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Astoria Financial Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 6, 2011 10:18AM

Astoria Financial Corp. (AF) filed Quarterly Report for the period ended 2011-03-31. Astoria Financial has a market cap of $1.4 billion; its shares were traded at around $14.18 with a P/E ratio of 14.8 and P/S ratio of 1.5. The dividend yield of Astoria Financial stocks is 3.6%.



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 with balances of $2.0 million or greater, commercial business loans with balances of $200,000 or greater and troubled debt restructurings. In addition, we generally review annually borrowing relationships whose combined outstanding balance is $2.0 million or greater. 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 2011 first quarter 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, the levels and composition of our loan delinquencies, non-performing loans and net loan charge-offs and the size and composition of our loan portfolio, we determined that an allowance for loan losses of $189.5 million was required at March 31, 2011, compared to $201.5 million at December 31, 2010, resulting in a provision for loan losses of $7.0 million for the three months ended March 31, 2011. 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.

At March 31, 2011, our MSR had an estimated fair value of $10.1 million and were valued based on expected future cash flows considering a weighted average discount rate of 10.95%, a weighted average constant prepayment rate on mortgages of 17.82% and a weighted average life of 4.2 years. At December 31, 2010, our MSR had an estimated fair value of $9.2 million and were valued based on expected future cash flows considering a weighted average discount rate of 10.96%, a weighted average constant prepayment rate on mortgages of 19.94% and a weighted average life of 3.8 years.

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 three months ended March 31, 2011 and 2010, net deposit and borrowing activity resulted in a use of funds. Net cash provided by operating activities totaled $103.0 million for the three months ended March 31, 2011 and $112.4 million for the three months ended March 31, 2010. Deposits decreased $123.7 million during the three months ended March 31, 2011 and decreased $127.4 million during the three months ended March 31, 2010. The net decreases in deposits for the three months ended March 31, 2011 and 2010 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 three months ended March 31, 2011 and 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 three months ended March 31, 2011 and 2010 appear to reflect customer preference for the liquidity these types of deposits provide. However, during the 2011 first quarter we have achieved some success in extending the terms of our retained certificates of deposit.

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 three months ended March 31, 2011 totaled $707.4 million, of which $495.0 million were originations and $212.4 million were purchases. This compares to gross mortgage loans originated and purchased for portfolio during the three months ended March 31, 2010 totaling $838.9 million, of which $699.6 million were originations and $139.3 million were purchases. All of our mortgage loan originations and purchases during 2010 and the 2011 first quarter 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 conforming mortgages, which we do not retain for portfolio, and the expanded conforming loan limits. Purchases of securities totaled $356.7 million during the three months ended March 31, 2011 and $308.7 million during the three months ended March 31, 2010.

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 $88.8 million to $207.8 million at March 31, 2011, from $119.0 million at December 31, 2010. At March 31, 2011, we had $1.05 billion in borrowings with a weighted average rate of 3.57% maturing over the next twelve months. We have the flexibility to either repay or rollover these borrowings as they mature. Included in our borrowings are various obligations which, by their terms, may be called by the securities dealers and the FHLB-NY. We believe the potential for these borrowings to be called does not present liquidity concerns as they have various call dates and coupons and we believe we can readily obtain replacement funding, albeit at higher rates. In addition, we had $3.04 billion in certificates of deposit and Liquid CDs at March 31, 2011 with a weighted average rate of 1.46% 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 continue to see a reduction in borrowings and/or deposits.

Read the The complete Report



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