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Astoria Financial Corp. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 28, 2012 01:29PM

Astoria Financial Corp. (AF) filed Annual Report for the period ended 2011-12-31. Astoria Finl Cp has a market cap of $895.7 million; its shares were traded at around $9.37 with a P/E ratio of 12.8 and P/S ratio of 1.2. The dividend yield of Astoria Finl Cp stocks is 5.7%.



Highlight of Business Operations:

Total assets decreased during the year ended December 31, 2011, primarily due to a decrease in our loan portfolio. However, the pace of the decline in the balance sheet and loan portfolio slowed significantly during the second half of 2011 and total assets increased slightly during the 2011 fourth quarter. The decrease in our loan portfolio was due to decreases in our multi-family, one-to-four family and commercial real estate mortgage loan portfolios resulting from repayments which outpaced our origination and purchase volume. One-to-four family mortgage loan repayments remained at elevated levels as interest rates on thirty year fixed rate conforming mortgages, which we do not retain for portfolio, remained at historic lows and as loans in our portfolio which qualified under the expanded conforming loan limits were refinanced into fixed rate conforming mortgages. The rise in interest rates on thirty year fixed rate mortgages at the end of the 2010 fourth quarter and into the 2011 first quarter led to a decrease in loan repayments which resulted in a significantly slower pace of decline in our one-to-four family mortgage loan portfolio during the first two quarters of 2011, compared to the 2010 fourth quarter. The decrease in interest rates on thirty year fixed rate mortgages during the 2011 second and third quarters, coupled with the flattening of the U.S. Treasury yield curve during the second half of 2011, led to an increase in mortgage loan repayments during the second half of 2011. However, the one-to-four family mortgage loan portfolio increased during the 2011 third quarter, which was the first increase in the portfolio in more than two years, and remained flat at December 31, 2011 compared to September 30, 2011. The decline in the multi-family and commercial real estate mortgage loan portfolio was due to the absence of our lending in this market during much of 2011. During the 2011 third quarter, we resumed originations of multi-family and commercial real estate loans in select locations within the New York metropolitan area. We expect the resumption of multi-family and commercial real estate lending should help to mitigate the negative impact of U.S. government programs that impede our ability to grow the one-to-four family mortgage loan portfolio profitably and should result in loan portfolio and balance sheet growth in 2012. The securities portfolio decreased during the year ended December 31, 2011 as a result of cash flows from repayments exceeding securities purchased. We expect to maintain our securities portfolio at, or slightly higher than, the December 31, 2011 level throughout 2012.

Net interest income decreased for the year ended December 31, 2011, compared to the year ended December 31, 2010, primarily due to a decline in average interest-earning assets. As previously noted, the negative impact of the U.S. government programs that impede our ability to grow the one-to-four family mortgage loan portfolio profitably and the absence of multi-family and commercial real estate mortgage loans during much of 2011 resulted in a significant decline in average interest-earning assets. Interest income for the year ended December 31, 2011 decreased, compared to the year ended December 31, 2010, primarily due to decreases in the average balances of mortgage loans and mortgage-backed and other securities, coupled with decreases in the average yields on one-to-four family mortgage loans and mortgage-backed and other securities. Interest expense for the year ended December 31, 2011 decreased, compared to the year ended December 31, 2010, primarily due to decreases in the average balances of borrowings and certificates of deposit, coupled with a decrease in the average cost of certificates of deposit. The net interest margin and the net interest rate spread decreased for the year ended December 31, 2011, compared to the year ended December 31, 2010, reflecting a significant decrease in the yield on average interest-earning assets, substantially offset by a decline in the cost of average interest-bearing liabilities.

Non-interest income decreased for the year ended December 31, 2011, compared to the year ended December 31, 2010, primarily due to decreases in other non-interest income, customer service fees and mortgage banking income, net, partially offset by an increase in income from BOLI. The decrease in other non-interest income was primarily due to a litigation settlement gain (Goodwill Litigation) and net gain on sales of non-performing loans held-for-sale recognized during the year ended December 31, 2010, partially offset by an asset impairment charge recorded in the 2010 second quarter. Non-interest expense increased for the year ended December 31, 2011, compared to the year ended December 31, 2010,

The fair value of our securities 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 December 31, 2011, we held 36 securities with an estimated fair value totaling $71.3 million which had an unrealized loss totaling $462,000. Of the securities in an unrealized loss position at December 31, 2011, $15.3 million, with an unrealized loss of $291,000, have been in a continuous unrealized loss position for more than twelve months. At December 31, 2011, 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.

Net income for the year ended December 31, 2011 decreased $6.5 million to $67.2 million, from $73.7 million for the year ended December 31, 2010. Diluted earnings per common share decreased to $0.70 per share for the year ended December 31, 2011, from $0.78 per share for the year ended December 31, 2010. Return on average assets was 0.39% for the year ended December 31, 2011 and 0.38% for the year ended December 31, 2010. Return on average stockholders’ equity decreased to 5.31% for the year ended December 31, 2011, from 6.02% for the year ended December 31, 2010. Return on average tangible stockholders’ equity, which represents average stockholders’ equity less average goodwill, decreased to 6.22% for the year ended December 31, 2011, from 7.09% for the year ended December 31, 2010. The decreases in the returns on average stockholders’ equity and average tangible stockholders’ equity for the year ended December 31, 2011, compared to the year ended December 31, 2010, were due to the decrease in net income, coupled with an increase in average stockholders’ equity.

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