Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. ASTORIA FINANCIAL CORP (910322) 10-Q published on Aug 04, 2017 at 8:45 am
Reporting Period: Jun 29, 2017
On June 6, 2017, Astoria, Sterling and the plaintiffs in the Class Actions entered into a memorandum of understanding, or the MOU, which provides for the settlement of the Class Actions. The MOU contemplates, among other things, that Astoria would make certain supplemental disclosures relating to the Sterling Merger. Although the defendants deny the allegations made in the Class Actions and believe that no supplemental disclosure is required under applicable laws, in order to minimize the distraction, burden, risk and expense of further litigation and in order to avoid any possible delay in the closing of the proposed Sterling Merger, Astoria agreed to make such supplemental disclosures pursuant to the terms of the MOU, which supplemental disclosures were made in Exhibit 99.1 to the Current Report on Form 8-K filed by Astoria with the SEC on June 7, 2017. Furthermore, pursuant to the MOU, plaintiffs in the Minzer Action, the Parshall Action and the Jenkins Action voluntarily dismissed their respective actions without prejudice.
In addition to cash provided by principal and interest payments on loans and securities, our other sources of funds include cash provided by operating activities, deposits and borrowings. Net cash provided by operating activities totaled $44.9 million for the six months ended June 30, 2017 and $45.1 million for the six months ended June 30, 2016. Deposits increased $12.5 million during the six months ended June 30, 2017 and
decreased $154.9 million during the six months ended June 30, 2016. The increase for the six months ended June 30, 2017 was due to a net increase in core deposits, partially offset by a decrease in certificates of deposit. The decrease in deposits for the six months ended June 30, 2016 was due to a decrease in certificates of deposit, partially offset by a net increase in core deposits. During the six months ended June 30, 2017 and 2016, we continued to allow high cost certificates of deposit to run off. Total deposits included business deposits of $1.13 billion at June 30, 2017, an increase of $43.8 million since December 31, 2016. At June 30, 2017, core deposits represented 83% of total deposits. We have continued our efforts to reposition the liability mix of our balance sheet, reducing the balance of high cost certificates of deposit and increasing the balance of low cost core deposits. Net borrowings decreased $456.8 million during the six months ended June 30, 2017 compared to an increase of $54.3 million during the six months ended June 30, 2016. The decrease in net borrowings for the six months ended June 30, 2017 was primarily due to a decrease in FHLB-NY advances. During the quarter, we repaid at maturity our $250.0 million 5.000% Senior Notes due June 19, 2017. The repayment was funded in part with the net proceeds of the issuance of $200.0 million 3.500% Senior Notes due June 8, 2020, with the remainder of the repayment funded with cash on hand.
Additional sources of liquidity at the holding company level have included public and private issuances of debt and equity securities into the capital markets. Holding company debt obligations are included in other borrowings. We have a shelf registration statement on Form S-3 on file with the SEC that we renewed in the 2015 second quarter, which 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, depositary shares, senior notes, subordinated notes, warrants to purchase common stock or preferred stock and units consisting of one or more of the foregoing. This 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, our ability and any decision to do so is subject to market conditions and our capital needs. 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 Bank’s ability to pay dividends to Astoria Financial Corporation, our credit profile and ratings and our business model. In addition, pursuant to the terms of the Sterling Merger Agreement, we are limited in our ability to issue or sell our capital stock without the consent of Sterling. Sterling has agreed not to unreasonably withhold any such consent. On June 8, 2017, we sold $200.0 million aggregate principal amount of senior unsecured notes due June 8, 2020 bearing a fixed rate of 3.500%.
ended June 30, 2017 was 2.26%, compared to 2.28% for the three months ended June 30, 2016 and was 2.28% for the six months ended June 30, 2017, compared to 2.29% for the six months ended June 30, 2016. The net interest margin was 2.35% for the three months ended June 30, 2017, compared to 2.36% for the three months ended June 30, 2016 and was 2.36% for the six months ended June 30, 2017, unchanged from the six months ended June 30, 2016. The decreases in net interest income were primarily due to declines in interest income, partially offset by declines in interest expense. The decrease in interest income for the 2017 second quarter, compared to the 2016 second quarter, reflected a decline in the average balance of our residential mortgage loan and multi-family and commercial real estate mortgage loan portfolios as well as a decline in the average yield on multi-family and commercial real estate mortgage loans, partially offset by an increase in the average yield on residential mortgage loans and an increase in the average balance of mortgage-backed and other securities. The decrease in interest expense for the 2017 second quarter, compared to the corresponding period one year ago, was primarily due to declines in the average balance of borrowings and certificates of deposit, partially offset by an increase in both the average cost of borrowings and certificates of deposit. The decrease in interest income for the first half of 2017, compared to the first half of 2016, reflected a significant decline in the average balance of our residential mortgage loan portfolio and our multi-family and commercial real estate mortgage loan portfolio, as well as a decline in the average yield on multi-family and commercial real estate mortgage loans, partially offset by an increase in the average yield on residential mortgage loans and an increase in the average balances of mortgage-backed and other securities. The decrease in interest expense for the first half of 2017, compared to the corresponding period in 2016, was primarily due to a decline in the average balance of borrowings, coupled with a decrease in the average balance of certificates of deposit, partially offset by an increase in the average balance of core deposits and an increase in the average cost of borrowings. The average balance of net interest-earning assets increased $51.4 million to $1.23 billion for the three months ended June 30, 2017, from $1.18 billion for the three months ended June 30, 2016, and increased $51.0 million to $1.21 billion for the six months ended June 30, 2017, from $1.16 billion for the six months ended June 30, 2016.
We discontinue accruing interest on loans when they become 90 days past due as to their payment due date and at the time a loan is deemed a TDR. We may also discontinue accruing interest on certain other loans because of deterioration in financial or other conditions of the borrower. 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, presuming we deem the remaining recorded investment in the loan to be fully collectible, income is recognized only to the extent cash is received until a return to accrual status is warranted. In some circumstances, mortgage loans will reach their maturity date with the borrower having an intent to refinance. If such loans become 30 days past maturity, we continue to consider such loans as current to the extent such borrowers continue to make monthly payments to us consistent with the original terms of the loan, and where we do not have a reason to believe that any loss will be incurred on the loan, in which case we continue to accrue interest. In other cases, we may defer recognition of income until the principal balance has been recovered. Should a loan reach 60 days past maturity we then classify such loans as past due. At June 30, 2017, there were no loans 30 days past maturity and there was one commercial real estate mortgage loan for $1.1 million that was 60 days past maturity. At December 31, 2016, there was one multi-family mortgage loan for $1.2 million that was 30 days past maturity, where the borrower had the intent and ability to refinance, classified as current. There were no loans 60 days past maturity at December 31, 2016. If all non-accrual loans at June 30, 2017 and 2016 had been performing in accordance with their original terms, we would have recorded interest income, with respect to such loans, of $3.0 million for the six months ended June 30, 2017 and $3.1 million for the six months ended June 30, 2016. Actual payments recorded as interest income, with respect to such loans, totaled $1.1 million for the six months ended June 30, 2017 and $1.3 million for the six months ended June 30, 2016.