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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 6, 2009 03:18PM
Astoria Financial Corp. (AF) filed Quarterly Report for the period ended 2009-09-30.
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 2009 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 continued weakness in the housing and real estate markets and overall economy, in particular, the significant increase in unemployment, and the increase in and composition of our delinquencies, non-performing loans and net loan charge-offs, we determined that an allowance for loan losses of $176.6 million was required at September 30, 2009, compared to $119.0 million at December 31, 2008, resulting in a provision for loan losses of $150.0 million for the nine months ended September 30, 2009. 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. At September 30, 2009, we had 56 securities with an estimated fair value totaling $165.0 million which had an unrealized loss totaling $3.2 million. Of the securities in an unrealized loss position at September 30, 2009, $110.7 million, with an unrealized loss of $2.9 million, have been in a continuous unrealized loss position for more than twelve months. At September 30, 2009, 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 $215.2 million for the nine months ended September 30, 2009 and $207.7 million for the nine months ended September 30, 2008. Deposits decreased $261.3 million during the nine months ended September 30, 2009 and increased $59.7 million during the nine months ended September 30, 2008. The net decrease in deposits for the nine months ended September 30, 2009 was 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. The increases in low cost savings, money market and NOW and demand deposit accounts reflect the decrease in competition for core community deposits, from that which we experienced during 2008, as credit markets have eased somewhat
Our primary use of funds is for the origination and purchase of mortgage loans. Gross mortgage loans originated and purchased for portfolio during the nine months ended September 30, 2009 totaled $2.24 billion, of which $1.97 billion were originations and $273.5 million were purchases. This compares to gross mortgage loans originated and purchased for portfolio during the nine months ended September 30, 2008 totaling $3.59 billion, of which $3.19 billion were originations and $402.3 million were purchases. The decrease in mortgage loan originations and purchases was due to a decrease in one-to-four family mortgage loan originations and purchases, coupled with a decrease in multi-family and commercial real estate loan originations. One-to-four family mortgage loan origination and purchase volume has been negatively affected by decreases in 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. We originated loans held-for-sale totaling $333.3 million during the nine months ended September 30, 2009, compared to $107.5 million during the nine months ended September 30, 2008. The increase in originations of loans held-for-sale reflects the impact of the expanded conforming loan limits and rapid decline in interest rates for these fixed rate products. The decrease in multi-family and commercial real estate loan originations reflects our decision to currently only offer such loans to select existing customers in New York. During the nine months ended September 30, 2009, we purchased securities to utilize a portion of the cash flows from mortgage loan and securities repayments in excess of mortgage loan originations and purchases. Purchases of securities totaled $706.6 million during the nine months ended September 30, 2009 and $488.8 million during the nine months ended September 30, 2008.
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 $32.2 million to $132.5 million at September 30, 2009, from $100.3 million at December 31, 2008. At September 30, 2009, we had $1.15 billion in borrowings with a weighted average rate of 3.79% maturing over the next twelve months. We have the flexibility to either repay or rollover these borrowings as they mature. In addition, we had $7.23 billion in certificates of deposit and Liquid CDs at September 30, 2009 with a weighted average rate of 2.68% 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.
Irving Kahn of Kahn Brothers & Company Inc..