Astoria Financial Corporation (NYSE:AF), the holding company for Astoria Bank (the “Bank”), today reported net income available to common shareholders of $16.5 million, or $0.16 diluted earnings per common share (“diluted EPS”), for the quarter ended September 30, 2016, compared to net income available to common shareholders of $16.7 million, or $0.17 diluted EPS, for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, net income available to common shareholders totaled $49.0 million, or $0.48 diluted EPS compared to $63.1 million, or $0.63 diluted EPS, for the comparable 2015 period. Included in the 2015 nine month results is a reduction in income tax expense of $11.4 million ($0.12 per common share) related to the impact of income tax legislation enacted in the second quarter of 2015, primarily related to New York City.
Monte N. Redman, President and Chief Executive Officer of Astoria, commenting on the results stated, “We are pleased that we continue to add value to the Astoria franchise as evidenced by the continued growth that we have seen in core deposits. Core deposits have grown by $166.2 million, including $107.9 million of business deposits since year end and now represent 82% of total deposits. In addition our high quality, higher yielding MF/CRE mortgage loan portfolio now represents 46% of the total loan portfolio.”
Board Declares Quarterly Cash Dividend of $0.04 Per Share
The Board of Directors of the Company, at its October 26, 2016 meeting, declared a quarterly cash dividend of $0.04 per common share. The dividend is payable on November 18, 2016 to shareholders of record as of November 7, 2016. This is the eighty sixth consecutive quarterly cash dividend declared by the Company.
Third Quarter and Nine Month Earnings Summary
Net interest income for the quarter ended September 30, 2016 totaled $83.6 million compared to $83.1 million for the previous quarter and $84.7 million for the 2015 third quarter. The net interest margin for the quarter ended September 30, 2016 was 2.39%, up from 2.36% for the previous quarter and 2.37% for the 2015 third quarter. For the nine months ended September 30, 2016, net interest income totaled $250.0 million, compared to $255.6 million for the comparable 2015 period, and the net interest margin was 2.37% for the nine months ended September 30, 2016, up slightly from 2.35% for the nine months ended September 30, 2015.
For the quarter ended September 30, 2016, a $1.0 million loan loss release was recorded compared to a $3.0 million release in the prior quarter and a $4.4 million loan loss release recorded in the 2015 third quarter. For the nine months ended September 30, 2016, we recorded a loan loss release of $7.1 million compared to a $7.7 million loan loss release for the comparable 2015 period. Mr. Redman stated, “The current quarter’s loan loss release reflects the continued contraction in the overall loan portfolio including the positive impact of reductions in the balances of some of our higher risk asset classes and our overall strong credit metrics.”
Non-interest income for the quarter ended September 30, 2016 totaled $12.8 million, compared to $11.9 million for the previous quarter and $12.9 million for the 2015 third quarter. Non-interest income for the nine months ended September 30, 2016 totaled $36.1 million compared to $41.1 million for the comparable 2015 period. The decrease for the nine months ended September 30, 2016 is primarily due to decreases in both mortgage banking income, net and customer service fees.
General and administrative (“G&A”) expense for the quarter ended September 30, 2016 totaled $68.7 million compared to $70.0 million for the previous quarter and $72.6 million for the 2015 third quarter. For the nine months ended September 30, 2016, G&A expense totaled $208.3 million, down from $214.6 million for the 2015 comparable period. The decrease for the nine months ended September 30, 2016 was primarily attributable to a decrease in FDIC insurance premiums, advertising expense and other expense.
Balance Sheet Summary
Total assets at September 30, 2016 were $14.8 billion, a decrease of $262.3 million from December 31, 2015. The decrease was primarily due to a decline in the loan portfolio which decreased $522.4 million from December 31, 2015 and totaled $10.6 billion at September 30, 2016, partially offset by an increase in the securities portfolio of $345.8 million over the same time period.
The MF/CRE mortgage loan portfolio totaled $4.9 billion at September 30, 2016, an increase of $6.7 million from December 31, 2015 and represents 46% of the total loan portfolio. For the quarter and nine months ended September 30, 2016, MF/CRE loan originations totaled $209.3 million and $620.2 million, respectively, compared to $137.6 million and $590.3 million, for the 2015 comparable periods. The MF/CRE loan production for the 2016 third quarter and nine months ended September 30, 2016 were originated with weighted average loan-to-value ratios of approximately 47% and 44%, respectively, and weighted average debt coverage ratios of approximately 1.61 and 1.57, respectively. MF/CRE loan prepayments for the quarter and nine months ended September 30, 2016 totaled $233.8 million and $506.0 million, respectively, compared to $173.8 million and $532.6 million for the comparable 2015 periods. At September 30, 2016, the MF/CRE pipeline totaled approximately $99.6 million.
The residential mortgage loan portfolio totaled $5.5 billion at September 30, 2016, compared to $6.0 billion at December 31, 2015. For the quarter and nine months ended September 30, 2016, residential loan originations for portfolio totaled $261.5 million and $524.2 million, respectively, compared to $151.5 million and $514.0 million for the 2015 comparable periods. The weighted average loan-to-value ratio of the residential loan production for portfolio at origination was approximately 62% and 61%, respectively, for the quarter and nine months ended September 30, 2016. Residential loan prepayments for the quarter and nine months ended September 30, 2016 totaled $320.5 million and $822.0 million, respectively, compared to $276.2 million and $948.9 million for the comparable 2015 periods. At September 30, 2016, the residential mortgage pipeline totaled approximately $368.3 million.
Core deposits increased to $7.3 billion at September 30, 2016 from $7.1 billion at December 31, 2015. This increase was primarily due to an increase in business checking deposits. At September 30, 2016, core deposits represented 82% of total deposits and had a weighted average rate of 13 basis points. Certificates of deposit decreased by $344.6 million over the same time period and had a weighted average rate of 98 basis points at September 30, 2016. Total deposits were $8.9 billion at September 30, 2016, a decrease of $178.4 million since year end 2015.
Stockholders’ equity totaled $1.71 billion, or 11.53% of total assets at September 30, 2016, an increase of $44.2 million from December 31, 2015. Astoria’s capital levels continue to exceed the minimum levels required to be designated as “well-capitalized” for bank regulatory purposes. At September 30, 2016, Tier 1 leverage, Common Equity Tier 1 risk based, Tier 1 risk-based and Total risk-based capital ratios were 11.75%, 21.07%, 21.07% and 22.14%, respectively for Astoria Bank, and 10.61%, 17.58%, 19.09% and 20.17%, respectively for Astoria Financial Corporation. At September 30, 2016, Astoria Financial Corporation’s tangible common equity ratio was 9.52%.
Asset Quality
Non-performing loans (“NPLs”), totaled $150.9 million, or 1.42% of total loans, at September 30, 2016, compared to $138.2 million, or 1.24% of total loans, at December 31, 2015. Included in the NPLs at September 30, 2016 is $47.1 million of loans which are current or less than 90 days past due compared to $54.3 million at December 31, 2015. Total delinquent loans and NPLs at September 30, 2016 were $235.6 million compared to $243.7 million at December 31, 2015. Net charge-offs for the quarter ended September 30, 2016 totaled $1.3 million compared to $1.2 million in the previous quarter and a net recovery of $439,000 in the 2015 third quarter. For the nine months ended September 30, 2016, net charge-offs totaled $3.2 million compared to $351,000 for the 2015 comparable period.
Other real estate owned declined to $14.6 million at September 30, 2016, compared to $19.8 million at December 31, 2015.
Future Outlook
Commenting on the Company’s future outlook, Mr. Redman stated, “As we previously announced on October 29, 2015, we have entered into a definitive agreement to merge with New York Community Bancorp (“NYCB”) which has been overwhelmingly approved by the respective shareholders of both Astoria and NYCB at their shareholder meetings. We look forward to working with NYCB to continue to serve the communities which have come to rely on us for the past 127 years.”
About Astoria Financial Corporation
Astoria Financial Corporation, with assets of $14.8 billion, is the holding company for Astoria Bank. Established in 1888, Astoria Bank, with deposits in New York totaling $8.9 billion, is the second largest thrift depository in New York and provides its retail and business customers and local communities it serves with quality financial products and services through 88 convenient banking branch locations, a business banking office in Manhattan, and multiple delivery channels, including its flexible mobile banking app. 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.
