LAKE SUCCESS, N.Y., April 16, 2014 /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 available to common shareholders of $29.4 million, or $0.30 diluted earnings per common share ("diluted EPS"), for the quarter ended March 31, 2014, compared to net income available to common shareholders of $13.9 million, or $0.14 diluted EPS, for the quarter ended March 31, 2013. Included in the 2014 first quarter results is a reduction in income tax expense of $11.5 million ($0.12 diluted EPS) related to the impact of New York State tax legislation which was signed into law on March 31, 2014 which resulted in a net income tax benefit for the quarter.

Financial Highlights

Loan Portfolio Shift Continues:

• Multi-family/commercial real estate ("MF/CRE") mortgage loans continue to become a larger percentage of the loan portfolio, increasing to 34% of total loans at March 31, 2014 from 33% at December 31, 2013 and 26% at March 31, 2013.
• At March 31, 2014, the MF/CRE pipeline totaled approximately $448 million, 44% higher than $312 million at December 31, 2013.

Deposits:

• Core deposits increased $89.4 million from December 31, 2013 to $6.7 billion and represent 68% of deposits at March 31, 2014, up from 67% and 64% at December 31, 2013 and March 31, 2013, respectively.
• Business deposits increased $40.0 million, or 6%, from December 31, 2013 to $690.1 million at March 31, 2014.

Net Interest Margin:

• For the quarter ended March 31, 2014, the net interest margin increased to 2.36% from 2.31% for the prior quarter and 2.19% for the 2013 first quarter.  The 2014 first quarter includes a large prepayment penalty on a group of loans to a single borrower which added approximately 2 basis points to our net interest margin.

Monte N. Redman, President and Chief Executive Officer of Astoria, commenting on the 2014 first quarter stated, "We are pleased with the results we reported today, which we believe provides further evidence that the strategic repositioning of our balance sheet continues to move forward according to plan. Our MF/CRE loan portfolio continues to grow, now representing 34% of our total loan portfolio, and remains on track to reach our December 2015 target of 45%. The strong push on building our business banking operation, including the opening of our first Manhattan branch on March 31^st, continues to provide positive results as evidenced by the growth of low cost business deposits of $40.0 million during the first quarter, representing a 6% increase from year-end 2013."

Board Declares Quarterly Cash Dividend of $0.04 Per Share
The Board of Directors of the Company, at its April 16, 2014 meeting, declared a quarterly cash dividend of $0.04 per common share. The dividend is payable on June 2, 2014 to shareholders of record as of May 15, 2014. This is the seventy-sixth consecutive quarterly cash dividend declared by the Company.

First Quarter Earnings Summary
Net interest income for the quarter ended March 31, 2014 totaled $88.0 million compared to $86.8 million for the previous quarter and $84.0 million for the 2013 first quarter. The net interest margin for the quarter ended March 31, 2014 increased to 2.36% from 2.31% for the previous quarter and 2.19% for the 2013 first quarter. In the 2014 first quarter, we had a large prepayment penalty on a group of loans to a single borrower that added approximately 2 basis points to our net interest margin.

For the quarter ended March 31, 2014, a $1.6 million provision for loan losses was recorded compared to $3.4 million for the previous quarter and $9.1 million for the 2013 first quarter. "We continue to maintain our allowance at a level which we believe is appropriate given the continued improvement in our asset quality metrics as well as the high quality of our loan originations. The allowance for loan losses coverage ratio to the total loan portfolio remains strong at 1.09%," Mr. Redman commented.

Non-interest income for the quarter ended March 31, 2014 totaled $13.7 million compared to $17.4 million for the previous quarter and $18.3 million for the 2013 first quarter. These decreases are due primarily to decreases in mortgage banking income, net.

General and administrative ("G&A") expense for the quarter ended March 31, 2014 totaled $70.2 million compared to $69.0 million for the previous quarter and $71.6 million for the 2013 first quarter. Mr. Redman commented, "Our G&A expense, while slightly higher than the 2013 fourth quarter is still below the lower end of the $72-$75 million per quarter range we have discussed on our previous conference calls. We believe that as we progress through the remainder of the year, our G&A expense will continue to trend towards the higher end of the range, reflecting the expenses associated with the branch we opened on March 31^st as well as the two additional branches we are planning to open in the second half of the year. In addition, we expect to incur increases in advertising, branding and compensation expenses in conjunction with both the branch openings and our continued focus on business banking."

Effective March 31, 2014, New York State tax legislation was signed into law in connection with the approval of the New York State 2014-2015 budget. Portions of the new legislation significantly affect the calculation of income taxes imposed on banks and thrifts operating in New York State. For Astoria, the impact of the legislation resulted in an increase in our net deferred tax asset as of March 31, 2014, with a corresponding reduction in income tax expense of $11.5 million, which resulted in a net income tax benefit for the quarter ended March 31, 2014.

Balance Sheet Summary
Total assets decreased $93.8 million from December 31, 2013, and totaled $15.7 billion at March 31, 2014. The decrease was primarily due to a decrease in the residential (one-to-four family) mortgage loan portfolio, partially offset by increases in the MF/CRE portfolio and the securities portfolio. The loan portfolio decreased $155.4 million from December 31, 2013 and totaled $12.3 billion at March 31, 2014.

The MF/CRE mortgage loan portfolio totaled $4.2 billion at March 31, 2014, an increase of $72.7 million from December 31, 2013, and represents 34% of the total loan portfolio. For the quarter ended March 31, 2014, MF/CRE loan originations totaled $218.0 million compared to $345.6 million for the 2013 first quarter. The 2014 first quarter MF/CRE loan production was originated with a weighted average loan-to-value ratio of approximately 54% and a weighted average debt coverage ratio of approximately 1.72. MF/CRE loan prepayments for the quarter ended March 31, 2014 totaled $112.9 million compared to $99.0 million for the comparable 2013 period. Included in the 2014 first quarter is the prepayment of approximately $27 million isolated to one borrower. At March 31, 2014, the MF/CRE pipeline totaled approximately $448 million.

The residential mortgage loan portfolio totaled $7.8 billion at March 31, 2014, compared to $8.0 billion at December 31, 2013. For the quarter ended March 31, 2014, residential loan originations for portfolio totaled $98.3 million compared to $233.5 million for the 2013 first quarter. The weighted average loan-to-value ratio of the residential loan production for portfolio was approximately 69% at origination for the 2014 first quarter. Residential loan prepayments for the 2014 first quarter totaled $225.1 million, compared to $638.5 million for the comparable 2013 period. "During the first quarter we saw a continuation of the trend of slower loan prepayments that began in the 2013 third quarter, due to higher long term interest rates. In addition we continue to experience a decrease in residential mortgage originations as the market has shifted from being refinance driven towards more purchase driven," Mr. Redman commented.

Commenting on the mortgage loan portfolio, Mr. Redman stated, "The trend of the residential loan portfolio contraction continues to move in a positive way. During the quarter ended March 31, 2014, the residential loan portfolio contracted by approximately $220 million, down from approximately $260 million in the 2013 fourth quarter. We believe that this trend will continue for the remainder of 2014 and will reach an inflection point where the MF/CRE portfolio growth will outpace the residential portfolio contraction in the second or third quarter."

Deposits decreased $134.2 million from December 31, 2013 to $9.7 billion at March 31, 2014. The decrease was primarily due to a decrease in higher cost certificates of deposit ("CDs"), partially offset by a net increase in lower cost core deposits. Core deposits totaled $6.7 billion, or 68% of total deposits, and had a weighted average rate of 9 basis points at March 31, 2014.

Borrowings decreased $41.9 million from December 31, 2013 to $4.1 billion at March 31, 2014. The decrease in borrowings, coupled with the growth in business banking deposits and decrease in CDs, is a further reflection of our continuing efforts to reposition the mix of liabilities.

Stockholders' equity totaled $1.6 billion, or 9.89% of total assets, at March 31, 2014, an increase of $32.6 million from December 31, 2013, primarily the result of undistributed net income. Astoria Federal continues to be designated as well-capitalized with Tier 1 leverage, Tangible, Total risk-based and Tier 1 risk-based capital ratios of 10.13%, 10.13%, 17.53% and 16.28%, respectively, at March 31, 2014.

Asset Quality
Non-performing loans ("NPLs"), including troubled debt restructurings ("TDRs") of $103.8 million, totaled $323.4 million, or 2.63% of total loans, at March 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 $323.4 million of non-performing loans at March 31, 2014 are $76.2 million of loans which are current or less than 90 days past due compared to $81.5 million at December 31, 2013.

Residential NPLs totaled $294.0 million, of which $228.4 million are 90 days or more delinquent, at March 31, 2014, compared to $305.6 million, of which $234.4 million are 90 days or more delinquent, at December 31, 2013. Of the $228.4 million of residential NPLs delinquent 90 or more days, $195.7 million, or 86%, represent loans which, at 180 days delinquent and annually thereafter were reviewed, and charged-off as needed, to the estimated fair value at such time of the underlying collateral less estimated selling costs. MF/CRE NPLs totaled $23.5 million and consumer and other NPLs totaled $5.9 million at March 31, 2014 compared to $20.4 million and $6.0 million, respectively, at December 31, 2013. Real estate owned, net totaled $46.2 million at March 31, 2014 compared to $42.6 million at December 31, 2013.

Included in the $2.1 million of residential loan net charge-offs in the 2014 first quarter are $1.7 million of charge-offs on $11.3 million of NPLs which, at 180 days delinquent and annually thereafter, were reviewed in the 2014 first quarter and charged-off, as needed, to the estimated fair value of the underlying collateral less estimated selling costs. "We are pleased with the continued reduction in loans delinquent less than 90 days. Although we continued to see increased levels of loans shifting from NPL status to real estate owned during the quarter, we expect the level of NPLs 90 days or more delinquent will remain somewhat elevated for some time, especially in those states requiring judicial foreclosure. It is important to note that the loss potential remaining on these NPLs has been greatly reduced as a result of our having already reviewed, marked down, and charged-off as necessary, 86% of the residential NPLs 90 days or more delinquent, to their adjusted fair value less estimated selling costs," Mr. Redman noted.

Future Outlook
Commenting on the future outlook, Mr. Redman stated, "Our strategy to expand our position as a full-service community bank continues to move forward. We believe that the branch we recently opened in Manhattan, along with the two additional branches we expect to open in the second half of the year, combined with an enriched advertising, marketing and branding campaign will assist our business bankers as they continue to grow their business. The growth of our business banking operation should allow us to continue to grow our low-cost, core deposits and move closer to our goal that they represent 80% of total deposits by the end of 2015. In a very competitive environment for MF/CRE lending, we are pleased that the MF/CRE pipeline grew by more than $135 million during the first quarter. We believe that the remainder of the year will provide us with increased loan originations leading to net growth in that portfolio similar to what we have achieved over the past two years. We expect this net growth to outpace the shrinkage in the residential loan portfolio, allowing us to begin to achieve net growth in the loan portfolio and, in turn, interest-earning assets."

About Astoria Financial Corporation
Astoria Financial Corporation, with assets of $15.7 billion, is the holding company for Astoria Federal Savings and Loan Association. Established in 1888, Astoria Federal, with deposits in New York totaling $9.7 billion, is the second 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 86 convenient banking branch locations, one business banking office, and multiple delivery channels, including its enhanced website, www.astoriafederal.com. Astoria Federal 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 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 correspondent relationships covering 10 states and the District of Columbia and 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.

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.

Tables Follow

CONTACT: Theodore S. Ayvas, Vice President, Investor Relations, 516-327-7877, ir@astoriafederal.com