AF Astoria Financial Corp. (delisted)

LAKE SUCCESS, N.Y., April 20, 2011 /PRNewswire/ -- 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 $27.4 million, or $0.29 diluted earnings per share ("diluted EPS"), for the quarter ended March 31, 2011, increases of 112% and 107%, respectively, over net income of $12.9 million, or $0.14 diluted EPS, for the quarter ended March 31, 2010.  On a linked quarter basis, net income and diluted EPS increased 15% and 16%, respectively.

Commenting on the first quarter results, George L. Engelke, Jr., Chairman and Chief Executive Officer of Astoria, stated, "I am very pleased to report a significant improvement in earnings on both a linked quarter and year over year basis, primarily due to lower credit costs, reflecting the continued improvement in credit quality."  

First Quarter Financial Highlights

• Net interest margin increased to 2.40%, up one basis point from March 31, 2010 and eight basis points from the previous quarter  
• Net income increased to $27.4 million, up 112% from March 31, 2010 and 15% from the previous quarter  
• Diluted EPS increased to $0.29, up 107% from March 31, 2010 and 16% from the previous quarter  
• Return on average assets increased to 0.61%, up 35 basis points from March 31, 2010 and 10 basis points from the previous quarter
• Return on average tangible equity increased to 10.29%, up 525 basis points from March 31, 2010 and 128 basis points from the previous quarter
• Low cost savings, money market and checking accounts increased $688.7 million, or 16%, from March 31, 2010 and $121.1 million from December 31, 2010,  or 10% annualized, to $4.9 billion
• Early stage loan delinquencies (30-89 days past due) decreased to $217.2 million, a 19% decline from March 31, 2010 and 1% from the previous quarter
• Non-performing loans decreased to $373.8 million, an 11% decline from March 31, 2010 and 4% from the previous quarter
• The Company's tangible common equity ratio increased to 6.16%, up 97 basis points from March 31, 2010 and 26 basis points from the previous quarter
• Astoria Federal's leverage and tangible capital ratios increased to 8.17%, up 123 basis points from March 31, 2010 and 23 basis points from the previous quarter
• Astoria Federal's tier 1 risk-based capital ratio increased to 13.89%, up 205 basis points from March 31, 2010 and 56 basis points from the previous quarter

Board Declares Quarterly Cash Dividend of $0.13 Per Share

The Board of Directors of the Company, at their April 20, 2011 meeting, declared a quarterly cash dividend of $0.13 per common share.  The dividend is payable on June 1, 2011 to shareholders of record as of May 16, 2011.  This is the sixty-fourth consecutive quarterly cash dividend declared by the Company.

First Quarter Earnings Summary

Net interest income for the quarter ended March 31, 2011 totaled $101.5 million compared to $101.2 million for the previous quarter and $114.4 million for the 2010 first quarter.  The net interest margin for the quarter ended March 31, 2011 was 2.40%, up eight basis points from the previous quarter and one basis point higher than the 2010 first quarter.  Approximately four basis points of the linked quarter increase is due to two less days of interest expense in the 2011 first quarter.  

For the quarter ended March 31, 2011, a $7.0 million provision for loan losses was recorded, $8.0 million lower than the previous quarter and $38.0 million lower than the 2010 first quarter.  Mr. Engelke noted, "The lower provision primarily reflects improving trends in asset quality over the past twelve months, notably a 19% decrease in early stage delinquencies, an 11% decrease in non-performing loans and a 14% decrease in total loan delinquencies, coupled with the decline in the loan portfolio.  Important to note, the allowance for loan losses to total loans, or the coverage ratio, remains strong at 1.37% at March 31, 2011."

Non-interest income for the quarter ended March 31, 2011 totaled $18.0 million compared to $20.7 million for the previous quarter and $18.7 million for the 2010 first quarter.  The linked quarter decrease is primarily due to lower other non-interest income and lower mortgage banking income, net, primarily due to lower net gain on sales of loans.  

General and administrative ("G&A") expense for the quarter ended March 31, 2011 totaled $69.6 million, essentially unchanged from the previous quarter and up $1.4 million from the 2010 first quarter.

Balance Sheet Summary

Total assets decreased $382.1 million from December 31, 2010 and totaled $17.7 billion at March 31, 2011.  The loan portfolio declined $438.1 million from December 31, 2010 and totaled $13.8 billion at March 31, 2011.  The one-to-four family portfolio totaled $10.6 billion at March 31, 2011 compared to $10.9 billion at December 31, 2010.  The combined multi-family/commercial real estate ("CRE") portfolio totaled $2.7 billion at March 31, 2011 compared to $3.0 billion at December 31, 2010.  

Commenting on the decrease in the balance sheet, Mr. Engelke stated, "As anticipated, the pace of the decline in the loan portfolio and the balance sheet has slowed as the level of loan prepayment activity has fallen.  We expect that this trend will continue which should mean less shrinkage in the second quarter and growth expected to resume in the second half of the year."

For the quarter ended March 31, 2011, one-to-four family loan originations for portfolio totaled $707.4 million compared to $643.6 million for the previous quarter and $838.9 million for the 2010 first quarter.  The loan-to-value ratio of the one-to-four family loan production for portfolio for the 2011 first quarter averaged approximately 60% at origination and the loan amount averaged approximately $727,000.  One-to-four family loan prepayments for the quarter ended March 31, 2011 totaled $786.2 million compared to $1.0 billion for the previous quarter and $749.6 million for the 2010 first quarter.  Multi-family/CRE loan prepayments totaled $193.1 million for the 2011 first quarter compared to $112.5 million for the previous quarter and $39.7 million for the 2010 first quarter.  

Deposits at March 31, 2011 totaled $11.5 billion compared to $11.6 billion at December 31, 2010.  During the 2011 first quarter, CD accounts (including Liquid CDs) decreased $244.8 million from December 31, 2010, while low cost savings, checking and money market accounts increased $121.1 million, or 10% annualized.  Notwithstanding the decline in CDs, during the 2011 first quarter we extended $320.7 million of CDs for terms of two years or more in an effort to help limit our exposure to future increases in interest rates.  At March 31, 2011, our one-year interest rate sensitivity gap was positive 4.92%.

Borrowings during the quarter ended March 31, 2011 decreased $291.9 million to $4.6 billion at March 31, 2011.

Stockholders' equity totaled $1.3 billion, or 7.14% of total assets at March 31, 2011.  Astoria Federal continues to be designated as well-capitalized with leverage, tangible, risk-based and Tier 1 risk-based capital ratios of 8.17%, 8.17%, 15.18% and 13.89%, respectively, at March 31, 2011.

Asset Quality

Non-performing loans ("NPLs"), including troubled debt restructurings ("TDRs") of $35.3 million, totaled $373.8 million, or 2.11% of total assets at March 31, 2011, a decrease of $16.9 million from the previous quarter.  During the 2011 first quarter, $9.0 million of NPLs were either sold or classified as held-for-sale.  At March 31, 2011, one-to-four family NPLs declined to $333.0 million, multi-family/CRE/construction NPLs declined to $35.6 million and consumer and other NPLs declined to $5.1 million compared to $342.3 million, $42.8 million and $5.6 million, respectively, at December 31, 2010.  Of the $333.0 million of one-to-four family NPLs, $257.1 million, or 77%, 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 following table illustrates loan migration trends from 30 days delinquent to 90+ days delinquent:

The table below details, as of March 31, 2011, 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 March 31, 2011 totaled $19.0 million (including $15.3 million of one-to-four family loans and $2.9 million of multi-family/CRE loans) compared to $19.7 million (including $15.6 million of one-to-four family loans and $2.6 million of multi-family/CRE loans) for the previous quarter.  Included in the $15.3 million of one-to-four family net loan charge-offs are $12.2 million of charge-offs on $53.1 million of NPLs which, at 180 days delinquent and annually thereafter, were reviewed in the 2011 first quarter and charged-off, as needed, to the estimated fair value of the underlying collateral less selling costs.  "While we expect NPL levels will remain elevated for some time, 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, 77% of the residential NPLs to their adjusted fair value less selling costs," Mr. Engelke noted.

Future Outlook  

Commenting on the near-term outlook, Mr. Engelke stated, "As the national economy continues to modestly recover and job growth continues, we expect further improvement in credit costs, even while non-performing loans remain elevated as we work through the extended foreclosure process.  The operating environment for residential mortgage portfolio lenders remains challenging, although we are cautiously optimistic that the recent elevated interest rate level of 30 year fixed-rate conforming loans compared to the 2010 third and fourth quarter levels, together with the anticipated reduction in the expanded conforming loan limits in October 2011, will facilitate future residential loan growth.  In addition, we expect to resume multi-family/commercial real estate lending in the second half of 2011 which will augment growth in the loan portfolio and balance sheet.  For 2011, we anticipate maintaining a relatively stable net interest margin which, when coupled with lower credit costs, should mitigate the earnings impact from a smaller average balance sheet and the expected impact of significantly higher FDIC insurance premium expense.  We expect capital levels to continue to increase which should support loan and balance sheet growth in the second half of 2011 and next year."

Earnings Conference Call April 21, 2011 at 10:00 a.m. (ET)

The Company, as previously announced, indicated that Monte N. Redman, President & COO will host an earnings conference call Thursday morning, April 21, 2011 at 10:00 a.m. (ET).   The toll-free dial-in number is (888) 562-3356, ID# 51499635.  A telephone replay will be available on April 21, 2011 from 1:00 p.m. (ET) through midnight April 30, 2011 (ET).   The replay number is (800) 642-1687, ID#:51499635.  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 $17.7 billion, is the holding company for Astoria Federal Savings and Loan Association.  Established in 1888, Astoria Federal, with deposits in New York totaling $11.5 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 fourteen states, primarily along the East Coast, and the District of Columbia, and through correspondent relationships covering fifteen 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," "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: 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 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, including the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, may adversely affect our business; 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 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. We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.

Tables Follow