This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A Bank Takeout Target Nobody's Talking About: Street Whispers

NEW YORK ( TheStreet) -- Astoria Financial (AF - Get Report) could wind up selling for the same reason Hudson City Bancorp (HCBK - Get Report) agreed to be taken out by M&T Bank (MTB - Get Report).

Despite Moody's concern about Hudson City's credit quality, the thrift's big problem has been a narrowing net interest margin, which is the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings.

Following a first-quarter 2011 restructuring that was forced by regulators and included a charge of $649.3 million to prepay $12.5 billion in higher-cost borrowings, the Hudson City prepaid another $4.3 billion in borrowings during the fourth quarter of last year, resulting in $440.7 million in charges.

Hudson City remained profitable, with second-quarter earnings of $72.3 million, or 15 cents a share, for a mediocre return on average assets (ROA) of 0.66% and a return on average equity (ROE) of 6.19%, but with mortgage loan rates continuing to decline, the company's second-quarter net interest margin was a low 2.12%, declining from 2.15% in the first quarter, and 2.14% in the second quarter of 2011.

Astoria is in a similar pickle, with a second-quarter net interest margin of just 2.12%, declining from 2.20% the previous quarter, and 2.34% a year earlier. The company had $17.6 billion in total assets as of June 30, and earned $12.8 million, or 13 cents a share, during the second quarter, increasing from $10 million, or 11 cents a share, during the first quarter, but declining from $16.8 million, or 18 cents a share, during the second quarter of 2011.

Astoria's second-quarter ROA was a dismal 0.30%, while its return on average tangible stockholders' equity was 4.70%.

The company -- headquartered in Lake Success, N.Y., with an extensive branch network in the New York City Burroughs of Queens and Brooklyn, as well as Nassau and Suffolk Counties on Long Island, and in Westchester County in New York -- has been growing its multifamily mortgage commercial real estate loan portfolios, in order to boost profitability, as single-family mortgage rates remain near historical lows.

Total multifamily mortgage and commercial real estate loans grew 17% just in the second quarter, to $2.8 billion, with a weighted average rate of 5.14%, providing hope for Astoria and its investors that the company can right the ship and become more profitable.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AF $13.05 -0.46%
HCBK $9.39 -0.21%
MTB $119.61 -0.48%
AAPL $130.28 0.47%
FB $81.53 -1.07%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs