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SEC Filings, Earing Reports, Press Releases
Astoria Financial Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 5, 2010 11:34AM
Astoria Financial Corp. (AF) filed Quarterly Report for the period ended 2010-09-30.
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 each quarter of 2010 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 $206.2 million was required at September 30, 2010, compared to $211.0 million at June 30, 2010, $210.7 million at March 31, 2010 and $194.0 million at December 31, 2009, resulting in a provision for loan losses of $100.0 million for the nine months ended September 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 September 30, 2010, we had 26 securities with an estimated fair value totaling $68.6 million which had an unrealized loss totaling $598,000. Of the securities in an unrealized loss position at September 30, 2010, $23.5 million, with an unrealized loss of $568,000, have been in a continuous unrealized loss position for more than twelve months. At September 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. However, for the nine months ended September 30, 2010 and 2009, net deposit and borrowing activity resulted in a use of funds. Net cash provided by operating activities totaled $203.4 million during the nine months ended September 30, 2010 and $215.2 million during the nine months ended September 30, 2009. Deposits decreased $705.0 million during the nine months ended September 30, 2010 and decreased $261.3 million during the nine months ended September 30, 2009. The net decreases in deposits for the nine months ended September 30, 2010 and 2009 were primarily due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in savings, money market and NOW and demand deposit accounts. During the nine months ended September 30, 2010, we continued to allow high cost certificates of deposit to run off as total assets declined. The increases in low cost savings, money market and NOW and demand deposit accounts during the nine months ended September 30, 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. The increases in these types of accounts during the nine months ended September 30, 2009 reflected 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 and, to a lesser degree, for the purchase of securities. Gross mortgage loans originated and purchased for portfolio during the nine months ended September 30, 2010 totaled $2.24 billion, of which $1.88 billion were originations and $360.2 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 nine months ended September 30, 2009 totaling $2.24 billion, of which $1.97 billion were originations and $273.5 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. Purchases of securities totaled $563.5 million during the nine months ended September 30, 2010 and $706.6 million during the nine months ended September 30, 2009.
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 $162.0 million to $273.6 million at September 30, 2010, from $111.6 million at December 31, 2009. This increase reflects the cash flows from mortgage loan and securities repayments in excess of mortgage loan originations and purchases, securities purchases, deposit outflows and the repayment of borrowings, which were not redeployed by the end of the 2010 third quarter. At September 30, 2010, we had $1.39 billion in borrowings with a weighted average rate of 3.67% maturing over the next twelve months. We have the flexibility to either repay or rollover these borrowings as they mature. In addition, we had $4.87 billion in certificates of deposit and Liquid CDs at September 30, 2010 with a weighted average rate of 1.69% 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. However, should our balance sheet continue to contract, we may see a reduction in borrowings and/or deposits.
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