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 perception of historical trends, current conditions and expected future developments, as well as other factors we believe 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:
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the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control;
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there may be increases in competitive pressure among financial institutions or from non-financial institutions;
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changes in the interest rate environment may reduce interest margins or affect the value of our investments;
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changes in deposit flows, loan demand or real estate values may adversely affect our business;
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changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently;
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general economic conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate or securities markets or the banking industry may be less favorable than we currently anticipate;
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legislative or regulatory changes, including the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Reform Act, and any actions regarding foreclosures, may adversely affect our business;
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transition of our regulatory supervisor from the Office of Thrift Supervision, or OTS, to the OCC;
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effects of changes in existing U.S. government or government-sponsored mortgage programs;
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technological changes may be more difficult or expensive than we anticipate;
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success or consummation of new business initiatives may be more difficult or expensive than we anticipate; or
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litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may be determined adverse to us or may delay the occurrence or non-occurrence of events longer than we anticipate.
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We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.
Executive Summary
The following overview should be read in conjunction with our MD&A in its entirety.
Astoria Financial Corporation is a Delaware corporation organized as the unitary savings and loan association holding company of Astoria Federal. Our primary business is the operation of 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 borrowings, primarily in one-to-four family mortgage loans, multi-family mortgage loans, commercial real estate loans and mortgage-backed securities. Our results of operations are dependent primarily on our net interest income, which is the difference between the interest earned on our assets, primarily our loan and securities portfolios, and the interest paid on our deposits and borrowings. 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.
As the premier Long Island community bank, our goals are to enhance shareholder value while building a solid banking franchise. We focus on growing our core businesses of mortgage portfolio lending and retail banking while maintaining strong asset quality and controlling operating expenses. We also provide returns to shareholders through dividends.
During the six months ended September 30, 2011, the national economy remained somewhat weaker from March 31, 2011 as evidenced by, among other things, an unemployment rate of 9.1% for September 2011 as compared to 8.8% for March 2011 although the unemployment rate was still down from December 2010. Job growth during the 2011 second and third quarters was significantly lower than the moderate growth experienced in the 2011 first quarter. Softness in the housing and real estate markets persist. The Reform Act, which was passed in July 2010, is intended to address perceived weaknesses in the U.S. financial regulatory system and prevent future economic and financial crises. As described in more detail in Part II, Item 1A, “Risk Factors,” in our March 31, 2011 Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors,” in our 2010 Annual Report on Form 10-K, certain aspects of the Reform Act will have an impact on us, including the combination of our former primary regulator, the OTS, with the OCC which occurred on July 21, 2011, the imposition of consolidated holding company capital requirements, changes to deposit insurance assessments and the roll back of federal preemption applicable to certain of our operations.
Total assets decreased during the nine months ended September 30, 2011, primarily due to a decrease in our loan portfolio. However, the pace of the decline in the balance sheet and loan portfolio has slowed significantly in the 2011 third quarter. The decrease in our loan portfolio was due to decreases in our multi-family, one-to-four family and commercial real estate mortgage loan portfolios resulting from repayments which outpaced our origination and purchase volume. One-to-four family mortgage loan repayments remained at elevated levels as interest rates on thirty year fixed rate conforming mortgages, which we do not retain for portfolio, remained at historic lows and as loans in our portfolio which qualified under the expanded conforming loan limits were refinanced into fixed rate conforming mortgages. The rise in interest rates on thirty year fixed rate mortgages at the end of the 2010 fourth quarter and in the 2011 first quarter led to a decrease in loan repayments which resulted in a significantly slower pace of decline in our one-to-four family mortgage loan portfolio in the first and second quarters
of 2011 compared to the fourth quarter of 2010. The decrease in interest rates on thirty year fixed rate mortgages during the 2011 second quarter, coupled with the flattening of the U.S. Treasury yield curve during the 2011 third quarter, led to an increase in repayments during the 2011 third quarter. However, the one-to-four family loan portfolio increased from June 30, 2011, which was the first increase in the portfolio in more than two years. During the 2011 second and third quarters, we decided to be somewhat more competitive with the pricing of our one-to-four family hybrid adjustable rate mortgage, or ARM, and fifteen year jumbo mortgage rates which resulted in an increase in applications and a larger mortgage loan pipeline as of September 30, 2011 versus June 30, 2011 and March 31, 2011. Additionally during the 2011 third quarter, we resumed originations of multi-family and commercial real estate loans in the New York City mortgage market. We expect modest loan growth in the 2011 fourth quarter and more significant growth in 2012 based upon the resumption of multi-family and commercial real estate lending, the increase in the one-to-four family mortgage loan pipeline as of September 30, 2011 and the reduction in the conforming loan limits on October 1, 2011. The securities portfolio decreased from December 31, 2010 as a result of cash flows from repayments exceeding securities purchased, but increased from June 30, 2011. We expect to maintain our securities portfolio at September 30, 2011 levels, or slightly higher, throughout the remainder of 2011.
Total deposits decreased during the nine months ended September 30, 2011, due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in money market, savings and NOW and demand deposit accounts. During the nine months ended September 30, 2011, we continued to allow high cost certificates of deposit to run off as total assets declined. The increases in low cost savings and NOW and demand deposit accounts appear to reflect customer preference for the liquidity these types of deposits provide. The increase in money market accounts reflects the introduction of our premium money market product which we began offering during the 2011 third quarter. We have achieved some success in extending the terms of our retained certificates of deposit. During the nine months ended September 30, 2011, we extended $606.5 million of certificates of deposit for terms of two years or more in an effort to help limit our exposure to future increases in interest rates. Cash flows from mortgage loan and securities repayments in excess of mortgage loan originations and purchases, securities purchases and deposit outflows enabled us to repay a portion of our matured borrowings during the nine months ended September 30, 2011, which resulted in a decrease in our borrowings portfolio from December 31, 2010.
Net income decreased for the three months ended September 30, 2011 compared to the three months ended September 30, 2010. This decrease was due to decreases in net interest income and non-interest income and an increase in non-interest expense, partially offset by decreases in provision for loan losses and income tax expense. Net income increased for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010. This increase was due to a decrease in provision for loan losses, partially offset by decreases in net interest income and non-interest income and increases in non-interest expense and income tax expense.
Net interest income decreased for the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010, due to decreases in interest income, partially offset by decreases in interest expense. Interest income for the three and nine months ended September 30, 2011 decreased, compared to the three and nine months ended September 30, 2010, primarily due to decreases in the average balances of mortgage loans and
mortgage-backed and other securities, coupled with decreases in the average yields on one-to-four family mortgage loans and mortgage-backed and other securities. Interest expense for the three and nine months ended September 30, 2011 decreased, compared to the three and nine months ended September 30, 2010, primarily due to decreases in the average balances of borrowings and certificates of deposit, coupled with decreases in the average costs of certificates of deposit. The net interest rate spread and net interest margin were down slightly for the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010. The declines are primarily due to the significant decreases in the yields on average interest-earning assets, substantially offset by the declines in the costs of average interest-bearing liabilities for the three and nine months ended September 30, 2011 compared to the same periods in 2010.
The allowance for loan losses decreased from December 31, 2010 to September 30, 2011 as well as the provision for loan losses which decreased for the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010. These decreases reflect the stabilizing trend in overall asset quality experienced in 2010 and into 2011, coupled with the decline in the loan portfolio over the same period. During the nine months ended September 30, 2011, we experienced improvements in both total delinquencies and non-performing loans, continuing the trend from 2010. Despite the improved credit metrics of the loan portfolio, including the decline in total loan delinquencies, we felt it prudent, at this time, to maintain our strong allowance for loan losses coverage ratio in the face of a continued weak economy and high unemployment along with prolonged softness in housing values. The allowance for loan losses at September 30, 2011 reflects the levels and composition of our loan delinquencies and non-performing loans, our loss history, the size and composition of our loan portfolio and our evaluation of the housing and real estate markets and overall economy, including the unemployment rate.
Non-interest expense increased for the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010 as a result of increases in Federal Deposit Insurance Corporation, or FDIC, insurance premium expense and compensation and benefits expense, primarily employee stock ownership plan, or ESOP, expense and pension and other postretirement benefits expense. For the nine months ended September 30, 2011, those increases were partially offset by litigation settlement expense (McAnaney Litigation) recorded in the 2010 second quarter. Non-interest income decreased for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010, primarily as a result of a litigation settlement (Goodwill Litigation) recognized in the 2010 second quarter.
We continue to operate in a challenging environment. Economic growth remains weak, unemployment remains elevated and home values continue to remain soft. In addition, the implementation of “Operation Twist” by the Federal Reserve has contributed to a further flattening of the U.S. Treasury yield curve, putting further downward pressure on long term interest rates and current mortgage product offerings, as well as increasing mortgage loan prepayments. However, we are optimistic that the increase in our loan pipeline, coupled with the reduction in the expanded conforming loan limits that commenced October 1, 2011 and the resumption of multi-family and commercial real estate lending, should facilitate modest loan and balance sheet growth in the 2011 fourth quarter and more robust growth in 2012. With respect to the net interest margin, we expect that, in the current low interest rate environment, with increased loan prepayment activity, the net interest margin for the 2011 fourth quarter will be
down slightly from the 2011 third quarter and for 2012 may be somewhat lower than the net interest margin for 2011.
Available Information
Our internet website address is www.astoriafederal.com. 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/edgar/searchedgar/webusers.htm.
Critical Accounting Policies
Note 1 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” of our 2010 Annual Report on Form 10-K, as supplemented by our March 31, 2011 and June 30, 2011 Quarterly Reports on Form 10-Q and 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. 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. These critical accounting policies are reviewed quarterly with the Audit Committee of our Board of Directors. The following description of these policies should be read in conjunction with the corresponding section of our 2010 Annual Report on Form 10-K.
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 probable inherent losses 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 although the total allowance for loan losses is available for losses applicable to the entire portfolio.
Specific valuation allowances are established in connection with individual loan reviews and the asset classification process, including the procedures for impairment recognition under GAAP. Such evaluation, which includes a review of loans on which full collectibility is not reasonably assured, considers the current 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.
Loan reviews are completed quarterly for all loans individually classified by our Asset Classification Committee. Individual loan reviews are generally completed annually for multi-family, commercial real estate and construction mortgage loans with balances of $2.0 million or greater, commercial business loans with balances of $200,000 or greater and troubled debt
restructurings. In addition, we generally review annually borrowing relationships whose combined outstanding balance is $2.0 million or greater. Approximately fifty percent of the outstanding principal balance of these loans to a single borrowing entity will be reviewed annually.
The primary considerations in establishing specific valuation allowances are the current estimated value of a loan’s underlying collateral and the loan’s payment history. We update our estimates of collateral value for non-performing multi-family, commercial real estate and construction mortgage loans with balances of $1.0 million or greater and one-to-four family mortgage loans which are 180 days or more delinquent, annually, and certain other loans when the Asset Classification Committee believes repayment of such loans may be dependent on the value of the underlying collateral. For one-to-four family mortgage loans, updated estimates of collateral value are obtained primarily through automated valuation models. For multi-family and commercial real estate properties, we estimate collateral value through appraisals or internal cash flow analyses, when current financial information is available, coupled with, in most cases, an inspection of the property. Other current and anticipated economic conditions on which our specific valuation allowances rely are the impact that national and/or local economic and business conditions may have on borrowers, the impact that local real estate markets may have on collateral values, the level and direction of interest rates and their combined effect on real estate values and the ability of borrowers to service debt. For multi-family and commercial real estate loans, additional factors specific to a borrower or the underlying collateral are considered. These factors include, but are not limited to, the composition of tenancy, occupancy levels for the property, location of the property, cash flow estimates and, to a lesser degree, the existence of personal guarantees. We also review all regulatory notices, bulletins and memoranda with the purpose of identifying upcoming changes in regulatory conditions which may impact our calculation of specific valuation allowances. Our primary banking regulator periodically reviews our reserve methodology during regulatory examinations and any comments regarding changes to reserves or loan classifications are considered by management in determining valuation allowances.
Pursuant to our policy, loan losses are charged-off in the period the loans, or portions thereof, are deemed uncollectible, or, in the case of one-to-four family mortgage loans, at 180 days past due, and annually thereafter, for the portion of the recorded investment in the loan in excess of the estimated fair value of the underlying collateral less estimated selling costs. 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 assessment of economic and regulatory conditions are subject to assumptions and judgments by management. Specific valuation allowances and charge-off amounts 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 which, unlike specific allowances, have not been allocated to particular loans. The determination of the adequacy of the general valuation allowances takes into consideration a variety of factors. We segment our one-to-four family mortgage loan portfolio by interest-only and amortizing loans, full documentation and reduced documentation loans and year of origination and analyze our historical loss experience and delinquency levels and trends of these segments. The resulting range of allowance percentages is used as an integral part of our judgment in developing estimated loss percentages to apply to the portfolio segments. We segment our consumer and other loan portfolio by home equity lines of credit, business loans, revolving credit lines and installment loans and perform
similar historical loss analyses. We monitor credit risk on interest-only hybrid ARM loans that were underwritten at the initial note rate, which may have been a discounted rate, in the same manner that we monitor credit risk on all interest-only hybrid ARM loans. We monitor interest rate reset dates of our portfolio, in the aggregate, and the current interest rate environment and consider the impact, if any, on borrowers’ ability to continue to make timely principal and interest payments in determining our allowance for loan losses. We also consider the size, composition, risk profile and delinquency levels of our portfolio, as well as our credit administration and asset management procedures. We monitor property value trends in our market areas by reference to various industry and market reports, economic releases and surveys, and our general and specific knowledge of the real estate markets in which we lend, in order to determine what impact, if any, such trends may have on the level of our general valuation allowances. In determining our allowance coverage percentages for non-performing loans, we consider our aggregate historical loss experience with respect to the ultimate disposition of the underlying collateral. To further enhance our non-performing loan analysis, during the quarter ended June 30, 2011, we began segmenting our non-performing loans by state and analyzing our historical loss experience and cure rates by state. In addition, we evaluate and consider the impact that current and anticipated economic and market conditions may have on the portfolio and known and inherent risks in the portfolio.
We use ratio analyses as a supplemental tool for evaluating the overall reasonableness of the allowance for loan losses. As such, we evaluate and consider our asset quality ratios as well as the allowance ratios and coverage percentages set forth in both peer group and regulatory agency data. We also consider any comments from our primary banking regulator resulting from their review of our general valuation allowance methodology during regulatory examinations. We consider the observed trends in our asset quality ratios in combination with our primary focus on our historical loss experience and the impact of current economic conditions. 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. We do not determine the appropriate level of our allowance for loan losses based exclusively on a single factor or asset quality ratio. Our evaluation of general valuation allowances is inherently subjective because, even though it is based on objective data, it is management’s interpretation of that data that determines the amount of the appropriate allowance. Therefore, we periodically review the actual performance and charge-off history of our portfolio and compare that to our previously determined allowance coverage percentages and specific valuation allowances. 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 a result of our updated charge-off and loss analyses, we modified certain allowance coverage percentages during each quarter of 2011 to reflect our current estimates of the amount of probable losses inherent in our loan portfolio in determining our general valuation allowances. Based on our evaluation of the housing and real estate markets and overall economy, including the unemployment rate, the levels and composition of our loan delinquencies and non-performing loans, our loss history and the size and composition of our loan portfolio, we determined that an allowance for loan losses of $178.4 million was required at September 30, 2011, compared to $182.7 million at June 30, 2011 and $201.5 million at December 31, 2010, resulting in a provision for loan losses of $27.0 million for the nine months ended September 30, 2011. The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at the reporting dates.
Actual results could differ from our estimates 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 that reflect the risks inherent in our loan portfolio, future adjustments may be necessary if portfolio performance or economic or market conditions differ 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 Part II, Item 7, “MD&A,” in our 2010 Annual Report on Form 10-K.
Valuation of MSR
The initial asset recognized for originated MSR is measured at fair value. The fair value of MSR is estimated by reference to current market values of similar loans sold servicing released. MSR are amortized in proportion to and over the period of estimated net servicing income. We apply the amortization method for measurement of our MSR. MSR are assessed for impairment based on fair value at each reporting date. Impairment exists if the carrying value of MSR exceeds the estimated fair value. The estimated fair value of MSR is obtained through independent third party valuations. MSR impairment, if any, is recognized in a valuation allowance through charges to earnings. Increases in the fair value of impaired MSR are recognized only up to the amount of the previously recognized valuation allowance.
At September 30, 2011, our MSR had an estimated fair value of $8.3 million and were valued based on expected future cash flows considering a weighted average discount rate of 10.95%, a weighted average constant prepayment rate on mortgages of 19.55% and a weighted average life of 3.9 years. At December 31, 2010, our MSR had an estimated fair value of $9.2 million and were valued based on expected future cash flows considering a weighted average discount rate of 10.96%, a weighted average constant prepayment rate on mortgages of 19.94% and a weighted average life of 3.8 years.
The fair value of MSR is highly sensitive to changes in assumptions. Changes in prepayment speed assumptions generally 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 tested, at least annually, for impairment at the reporting unit level. If the estimated fair value of the reporting unit exceeds its carrying amount, further evaluation is not necessary. However, if the fair value of the reporting unit is less than its carrying amount, further evaluation is required to compare the implied fair value of the reporting unit’s goodwill to its carrying amount to determine if a write-down of goodwill is required. Impairment exists when the carrying amount of goodwill exceeds its implied fair value.
For purposes of our goodwill impairment testing, we have identified a single reporting unit. We consider the quoted market price of our common stock on our impairment testing date as an initial indicator of estimating the fair value of our reporting unit. We also consider our average stock price, both before and after our impairment test date, as well as market-based control premiums in determining the estimated fair value of our reporting unit. In addition to our internal goodwill impairment analysis, we periodically obtain a goodwill impairment analysis from an independent third party valuation firm. The independent third party utilizes multiple valuation approaches including comparable transactions, control premium, public market peers and discounted cash flow. Management reviews the assumptions and inputs used in the third party analysis for reasonableness.
At September 30, 2011, the carrying amount of our goodwill totaled $185.2 million. On September 30, 2011, we performed our annual goodwill impairment test internally and also obtained an independent third party analysis. Both analyses concluded there was no goodwill impairment. We would test our goodwill for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount. The identification of additional reporting units, the use of other valuation techniques or changes to the input assumptions used in our analysis or the analysis by our third party valuation firm could result in materially different evaluations of impairment.
Securities Impairment
Our available-for-sale securities portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. Debt 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.
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he fair values for our securities are obtained from an independent nationally recognized pricing service.
Our investment portfolio is comprised primarily of fixed rate mortgage-backed securities guaranteed by a GSE as issuer. GSE issuance mortgage-backed securities comprised 96% of our securities portfolio at September 30, 2011. Non-GSE issuance mortgage-backed securities at September 30, 2011 comprised 1% of our securities portfolio and had an amortized cost of $36.9 million, 47% of which are classified as available-for-sale and 53% of which are classified as held-to-maturity. Substantially all of our non-GSE issuance securities are investment grade securities and they have performed similarly to our GSE issuance securities. Credit quality concerns have not significantly impacted the performance of our non-GSE securities or our ability to obtain reliable prices.
The fair value of our investment portfolio is primarily impacted by changes
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 conduct a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. Our evaluation of other-than-temporary impairment, or OTTI, considers the duration and severity of the impairment, our assessments of the reason for the decline in value, the likelihood of a near-term recovery and our intent and ability to not sell the securities. We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience. If such decline is deemed other-than-temporary, the security is written down to a new cost basis and the resulting loss is
charged to earnings as a component of non-interest income, except for the amount of the total OTTI for a debt security that does not represent credit losses which is recognized in other comprehensive income/loss, net of applicable taxes. At September 30, 2011, we had 38 securities with an estimated fair value totaling $46.1 million which had an unrealized loss totaling $585,000. Of the securities in an unrealized loss position at September 30, 2011, $16.5 million, with an unrealized loss of $321,000, have been in a continuous unrealized loss position for more than twelve months. At September 30, 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.
Liquidity and Capital Resources
Our primary source of funds is cash provided by principal and interest payments on loans and securities. The most significant liquidity challenge we face is the variability in cash flows as a result of changes in mortgage refinance activity. Principal payments on loans and securities totaled $3.93 billion for the nine months ended September 30, 2011, compared to $4.11 billion for the nine months ended September 30, 2010. The net decrease in loan and securities repayments for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, was primarily due to a decrease in securities repayments, partially offset by an increase in loan repayments. The decrease in securities repayments is due, in part, to securities which were called during the nine months ended September 30, 2010. The increase in loan repayments was primarily due to an increase in multi-family and commercial real estate mortgage loan repayments, partially offset by a decrease in one-to-four family mortgage loan repayments. One-to-four family mortgage loan repayments for the nine months ended September 30, 2011 decreased slightly compared to the nine months ended September 30, 2010, but remained at elevated levels as interest rates on thirty year fixed rate conforming mortgage loans, which we do not retain for portfolio, remained at historic lows and as loans in our portfolio which qualified under the expanded conforming loan limits were refinanced into fixed rate conforming mortgages. The rise in interest rates on thirty year fixed rate mortgage loans at the end of the 2010 fourth quarter and in the 2011 first quarter led to a decrease in loan repayments for the 2011 first and second quarters compared to the 2010 fourth quarter. The decrease in interest rates on thirty year fixed rate mortgage loans during the 2011 second quarter, coupled with the flattening of the U.S. Treasury yield curve during the 2011 third quarter, led to an increase in repayments during the 2011 third quarter. During the 2011 second and third quarters, we were somewhat more competitive with the pricing of our one-to-four family hybrid ARM and fifteen year jumbo mortgage rates which resulted in an increase in applications and a larger mortgage loan pipeline as of September 30, 2011 versus June 30, 2011 and March 31, 2011. Additionally, we resumed originations of multi-family and commercial real estate loans in the New York City mortgage market during the 2011 third quarter.
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. However, for the nine months ended September 30, 2011 and 2010, net deposit and borrowing activity resulted in a use of funds. Net cash provided by operating activities totaled $228.4 million for the nine months ended September 30, 2011 and $203.4 million for the nine months ended September 30, 2010. Deposits decreased $331.9 million during the nine months ended
September 30, 2011 and decreased $705.0 million during the nine months ended September 30, 2010. The net decreases in deposits for the nine months ended September 30, 2011 and 2010 were primarily due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in savings, NOW and demand deposit and money market accounts. During the nine months ended September 30, 2011 and 2010, we continued to allow high cost certificates of deposit to run off as total assets declined. The increases in low cost savings and NOW and demand deposit accounts during the nine months ended September 30, 2011 and 2010 appear to reflect customer preference for the liquidity these types of deposits provide. The increase in money market accounts during the nine months ended September 30, 2011 reflects the introduction of our premium money market product during the 2011 third quarter. We have achieved some success in extending the terms of our retained certificates of deposit. During the nine months ended September 30, 2011, we extended $606.5 million of certificates of deposit for terms of two years or more in an effort to help limit our exposure to future increases in interest rates.
Net borrowings decreased $846.7 million during the nine months ended September 30, 2011 and decreased $664.7 million during the nine months ended September 30, 2010. The decrease in net borrowings during the nine months ended September 30, 2011 and September 30, 2010 was primarily due to cash flows from mortgage loan and securities
repayments in excess of mortgage loan originations and purchases, securities purchases and deposit outflows which enabled us to repay a portion of our matured borrowings.
Our primary use of funds is for the origination and purchase of mortgage loans and, to a lesser degree, for the purchase of securities. Gross mortgage loans originated and purchased for portfolio during the nine months ended September 30, 2011 totaled $2.37 billion, of which $1.61 billion were originations and $754.9 million were purchases, substantially all of which were one-to-four family mortgage loans. This compares to gross mortgage loans originated and purchased for portfolio during the nine months ended September 30, 2010 totaling $2.24 billion, of which $1.88 billion were originations and $360.2 million were purchases, all of which were one-to-four family mortgage loans. Despite our modest increases in originations and purchases, overall one-to-four family mortgage loan origination and purchase volume for portfolio has been negatively affected for an extended period of time by the historic low interest rates on thirty year fixed rate conforming mortgage loans, which we do not retain for portfolio, and the expanded conforming loan limits. Purchases of securities totaled $651.3 million during the nine months ended September 30, 2011 and $563.5 million during the nine months ended September 30, 2010.
Our policies and procedures with respect to managing funding and liquidity risk are established to ensure our safe and sound operation in compliance with applicable bank regulatory requirements. Our liquidity management process is sufficient to meet our daily funding needs and cover both expected and unexpected deviations from normal daily operations. Processes are in place to appropriately identify, measure, monitor and control liquidity and funding risk. The primary tools we use for measuring and managing liquidity risk include cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets and contingency funding plans.
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 repurchase agreements, our most liquid assets, totaled $110.9 million at September 30, 2011 and $119.0 million at December 31, 2010.
At September 30, 2011, we had $769.0 million in borrowings with a weighted average rate of 4.37% maturing over the next twelve months. We have the flexibility to either repay or rollover these borrowings as they mature. Included in our borrowings are various obligations which, by their terms, may be called by the securities dealers and the FHLB-NY. We believe the potential for these borrowings to be called does not present liquidity concerns as they have various call dates and coupons and we believe we can readily obtain replacement funding, albeit at higher rates. We do not believe any of our borrowing counterparty concentrations represent a material risk to our liquidity. In addition, we had $3.49 billion in certificates of deposit and Liquid CDs at September 30, 2011 with a weighted average rate of 1.54% maturing over the next twelve months. We have the ability to retain or replace a significant portion of such deposits based on our pricing and historical experience.
The following table details our borrowing, certificate of deposit and Liquid CD maturities and their weighted average rates at September 30, 2011.
|
|
|
|
Certificates of Deposit
|
|
|
Borrowings
|
|
and Liquid CDs
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
(Dollars in Millions)
|
Amount
|
|
|
Rate
|
|
Amount
|
|
|
Rate
|
|
Contractual Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months or less
|
|
$
|
769
|
|
|
|
|
4.37
|
%
|
|
|
$
|
3,488
|
(1)
|
|
|
|
1.54
|
%
|
|
Thirteen to thirty-six months
|
|
|
1,025
|
(2)
|
|
|
|
3.28
|
|
|
|
|
1,190
|
|
|
|
|
2.40
|
|
|
Thirty-seven to sixty months
|
|
|
550
|
(3)
|
|
|
|
3.50
|
|
|
|
|
1,154
|
|
|
|
|
2.75
|
|
|
Over sixty months
|
|
|
1,679
|
(4)
|
|
|
|
4.76
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Total
|
|
$
|
4,023
|
|
|
|
|
4.14
|
%
|
|
|
$
|
5,832
|
|
|
|
|
1.95
|
%
|
|
(1)
|
|
Includes $301.2 million of Liquid CDs with a weighted average rate of 0.19% and $3.19 billion of certificates of deposit with a weighted average rate of 1.66%.
|
|
(2)
|
|
Includes $200.0 million of borrowings, with a weighted average rate of 3.90%, which are callable by the counterparty within the next three months and at various times thereafter.
|
|
(3)
|
|
Includes $400.0 million of borrowings with a weighted average rate of 4.28%, which are callable by the counterparty within the next three months and at various times thereafter.
|
|
(4)
|
|
Includes $1.55 billion of borrowings, with a weighted average rate of 4.35%, which are callable by the counterparty within the next three months and at various times thereafter.
|
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.
H
olding company debt obligations are included in other borrowings. Our ability to continue to access the capital markets for additional financing at favorable terms may be limited by, among other things, market conditions, interest rates, our capital levels, Astoria Federal’s ability to pay dividends to Astoria Financial Corporation, our credit profile and ratings and our business model.
On May 19, 2010, we filed an automatic shelf registration statement on Form S-3 with the SEC, which was declared effective immediately upon filing. This shelf registration statement allows us to periodically offer and sell, from time to time, in one or more offerings, individually or in any combination, common stock, preferred stock, debt securities, capital securities, guarantees, warrants to purchase common stock or preferred stock and units consisting of one or more of the foregoing. The shelf registration statement provides us with greater capital management flexibility and enables us to more readily access the capital markets in order to pursue growth opportunities that may become available to us in the future or should there be any changes in the regulatory environment that call for increased capital requirements. Although the shelf
registration statement does not limit the amount of the foregoing items that we may offer and sell pursuant to the shelf registration statement, our ability and any decision to do so is subject to market conditions and our capital needs. At this time, we do not have immediate plans or current commitments to sell securities under the shelf registration statement.
Astoria Financial Corporation’s primary uses of funds include payment of dividends, payment of interest on its debt obligations and repurchases of common stock. During the nine months ended September 30, 2011, Astoria Financial Corporation paid interest totaling $13.3 million and dividends totaling $37.1 million. On October 19, 2011, we declared a quarterly cash dividend of $0.13 per share on shares of our common stock payable on December 1, 2011 to stockholders of record as of the close of business on November 15, 2011. Our twelfth stock repurchase plan, approved by our Board of Directors on April 18, 2007, authorized the purchase of 10,000,000 shares, or approximately 10% of our common stock then outstanding, in open-market or privately negotiated transactions. At September 30, 2011, a maximum of 8,107,300 shares may yet be purchased under this plan, however, we are not currently repurchasing additional shares of our common stock and have not since the 2008 third quarter.
Our ability to pay dividends, service our debt obligations and repurchase common stock is dependent primarily upon receipt of capital distributions from Astoria Federal. Since Astoria Federal is a federally chartered savings association, there are limits on its ability to make distributions to Astoria Financial Corporation. During the nine months ended September 30, 2011, Astoria Federal paid dividends to Astoria Financial Corporation totaling $38.0 million. On October 11, 2011, Astoria Federal paid a dividend to Astoria Financial Corporation totaling $26.0 million.
See “Financial Condition” for further discussion of the changes in stockholders’ equity.
At September 30, 2011, our tangible capital ratio, which represents stockholders’ equity less goodwill divided by total assets less goodwill, was 6.55%. At September 30, 2011, Astoria Federal’s capital levels exceeded all of its regulatory capital requirements with a tangible capital ratio of 8.75%, leverage capital ratio of 8.75% and total risk-based capital ratio of 16.18%. Astoria Federal’s Tier 1 risk-based capital ratio was 14.89% at September 30, 2011. As of September 30, 2011, Astoria Federal continues to be a well capitalized institution for all bank regulatory purposes.
Off-Balance Sheet Arrangements and Contractual Obligations
We are a party to financial instruments with off-balance sheet risk in the normal course of our business in order to meet the financing needs of our customers and in connection with our overall interest rate risk management strategy. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are either not recorded in the consolidated financial statements or are recorded in amounts that differ from the notional amounts. Such instruments primarily include lending commitments and lease commitments.
Lending commitments include commitments to originate and purchase loans and commitments to fund unused lines of credit. Additionally, in connection with our mortgage banking activities, we have commitments to fund loans held-for-sale and commitments to sell loans which are considered derivative instruments. Commitments to sell loans totaled $47.1 million at
September 30, 2011. The fair values of our mortgage banking derivative instruments are immaterial to our financial condition and results of operations.
The following table details our contractual obligations at September 30, 2011.
|
|
|
Payments due by period
|
|
|
|
|
|
|
|
Less than
|
|
|
One to
|
|
|
Three to
|
|
|
More than
|
|
|
(In Thousands)
|
|
Total
|
|
|
One Year
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Five Years
|
|
|
On-balance sheet contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings with original terms greater than three months
|
|
$
|
4,022,866
|
|
|
$
|
769,000
|
|
|
$
|
1,025,000
|
|
|
$
|
550,000
|
|
|
$
|
1,678,866
|
|
|
Off-balance sheet contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rental payments due under non-cancelable
operating leases (1)
|
|
|
94,832
|
|
|
|
8,147
|
|
|
|
17,774
|
|
|
|
18,569
|
|
|
|
50,342
|
|
|
Commitments to originate and purchase loans (2)
|
|
|
716,137
|
|
|
|
716,137
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commitments to fund unused lines of credit (3)
|
|
|
249,804
|
|
|
|
249,804
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
5,083,639
|
|
|
$
|
1,743,088
|
|
|
$
|
1,042,774
|
|
|
$
|
568,569
|
|
|
$
|
1,729,208
|
|
|
(1)
|
|
Operating lease commitments include the commitment entered into during the 2011 third quarter for office space in Jericho, New York to house our new multi-family and commercial real estate lending department and other operations.
|
|
(2)
|
|
Commitments to originate and purchase loans include commitments to originate loans held-for-sale of $40.1 million.
|
|
(3)
|
|
Unused lines of credit relate primarily to home equity lines of credit.
|
In addition to the contractual obligations previously discussed, we have liabilities for gross unrecognized tax benefits and interest and penalties related to uncertain tax positions which have not changed significantly from December 31, 2010. For further information regarding these liabilities, see Note 11 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” in our 2010 Annual Report on Form 10-K. We also have contingent liabilities related to assets sold with recourse and standby letters of credit which have not changed significantly from December 31, 2010.
For further information regarding our off-balance sheet arrangements and contractual obligations, see Part II, Item 7, “MD&A,” in our 2010 Annual Report on Form 10-K.
Comparison of Financial Condition as of September 30, 2011 and December 31, 2010 and Operating Results for the Three and Nine Months Ended September 30, 2011 and 2010
Total assets decreased $1.11 billion to $16.98 billion at September 30, 2011, from $18.09 billion at December 31, 2010. The decrease in total assets was primarily due to a decrease in loans receivable. Loans receivable, net, decreased $880.3 million to $13.14 billion at September 30, 2011, from $14.02 billion at December 31, 2010. This decrease was a result of repayments outpacing our mortgage loan origination and purchase volume during the nine months ended September 30, 2011.
Mortgage loans decreased $876.5 million to $12.95 billion at September 30, 2011, from $13.83 billion at December 31, 2010. This decrease was primarily due to decreases in our multi-family, one-to-four family and commercial real estate mortgage loan portfolios. Mortgage loan repayments increased to $3.12 billion for the nine months ended September 30, 2011, from $2.89 billion for the nine months ended September 30, 2010. This increase was primarily due to an increase in multi-family and commercial real estate mortgage loan repayments, partially offset by a slight decrease in one-to-four family mortgage loan repayments.
Gross mortgage loans originated and purchased for portfolio during the nine months ended September 30, 2011 totaled
$2.37 billion, of which $1.61 billion were originations and $754.9 million were purchases, substantially all of which were one-to-four family mortgage loans. This compares to gross mortgage loans originated and purchased for portfolio totaling $2.24 billion during the nine months ended September 30, 2010, of which $1.88 billion were originations and $360.2 million were purchases, all of which were one-to-four family mortgage loans.
Our mortgage loan portfolio continues to consist primarily of one-to-four family mortgage loans. Our one-to-four family mortgage loan portfolio decreased $292.7 million to $10.56 billion at September 30, 2011, from $10.86 billion at December 31, 2010, and represented 79.8% of our total loan portfolio at September 30, 2011. The decrease was primarily the result of the levels of repayments which outpaced our originations and purchases during the nine months ended September 30, 2011. One-to-four family mortgage loan repayments decreased slightly during the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, but remain at elevated levels. The rise in interest rates on thirty year fixed rate mortgages at the end of the 2010 fourth quarter and in the 2011 first quarter led to a decrease in loan repayments which resulted in a significantly slower pace of decline in our one-to-four family mortgage loan portfolio in the 2011 first and second quarters, compared to the 2010 fourth quarter. The decrease in interest rates on thirty year fixed rate mortgage loans during the 2011 second quarter, coupled with the flattening of the U.S. Treasury yield curve during the 2011 third quarter led to an increase in loan repayments during the 2011 third quarter. However, origination and purchase volume also increased during the 2011 third quarter as a result of our more competitive pricing during the 2011 second and third quarters and outpaced repayments resulting in a slight increase in our one-to-four family mortgage loan portfolio at September 30, 2011 compared to June 30, 2011. One-to-four family mortgage loan origination and purchase volume for portfolio has been negatively affected by the historic low interest rates for thirty year fixed rate conforming mortgages and the expanded conforming loan limits resulting in more borrowers opting for thirty year fixed rate conforming mortgages which we do not retain for portfolio. During the nine months ended September 30, 2011, the loan-to-value ratio of our one-to-four family mortgage loan originations and purchases for portfolio, at the time of origination or purchase, averaged approximately 60% and the loan amount averaged approximately $766,000.
Our multi-family mortgage loan portfolio decreased $502.6 million to $1.69 billion at September 30, 2011, from $2.19 billion at December 31, 2010. Our commercial real estate loan portfolio decreased $78.9 million to $692.8 million at September 30, 2011, from $771.7 million at December 31, 2010. The decreases in these loan portfolios are attributable to repayments, the sale or transfer to held-for-sale of certain delinquent and non-performing loans and the absence of new multi-family and commercial real estate loan originations. We resumed originations of multi-family and commercial real estate mortgage loans in the New York City mortgage market during the 2011 third quarter.
Securities decreased $88.7 million to $2.48 billion at September 30, 2011, from $2.57 billion at December 31, 2010. This decrease was primarily the result of principal payments received of $736.3 million, partially offset by purchases of $651.3 million. At September 30, 2011, our securities portfolio was comprised primarily of fixed rate REMIC and CMO securities which had an amortized cost of $2.37 billion, a weighted average current coupon of 3.66%, a weighted average collateral coupon of 5.14% and a weighted average life of 2.1 years. We expect to maintain our securities portfolio at September 30, 2011 levels, or slightly higher, throughout the
remainder of 2011.
For additional information regarding our securities portfolio, see Note 2 of Notes to Consolidated Financial Statements, in Item 1, “Financial Statements (Unaudited).”
Deposits decreased $331.9 million to $11.27 billion at September 30, 2011, from $11.60 billion at December 31, 2010, due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in money market, savings and NOW and demand deposit accounts. Certificates of deposit decreased $783.2 million since December 31, 2010 to $5.53 billion at September 30, 2011. Liquid CDs decreased $167.5 million since December 31, 2010 to $301.2 million at September 30, 2011. Money market accounts increased $488.0 million since December 31, 2010 to $864.3 million at September 30, 2011. Savings accounts increased $96.1 million since December 31, 2010 to $2.76 billion at September 30, 2011. NOW and demand deposit accounts increased $34.9 million since December 31, 2010 to $1.81 billion at September 30, 2011. During the nine months ended September 30, 2011, we continued to allow high cost certificates of deposit to run off as total assets declined. The increases in low cost savings and NOW and demand deposit accounts during the nine months ended September 30, 2011 appear to reflect customer preference for the liquidity these types of deposits provide. The increase in money market accounts reflects the introduction of our premium money market product which we began offering during the 2011 third quarter.
Total borrowings, net, decreased $846.7 million to $4.02 billion at September 30, 2011, from $4.87 billion at December 31, 2010. The decrease in total borrowings was primarily the result of cash flows from mortgage loan and securities repayments exceeding mortgage loan originations and purchases, securities purchases and deposit outflows which enabled us to repay a portion of our matured borrowings.
Stockholders' equity increased $42.8 million to $1.28 billion at September 30, 2011, from $1.24 billion at December 31, 2010.
The increase in stockholders’ equity was due to net income of $55.4 million, the allocation of shares held by the ESOP of $12.1 million, stock-based compensation of $7.0 million and a decrease in accumulated other comprehensive loss of $5.2 million. These increases were partially offset by dividends declared of $37.1 million.
Results of Operations
General
Net income for the three months ended September 30, 2011 decreased $10.3 million to $11.2 million, from $21.5 million for the three months ended September 30, 2010. Diluted earnings per common share decreased to $0.12 per share for the three months ended September 30, 2011, from $0.23 per share for the three months ended September 30, 2010. Return on average assets decreased to 0.26% for the three months ended September 30, 2011, from 0.44% for the three months ended September 30, 2010, due to the decrease in net income, partially offset by a decrease in average assets. Return on average stockholders’ equity decreased to 3.51% for the three months ended September 30, 2011, from 6.97% for the three months ended September 30, 2010. Return on average tangible stockholders’ equity, which represents average stockholders’ equity less average goodwill, decreased to 4.11% for the three months ended September 30, 2011, from 8.21% for the three months ended September 30, 2010. The decreases in the returns on average stockholders’ equity and average tangible stockholders’ equity for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, were primarily due to the decrease in net income.
Net income for the nine months ended September 30, 2011 increased $5.5 million to $55.4 million, from $49.9 million for the nine months ended September 30, 2010. Diluted earnings per common share increased to $0.58 per share for the nine months ended September 30, 2011, from $0.53 per share for the nine months ended September 30, 2010. Return on average assets increased to 0.42% for the nine months ended September 30, 2011, from 0.34% for the nine months ended September 30, 2010, due to the increase in net income and a decrease in average assets. Return on average stockholders’ equity increased to 5.85% for the nine months ended September 30, 2011, from 5.45% for the nine months ended September 30, 2010. Return on average tangible stockholders’ equity increased to 6.85% for the nine months ended September 30, 2011, from 6.43% for the nine months ended September 30, 2010. The increases in the returns on average stockholders’ equity and average tangible stockholders’ equity for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, were due to the increase in net income, partially offset by an increase in average stockholders’ equity.
Our results of operations for the nine months ended September 30, 2010 include $6.2 million ($4.0 million, after tax) of non-interest income related to a litigation settlement (Goodwill Litigation), $7.9 million ($5.1 million, after tax) of non-interest expense related to a litigation settlement (McAnaney Litigation), and a $1.5 million ($981,000, after tax) asset impairment charge against non-interest income related to an office building previously included in premises and equipment, net, which was sold in the 2011 second quarter. For the nine months ended September 30, 2010, these net charges reduced diluted earnings per common share by $0.02 per share, return on average assets by 1 basis point, return on average stockholders’ equity by 23 basis points and return on average tangible stockholders’ equity by 27 basis points. For further discussion of the litigation settlements, see Note 10 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” in our 2010 Annual Report on Form 10-K. For further discussion of the asset impairment charge recorded in the 2010 second quarter and the sale of the office building in the 2011 second quarter, see Note 1 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” in our 2010 Annual Report on Form 10-K and
Note 5 of Notes to Consolidated Financial Statements in Item 1, “Financial Statements (Unaudited),” in this Quarterly Report on Form 10-Q.
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 and their related impact on cash flows. 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 September 30, 2011, net interest income decreased $15.4 million to $90.6 million, from $106.0 million for the three months ended September 30, 2010, and decreased $44.4 million to $287.9 million for the nine months ended September 30, 2011, from $332.3 million for the nine months ended September 30, 2010, due to decreases in interest income, partially offset by decreases in interest expense. Interest income for the three and nine
months ended September 30, 2011 decreased, compared to the three and nine months ended September 30, 2010, primarily due to decreases in the average balances of mortgage loans and mortgage-backed and other securities, coupled with decreases in the average yields on one-to-four family mortgage loans and mortgage-backed and other securities. Interest expense for the three and nine months ended September 30, 2011 decreased, compared to the three and nine months ended September 30, 2010, primarily due to decreases in the average balances of borrowings and certificates of deposit, coupled with decreases in the average costs of certificates of deposit. The net interest rate spread decreased to 2.19% for the three months ended September 30, 2011, from 2.25% for the three months ended September 30, 2010, and decreased to 2.26% for the nine months ended September 30, 2011, from 2.29% for the nine months ended September 30, 2010. The net interest margin decreased to 2.27% for the three months ended September 30, 2011, from 2.32% for the three months ended September 30, 2010, and decreased to 2.34% for the nine months ended September 30, 2011, from 2.36% for the nine months ended September 30, 2010. The decreases in the net interest rate spread and net interest margin reflect the significant decreases in the yields on average interest-earning assets, partially offset by the declines in the costs of average interest-bearing liabilities, for the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010. The average balance of net interest-earning assets increased $26.3 million to $588.8 million for the three months ended September 30, 2011, from $562.5 million for the three months ended September 30, 2010, and increased $15.9 million to $588.2 million for the nine months ended September 30, 2011, from $572.3 million for the nine months ended September 30, 2010.
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 nine months ended September 30, 2011 and 2010. 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.
|
|
|
|
For the Three Months Ended September 30,
|
|
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
Average
Balance
|
|
|
Interest
|
Average
Yield/
Cost
|
|
|
Average
Balance
|
|
|
Interest
|
Average
Yield/
Cost
|
|
|
|
|
|
|
|
|
(Annualized)
|
|
|
|
|
|
|
(Annualized)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
10,604,853
|
|
$
|
105,769
|
|
3.99
|
%
|
|
$
|
11,678,392
|
|
$
|
130,936
|
|
|
4.48
|
%
|
|
Multi-family, commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
real estate and construction
|
|
|
2,515,957
|
|
|
39,338
|
|
6.25
|
|
|
|
3,201,711
|
|
|
48,446
|
|
|
6.05
|
|
|
Consumer and other loans (1)
|
|
|
293,238
|
|
|
2,461
|
|
3.36
|
|
|
|
323,916
|
|
|
2,656
|
|
|
3.28
|
|
|
Total loans
|
|
|
13,414,048
|
|
|
147,568
|
|
4.40
|
|
|
|
15,204,019
|
|
|
182,038
|
|
|
4.79
|
|
|
Mortgage-backed and other securities (2)
|
|
|
2,344,816
|
|
|
19,670
|
|
3.36
|
|
|
|
2,555,951
|
|
|
25,336
|
|
|
3.97
|
|
|
Repurchase agreements and interest-
earning cash accounts
|
|
|
115,228
|
|
|
54
|
|
0.19
|
|
|
|
332,171
|
|
|
188
|
|
|
0.23
|
|
|
FHLB-NY stock
|
|
|
128,664
|
|
|
1,432
|
|
4.45
|
|
|
|
174,220
|
|
|
1,999
|
|
|
4.59
|
|
|
Total interest-earning assets
|
|
|
16,002,756
|
|
|
168,724
|
|
4.22
|
|
|
|
18,266,361
|
|
|
209,561
|
|
|
4.59
|
|
|
Goodwill
|
|
|
185,151
|
|
|
|
|
|
|
|
|
185,151
|
|
|
|
|
|
|
|
|
Other non-interest-earning assets
|
|
|
925,222
|
|
|
|
|
|
|
|
|
888,925
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
17,113,129
|
|
|
|
|
|
|
|
$
|
19,340,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
2,799,738
|
|
|
2,316
|
|
0.33
|
|
|
$
|
2,407,180
|
|
|
2,448
|
|
|
0.41
|
|
|
Money market
|
|
|
646,966
|
|
|
1,491
|
|
0.92
|
|
|
|
342,453
|
|
|
385
|
|
|
0.45
|
|
|
NOW and demand deposit
|
|
|
1,804,760
|
|
|
301
|
|
0.07
|
|
|
|
1,686,109
|
|
|
279
|
|
|
0.07
|
|
|
Liquid CDs
|
|
|
328,426
|
|
|
193
|
|
0.24
|
|
|
|
585,814
|
|
|
689
|
|
|
0.47
|
|
|
Total core deposits
|
|
|
5,579,890
|
|
|
4,301
|
|
0.31
|
|
|
|
5,021,556
|
|
|
3,801
|
|
|
0.30
|
|
|
Certificates of deposit
|
|
|
5,623,449
|
|
|
29,185
|
|
2.08
|
|
|
|
7,155,096
|
|
|
42,343
|
|
|
2.37
|
|
|
Total deposits
|
|
|
11,203,339
|
|
|
33,486
|
|
1.20
|
|
|
|
12,176,652
|
|
|
46,144
|
|
|
1.52
|
|
|
Borrowings
|
|
|
4,210,625
|
|
|
44,594
|
|
4.24
|
|
|
|
5,527,188
|
|
|
57,392
|
|
|
4.15
|
|
|
Total interest-bearing liabilities
|
|
|
15,413,964
|
|
|
78,080
|
|
2.03
|
|
|
|
17,703,840
|
|
|
103,536
|
|
|
2.34
|
|
|
Non-interest-bearing liabilities
|
|
|
421,604
|
|
|
|
|
|
|
|
|
405,907
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
15,835,568
|
|
|
|
|
|
|
|
|
18,109,747
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
1,277,561
|
|
|
|
|
|
|
|
|
1,230,690
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
17,113,129
|
|
|
|
|
|
|
|
$
|
19,340,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net interest rate spread (3)
|
|
|
|
|
$
|
90,644
|
|
2.19
|
%
|
|
|
|
|
$
|
106,025
|
|
|
2.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net interest margin (4)
|
|
$
|
588,792
|
|
|
|
|
2.27
|
%
|
|
$
|
562,521
|
|
|
|
|
|
2.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest-bearing liabilities
|
|
|
1.04
|
x
|
|
|
|
|
|
|
|
1.03
|
x
|
|
|
|
|
|
|
|
(1)
|
Mortgage loans 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 included at average amortized cost.
|
|
(3)
|
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.
|
|
(4)
|
Net interest margin represents net interest income divided by average interest-earning assets.
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Average
Balance
|
|
Interest
|
Average
Yield/
Cost
|
|
Average
Balance
|
|
|
|
Interest
|
Average
Yield/
Cost
|
|
|
|
|
|
|
|
|
(Annualized)
|
|
|
|
|
|
|
(Annualized)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
10,701,179
|
|
$
|
332,314
|
|
4.14
|
%
|
$
|
11,856,597
|
|
|
$
|
408,640
|
|
|
4.60
|
%
|
|
Multi-family, commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
real estate and construction
|
|
|
2,694,186
|
|
|
124,915
|
|
6.18
|
|
|
3,319,318
|
|
|
|
149,169
|
|
|
5.99
|
|
|
Consumer and other loans (1)
|
|
|
300,502
|
|
|
7,477
|
|
3.32
|
|
|
328,264
|
|
|
|
7,975
|
|
|
3.24
|
|
|
Total loans
|
|
|
13,695,867
|
|
|
464,706
|
|
4.52
|
|
|
15,504,179
|
|
|
|
565,784
|
|
|
4.87
|
|
|
Mortgage-backed and other securities (2)
|
|
|
2,441,661
|
|
|
63,432
|
|
3.46
|
|
|
2,897,654
|
|
|
|
86,319
|
|
|
3.97
|
|
|
Repurchase agreements and interest-
earning cash accounts
|
|
|
153,312
|
|
|
221
|
|
0.19
|
|
|
181,366
|
|
|
|
257
|
|
|
0.19
|
|
|
FHLB-NY stock
|
|
|
134,549
|
|
|
5,386
|
|
5.34
|
|
|
177,246
|
|
|
|
6,416
|
|
|
4.83
|
|
|
Total interest-earning assets
|
|
|
16,425,389
|
|
|
533,745
|
|
4.33
|
|
|
18,760,445
|
|
|
|
658,776
|
|
|
4.68
|
|
|
Goodwill
|
|
|
185,151
|
|
|
|
|
|
|
|
185,151
|
|
|
|
|
|
|
|
|
|
Other non-interest-earning assets
|
|
|
908,537
|
|
|
|
|
|
|
|
879,392
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
17,519,077
|
|
|
|
|
|
|
$
|
19,824,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
2,770,622
|
|
|
7,812
|
|
0.38
|
|
$
|
2,324,727
|
|
|
|
7,023
|
|
|
0.40
|
|
|
Money market
|
|
|
476,046
|
|
|
2,370
|
|
0.66
|
|
|
336,482
|
|
|
|
1,117
|
|
|
0.44
|
|
|
NOW and demand deposit
|
|
|
1,787,848
|
|
|
872
|
|
0.07
|
|
|
1,662,287
|
|
|
|
807
|
|
|
0.06
|
|
|
Liquid CDs
|
|
|
384,259
|
|
|
699
|
|
0.24
|
|
|
626,625
|
|
|
|
2,281
|
|
|
0.49
|
|
|
Total core deposits
|
|
|
5,418,775
|
|
|
11,753
|
|
0.29
|
|
|
4,950,121
|
|
|
|
11,228
|
|
|
0.30
|
|
|
Certificates of deposit
|
|
|
5,933,823
|
|
|
94,403
|
|
2.12
|
|
|
7,507,295
|
|
|
|
137,954
|
|
|
2.45
|
|
|
Total deposits
|
|
|
11,352,598
|
|
|
106,156
|
|
1.25
|
|
|
12,457,416
|
|
|
|
149,182
|
|
|
1.60
|
|
|
Borrowings
|
|
|
4,484,543
|
|
|
139,694
|
|
4.15
|
|
|
5,730,714
|
|
|
|
177,268
|
|
|
4.12
|
|
|
Total interest-bearing liabilities
|
|
|
15,837,141
|
|
|
245,850
|
|
2.07
|
|
|
18,188,130
|
|
|
|
326,450
|
|
|
2.39
|
|
|
Non-interest-bearing liabilities
|
|
|
417,391
|
|
|
|
|
|
|
|
416,514
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
16,254,532
|
|
|
|
|
|
|
|
18,604,644
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
1,264,545
|
|
|
|
|
|
|
|
1,220,344
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
17,519,077
|
|
|
|
|
|
|
$
|
19,824,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net interest rate spread (3)
|
|
|
|
|
$
|
287,895
|
|
2.26
|
%
|
|
|
|
|
$
|
332,326
|
|
|
2.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net interest margin (4)
|
|
$
|
588,248
|
|
|
|
|
2.34
|
%
|
$
|
572,315
|
|
|
|
|
|
|
2.36
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest-bearing liabilities
|
|
|
1.04
|
x
|
|
|
|
|
|
|
1.03
|
x
|
|
|
|
|
|
|
|
|
(1)
|
Mortgage loans 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 included at average amortized cost.
|
|
(3)
|
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.
|
|
(4)
|
Net interest margin represents net interest income divided by average interest-earning assets.
|
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 September 30, 2011
Compared to
Three Months Ended September 30, 2010
|
|
|
Nine Months Ended September 30, 2011
Compared to
Nine Months Ended September 30, 2010
|
|
|
|
|
Increase (Decrease)
|
|
|
Increase (Decrease)
|
|
|
(In Thousands)
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
(11,493
|
)
|
|
$
|
(13,674
|
)
|
|
$
|
(25,167
|
)
|
|
$
|
(37,670
|
)
|
|
$
|
(38,656
|
)
|
|
$
|
(76,326
|
)
|
|
Multi-family, commercial real estate
and construction
|
|
|
(10,664
|
)
|
|
|
1,556
|
|
|
|
(9,108
|
)
|
|
|
(28,854
|
)
|
|
|
4,600
|
|
|
|
(24,254
|
)
|
|
Consumer and other loans
|
|
|
(258
|
)
|
|
|
63
|
|
|
|
(195
|
)
|
|
|
(690
|
)
|
|
|
192
|
|
|
|
(498
|
)
|
|
Mortgage-backed and other securities
|
|
|
(1,981
|
)
|
|
|
(3,685
|
)
|
|
|
(5,666
|
)
|
|
|
(12,600
|
)
|
|
|
(10,287
|
)
|
|
|
(22,887
|
)
|
|
Repurchase agreements and interest-
earning cash accounts
|
|
|
(106
|
)
|
|
|
(28
|
)
|
|
|
(134
|
)
|
|
|
(36
|
)
|
|
|
-
|
|
|
|
(36
|
)
|
|
FHLB-NY stock
|
|
|
(508
|
)
|
|
|
(59
|
)
|
|
|
(567
|
)
|
|
|
(1,659
|
)
|
|
|
629
|
|
|
|
(1,030
|
)
|
|
Total
|
|
|
(25,010
|
)
|
|
|
(15,827
|
)
|
|
|
(40,837
|
)
|
|
|
(81,509
|
)
|
|
|
(43,522
|
)
|
|
|
(125,031
|
)
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
|
378
|
|
|
|
(510
|
)
|
|
|
(132
|
)
|
|
|
1,179
|
|
|
|
(390
|
)
|
|
|
789
|
|
|
Money market
|
|
|
509
|
|
|
|
597
|
|
|
|
1,106
|
|
|
|
569
|
|
|
|
684
|
|
|
|
1,253
|
|
|
NOW and demand deposit
|
|
|
22
|
|
|
|
-
|
|
|
|
22
|
|
|
|
20
|
|
|
|
45
|
|
|
|
65
|
|
|
Liquid CDs
|
|
|
(234
|
)
|
|
|
(262
|
)
|
|
|
(496
|
)
|
|
|
(682
|
)
|
|
|
(900
|
)
|
|
|
(1,582
|
)
|
|
Certificates of deposit
|
|
|
(8,373
|
)
|
|
|
(4,785
|
)
|
|
|
(13,158
|
)
|
|
|
(26,513
|
)
|
|
|
(17,038
|
)
|
|
|
(43,551
|
)
|
|
Borrowings
|
|
|
(14,010
|
)
|
|
|
1,212
|
|
|
|
(12,798
|
)
|
|
|
(38,851
|
)
|
|
|
1,277
|
|
|
|
(37,574
|
)
|
|
Total
|
|
|
(21,708
|
)
|
|
|
(3,748
|
)
|
|
|
(25,456
|
)
|
|
|
(64,278
|
)
|
|
|
(16,322
|
)
|
|
|
(80,600
|
)
|
|
Net change in net interest income
|
|
$
|
(3,302
|
)
|
|
$
|
(12,079
|
)
|
|
$
|
(15,381
|
)
|
|
$
|
(17,231
|
)
|
|
$
|
(27,200
|
)
|
|
$
|
(44,431
|
)
|
Interest Income
Interest income decreased $40.9 million to $168.7 million for the three months ended September 30, 2011, from $209.6 million for the three months ended September 30, 2010, due to a decrease of $2.27 billion in the average balance of interest-earning assets to $16.00 billion for the three months ended September 30, 2011, from $18.27 billion for the three months ended September 30, 2010, coupled with a decrease in the average yield on interest-earning assets to 4.22% for the three months ended September 30, 2011, from 4.59% for the three months ended September 30, 2010. The decrease in the average balance of interest-earning assets was due to decreases in the average balances of all interest-earning asset categories. The decrease in the average yield on interest-earning assets was primarily due to decreases in the average yields on one-to-four family mortgage loans and mortgage-backed and other securities, partially offset by an increase in the average yield on multi-family, commercial real estate and construction loans.
Interest income on one-to-four family mortgage loans decreased $25.1 million to $105.8 million for the three months ended September 30, 2011, from $130.9 million for the three months ended September 30, 2010, due to the combined effect of a decrease in the average yield to 3.99% for the three months ended September 30, 2011, from 4.48% for the three months ended September
30, 2010 and a decrease of $1.07 billion in the average balance of such loans. The decrease in the average balance of one-to-four family mortgage loans was primarily due to the levels of repayments over the past year which have outpaced the levels of originations and purchases. The decrease in the average yield was primarily due to new originations at lower interest rates than the rates on loans repaid over the past year and the impact of the downward repricing of our ARM loans, slightly offset by a decrease in net premium amortization. The lower interest rates and decrease in the average balance are attributable to the U.S. government subsidizing the residential mortgage market with programs designed to keep the interest rate for thirty year fixed rate conforming mortgage loans at historic low levels, coupled with expanded conforming loan limits. Net premium amortization on one-to-four family mortgage loans decreased $799,000 to $7.2 million for the three months ended September 30, 2011, from $8.0 million for the three months ended September 30, 2010. The decrease in net premium amortization primarily reflects the lower average balance of one-to-four family mortgage loans during the three months ended September 30, 2011, compared to the three months ended September 30, 2010.
Interest income on multi-family, commercial real estate and construction loans decreased $9.1 million to $39.3 million for the three months ended September 30, 2011, from $48.4 million for the three months ended September 30, 2010, due to a decrease of $685.8 million in the average balance of such loans, partially offset by an increase in the average yield to 6.25% for the three months ended September 30, 2011, from 6.05% for the three months ended September 30, 2010. The decrease in the average balance of multi-family, commercial real estate and construction loans is attributable to repayments, the sale or transfer to held-for-sale of certain delinquent and non-performing loans and the absence of new multi-family, commercial real estate and construction loan originations. The increase in the average yield on multi-family, commercial real estate and construction loans is primarily due to an increase in prepayment penalties. Prepayment penalties increased $1.4 million to $2.1 million for the three months ended September 30, 2011, from $646,000 for the three months ended September 30, 2010.
Interest income on mortgage-backed and other securities decreased $5.6 million to $19.7 million for the three months ended September 30, 2011, from $25.3 million for the three months ended September 30, 2010, due to a decrease in the average yield to 3.36% for the three months ended September 30, 2011, from 3.97% for the three months ended September 30, 2010, coupled with a decrease of $211.1 million in the average balance of the portfolio. The decrease in the average yield was primarily due to repayments on higher yielding securities and purchases of new securities with lower coupons, in the prolonged low interest rate environment, than the weighted average coupon for the portfolio. The decrease in the average balance of mortgage-backed and other securities was the result of repayments exceeding securities purchased over the past year.
Dividend income on FHLB-NY stock decreased $567,000 to $1.4 million for the three months ended September 30, 2011, from $2.0 million for the three months ended September 30, 2010, primarily due to a decrease of $45.6 million in the average balance. The decrease in the average balance of FHLB-NY stock reflects a decrease in the level of FHLB-NY advances during the three months ended September 30, 2011, compared to the three months ended September 30, 2010.
Interest income decreased $125.1 million to $533.7 million for the nine months ended September 30, 2011, from $658.8 million for the nine months ended September 30, 2010, due to a decrease of $2.33 billion in the average balance of interest-earning assets to $16.43 billion for the nine months ended September 30, 2011, from $18.76 billion for the nine months ended September 30,
2010, coupled with a decrease in the average yield on interest-earning assets to 4.33% for the nine months ended September 30, 2011, from 4.68% for the nine months ended September 30,
2010.
Interest income on one-to-four family mortgage loans decreased $76.3 million to $332.3 million for the nine months ended September 30, 2011, from $408.6 million for the nine months ended September 30, 2010, due to the combined effect of a decrease in the average yield to 4.14% for the nine months ended September 30, 2011, from 4.60% for the nine months ended September 30, 2010 and a decrease of $1.16 billion in the average balance of such loans. Net premium amortization on one-to-four family mortgage loans decreased $3.8 million to $19.6 million for the nine months ended September 30, 2011, from $23.4 million for the nine months ended September 30, 2010.
Interest income on multi-family, commercial real estate and construction loans decreased $24.3 million to $124.9 million for the nine months ended September 30, 2011, from $149.2 million for the nine months ended September 30, 2010, due to a decrease of $625.1 million in the average balance of such loans, partially offset by an increase in the average yield to 6.18% for the nine months ended September 30, 2011, from 5.99% for the nine months ended September 30, 2010. Prepayment penalties increased $3.3 million to $5.2 million for the nine months ended September 30, 2011, from $1.9 million for the nine months ended September 30, 2010.
Interest income on mortgage-backed and other securities decreased $22.9 million to $63.4 million for the nine months ended September 30, 2011, from $86.3 million for the nine months ended September 30, 2010. This decrease was due to a decrease of $456.0 million in the average balance of the portfolio, coupled with a decrease in the average yield to 3.46% for the nine months ended September 30, 2011, from 3.97% for the nine months ended September 30, 2010.
Dividend income on FHLB-NY stock decreased $1.0 million to $5.4 million for the nine months ended September 30, 2011, from $6.4 million for the nine months ended September 30, 2010. This decrease was due to a decrease of $42.7 million in the average balance, partially offset by an increase in the average yield to 5.34% for the nine months ended September 30, 2011, from 4.83% for the nine months ended September 30, 2010.
Except as otherwise noted, the principal reasons for the changes in the average yields and average balances of the various assets noted above for the nine months ended September 30, 2011 are consistent with the principal reasons for the changes noted for the three months ended September 30, 2011.
Interest Expense
Interest expense decreased $25.4 million to $78.1 million for the three months ended September 30, 2011, from $103.5 million for the three months ended September 30, 2010, due to a decrease of $2.29 billion in the average balance of interest-bearing liabilities to $15.41 billion for the three months ended September 30, 2011, from $17.70 billion for the three months ended September 30, 2010, coupled with a decrease in the average cost of interest-bearing liabilities to 2.03% for the three months ended September 30, 2011, from 2.34% for the three months ended September 30, 2010. The decrease in the average balance of interest-bearing liabilities was primarily due to decreases in the average balances of certificates of deposit and borrowings. The decrease in the
average cost of interest-bearing liabilities was primarily due to a decrease in the average cost of certificates of deposit, partially offset by an increase in the average cost of borrowings.
Interest expense on total deposits decreased $12.6 million to $33.5 million for the three months ended September 30, 2011, from $46.1 million for the three months ended September 30, 2010, due to a decrease of $973.3 million in the average balance of total deposits to $11.20 billion for the three months ended September 30, 2011, from $12.18 billion for the three months ended September 30, 2010, coupled with a decrease in the average cost to 1.20% for the three months ended September 30, 2011, from 1.52% for the three months ended September 30, 2010. The decrease in the average balance of total deposits was primarily due to decreases in the average balances of certificates of deposit and Liquid CDs, partially offset by increases in the average balances of savings, money market and NOW and demand deposit accounts. The decrease in the
average cost of total deposits was primarily due to the impact of the decline in interest rates over the past year on our certificates of deposit which matured and were replaced at lower interest rates.
Interest expense on certificates of deposit decreased $13.1 million to $29.2 million for the three months ended September 30, 2011, from $42.3 million for the three months ended September 30, 2010, due to a decrease of $1.53 billion in the average balance, coupled with a decrease in the average cost to 2.08% for the three months ended September 30, 2011, from 2.37% for the three months ended September 30, 2010. The decrease in the average balance of certificates of deposit was primarily the result of our reduced focus on certificates of deposit. Throughout most of 2010 and during 2011, we continued to allow high cost certificates of deposit to run off as total assets declined. The decrease in the average cost of certificates of deposit reflects the impact of certificates of deposit at higher rates maturing and being replaced at lower interest rates. During the three months ended September 30, 2011, $735.8 million of certificates of deposit matured, with a weighted average rate of 1.39% and a weighted average maturity at inception of sixteen months, and $436.4 million of certificates of deposit were issued or repriced, with a weighted average rate of 0.53% and a weighted average maturity at inception of fourteen months.
Interest expense on borrowings decreased $12.8 million to $44.6 million for the three months ended September 30, 2011, from $57.4 million for the three months ended September 30, 2010, due to a decrease of $1.32 billion in the average balance, partially offset by an increase in the average cost to 4.24% for the three months ended September 30, 2011, from 4.15% for the three months ended September 30, 2010. The decrease in the average balance of borrowings was the result of cash flows from mortgage loan and securities repayments exceeding mortgage loan originations and purchases, securities purchases and deposit outflows which enabled us to repay a portion of our matured borrowings. The increase in the average cost of borrowings is a result of borrowings which matured over the past year which had interest rates below the weighted average rate for the borrowings portfolio.
Interest expense decreased $80.6 million to $245.9 million for the nine months ended September 30, 2011, from $326.5 million for the nine months ended September 30, 2010, due to a decrease of $2.35 billion in the average balance of interest-bearing liabilities to $15.84 billion for the nine months ended September 30, 2011, from $18.19 billion for the nine months ended September 30, 2010, coupled with a decrease in the average cost of interest-bearing liabilities to 2.07% for the nine months ended September 30, 2011, from 2.39% for the nine months ended September 30, 2010.
Interest expense on total deposits decreased $43.0 million to $106.2 million for the nine months ended September 30, 2011, from $149.2 million for the nine months ended September 30, 2010, due to a decrease of $1.11 billion in the average balance of total deposits to $11.35 billion for the nine months ended September 30, 2011, from $12.46 billion for the nine months ended September 30, 2010, coupled with a decrease in the average cost to 1.25% for the nine months ended September 30, 2011, from 1.60% for the nine months ended September 30, 2010.
Interest expense on certificates of deposit decreased $43.6 million to $94.4 million for the nine months ended September 30, 2011, from $138.0 million for the nine months ended September 30, 2010, due to a decrease of $1.57 billion in the average balance, coupled with a decrease in the average cost to 2.12% for the nine months ended September 30, 2011, from 2.45% for the nine months ended September 30, 2010. During the nine months ended September 30, 2011, $2.82 billion of certificates of deposit matured, with a weighted average rate of 1.60% and a weighted average maturity at inception of seventeen months, and $1.95 billion of certificates of deposit were issued or repriced, with a weighted average rate of 0.92% and a weighted average maturity at inception of twenty months.
Interest expense on borrowings decreased $37.6 million to $139.7 million for the nine months ended September 30, 2011, from $177.3 million for the nine months ended September 30, 2010, due to a decrease of $1.25 billion in the average balance, partially offset by an increase in the average cost to 4.15% for the nine months ended September 30, 2011, from 4.12% for the nine months ended September 30, 2010.
Except as otherwise noted, the principal reasons for the changes in the average costs and average balances of the various liabilities noted above for the nine months ended September 30, 2011 are consistent with the principal reasons for the changes noted for the three months ended September 30, 2011.
Provision for Loan Losses
We review our allowance for loan losses on a quarterly basis. Material factors considered during our quarterly review are our loss experience, the composition and direction of loan delinquencies, the size and composition of our loan portfolio and the impact of current economic conditions. We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. As a geographically diversified residential lender, we have been affected by negative consequences arising from the economic recession that continued throughout most of 2009 and, in particular, a sharp downturn in the housing industry nationally, as well as economic and housing industry weaknesses in the New York metropolitan area. We are particularly vulnerable to a job loss recession. Although the national economy experienced some recovery during the 2011 first quarter, it weakened during the six months ended September 30, 2011 as evidenced by, among other things, an increase in the unemployment rate since March 2011 and significantly lower job growth during the 2011 second and third quarters than the moderate growth experienced in the 2011 first quarter. In addition, softness persists in the housing and real estate markets.
The allowance for loan losses decreased to $178.4 million at September 30, 2011, compared to $182.7 million at June 30, 2011 and $201.5 million at December 31, 2010. The allowance for loan losses reflects the levels and composition of our loan delinquencies and non-performing loans, our loss history, the size and composition of our loan portfolio and our evaluation of the
housing and real estate markets and overall economy, including the unemployment rate. The provision for loan losses decreased to $10.0 million for the three months ended September 30, 2011, compared to $20.0 million for the three months ended September 30, 2010, and decreased to $27.0 million for the nine months ended September 30, 2011, compared to $100.0 million for the nine months ended September 30, 2010. The decreases in the allowance for loan losses and the provision for loan losses reflect the stabilizing trend in overall asset quality experienced in 2010 and into 2011, coupled with the decline in the loan portfolio over the same period. The provision for loan losses for the 2011 third quarter was equal to the provision for loan losses for the 2011 second quarter because we felt it prudent, at this time, to maintain our strong coverage ratios in the face of a continued weak economy and persistent high unemployment along with prolonged softness in housing values. The allowance for loan losses as a percentage of total loans was 1.34% at September 30, 2011, compared to 1.35% at June 30, 2011 and 1.42% at December 31, 2010. The allowance for loan losses as a percentage of non-performing loans was 46.94% at September 30, 2011, compared to 48.55% at June 30, 2011 and 51.57% at December 31, 2010. Total delinquencies declined $15.0 million to $568.5 million at September 30, 2011, compared to $583.5 million at June 30, 2011 and declined $42.4 million, compared to $610.9 million at December 31, 2010. Non-performing loans totaled $380.0 million at September 30, 2011, an increase of $3.7 million compared to $376.3 million at June 30, 2011 and a decrease of $10.7 million compared to $390.7 million at December 31, 2010. The changes in non-performing loans during any period are taken into account when determining the allowance for loan losses because the allowance coverage percentages we apply to our non-performing loans are higher than the allowance coverage percentages applied to our performing loans. In determining our allowance coverage percentages for non-performing loans, we consider our aggregate historical loss experience with respect to the ultimate disposition of the underlying collateral. To further enhance our non-performing loan analysis, during the quarter ended June 30, 2011, we began segmenting our non-performing loans by state and analyzing our historical loss experience and cure rates by state.
When analyzing our asset quality trends and coverage ratios, consideration is given to the accounting for non-performing loans, particularly when reviewing our allowance for loan losses to non-performing loans ratio. Included in our non-performing loans are one-to-four family mortgage loans which are 180 days or more past due. We update our collateral values on one-to-four family mortgage loans which are 180 days past due and annually thereafter. If the estimated fair value of the loan collateral less estimated selling costs is less than the recorded investment in the loan, a charge-off of the difference is recorded to reduce the loan to its fair value less estimated selling costs. Therefore certain losses inherent in our non-performing one-to-four family mortgage loans are being recognized at 180 days of delinquency and annually thereafter and accordingly are charged off. The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the allowance for loan losses required on these loans. In effect, these loans have been written down to their fair value less estimated selling costs and the inherent loss has been recognized. Therefore, when reviewing the adequacy of the allowance for loan losses as a percentage of non-performing loans, the impact of these charge-offs is considered. At September 30, 2011, non-performing loans included one-to-four family mortgage loans which were 180 days or more past due totaling $258.7 million, net of $74.7 million in charge-offs related to such loans, which had a related allowance for loan losses totaling $7.3 million. Excluding these one-to-four family mortgage loans which were 180 days or more past due at September 30, 2011 and their related allowance, our ratio of the allowance for loan losses to non-performing loans would be approximately
141%, which is a non-GAAP financial measure, compared to the ratio of the allowance for loan losses to non-performing loans of approximately 47%, as noted above.
While ratio analyses are used as a supplemental tool for evaluating the overall reasonableness of the allowance for loan losses, the adequacy of the allowance for loan losses is ultimately determined by the actual losses and charges recognized in the portfolio. We update our loss analyses quarterly to ensure that our allowance coverage percentages are adequate and the overall allowance for loan losses is our best estimate of loss as of a particular point in time. Our 2011 third quarter analysis of loss severity on one-to-four family mortgage loans, defined as the ratio of net write-downs taken through disposition of the asset (typically the sale of REO) to the loan’s original principal balance during the twelve months ended June 30, 2011, indicated an average loss severity of approximately 29% compared to an average loss severity of approximately 28% in our 2011 second quarter analysis and 26% in our 2011 first quarter analysis. Our analysis in the 2011 third quarter primarily reviewed one-to-four family REO sales which occurred during the twelve months ended June 30, 2011 and included both full documentation and reduced documentation loans in a variety of states with varying years of origination. Our 2011 third quarter analysis of charge-offs on multi-family, commercial real estate and construction loans, primarily related to loan sales, during the twelve months ended June 30, 2011, indicated an average loss severity of approximately 29%. This compares to an average loss severity of approximately 31% in our 2011 second quarter analysis and 30% in our 2011 first quarter analysis. We consider our average loss severity experience as a gauge in evaluating the overall adequacy of our allowance for loan losses. However, the uniqueness of each multi-family, commercial real estate and construction loan, particularly multi-family loans within New York City, many of which are rent stabilized, is also factored into our analyses. We also obtain updated estimates of collateral value on our non-performing multi-family, commercial real estate and construction loans with balances of $1.0 million or greater. We believe that using the loss experience of the past year (twelve months prior to the quarterly analysis) is reflective of the current economic and real estate environment. The ratio of the allowance for loan losses to non-performing loans was approximately 47% at September 30, 2011, which exceeds our average loss severity experience for our mortgage loan portfolios, supporting our determination that our allowance for loan losses is adequate to cover potential losses.
Net loan charge-offs totaled $14.4 million, or forty-three basis points of average loans outstanding, annualized, for the three months ended September 30, 2011 and $50.1 million, or forty-nine basis points of average loans outstanding, annualized, for the nine months ended September 30, 2011. This compares to net loan charge-offs of $24.8 million, or sixty-five basis points of average loans outstanding, annualized, for the three months ended September 30, 2010 and $87.8 million, or seventy-six basis points of average loans outstanding, annualized, for the nine months ended September 30, 2010. The decrease in net loan charge-offs for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, was primarily due to decreases in multi-family and one-to-four family mortgage loan net charge-offs. The decrease in net loan charge-offs for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, was primarily due to decreases in multi-family, one-to-four family and commercial real estate mortgage loan net charge-offs. Our non-performing loans, which are comprised primarily of mortgage loans, decreased $10.7 million to $380.0 million, or 2.85% of total loans, at September 30, 2011, from $390.7 million, or 2.75% of total loans, at December 31, 2010. The decrease was primarily due to a decrease of $17.4 million in non-performing one-to-four family mortgage loans, partially offset by an
increase of $8.2 million in multi-family and commercial real estate loans. We proactively manage our non-performing assets, in part, through the sale of certain delinquent and non-performing loans. If the sale and reclassification to held-for-sale of certain delinquent and non-performing loans, primarily multi-family and one-to-four family mortgage loans, during the nine months ended September 30, 2011 had not occurred, our non-performing loans would have been $24.4 million higher, which amount is gross of $7.0 million in net charge-offs taken on such loans.
We obtain updated estimates of collateral value for non-performing multi-family, commercial real estate and construction loans with balances of $1.0 million or greater and one-to-four family mortgage loans which are 180 days or more delinquent, annually, and certain other loans when the Asset Classification Committee believes repayment of such loans may be dependent on the value of the underlying collateral. We monitor property value trends in our market areas to determine what impact, if any, such trends may have on our loan-to-value ratios and the adequacy of the allowance for loan losses.
During the 2011 first quarter, total delinquencies decreased primarily due to a decrease in non-performing loans and early stage delinquencies, continuing the trend from 2010. Net loan charge-offs decreased slightly for the 2011 first quarter compared to the 2010 fourth quarter. The national unemployment rate decreased to 8.8% for March 2011 and there were modest job gains for the quarter totaling 478,000 at the time of our analysis. We continued to update our charge-off and loss analysis during the 2011 first quarter and modified our allowance coverage percentages accordingly. As a result of these factors, our allowance for loan losses decreased compared to December 31, 2010 and totaled $189.5 million at March 31, 2011 which resulted in a provision for loan losses of $7.0 million for the 2011 first quarter. During the 2011 second quarter, total delinquencies decreased due to a decrease in loans 60-89 days past due, partially offset by an increase in loans 30-59 days past due and a slight increase in non-performing loans. The unemployment rate increased to 9.2% for June 2011 and job gains decreased significantly from the first quarter and totaled 260,000 at the time of our analysis. Net loan charge-offs decreased for the 2011 second quarter compared to the 2011 first quarter. We continued to update our charge-off and loss analysis during the 2011 second quarter and modified our allowance coverage percentages accordingly. As a result of these factors, our allowance for loan losses decreased compared to March 31, 2011 and totaled $182.7 million at June 30, 2011 which resulted in a provision for loan losses of $10.0 million for the three months ended June 30, 2011 and $17.0 million for the six months ended June 30, 2011. During the 2011 third quarter, total delinquencies decreased due to a decrease in loans 30-59 days past due, partially offset by a slight increase in non-performing loans. The unemployment rate decreased slightly to 9.1% and there were job gains for the quarter totaling 287,000 at the time of our analysis. Net loan charge-offs decreased for the 2011 third quarter compared to the 2011 second quarter. We continued to update our charge-off and loss analysis during the 2011 third quarter and modified our allowance coverage percentages accordingly. As a result of these factors, our allowance for loan losses decreased compared to June 30, 2011 and totaled $178.4 million at September 30, 2011 which resulted in a provision for loan losses of $10.0 million for the three months ended September 30, 2011 and $27.0 million for the nine months ended September 30, 2011.
There are no material assumptions relied on by management which have not been made apparent in our disclosures or reflected in our asset quality ratios and activity in the allowance for loan losses. We believe our allowance for loan losses has been established and maintained at levels that reflect the risks inherent in our loan portfolio, giving consideration to the composition and
size of our loan portfolio, delinquencies and non-accrual and non-performing loans, our loss history and the current economic environment. The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at September 30, 2011 and December 31, 2010.
For further discussion of the methodology used to determine the allowance for loan losses, see “Critical Accounting Policies-Allowance for Loan Losses” and for further discussion of our loan portfolio composition and non-performing loans, see “Asset Quality” and Note 4 of Notes to Consolidated Financial Statements in Item 1, “Financial Statements (Unaudited).”
Non-Interest Income
Non-interest income decreased $2.1 million to $16.5 million for the three months ended September 30, 2011, from $18.6 million for the three months ended September 30, 2010, and decreased $8.9 million to $51.6 million for the nine months ended September 30, 2011, from $60.5 million for the nine months ended September 30, 2010. These decreases were primarily due to decreases in other non-interest income and customer service fees.
Other non-interest income decreased $901,000 to $1.3 million for the three months ended September 30, 2011, from $2.2 million for the three months ended September 30, 2010, primarily due to a decrease in net gain on sales of non-performing loans held-for-sale. For the nine months ended September 30, 2011, other non-interest income decreased $6.2 million to $3.1 million, from $9.3 million for the nine months ended September 30, 2010, primarily due to a litigation settlement (Goodwill Litigation) of $6.2 million recorded in the 2010 second quarter and a decrease of $1.2 million in net gain on sales of non-performing loans held-for-sale, partially offset by an asset impairment charge of $1.5 million recorded in the 2010 second quarter. For further discussion of the litigation settlement, see Note 10 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” in our 2010 Annual Report on Form 10-K. The asset impairment charge was related to an office building previously included in premises and equipment, net, which was sold in the 2011 second quarter. For further discussion of the asset impairment charge recorded in the 2010 second quarter and the sale of the building in the 2011 second quarter, see Note 1 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” in our 2010 Annual Report on Form 10-K and Note 5 of Notes to Consolidated Financial Statements in Item 1, “Financial Statements (Unaudited),” in this Quarterly Report on Form 10-Q.
Customer service fees decreased $596,000 to $11.9 million for the three months ended September 30, 2011, from $12.5 million for the three months ended September 30, 2010, and decreased $3.4 million to $35.7 million for the nine months ended September 30, 2011, from $39.1 million for the nine months ended September 30, 2010. These decreases were primarily due to decreases in overdraft fees related to transaction accounts.
Non-Interest Expense
Non-interest expense increased $7.7 million to $78.6 million for the three months ended September 30, 2011, from $70.9 million for the three months ended September 30, 2010, primarily due to increases in FDIC insurance premium expense and compensation and benefits expense. For the nine months ended September 30, 2011, non-interest expense increased $9.2 million to $224.2 million, from $215.0 million for the nine months ended September 30, 2010,
primarily due to increases in FDIC insurance premium expense, compensation and benefits expense and advertising expense, partially offset by a decrease in other non-interest expense. Our percentage of general and administrative expense to average assets, annualized, increased to 1.84% for the three months ended September 30, 2011, from 1.47% for the three months ended September 30, 2010, and increased to 1.71% for the nine months ended September 30, 2011, from 1.45% for the nine months ended September 30, 2010. The increases in these ratios were due to the decreases in average assets, coupled with the increases in general and administrative expenses, for the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010.
FDIC insurance premium expense increased $4.3 million to $10.8 million for the three months ended September 30, 2011, from $6.5 million for the three months ended September 30, 2010, and increased $7.8 million to $27.5 million for the nine months ended September 30, 2011, from $19.7 million for the nine months ended September 30, 2010. On February 7, 2011, the FDIC adopted a final rule that redefined the assessment base for deposit insurance assessments as average consolidated total assets minus average tangible equity, rather than on deposit bases, as required by the Reform Act, and revised the risk-based assessment system for all large insured depository institutions effective April 1, 2011 and results in significantly higher FDIC insurance premium expense. For further discussion of the changes in FDIC insurance premiums, see “Federally Chartered Savings Association Regulation – Insurance of Deposit Accounts,” in Part I, Item 1, of our 2010 Annual Report on Form 10-K and Part II, Item 1A, “Risk Factors,” in our March 31, 2011 Quarterly Report on Form 10-Q.
Compensation and benefits expense increased $3.5 million to $39.5 million for the three months ended September 30, 2011, from $36.0 million for the three months ended September 30, 2010, and increased $7.3 million to $113.2 million for the nine months ended September 30, 2011, from $105.9 million for the nine months ended September 30, 2010. These increases were primarily due to increases in ESOP related expenses, pension and other postretirement benefits expense, salary expense and stock-based compensation, partially offset by decreases in officer incentive accruals. The increase in ESOP related expenses primarily reflects the reduction in the market value of our common stock during the 2011 third quarter.
Other non-interest expense decreased $6.8 million to $28.4 million for the nine months ended September 30, 2011, from $35.2 million for the nine months ended September 30, 2010, primarily due to a litigation settlement (McAnaney Litigation) of $7.9 million recorded in the 2010 second quarter and a decrease in legal expenses, partially offset by an increase in REO related expenses. For further discussion of the litigation settlement, see Note 10 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” in our 2010 Annual Report on Form 10-K. REO related expenses increased $2.2 million to $8.7 million for the nine months ended September 30, 2011. Advertising expense increased $1.8 million to $6.4 million for the nine months ended September 30, 2011, from $4.6 million for the nine months ended September 30, 2010, due to additional marketing campaigns.
In connection with the implementation of the Reform Act and our transition to the OCC as our primary regulator and the resultant enhanced scrutiny of larger institutions, we have decided to enhance various systems and add staff to keep up with the operational and regulatory burden associated with an institution of our size. This will result in additional investments in both technology and staffing that are likely to increase our non-interest expense.
Income Tax Expense
For the three months ended September 30, 2011, income tax expense totaled $7.4 million, representing an effective tax rate of 39.7%, compared to $12.3 million for the three months ended September 30, 2010, representing an effective tax rate of 36.4%. For the nine months ended September 30, 2011, income tax expense totaled $32.9 million, representing an effective tax rate of 37.2%, compared to $27.9 million for the nine months ended September 30, 2010, representing an effective tax rate of 35.8%. The increases in the effective tax rate for the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010, primarily reflect significant increases in net nonfavorable permanent differences, primarily due to the increase in non-deductible ESOP expense, coupled with the decrease in pre-tax book income for the three months ended September 30, 2011, compared to the three months ended September 30, 2010.
Asset Quality
One of our key operating objectives has been and continues to be to maintain a high level of asset quality. We continue to employ sound underwriting standards for new loan originations. Through a variety of strategies, including, but not limited to, collection efforts and the marketing of delinquent and non-performing loans and foreclosed properties, we have been proactive in addressing problem and non-performing assets which, in turn, has helped to maintain the strength of our financial condition.
The composition of our loan portfolio, by property type, has remained relatively consistent over the last several years. At September 30, 2011, our loan portfolio was comprised of 80% one-to-four family mortgage loans, 13% multi-family mortgage loans, 5% commercial real estate loans and 2% other loan categories. This compares to 77% one-to-four family mortgage loans, 16% multi-family mortgage loans, 5% commercial real estate loans and 2% other loan categories at December 31, 2010.
Full documentation loans comprised 85% of our one-to-four family mortgage loan portfolio at September 30, 2011, compared to 84% at December 31, 2010 and comprised 88% of our total loan portfolio at September 30, 2011, compared to 87% at December 31, 2010.
The following table provides further details on the composition of our one-to-four family mortgage loan portfolio in dollar amounts and percentages of the portfolio at the dates indicated.
|
|
|
At September 30, 2011
|
|
At December 31, 2010
|
|
|
|
|
Percent
|
|
|
Percent
|
|
(Dollars in Thousands)
|
|
Amount
|
of Total
|
|
Amount
|
of Total
|
|
One-to-four family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full documentation interest-only (1)
|
|
$
|
3,019,747
|
|
28.59
|
%
|
|
$
|
3,811,762
|
|
35.12
|
%
|
|
Full documentation amortizing
|
|
|
5,942,774
|
|
56.26
|
|
|
|
5,272,171
|
|
48.57
|
|
|
Reduced documentation interest-only (1)(2)
|
|
|
1,182,887
|
|
11.20
|
|
|
|
1,331,294
|
|
12.26
|
|
|
Reduced documentation amortizing (2)
|
|
|
416,956
|
|
3.95
|
|
|
|
439,834
|
|
4.05
|
|
|
Total one-to-four family
|
|
$
|
10,562,364
|
|
100.00
|
%
|
|
$
|
10,855,061
|
|
100.00
|
%
|
|
(1)
|
|
Interest-only loans require the borrower to pay interest only during the first ten years of the loan term. After the tenth anniversary of the loan, principal and interest payments are required to amortize the loan over the remaining loan term. Includes interest-only hybrid ARM loans which were underwritten at the initial note rate, which may have been a discounted rate, totaling $2.59 billion at September 30, 2011 and $2.91 billion at December 31, 2010.
|
|
(2)
|
|
Includes SISA loans totaling $246.0 million at September 30, 2011 and $272.7 million at December 31, 2010.
|
We continue to adhere to prudent underwriting standards. We underwrite our one-to-four family mortgage loans primarily based upon our evaluation of the borrower’s ability to pay. We do not originate negative amortization loans, payment option loans or other loans with short-term interest-only periods. Additionally, we do not originate one-year ARM loans. The ARM loans in our portfolio which currently reprice annually represent hybrid ARM loans (interest-only and amortizing) which have passed their initial fixed rate period. In 2006, we began underwriting our one-to-four family interest-only hybrid ARM loans based on a fully amortizing loan (in effect, underwriting interest-only hybrid ARM loans as if they were amortizing hybrid ARM loans). Prior to 2007, we would underwrite our one-to-four family interest-only hybrid ARM loans using the initial note rate, which may have been a discounted rate. In 2007, we began underwriting our one-to-four family interest-only hybrid ARM loans at the higher of the fully indexed rate or the initial note rate. In 2009, we began underwriting our one-to-four family interest-only and amortizing hybrid ARM loans at the higher of the fully indexed rate, the initial note rate or 6.00%. During the 2010 second quarter, we reduced the underwriting interest rate floor from 6.00% to 5.00% to reflect the current interest rate environment. During the 2010 third quarter, we stopped offering interest-only loans. Our reduced documentation loans are comprised primarily of SIFA (stated income, full asset) loans. To a lesser extent, reduced documentation loans in our portfolio also include SISA (stated income, stated asset) loans. SIFA and SISA loans required a prospective borrower to complete a standard mortgage loan application. During the 2007 fourth quarter, we stopped offering reduced documentation loans.
The market does not apply a uniform definition of what constitutes “subprime” lending. Our reference to subprime lending relies upon the “Statement on Subprime Mortgage Lending” issued by the federal bank regulatory agencies, or the Agencies, on June 29, 2007, which further references the “Expanded Guidance for Subprime Lending Programs,” or the Expanded Guidance, issued by the Agencies by press release dated January 31, 2001. In the Expanded Guidance, the Agencies indicated that subprime lending does not refer to individual subprime loans originated and managed, in the ordinary course of business, as exceptions to prime risk selection standards. The Agencies recognize that many prime loan portfolios will contain such accounts. The Agencies also excluded prime loans that develop credit problems after acquisition and community development loans from the subprime arena. According to the Expanded Guidance, subprime loans are other loans to borrowers which display one or more characteristics
of reduced payment capacity. Five specific criteria, which are not intended to be exhaustive and are not meant to define specific parameters for all subprime borrowers and may not match all markets or institutions’ specific subprime definitions, are set forth, including having a credit (FICO) score of 660 or below. However, we do not associate a particular FICO score with our definition of subprime loans. Consistent with the guidance provided by federal bank regulatory agencies, we consider subprime loans to be loans to borrowers with a credit history containing one or more of the following at the time of origination: (1) bankruptcy within the last four years; (2) foreclosure within the last two years; or (3) two 30 day mortgage delinquencies in the last twelve months. In addition, subprime loans generally display the risk layering of the following features: high debt-to-income ratio; low or no cash reserves; loan-to-value ratios over 90%; short-term interest-only periods or negative amortization loan products; or reduced or no documentation loans. Our current underwriting standards would generally preclude us from originating loans to borrowers with a credit history containing a bankruptcy or a foreclosure within the last five years or two 30 day mortgage delinquencies in the last twelve months. Based upon the definition and exclusions described above, we are a prime lender. Within our portfolio of one-to-four family mortgage loans, we have loans to borrowers who had FICO scores of 660 or below at the time of origination. However, as a portfolio lender we underwrite our loans considering all credit criteria, as well as collateral value, and do not base our underwriting decisions solely on FICO scores. Based on our underwriting criteria, particularly the average loan-to-value ratios at origination, we consider our loans to borrowers with FICO scores of 660 or below at origination to be prime loans.
Although FICO scores are considered as part of our underwriting process, they have not always been recorded on our mortgage loan system and are not available for all of the one-to-four family mortgage loans on our mortgage loan system. However, substantially all of our one-to-four family mortgage loans originated since March 2005 have credit scores available on our mortgage loan system. At September 30, 2011, one-to-four family mortgage loans which had FICO scores available on our mortgage loan system totaled $9.25 billion, or 88% of our total one-to-four family mortgage loan portfolio, of which $441.4 million, or 5%, had FICO scores of 660 or below at the date of origination. At December 31, 2010, one-to-four family mortgage loans which had FICO scores available on our mortgage loan system totaled $9.39 billion, or 86% of our total one-to-four family mortgage loan portfolio, of which $473.3 million, or 5%, had FICO scores of 660 or below at the date of origination.
Of our one-to-four family mortgage loans to borrowers with known FICO scores of 660 or below, 72% are interest-only loans and 28% are amortizing loans at September 30, 2011 and 73% are interest-only loans and 27% are amortizing loans at December 31, 2010. In addition, 67% of our loans to borrowers with known FICO scores of 660 or below were full documentation loans and 33% were reduced documentation loans at September 30, 2011 and at December 31, 2010.
We believe the aforementioned loans, when originated, were amply collateralized and otherwise conformed to our prime lending standards and do not present a greater risk of loss or other asset quality risk relative to comparable loans in our portfolio to other borrowers with higher credit scores. We do not have FICO scores recorded on our mortgage loan system for 12% of our one-to-four family mortgage loans at September 30, 2011 and 14% of our one-to-four family mortgage loans at December 31, 2010.
Of our one-to-four family mortgage loans without a FICO score available on our mortgage loan system, 75% are amortizing loans and 25% are interest-only loans at September 30, 2011 and 74% are amortizing loans and 26% are interest-only loans at December 31, 2010.
Non-Performing Assets
The following table sets forth information regarding non-performing assets at the dates indicated.
|
(Dollars in Thousands)
|
|
At September 30, 2011
|
|
At December 31, 2010
|
|
Non-accrual delinquent mortgage loans
|
|
$
|
373,476
|
|
|
$
|
384,291
|
|
|
Non-accrual delinquent consumer and other loans
|
|
|
5,501
|
|
|
|
5,574
|
|
|
Mortgage loans delinquent 90 days or more and
still accruing interest (1)
|
|
|
1,006
|
|
|
|
845
|
|
|
Total non-performing loans (2)
|
|
|
379,983
|
|
|
|
390,710
|
|
|
REO, net (3)
|
|
|
50,762
|
|
|
|
63,782
|
|
|
Total non-performing assets
|
|
$
|
430,745
|
|
|
$
|
454,492
|
|
|
Non-performing loans to total loans
|
|
|
2.85
|
%
|
|
|
2.75
|
%
|
|
Non-performing loans to total assets
|
|
|
2.24
|
|
|
|
2.16
|
|
|
Non-performing assets to total assets
|
|
|
2.54
|
|
|
|
2.51
|
|
|
Allowance for loan losses to non-performing loans
|
|
|
46.94
|
|
|
|
51.57
|
|
|
Allowance for loan losses to total loans
|
|
|
1.34
|
|
|
|
1.42
|
|
|
(1)
|
|
Mortgage loans delinquent 90 days or more and still accruing interest consist primarily of loans delinquent 90 days or more as to their maturity date but not their interest due.
|
|
(2)
|
|
Non-performing loans exclude loans which have been restructured and are accruing and performing in accordance with the restructured terms for a satisfactory period of time, generally six months. Restructured accruing loans totaled $64.2 million at September 30, 2011 and $49.2 million at December 31, 2010. Restructured loans included in non-performing loans totaled $36.8 million at September 30, 2011 and $47.5 million at December 31, 2010.
|
|
(3)
|
|
REO, primarily all of which are one-to-four family properties, is net of allowance for losses totaling $1.9 million at September 30, 2011 and $1.5 million at December 31, 2010.
|
Total non-performing assets decreased $23.8 million to $430.7 million at September 30, 2011, from $454.5 million at December 31, 2010. This decrease was due to a decrease in REO, net, and a decrease in non-performing loans. Non-performing loans, the most significant component of non-performing assets, decreased $10.7 million to $380.0 million at September 30, 2011, from $390.7 million at December 31, 2010, primarily due to a decrease of $17.4 million in non-performing one-to-four family mortgage loans, partially offset by an increase of $8.2 million in multi-family and commercial real estate loans. Non-performing one-to-four family mortgage loans reflect a greater concentration of reduced documentation loans. Reduced documentation loans represent only 15% of the one-to-four family mortgage loan portfolio, yet represent 54% of non-performing one-to-four family mortgage loans at September 30, 2011. The ratio of non-performing loans to total loans increased to 2.85% at September 30, 2011, from 2.75% at December 31, 2010. The ratio of non-performing assets to total assets increased to 2.54% at September 30, 2011, from 2.51% at December 31, 2010. The increases in these ratios are attributable to the decreases in total loans and total assets, partially offset by the decreases in non-performing loans and non-performing assets at September 30, 2011 compared to December 31, 2010.
We proactively manage our non-performing assets, in part, through the sale of certain delinquent and non-performing loans. During the nine months ended September 30, 2011, we sold $20.4 million, net of charge-offs of $8.3 million, of delinquent and non-performing loans, primarily multi-family and one-to-four family mortgage loans. In addition, included in loans held-for-sale, net, are delinquent and non-performing loans totaling $6.7 million, net of charge-offs of $3.7 million and a $71,000 lower of cost or market valuation allowance, at September 30, 2011 and $10.9 million, net of charge-offs of $5.2 million and a $169,000 lower of cost or market valuation allowance, at December 31, 2010, consisting primarily of multi-family and commercial real estate loans. Such loans are excluded from non-performing loans, non-performing assets and related ratios. Assuming we did not sell or reclassify to held-for-sale any delinquent and
non-performing loans during 2011, at September 30, 2011 our non-performing loans and non-performing assets would have been $24.4 million higher and our allowance for loan losses would have been $7.0 million higher. Additionally, the ratio of non-performing loans to total loans would have been 19 basis points higher, the ratio of non-performing assets to total assets would have been 14 basis points higher and the ratio of the allowance for loan losses to non-performing loans would have been 111 basis points lower.
The following table provides further details on the composition of our non-performing one-to-four family mortgage loans in dollar amounts and percentages of the portfolio, at the dates indicated.
|
|
|
At September 30, 2011
|
|
At December 31, 2010
|
|
|
|
|
Percent
|
|
|
Percent
|
|
(Dollars in Thousands)
|
|
Amount
|
of Total
|
|
Amount
|
of Total
|
|
Non-performing one-to-four family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full documentation interest-only
|
|
$
|
110,126
|
|
33.90
|
%
|
|
$
|
105,982
|
|
30.96
|
%
|
|
Full documentation amortizing
|
|
|
40,637
|
|
12.51
|
|
|
|
45,720
|
|
13.36
|
|
|
Reduced documentation interest-only
|
|
|
137,695
|
|
42.38
|
|
|
|
157,464
|
|
46.00
|
|
|
Reduced documentation amortizing
|
|
|
36,423
|
|
11.21
|
|
|
|
33,149
|
|
9.68
|
|
|
Total non-performing one-to-four family
|
|
$
|
324,881
|
|
100.00
|
%
|
|
$
|
342,315
|
|
100.00
|
%
|
The following table provides details on the geographic composition of both our total and non-performing one-to-four family mortgage loans as of September 30, 2011.
|
|
|
One-to-Four Family Mortgage Loans
|
|
|
|
At September 30, 2011
|
|
|
|
Total Loans
|
|
Percent of
Total Loans
|
|
Total
Non-Performing
Loans
|
|
Percent of
Total
Non-Performing
Loans
|
|
Non-Performing
Loans
as Percent of
State Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
|
|
State:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
$
|
2,994.0
|
|
|
|
28.3
|
%
|
|
$
|
40.6
|
|
|
|
12.5
|
%
|
|
|
1.36
|
%
|
|
Illinois
|
|
|
1,286.4
|
|
|
|
12.2
|
|
|
|
49.5
|
|
|
|
15.2
|
|
|
|
3.85
|
|
|
Connecticut
|
|
|
1,041.1
|
|
|
|
9.9
|
|
|
|
32.1
|
|
|
|
9.9
|
|
|
|
3.08
|
|
|
New Jersey
|
|
|
763.8
|
|
|
|
7.2
|
|
|
|
56.6
|
|
|
|
17.4
|
|
|
|
7.41
|
|
|
Massachusetts
|
|
|
753.6
|
|
|
|
7.1
|
|
|
|
11.2
|
|
|
|
3.4
|
|
|
|
1.49
|
|
|
California
|
|
|
721.9
|
|
|
|
6.8
|
|
|
|
35.0
|
|
|
|
10.8
|
|
|
|
4.85
|
|
|
Virginia
|
|
|
636.9
|
|
|
|
6.0
|
|
|
|
12.4
|
|
|
|
3.8
|
|
|
|
1.95
|
|
|
Maryland
|
|
|
622.2
|
|
|
|
5.9
|
|
|
|
39.9
|
|
|
|
12.3
|
|
|
|
6.41
|
|
|
Washington
|
|
|
309.1
|
|
|
|
2.9
|
|
|
|
2.7
|
|
|
|
0.8
|
|
|
|
0.87
|
|
|
Texas
|
|
|
246.4
|
|
|
|
2.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
All other states (1) (2)
|
|
|
1,187.0
|
|
|
|
11.4
|
|
|
|
44.9
|
|
|
|
13.9
|
|
|
|
3.78
|
|
|
Total
|
|
$
|
10,562.4
|
|
|
|
100.0
|
%
|
|
$
|
324.9
|
|
|
|
100.0
|
%
|
|
|
3.08
|
%
|
|
|
Includes 27 states and Washington, D.C.
|
|
|
Includes Florida with $203.3 million total loans, of which $23.2 million are non-performing loans.
|
At September 30, 2011, the geographic composition of our multi-family and commercial real estate mortgage loan portfolio was 94% in the New York metropolitan area, 3% in Florida, 2% in Pennsylvania and 1% in various other states and the geographic composition of non-performing multi-family and commercial real estate mortgage loans was 93% in the New York metropolitan area and 7% in Florida.
We discontinue accruing interest on loans when they become 90 days delinquent as to their payment due date. In addition, we reverse all previously accrued and uncollected interest through a charge to interest income. While loans are in non-accrual status, interest due is monitored and income is recognized only to the extent cash is received until a return to accrual status is warranted. If all non-accrual loans at September 30, 2011 and 2010 had been performing in accordance with their original terms, we would have recorded interest income, with respect to such loans, of $16.5 million for the nine months ended September 30, 2011 and $18.4 million for the nine months ended September 30, 2010. This compares to actual payments recorded as interest income, with respect to such loans, of $4.7 million for the nine months ended September 30, 2011 and $6.1 million for the nine months ended September 30, 2010.
We may agree to modify the contractual terms of a borrower’s loan. In cases where such modifications represent a concession to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring. Loans modified in a troubled debt restructuring are placed on non-accrual status until we determine that future collection of principal and interest is reasonably assured, which requires that the borrower demonstrate performance according to the restructured terms generally for a period of six months. Loans modified in a troubled debt restructuring which are included in non-accrual loans totaled $36.8 million at September 30, 2011 and $47.5 million at December 31, 2010. Excluded from non-performing assets are restructured loans that have complied with the terms of their restructure agreement for a satisfactory period of time and have, therefore, been returned to accrual status. Restructured accruing loans totaled $64.2 million at September 30, 2011 and $49.2 million at December 31, 2010.
In addition to non-performing loans, we had $185.3 million of potential problem loans at September 30, 2011, compared to $170.5 million at December 31, 2010. Such loans include loans which are 60-89 days delinquent as shown in the following table and certain other internally adversely classified loans.
Delinquent Loans
The following table shows a comparison of delinquent loans at the dates indicated. Delinquent loans are reported based on the number of days the loan payments are past due.
|
|
|
30-59 Days
Past Due
|
|
60-89 Days
Past Due
|
|
90 Days or More
Past Due
|
|
|
|
Number
|
|
|
|
|
Number
|
|
|
|
|
Number
|
|
|
|
|
|
|
of
|
|
|
|
|
of
|
|
|
|
|
of
|
|
|
|
|
(Dollars in Thousands)
|
|
Loans
|
|
Amount
|
|
|
Loans
|
|
Amount
|
|
|
Loans
|
|
Amount
|
|
|
At September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
358
|
|
|
$
|
108,884
|
|
|
|
105
|
|
|
$
|
36,197
|
|
|
|
1,034
|
|
|
$
|
324,881
|
|
|
|
Multi-family
|
|
37
|
|
|
|
29,847
|
|
|
|
10
|
|
|
|
5,869
|
|
|
|
35
|
|
|
|
34,027
|
|
|
|
Commercial real estate
|
|
2
|
|
|
|
512
|
|
|
|
1
|
|
|
|
1,960
|
|
|
|
8
|
|
|
|
10,914
|
|
|
|
Construction
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
4,660
|
|
|
|
Consumer and other loans
|
|
88
|
|
|
|
4,533
|
|
|
|
29
|
|
|
|
697
|
|
|
|
50
|
|
|
|
5,501
|
|
|
|
Total delinquent loans
|
|
485
|
|
|
$
|
143,776
|
|
|
|
145
|
|
|
$
|
44,723
|
|
|
|
1,128
|
|
|
$
|
379,983
|
|
|
|
Delinquent loans to total loans
|
|
|
|
|
|
1.08
|
%
|
|
|
|
|
|
|
0.34
|
%
|
|
|
|
|
|
|
2.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
396
|
|
|
$
|
125,103
|
|
|
|
135
|
|
|
$
|
47,862
|
|
|
|
1,040
|
|
|
$
|
342,315
|
|
|
|
Multi-family
|
|
40
|
|
|
|
33,627
|
|
|
|
7
|
|
|
|
6,056
|
|
|
|
30
|
|
|
|
30,195
|
|
|
|
Commercial real estate
|
|
8
|
|
|
|
2,925
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
6,529
|
|
|
|
Construction
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
6,097
|
|
|
|
Consumer and other loans
|
|
100
|
|
|
|
4,155
|
|
|
|
22
|
|
|
|
421
|
|
|
|
58
|
|
|
|
5,574
|
|
|
|
Total delinquent loans
|
|
544
|
|
|
$
|
165,810
|
|
|
|
164
|
|
|
$
|
54,339
|
|
|
|
1,134
|
|
|
$
|
390,710
|
|
|
|
Delinquent loans to total loans
|
|
|
|
|
|
1.17
|
%
|
|
|
|
|
|
|
0.38
|
%
|
|
|
|
|
|
|
2.75
|
%
|
|
Allowance for Loan Losses
Activity in the allowance for loan losses is summarized as follows:
|
|
|
For the Nine
Months Ended
September 30, 2011
|
|
(In Thousands)
|
|
|
Balance at January 1, 2011
|
|
$
|
201,499
|
|
|
Provision charged to operations
|
|
|
27,000
|
|
|
Charge-offs:
|
|
|
|
|
|
One-to-four family
|
|
|
(50,361
|
)
|
|
Multi-family
|
|
|
(6,696
|
)
|
|
Commercial real estate
|
|
|
(756
|
)
|
|
Construction
|
|
|
(420
|
)
|
|
Consumer and other loans
|
|
|
(1,072
|
)
|
|
Total charge-offs
|
|
|
(59,305
|
)
|
|
Recoveries:
|
|
|
|
|
|
One-to-four family
|
|
|
8,546
|
|
|
Multi-family
|
|
|
7
|
|
|
Construction
|
|
|
495
|
|
|
Consumer and other loans
|
|
|
109
|
|
|
Total recoveries
|
|
|
9,157
|
|
|
Net charge-offs (1)
|
|
|
(50,148
|
)
|
|
Balance at September 30, 2011
|
|
$
|
178,351
|
|
|
|
(1)
|
Net charge-offs include $23.5 million related to one-to-four family reduced documentation mortgage loans and $7.0 million related to certain delinquent and non-performing loans transferred to held-for-sale.
|
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
As a financial institution, the primary component of our market risk is interest rate risk. The objective of our interest rate risk management policy is to maintain an appropriate mix and level of assets, liabilities and off-balance sheet items to enable us to meet our earnings and/or growth objectives, while maintaining specified minimum capital levels as required by our primary banking regulator, in the case of Astoria Federal, and as established by our Board of Directors. We use a variety of analyses to monitor, control and adjust our asset and liability positions, primarily interest rate sensitivity gap analysis, or gap analysis, and net interest income sensitivity analysis. Additional interest rate risk modeling is done by Astoria Federal in conformity with regulatory requirements.
Gap Analysis
Gap analysis measures the difference between the amount of interest-earning assets anticipated to mature or reprice within specific time periods and the amount of interest-bearing liabilities anticipated to mature or reprice within the same time periods. Gap analysis does not indicate the impact of general interest rate movements on our net interest income because the actual repricing dates of various assets and liabilities will differ from our estimates and it does not give consideration to the yields and costs of the assets and liabilities or the projected yields and costs to replace or retain those assets and liabilities. Callable features of certain assets and liabilities, in addition to the foregoing, may also cause actual experience to vary from the analysis.
The following table, referred to as the Gap Table, sets forth the amount of interest-earning assets and interest-bearing liabilities outstanding at September 30, 2011 that we anticipate will reprice or mature in each of the future time periods shown using certain assumptions based on our historical experience and other market-based data available to us. The Gap Table includes $2.15 billion of callable borrowings classified according to their maturity dates, primarily in the more than three years to five years and more than five years categories, which are callable within one year and at various times thereafter. In addition, the Gap Table includes callable securities with an amortized cost of $52.9 million classified according to their maturity dates, in the more than five years category, which are callable within one year and at various times thereafter. The classification of callable borrowings and securities according to their maturity dates is based on our experience with, and expectations of, these types of instruments and the current interest rate environment. As indicated in the Gap Table, our one-year cumulative gap at September 30, 2011 was positive 3.22% compared to positive 5.18% at December 31, 2010. The change in our one-year cumulative gap is primarily due to a decrease in projected mortgage loan and securities repayments within one year at September 30, 2011, compared to December 31, 2010.
|
|
|
At September 30, 2011
|
|
|
|
|
|
More than
|
|
More than
|
|
|
|
|
|
|
|
|
|
One Year
|
|
Three Years
|
|
|
|
|
|
|
|
One Year
|
|
to
|
|
to
|
|
More than
|
|
|
|
(Dollars in Thousands)
|
|
or Less
|
|
Three Years
|
|
Five Years
|
|
Five Years
|
|
Total
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans (1)
|
|
$
|
4,832,300
|
|
|
$
|
4,291,411
|
|
|
$
|
2,952,369
|
|
|
$
|
516,640
|
|
|
$
|
12,592,720
|
|
|
Consumer and other loans (1)
|
|
|
280,243
|
|
|
|
2,619
|
|
|
|
10
|
|
|
|
188
|
|
|
|
283,060
|
|
|
Interest-earning cash accounts
|
|
|
39,453
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,453
|
|
|
Securities available-for-sale
|
|
|
130,724
|
|
|
|
144,309
|
|
|
|
80,079
|
|
|
|
24,665
|
|
|
|
379,777
|
|
|
Securities held-to-maturity
|
|
|
585,849
|
|
|
|
589,502
|
|
|
|
494,197
|
|
|
|
384,344
|
|
|
|
2,053,892
|
|
|
FHLB-NY stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
126,759
|
|
|
|
126,759
|
|
|
Total interest-earning assets
|
|
|
5,868,569
|
|
|
|
5,027,841
|
|
|
|
3,526,655
|
|
|
|
1,052,596
|
|
|
|
15,475,661
|
|
|
Net unamortized purchase
premiums and deferred costs (2)
|
|
|
36,929
|
|
|
|
32,130
|
|
|
|
22,680
|
|
|
|
6,574
|
|
|
|
98,313
|
|
|
Net interest-earning assets (3)
|
|
|
5,905,498
|
|
|
|
5,059,971
|
|
|
|
3,549,335
|
|
|
|
1,059,170
|
|
|
|
15,573,974
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
|
513,014
|
|
|
|
516,294
|
|
|
|
516,294
|
|
|
|
1,215,320
|
|
|
|
2,760,922
|
|
|
Money market
|
|
|
489,941
|
|
|
|
173,994
|
|
|
|
173,994
|
|
|
|
26,324
|
|
|
|
864,253
|
|
|
NOW and demand deposit
|
|
|
98,551
|
|
|
|
197,114
|
|
|
|
197,114
|
|
|
|
1,316,883
|
|
|
|
1,809,662
|
|
|
Liquid CDs
|
|
|
301,221
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
301,221
|
|
|
Certificates of deposit
|
|
|
3,187,243
|
|
|
|
1,189,813
|
|
|
|
1,154,033
|
|
|
|
-
|
|
|
|
5,531,089
|
|
|
Borrowings, net
|
|
|
768,615
|
|
|
|
1,025,000
|
|
|
|
550,000
|
|
|
|
1,678,866
|
|
|
|
4,022,481
|
|
|
Total interest-bearing liabilities
|
|
|
5,358,585
|
|
|
|
3,102,215
|
|
|
|
2,591,435
|
|
|
|
4,237,393
|
|
|
|
15,289,628
|
|
|
Interest sensitivity gap
|
|
|
546,913
|
|
|
|
1,957,756
|
|
|
|
957,900
|
|
|
|
(3,178,223
|
)
|
|
$
|
284,346
|
|
|
Cumulative interest sensitivity gap
|
|
$
|
546,913
|
|
|
$
|
2,504,669
|
|
|
$
|
3,462,569
|
|
|
$
|
284,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative interest sensitivity gap
as a percentage of total assets
|
|
|
3.22
|
%
|
|
|
14.75
|
%
|
|
|
20.40
|
%
|
|
|
1.67
|
%
|
|
|
|
|
|
Cumulative net interest-earning
assets as a percentage of interest-
bearing liabilities
|
|
|
110.21
|
%
|
|
|
129.60
|
%
|
|
|
131.33
|
%
|
|
|
101.86
|
%
|
|
|
|
|
|
(1)
|
Mortgage loans and consumer and other loans include loans held-for-sale and exclude non-performing loans and the allowance for loan losses.
|
|
(2)
|
Net unamortized purchase premiums and deferred costs are prorated.
|
|
(3)
|
Includes securities available-for-sale at amortized cost.
|
Net Interest Income Sensitivity Analysis
In managing interest rate risk, we also use an internal income simulation model for our net interest income sensitivity analyses. These analyses measure changes in projected net interest income over various time periods resulting from hypothetical changes in interest rates. The interest rate scenarios most commonly analyzed reflect gradual and reasonable changes over a specified time period, which is typically one year. The base net interest income projection utilizes similar assumptions as those reflected in the Gap Table, assumes that cash flows are reinvested in similar assets and liabilities and that interest rates as of the reporting date remain constant over the projection period. For each alternative interest rate scenario, corresponding changes in the cash flow and repricing assumptions of each financial instrument are made to determine the impact on net interest income.
We perform analyses of interest rate increases and decreases of up to 300 basis points although changes in interest rates of 200 basis points is a more common and reasonable scenario for analytical purposes. Assuming the entire yield curve was to increase 200 basis points, through quarterly parallel increments of 50 basis points, our projected net interest income for the twelve month period beginning October 1, 2011 would increase by approximately 3.13% from the base projection. At December 31, 2010, in the up 200 basis point scenario, our projected net interest income for the twelve month period beginning January 1, 2011 would have increased by approximately 5.04% from the base projection. The current low interest rate environment prevents us from performing an income simulation for a decline in interest rates of the same magnitude and timing as our rising interest rate simulation, since certain asset yields, liability costs and related indices are below 2.00%. However, assuming the entire yield curve was to decrease 100 basis points, through quarterly parallel decrements of 25 basis points, our projected net interest income for the twelve month period beginning October 1, 2011 would decrease by approximately 4.00% from the base projection. At December 31, 2010, in the down 100 basis point scenario, our projected net interest income for the twelve month period beginning January 1, 2011 would have decreased by approximately 5.24% from the base projection. The down 100 basis point scenarios include some limitations as well since certain indices, yields and costs are already below 1.00%.
Various shortcomings are inherent in both gap analyses and net interest income sensitivity analyses. Certain assumptions may not reflect the manner in which actual yields and costs respond to market changes. Similarly, prepayment estimates and similar assumptions are subjective in nature, involve uncertainties and, therefore, cannot be determined with precision. Changes in interest rates may also affect our operating environment and operating strategies as well as those of our competitors. In addition, certain adjustable rate assets have limitations on the magnitude of rate changes over specified periods of time. Accordingly, although our net interest income sensitivity analyses may provide an indication of our interest rate risk exposure, such analyses are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and our actual results will differ. Additionally, certain assets, liabilities and items of income and expense which may be affected by changes in interest rates, albeit to a much lesser degree, and which do not affect net interest income, are excluded from this analysis. These include income from bank owned life insurance and changes in the fair value of MSR. With respect to these items alone, and assuming the entire yield curve was to increase 200 basis points, through quarterly parallel increments of 50 basis points, our projected net income for the twelve month period beginning October 1, 2011 would increase by approximately $5.2 million. Conversely, assuming the entire yield curve was to decrease 100
b
asis points, through quarterly parallel decrements of 25 basis points, our projected net income for the twelve month period beginning October 1, 2011 would decrease by approximately $2.2 million with respect to these items alone.
For further information regarding our market risk and the limitations of our gap analysis and net interest income sensitivity analysis, see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” included in our 2010 Annual Report on Form 10-K.
ITEM 4.
Controls and Procedures
Monte N. Redman, our President and Chief Executive Officer, and Frank E. Fusco, our Executive Vice President, Treasurer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2011. Based upon their evaluation, they each found that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting that occurred during the three months ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1.
Legal Proceedings
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.
City of New York Notice of Determination
By “Notice of Determination” dated September 14, 2010 and August 26, 2011, the City of New York has notified us of alleged tax deficiencies in the amount of $13.3 million, including interest and penalties, related to our 2006 through 2008 tax years. The deficiencies relate to our operation of two subsidiaries of Astoria Federal, Fidata and AF Mortgage. Fidata is a passive investment company which maintains offices in Connecticut. AF Mortgage is an operating subsidiary through which Astoria Federal engaged in lending activities outside the State of New York. We disagree with the assertion of the tax deficiencies and we filed Petitions for Hearings with the City of New York on December 6, 2010 and October 5, 2011 to oppose the Notices of Determination and to consolidate the hearings. At this time, management believes it is more likely than not that we will succeed in refuting the City of New York’s position, although defense costs may be significant. Accordingly, no liability or reserve has been recognized in our consolidated statement of financial condition at September 30, 2011 with respect to this matter.
No assurance can be given as to whether or to what extent we will be required to pay the amount of the tax deficiencies asserted by the City of New York, whether additional tax will be assessed for years subsequent to 2008, that this matter will not be costly to oppose, that this matter will not have an impact on our financial condition or results of operations or that, ultimately, any such impact will not be material.
Automated Transactions LLC Litigation
On November 20, 2009, an action entitled
Automated Transactions LLC v. Astoria Financial Corporation and Astoria Federal Savings and Loan Association
was commenced in the Southern District Court against us by Automated Transactions LLC, alleging patent infringement involving integrated banking and transaction machines, including automated teller machines, that we utilize. We were served with the summons and complaint in such action on March 2, 2010. The plaintiff also filed a similar suit on the same day against another financial institution and its holding company. The plaintiff seeks unspecified monetary damages and an injunction preventing us from continuing to utilize the allegedly infringing machines. We are vigorously defending this lawsuit, and filed an answer and counterclaims to the plaintiff’s complaint on March 23, 2010, to which the plaintiff filed a reply on April 12, 2010.
On May 18, 2010, the plaintiff filed an amended complaint at the direction of the Southern District Court, containing substantially the same allegations as the original complaint. On May 27, 2010, we moved to dismiss the amended complaint. On March 10, 2011, the Southern District Court entered an order on the record that dismissed all claims against Astoria Financial Corporation but denied the motion to dismiss the claims against Astoria Federal for alleged direct patent infringement. The order also dismissed in part the claims against Astoria Federal for alleged inducement of our customers to violate plaintiff’s patents and for Astoria Federal’s allegedly willful violation of the plaintiff’s patents, allowing claims to continue only for alleged inducement and willful infringement after our receiving notice of the pending suit from plaintiff’s counsel. Based on the Southern District Court’s ruling, on March 31, 2011, we answered the amended complaint substantially denying the allegations of the amended complaint.
On July 22, 2011, we filed a motion to stay the action pending the outcome of an appeal pending before the Circuit Court of the Delaware District Court’s ruling in the IYG action. The IYG action involves the same plaintiff making substantially similar allegations with respect to identical and substantially similar patents as those involved in the action against us. The Delaware District Court granted IYG’s motion for summary judgment. In our motion to stay, we assert that, should the Circuit Court uphold the Delaware District Court’s rulings, the Delaware District Court decision should be binding on the plaintiff in the litigation against us.
We have tendered requests for indemnification from the manufacturer and from the transaction processor utilized with respect to the integrated banking and transaction machines, and we served third party complaints against Metavante Corporation and Diebold, Inc. seeking to enforce our indemnification rights.
An adverse result in this lawsuit may include an award of monetary damages, on-going royalty obligations, and/or may result in a change in our business practice, which could result in a loss of revenue. We cannot at this time estimate the possible loss or range of loss, if any. No assurance can be given at this time that the litigation against us will be resolved amicably, that if this litigation results in an adverse decision that we will be successful in seeking indemnification,
that this litigation will not be costly to defend, that this litigation will not have an impact on our financial condition or results of operations or that, ultimately, any such impact will not be material.
ITEM 1A.
Risk Factors
For a summary of risk factors relevant to our operations, see Part I, Item 1A, “Risk Factors,” in our 2010 Annual Report on Form 10-K and Part II, Item 1A. “Risk Factors,” in our March 31, 2011 and June 30, 2011 Quarterly Reports on Form 10-Q. There are no other material changes in risk factors relevant to our operations since June 30, 2011 except as discussed below.
Declines in the market value of our common stock may have a material effect on the value of our reporting unit which could result in a goodwill impairment charge and adversely affect our results of operations.
At September 30, 2011, the carrying amount of our goodwill totaled $185.2 million. We performed our annual goodwill impairment test on September 30, 2011 and determined there was no goodwill impairment. Due to market volatility during the 2011 third quarter, we experienced a decline in our market capitalization at September 30, 2011. Our market capitalization continues to be less than our total stockholders’ equity at October 31, 2011. We considered this and other factors in our goodwill impairment analyses. No assurance can be given that we will not record an impairment loss on goodwill in a subsequent period. However, our tangible capital ratio and Astoria Federal’s regulatory capital ratios would not be affected by this potential non-cash expense.
Our transition to the OCC as Astoria Federal’s primary banking regulator and the Board of Governors of the Federal Reserve System, or FRB, as our holding company regulator may increase our compliance costs.
On July 21, 2011, the OTS was eliminated and the OCC took over the regulation of all federal savings associations, including Astoria Federal. The FRB also acquired the OTS’s authority over all savings and loan holding companies, including Astoria Financial Corporation, and became the supervisor of all subsidiaries of savings and loan holding companies other than depository institutions. Consequently, we are now subject to regulation, supervision and examination by the OCC and the FRB, rather than the OTS. Additionally, we have been advised by the Consumer Financial Protection Bureau that it will be supervising our compliance with consumer protection laws. As a result of becoming subject to regulation by these three entities and in light of the overall enhanced regulatory scrutiny in our industry, we have decided to enhance various systems and add staff to keep up with the operational and regulatory burden associated with an institution of our size. For example, we have, among other things, established and commenced implementing (a) a comprehensive enterprise risk management program, including the creation of an Enterprise Risk Management Department and an Enterprise Risk Management Committee of the Board of Directors of each of Astoria Federal and Astoria Financial Corporation, and (b) a comprehensive compliance management program, including the creation of a centralized Corporate Compliance Department. These enhancements will result in additional investments in both technology and staffing that are likely to increase our non-interest expense. Moreover, as our new regulators adopt implementing regulations and guidance with respect to their supervision of federal savings banks, we may need to evaluate and modify
various policies and procedures, further enhance our technology and add more staff to ensure continued compliance with this regulatory burden.
Recent OCC guidance regarding mortgage foreclosure processes and an OCC mandated self-assessment may increase our compliance costs and could impact our foreclosure process.
Several of the nation’s largest mortgage loan servicers have experienced highly publicized issues with respect to their foreclosure processes. In light of these issues, on June 30, 2011, the OCC issued supervisory guidance regarding the OCC’s expectations for the oversight and management of mortgage foreclosure activities by banks engaged in mortgage servicing, such as Astoria Federal, to ensure that mortgage servicers comply with foreclosure laws, conduct foreclosure processing in a safe and sound manner and establish responsible business practices that provide accountability and appropriate treatment of borrowers in the foreclosure process. The OCC’s supervisory guidance requires that all banks supervised by the OCC conduct a self-assessment of foreclosure management policies, including compliance with legal requirements, testing and file reviews and to take immediate corrective action with respect to any identified weaknesses in their foreclosure processes. As part of the self-assessment we are also required to determine if such weaknesses resulted in any financial harm to borrowers and provide remediation where appropriate. Compliance with the OCC’s supervisory guidance and the mandated self-assessment is likely to increase our non-interest expense. In addition, while we do not believe that there are any material weaknesses in our foreclosure process or that our borrowers experienced any financial harm, we may be required to enhance our policies and procedures to meet heightened standards and restrictions not currently set forth in any statutory laws or regulations.
Multi-family and commercial real estate lending may expose us to increased lending risks.
While we are primarily a one-to-four family mortgage lender, we also originate multi-family and commercial real estate loans. At September 30, 2011, $1.69 billion, or 13%, of our total loan portfolio consisted of multi-family loans and $692.8 million, or 5%, of our total loan portfolio consisted of commercial real estate loans. Multi-family and commercial real estate loans generally involve a greater degree of credit risk than one-to-four family mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by multi-family properties and commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulation. At September 30, 2011, non-performing multi-family and commercial real estate loans totaled $44.9 million, or 1.89% of our total portfolio of multi-family and commercial real estate loans.
We have originated multi-family and commercial real estate loans in areas other than the New York metropolitan area. At September 30, 2011, loans in states other than New York, New Jersey and Connecticut comprised 6% of the total multi-family and commercial real estate loan portfolio. We could be subject to additional risks with respect to multi-family and commercial real estate lending in areas other than the New York metropolitan area since we have less experience in these areas with this type of lending and less direct oversight of the local market and the borrowers’ operations.
We did not originate any multi-family and commercial real estate loans during 2010. However, we resumed originations in the New York City multi-family mortgage market in the 2011 third quarter.
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
During the nine months ended September 30, 2011, there were no repurchases of our common stock. Our twelfth stock repurchase plan, approved by our Board of Directors on April 18, 2007, authorized the purchase of 10,000,000 shares, or approximately 10% of our common stock then outstanding, in open-market or privately negotiated transactions. At September 30, 2011, a maximum of 8,107,300 shares may yet be purchased under this plan, however, we are not currently repurchasing additional shares of our common stock and have not since the 2008 third quarter.
ITEM 3.
Defaults Upon Senior Securities
Not applicable.
ITEM 4.
(Removed and Reserved)
ITEM 5.
Other Information
Not applicable.
ITEM 6.
Exhibits
See Index of Exhibits on page 72.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Astoria Financial Corporation
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Dated:
November 4, 2011
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By:
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s/
Monte N. Redman
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Monte N. Redman
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President and Chief Executive Officer
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Dated:
November 4, 2011
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By:
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/s/
Frank E. Fusco
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Frank E. Fusco
Executive Vice President,
Treasurer and Chief Financial Officer
(Principal Accounting Officer)
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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX OF EXHIBITS
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Exhibit No.
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Identification of Exhibit
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31.1
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Certifications of Chief Executive Officer.
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31.2
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Certifications of Chief Financial Officer.
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32.1
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Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC rules, this exhibit will not be deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.
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101.INS
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XBRL Instance Document (1)
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101.SCH
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XBRL Taxonomy Extension Schema Document (1)
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document (1)
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document (1)
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document (1)
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101.DEF
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XBRL Taxonomy Extension Definitions Linkbase Document (1)
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(1)
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Pursuant to SEC rules, these interactive data file exhibits shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Exchange Act or otherwise subject to the liability of those sections.
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