Astoria Financial Corporation (NYSE: AF), the holding company for Astoria Federal Savings and Loan Association, reported net income of $33.5 million, or $0.37 diluted earnings per share ("EPS"), for the quarter ended June 30, 2008, compared to $34.1 million, or $0.37 EPS, for the 2007 second quarter. For the six months ended June 30, 2008, net income totaled $62.4 million, or $0.69 EPS, compared to $69.8 million, or $0.75 EPS, for the comparable 2007 period.
Second Quarter 2008 Financial Highlights:
-- Diluted earnings per share of $0.37, up 16% from the 2008 first quarter
-- Margin increased 24 basis points from the linked quarter to 1.81%
-- Deposits increased $86 million, or 3% annualized
-- Loan portfolio increased $479 million, or 12% annualized
- One-to-four family loan portfolio increased $550 million, or 20% annualized
-- Mortgage loan production increased $892 million from the 2008 first quarter and totaled $1.6 billion
- One-to-four family loan production increased $833 million from the 2008 first quarter and totaled $1.5 billion
Commenting on the 2008 second quarter results, George L. Engelke, Jr., Chairman and Chief Executive Officer of Astoria, noted, "We are pleased to report solid second quarter results which reflect double-digit increases in both earnings and earnings per share over the 2008 first quarter. As anticipated, these very positive results were achieved due to a significant improvement in the net interest margin, resulting primarily from lower liability costs, solid loan and deposit growth and lower premium amortization expense. We expect continued expansion in the net interest margin, as well as loan and deposit growth."
Board Declares Quarterly Cash Dividend of $0.26 Per Share
The Board of Directors of the Company, at their July 16, 2008 meeting, declared a quarterly cash dividend of $0.26 per common share. The dividend is payable on September 2, 2008 to shareholders of record as of August 15, 2008. This is the fifty-third consecutive quarterly cash dividend declared by the Company.
Second Quarter and Six Month Earnings Summary
Net interest income for the quarter ended June 30, 2008 increased $11.8 million, or 15%, from the 2008 first quarter and $9.7 million, or 12%, from the 2007 second quarter to $92.6 million. For the six months ended June 30, 2008, net interest income increased $2.9 million, compared to the six months ended June 30, 2007, to $173.4 million.
Astoria's net interest margin for the quarter ended June 30, 2008 increased 24 basis points from the 2008 first quarter and 19 basis points from the 2007 second quarter to 1.81%. The increases were primarily due to a decrease in the cost of interest bearing-liabilities. "We expect that the net interest margin will continue to expand this year, as we realize the repricing benefit of deposit and borrowing liabilities which have rates that are considerably above current market rates. Over the next six months, CDs (excluding Liquid CDs) totaling $3.7 billion, with a weighted average rate of 4.29%, and medium and long-term borrowings totaling $1.3 billion, with a weighted average rate of 4.95%, are scheduled to mature," Mr. Engelke noted.
For the quarter ended June 30, 2008, a $7.0 million provision for loan losses was recorded compared to $4.0 million for the previous quarter. For the six months ended June 30, 2008, provision for loan losses totaled $11.0 million. No provision for loan losses was recorded in the comparable 2007 periods. Quarterly provisions for the remainder of 2008 are expected to remain at or increase somewhat from the second quarter level.
General and administrative expense ("G&A") for the quarter ended June 30, 2008 increased $1.8 million, to $60.0 million, from the 2008 first quarter and $1.3 million from the 2007 second quarter. The linked quarter increase is primarily due to increases in advertising and goodwill litigation expense. The year over year increase is due primarily to increases in compensation and benefits and real estate owned (REO) expense, partially offset by lower goodwill litigation expense.
For the six months ended June 30, 2008, G&A expense increased $2.4 million, compared to the six months ended June 30, 2007, to $118.2 million. The increase was primarily due to an increase in compensation and benefits expense, partially offset by a decrease in advertising expense.
Balance Sheet Summary
For the quarter and six months ended June 30, 2008, the total loan portfolio increased $478.8 million and $25.4 million, respectively, to $16.2 billion. The loan growth was funded primarily with excess liquidity and, to a lesser extent, retail deposits and wholesale borrowings. Total loan production for the quarter and six months ended June 30, 2008 increased to $1.6 billion and $2.4 billion, respectively, from $1.4 billion and $2.3 billion, respectively, for the comparable 2007 periods.
For the quarter and six months ended June 30, 2008, the one-to-four family mortgage loan portfolio increased $550.4 million and $197.7 million, respectively, to $11.8 billion. One-to-four family loan originations and purchases for the quarter and six months ended June 30, 2008 increased to $1.5 billion and $2.2 billion, respectively, from $1.3 billion and $2.0 billion, respectively, for the comparable 2007 periods. One-to-four family loan prepayments for the quarter and six months ended June 30, 2008 totaled $821.3 million and $1.7 billion, respectively, compared to $583.1 million and $1.1 billion, respectively, for the comparable 2007 periods.
Indicative of Astoria's conservative underwriting standards, the loan-to-value ("LTV") ratio of the 2008 second quarter and six month one-to- four family loan production for portfolio averaged approximately 57% for each period and the loan amounts averaged approximately $690,000 and $675,000, respectively. "It is important to note that the double-digit linked quarter loan growth attained in the second quarter has been achieved without sacrificing asset quality, as reflected in the very low average LTV ratio on second quarter loan production," Mr. Engelke noted.
For the quarter and six months ended June 30, 2008, the multi-family and commercial real estate ("CRE") loan portfolio decreased $60.1 million and $132.0 million, respectively. Multi-family/CRE loan originations totaled $126.6 million and $193.8 million, for the respective three and six month periods ended June 30, 2008. At June 30, 2008, the combined multi-family and CRE loan portfolio totaled $3.8 billion, or 24% of total loans. The loan-to- value ratio of the 2008 second quarter and six-month multi-family/CRE loan production averaged approximately 62% for each period and the loan amounts averaged approximately $2.0 million and $1.8 million, respectively.
Asset Quality
Asset quality continued to remain strong during the 2008 second quarter. Non-performing loans ("NPL") totaled $128.6 million at June 30, 2008, an increase of $22.0 million from the previous quarter, and represent just 0.59% of total assets. At June 30, 2008, one-to-four family non-performing loans totaled $101.0 million and multi-family/CRE non-performing loans totaled $24.5 million, compared to $88.4 million and $14.9 million, respectively, at March 31, 2008. -- Astoria Financial Corporation
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