Collectively evaluated for impairment   24,758    34,044    8,963    4,489    72,254 
Total allowance for loan losses  $31,215   $34,218   $9,095   $4,765   $79,293 

 

   At December 31, 2016 
   Mortgage Loans   Consumer     
       Multi-   Commercial   and Other     
(In Thousands)  Residential   Family   Real Estate   Loans   Total 
Loans:                         
Individually evaluated for impairment  $192,427   $7,112   $10,033   $4,091   $213,663 
Collectively evaluated for impairment   5,172,936    4,039,510    719,226    235,023    10,166,695 
Total loans  $5,365,363   $4,046,622   $729,259   $239,114   $10,380,358 
Allowance for loan losses:                         
Individually evaluated for impairment  $9,044   $24   $—   $310   $9,378 
Collectively evaluated for impairment   27,395    34,877    9,299    5,151    76,722 
Total allowance for loan losses  $36,439   $34,901   $9,299   $5,461   $86,100 

  

 14 

 

 

5.Securities Sold Under Agreements to Repurchase

 

The following table details the remaining contractual maturities of our agreements to repurchase, or repo agreements, at September 30, 2017.

 

Year  Amount 
   (In Thousands) 
2018  $200,000 
2019   600,000 
2020   300,000 
Total  $1,100,000 (1)

 

(1)Callable within the next three months and on a quarterly basis thereafter.

 

The outstanding repo agreements at September 30, 2017 were fixed rate and collateralized by GSE securities. Securities collateralizing these agreements are classified as encumbered securities in the consolidated statements of financial condition. The amount of excess collateral required is governed by each individual contract. The primary risk associated with these secured borrowings is the requirement to pledge a market value based balance of collateral in excess of the borrowed amount. The excess collateral pledged represents an unsecured exposure to the lending counterparty. As the market value of the collateral changes, both through changes in discount rates and spreads as well as related cash flows, additional collateral may need to be pledged. In accordance with our policies, criteria for eligible counterparties has been established and excess collateral pledged is monitored to minimize our exposure.

 

 15 

 

  

6.Earnings Per Common Share

 

The following table is a reconciliation of basic and diluted earnings per common share, or EPS.

 

   For the Three Months Ended
September 30,		   For the Nine Months Ended
September 30,		 
(In Thousands, Except Share Data)  2017   2016   2017   2016 
Net (loss) income  $(17,835)  $18,691   $14,555   $55,592 
Preferred stock dividends   (2,194)   (2,194)   (6,582)   (6,582)
Net (loss) income available to common shareholders   (20,029)   16,497    7,973    49,010 
Income allocated to participating securities   (45)   (153)   (112)   (448)
Net (loss) income allocated to common shareholders  $(20,074)  $16,344   $7,861   $48,562 
                     
Basic weighted average common shares outstanding   100,597,399    100,383,631    100,592,921    100,377,618 
Dilutive effect of stock options and restricted stock units (1) (2)   —    —    —    — 
Diluted weighted average common shares outstanding   100,597,399    100,383,631    100,592,921    100,377,618 
                     
Basic (loss) earnings per common share  $(0.20)  $0.16   $0.08   $0.48 
Diluted (loss) earnings per common share  $(0.20)  $0.16   $0.08   $0.48 

 

(1)Excludes options to purchase 6,000 shares of common stock which were outstanding during the three months ended September 30, 2016; options to purchase 311 shares of common stock which were outstanding during the nine months ended September 30, 2017; and options to purchase 6,330 shares of common stock which were outstanding during the nine months ended September 30, 2016 because their inclusion would be anti-dilutive. There were no options to purchase shares of common stock outstanding during the three months ended September 30, 2017.
(2)Excludes 367,800 unvested restricted stock units which were outstanding during the three months ended September 30, 2017; 737,315 unvested restricted stock units which were outstanding during the three months ended September 30, 2016; 398,762 unvested restricted stock units which were outstanding during the nine months ended September 30, 2017; and 743,102 unvested restricted stock units which were outstanding during the nine months ended September 30, 2016 because the performance conditions have not been satisfied.

 

 16 

 

 

7.Other Comprehensive Income/Loss

 

The following tables set forth the components of accumulated other comprehensive loss, net of related tax effects, at the dates indicated and the changes during the three and nine months ended September 30, 2017 and 2016.

 

(In Thousands)  At
 June 30, 2017		  

Other

Comprehensive

Income

   At
 September 30, 2017		 
Net unrealized gain on securities available-for-sale  $2,487   $522   $3,009 
Net actuarial loss on pension plans and other postretirement benefits   (55,549)   329    (55,220)
Prior service cost on pension plans and other postretirement benefits   (2,878)   28    (2,850)
Accumulated other comprehensive loss  $(55,940)  $879   $(55,061)

 

(In Thousands)  At
 December 31, 2016		   Other
Comprehensive
Income		   At
 September 30, 2017		 
Net unrealized gain on securities available-for-sale  $2,261   $748   $3,009 
Net actuarial loss on pension plans and other postretirement benefits   (56,207)   987    (55,220)
Prior service cost on pension plans and other postretirement benefits   (2,935)   85    (2,850)
Accumulated other comprehensive loss  $(56,881)  $1,820   $(55,061)

 

(In Thousands)  At
 June 30, 2016		   Other
Comprehensive
(Loss) Income		   At
 September 30, 2016		 
Net unrealized gain on securities available-for-sale  $7,319   $(955)  $6,364 
Net actuarial loss on pension plans and other postretirement benefits   (57,684)   356    (57,328)
Prior service cost on pension plans and other postretirement benefits   (2,991)   28    (2,963)
Accumulated other comprehensive loss  $(53,356)  $(571)  $(53,927)

 

(In Thousands)  At
 December 31, 2015		   Other
Comprehensive
Income		   At
 September 30, 2016		 
Net unrealized gain on securities available-for-sale  $2,827   $3,537   $6,364 
Net actuarial loss on pension plans and other postretirement benefits   (58,396)   1,068    (57,328)
Prior service cost on pension plans and other postretirement benefits   (3,048)   85    (2,963)
Accumulated other comprehensive loss  $(58,617)  $4,690   $(53,927)

 

 17 

 

  

The following tables set forth the components of other comprehensive income/loss for the periods indicated.

 

   For the Three Months Ended
 September 30, 2017		 
(In Thousands) 

Before Tax

Amount

  

Income Tax

Expense

  

After Tax

Amount

 
Net unrealized holding gain on securities available-for-sale arising during the period  $875   $(353)  $522 
Reclassification adjustment for net actuarial loss on pension plans and other postretirement benefits included in net income   552    (223)   329 
Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income   47    (19)   28 
Other comprehensive income  $1,474   $(595)  $879 

 

   For the Nine Months Ended
 September 30, 2017		 
(In Thousands) 

Before Tax

Amount

  

Income Tax

Expense

  

After Tax

Amount

 
Net unrealized holding gain on securities available-for-sale arising during the period  $1,255   $(507)  $748 
Reclassification adjustment for net actuarial loss on pension plans and other postretirement benefits included in net income   1,657    (670)   987 
Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income   142    (57)   85 
Other comprehensive income  $3,054   $(1,234)  $1,820 

 

   For the Three Months Ended
 September 30, 2016		 
(In Thousands) 

Before Tax

Amount

  

Income Tax

Benefit
(Expense)

  

After Tax

Amount

 
Net unrealized holding loss on securities available-for-sale arising during the period  $(1,603)  $648   $(955)
Reclassification adjustment for net actuarial loss on pension plans and other postretirement benefits included in net income   598    (242)   356 
Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income   48    (20)   28 
Other comprehensive loss  $(957)  $386   $(571)

 

   For the Nine Months Ended
 September 30, 2016		 
(In Thousands) 

Before Tax

Amount

  

Income Tax

(Expense)

Benefit

  

After Tax

Amount

 
Net unrealized gain on securities available-for-sale:               
Net unrealized holding gain on securities arising during the period  $6,023   $(2,435)  $3,588 
Reclassification adjustment for gain on sales of securities included in net income   (86)   35    (51)
Net unrealized gain on securities available-for-sale   5,937    (2,400)   3,537 
Reclassification adjustment for net actuarial loss on pension plans and other postretirement benefits included in net income   1,793    (725)   1,068 
Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income   143    (58)   85 
Other comprehensive income  $7,873   $(3,183)  $4,690 

 

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The following tables set forth information about amounts reclassified from accumulated other comprehensive loss to, and the affected line items in, the consolidated statements of income for the periods indicated.

 

   For the Three Months Ended September 30,   Income Statement
(In Thousands)  2017   2016   Line Item
Reclassification adjustment for net actuarial loss (1)  $(552)  $(598)  Compensation and benefits
Reclassification adjustment for prior service cost (1)   (47)   (48)  Compensation and benefits
Total reclassifications, before tax   (599)   (646)   
Income tax effect   242    262   Income tax expense
Total reclassifications, net of tax  $(357)  $(384)  Net income

 

   For the Nine Months Ended September 30,   Income Statement
(In Thousands)  2017   2016   Line Item
Reclassification adjustment for gain on sales of securities  $—   $86   Gain on sales of securities
Reclassification adjustment for net actuarial loss (1)   (1,657)   (1,793)  Compensation and benefits
Reclassification adjustment for prior service cost (1)   (142)   (143)  Compensation and benefits
Total reclassifications, before tax   (1,799)   (1,850)   
Income tax effect   727    748   Income tax expense
Total reclassifications, net of tax  $(1,072)  $(1,102)  Net income

 

(1)These other comprehensive income/loss components are included in the computations of net periodic cost/benefit for our defined benefit pension plans and other postretirement benefit plan. See Note 8 for additional details.

 

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8.Pension Plans and Other Postretirement Benefits

 

The following tables set forth information regarding the components of net periodic cost for our defined benefit pension plans and other postretirement benefit plan for the periods indicated.

 

   Pension Benefits  

Other Postretirement

Benefits

 
  

For the Three Months Ended

September 30,

  

For the Three Months Ended

September 30,

 
   2017   2016   2017   2016 
Service cost  $—   $—   $398   $465 
Interest cost   2,385    2,510    245    249 
Expected return on plan assets   (3,100)   (3,058)   —    — 
Recognized net actuarial loss (gain)   689    703    (137)   (105)
Amortization of prior service cost   47    48    —    — 
Settlement   43    —    —    — 
Net periodic cost  $64   $203   $506   $609 

 

   Pension Benefits  

Other Postretirement

Benefits

 
  

For the Nine Months Ended

September 30,

  

For the Nine Months Ended

September 30,

 
(In thousands)  2017   2016   2017   2016 
Service cost  $—   $—   $1,193   $1,397 
Interest cost   7,153    7,531    736    746 
Expected return on plan assets   (9,300)   (9,174)   —    — 
Recognized net actuarial loss (gain)   2,067    2,110    (410)   (317)
Amortization of prior service cost   142    143    —    — 
Settlement   129    —    —    — 
Net periodic cost  $191   $610   $1,519   $1,826 

 

9.Stock Incentive Plans

 

During the nine months ended September 30, 2017, 504,252 shares of restricted common stock were granted to select officers under the 2014 Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation, or the 2014 Employee Stock Plan, of which 497,712 shares remain outstanding at September 30, 2017 and all of which vest one-third per year beginning in December 2017.  In the event the grantee terminates his/her employment due to death or disability, or in the event we experience a change in control, as defined and specified in the 2014 Employee Stock Plan, all restricted common stock granted pursuant to such plan immediately vests.

 

During the nine months ended September 30, 2017, 17,532 shares of restricted common stock were granted to directors under the Astoria Financial Corporation 2007 Non-Employee Directors Stock Plan, as amended, all of which remain outstanding at September 30, 2017 and vest 100% in January 2020, although awards immediately vest upon death, disability, mandatory retirement, involuntary termination or a change in control, as such terms are defined in the plan.

 

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The following table summarizes restricted common stock and performance-based restricted stock unit activity in our stock incentive plans for the nine months ended September 30, 2017.

 

   Restricted Common Stock   Restricted Stock Units 
   Number of
Shares		  

Weighted Average

Grant Date Fair Value

  

Number of

Units

  

Weighted Average

Grant Date Fair Value

 
Unvested at January 1, 2017   639,329   $14.40    705,600   $12.41 
Granted   521,784    19.80    —    — 
Vested   (21,790)   (12.62)   —    — 
Forfeited   (18,140)   (16.43)   (10,000)   (12.64)
Expired   —    —    (327,800 )(1)   (12.14)
Unvested at September 30, 2017   1,121,183    16.91    367,800    12.64 

 

(1)Expired on February 1, 2017. Performance-based conditions were not achieved.

 

Stock-based compensation expense is recognized on a straight-line basis over the vesting period and totaled $2.4 million, net of taxes of $1.6 million, for the three months ended September 30, 2017 and $245,000, net of taxes of $166,000, for the three months ended September 30, 2016. Stock-based compensation expense totaled $2.4 million, net of taxes of $1.6 million, for the nine months ended September 30, 2017 and $1.5 million, net of taxes of $1.0 million, for the nine months ended September 30, 2016. At September 30, 2017, pre-tax compensation cost related to all unvested awards of restricted common stock and restricted stock units not yet recognized totaled $12.4 million and will be recognized over a weighted average period of approximately 1.8 years, which excludes $2.3 million of pre-tax compensation cost related to 183,900 performance-based restricted stock units granted in 2015, for which compensation cost will begin to be recognized when the achievement of the performance conditions becomes probable.

 

10.Litigation

 

In the ordinary course of our business, we are routinely made a defendant in or a party to pending or threatened legal actions or proceedings which, in some cases, seek substantial monetary damages from or other forms of relief against us.  In our opinion, after consultation with legal counsel, we believe it unlikely that such actions or proceedings will have a material adverse effect on our financial condition, results of operations or liquidity.

 

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