AF Astoria Financial Corp. (delisted)

LAKE SUCCESS, N.Y., July 26, 2017 /PRNewswire/ -- Astoria Financial Corporation (NYSE: AF) ("Astoria", or the "Company"), the holding company for Astoria Bank (the "Bank"), today reported net income available to common shareholders of $15.8 million, or $0.16 diluted earnings per common share ("diluted EPS"), for the quarter ended June 30, 2017, compared to net income available to common shareholders of $16.1 million, or $0.16 diluted EPS, for the quarter ended June 30, 2016. For the six months ended June 30, 2017, net income available to common shareholders totaled $28.0 million, or $0.28 diluted EPS compared to $32.5 million, or $0.32 diluted EPS, for the comparable 2016 period. Included in the 2017 six month results is a $4.0 million charge ($2.6 million, or $0.03 per common share, after tax) related to the recognition of settlement costs related to lease obligations in connection with the residential lending team being relocated to other Astoria office space.

Board Declares Quarterly Cash Dividend of $0.04 Per Share

On July 26, 2017, the Board of Directors of the Company declared a quarterly cash dividend of $0.04 per common share.  The dividend is payable on August 21, 2017 to shareholders of record as of August 7, 2017.  This is the eighty-ninth consecutive quarterly cash dividend declared by the Company.

Second Quarter and Six Months Earnings Summary

Net interest income for the quarter ended June 30, 2017 totaled $78.5 million compared to $80.1 million for the previous quarter and $83.1 million for the 2016 second quarter.  The net interest margin for the quarter ended June 30, 2017 was 2.35%, compared to 2.37% for the previous quarter and 2.36% for the 2016 second quarter. For the six months ended June 30, 2017, net interest income totaled $158.7 million, compared to $166.3 million for the comparable 2016 period, and the net interest margin was 2.36% for the six months ended June 30, 2017, unchanged from the six months ended June 30, 2016.

For the quarter ended June 30, 2017, a $2.5 million loan loss release was recorded compared to a $2.5 million release in the prior quarter and a $3.0 million release recorded in the 2016 second quarter.  For the six months ended June 30, 2017, we recorded a loan loss release of $4.9 million compared to a $6.1 million loan loss release for the comparable 2016 period.  

Non-interest income for the quarter ended June 30, 2017 totaled $11.8 million, compared to $11.9 million for the previous quarter and $11.9 million for the 2016 second quarter. Non-interest income for the six months ended June 30, 2017 totaled $23.7 million compared to $23.3 million for the comparable 2016 period.    

General and administrative ("G&A") expense for the quarter ended June 30, 2017 totaled $64.7 million compared to $72.0 million for the previous quarter and $70.0 million for the 2016 second quarter.   For the six months ended June 30, 2017, G&A expense totaled $136.7 million, down from $139.6 million for the 2016 comparable period.  Included in the 2017 six month results is the $4.0 million pre-tax charge related to the recognition of settlement costs of certain lease obligations.

Balance Sheet Summary

Total assets at June 30, 2017 were $14.1 billion, a decrease of $410.3 million from December 31, 2016. The decrease was primarily due to a decline in the loan portfolio, which decreased $517.6 million from December 31, 2016. 

The multi-family/commercial real estate ("MF/CRE") mortgage loan portfolio totaled $4.7 billion at June 30, 2017 compared to $4.8 billion at December 31, 2016 and represents 47% of the total loan portfolio.  For the quarter and six months ended June 30, 2017, MF/CRE loan originations totaled $127.3 million and $222.3 million, respectively, compared to $193.6 million and $411.0 million, for the 2016 comparable periods. The MF/CRE loan production for the 2017 second quarter and six months ended June 30, 2017 were originated with weighted average loan-to-value ratios of approximately 34% and 36%, respectively, and weighted average debt coverage ratios of approximately 1.63 and 1.52, respectively. MF/CRE loan prepayments for the quarter and six months ended June 30, 2017 totaled $163.5 million and $272.5 million, respectively, compared to $135.9 million and $272.2 million for the 2016 comparable periods. At June 30, 2017, the MF/CRE pipeline totaled $123.9 million.

The residential mortgage loan portfolio totaled $5.0 billion at June 30, 2017, compared to $5.4 billion at December 31, 2016.  For the quarter and six months ended June 30, 2017, residential loan originations for portfolio totaled $86.3 million and $222.1 million, respectively, compared to $173.2 million and $262.7 million for the comparable 2016 periods.  The weighted average loan-to-value ratio of the residential loan production for portfolio at origination was approximately 57% for both the quarter and six months ended June 30, 2017.  Residential loan prepayments for the quarter and six months ended June 30, 2017 totaled $241.7 million and $452.5 million, respectively, compared to $289.4 million and $501.5 million for the comparable 2016 periods. At June 30, 2017, the residential mortgage pipeline totaled approximately $80.9 million.

Deposits totaled $8.9 billion at June 30, 2017, an increase of $12.5 million from December 31, 2016.  Core deposits totaled $7.4 billion, or 83% of total deposits, and had a weighted average rate of 13 basis points at June 30, 2017.

As we previously announced, during the second quarter, Astoria completed its public offering of $200 million aggregate principal amount of 3.500% Senior Notes due 2020 (the "Offering"). The Company used the net proceeds of the Offering, along with cash on hand, to repay at maturity its 5.000% Senior Notes due June 19, 2017.

Stockholders' equity totaled $1.74 billion, or 12.29% of total assets at June 30, 2017, an increase of $25.0 million from December 31, 2016.  Astoria Bank's capital levels continue to be above the minimum levels required to be designated as "well-capitalized" for bank regulatory purposes. At June 30, 2017, Tier 1 leverage, Common Equity Tier 1 risk based, Tier 1 risk-based and Total risk-based capital ratios were 12.28%, 22.28%, 22.28% and 23.32%, respectively for Astoria Bank, and 11.34%, 19.03%, 20.68% and 21.71%, respectively for Astoria Financial Corporation.  At June 30, 2017, Astoria Financial Corporation's tangible common equity ratio was 10.20%.

Asset Quality

Non-performing loans ("NPLs"), totaled $140.0 million, or 1.41% of total loans, at June 30, 2017, compared to $148.2 million, or 1.42% of total loans, at December 31, 2016. Included in the NPLs at June 30, 2017 is $32.1 million of loans which are current or less than 90 days past due compared to $40.9 million at December 31, 2016. Total delinquent loans and NPLs at June 30, 2017 were $212.6 million compared to $241.7 million at December 31, 2016. Net charge-offs for the quarter ended June 30, 2017 totaled $545,000 compared to net charge-offs of $1.1 million for the previous quarter and net charge-offs of $1.2 million for the 2016 second quarter. For the six months ended June 30, 2017, net charge-offs totaled $1.7 million compared to $1.9 million for the 2016 comparable period.  Other real estate owned declined to $14.8 million at June 30, 2017, compared to $15.1 million at December 31, 2016.

Future Outlook 

Commenting on the Company's future outlook, Mr. Redman stated, "As we previously announced on March 7, 2017, we have entered into a definitive agreement to merge with Sterling Bancorp ("Sterling"), which has been overwhelmingly approved by the respective shareholders of both Astoria and Sterling at their shareholder meetings.  We believe that combining our significant strengths will create a strong regional bank that will provide exceptional value for our investors while maintaining our strong commitment to our customers and the communities we serve."

About Astoria Financial Corporation

Astoria Financial Corporation, with assets of $14.1 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 in New York State, the District of Columbia and eight other states through its banking and loan production offices in New York.

Cautionary Statements Regarding Forward-Looking Information

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 that may be subject to circumstances beyond our control; increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment; changes in deposit flows, loan demand or collateral values; changes in accounting principles, policies or guidelines; changes in 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; legislative or regulatory changes, including those that may be implemented by the new administration in Washington, D.C.; 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; our ability to successfully implement technological changes; our ability to successfully  consummate new business initiatives;  litigation or other matters before regulatory agencies, whether currently existing or commencing in the future; or our ability to implement enhanced risk management policies, procedures and controls commensurate with shifts in our business strategies and regulatory expectations.   

This press release may also contain forward-looking statements about the benefits of the merger with Sterling Bancorp ("Sterling"), including future financial and operating results of Sterling, Astoria or the combined company following the merger, the combined company's plans, objectives, expectations and intentions, the expected timing of the completion of the merger, financing plans and the availability of capital, the likelihood of success and impact of litigation and other statements that are not historical facts. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties which change over time.  The following factors, among others, could cause actual results to differ materially from forward-looking statements: the inability to close the merger in a timely manner; the failure to complete the merger due to the failure of Sterling or Astoria common stockholders to approve the Sterling or Astoria merger proposals; failure to obtain applicable regulatory approvals and meet other closing conditions to the merger on the expected terms and schedule; the potential impact of announcement or consummation of the proposed merger on relationships with third parties, including customers, employees, and competitors; business disruption following the merger; difficulties and delays in integrating the Sterling and Astoria businesses or fully realizing cost savings and other benefits; Sterling's potential exposure to unknown or contingent liabilities of Astoria; the challenges of integrating, retaining, and hiring key personnel; failure to attract new customers and retain existing customers in the manner anticipated; the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the merger; any interruption or breach of security resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems; changes in Sterling's stock price before closing, including as a result of the financial performance of Astoria prior to closing; operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which Sterling and Astoria are highly dependent; changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, the Dodd-Frank Wall Street Reform and Consumer Protection Act and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection, and insurance, and the ability to comply with such changes in a timely manner; changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System; changes in interest rates, which may affect Sterling's or Astoria's net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of Sterling's or Astoria's assets, including its investment securities; changes in accounting principles, policies, practices, or guidelines; changes in Sterling's credit ratings or in Sterling's ability to access the capital markets; natural disasters, war, or terrorist activities; and other economic, competitive, governmental, regulatory, technological, and geopolitical factors affecting Sterling's or Astoria's operations, pricing, and services.

We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release.

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