Astoria Financial Corporation Reports First Quarter Earnings Per Share of $0.11

LAKE SUCCESS, N.Y., April 18, 2012 /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 $10.0 million, or $0.11 diluted earnings per share ("diluted EPS") for the quarter ended March 31, 2012 compared to net income of $27.4 million, or $0.29 diluted EPS, for the quarter ended March 31, 2011.  The quarter ended March 31, 2012 includes net charges totaling $3.4 million ($2.2 million, or $0.02 per share, after-tax), representing severance related expenses associated with cost control initiatives implemented in the 2012 first quarter. 

Commenting on the first quarter results, Monte N. Redman, President and Chief Executive Officer of Astoria, stated, "I am pleased to report robust multi-family/commercial real estate ("MF/CRE") lending in the first quarter which fueled growth in the loan portfolio, the first such growth in several years.  The strength of the MF/CRE loan production, as reflected in the significant increase in the loan pipeline since year-end, has exceeded our expectations and reinforces our confidence that MF/CRE lending will be an important contributor to growth in interest earning assets during the year, driving earnings growth and improved overall profitability." 

First Quarter Financial Highlights

• Low cost savings, money market and checking account deposits increased $176.1 million, or 12% annualized, from December 31, 2011 to $5.9 billion, or 53% of total deposits.
• Early stage loan delinquencies (30-89 days) declined $52.2 million, or 24%, from December 31, 2011 to $163.3 million.  
• Total loan delinquencies (30 days or more past due) and real estate owned, net, declined $37.6 million, or 6%, from December 31, 2011 to $558.8 million.
• MF/CRE loan originations totaled $344.3 million, up 70% from the 2011 fourth quarter.
• MF/CRE loan pipeline increased 101% from December 31, 2011 to $798.6 million.

Board Declares Quarterly Cash Dividend of $0.04 Per Share 
The Board of Directors of the Company, at its April 18, 2012 meeting, declared a quarterly cash dividend of $0.04 per common share.  The dividend is payable on June 1, 2012 to shareholders of record as of May 15, 2012.  This is the sixty-eighth consecutive quarterly cash dividend declared by the Company.

Commenting on the dividend action, Mr. Redman stated, "The Board's decision to reduce the dividend is based on, among other things, the current payout ratio in relation to current earnings and the desire to bring the payout ratio and dividend yield more in line with norms in the financial industry.  In addition, the Board believes this action will provide management with added flexibility to redeploy capital to support future loan and balance sheet growth in light of the opportunities available in multi-family lending, which has demonstrated better than expected strength."   

First Quarter Earnings Summary
Net interest income for the quarter ended March 31, 2012 totaled $88.2 million compared to $87.5 million for the previous quarter and $101.5 million for the 2011 first quarter.  The net interest margin for the quarter ended March 31, 2012 was 2.20%, unchanged from the previous quarter and 20 basis points lower than the 2011 first quarter.  The year over year declines were due primarily to a more rapid decline in the yield on average interest earning assets than the cost of interest bearing liabilities during 2011. 

For the quarter ended March 31, 2012, a $10.0 million provision for loan losses was recorded, the same amount as in the previous quarter and up from the $7.0 million provision recorded for the 2011 first quarter.  The ratio of the allowance for loan losses to total loans, or the coverage ratio, at 1.12% at March 31, 2012, remains strong.

Non-interest income for the quarter ended March 31, 2012 totaled $19.6 million compared to $17.3 million for the previous quarter and $18.0 million for the 2011 first quarter.  The linked quarter and year over year increases are primarily due to a gain on sales of securities for the 2012 first quarter.  In addition, other non-interest income increased and customer service fees and mortgage banking income, net, declined for the 2012 first quarter compared to the 2011 first quarter. 

General and administrative ("G&A") expense for the quarter ended March 31, 2012 totaled $82.2 million compared to $77.2 million for the previous quarter and $69.6 million for the 2011 first quarter.  The linked quarter increase of $5.0 million is due primarily to increased compensation and benefits expense, resulting from net charges of $3.4 million representing severance related expenses and an increase of $1.7 million in pension and other post-retirement benefits expense.  The year over year increase of $12.6 million is due to a $5.7 million increase in FDIC expense and a $5.6 million increase in compensation and benefits expense, primarily due to the severance and pension and other post-retirement benefits expense noted above. 

Expense Control Initiatives
Commenting on G&A expenses, Mr. Redman noted, "During the first quarter, we completed the cost control initiatives announced earlier this year which were necessary to significantly slow the growth of G&A expenses in 2012 and beyond.  In addition to the salary freeze for executive and senior officers and the elimination of stock-based compensation awards for 2012 announced in January, the Company completed a review of staffing levels in February which resulted in the elimination of 142 positions.  In addition, effective April 30, 2012, we will implement a freeze in all defined benefit pension programs.  As a result of these actions, we expect the second quarter G&A expense will return to a more normal run rate of approximately $75.0 million per quarter with the exception of a one-time additional expense of approximately $2.0 million, expected to be recorded in the second half of 2012, related to the settlement of employment agreements associated with previously announced executive retirements."

Balance Sheet Summary
Total assets increased slightly from December 31, 2011 and totaled $17.1 billion at March 31, 2012.  The loan portfolio increased $106.0 million from December 31, 2011 and totaled $13.4 billion at March 31, 2012.  Commenting on the loan and balance sheet growth, Mr. Redman stated, "As anticipated, the balance sheet expanded in the first quarter and the loan portfolio grew for the first time in several years, fueled by growth in the MF/CRE portfolios. With the MF/CRE lending now operating at full throttle, as evidenced by the $1.1 billion of MF/CRE loan applications taken in the last six months, the closing of more than $540 million of loans during the same period and the strong MF/CRE loan pipeline which totaled almost $800 million at March 31, 2012, we expect continued growth in the MF/CRE portfolios which should lead to consistent balance sheet growth going forward."       

The one-to-four family (residential) loan portfolio decreased $16.2 million from December 31, 2011 to $10.5 billion at March 31, 2012.  For the quarter ended March 31, 2012, residential loan originations for portfolio totaled $880.4 million compared to $707.4 million for the comparable 2011 period.  The loan-to-value ratio of the residential loan production for portfolio for the 2012 first quarter averaged approximately 59% at origination and the loan amount averaged approximately $747,000.  Residential loan prepayments for the quarter ended March 31, 2012 totaled $766.7 million, a 23% decline from the previous quarter and down from $786.2 million for the comparable 2011 period.  "Although residential loan prepayments decreased from the previous quarter, they remain at elevated levels.  Importantly, they have not accelerated despite the low mortgage rate environment, which has helped stem the decline in the residential loan portfolio," Mr. Redman noted.  At March 31, 2012, the residential loan pipeline totaled $1.1 billion.  

The combined MF/CRE portfolio increased $129.6 million, or 22% on an annualized basis, from December 31, 2011 to $2.5 billion at March 31, 2012.  For the quarter ended March 31, 2012, MF/CRE loan originations totaled $344.3 million with loan-to-value ratios averaging approximately 52% at origination.  There were no multi-family/CRE loans originated in the 2011 first quarter.  MF/CRE loan prepayments for the quarter ended March 31, 2012 totaled $192.3 million compared to $193.1 million for the comparable 2011 period.  At March 31, 2012, the MF/CRE pipeline totaled $798.6 million.

The securities portfolio remained essentially unchanged from December 31, 2011 and totaled $2.5 billion at March 31, 2012.  The Company expects to maintain the securities portfolio at current levels throughout 2012.    

Deposits decreased $133.0 million from December 31, 2011 to $11.1 billion at March 31, 2012.  The decrease was entirely the result of a $309.1 million decrease in certificate of deposits, as the Bank reflected  an increase of $176.1 million in low-cost savings, money market and checking accounts, which totaled $5.9 billion, or 53% of total deposits at March 31, 2012. 

Stockholders' equity increased $19.1 million to $1.3 billion, or 7.42% of total assets, at March 31, 2012.  Astoria Federal continues to be designated as well-capitalized with leverage, tangible, risk-based and Tier 1 risk-based capital ratios of 8.75%, 8.75%, 16.19% and 14.92%, respectively, at March 31, 2012.

Asset Quality
Non-performing loans ("NPLs"), including troubled debt restructurings ("TDRs") of $43.5 million, totaled $355.6 million, or 2.08% of total assets, at March 31, 2012, an increase of $22.7 million from the previous quarter, due primarily to an increase in TDRs.  Residential NPLs totaled $312.2 million, MF/CRE NPLs totaled $36.9 million and consumer and other NPLs totaled $6.4 million at March 31, 2012 compared to $317.9 million, $8.9 million and $6.1 million, respectively, at December 31, 2011.  Of the $312.2 million of residential NPLs, $258.4 million, or 83%, 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 and over delinquent:

The table below details, as of March 31, 2012, the ten largest concentrations by state of residential 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, 2012 totaled $17.3 million (including $16.1 million of residential loans and $693,000 of MF/CRE loans) compared to $31.2 million (including $12.2 million of residential loans and $18.4 million of MF/CRE loans) for the previous quarter.  Included in the $16.1 million of residential net loan charge-offs are $10.9 million of charge-offs on $46.6 million of NPLs which, at 180 days delinquent and annually thereafter, were reviewed in the 2012 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, 83% of the residential NPLs to their adjusted fair value less selling costs," Mr. Redman noted.

Future Outlook 

Commenting on the future outlook, Mr. Redman stated, "Our goal for 2012 is to demonstrate consistent loan and balance sheet growth and improved operating efficiency, as well as to reposition the asset/liability mix, concentrating more on higher yielding multifamily loans than on lower yielding residential loans, and reducing higher cost CDs and increasing lower cost savings, money market and checking deposits.  With the MF/CRE lending operation now operating at full throttle, we anticipate that interest earning assets will continue to accelerate throughout the year which will help fuel earnings growth.  Our outlook for the net interest margin remains consistent with our outlook at the end of 2011, which is that we anticipate the 2012 full year margin will be similar to the 2011 fourth and 2012 first quarters net interest margin of 2.20%.   As I previously stated, 2012 continues to be the transitional year for us with continued quarterly earnings and balance sheet growth."

Earnings Conference Call April 19, 2012 at 10:00 a.m. (ET) 
The Company, as previously announced, indicated that Monte N. Redman, President & CEO will host an earnings conference call Thursday morning, April 19, 2012 at 10:00 a.m. (ET).   The toll-free dial-in number is (877) 709-8150.  A telephone replay will be available on April 19, 2012 from 1:00 p.m. (ET) through midnight April 28, 2012 (ET).   The toll-free replay number is (877) 660-6853, account # 399, ID# 390956.  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 $17.1 billion, is the holding company for Astoria Federal Savings and Loan Association.  Established in 1888, Astoria Federal, with deposits in New York totaling $11.1 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 implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and any actions regarding foreclosures may adversely affect our business; transition of our regulatory supervisor from the Office of Thrift Supervision to the Office of the Comptroller of the Currency; effects of changes in existing U.S. government or government-sponsored mortgage programs; 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

SOURCE Astoria Financial Corporation