Astoria Financial Corp. (AF), the holding company for Astoria Federal Savings and Loan Association, on Wednesday reported a 72% fall in profit for the fourth quarter from last year on lower revenues, higher expenses and a higher provision for loan losses. However, adjusted earnings per share for the quarter topped analysts' consensus by a penny.
Looking ahead, the company expects a modest increase in net interest margin in the first half of 2010, and said that the improvement in net interest income and the net interest margin coupled with the stabilizing trend in non-performing loans will have a positive impact on earnings in future quarters.
The Lake Success, New York-based company posted net income for the fourth quarter of $8.14 million or $0.09 per share, down from $29.45 million or $0.32 per share in the prior-year period.
The year-ago quarter's results included a tax benefit of $7.4 million or $0.08 per share, due to a tax adjustment related to the recognition of the 2008 third quarter other-than-temporary impairment.
Operating income for the quarter was $8.14 million or $0.09 per share, up from $22.07 million or $0.24 per share in the same period last year. On average, thirteen analysts polled by Thomson Reuters expected the company to report earnings of $0.08 per share. Analysts' estimates typically exclude special items.
Net interest income for the quarter slipped to $104.96 million from $114.95 million in the previous-year period. Non-interest income totaled $23.35 million, up from $19.21 million a year ago. Analysts had a consensus revenue estimate for the quarter of $107.42 million.
The increase in non-interest income is primarily due to security gains of $1.5 million and net mortgage banking income of $0.81 million compared to a $2.2 million net mortgage banking loss in the year-ago period.
Commenting on the results, George Engelke, Jr., Chairman and Chief Executive Officer of Astoria, said, "While the decreases in the year-over-year fourth quarter and full year results reflect the effect of a prolonged and severe job loss recession that has resulted in increased loan delinquencies, higher credit costs and non-performing loans as compared to a year ago, the fundamental operating performance of the company on a linked quarter basis is encouraging. Specifically, the improvement in net interest income and the net interest margin coupled with the stabilizing trend in non-performing loans, will have a positive impact on earnings in future quarters."
Astoria's net interest margin for the latest quarter was 2.15%, up 8 basis points from the preceding third quarter, but down 3 basis points from last year. The sequential increase in net interest margin was due to the cost of interest-bearing liabilities declining more rapidly than the yield on interest-earning assets.
Non-interest expense for the quarter was $66.84 million, up from $56.25 million in the same period last year. Federal deposit insurance premiums for the quarter rose to $6.57 million from $0.55 million a year ago.
For the quarter ended December 31, 2009, the company recorded a $50.0 million provision for loan losses that was equal to the provision for the previous quarter, and up from the $45.0 million provision in the year-ago period.
Deposits for the fourth quarter decreased $406.4 million from the previous quarter and $667.7 million from the year-ago period and totaled $12.8 billion at December 31, 2009. The decreases were due primarily to decreases in CDs. Borrowings for the quarter increased $40.1 million from the previous quarter and decreased $1.1 billion from December 31, 2008 to $5.9 billion.
For fiscal year 2009, the company reported net income of $27.68 million or $0.30 per share, down from $75.34 million or $0.82 per share last year.
Operating income for the year dropped to $38.56 million or $0.42 per share from $125.84 million or $1.38 per share in the previous year. Analysts expected earnings of $0.41 per share for the year.
Net interest income increased 8.4% to $428.77 million from $395.38 million in the prior year. Non-interest income rose to $79.80 million from $11.18 million last year. Analysts expected revenues of $429.24 million.
For the year ended December 31, 2009, the company's provisions for loan losses totaled $200.0 million, up sharply from $69.0 million for 2008.
Engelke said, "The significant increase in the 2009 provisions recognizes the deterioration in the financial condition of many prime residential borrowers during the year, due to the severity of a prolonged job loss recession, weakness in the national housing market and a decline in real estate values, which resulted in higher loan delinquencies, credit costs and non-performing loans."
Additionally, the company announced a quarterly cash dividend of $0.13 per common share, payable on March 1, 2010 to shareholders of record as of February 16, 2009.
The company's board of directors, at their January 27, 2010 meeting, established May 19, 2010 as the date for the annual meeting of shareholders, with a voting record date of March 24, 2010.
Engelke said, "With respect to the net interest margin, we expect modest increases in the first half of 2010 as we continue to realize the benefit from significant CD repricing opportunities."
AF closed Wednesday's trading at $13.50, up $0.40 or 3.05% on a volume of about 1.03 million shares.
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