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SEC Filings, Earing Reports, Press Releases
Astoria Financial Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2012 11:22AM
Astoria Financial Corp. (AF) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:Net interest income, the net interest rate spread and the net interest margin for the three months ended March 31, 2012 were lower, as compared to the same period one year earlier, primarily due to a more rapid decline in the yields on average interest-earning assets than the decline in the costs of average interest-bearing liabilities. Interest income for the three months ended March 31, 2012 declined compared to the 2011 first quarter primarily due to the decreases in the average yields on one-to-four family mortgage loans and mortgage-backed and other securities, coupled with a decrease in the average balance of mortgage loans. Interest expense for the three months ended March 31, 2012 also decreased, compared to the three months ended March 31, 2011, reflecting decreases in the average balances and average costs of certificates of deposit and borrowings.
We analyze our historical loss experience over twelve month, fifteen month, eighteen month and twenty-four month periods, however our quantitative allowance coverage percentages are based on our twelve month loss history. We believe the twelve month loss analysis is most reflective of current conditions and the potential impact on our future loss exposure. However, the longer periods provide further insight into trends or anomalies and can be a factor in making adjustments to the twelve month analysis. Also, for a particular loan type we may not have sufficient loss history to develop a reasonable estimate of loss. In that circumstance we would consider our loss experience for other, similar loan types. Additionally, multi-family and commercial real estate loss experience may be adjusted based on the composition of the losses (loan sales, short sales and partial charge-offs). We update our historical loss analyses quarterly and evaluate the need to modify our quantitative allowance as a result of our updated charge-off and loss analyses. The historical loss component of the allowance for loan losses is determined by applying the results of this quantitative analysis to each of our loans.
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 other-than-temporary impairment, or 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 March 31, 2012, we held 33 securities with an estimated fair value totaling $143.7 million which had an unrealized loss totaling $416,000. Of the securities in an unrealized loss position at March 31, 2012, $14.6 million, with an unrealized loss of $203,000, have been in a continuous unrealized loss position for more than twelve months. At March 31, 2012, 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 three months ended March 31, 2012 decreased $17.4 million to $10.0 million, from $27.4 million for the three months ended March 31, 2011, primarily due to a reduced level of net interest income, increased non-interest expense and higher provision for loan losses, partially offset by an increase in non-interest income. Diluted earnings per common share decreased to $0.11 per share for the three months ended March 31, 2012, from $0.29 per share for the three months ended March 31, 2011. Return on average assets decreased to 0.23% for the three months ended March 31, 2012, from 0.61% for the three months ended March 31, 2011, due to the decrease in net income, partially offset by a decrease in average assets. Return on average stockholders’ equity decreased to 3.19% for the three months ended March 31, 2012, from 8.76% for the three months ended March 31, 2011. Return on average tangible stockholders’ equity, which represents average stockholders’ equity less average goodwill, decreased to 3.75% for the three months ended March 31, 2012, from 10.29% for the three months ended March 31, 2011. The decreases in the returns on average stockholders’ equity and average tangible stockholders’ equity for the three months ended March 31, 2012, compared to the three months ended March 31, 2011, were primarily due to the decrease in net income.
Our result of operations for the three months ended March 31, 2012 include net charges of $3.4 million ($2.2 million, after tax) included in non-interest expense related to compensation and benefits expense associated with cost control initiatives implemented in the 2012 first quarter. For the three months ended March 31, 2012, these net charges reduced diluted earnings per common share by $0.02 per share, return on average assets by 6 basis points, return on average stockholders’ equity by 71 basis points and return on average tangible stockholders’ equity by 83