LAKE SUCCESS, N.Y., Jan. 25, 2012 /PRNewswire/ -- Astoria Financial Corporation (NYSE: AF) ("Astoria," the "Company"), the holding company for Astoria Federal Savings and Loan Association ("Astoria Federal"), today reported net income of $11.8 million, or $0.12 diluted earnings per share ("diluted EPS"), for the quarter ended December 31, 2011 compared to net income of $23.8 million, or $0.25 diluted EPS, for the quarter ended December 31, 2010. For the year ended December 31, 2011, net income totaled $67.2 million, or $0.70 diluted EPS compared to net income of $73.7 million, or $0.78 diluted EPS, for the year ended December 31, 2010. The year ended December 31, 2010 includes net charges totaling $3.2 million ($2.1 million, or $0.02 per share, after-tax), which are not routine to our core operations. For further details, please refer to the "Reconciliation of GAAP Measures to Non-GAAP Measures" table included in this release.

Commenting on the 2011 fourth quarter and full year results, Monte N. Redman, President and Chief Executive Officer of Astoria, stated, "The declines in fourth quarter and full year earnings were due to significant decreases in average interest-earning assets from the comparable 2010 periods, primarily due to declines in both our one-to-four family ("residential") and multi-family and commercial real estate ("CRE") loan portfolios. The decline in the residential loan portfolio was due primarily to the effect of continued elevated levels of mortgage prepayment activity resulting from government programs designed to keep 30-year fixed-rate conforming loan interest rates at historic low levels. The decline in the multi-family/CRE loan portfolio was due to the absence of lending in this market during much of 2011. The resumption of multi-family/CRE lending, which began in the 2011 third quarter and is demonstrating solid growth as evidenced by the fourth quarter originations and year-end pipeline, should help to mitigate the negative impact of U.S. government programs that impede our ability to grow the residential loan portfolio profitably. Accordingly, we anticipate average interest-earning assets to begin increasing modestly in the 2012 first quarter and more robustly as the year progresses."

Full Year Financial Highlights

• Low cost savings, money market and checking account deposits increased $910.7 million, or 19%, to $5.7 billion, or 51% of total deposits.
• Total non-performing loans decreased $57.8 million, or 15%, to $332.9 million.
• The Company's tangible common equity ratio increased 43 basis points to 6.33%.
• Astoria Federal's leverage and tangible capital ratios increased 76 basis points to 8.70%.  
• Astoria Federal's Tier 1 risk-based capital ratio increased 147 basis points to 14.80%.  
• Residential loan originations for portfolio totaled $3.5 billion, multi-family/CRE loan originations totaled $204.0 million

Board Declares Quarterly Cash Dividend of $0.13 Per Share; Sets Annual Shareholder Meeting Date
The Board of Directors of the Company, at their January 25, 2012 meeting, declared a quarterly cash dividend of $0.13 per common share. The dividend is payable on March 1, 2012 to shareholders of record as of February 15, 2012. This is the sixty-seventh consecutive quarterly cash dividend declared by the Company. The Board also established May 16, 2012 as the date for the Annual Meeting of Shareholders, with a voting record date of March 26, 2012.

Fourth Quarter and Full Year Earnings Summary
Net interest income for the quarter ended December 31, 2011 totaled $87.5 million compared to $90.6 million for the previous quarter and $101.2 million for the 2010 fourth quarter. For the year ended December 31, 2011, net interest income totaled $375.4 million compared to $433.6 million for the year ended December 31, 2010. The decreases in net interest income for the year over year quarter and full year periods are due primarily to a decline in average interest-earning assets of $1.6 billion and $2.1 billion, respectively.

The net interest margin for the quarter ended December 31, 2011 was 2.20% compared to 2.27% for the previous quarter and 2.32% for the 2010 fourth quarter. For the year ended December 31, 2011, the net interest margin was 2.30% compared to 2.35% for the year ended December 31, 2010.

For the quarter ended December 31, 2011, a $10.0 million provision for loan losses was recorded, which was equal to the provision for the previous quarter and 33% lower than the $15.0 million provision recorded for the 2010 fourth quarter. For the year ended December 31, 2011, the provision for loan losses totaled $37.0 million, 68% lower than the $115.0 million provision for the year ended December 31, 2010.

Non-interest income for the quarter ended December 31, 2011 totaled $17.3 million compared to $16.5 million for the previous quarter and $20.7 million for the 2010 fourth quarter. Non-interest income for the year ended December 31, 2011 totaled $68.9 million compared to $81.2 million for the year ended December 31, 2010. The decrease for the year ended December 31, 2011 is primarily due to a $6.2 million gain relating to a litigation settlement recorded in 2010, a decrease of $5.1 million in customer service fees and net gains of $2.1 million on sales of non-performing loans held-for-sale recorded in 2010, partially offset by a $1.5 million impairment write-down of premises and equipment recorded in 2010.

General and administrative ("G&A") expense for the quarter ended December 31, 2011 totaled $77.2 million, a $1.3 million decline from the previous quarter and a $7.3 million increase from the 2010 fourth quarter. The linked quarter decrease is due primarily to decreases in compensation and benefits expense and advertising expense, partially offset by an increase in other expense. The quarterly year over year increase is primarily due to a $4.5 million increase in FDIC deposit insurance expense and a $2.3 million increase in compensation and benefits expense, including a $1.1 million increase in non-cash ESOP expense.

For the year ended December 31, 2011, G&A expense totaled $301.4 million compared to $284.9 million for the year ended December 31, 2010. The increase is due primarily to a $12.4 million increase in FDIC deposit insurance expense and a $9.6 million increase in compensation and benefits expense, primarily ESOP and pension expense, partially offset by a $7.9 million litigation settlement expense recorded in 2010.

Expense Control Initiatives
Commenting on plans to restrain future expense growth, Mr. Redman stated, "In an effort to control the growth in G&A expense, due primarily to the impact of higher FDIC deposit insurance expense, increased regulatory compliance expense, pension expense and the additional expenses associated with the resumption of multi-family lending, the Company has initiated several steps that will significantly slow the growth of G&A in 2012 and beyond. Specifically, the Company has instituted a salary freeze, including the exclusion of a corporate incentive bonus and equity compensation awards, for executive and senior officers. Further, the Company has commenced a corporate-wide review of all components of compensation, including retirement plans and staffing levels. These initiatives are expected to essentially keep core G&A expense (excluding any one-time charges associated with these initiatives) similar to the total G&A expense recorded in 2011, despite the higher costs stated above and the projected balance sheet growth."

Balance Sheet Summary
Total assets increased $45.4 million from September 30, 2011 and declined $1.1 billion from December 31, 2010 and totaled $17.0 billion at December 31, 2011. The year over year decrease is primarily due to a decrease in the loan portfolio. "We are pleased to report a slight increase in the balance sheet in the 2011 fourth quarter, primarily from the multi-family/CRE loan closings in December, the first balance sheet increase in more than two years. As previously stated, our expectation for more significant growth in 2012 is predicated on the growth of the multi-family/CRE loan portfolio more than offsetting any decline in the residential loan portfolio. At December 31, 2011, the residential loan pipeline was $1.1 billion and the multi-family/CRE loan pipeline was $396.5 million, and is continuing to grow due to the robust multi-family lending we are now experiencing," Mr. Redman noted.

The residential loan portfolio remained essentially unchanged from September 30, 2011 and totaled $10.6 billion at December 31, 2011 compared to $10.9 billion at December 31, 2010. For the quarter and year ended December 31, 2011, residential loan originations for portfolio totaled $1.1 billion and $3.5 billion, respectively, compared to $643.6 million, and $2.9 billion, respectively, for the comparable 2010 periods. The loan-to-value ratio of the residential loan production for portfolio for the 2011 fourth quarter and full year averaged approximately 60% at origination and the loan amount averaged approximately $765,000. Residential loan prepayments for the quarter and year ended December 31, 2011 totaled $996.0 million and $3.3 billion, respectively, compared to $1.0 billion and $3.4 billion, respectively, for the comparable 2010 periods.

The combined multi-family/CRE portfolio remained essentially unchanged from September 30, 2011 and totaled $2.3 billion at December 31, 2011 compared to $3.0 billion at December 31, 2010. For the quarter and year ended December 31, 2011, multi-family/CRE loan originations totaled $202.9 million and $204.0 million, respectively. There were no multi-family/CRE loans originated in 2010. Multi-family/CRE loan prepayments for the quarter and year ended December 31, 2011 totaled $182.3 million and $684.8 million, respectively, compared to $112.5 million and $299.0 million for the comparable 2010 periods.

The securities portfolio remained essentially unchanged from September 30, 2011 and totaled $2.5 billion at December 31, 2011 compared to $2.6 billion at December 31, 2010. We expect to maintain the securities portfolio at, or slightly higher than, current levels throughout 2012.

Deposits remained essentially unchanged from September 30, 2011 and totaled $11.2 billion at December 31, 2011 compared to $11.6 billion at December 31, 2010. Importantly, low-cost savings, money market and checking account deposits increased $291.8 million, or 21% annualized, from September 30, 2011 and $910.7 million, or 19%, from December 31, 2010 to $5.7 billion, or 51% of total deposits as compared to 42% at December 31, 2010. Certificate of deposit ("CD") accounts (including Liquid CDs) decreased $313.3 million from September 30, 2011 and $1.3 billion from December 31, 2010. Notwithstanding the decline in CDs, during the year ended December 31, 2011, we extended $635.4 million of CDs for terms of two years or more in an effort to help limit our exposure to future increases in interest rates. At December 31, 2011, our one-year interest rate sensitivity gap was positive 1.5%. Borrowings increased slightly from September 30, 2011 and decreased $747.6 million from December 31, 2010 to $4.1 billion at December 31, 2011.

On a linked quarter basis, stockholders' equity declined $33.3 million, primarily due to a $36.0 million other comprehensive loss adjustment to reflect a decrease in the funded status of our defined benefit pension plans at December 31, 2011 compared to December 31, 2010. For the full year, stockholders' equity increased $9.4 million to $1.3 billion, or 7.35% of total assets, at December 31, 2011. Astoria Federal continues to be designated as well-capitalized with leverage, tangible, risk-based and Tier 1 risk-based capital ratios of 8.70%, 8.70%, 16.08% and 14.80%, respectively, at December 31, 2011.

Asset Quality
Non-performing loans ("NPLs"), including troubled debt restructurings of $18.8 million, totaled $332.9 million, or 1.96% of total assets, at December 31, 2011, a decrease of $47.1 million from the previous quarter. During the 2011 fourth quarter, $36.5 million of NPLs were either sold or classified as held-for-sale. Residential NPLs totaled $317.9 million, multi-family/CRE/construction NPLs totaled $8.9 million and consumer and other NPLs totaled $6.1 million, compared to $324.9 million, $49.6 million and $5.5 million, respectively, at September 30, 2011. Of the $317.9 million of residential NPLs, $256.4 million, or 81%, represent residential loans which, at 180 days delinquent and annually thereafter, were reviewed and charged-off, as needed, to the estimated fair value of the underlying collateral at such time, less estimated selling costs.

The following table illustrates loan migration trends from 30 days delinquent to 90+ days delinquent:

The table below details, as of December 31, 2011, the ten largest concentrations by state of one-to-four family loans and the respective non-performing loan totals in those states. More comprehensive state details are included in the "One-to-Four Family Residential Loan Portfolio-Geographic Analysis" table included in this release.

Net loan charge-offs for the quarter and year ended December 31, 2011 totaled $31.2 million and $81.3 million, respectively, compared to $19.7 million and $107.6 million, respectively, for the comparable 2010 periods. Included in the $31.2 million net loan charge-offs are $13.6 million of loan charge-offs related to loans transferred to held-for-sale and specific valuation allowances charged-off in accordance with OCC regulatory guidelines. Included in the 2011 fourth quarter residential net loan charge-offs are $10.8 million of charge-offs on $60.7 million of NPLs which, at 180 days delinquent and annually thereafter, were reviewed in the 2011 fourth quarter and charged-off, as needed, to the estimated fair value of the underlying collateral less estimated selling costs. "While we expect NPL levels will remain elevated for some time, especially in those states requiring judicial foreclosure, it is important to note that we believe the loss potential remaining has been greatly reduced as a result of our having already reviewed, marked down, and charged-off as necessary, 81% of the residential NPLs to their adjusted fair value less estimated selling costs," Mr. Redman noted.

Selected Asset Quality Metrics
(at or for the three months ended December 31, 2011, except as noted)

Future Outlook
Commenting on the outlook for 2012, Mr. Redman stated, "We continue to face several headwinds as we enter 2012. Economic growth remains weak, unemployment remains stubbornly elevated and home values continue to remain soft. In addition, the implementation of "Operation Twist" by the Federal Reserve has contributed to a flattening of the U.S. Treasury yield curve, putting further downward pressure on long term interest rates and current mortgage product offerings, as well as keeping mortgage loan prepayments at elevated levels. However, we are optimistic that the increase in the multi-family/CRE loan pipeline should facilitate modest loan and balance sheet growth in the first quarter and more robust growth as the year progresses. For 2012, we expect multi-family/CRE loan originations of approximately $1.5 billion and residential loan originations for portfolio of approximately $3.5 billion, assuming market conditions remain stable throughout 2012. With respect to the net interest margin, we expect core deposits will continue to increase in 2012 and that, in the current low interest rate environment, residential loan prepayment activity will remain elevated. Accordingly, we anticipate the margin for 2012 will be relatively similar to the margin for the 2011 fourth quarter."

Earnings Conference Call January 26, 2012 at 10:00 a.m. (ET)
The Company, as previously announced, indicated that Monte N. Redman, President & CEO will host an earnings conference call Thursday morning, January 26, 2012 at 10:00 a.m. (ET). The toll-free dial-in number is (877) 709-8150. A telephone replay will be available on January 26, 2012 from 1:00 p.m. (ET) through midnight February 4, 2012 (ET). The toll-free replay number is (877) 660-6853, account # 399, ID# 386402. The conference call will also be simultaneously webcast on the Company’s website www.astoriafederal.com and archived for one year.

Astoria Financial Corporation, with assets of $17.0 billion, is the holding company for Astoria Federal Savings and Loan Association. Established in 1888, Astoria Federal, with deposits in New York totaling $11.2 billion, is the largest thrift depository in New York and embraces its philosophy of “Putting people first” by providing the customers and local communities it serves with quality financial products and services through 85 convenient banking office locations and multiple delivery channels, including its enhanced website, www.astoriafederal.com. Astoria Federal commands the fourth largest 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 Federal originates mortgage loans through its banking and loan production offices in New York, an extensive broker network covering fourteen states, primarily along the East Coast, and the District of Columbia, and through correspondent relationships covering fifteen states and the District of Columbia.

Forward Looking Statements
This document 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; transition of our regulatory supervisor from the Office of Thrift Supervision to the Office of the Comptroller of the Currency, 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 document.