Astoria Financial Corporation Reports Fourth Quarter And Full Year Earnings Per Common Share Of $0.21 And $0.88, Respectively

LAKE SUCCESS, N.Y., Jan. 28, 2015 /PRNewswire/ -- Astoria Financial Corporation AF ("Astoria", the "Company"), the holding company for Astoria Bank ("the Bank") today reported net income available to common shareholders of $21.1 million, or $0.21 diluted earnings per common share ("diluted EPS"), for the quarter ended December 31, 2014, compared to net income available to common shareholders of $18.0 million, or $0.18 diluted EPS, for the quarter ended December 31, 2013.  Included in the 2014 fourth quarter results is $4.2 million ($0.04 per common share) of tax benefits recognized primarily related to the resolution of a tax matter with New York State and the related impact of changes in New York State tax legislation which was signed into law on March 31, 2014 and became effective January 1, 2015. For the year ended December 31, 2014, net income available to common shareholders totaled $87.1 million, or $0.88 diluted EPS, compared to $59.4 million, or $0.60 diluted EPS, for the year ended December 31, 2013.  Included in the 2014 full year results is a reduction in income tax expense of $11.5 million ($0.12 per common share) recorded in the 2014 first quarter related to the impact of changes in New York State tax legislation, a $5.7 million loan loss release ($3.7 million, or $0.04 per common share, after tax) related to the designation of non-performing residential mortgage loans ("NPLs") as held-for-sale in the 2014 second quarter and the previously discussed $4.2 million of tax benefits. Included in the 2013 full year results is a $4.3 million prepayment charge ($2.8 million, or $0.03 per common share, after tax) related to the redemption of capital securities.

Financial Highlights

Business Banking Activity:

• Business deposits increased $280.4 million, or 43%, from December 31, 2013 to $930.5 million at December 31, 2014.

Loan Portfolio :

• Total loans increased by $41.5 million in the 2014 fourth quarter, the first growth in total loans since the 2012 second quarter.
• Multi-family/commercial real estate ("MF/CRE") mortgage loans continue to become a larger percentage of the loan portfolio, increasing to 40% of total loans at December 31, 2014 from 33% at December 31, 2013.

Net Interest Margin Expansion:

• Net interest margin increased to 2.32% for the year ended December 31, 2014, up 7 basis points or 3% from 2.25% for the year ended December 31, 2013.

Monte N. Redman, President and Chief Executive Officer of Astoria, commenting on the results stated, "We are pleased with the results that we have reported today.  The focus we have placed on expanding business banking, including the opening of a branch in Melville, NY on December 1, 2014, continues to be rewarded as is evidenced by the growth in business deposits that we experienced in 2014.  At December 31, 2014, business deposits totaled $930.5 million, having grown by $280.4 million, or 43%, from year end 2013.  This strong growth in business deposits was a contributing factor in the expansion of our net interest margin by 3% year over year, despite the current low interest rate environment."

Board Declares Quarterly Cash Dividend of $0.04 Per Share
The Board of Directors of the Company, at its January 26, 2015 meeting, declared a quarterly cash dividend of $0.04 per common share.  The dividend is payable on March 2, 2015 to shareholders of record as of February 17, 2015.  This is the seventy-ninth consecutive quarterly cash dividend declared by the Company.

Fourth Quarter and Full Year Earnings Summary
Net interest income for the quarter ended December 31, 2014 totaled $83.9 million compared to $84.6 million for the previous quarter and $86.8 million for the 2013 fourth quarter.  The net interest margin for the quarter ended December 31, 2014 was 2.30%, compared to 2.31% for both the previous quarter and the 2013 fourth quarter. For the year ended December 31, 2014, net interest income totaled $342.3 million, compared to $341.9 million for the year ended December 31, 2013, and the net interest margin increased to 2.32% for the year ended December 31, 2014, up from 2.25% for the year ended December 31, 2013. Mr. Redman commented, "This is the second consecutive year that, despite the current low interest rate environment, we have increased our net interest margin."

For the quarter ended December 31, 2014, a $2.3 million loan loss release was recorded compared to a $3.0 million loan loss release recorded in the prior quarter and a $3.4 million provision for loan losses recorded in the 2013 fourth quarter.  For the year ended December 31, 2014, the loan loss release totaled $9.5 million (including the $5.7 million loan loss release related to the designation of non-performing residential mortgage loans, previously discussed) compared to a $19.6 million provision for loan losses for the year ended December 31, 2013.  Mr. Redman stated, "The current quarter's release reflects the improved asset quality in our loan portfolio as a result of the reductions in the balances of some of our higher risk asset classes (interest-only residential loan  portfolio, pre-2008 residential portfolio, pre-2011 multi-family portfolio)."

Non-interest income for the quarter ended December 31, 2014, totaled $13.6 million, compared to $13.8 million for the previous quarter and $17.4 million for the 2013 fourth quarter. The decrease from the 2013 fourth quarter is primarily due to decreases in mortgage banking income, net, customer service fees and other operating income.  Non-interest income for the year ended December 31, 2014 totaled $54.8 million compared to $69.6 million for the comparable 2013 period.  The decrease for the year ended December 31, 2014 is primarily due to decreases in mortgage banking income, net, gain on sales of securities and other operating income. 

General and administrative ("G&A") expense for the quarter ended December 31, 2014 totaled $70.2 million compared to $72.4 million for the previous quarter and $69.0 million for the 2013 fourth quarter. For the year ended December 31, 2014, G&A expense decreased $3.1 million to $284.4 million from $287.5 million for the 2013 comparable period.  The 2013 full year included a $4.3 million prepayment charge for the early extinguishment of debt in connection with the previously discussed redemption of $125 million of capital securities. Mr. Redman commented, "Our G&A expense has not increased as we had previously anticipated, largely the result of our FDIC insurance premiums coming down more quickly than we had expected.  As a result, we now believe that our G&A expense will be within a range of $70 - $73 million per quarter as we move forward."    

Balance Sheet Summary
Total assets at December 31, 2014 were $15.6 billion, an increase of $179.7 million from September 30, 2014 and a decrease of $153.7 million from December 31, 2013. The increase from the prior quarter was primarily due to increases in the securities and loan portfolios.  The decrease from December 31, 2013 was primarily due to a decrease in the residential mortgage loan portfolio, due in part to the sale of NPLs in the 2014 third quarter, partially offset by growth in the MF/CRE portfolio and the securities portfolio. The total loan portfolio increased $41.5 million from September 30, 2014 and decreased $484.6 million from December 31, 2013, and totaled $12.0 billion at December 31, 2014.  Mr. Redman stated, "For the past several quarters we have been anticipating that our loan portfolio would reach an inflection point where the growth in the MF/CRE portfolio would more than offset the shrinkage we were experiencing in the residential portfolio resulting in net growth in the total loan portfolio.  In the fourth quarter, for the first time since the 2012 second quarter, we reached this inflection point. While we may not experience consistent growth on a linked quarter comparison going forward due to the seasonality of MF/CRE originations, we do believe that this net growth trend will continue and expect that the loan portfolio at the end of 2015 will be larger than the loan portfolio at the end of 2014."

The MF/CRE mortgage loan portfolio totaled $4.8 billion at December 31, 2014, an increase of $247.3 million and $677.4 million from September 30, 2014 and December 31, 2013, respectively, and represents 40% of the total loan portfolio.  For the quarter and year ended December 31, 2014, MF/CRE loan originations totaled $388.0 million and $1.2 billion, respectively, compared to $325.2 million and $1.6 billion for the 2013 comparable periods. The MF/CRE loan production for the 2014 fourth quarter and year ended December 31, 2014 were originated with weighted average loan-to-value ratios of approximately 49% and 51%, respectively and weighted average debt coverage ratios of approximately 1.69 and 1.64, respectively. MF/CRE loan prepayments for the quarter and year ended December 31, 2014 totaled $105.9 million and $375.7 million, respectively, down from $125.1 million and $495.4 million for the comparable 2013 periods.  At December 31, 2014, the MF/CRE pipeline totaled approximately $422.0 million. 

The residential mortgage loan portfolio totaled $6.9 billion at December 31, 2014, compared to $8.0 billion at December 31, 2013.  For the quarter and year ended December 31, 2014, residential loan originations for portfolio totaled $129.1 million and $455.9 million, respectively, compared to $158.2 million and $996.0 million for the comparable 2013 periods.  The weighted average loan-to-value ratio of the residential loan production for portfolio was approximately 66% and 69% at origination, respectively, for the quarter and year ended December 31, 2014.  Residential loan prepayments for the quarter and year ended December 31, 2014 totaled $265.1 million and $1.1 billion, respectively, down significantly from $323.2 million and $2.3 billion for the comparable 2013 periods. At December 31, 2014, the residential mortgage pipeline totaled approximately $197.7 million. 

Deposits totaled $9.5 billion at December 31, 2014, a decrease of $107.9 million and $350.4 million from September 30, 2014 and December 31, 2013, respectively.  These decreases were primarily due to decreases in higher cost certificates of deposit, partially offset by net increases in lower cost core deposits. Core deposits totaled $6.8 billion, or 72% of total deposits, and had a weighted average rate of 11 basis points at December 31, 2014.    

Stockholders' equity totaled $1.6 billion, or 10.10% of total assets at December 31, 2014, an increase of $60.6 million from December 31, 2013, primarily the result of undistributed net income, partially offset by a decrease in accumulated other comprehensive income to adjust our pension liability due to lower interest rates at year end.  Astoria Bank's capital levels continue to be above the minimum levels required to be designated as "well-capitalized" for bank regulatory purposes, with Tier 1 leverage, Tangible, Total risk-based and Tier 1 risk-based capital ratios of 10.62%, 10.62%, 18.76% and 17.55%, respectively, at December 31, 2014.  At December 31, 2014, Astoria Financial Corporation's tangible common equity ratio was 8.19%.

Asset Quality
NPLs, including troubled debt restructurings ("TDRs") of $68.4 million, totaled $127.8 million, or 1.07% of total loans, at December 31, 2014, compared to $332.0 million, including TDRs of $109.8 million, or 2.67% of total loans, at December 31, 2013. Included in the $127.8 million of NPLs at December 31, 2014 are $65.0 million of loans which are current or less than 90 days past due compared to $81.5 million at December 31, 2013. The significant decline in the NPLs at December 31, 2014 compared to December 31, 2013 includes the impact of the NPL sale which was completed during the 2014 third quarter.

The following table illustrates a two-year migration trend for loan delinquencies and NPLs:

 

Future Outlook

Commenting on the Company's future outlook, Mr. Redman stated, "The results that we have reported continue to provide us with evidence that the path we have chosen to become a more fully diversified, full-service community bank is, indeed, the correct one. We are encouraged by the first net growth we have seen in the loan portfolio in the past nine quarters and our fourth consecutive year of double digit growth in business deposits.  We believe that we will continue to grow these deposits in 2015 which will also provide us with some measure of interest rate sensitivity protection."

"With respect to our net interest margin, while we are pleased with the 7 basis point growth to 2.32% which we achieved for the full year 2014 compared to the full year 2013, given the headwinds created by the flattening of the yield curve in this continued low rate environment, we believe that our net interest margin for 2015 will be relatively flat compared to our 2014 net interest margin."

About Astoria Financial Corporation
Astoria Financial Corporation, with assets of $15.6 billion, is the holding company for Astoria Bank.  Established in 1888, Astoria Bank, with deposits in New York totaling $9.5 billion, is the second largest thrift depository in New York and provides the customers and local communities it serves with quality financial products and services through 87 convenient banking branch locations, one business banking office, and multiple delivery channels, including its enhanced website, www.astoriabank.com.  Astoria Bank commands a significant deposit market share in the attractive Long Island market, which includes Brooklyn, Queens, Nassau, and Suffolk counties with a population exceeding that of 38 individual states.  Astoria Bank originates multi-family and commercial real estate loans, primarily on rent controlled and rent stabilized apartment buildings, located in New York City and the surrounding metropolitan area and originates residential mortgage loans through its banking and loan production offices in New York, a broker network in four states, primarily along the East Coast, and correspondent relationships covering 13 states and the District of Columbia.

Forward Looking Statements
This press release contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by the use of such words as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "outlook," "plan," "potential," "predict," "project," "should," "will," "would," and similar terms and phrases, including references to assumptions.

Forward-looking statements are based on various assumptions and analyses made by us in light of our management's experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances.  These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  These factors include, without limitation, the following: the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; there may be increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment may reduce interest margins or affect the value of our investments; changes in deposit flows, loan demand or real estate values may adversely affect our business; changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently; general economic conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate or securities markets or the banking industry may be less favorable than we currently anticipate; legislative or regulatory changes, including the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and any actions regarding foreclosures, may adversely affect our business; enhanced supervision and examination by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau; effects of changes in existing U.S. government or government-sponsored mortgage programs; technological changes may be more difficult or expensive than we anticipate; success or consummation of new business initiatives may be more difficult or expensive than we anticipate; or litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may be determined adverse to us or may delay the occurrence or non-occurrence of events longer than we anticipate. We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release.                                                                                       

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SOURCE Astoria Financial Corporation