LAKE SUCCESS, N.Y., Jan. 23, 2013 /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 $16.9 million, or $0.17 diluted earnings per share ("diluted EPS"), for the quarter ended December 31, 2012, compared to net income of $11.8 million, or $0.12 diluted EPS, for the quarter ended December 31, 2011. For the year ended December 31, 2012, net income totaled $53.1 million, or $0.55 diluted EPS, compared to net income of $67.2 million, or $0.70 diluted EPS, for the year ended December 31, 2011.

Included in the 2012 fourth quarter net income is a $6.0 million ($3.9 million, or $0.04 per share, after tax) gain resulting from the sale of the Company's entire holdings of Freddie Mac preferred stock and a $2.2 million ($1.4 million, or $0.02 per share, after-tax) charge related to the previously announced settlement of employment agreements associated with executive retirements in the 2012 first quarter. Also included in the 2012 full year net income are net charges totaling $3.4 million, ($2.2 million, or $0.02 per share, after-tax), representing severance related expenses associated with cost control initiatives implemented in the 2012 first quarter and a $1.2 million expense ($785,000, or $0.01 per share, after-tax) related to the early extinguishment of debt in the 2012 third quarter.

Financial Highlights

• Loan Portfolio Shift Continues: Higher-yielding multi-family/commercial real estate loans ("MF/CRE") continue to become a larger percentage of the loan portfolio; increased to 24% of total loans from 18% a year ago.
• Greater Core Deposit Concentration: Lower cost core deposits continue to become a larger percentage of deposit liabilities; increased to 62% of total deposits from 51% a year ago; business deposits increased 12% from a year ago to $489.3 million.
• Cost Control Initiatives Continue to Benefit Operating Efficiency.
• Delinquent Loans, Non-performing Loans and REO Continue to Decline.

Commenting on the 2012 fourth quarter results, Monte N. Redman, President and Chief Executive Officer of Astoria, stated, "I am pleased to report continued improvements in the asset and liability mix which reflect our success in repositioning the balance sheet from lower yielding residential mortgage loans to higher yielding MF/CRE loans and from higher cost CD accounts to lower cost core deposits. These efforts had a positive benefit on the net interest margin. Additionally, our focus on controlling operating expenses and continued improvement in asset quality provides a positive contribution to earnings."

Board Declares Quarterly Cash Dividend of $0.04 Per Share; Sets Annual Shareholder Meeting Date
The Board of Directors of the Company, at its January 23, 2013 meeting, declared a quarterly cash dividend of $0.04 per common share. The dividend is payable on March 1, 2013 to shareholders of record as of February 15, 2013. This is the seventy-first consecutive quarterly cash dividend declared by the Company. The Board also established May 15, 2013 as the date for the Annual Meeting of Shareholders, with a voting record date of March 25, 2013.

Fourth Quarter and Full Year Earnings Summary
Net interest income for the quarter ended December 31, 2012 totaled $87.4 million compared to $86.0 million for the previous quarter and $87.5 million for the 2011 fourth quarter. For the year ended December 31, 2012, net interest income totaled $348.3 million compared to $375.4 million for the year ended December 31, 2011. The net interest margin for the quarter ended December 31, 2012 was 2.21% compared to 2.09% for the previous quarter and 2.20% for the 2011 fourth quarter. The margin for the previous quarter was negatively impacted by approximately nine basis points due to the additional short-term carrying cost of an additional $250 million of senior notes whose proceeds were used to repay the Company's 5.75% senior notes in September. For the year ended December 31, 2012, the net interest margin was 2.16% compared to 2.30% for the year ended December 31, 2011.

For the quarter ended December 31, 2012, a $10.9 million provision for loan losses was recorded, which compares to $9.5 million for the previous quarter and $10.0 million for the comparable 2011 quarter. For the year ended December 31, 2012, the provision for loan losses totaled $40.4 million compared to $37.0 million for the year ended December 31, 2011.

Non-interest income totaled $21.6 million for the quarter ended December 31, 2012 compared to $16.6 million for the previous quarter and $17.3 million for the 2011 fourth quarter. For the year ended December 31, 2012, non-interest income totaled $73.2 million compared to $68.9 million for the year ended December 31, 2011. The 2012 fourth quarter and full year non-interest income includes a $6.0 million gain on sale of securities resulting from the sale of the Company's Freddie Mac preferred stock in the 2012 fourth quarter. The sale of the stock, which had been written off in prior years as an impaired asset for book purposes, had the effect of reducing the Company's net deferred tax asset ("DTA") and eliminated the potential risk for the exclusion of the DTA related to the Freddie Mac stock from regulatory capital in future periods.

General and administrative ("G&A") expense for the quarter ended December 31, 2012 totaled $73.2 million compared to $72.6 million for the previous quarter and $77.2 million for the 2011 fourth quarter. For the year ended December 31, 2012, G&A expense totaled $300.1 million compared to $301.4 million for the year ended December 31, 2011. The fourth quarter G&A expense includes a $2.2 million settlement charge associated with previously announced executive retirements. The full year 2012 expense includes net charges totaling $5.6 million representing severance related expenses associated with cost control initiatives implemented in the 2012 first quarter, including the 2012 fourth quarter settlement charge, and a $1.2 million expense related to the early extinguishment of debt in the 2012 third quarter.

Impact from Hurricane Sandy
Repair and recovery costs as a result of Hurricane Sandy reflected in non-interest expense totaled $855,000. In addition, in support of the communities we serve, the Company contributed relief donations of $154,000 and waived banking fees of approximately $328,000 for customers impacted by the storm. From a credit standpoint, we have not currently experienced any notable increase in missed loan payments.

Balance Sheet Summary
Total assets decreased $525.4 million from December 31, 2011 to $16.5 billion at December 31, 2012. The decline is primarily attributable to a decrease in the securities portfolio. The net decline in the loan portfolio, down $50.6 million year-over-year, reflects the changing mix in the loan composition, with multi-family loans increasing and residential loans decreasing as a percentage of the total loan portfolio.

The residential (one-to-four family) loan portfolio decreased $528.2 million from September 30, 2012 and $850.3 million from December 31, 2011 to $9.7 billion at December 31, 2012. The decline was due to the pace of residential loan prepayments exceeding the pace of residential loan originations due to historic low interest rates for 30-year fixed rate conforming loans, thereby making the hybrid ARM product less attractive to borrowers. For the quarter and year ended December 31, 2012, residential loan originations for portfolio totaled $220.4 million and $2.5 billion, respectively, compared to $1.1 billion and $3.5 billion, respectively, for the comparable 2011 periods. The loan-to-value ratio of the residential loan production for portfolio for the 2012 fourth quarter and full year averaged approximately 59% and 60%, respectively, at origination and the loan amount averaged approximately $782,000 and $738,000, respectively. Residential loan prepayments for the quarter and year ended December 31, 2012 totaled $633.7 million and $2.9 billion, respectively, compared to $996.0 million and $3.3 billion, respectively, for the comparable 2011 periods. "We expect the level of residential loan prepayments to continue to remain elevated and residential ARM loan production to remain tepid as 30-year fixed rate mortgage interest rates are expected to remain at historic lows for some time," Mr. Redman noted.

The combined MF/CRE portfolios increased $203.4 million, or 7%, from September 30, 2012 and $827.0 million, or 35%, from December 31, 2011 to $3.2 billion at December 31, 2012, and represents 24% of the total loan portfolio. For the quarter and year ended December 31, 2012, MF/CRE loan originations totaled $383.4 million and $1.6 billion, respectively, compared to $202.9 million and $204.0 million, respectively, for the comparable 2011 periods. The $1.6 billion of MF/CRE loans originated during 2012 have loan to value ratios averaging approximately 53% at origination and balances averaging approximately $3.1 million with a weighted average coupon of 3.63%. Commenting on the loan volume, Mr. Redman noted, "I am very pleased that our 2012 MF/CRE loan production exceeded our expectations, which demonstrates the success achieved since re-entering this business in late 2011. We remain confident that our continued focus on MF/CRE lending will further enhance our franchise and benefit the net interest margin and future profitability." MF/CRE loan prepayments for the quarter and year ended December 31, 2012 totaled $150.6 million and $694.8 million, respectively, compared to $182.4 million and $684.9 million for the comparable 2011 periods.

The securities portfolio declined $242.4 million, or 11%, from September 30, 2012 and $438.6 million, or 18%, from December 31, 2011 and totaled $2.0 billion at December 31, 2012 representing 12% of total assets at December 31, 2012.

Deposits decreased $94.9 million from September 30, 2012 and $801.7 million from December 31, 2011 and totaled $10.4 billion at December 31, 2012. These declines are due to decreases of $363.9 million and $1.6 billion, respectively, in high cost CDs, offset by increases of $269.0 million and $757.0 million, respectively, in low cost core deposits. Core deposits, which totaled $6.5 billion, or 62% of total deposits, at December 31, 2012, had an average cost of 20 basis points for the 2012 fourth quarter. The growth in core deposits is a result of our efforts to reposition the mix of both assets and liabilities. Business core deposits for the year 2012 increased 12% and totaled $489.3 million at December 31, 2012. Mr. Redman, commenting on the growth in business banking, stated, "Our business banking expansion initiatives helped facilitate the growth in our core deposits and are generating new core relationships within the community and deepening our existing relationships."

Borrowings decreased $435.9 million from September 30, 2012 and increased $251.9 million from December 31, 2011 to $4.4 billion at December 31, 2012. During the full year 2012, we extended $700.0 million of borrowings with a weighted average rate of 1.05% and a weighted average term of 46 months, excluding the 5.00% Senior Notes issued in June 2012, the proceeds of which were used to redeem our 5.75% Senior Notes in September 2012. In addition, notwithstanding the decline in CDs, during the full year of 2012, we extended $672.2 million of CDs for terms of two years or more. These transactions were initiated in an effort to help limit our exposure to future increases in interest rates. At December 31, 2012, our one year interest rate sensitivity gap was positive 13.23%.

Stockholders' equity totaled $1.3 billion, or 7.84% of total assets, at December 31, 2012. Astoria Federal continues to be well-capitalized with leverage, tangible, total risk-based and Tier 1 risk-based capital ratios of 9.24%, 9.24%, 16.49% and 15.23%, respectively, at December 31, 2012.

Asset Quality
Non-performing loans ("NPLs"), including troubled debt restructurings ("TDRs") of $32.8 million, totaled $315.1 million, or 1.91% of total assets, at December 31, 2012, a decrease of $7.1 million from the previous quarter and $17.8 million from December 31, 2011. As a result of the implementation of regulatory guidance, the Company has reflected $12.5 million of residential loans in Chapter 7 bankruptcy as TDRs, of which $5.7 million were newly included in NPLs, even though less than 90 days delinquent, as of year-end 2012. At December 31, 2012, residential NPLs totaled $291.1 million, MF/CRE NPLs totaled $17.5 million and consumer and other NPLs totaled $6.5 million, compared to $294.7 million, $21.4 million and $6.1 million, respectively, at September 30, 2012. Of the $291.1 million of residential NPLs, $242.0 million, or 83%, 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 a two-year migration for loan delinquencies:

The table below details, as of December 31, 2012, the ten largest concentrations by state of residential loans and the respective non-performing loan totals in those states.

Included in the 2012 fourth quarter residential net loan charge-offs are $8.0 million of charge-offs on $50.5 million of NPLs which, at 180 days delinquent and annually thereafter, were reviewed in the 2012 fourth quarter and charged-off, as needed, to the estimated fair value of the underlying collateral less estimated selling costs. "While the trend of lower NPLs is continuing, we expect NPL levels will remain somewhat elevated for some time, especially in those states requiring judicial foreclosure. It is important to note that the loss potential remaining has been greatly reduced as a result of our having already reviewed, marked down, and charged-off as necessary, 83% of the residential NPLs to their adjusted fair value less estimated selling costs," Mr. Redman noted.

Future Outlook
Commenting on the outlook for 2013, Mr. Redman stated, "With the yield curve remaining flat and interest rates expected to remain at historic lows for the near term, the operating environment for financial institutions remains challenging. We will, therefore, continue to concentrate on growing the MF/CRE loan portfolio and increasing low-cost core deposits, particularly through the expansion of our business banking platform in 2013. This will include the addition of seasoned business relationship managers to accelerate business deposit growth, coupled with the opening of several branches in select communities that offer increased opportunities to extend our business banking footprint. While these initiatives are expected to result in higher G&A expenses this year, we expect that they will further enhance the value of our franchise and improve future profitability. In addition, the positive effect of the balance sheet repositioning should help mitigate the negative impact of the low interest rate environment and allow us to maintain a net interest margin for 2013 at, or slightly higher than, the margin for the 2012 full year."

Earnings Conference Call January 24, 2013 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 24, 2013 at 10:00 a.m. (ET). The toll-free dial-in number is (877) 709-8150. A telephone replay will be available on January 24, 2013 from 1:00 p.m. (ET) through midnight, Saturday, February 2, 2013. The replay number is (877) 660-6853, ID# 405678. 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 $16.5 billion, is the holding company for Astoria Federal Savings and Loan Association. Established in 1888, Astoria Federal, with deposits in New York totaling $10.4 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 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 through correspondent relationships covering nine states and the District of Columbia. Astoria Federal also originates multi-family and commercial real estate loans, primarily on rent controlled and rent stabilized apartment buildings, located in New York City and the metropolitan area.

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 and the Board of Governors of the Federal Reserve Board, or FRB; 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.

Tables Follow