5 Banks 'Potentially At Risk' From Stress Tests

4. Astoria Financial
Shares of Astoria Financial (AF) of Lake Success, N.Y., closed at $9.05 Friday, returning 9% year-to-date, following a 36% decline during 2011.

The shares trade for 0.8 times tangible book value, and for 14 times the consensus 2013 EPS estimate of 66 cents The consensus 2012 EPS estimate is 54 cents.

Astoria during the first quarter cut its quarterly dividend to four cents from 13 cents, as the company suffered year-over-year declines in net interest income and margin, with weak mortgage loan demand in the prolonged low-rate environment.

The company had $17.1 billion in total assets as of March 31, and reported first-quarter net income of $10.0 million, or 11 cents a share, declining from $11.8 million, or 12 cents a share, the previous quarter, and $27.4 million, or 29 cents a share, a year earlier. Astoria said that its first-quarter results included "net charges totaling $3.4 million ($2.2 million, or $0.02 per share, after-tax), representing severance related expenses associated with cost control initiatives implemented in the 2012 first quarter."

The first-quarter net interest margin was 2.20%, unchanged from the fourth quarter, but declining from 2.40% during the first quarter of 2011.

Sterne Agee's #4 ranking for Astoria Financial's risk from the coming stress tests factors-in a tangible common equity ratio of 6.4%, ranking 39th out of 54 banks; a loans-to-deposits ratio of 118.4%, ranking 50th; and an estimated 2013 return on average assets (ROA) of 0.29%, for a 50th-place ranking.

Sterne Agee analyst Matthew Kelley rates Astoria "Underperform," with a price target of $7.00, saying on April 19 that "with the common dividend smartly reduced, the company now has the internal capital generation to start rebuilding the loan portfolio which has been shrinking since 2008." Kelly added that the shares were "overvalued on an earnings basis (14x 2013E)" and that he didn't see the company selling to a competitor "while in cost-cutting and asset rebuilding mode over the next year."

Kelley estimates that Astoria will earn 51 cents a share this year, followed by EPS of 66 cents during 2013.

Interested in more on Astoria Financial? See TheStreet Ratings' report card for this stock.

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