(Source: PRNewswire-FirstCall)
LAKE SUCCESS, N.Y., July 22 /PRNewswire-FirstCall/ -- Astoria Financial Corporation ("Astoria", the "Company"), the holding company for Astoria Federal Savings and Loan Association ("Astoria Federal"), today reported net income of $2.7 million, or $0.03 diluted earnings per share ("EPS"), (operating income of $10.1 million, or $0.11 operating EPS), for the quarter ended June 30, 2009, compared to $33.5 million, or $0.37 EPS for the comparable 2008 period. For the six months ended June 30, 2009, net income totaled $11.5 million, or $0.12 EPS (operating income of $22.4 million, or $0.24 operating EPS), compared to $62.4 million, or $0.68 EPS, for the comparable 2008 period.
Included in the 2009 second quarter results are two charges totaling $11.4 million ($7.4 million, or $0.08 EPS, after-tax), which are not routine to our core operations: the FDIC deposit insurance special assessment totaling $9.9 million and a $1.5 million lower of cost or market write-down on a former mortgage origination building held-for-sale ("Mortgage building write-down"). Included in the six month period ended June 30, 2009, in addition to the aforementioned items, is an other-than-temporary impairment ("OTTI"), non-cash charge of $5.3 million ($3.4 million, or $0.04 EPS, after-tax) reported in the 2009 first quarter, to write-off the remaining cost basis of our investment in Freddie Mac preferred stock. Operating income and operating EPS, representing net income and EPS determined in accordance with generally accepted accounting principles ("GAAP") excluding the after-tax effects of the FDIC deposit insurance special assessment, the OTTI charge and the Mortgage building write-down, are non-GAAP measures which provide a meaningful comparison for effectively evaluating Astoria's operating results. Operating income and operating EPS equaled net income and diluted EPS for the 2008 second quarter and six months. Please refer to the reconciliation of GAAP measures and non-GAAP measures table in this release.
Commenting on the second quarter results, George L. Engelke, Jr., Chairman and Chief Executive Officer of Astoria, stated, "On an operating basis, our year over year quarter and six month results were primarily affected by increased credit costs associated with the national recession and, on a linked quarter basis, from a reduction in interest earning assets resulting from shrinkage of the securities and loan portfolios due primarily to repayments in the second quarter, coupled with a lag in deploying excess liquidity. During the second half of 2009, we expect to deploy the excess liquidity into higher yielding assets, which will have a positive impact on net income and the net interest margin. Additionally, we expect problem assets to remain at manageable levels as we pro-actively address our non-performing loans."
Board Declares Quarterly Cash Dividend of $0.13 Per Share
The Board of Directors of the Company, at their July 22, 2009 meeting, declared a quarterly cash dividend of $0.13 per common share. The dividend is payable on September 1, 2009 to shareholders of record as of August 17, 2009. This is the fifty-seventh consecutive quarterly cash dividend declared by the Company.
Second Quarter and Six Month Earnings Summary
Net interest income for the quarter ended June 30, 2009 increased to $109.1 million, or 18%, from $92.6 million for the 2008 second quarter. For the six months ended June 30, 2009, net interest income increased to $220.7 million, or 27%, compared to $173.4 million for the comparable 2008 period.
The net interest margin for the quarter ended June 30, 2009 was 2.16%, unchanged from the previous quarter and 35 basis points higher than 1.81% for the 2008 second quarter. On a linked quarter basis, excess liquidity reduced the margin five basis points. The year-over-year increase in the margin was due to the cost of liabilities declining more rapidly than the yield on interest earning assets.
"We expect a resumption of net interest margin expansion in the third quarter, as we realize the benefit from deploying excess liquidity into higher yielding assets coupled with the repricing benefit from maturing non-Liquid CDs with interest rates considerably above current market rates, which will be somewhat offset by a decline in asset yields. Non-Liquid CDs totaling $3.2 billion are scheduled to mature in the 2009 second half, with a weighted average rate of 3.32%. Non-Liquid CDs were issued or repriced in June 2009 at a weighted average rate of 1.73%. Further illustrating the pace of decline in deposit costs, the average cost of deposits for the second quarter was 2.42%, while the weighted average cost of deposits at quarter-end was 2.30%," Mr. Engelke noted.
For the quarter ended June 30, 2009, a $50.0 million provision for loan losses was recorded which was equal to the provision for the previous quarter and greater than the $7.0 million provision for the 2008 second quarter. For the six months ended June 30, 2009, provision for loan losses totaled $100.0 million compared to $11.0 million for the comparable period in 2008. Mr. Engelke noted, "The 2009 provisions recognize the impact that the continued weakness in both the national housing market and the economy in general, particularly increasing unemployment, have had on our overall level of loan delinquencies and loan charge-offs."
Non-interest income for the quarter ended June 30, 2009 totaled $22.0 million, excluding the Mortgage building write-down, compared to $24.8 million for the 2008 second quarter. For the six months ended June 30, 2009, non-interest income, excluding the Mortgage building write-down and the OTTI charge, totaled $43.3 million, compared to $47.3 million for the comparable 2008 period.
General and administrative ("G&A") expense for the quarter ended June 30, 2009, excluding the FDIC special assessment, totaled $66.2 million compared to $60.0 million for the 2008 second quarter. For the six months ended June 30, 2009, G&A expense totaled $130.1 million, excluding the FDIC special assessment, compared to $118.2 million for the six months ended June 30, 2008. The increases were due primarily to an increase in FDIC insurance premiums, beyond the FDIC special assessment, and compensation and benefits expense, primarily pension expense.
Balance Sheet Summary
The loan portfolio declined $449.0 million from the previous quarter and $739.5 million from December 31, 2008 and totaled $16.0 billion at June 30, 2009. The primary reason for the declines were decreases of $262.2 million and $454.5 million, respectively, in the one-to-four family loan portfolio, primarily due to accelerated prepayment activity, as well as decreases of $171.5 million and $266.2 million, respectively, in the combined multi-family and commercial real estate ("CRE") portfolio. At June 30, 2009, the one-to-four family loan portfolio totaled $11.9 billion and the multi-family/CRE portfolio totaled $3.6 billion.
For the quarter and six months ended June 30, 2009, one-to-four family loan originations for portfolio totaled $668.5 million and $1.1 billion, respectively, compared to $1.5 billion and $2.1 billion, respectively, for the comparable 2008 periods. One-to-four family loan prepayments for the quarter and six months ended June 30, 2009 totaled $810.1 million and $1.3 billion, respectively, compared to $821.3 million and $1.7 billion, respectively, for the comparable 2008 periods. The loan-to-value ("LTV") ratio of the one-to-four family loan production for portfolio for the 2009 second quarter and six months each averaged 56% at origination and the loan amount each averaged approximately $720,000. Based on our decision at the end of March 2009 to more competitively price our 5/1 jumbo ARM and retain 15 year jumbo fixed-rate loans, our loan pipeline at June 30, 2009 increased 65% from the pipeline at March 31, 2009. This was achieved while maintaining our strict underwriting standards.
Deposits were relatively flat from the previous quarter and increased $130.3 million from December 31, 2008 to $13.6 billion at June 30, 2009. Importantly, low-cost savings, money market and checking account deposits increased $93.8 million and $233.5 million for the 2009 second quarter and six months, respectively. Commenting on deposit flows, Mr. Engelke noted, "During the second quarter we reduced our focus on CD deposits and slowed deposit growth. This was done to offset the impact of accelerated mortgage prepayment activity, which outpaced our loan production. This notwithstanding, during the 2009 six month period, we achieved a 6.5% increase in low-cost savings, money market and checking deposits."
Borrowings decreased $249.9 million from the previous quarter and $1.1 billion from December 31, 2008 to $5.9 billion, at June 30, 2009. Total assets declined $303.5 million from the prior quarter and $880.8 million from December 31, 2008 to $21.1 billion at June 30, 2009.
Stockholders' equity was $1.2 billion, or 5.68% of total assets at June 30, 2009. Astoria Federal continues to be designated as well-capitalized with core, tangible, risk-based and Tier 1 risk-based capital ratios of 6.62%, 6.62%, 12.73% and 11.46%, respectively, at June 30, 2009.
Asset Quality
Non-performing loans ("NPL"), including troubled debt restructurings ("TDR") of $47.8 million, totaled $360.0 million, or 1.71% of total assets at June 30, 2009, an increase of $23.4 million from the previous quarter, net of $46.1 million of non-performing loans either sold or classified as held-for-sale. At June 30, 2009, one-to-four family non-performing loans totaled $287.9 million and multi-family/CRE non-performing loans totaled $68.2 million compared to $245.5 million and $88.7 million, respectively, at March 31, 2009. Important to note, of the $360.0 million of non-performing loans, $166.5 million, or 46%, represent residential loans which, at 180 days delinquent and annually thereafter, were reviewed and adjusted, 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:
Combined Change Total 30-59 60-89 30-89 from 90 + Days 30-90+ Days Days Days Previous Past Due Days (In millions) Past Due Past Due Past Due Quarter (NPL) Past Due At June 30, 2008 $134.5 $51.0 $185.5 +$0.4 $128.6 $314.1 At Sept. 30, 2008 $171.0 $54.7 $225.7 +$40.2 $164.8 $390.5 At Dec. 31, 2008 $229.8 $70.1 $299.9 +$74.2 $238.6 $538.5 At March 31, 2009 $215.9 $105.7 $321.6 +$21.7 $336.6 $658.2 At June 30, 2009 $210.5 $109.7 $320.2 $(1.4) $360.0 $680.2
The table below details, as of June 30, 2009, 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 table at the end of this release.
(In millions) Total 1-4 % of 1-4 Total 1-4 NPLs as % Family Family Loan Family of State State Loans Portfolio NPLs Total ----- -------- --------- ------- ------- New York $2,904.2 24% $31.0 1.07% Illinois $1,310.1 11% $30.9 2.36% California $1,235.4 10% $47.9 3.88% Connecticut $1,234.9 10% $24.1 1.95% New Jersey $962.2 8% $28.4 2.95% Virginia $854.7 7% $24.5 2.87% Massachusetts $839.8 7% $14.9 1.77% Maryland $815.2 7% $37.7 4.62% Washington $320.1 3% $2.3 0.72% Florida $289.9 2% $20.6 7.11% ------ ----- Top 10 States $10,766.5 91%(1) $262.3 2.44% All other states (2) $1,128.6 9% $25.6 2.27% -------- ----- Total 1-4 Family Portfolio $11,895.1 100% $287.9 2.42% ========= ==== ====== (1) Does not foot due to rounding. (2) Includes 29 states and Washington, DC
Net loan charge-offs for the quarter ended June 30, 2009 totaled $38.9 million (of which $20.6 million represented one-to-four family loans and $17.7 million represented multi-family/CRE loans) compared to $19.8 million (of which $11.2 million represented one-to-four family loans and $8.2 million represented multi-family/CRE loans) for the 2009 first quarter. Included in the $20.6 million of one-to-four family loan charge-offs are $13.9 million of charge-offs on $67.4 million of non-performing loans which, at 180 days delinquent, were reviewed and adjusted to the estimated fair value of the underlying collateral less estimated selling costs. Included in the $17.7 million of multi-family/CRE loan charge-offs were $15.7 million on $46.1 million of non-performing loans that were either sold or classified as held-for-sale. Commenting on asset quality, Mr. Engelke noted, "The prolonged recession and high unemployment continues to strain the financial condition of prime residential borrowers and their ability to remain current on their mortgage loans and the ability of tenants in multi-family properties to pay rent on their apartments. Important to note, although we experienced increased foreclosures, credit costs and non-performing loans, the pace of growth in non-performing loans slowed from the previous two quarters. Additionally, loans delinquent 30-89 days decreased $1.4 million from March 31, 2009, considerably less than the $21.7 million and $74.2 million increases, respectively, in the previous two quarters."
Future Outlook
Commenting on the outlook for the remainder of 2009, Mr. Engelke stated, "The year continues to present us with both opportunities and challenges. Although we are encouraged by the linked quarter decline in 30-89 day loan delinquencies and the reduced pace of growth in non-performing loans, we expect that job losses and economic weakness will continue to put pressure on borrowers. This may result in somewhat higher delinquencies and non-performing loans; however, credit costs should continue to remain manageable.
With respect to our fundamental operating performance, we expect increases in net interest income and the net interest margin going forward as we begin to realize the benefit from the deployment of excess liquidity, coupled with significant CD maturities throughout the year at rates that are considerably above current market rates. With respect to loan growth, although our mortgage loan pipeline has increased 65% this quarter, lower market rates for 30-year conforming mortgage loans coupled with the increased conforming loan limits in many of the markets we operate in, will accelerate loan prepayments in our one-to-four family loan portfolio and will temper loan growth in the near term."
Astoria Financial Corporation, with assets of $21.1 billion, is the holding company for Astoria Federal Savings and Loan Association. Established in 1888, Astoria Federal, with deposits in New York totaling $13.6 billion, is the largest thrift depository headquartered 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, http://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 July 23, 2009 at 10:00 a.m. (ET)
The Company, as previously announced, indicated that Mr. Engelke will host an earnings conference call Thursday morning, July 23, 2009 at 10:00 a.m. (ET). The toll-free dial-in number is (888) 562-3356, ID# 14032640. A telephone replay will be available on July 23, 2009 from 1:00 p.m. (ET) through July 31, 2009, 11:59 p.m. (ET). The replay number is (800) 642-1687, ID#: 14032640. The conference call will also be simultaneously webcast on the Company's website http://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 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.
