Astoria Financial Corporation Reports First Quarter Earnings Per Share of $0.14

LAKE SUCCESS, N.Y., April 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 $12.9 million, or $0.14 diluted earnings per share ("EPS") for the quarter ended March 31, 2010, an increase of 47% and 40%, respectively, from $8.8 million, or $0.10 EPS, for the 2009 first quarter and 59% and 56%, respectively, from $8.1 million, or $0.09 EPS, for the 2009 fourth quarter.  Last year's first quarter results include an other-than-temporary impairment ("OTTI"), after-tax, non-cash charge of $3.4 million, or $0.04 EPS.  

Commenting on the first quarter results, George L. Engelke, Jr., Chairman and Chief Executive Officer of Astoria, stated, "I am very pleased with the significant improvement in the net interest margin and higher net interest income despite a smaller balance sheet.  I am encouraged by the noticeable stabilization in loan delinquencies which has led to some improvement in credit costs."

Board Declares Quarterly Cash Dividend of $0.13 Per Share

The Board of Directors of the Company, at their April 21, 2010 meeting, declared a quarterly cash dividend of $0.13 per common share.  The dividend is payable on June 1, 2010 to shareholders of record as of May 17, 2010.  This is the sixtieth consecutive quarterly cash dividend declared by the Company.

First Quarter 2010 Earnings Summary

Net interest income for the quarter ended March 31, 2010 increased $9.4 million, or 9.0%, from the 2009 fourth quarter and $2.7 million, or 2.4%, from the 2009 first quarter to $114.4 million.  The net interest margin for the quarter ended March 31, 2010 increased to 2.39%, 24 basis points above the 2009 fourth quarter and 23 basis points higher than the 2009 first quarter.  The increases were due to the cost of liabilities declining more rapidly than the yield on interest-earning assets.  

"We have been successful in our efforts to reduce the cost of CDs while extending the maturity terms in an effort to reduce interest rate risk sensitivity," Mr. Engelke noted.  During the 2010 first quarter, $2.5 billion of non-Liquid CDs matured, with a weighted average rate of 2.89% and an original weighted average maturity of 14 months, and $2.3 billion of non-Liquid CDs were issued or repriced, with a weighted average rate of 1.63% and a weighted average maturity of 18 months.  During the 2010 second quarter, $1.5 billion of non-Liquid CDs are scheduled to mature, with a weighted average rate of 2.06%.  For the second half of 2010, non-Liquid CDs totaling $2.5 billion are scheduled to mature, with a weighted average rate of 2.10%.  For comparison, non-Liquid CDs were issued in March at a weighted average rate of 1.26%.  For additional detail regarding the yields on interest-earning assets and costs of interest-bearing liabilities please refer to the "Average Balance Sheets" table included in this release.  

For the quarter ended March 31, 2010, a $45.0 million provision for loan losses was recorded compared to $50.0 million for both the previous quarter and the 2009 first quarter.  "The provision recorded this quarter is the first improvement in four quarters and recognizes the stabilizing trends in overall credit quality, particularly the decrease in early stage loan delinquencies.  Should the economy continue to show signs of improvement and the positive trend in loan delinquencies continue, future credit costs should continue to improve," Mr. Engelke noted.

Non-interest income for the quarter ended March 31, 2010 totaled $18.7 million compared to $21.9 million, excluding gain on sales of securities, for the 2009 fourth quarter and $19.1 million, excluding gains on sales of securities and a non-cash pre-tax OTTI charge of $5.3 million, for the 2009 first quarter.   The linked quarter decrease was primarily due to a $1.3 million decline in customer service fees and a $1.8 million decrease in other income.  The decrease from the 2009 first quarter was primarily due to a $1.5 million decline in customer service fees, partially offset by a $1.1 million increase in mortgage banking income, net.

General and administrative expense for the quarter ended March 31, 2010 totaled $68.3 million compared to $66.8 million for the 2009 fourth quarter and $64.0 million for the 2009 first quarter.   The linked quarter increase was primarily due to a $1.1 million increase in compensation and benefits expense.  The year over year increase is primarily due to a $2.7 million increase in FDIC insurance premiums and a $1.3 million increase in compensation and benefits expense.

Balance Sheet Summary

Total assets decreased $191.1 million from December 31, 2009 and totaled $20.1 billion at March 31, 2010.  The loan portfolio declined $142.9 million from December 31, 2009 to $15.6 billion at March 31, 2010.  The one-to-four family portfolio totaled $11.8 billion at March 31, 2010 compared to $11.9 billion at December 31, 2009 and the combined multifamily/commercial real estate portfolio totaled $3.3 billion at March 31, 2010 compared to $3.4 billion at December 31, 2009.  

One-to-four family loan originations and purchases for portfolio for the quarter ended March 31, 2010 totaled $838.9 million compared to $916.4 million for the previous quarter and $382.5 million for the comparable 2009 quarter.  One-to-four family loan prepayments for the quarter ended March 31, 2010 totaled $749.6 million compared to $891.3 million for the previous quarter and $457.1 million for the 2009 first quarter.  The loan-to-value ratio ("LTV") of the one-to-four family loan production for portfolio for the 2010 first quarter averaged 62% at origination and the loan amount averaged approximately $720,000.

Deposits totaled $12.7 billion at March 31, 2010 compared to $12.8 billion at December 31, 2009. The decrease was due primarily to decreases in CDs.  Important to note, low-cost savings, money market and checking deposits increased $80.6 million, or 8% annualized, in the 2010 first quarter.  Also noteworthy, total deposits are comprised of retail deposits and do not include any broker or municipal deposits.  

Stockholders' equity was $1.2 billion, or 6.06% of total assets at March 31, 2010.  Astoria Federal continues to be designated as well-capitalized with core, tangible, risk-based and Tier 1 risk-based capital ratios of 6.94%, 6.94%, 13.11% and 11.84%, respectively, at March 31, 2010.

Asset Quality

Non-performing loans ("NPL"), including troubled debt restructurings ("TDR") of $59.9 million, totaled $419.1 million, or 2.09% of total assets, at March 31, 2010, up slightly from the previous quarter.  During the 2010 first quarter, $25.7 million of NPLs were either sold or classified as held-for-sale.  At March 31, 2010, one-to-four family NPLs totaled $349.5 million, multi-family/CRE/construction NPLs totaled $64.7 million and consumer and other NPLs totaled $4.9 million compared to $330.1 million, $73.7 million and $4.8 million, respectively, at December 31, 2009.  Important to note, of the $349.5 million of non-performing one-to-four family loans, $246.1 million, or 70.4%, 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.  "Although non-performing loans have increased slightly from the previous quarter, as we anticipated they would, we are encouraged by the improving trends in early stage loan delinquencies.  Loans 30-89 days past due declined $20.9 million, or 7%, from the previous quarter and $53.3 million, or 17%, from the 2009 first quarter," Mr. Engelke noted.  

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

The table below details, as of March 31, 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 March 31, 2010 totaled $28.3 million (of which $17.4 million represented one-to-four family loans and $10.6 million represented multi-family/CRE loans) compared to $32.6 million (of which $22.8 million represented one-to-four family loans and $9.2 million represented multi-family/CRE loans) for the 2009 fourth quarter.  Included in the $17.4 million one-to-four family net loan charge-offs are $13.3 million of charge-offs on $48.7 million of non-performing loans which, at 180 days delinquent or annually thereafter, were adjusted to the estimated fair value of the underlying collateral less selling costs.  "While we expect non-performing loan levels may remain elevated for sometime 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 marked down, and charged-off as necessary, over 70% of the residential non-performing loans to their adjusted fair value less selling costs," Mr. Engelke noted.

Supervisory Goodwill Litigation Settlement

On January 8, 2008, the U.S. Court of Federal Claims ("Federal Claims Court") awarded Astoria Federal $16.0 million in damages ("Original Award") from the U.S. Government in the case entitled Astoria Federal Savings and Loan Association vs. The United States, No 95-468C.  The case involved an assisted acquisition made in the early 1980's and supervisory goodwill accounting utilized in connection therewith.  The U.S. Government appealed such decision to the U.S. Court of Appeals for the Federal Circuit ("Appeals Court").  On May 28, 2009, the Appeals Court affirmed in part and reversed in part the lower court's ruling and remanded the case to Federal Claims Court for further proceeding.  On April 12, 2010, Astoria Federal and the U.S. Government entered into a stipulated settlement agreement (the "Agreement") in the amount of $6.2 million, which, after-tax, the Company will recognize in net income in the 2010 second quarter.  The Agreement is intended to resolve all claims arising from or related to the aforementioned case.  No portion of the Original Award was recognized in our consolidated financial statements.  Legal expense related to this action has been recognized as it was incurred.

Future Outlook

Commenting on the outlook for 2010, Mr. Engelke stated, "While it appears that a moderate economic recovery is underway, the housing market remains soft and high unemployment persists, which may restrain the pace of the recovery.  This notwithstanding, the long-term outlook for credit is improving which should translate into declining credit costs and improved financial performance this year.  In terms of loan growth, as the interest rate for 30-year fixed-rate conforming mortgage loans increases, we anticipate that loan prepayments should decline, which should result in loan growth in the second half of the year."  

Astoria Financial Corporation, with assets of $20.1 billion, is the holding company for Astoria Federal Savings and Loan Association.  Established in 1888, Astoria Federal, with deposits in New York totaling $12.7 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.

Earnings Conference Call April 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, April 22, 2010 at 10:00 a.m. (ET).   The toll-free dial-in number is (888) 562-3356, passcode 64457235.  A telephone replay will be available on April 22, 2010 from 1:00 p.m. (ET) through midnight May 1, 2010 (ET).  The replay number is (800) 642-1687, passcode: 64457235.  The conference call will also be simultaneously webcast on the Company's website 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 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.

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SOURCE Astoria Financial Corporation