AF Astoria Financial Corp. (delisted)

LAKE SUCCESS, N.Y., July 21 /PRNewswire-FirstCall/ -- Astoria Financial Corporation (NYSE: AF) (“Astoria”, the “Company”), the holding company for Astoria Federal Savings and Loan Association (“Astoria Federal”), today reported net income of $15.5 million, or $0.17 EPS, for the quarter ended June 30, 2010, compared to $2.7 million, or $0.03 EPS, for the comparable 2009 period.  For the six months ended June 30, 2010, net income totaled $28.5 million, or $0.30 EPS, compared to $11.5 million, or $0.12 EPS, for the comparable 2009 period.  Included in the 2010 second quarter and six month results are net charges totaling $3.2 million (or $2.1 million, or $0.02 per share, after-tax), which are not routine to our core operations and are excluded from operating income and operating EPS. For further details and a reconciliation of GAAP and non-GAAP measures, please refer to the “Reconciliation of GAAP Measures to non-GAAP Measures” tables included in this release.

Operating income and operating EPS for the quarter and six months ended June 30, 2010 totaled $17.6 million, or $0.19, and $30.6 million, or $0.33, respectively, compared to $10.1 million, or $0.11, and $22.4 million, or $0.24, respectively, for the comparable 2009 periods.  

Commenting on the second quarter results, George L. Engelke, Jr., Chairman and Chief Executive Officer of Astoria, stated, “I am pleased to report continued earnings improvement in the 2010 second quarter, a significant achievement considering our balance sheet contracted during the quarter.  The improvement is due, primarily, to lower credit costs.”

Board Declares Quarterly Cash Dividend of $0.13 Per Share

The Board of Directors of the Company, at their July 21, 2010 meeting, declared a quarterly cash dividend of $0.13 per common share.  The dividend is payable on September 1, 2010 to shareholders of record as of August 16, 2010.  This is the sixty-first consecutive quarterly cash dividend declared by the Company.

Second Quarter and Six Month Earnings Summary

Net interest income for the quarter ended June 30, 2010 increased to $111.9 million from $109.1 million for the 2009 second quarter. For the six months ended June 30, 2010, net interest income increased to $226.3 million from $220.7 million for the comparable 2009 period.

The net interest margin for the quarter ended June 30, 2010 was 2.37%, two basis points lower than the previous quarter and 21 basis points higher than 2.16% for the 2009 second quarter.  The linked quarter decrease was due to the effect of one extra day of interest expense and the extension of borrowings in the 2010 second quarter.  During the 2010 second quarter $325 million of borrowings were extended with an average maturity of 3.3 years and a weighted average rate of 1.93% which resulted in excess liquidity at quarter-end pending the deployment of the proceeds.  The year-over-year increase in the margin was due to the cost of interest-bearing liabilities declining more rapidly than the yield on interest-earning assets.  

For the six months ended June 30, 2010, the net interest margin increased 22 basis points to 2.38% from 2.16% for the comparable 2009 period.

For the quarter ended June 30, 2010, a $35.0 million provision for loan losses was recorded, $10.0 million lower than the $45.0 million provision for the previous quarter and $15.0 million lower than the provision for the 2009 second quarter.  For the six months ended June 30, 2010, the provision for loan losses totaled $80.0 million, $20.0 million lower than the provision for the comparable 2009 period.  Mr. Engelke noted, “The lower provision for loan losses recognizes the stabilization in our asset quality and the improvement in the economy in general.  We remain cautiously optimistic that these trends will continue.”

Non-interest income for the quarter ended June 30, 2010 totaled $23.2 million compared to $20.4 million for the 2009 second quarter.  Non-interest income for the quarter ended June 30, 2010, excluding the previously announced goodwill litigation settlement, partially offset by a write-down of premises and equipment, totaled $18.5 million compared to $22.0 million for the 2009 second quarter, excluding a write-down of premises and equipment.  This decrease is due to lower mortgage banking fee income, net, and lower customer service fees.

Non-interest income for the six months ended June 30, 2010 totaled $41.9 million compared to $36.4 million for the comparable 2009 period.  For the six months ended June 30, 2010, non-interest income, excluding the aforementioned items, totaled $37.2 million compared to $43.3 million for the comparable 2009 period, excluding a write-down of premises and equipment and an other-than-temporary impairment write-down of Freddie Mac securities.  This decrease is due primarily to lower customer service fees, the absence of security gains in the 2010 six month period and lower mortgage banking fee income, net.

General and administrative (“G&A”) expense for the quarter and six months ended June 30, 2010 totaled $75.8 million and $144.1 million, respectively, compared to $76.0 million and $140.0 million, respectively, for the comparable 2009 periods.  Excluding the recently announced McAnaney litigation settlement, G&A expense for the quarter and six months ended June 30, 2010 totaled $68.0 million and $136.2 million, respectively, compared to $66.2 million and $130.1 million, respectively, for the 2009 second quarter and six months, excluding the FDIC special assessment.  The six month increase is primarily due to increased compensation and benefits expense and higher FDIC insurance premiums.  

For further details and a reconciliation of GAAP measures to non-GAAP measures, please refer to the “Reconciliation of GAAP Measures to non-GAAP Measures” tables included in this release.

Balance Sheet Summary

Total assets decreased $391.0 million from the previous quarter and $582.2 million from December 31, 2009 and totaled $19.7 billion at June 30, 2010.  The loan portfolio declined $271.5 million from the previous quarter and $414.4 million from December 31, 2009 and totaled $15.4 billion at June 30, 2010.  The one-to-four family portfolio totaled $11.7 billion at June 30, 2010 compared to $11.8 billion at March 31, 2010 and $11.9 billion at December 31, 2009.  The combined multifamily/commercial real estate portfolio totaled $3.2 billion at June 30, 2010 compared to $3.3 billion at March 31, 2010 and $3.4 billion at December 31, 2009.

For the quarter and six months ended June 30, 2010, one-to-four family loan originations for portfolio totaled $758.5 million and $1.6 billion, respectively, compared to $668.5 million and $1.1 billion, respectively, for the comparable 2009 periods.  This was achieved while maintaining our strict underwriting standards.  The loan-to-value ratio of the one-to-four family loan production for portfolio for the 2010 second quarter and six months each averaged approximately 61% at origination and the loan amount averaged approximately $755,000 and $737,000, respectively.  One-to-four family loan prepayments for the quarter and six months ended June 30, 2010 totaled $748.4 million and $1.5 billion, respectively, compared to $810.1 million and $1.3 billion, respectively, for the comparable 2009 periods.  

Deposits decreased $436.4 million from the previous quarter and $563.8 million from December 31, 2009 to $12.2 billion at June 30, 2010.  Importantly, low-cost savings, money market and checking account deposits increased $112.2 million, or 11% annualized, from March 31, 2010 and $192.8 million, or 10% annualized, from December 31, 2009.  The Company continues to focus on lengthening liabilities, both CDs and borrowings, in an effort to reduce future interest rate risk.  During the first half of 2010 approximately $1 billion of CD’s were extended for terms of at least 2 years with a weighted average rate of 2.58% and $525 million of borrowings were extended for an average term of 3.3 years with a weighted average rate of 2.05%.    

Stockholders’ equity was $1.2 billion, or 6.24% of total assets at June 30, 2010.  Astoria Federal continues to be designated as well-capitalized with core, tangible, risk-based and Tier 1 risk-based capital ratios of 7.15%, 7.15%, 13.47% and 12.21%, respectively, at June 30, 2010.

Asset Quality

Non-performing loans (“NPL”), including troubled debt restructurings (“TDR”) of $51.8 million, totaled $415.1 million, or 2.11% of total assets at June 30, 2010, a decrease of $4.0 million from the previous quarter.  During the 2010 second quarter, $31.6 million of NPLs were either sold or classified as held-for-sale.  At June 30, 2010, one-to-four family NPLs totaled $350.6 million, multi-family/CRE/construction NPLs totaled $59.2 million and consumer and other NPLs totaled $5.3 million compared to $349.5 million, $64.7 million and $4.9 million, respectively, at March 31, 2010.  Important to note, of the $350.6 million of non-performing one-to-four family loans, $245.4 million, or 70%, represent residential loans which, at 180 days delinquent and annually thereafter, were reviewed and charged-off, as needed, to the estimated fair value of the underlying collateral at such time, less estimated selling costs.

The comparative table below illustrates loan migration from 30 days delinquent to 90+ days delinquent:

The following table details, as of June 30, 2010, the ten largest concentrations by state of one-to-four family loans and the respective non-performing loan totals in those states.  More comprehensive state details are included in the “One-to-Four Family Residential Loan Portfolio-Geographic Analysis” table included in this release.  

Net loan charge-offs for the quarter ended June 30, 2010 totaled $34.7 million (including $20.1 million of one-to-four family loans and $12.6 million of multi-family/CRE loans) compared to $28.3 million (including $17.4 million of one-to-four family loans and $10.6 million of multi-family/CRE loans) for the 2010 first quarter. Included in the $20.1 million of one-to-four family loan charge-offs are $14.7 million of charge-offs on $73.2 million of non-performing loans which, at 180 days delinquent or annually thereafter, were reviewed and adjusted, as needed, to the estimated fair value of the underlying collateral less selling costs.  

“While we expect non-performing loan levels may remain elevated for some time as we work through the foreclosure process, it is important to note that the loss potential remaining has been greatly reduced as a result of our having already reviewed, marked down, and charged-off as necessary, 70% of the residential non-performing loans to their adjusted fair value less selling costs,” Mr. Engelke noted.

Future Outlook

Commenting on the outlook for 2010, Mr. Engelke stated, “With the national economic recovery underway, and despite the fact that the pace appears to be moderating and the housing market remains soft, the long-term outlook for our credit quality is improving.  This should translate into lower credit costs and further improvement in our financial performance.  In terms of loan and balance sheet growth, as long as the U.S. government continues to subsidize the residential mortgage market with programs designed to keep 30-year fixed-rate conforming loans below normal market rate levels, coupled with expanded conforming loan limits in many of the markets we operate in, we do not anticipate our loan production increasing at this time which, more than likely, will result in a slightly smaller loan portfolio and balance sheet.”

Earnings Conference Call July 22, 2010 at 10:00 a.m. (ET)

The Company, as previously announced, indicated that Mr. Engelke will host an earnings conference call Thursday morning, July 22, 2010 at 10:00 a.m. (ET).   The toll-free dial-in number is (888) 562-3356, ID# 83093432.  A telephone replay will be available on July 22, 2010 from 1:00 p.m. (ET) through midnight July 31, 2010 (ET).   The replay number is (800) 642-1687, ID#: 83093432.  The conference call will also be simultaneously webcast on the Company’s website www.astoriafederal.com and archived for one year.

Astoria Financial Corporation, with assets of $19.7 billion, is the holding company for Astoria Federal Savings and Loan Association.  Established in 1888, Astoria Federal, with deposits in New York totaling $12.2 billion, is the largest thrift depository in New York and embraces its philosophy of “Putting people first” by providing the customers and local communities it serves with quality financial products and services through 85 convenient banking office locations and multiple delivery channels, including its enhanced website, 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 and loan production offices in New York, an extensive broker network covering sixteen states, primarily along the East Coast, and the District of Columbia, and through correspondent relationships covering seventeen states and the District of Columbia.

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 real estate or 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 be determined adverse to us or 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.