LAKE SUCCESS, N.Y., July 23, 2014 /PRNewswire/ -- Astoria Financial Corporation (NYSE: AF) ("Astoria", the "Company"), the holding company for Astoria Bank ("the Bank") today reported net income available to common shareholders of $20.1 million, or $0.20 diluted earnings per common share ("diluted EPS"), for the quarter ended June 30, 2014, compared to net income available to common shareholders of $12.8 million, or $0.13 diluted EPS, for the quarter ended June 30, 2013. For the six months ended June 30, 2014, net income available to common shareholders totaled $49.5 million, or $0.50 diluted EPS, compared to $26.7 million, or $0.27 diluted EPS, for the comparable 2013 period. Included in the 2014 second quarter results is 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 as held-for-sale. Included in the 2014 six month results is a reduction in income tax expense of $11.5 million ($0.12 per common share) related to the impact of New York State tax legislation which was signed into law on March 31, 2014.

Six Month Financial Highlights

Non-Performing Loans ("NPLs"):

• Reduced non-performing residential mortgage loans by approximately $195 million by designating them as held-for-sale; subsequently entered into an agreement to sell these loans in a bulk sale transaction expected to close on or about July 31, 2014.
• NPLs at June 30, 2014 totaled $109.7 million, down from $332.0 million at December 31, 2013.

Deposits:

• Business deposits increased $151.2 million, or 23%, from December 31, 2013 to $801.3 million at June 30, 2014.

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 37% of total loans at June 30, 2014 from 33% at December 31, 2013.

Monte N. Redman, President and Chief Executive Officer of Astoria, commenting on the 2014 second quarter stated, "Our continued focus on growing business banking, including the opening of our first Manhattan branch on March 31^st combined with increased brand awareness and advertising continues to deliver positive results as evidenced by a 23% increase in low cost business deposits from year-end 2013, including $111.2 million of new business deposits in the second quarter alone."

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

Non-Performing Loan Sale
On July 21, 2014, the Bank entered into an agreement to sell non-performing residential mortgage loans for a purchase price of approximately $186 million in a bulk sale transaction that is expected to close on or about July 31, 2014. These loans, with a carrying value of approximately $195 million, were designated as held-for-sale at the end of the second quarter, at which time the Company took an $8.7 million charge against its allowance for loan losses. In addition, the Company recorded a loan loss release of $5.7 million reflecting reserves that were no longer deemed necessary in light of the designation of the NPLs as held-for-sale. Commenting on the anticipated NPL sale, Mr. Redman said, "We are obviously very pleased with the agreement to sell these non-performing residential loans. We believe that this sale will have several positive impacts on the Company as we move forward including, but not limited to, a positive effect on future FDIC insurance assessment rates, an improved risk profile on our loan portfolio and reduced foreclosure related expenses."

Astoria Bank
On June 1, 2014, the Company's wholly owned subsidiary changed its name to Astoria Bank to better reflect its business as a diversified, full service community bank. Commenting on the change, Mr. Redman stated, "Astoria Bank is a better name for who we are and what we do today as a leading, full-service community bank. For more than 125 years, we've adapted and evolved to meet the needs of our expanding customer base and our new name reflects that change."

Second Quarter and Six Month Earnings Summary
Net interest income for the quarter ended June 30, 2014 totaled $85.8 million compared to $88.0 million for the previous quarter and $84.9 million for the 2013 second quarter. The net interest margin for the quarter ended June 30, 2014 was 2.31% compared to 2.36% for the previous quarter and 2.22% for the 2013 second 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. For the six months ended June 30, 2014, net interest income totaled $173.7 million, compared to $168.9 million for the comparable 2013 period, and the net interest margin increased to 2.34% for the six months ended June 30, 2014 from 2.20% for the six months ended June 30, 2013.

For the quarter ended June 30, 2014, a $5.7 million loan loss release was recorded compared to a $1.6 million provision for loan losses taken in the previous quarter and a $4.5 million provision taken in the 2013 second quarter. For the six months ended June 30, 2014, the loan loss release totaled $4.1 million compared to a $13.7 million provision for the comparable 2013 period. Mr. Redman commented, "The loan loss release that we recorded in connection with the designation of NPLs as held-for-sale further illustrates the effectiveness of our policy to review NPLs when they reach 180 days delinquent and annually thereafter, writing them down to their estimated fair value at such time less estimated selling costs. We continue to maintain our allowance at a level which we believe is appropriate given the significant reduction in NPLs, the continued improvement in our asset quality metrics, as well as the high quality of our loan originations. The ratio of the allowance for loan losses to total loans (which excludes loans held-for-sale) was 98 basis points at quarter-end."

Non-interest income for the quarter ended June 30, 2014 totaled $13.8 million compared to $13.7 million for the previous quarter and $18.6 million for the 2013 second quarter. Non-interest income for the six months ended June 30, 2014 totaled $27.5 million compared to $36.9 million for the comparable 2013 period. The decreases for the quarter and six months ended June 30, 2014 are primarily due to decreases in mortgage banking income, net, and the absence of gain on sales of securities in the 2014 periods.

General and administrative ("G&A") expense for the quarter ended June 30, 2014 totaled $71.6 million compared to $70.2 million for the previous quarter and $74.4 million for the 2013 second quarter. For the six months ended June 30, 2014, G&A expense decreased $4.1 million, or 3%, to $141.8 million from $145.9 million for the 2013 comparable period. The quarter and six months ended June 30, 2013 included a $4.3 million prepayment charge for the early extinguishment of debt in connection with the redemption of $125 million of capital securities. Mr. Redman commented, "Our G&A expense has increased more slowly than we had anticipated as some of the initiatives we had factored into our guidance have had their timetables shifted towards later in the year. We continue to believe that as the year progresses, G&A expenses will trend higher and will be within the $72 - $75 million per quarter range that we have discussed on our previous conference calls, reflecting the expenses associated with the branch we opened on March 31^st, additional branches that we hope to open later this year, as well as increases in advertising, branding and compensation expenses related to both the branch openings and our continued focus on growing business banking. These expenses will be offset somewhat by the positive impact on future FDIC insurance assessment rates and foreclosure related expenses as a result of the NPL sale."

Balance Sheet Summary
Total assets increased $42.2 million from March 31, 2014 and decreased $51.7 million from December 31, 2013, and totaled $15.7 billion at June 30, 2014. The increase from March 31, 2014 was primarily due to an increase in the securities portfolio. The decrease from year-end was primarily due to a decrease in the residential mortgage loan portfolio, partially offset by increases in the MF/CRE portfolio and the securities portfolio. The total loan portfolio decreased $225.1 million and $380.4 million from March 31, 2014 and December 31, 2013, respectively, of which $186.3 million is attributable to the designation of NPLs as held-for-sale, and totaled $12.1 billion at June 30, 2014.

The MF/CRE mortgage loan portfolio totaled $4.4 billion at June 30, 2014, an increase of $263.9 million and $336.6 million from March 31, 2014 and December 31, 2013, respectively, and represents 37% of the total loan portfolio. For the quarter and six months ended June 30, 2014, MF/CRE loan originations totaled $353.5 million and $571.5 million, respectively, compared to $529.2 million and $874.8 million for the 2013 comparable periods. The MF/CRE loan production for the 2014 quarter and six months ended June 30, 2014 were originated with weighted average loan-to-value ratios of approximately 52% and weighted average debt coverage ratios of approximately 1.57 and 1.63, respectively. MF/CRE loan prepayments for the quarter and six months ended June 30, 2014 totaled $56.6 million and $169.5 million, respectively, down from $158.8 million and $257.8 million for the comparable 2013 periods. At June 30, 2014, the MF/CRE pipeline totaled approximately $346.8 million.

The residential mortgage loan portfolio totaled $7.3 billion at June 30, 2014, compared to $8.0 billion at December 31, 2013. This decrease is partially due to the previously discussed designation of NPLs as held-for-sale. For the quarter and six months ended June 30, 2014, residential loan originations for portfolio totaled $83.2 million and $181.5 million, respectively, compared to $234.3 million and $467.8 million for the comparable 2013 periods. The weighted average loan-to-value ratio of the residential loan production for portfolio was approximately 71% and 70% at origination, respectively, for the quarter and six months ended June 30, 2014. Residential loan prepayments for the quarter and six months ended June 30, 2014 totaled $289.9 million and $515.1 million, respectively, down significantly from $705.1 million and $1.3 billion for the comparable 2013 periods. At June 30, 2014, the residential mortgage pipeline totaled approximately $207.1 million. Mr. Redman commented, "Of note is the fact that within the pool of loans designated as held-for-sale was approximately $133 million of interest-only ("IO") loans, which serves to further reduce our overall IO portfolio as well. At June 30, 2014 our residential IO portfolio totaled $1.8 billion, down from $2.2 billion and $2.7 billion at December 31, 2013 and June 30, 2013, respectively."

Deposits decreased $61.7 million and $195.9 million from March 31, 2014 and December 31, 2013, respectively, and totaled $9.7 billion at June 30, 2014. The decreases were primarily due to decreases in higher cost certificates of deposit ("CDs"), partially offset by net increases in lower cost core deposits. Core deposits totaled $6.7 billion, or 69% of total deposits, and had a weighted average rate of 10 basis points at June 30, 2014.

Stockholders' equity totaled $1.6 billion, or 10.02% of total assets, at June 30, 2014, an increase of $57.9 million from December 31, 2013, primarily the result of undistributed net income. 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 10.32%, 10.32%, 18.73% and 17.48%, respectively, at June 30, 2014. At June 30, 2014, Astoria Financial Corporation's tangible common equity ratio was 8.12%.

Asset Quality
NPLs, including troubled debt restructurings ("TDRs") of $72.0 million, totaled $109.7 million, or 0.91% of total loans, at June 30, 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 $109.7 million of NPLs at June 30, 2014 are $71.5 million of loans which are current or less than 90 days past due compared to $81.5 million at December 31, 2013. NPLs at June 30, 2014 do not include loans held-for-sale.

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

Selected Asset Quality Metrics
(at June 30, 2014 except as 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 gain momentum. The 23% growth of business deposits in the first half of 2014 is extremely encouraging, providing us with proof that we are reaping the rewards associated with all of the focus and effort that we have placed on growing business banking. We believe that this is only the start for business banking and we look forward to even stronger growth in the second half of the year. The growth of these core business deposits continues to be one of the biggest contributing factors as we move closer to our goal that core deposits represent 80% of total deposits by the end of 2015.

With the significant strengthening of our credit metrics, combined with the strong credit quality we have experienced on our residential loan production since 2008 and our MF/CRE originations since 2011, we believe that the majority of our previous credit issues are behind us and look forward to further strengthening our position as a full-service community bank."

About Astoria Financial Corporation
Astoria Financial Corporation, with assets of $15.7 billion, is the holding company for Astoria Bank. Established in 1888, Astoria Bank, with deposits in New York totaling $9.7 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 86 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 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 and 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.

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.