Astoria Financial Corporation Reports Fourth Quarter And Full Year Earnings Per Common Share Of $0.18 And $0.60, Respectively

LAKE SUCCESS, N.Y., Jan. 29, 2014 /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 available to common shareholders of $18.0 million, or $0.18 diluted earnings per common share ("diluted EPS"), for the quarter ended December 31, 2013, compared to net income available to common shareholders of $16.9 million, or $0.17 diluted EPS, for the quarter ended December 31, 2012. For the year ended December 31, 2013, net income available to common shareholders totaled $59.4 million, or $0.60 diluted EPS, compared to $53.1 million, or $0.55 diluted EPS, for the year ended December 31, 2012.

Included in the 2013 full year results is a $4.3 million prepayment charge ($2.8 million, or $0.03 per common share, after tax) for the early extinguishment of debt during the 2013 second quarter in connection with the redemption of $125 million of capital securities. Included in the 2012 fourth quarter is a $6.0 million ($3.9 million, or $0.04 per common share, after tax) gain resulting from the sale of the Company's entire holdings of Freddie Mac preferred stock and a $2.2 million ($1.4 million, or $0.02 per common share, after tax) charge related to the settlement of employment agreements associated with executive retirements in the 2012 first quarter. Also included in the 2012 full year results are net charges totaling $3.4 million ($2.2 million, or $0.02 per common share, after-tax), representing severance related expenses associated with cost control initiatives implemented in the 2012 first quarter, and a $1.2 million ($785,000, or $0.01 per common share, after tax) charge related to the early extinguishment of debt in the 2012 third quarter.

Financial Highlights

Loan Portfolio Shift Continues:

• Multifamily/commercial real estate ("MF/CRE") mortgage loan originations totaled $1.6 billion for the year ended December 31, 2013.
• MF/CRE loans continue to become a larger percentage of the loan portfolio, increasing to 33% of total loans at December 31, 2013 from 24% at December 31, 2012.
• At December 31, 2013, the MF/CRE pipeline totaled approximately $312 million.

Deposits:

• Business deposits increased 32% from December 31, 2012 to $650.1 million at December 31, 2013.
• Core deposits increased to 67% of deposits at December 31, 2013, up from 62% at December 31, 2012.

Net Interest Margin:

• For the year ended December 31, 2013, the net interest margin increased to 2.25% from 2.16% for the 2012 comparable period.

Operating Expense Improvement:

• Year over year decline in operating expenses achieved in part through cost control initiatives implemented in 2012 resulting in lower compensation and benefits expense, primarily pension related, coupled with lower FDIC insurance premium expense and other expense.

Monte N. Redman, President and Chief Executive Officer of Astoria, commenting on the 2013 fourth quarter stated, "We are pleased with the results that we have reported today which we believe demonstrate that our plan to strategically reposition our balance sheet continues to gain traction.  On the asset side of the balance sheet, our MF/CRE loan portfolio continued to grow and now represents 33% of our loan portfolio, well on its way towards our target of 45% by the end of 2015.  Likewise, on the liability side, our continued focus on growing business banking continues to pay dividends by providing us with low cost business deposits, which have grown 32% during the year ended December 31, 2013." 

Board Declares Quarterly Cash Dividend of $0.04 Per Share; Sets Annual Shareholder Meeting Date

The Board of Directors of the Company, at its January 29, 2014 meeting, declared a quarterly cash dividend of $0.04 per common share.  The dividend is payable on March 1, 2014 to shareholders of record as of February 14, 2014.  This is the seventy-fifth consecutive quarterly cash dividend declared by the Company. In addition, the Board established May 21, 2014 as the date for the Annual Meeting of Shareholders, and set March 27, 2014 as the voting record date. In addition, as stated earlier today in a press release, the Company announced that Jane D. Carlin has been appointed to serve as a director of both the Company and Astoria Federal effective January 29, 2014.

Fourth Quarter and Full Year Earnings Summary

Net interest income for the quarter ended December 31, 2013 totaled $86.8 million compared to $86.2 million for the previous quarter and $87.4 million for the 2012 fourth quarter.  The net interest margin for the quarter ended December 31, 2013 increased to 2.31% from 2.28% for the previous quarter and 2.21% for the 2012 fourth quarter.  For the year ended December 31, 2013, net interest income totaled $341.9 million, compared to $348.3 million for the year ended December 31, 2012, and the net interest margin increased to 2.25% for the full year 2013 from 2.16% for the full year 2012. 

For the quarter ended December 31, 2013, a $3.4 million provision for loan losses was recorded compared to $2.5 million for the previous quarter and $10.9 million for the 2012 fourth quarter.  For the year ended December 31, 2013, the provision for loan losses totaled $19.6 million compared to $40.4 million for the year ended December 31, 2012. "The level of provision is a continued reflection of the improvement in our asset quality metrics, as well as the contraction of the overall loan portfolio.  The allowance for loan losses coverage ratio to the total loan portfolio remains strong at 1.12%," Mr. Redman commented. 

Non-interest income for the quarter ended December 31, 2013 totaled $17.4 million compared to $21.6 million for the 2012 fourth quarter.  This decrease is due primarily to a decrease in gain on sales of securities, partially offset by an increase in mortgage banking income, net, including a partial recovery of the MSR valuation allowance of $2.3 million. For the year ended December 31, 2013, non-interest income totaled $69.6 million compared to $73.2 million for the year ended December 31, 2012.  This decrease is primarily due to decreases in gain on sales of securities, customer service fees, and income from bank owned life insurance, partially offset by an increase in mortgage banking income, net, including a partial recovery of the MSR valuation allowance totaling $5.4 million.

General and administrative ("G&A") expense for the quarter ended December 31, 2013 totaled $69.0 million compared to $72.5 million for the previous quarter and $73.2 million for the 2012 fourth quarter. The decrease from the previous quarter is primarily due to decreases in advertising expense and other expense.  The decrease from the 2012 fourth quarter is due to the decline in FDIC insurance premium expense and decreases in advertising expense and other expense. For the year ended December 31, 2013, G&A expense decreased $12.6 million, or 4%, to $287.5 million from $300.1 million for the year ended December 31, 2012.  This decrease is primarily due to decreases in FDIC insurance premium expense, compensation and benefits expense, and other expense which were partially offset by increases in occupancy, equipment and systems expense and extinguishment of debt expense.

Balance Sheet Summary

Total assets decreased $228.4 million and $702.9 million, from September 30, 2013 and December 31, 2012, respectively, and totaled $15.8 billion at December 31, 2013.  The declines were primarily due to decreases in the residential mortgage loan portfolio, partially offset by an increase in the securities portfolio since December 31, 2012.  The loan portfolio decreased $99.5 million and $781.9 million from September 30, 2013 and December 31, 2012, respectively, and totaled $12.4 billion at December 31, 2013. 

The residential (one-to-four family) mortgage loan portfolio totaled $8.0 billion at December 31, 2013, compared to $8.3 billion at September 30, 2013 and $9.7 billion at December 31, 2012. For the quarter and year ended December 31, 2013, residential loan originations for portfolio totaled $158.2 million and $996.0 million, respectively, compared to $220.4 million and $2.5 billion, respectively, for the comparable 2012 periods.  The weighted average loan-to-value ratios of the residential loan production for portfolio were approximately 72% and 66% at origination for the quarter and year ended December 31, 2013, respectively, and the loan amounts averaged approximately $582,000 and $694,000, respectively.  Residential loan prepayments for the quarter and year ended December 31, 2013 totaled $323.2 million and $2.3 billion, respectively, compared to $633.7 million and $2.9 billion, respectively, for the comparable 2012 periods.  "During the fourth quarter, as longer-term interest rates moved higher, we experienced a more dramatic slowdown in residential loan prepayments,  the early signs of which we had begun to see in the 2013 third quarter. In addition we experienced a decrease in residential mortgage originations as the market shifted away from a refinance market towards more of a purchase market," Mr. Redman commented.  

The MF/CRE mortgage loan portfolio increased $168.6 million, or 4%, from September 30, 2013 and $928.8 million, or 29%, from December 31, 2012 to $4.1 billion at December 31, 2013, and represents 33% of the total loan portfolio.  For the quarter and year ended December 31, 2013, MF/CRE loan originations totaled $325.2 million and $1.6 billion, respectively, compared to $383.4 million and $1.6 billion, respectively, for the 2012 comparable periods.  The 2013 quarter and year ended December 31, 2013 MF/CRE loan production was originated with weighted average loan-to-value ratios of approximately 29% and 43%, respectively, weighted average debt coverage ratios of approximately 1.68%  and 1.74%, respectively, and loan balances averaging approximately $2.5 million and $2.6 million, respectively.  MF/CRE loan prepayments for the quarter and year ended December 31, 2013 totaled $125.1 million and $495.4 million, respectively, compared to $150.6 million and $694.8 million for the comparable 2012 periods.  At December 31, 2013, the MF/CRE pipeline totaled approximately $312 million.  Mr. Redman stated, "Similar to what we saw in the residential mortgage loan portfolio, as longer-term rates moved higher, deal activity appears to have slowed down which has led to a decrease in our pipeline from where it stood earlier in 2013."  

Deposits decreased $205.1 million and $588.6 million from September 30, 2013 and December 31, 2012, respectively, to $9.9 billion at December 31, 2013.  The year-to-date decreases were primarily due to decreases in higher cost certificates of deposit ("CDs"), partially offset by a net increase in lower cost core deposits. Core deposits totaled $6.6 billion, or 67% of total deposits, and had a weighted average rate of 11 basis points at December 31, 2013, compared to 62% of total deposits at December 31, 2012.  CDs, which totaled $3.3 billion at December 31, 2013, or 33% of total deposits, declined 17% from December 31, 2012.    

Borrowings totaled $4.1 billion at December 31, 2013, a decrease of $236.3 million from December 31, 2012. The decrease in borrowings, coupled with the growth in business banking deposits and decrease in CDs, is a further reflection of our continuing efforts to reposition the mix of liabilities. 

Stockholders' equity totaled $1.5 billion, or 9.62% of total assets, at December 31, 2013, an increase of $225.5 million from December 31, 2012, primarily the result of the issuance of preferred stock in the 2013 first quarter, undistributed net income and other comprehensive income.  Astoria Federal continues to be designated as well-capitalized with Tier 1 leverage, Tangible, Total risk-based and Tier 1 risk-based capital ratios of 9.93%, 9.93%, 17.05% and 15.79%, respectively, at December 31, 2013.

Asset Quality

Non-performing loans ("NPLs"), including troubled debt restructurings ("TDRs") of $109.8 million, totaled $332.0 million, or 2.10% of total assets, at December 31, 2013, compared to $315.1 million, including TDRs of $32.8 million, or 1.91% of total assets, at December 31, 2012. Included in the $332.0 million of non-performing loans at December 31, 2013 are $81.5 million of loans which are current or less than 90 days past due compared to $13.7 million at December 31, 2012.

Residential NPLs totaled $305.6 million, of which $234.4 million are 90 days or more delinquent, at December 31, 2013, compared to $291.1 million, of which $280.7 million are 90 days or more delinquent, at December 31, 2012. Of the $234.4 million of residential NPLs delinquent 90 or more days, $202.7 million, or 86%, represent 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.  MF/CRE NPLs totaled $20.4 million and consumer and other NPLs totaled $6.0 million at December 31, 2013 compared to $17.5 million and $6.5 million, respectively, at December 31, 2012. Real estate owned, net totaled $42.6 million at December 31, 2013 compared to $28.5 million at December 31, 2012.

The following table illustrates a two-year migration trend for loan delinquencies and NPLs:

 

The table below details, as of December 31, 2013, the ten largest concentrations by state of residential mortgage loans and the respective non-performing loan totals in those states. 

 

 

Included in the $5.0 million of residential loan net charge-offs in the 2013 fourth quarter are $3.3 million of charge-offs on $18.4 million of NPLs which, at 180 days delinquent and annually thereafter, were reviewed in the 2013 fourth quarter and charged-off, as needed, to the estimated fair value of the underlying collateral less estimated selling costs.  "Although we continued to see increased levels of loans shifting from NPL status to real estate owned during the quarter, we expect the level of NPLs 90 days or more delinquent will remain somewhat elevated for some time, especially in those states requiring judicial foreclosure.  It is important to note that the loss potential remaining on these NPLs has been greatly reduced as a result of our having already reviewed, marked down, and charged-off as necessary, 86% of the residential NPLs 90 days or more delinquent, to their adjusted fair value less estimated selling costs," Mr. Redman noted.

Future Outlook 

Commenting on the future outlook, Mr. Redman stated, "It is clear to us that our strategy to become a full service community bank is taking hold.  As we move forward we will continue to execute this strategy to further diversify the balance sheet and improve our net interest margin. Business banking will remain a focus and we expect to open our first full-service branch in Manhattan by the end of the first quarter.  In addition, we plan to open two more full-service branches in the second half of the year in prime locations within our market from which to better serve our business banking clients.  We anticipate that our net interest margin in 2014 will be higher than the 2.25% margin we achieved in 2013.  We believe we will experience a growth in earning assets in 2014 as the contraction we have witnessed over the past several years in the residential portfolio continues to slow down and the growth in our MF/CRE portfolio starts to outpace the shrinkage."

Earnings Conference Call January 30, 2014 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, January 30, 2014 at 10:00 a.m. (ET).   The toll-free dial-in number is (877) 709-8150.  A telephone replay will be available on January 30, 2014 from 1:00 p.m. (ET) through midnight Saturday, February 8, 2014 (ET).   The replay number is (877) 660-6853, ID# 421313.  The conference call will also be simultaneously webcast on the Company's website www.astoriafederal.com and archived for one year.

About Astoria Financial Corporation

Astoria Financial Corporation, with assets of $15.8 billion, is the holding company for Astoria Federal Savings and Loan Association.  Established in 1888, Astoria Federal, with deposits in New York totaling $9.9 billion, is the second 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 branch locations, one business banking office, and multiple delivery channels, including its enhanced website, www.astoriafederal.com.  Astoria Federal commands a significant 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 residential mortgage loans through its banking and loan production offices in New York, a broker network in four states, primarily along the East Coast, and correspondent relationships covering nine states and the District of Columbia and multi-family and commercial real estate loans, primarily on rent controlled and rent stabilized apartment buildings, located in New York City and the surrounding metropolitan area.

Forward Looking Statements

This press release 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; enhanced supervision and examination by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau; 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 press release.

 Tables Follow

SOURCE Astoria Financial Corporation