Astoria Financial Corporation Announces Second Quarter EPS of $0.49

LAKE SUCCESS, N.Y., July 20 /PRNewswire-FirstCall/ -- Astoria Financial Corporation ("Astoria"), the holding company for Astoria Federal Savings and Loan Association ("Astoria Federal"), today reported net income of $47.8 million, or $0.49 diluted earnings per share ("EPS"), for the quarter ended June 30, 2006, compared to $57.4 million, or $0.55 EPS, for the 2005 second quarter. For the 2006 second quarter, annualized returns on average equity, average tangible equity and average assets were 14.94%, 17.48% and 0.87%, respectively, compared to 16.66%, 19.24% and 1.00%, respectively, for the comparable 2005 period.

For the six months ended June 30, 2006, net income totaled $96.7 million, or $0.98 EPS, compared to $116.9 million, or $1.12 EPS, for the comparable 2005 period. For the six months ended June 30, 2006, annualized returns on average equity, average tangible equity and average assets were 14.87%, 17.34% and 0.87%, respectively, compared to 17.02%, 19.68% and 1.01%, respectively, for the comparable 2005 period.

First Half 2006 Balance Sheet Highlights: - Deposits increased $282 million, or 4% annualized -- Core deposits(1) increased $195 million, or 7% annualized - Loan portfolio increased $241 million, or 3% annualized -- Multifamily/Commercial Real Estate ("CRE") loan portfolio increased $184 million, or 9% annualized - Securities portfolio decreased $701 million, or 21% annualized - Borrowings decreased $735 million, or 19% annualized - Repurchased 4.7 million shares

Commenting on the 2006 second quarter results, George L. Engelke, Jr., Chairman, President and Chief Executive Officer of Astoria, noted, "The effect of seventeen interest rate increases by the Federal Reserve over the past two years has resulted in a prolonged flat to inverted yield curve environment which, in addition to putting pressure on our net interest margin and earnings, continues to limit profitable growth opportunities. While we have been somewhat successful in mitigating the negative impact on our margin through reductions of our securities and borrowings, a sustained flat to inverted yield curve will continue to exert downward pressure on our margin and earnings. During this challenging period we will continue our strategy of shrinking the balance sheet by reducing the securities portfolio and borrowings, growing loans and deposits and repurchasing our stock."

Board Declares Quarterly Cash Dividend of $0.24 Per Share

The Board of Directors of the Company, at their July 19, 2006 meeting, declared a quarterly cash dividend of $0.24 per common share. The dividend is payable on September 1, 2006 to shareholders of record as of August 15, 2006. This is the forty-fifth consecutive quarterly cash dividend declared by the Company.

Eleventh Stock Repurchase Program Continues

During the second quarter, Astoria repurchased 2.2 million shares of its common stock at an average cost of $30.58 per share. During the six month period ended June 30, 2006 Astoria repurchased a total of 4.7 million shares, completing its tenth stock repurchase program and commencing its eleventh stock repurchase program in the first quarter. Under the current stock repurchase program, 5.6 million shares of the 10 million shares authorized remain available for repurchase.

Second Quarter and Six Month Earnings Summary

Net interest income for the quarter ended June 30, 2006 totaled $101.3 million compared to $111.5 million for the 2006 first quarter and $121.3 million for the second quarter a year ago. For the six months ended June 30, 2006, net interest income totaled $212.9 million compared to $246.6 million for the comparable 2005 six month period.

Astoria's net interest margin for the quarter ended June 30, 2006 declined to 1.92% from 2.10% for the previous quarter and 2.21% for the quarter ended June 30, 2005, primarily due to the cost of interest-bearing liabilities rising more rapidly than the yield on interest-earning assets. The Company's core interest rate spread (the difference between the yield on loans and the cost of deposits) for the 2006 second quarter declined to 2.63% from 2.84% for the 2006 first quarter and 3.09% for the second quarter a year ago.

Non-interest income for the quarter ended June 30, 2006 increased $3.2 million to $25.7 million from $22.5 million for the 2005 second quarter. The increase is primarily due to an increase in mortgage banking income, net, primarily due to a $1.3 million recovery in the mortgage servicing rights ("MSR") valuation allowance in the 2006 second quarter compared to a $2.5 million MSR impairment charge in the 2005 second quarter.

For the six months ended June 30, 2006, non-interest income totaled $44.6 million compared to $47.3 million for the comparable 2005 period. The decline was primarily due to a $5.5 million, pre-tax, charge related to the termination of interest rate swap agreements in the 2006 first quarter, partially offset by increases in mortgage banking income, net, of $2.2 million and customer service and other loan fees of $1.3 million.

The components of mortgage banking income (loss), net, which is included in non-interest income, are detailed below:

(Dollars in millions) 2Q06 2Q05 1H06 1H05 Loan servicing fees $ 1.1 $ 1.3 $ 2.3 $ 2.6 Amortization of MSR (0.9) (1.3) (1.9) (2.7) MSR valuation adjustments 1.3 (2.5) 2.0 (0.1) Net gain on sale of loans 0.6 0.9 1.2 1.6 Mortgage banking income (loss), net $ 2.1 $(1.6) $ 3.6 $ 1.4

General and administrative expense ("G&A") for the quarter ended June 30, 2006 declined $2.4 million to $55.2 million from $57.6 million for the comparable 2005 period due primarily to lower compensation and benefit expenses and lower goodwill litigation expense (included in other G&A expense). On a linked quarter basis, G&A declined $1.1 million, primarily due to reduced pension and incentive compensation accruals.

For the six months ended June 30, 2006, G&A declined $6.6 million to $111.5 million from $118.1 million for the comparable 2005 period. The decrease was primarily due to a $4.3 million decrease in goodwill litigation expense, a $1.9 million decrease in advertising expense, a $1.9 million decrease in compensation and benefits expense, partially offset by a $1.3 million increase in occupancy, equipment and systems expense.

Balance Sheet Summary

Due to the continued flat to inverted yield curve during the second quarter, spread availability continued to narrow. Accordingly, we continued to reduce our balance sheet through the reduction of non-core business activities. Total securities for the quarter ended June 30, 2006 declined $356.5 million, or 23% annualized, to $5.9 billion at June 30, 2006, representing 27% of total assets, of which $1.6 billion, or 8% of total assets, are categorized as available-for-sale. Borrowings declined in the second quarter of 2006 by $391.8 million, or 21% annualized, to $7.2 billion at June 30, 2006, representing 33% of total assets.

For the six months ended June 30, 2006 total securities declined $701.6 million, or 21% annualized, and borrowings declined $734.9 million, or 19% annualized. Total assets declined $376.5 million from March 31, 2006 and $518.8 million from December 31, 2005 and total $21.9 billion at June 30, 2006.

Key balance sheet highlights, reflecting the improvement in the quality of the Company's balance sheet since December 31, 1999, follow:

(Dollars in % Change millions) 12/31/99 12/31/01 12/31/03 12/31/05 06/30/06 12/31/99- 06/30/06 Assets $22,700 $22,672 $22,462 $22,380 $21,861 . 4% Loans $10,286 $12,167 $12,687 $14,392 $14,633 + 42% Securities $10,763 $ 8,013 $ 8,448 $ 6,572 $ 5,871 . 45% Deposits $ 9,555 $10,904 $11,187 $12,810 $13,092 + 37% Borrowings $11,528 $ 9,826 $ 9,632 $ 7,938 $ 7,203 . 38%

The following table illustrates this improvement on an outstanding per share basis:

Amount per share 12/31/99 12/31/01 12/31/03 12/31/05 06/30/06 % Change CAGR Loans $ 66.28 $ 89.36 $107.51 $137.11 $144.80 118% 13% Deposits $ 61.57 $ 80.09 $ 94.80 $122.04 $129.55 110% 12%

During the 2006 second quarter, the 1-4 family mortgage loan portfolio decreased slightly and totaled $9.8 billion at June 30, 2006. For the quarter ended June 30, 2006, 1-4 family loan originations and purchases totaled $554.3 million compared to $707.1 million for the 2005 second quarter. Of the 2006 second quarter production, 78% consisted of 3/1 and 5/1 adjustable rate mortgage loans.

For the six months ended June 30, 2006, the 1-4 family mortgage loan portfolio increased $66.1 million. For the six month period ended June 30, 2006, 1-4 family loan originations and purchases totaled $1.1 billion compared to $1.4 billion in the year-ago six month period.

During the 2006 second quarter, the multifamily and CRE loan portfolio increased $72.5 million, or 7% annualized, to $4.1 billion, or 28% of total loans, at June 30, 2006. Multifamily and CRE loan originations totaled $183.7 million for the 2006 second quarter compared to $241.9 million for the comparable 2005 period. The average loan-to-value ratio of the multifamily and CRE loan portfolio continues to be less than 65%, based on current principal balance and original appraised value, and the average loan balance is less than $1 million.

For the six month period ended June 30, 2006, the multifamily and CRE loan portfolio increased $184.4 million, or 9% annualized. Multifamily and CRE loan originations totaled $401.1 million for the 2006 six month period compared to $498.5 million in the year-ago six month period.

At June 30, 2006, non-performing loans totaled $54.3 million, or 0.25% of total assets, compared to $50.0 million, or 0.23% of total assets, at March 31, 2006. Net charge-offs for the quarter and six months ended June 30, 2006 totaled $80,000 and $96,000, respectively, or an annualized rate of less than one basis point of the average total loans outstanding for each period. The ratio of the allowance for loan losses to non-performing loans at June 30, 2006 was 149%.

Deposits for the second quarter increased $103.3 million to $13.1 billion at June 30, 2006, primarily due to an increase in Liquid CD accounts, which increased core deposits $101.2 million to $5.5 billion with an average cost of 1.05%. During the 2006 second quarter, our efforts to extend deposit liabilities resulted in $1.8 billion of non-Liquid CDs issued or repriced at a weighted average rate of 4.83% with a weighted average maturity of 13 months.

For the six months ended June 30, 2006, deposits increased $281.8 million, or 4% annualized, due primarily to an increase in core deposits, primarily Liquid CD accounts. In addition, for the six months ended June 30, 2006, $3.2 billion of non-Liquid CDs were issued or repriced at a weighted average rate of 4.65% with a weighted average maturity of 12 months.

Stockholders' equity was $1.3 billion, or 5.80% of total assets at June 30, 2006. Astoria Federal continues to maintain capital ratios in excess of regulatory requirements with core, tangible and risk-based capital ratios of 6.53%, 6.53% and 12.22%, respectively, at June 30, 2006.

Future Outlook

Commenting on the outlook for the second half of 2006, Mr. Engelke stated, "The operating environment continues to remain challenging as a result of rising short term interest rates and a continued flat to inverted yield curve which will result in a slightly lower net interest margin for the year than previously forecast. We expect to continue our strategy of shrinking the balance sheet through reductions in the securities portfolio and borrowings through normal cash flow, while we emphasize deposit and loan growth, all of which will continue to improve the quality of both the balance sheet and earnings. As we reduce the size of the balance sheet, we will continue to focus on the repurchase of our stock as a very desirable use of capital. This strategy should better position us to take advantage of more profitable asset growth opportunities when the yield curve steepens."

Astoria Financial Corporation, the holding company for Astoria Federal Savings and Loan Association, with assets of $21.9 billion is the sixth largest thrift institution in the United States. Established in 1888, Astoria Federal is the largest thrift depository headquartered in New York with deposits of $13.1 billion and embraces its philosophy of Putting people first by providing the customers and local communities it serves with quality financial products and services through 86 convenient banking office locations and multiple delivery channels, including its enhanced website, http://www.astoriafederal.com/. Astoria Federal commands the fourth largest deposit market share in the attractive Long Island market, which includes Brooklyn, Queens, Nassau, and Suffolk counties with a population exceeding that of 38 individual states. Astoria Federal originates mortgage loans through its banking offices and loan production offices in New York, an extensive broker network covering twenty-four states, primarily the East Coast, and the District of Columbia, and through correspondent relationships covering forty- four states and the District of Columbia.

Earnings Conference Call July 20, 2006 at 3:30 p.m. (ET)

The Company, as previously announced, indicated that Mr. Engelke will host an earnings conference call Thursday afternoon, July 20, 2006 at 3:30 p.m. (ET). The toll-free dial-in number is (800) 967-7140.

A telephone replay will be available on July 20, 2006 from 7:00 p.m. (ET) through Friday, July 28, 2006, 11:59 p.m. (ET). The replay number is (888) 203-1112, passcode: 4153753. The conference call will also be simultaneously webcast on the Company's website http://www.astoriafederal.com/ and archived for one year.

Forward Looking Statements

This document contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by the use of such words as "anticipate," "believe," "could," "estimate," "expect," "intend," "outlook," "plan," "potential," "predict," "project," "should," "will," "would," and similar terms and phrases, including references to assumptions.

Forward-looking statements are based on various assumptions and analyses made by us in light of our management's experience and its perception of historical trends, current conditions and expected future developments, as well as other factors 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: the timing and occurrence or non- occurrence of events may be subject to circumstances beyond our control; there may be increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment may reduce interest margins or affect the value of our investments; changes in deposit flows, loan demand or real estate values may adversely affect our business; changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently; general economic conditions, either nationally or locally in some or all of the areas in which we do business, or conditions in the securities markets or the banking industry may be less favorable than we currently anticipate; legislative or regulatory changes may adversely affect our business; applicable technological changes may be more difficult or expensive than we anticipate; success or consummation of new business initiatives may be more difficult or expensive than we anticipate; or litigation or matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than we anticipate. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.

(1) Core deposits include savings, money market, checking and Liquid CD accounts. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In Thousands, Except Share Data) At At June 30, December 31, 2006 2005 ASSETS Cash and due from banks $ 139,330 $ 169,234 Repurchase agreements 148,570 182,803 Securities available-for-sale 1,646,866 1,841,351 Securities held-to-maturity (fair value of $4,059,226 and $4,627,013, respectively) 4,223,867 4,730,953 Federal Home Loan Bank of New York stock, at cost 137,355 145,247 Loans held-for-sale, net 16,549 23,651 Loans receivable: Mortgage loans, net 14,154,518 13,879,804 Consumer and other loans, net 478,094 512,489 14,632,612 14,392,293 Allowance for loan losses (81,063) (81,159) Total loans receivable, net 14,551,549 14,311,134 Mortgage servicing rights, net 17,246 16,502 Accrued interest receivable 76,973 80,318 Premises and equipment, net 148,511 151,494 Goodwill 185,151 185,151 Bank owned life insurance 382,176 382,613 Other assets 187,332 159,820 TOTAL ASSETS $21,861,475 $22,380,271 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $13,092,232 $12,810,455 Reverse repurchase agreements 5,180,000 5,780,000 Federal Home Loan Bank of New York advances 1,587,000 1,724,000 Other borrowings, net 435,662 433,526 Mortgage escrow funds 143,056 124,929 Accrued expenses and other liabilities 155,390 157,134 TOTAL LIABILITIES 20,593,340 21,030,044 Stockholders' equity: Preferred stock, $1.00 par value; 5,000,000 shares authorized: Series A (1,800,000 shares authorized and - 0 - shares issued and outstanding) - - Series B (2,000,000 shares authorized and - 0 - shares issued and outstanding) - - Common stock, $.01 par value; (200,000,000 shares authorized; 166,494,888 shares issued; and 101,055,435 and 104,967,280 shares outstanding, respectively) 1,665 1,665 Additional paid-in capital 834,794 824,102 Retained earnings 1,820,876 1,774,924 Treasury stock (65,439,453 and 61,527,608 shares, at cost, respectively) (1,296,676) (1,171,604) Accumulated other comprehensive loss (69,418) (49,536) Unallocated common stock held by ESOP (6,306,603 and 6,465,273 shares, respectively) (23,106) (23,688) Deferred compensation - (5,636) TOTAL STOCKHOLDERS' EQUITY 1,268,135 1,350,227 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $21,861,475 $22,380,271 CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Share Data) For the Three For the Six Months Ended Months Ended June 30, June 30, 2006 2005 2006 2005 Interest income: Mortgage loans: One-to-four family $125,606 $112,898 $250,491 $224,480 Multi-family, commercial real estate and construction 63,986 58,300 126,245 116,496 Consumer and other loans 8,972 7,475 17,819 14,256 Mortgage-backed and other securities 68,532 88,526 140,427 182,448 Repurchase agreements 2,296 1,361 3,939 2,810 Federal Home Loan Bank of New York stock 1,797 1,650 3,486 2,823 Total interest income 271,189 270,210 542,407 543,313 Interest expense: Deposits 90,549 67,065 173,254 132,025 Borrowings 79,324 81,798 156,291 164,728 Total interest expense 169,873 148,863 329,545 296,753 Net interest income 101,316 121,347 212,862 246,560 Provision for loan losses - - - - Net interest income after provision for loan losses 101,316 121,347 212,862 246,560 Non-interest income: Customer service fees 16,440 16,305 33,038 31,251 Other loan fees 962 1,082 1,772 2,246 Mortgage banking income (loss), net 2,147 (1,582) 3,629 1,364 Income from bank owned life insurance 4,031 4,190 8,106 8,365 Other 2,147 2,531 (1,921) 4,042 Total non-interest income 25,727 22,526 44,624 47,268 Non-interest expense: General and administrative: Compensation and benefits 28,528 29,967 58,839 60,757 Occupancy, equipment and systems 16,297 15,787 33,105 31,812 Federal deposit insurance premiums 415 447 849 895 Advertising 1,902 1,870 3,829 5,775 Other 8,077 9,492 14,906 18,836 Total non-interest expense 55,219 57,563 111,528 118,075 Income before income tax expense 71,824 86,310 145,958 175,753 Income tax expense 24,061 28,914 49,261 58,878 Net income $ 47,763 $ 57,396 $ 96,697 $116,875 Basic earnings per common share $ 0.50 $ 0.56 $ 1.00 $ 1.14 Diluted earnings per common share $ 0.49 $ 0.55 $ 0.98 $ 1.12 Basic weighted average common shares 95,477,528 102,253,984 96,386,742 102,704,734 Diluted weighted average common and common equivalent shares 98,059,723 104,184,538 98,974,405 104,568,500 SELECTED FINANCIAL RATIOS AND OTHER DATA For the At or For the Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Selected Returns and Financial Ratios (annualized) Return on average stockholders' equity 14.94 % 16.66 % 14.87 % 17.02 % Return on average tangible stockholders' equity(1) 17.48 19.24 17.34 19.68 Return on average assets 0.87 1.00 0.87 1.01 General and administrative expense to average assets 1.00 1.00 1.01 1.02 Efficiency ratio (2) 43.46 40.01 43.31 40.19 Net interest rate spread (3) 1.82 2.12 1.91 2.14 Net interest margin (4) 1.92 2.21 2.01 2.22 Selected Non-GAAP Returns and Financial Ratios (annualized) (5) Non-GAAP return on average stockholders' equity 15.43 % 17.02 % Non-GAAP return on average tangible stockholders' equity (1) 17.99 19.68 Non-GAAP return on average assets 0.91 1.01 Non-GAAP efficiency ratio (2) 42.42 40.19 Asset Quality Data (dollars in thousands) Non-performing loans/ total loans 0.37 % 0.21 % Non-performing loans/ total assets 0.25 0.13 Non-performing assets/ total assets 0.25 0.13 Allowance for loan losses/ non-performing loans 149.31 287.86 Allowance for loan losses/ non-accrual loans 150.81 308.11 Allowance for loan losses/ total loans 0.55 0.60 Net charge-offs to average loans outstanding (annualized) 0.00 % 0.01 % 0.00 0.00 Non-performing assets $55,361 $30,080 Non-performing loans 54,290 28,666 Loans 90 days past maturity but still accruing interest 537 1,884 Non-accrual loans 53,753 26,782 Net charge-offs $ 80 $ 211 96 239 Capital Ratios (Astoria Federal) Tangible 6.53 % 6.71 % Core 6.53 6.71 Risk-based 12.22 13.33 Other Data Cash dividends paid per common share $ 0.24 $ 0.20 $ 0.48 $ 0.40 Dividend payout ratio 48.98 % 36.36 % 48.98 % 35.71 % Book value per share (6) $13.38 $13.71 Tangible book value per share (7) 11.43 11.88 Average equity/average assets 5.81 % 5.98 % 5.88 % 5.91 % Mortgage loans serviced for others (in thousands) $1,430,746 $1,605,071 Full time equivalent employees 1,635 1,864 (1) Average tangible stockholders' equity represents average stockholders' equity less average goodwill. (2) The efficiency ratio represents general and administrative expense divided by the sum of net interest income plus non-interest income. (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. (5) The information presented for the six months ended June 30, 2006 represents pro forma calculations which are not in conformity with U.S. generally accepted accounting principles, or GAAP. The 2006 information excludes the $3.6 million, after tax, ($5.5 million, before tax) charge for the termination of our interest rate swap agreements recorded in the 2006 first quarter. See page 12 for a reconciliation of GAAP net income to non-GAAP earnings for the six months ended June 30, 2006. (6) Book value per share represents stockholders' equity divided by outstanding shares, excluding unallocated Employee Stock Ownership Plan, or ESOP, shares. (7) Tangible book value per share represents stockholders' equity less goodwill divided by outstanding shares, excluding unallocated ESOP shares. AVERAGE BALANCE SHEETS (Dollars in Thousands) For the Three Months Ended June 30, 2006 Average Average Yield/ Balance Interest Cost (Annualized) Assets: Interest-earning assets: Mortgage loans (1): One-to-four family $ 9,920,003 $125,606 5.06 % Multi-family, commercial real estate and construction 4,214,459 63,986 6.07 Consumer and other loans (1) 490,463 8,972 7.32 Total loans 14,624,925 198,564 5.43 Mortgage-backed and other securities (2) 6,099,829 68,532 4.49 Repurchase agreements 189,049 2,296 4.86 Federal Home Loan Bank stock 142,884 1,797 5.03 Total interest-earning assets 21,056,687 271,189 5.15 Goodwill 185,151 Other non-interest-earning assets 778,676 Total assets $22,020,514 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings $ 2,396,537 2,405 0.40 Money market 563,782 1,381 0.98 NOW and demand deposit 1,540,556 224 0.06 Liquid certificates of deposit 966,457 10,397 4.30 Total core deposits 5,467,332 14,407 1.05 Certificates of deposit 7,485,159 76,142 4.07 Total deposits 12,952,491 90,549 2.80 Borrowings 7,433,642 79,324 4.27 Total interest-bearing liabilities 20,386,133 169,873 3.33 Non-interest-bearing liabilities 355,948 Total liabilities 20,742,081 Stockholders' equity 1,278,433 Total liabilities and stockholders' equity $22,020,514 Net interest income/net interest rate spread $101,316 1.82 % Net interest-earning assets/net interest margin $ 670,554 1.92 % Ratio of interest-earning assets to interest-bearing liabilities 1.03x For the Three Months Ended June 30, 2005 Average Average Yield/ Balance Interest Cost (Annualized) Assets: Interest-earning assets: Mortgage loans (1): One-to-four family $ 9,342,312 $112,898 4.83 % Multi-family, commercial real estate and construction 3,827,458 58,300 6.09 Consumer and other loans (1) 529,679 7,475 5.64 Total loans 13,699,449 178,673 5.22 Mortgage-backed and other securities (2) 7,997,687 88,526 4.43 Repurchase agreements 189,058 1,361 2.88 Federal Home Loan Bank stock 126,518 1,650 5.22 Total interest-earning assets 22,012,712 270,210 4.91 Goodwill 185,151 Other non-interest-earning assets 851,531 Total assets $23,049,394 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings $ 2,827,699 2,831 0.40 Money market 848,457 2,037 0.96 NOW and demand deposit 1,597,270 235 0.06 Liquid certificates of deposit 291,669 1,872 2.57 Total core deposits 5,565,095 6,975 0.50 Certificates of deposit 7,004,979 60,090 3.43 Total deposits 12,570,074 67,065 2.13 Borrowings 8,757,467 81,798 3.74 Total interest-bearing liabilities 21,327,541 148,863 2.79 Non-interest-bearing liabilities 343,422 Total liabilities 21,670,963 Stockholders' equity 1,378,431 Total liabilities and stockholders' equity $23,049,394 Net interest income/net interest rate spread $121,347 2.12 % Net interest-earning assets/net interest margin $ 685,171 2.21 % Ratio of interest-earning assets to interest-bearing liabilities 1.03x (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. AVERAGE BALANCE SHEETS (Dollars in Thousands) For the Six Months Ended June 30, 2006 Average Average Yield/ Balance Interest Cost (Annualized) Assets: Interest-earning assets: Mortgage loans (1): One-to-four family $ 9,905,279 $250,491 5.06 % Multi-family, commercial real estate and construction 4,153,353 126,245 6.08 Consumer and other loans (1) 498,280 17,819 7.15 Total loans 14,556,912 394,555 5.42 Mortgage-backed and other securities (2) 6,263,198 140,427 4.48 Repurchase agreements 170,104 3,939 4.63 Federal Home Loan Bank stock 140,855 3,486 4.95 Total interest-earning assets 21,131,069 542,407 5.13 Goodwill 185,151 Other non-interest-earning assets 792,174 Total assets $22,108,394 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings $ 2,432,131 4,855 0.40 Money market 592,217 2,854 0.96 NOW and demand deposit 1,528,357 444 0.06 Liquid certificates of deposit 848,717 17,452 4.11 Total core deposits 5,401,422 25,605 0.95 Certificates of deposit 7,517,750 147,649 3.93 Total deposits 12,919,172 173,254 2.68 Borrowings 7,542,721 156,291 4.14 Total interest-bearing liabilities 20,461,893 329,545 3.22 Non-interest-bearing liabilities 345,909 Total liabilities 20,807,802 Stockholders' equity 1,300,592 Total liabilities and stockholders' equity $22,108,394 Net interest income/net interest rate spread $212,862 1.91 % Net interest-earning assets/net interest margin $ 669,176 2.01 % Ratio of interest-earning assets to interest-bearing liabilities 1.03x For the Six Months Ended June 30, 2005 Average Average Yield/ Balance Interest Cost (Annualized) Assets: Interest-earning assets: Mortgage loans (1): One-to-four family $ 9,306,432 $224,480 4.82 % Multi-family, commercial real estate and construction 3,754,593 116,496 6.21 Consumer and other loans (1) 526,117 14,256 5.42 Total loans 13,587,142 355,232 5.23 Mortgage-backed and other securities (2) 8,259,673 182,448 4.42 Repurchase agreements 216,177 2,810 2.60 Federal Home Loan Bank stock 134,388 2,823 4.20 Total interest-earning assets 22,197,380 543,313 4.90 Goodwill 185,151 Other non-interest-earning assets 858,133 Total assets $23,240,664 Liabilities and stockholders' equity: Interest-bearing liabilities: Savings $ 2,848,793 5,673 0.40 Money market 881,618 3,959 0.90 NOW and demand deposit 1,578,781 465 0.06 Liquid certificates of deposit 234,291 2,945 2.51 Total core deposits 5,543,483 13,042 0.47 Certificates of deposit 6,969,312 118,983 3.41 Total deposits 12,512,795 132,025 2.11 Borrowings 9,017,082 164,728 3.65 Total interest-bearing liabilities 21,529,877 296,753 2.76 Non-interest-bearing liabilities 337,679 Total liabilities 21,867,556 Stockholders' equity 1,373,108 Total liabilities and stockholders' equity $23,240,664 Net interest income/net interest rate spread $246,560 2.14 % Net interest-earning assets/net interest margin $ 667,503 2.22 % Ratio of interest-earning assets to interest-bearing liabilities 1.03x (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. END OF PERIOD BALANCES AND RATES (Dollars in Thousands) At June 30, 2006 At March 31, 2006 Weighted Weighted Average Average Balance Rate (1) Balance Rate (1) Selected interest-earning assets: Mortgage loans, gross (2): One-to-four family $9,824,066 5.32 % $9,846,475 5.25 % Multi-family, commercial real estate and construction 4,245,697 5.95 4,163,563 5.91 Mortgage-backed and other securities (3) 5,870,733 4.34 6,227,251 4.34 Interest-bearing liabilities: Savings 2,352,923 0.40 2,438,090 0.40 Money market 537,602 1.01 598,766 0.97 NOW and demand deposit 1,535,833 0.06 1,562,612 0.06 Liquid certificates of deposit 1,117,478 4.54 843,131 4.09 Total core deposits 5,543,836 1.20 5,442,599 0.94 Certificates of deposit 7,548,396 4.26 7,546,339 3.92 Total deposits 13,092,232 2.96 12,988,938 2.67 Borrowings, net 7,202,662 4.29 7,594,475 4.13 At June 30, 2005 Weighted Average Balance Rate (1) Selected interest-earning assets: Mortgage loans, gross(2): One-to-four family $9,267,038 5.08 % Multi-family, commercial real estate and construction 3,877,208 5.86 Mortgage-backed and other securities (3) 7,769,396 4.35 Interest-bearing liabilities: Savings 2,779,265 0.40 Money market 811,836 0.97 NOW and demand deposit 1,571,911 0.06 Liquid certificates of deposit 331,746 2.70 Total core deposits 5,494,758 0.53 Certificates of deposit 7,090,469 3.48 Total deposits 12,585,227 2.19 Borrowings, net 8,568,796 3.70 (1) Weighted average rates represent stated or coupon interest rates excluding the effect of yield adjustments for premiums, discounts and deferred loan origination fees and costs and the impact of prepayment penalties. (2) Mortgage loans exclude loans held-for-sale and include non-performing loans. (3) Securities available-for-sale are reported at fair value and securities held-to-maturity are reported at amortized cost. RECONCILIATION OF 2006 GAAP NET INCOME TO NON-GAAP EARNINGS (In Thousands, Except Per Share Data) For the Six Months Ended June 30, 2006 GAAP Adjustments(4) Non-GAAP Net interest income after provision for loan losses $212,862 $ - $212,862 Non-interest income 44,624 5,456 50,080 Non-interest expense 111,528 - 111,528 Income before income tax expense 145,958 5,456 151,414 Income tax expense 49,261 1,841 51,102 Net income $ 96,697 $3,615 $100,312 Basic earnings per common share $ 1.00 $ 0.04 $ 1.04 Diluted earnings per common share $ 0.98 $ 0.04 $ 1.01(5) (4) Adjustments relate to the $5.5 million charge for the termination of our interest rate swap agreements and the related tax effects. (5) Figures do not cross foot due to rounding.