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SEC Filings, Earing Reports, Press Releases
Astoria Financial Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 6, 2010 11:31AM
Astoria Financial Corp. (AF) filed Quarterly Report for the period ended 2010-06-30.
Highlight of Business Operations:
Loan reviews are completed quarterly for all loans individually classified by our Asset Classification Committee. Individual loan reviews are generally completed annually for multi-family, commercial real estate and construction mortgage loans in excess of $2.0 million, commercial business loans in excess of $200,000, one-to-four family mortgage loans in excess of $1.0 million and troubled debt restructurings. In addition, we generally review annually borrowing relationships whose combined outstanding balance exceeds $2.0 million. Approximately fifty percent of the outstanding principal balance of these loans to a single borrowing entity will be reviewed annually.
As a result of our updated charge-off and loss analyses, we modified certain allowance coverage percentages during the 2010 first and second quarters to reflect our current estimates of the amount of probable losses inherent in our loan portfolio in determining our general valuation allowances. Based on our evaluation of the housing and real estate markets and overall economy, in particular, the unemployment rate and the levels and composition of our loan delinquencies, non-performing loans and net loan charge-offs, we determined that an allowance for loan losses of $211.0 million was required at June 30, 2010, compared to $210.7 million at March 31, 2010 and $194.0 million at December 31, 2009, resulting in a provision for loan losses of $80.0 million for the six months ended June 30, 2010. The balance of our allowance for loan losses represents management s best estimate of the probable inherent losses in our loan portfolio at the reporting dates.
The fair value of our investment portfolio is primarily impacted by changes in interest rates. In general, as interest rates rise, the fair value of fixed rate securities will decrease; as interest rates fall, the fair value of fixed rate securities will increase. We conduct a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. Our evaluation of OTTI considers the duration and severity of the impairment, our assessments of the reason for the decline in value, the likelihood of a near-term recovery and our intent and ability to not sell the securities. We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience. If such decline is deemed other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged to earnings as a component of non-interest income, except for the amount of the total OTTI for a debt security that does not represent credit losses which is recognized in other comprehensive income/loss, net of applicable taxes. At June 30, 2010, we had 32 securities with an estimated fair value totaling $109.4 million which had an unrealized loss totaling $1.2 million. Of the securities in an unrealized loss position at June 30, 2010, $81.9 million, with an unrealized loss of $953,000, have been in a continuous unrealized loss position for more than twelve months. At June 30, 2010, the impairments are deemed temporary based on (1) the direct relationship of the decline in fair value to movements in interest rates, (2) the estimated remaining life and high credit quality of the investments and (3) the fact that we do not intend to sell these securities and it is not more likely than not that we will be required to sell these securities before their anticipated recovery of the remaining amortized cost basis and we expect to recover the entire amortized cost basis of the security.
In addition to cash provided by principal and interest payments on loans and securities, our other sources of funds include cash provided by operating activities, deposits and borrowings. Net cash provided by operating activities totaled $134.7 million during the six months ended June 30, 2010 and $87.3 million during the six months ended June 30, 2009. Deposits decreased $563.8 million during the six months ended June 30, 2010 and increased $130.3 million during the six months ended June 30, 2009. The net decrease in deposits for the six months ended June 30, 2010 was primarily due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in savings, NOW and demand deposit and money market accounts. During the first half of 2010, we continued to allow high cost certificates of deposit to run off as total assets declined. The increases in low cost savings, NOW and demand deposit and money market accounts during the first half of 2010 appear to reflect customer preference for the liquidity these types of deposits provide over the rates currently offered for longer term certificates of deposit. We have, however, recently begun to offer aggressive rates on long term certificates of deposit to extend these deposits. The net increase in deposits for the six months ended June 30, 2009 was due to increases in savings, NOW and demand deposit and money market accounts, partially offset by decreases in Liquid CDs and certificates of deposit, and reflects the decrease in competition for core community deposits from that which we experienced during 2008.
Our primary use of funds is for the origination and purchase of mortgage loans. Gross mortgage loans originated and purchased for portfolio during the six months ended June 30, 2010 totaled $1.60 billion, of which $1.35 billion were originations and $243.4 million were purchases, all of which were one-to-four family mortgage loans. This compares to gross mortgage loans originated and purchased for portfolio during the six months ended June 30, 2009 totaling $1.06 billion, of which $932.4 million were originations and $128.8 million were purchases, substantially all of which were one-to-four family mortgage loans. Overall one-to-four family mortgage loan origination and purchase volume for portfolio has been negatively affected by the historic low interest rates on thirty year fixed rate mortgages and the expanded conforming loan limits resulting in more borrowers opting for thirty year fixed rate mortgages which we do not retain for portfolio. Additionally, one-to-four family mortgage loan origination and purchase volume during the first half of 2009 was negatively affected by wider funding and mortgage interest rate spreads over market indices coupled with continued fallout from our mortgage loan application pipeline and an upward trend in interest rates. We also originated loans held-for-sale totaling $115.2 million during the six months ended June 30, 2010 and $248.0 million during the six months ended June 30, 2009. During the six months ended June 30, 2010 and 2009, we purchased securities to partially offset the cash flows from securities repayments. Purchases of
We maintain liquidity levels to meet our operational needs in the normal course of our business. The levels of our liquid assets during any given period are dependent on our operating, investing and financing activities. Cash and due from banks and repurchase agreements, our most liquid assets, increased $250.3 million to $361.9 million at June 30, 2010, from $111.6 million at December 31, 2009. This increase reflects the cash flows from securities calls and new borrowings which were not redeployed by the end of the 2010 second quarter. At June 30, 2010, we had $1.59 billion in borrowings with a weighted average rate of 3.39% maturing over the next twelve months. We have the flexibility to either repay or rollover these borrowings as they mature. In addition, we had $5.2 billion in certificates of deposit and Liquid CDs at June 30, 2010 with a weighted average rate of 1.76% maturing over the next twelve months. We have the ability to retain or replace a significant portion of such deposits based on our pricing and historical experience. As previously discussed, our efforts to extend certificates of deposit and borrowings aid in our interest rate risk management by reducing our exposure to rising interest rates.
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