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

Astoria CEO Monte Redman said in July that he was "pleased with the positive progression in our asset/liability repositioning," and that "We expect that together, the growth and repositioning of the balance sheet coupled with improved operating efficiency should benefit the net interest margin and improve profitability throughout the remainder of the year."

That being said, Redman added that "with respect to the net interest margin, due to the impact of extending $500 million of borrowings in the 2012 second quarter and the additional short-term cost to carry the 5% Senior Notes until we extinguish our existing 5.75% Senior Notes, we now anticipate the net interest margin for the 2012 full year to be slightly lower than the 2011 fourth quarter margin of 2.20%."

"2012 continues to be the transitional year for us with continued quarterly earnings and balance sheet growth," he said.

Astoria's shares closed at $9.86 Monday, returning 19% year-to-date, following a 36% decline during 2011. The shares trade for 0.9 times tangible book value, according to Thomson Reuters Bank Insight, and for 15 times the consensus 2013 earnings estimate of 65 cents a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 52 cents.

Guggenheim Securities analyst David Darst said on Aug. 10 that Astoria's shares "will begin to trade closer to [tangible book value] over the next year; however, this likely will not materialize until early/mid-2013 as earnings increase." Despite the hopeful signs from such strong growth in multifamily and commercial real estate lending, Darst said that "longer term, we believe AF will need to show more significant improvement to remain independent."

Darst has a neutral rating on Astoria, with a price target of $11.00.

Astoria has been included in KBW's "Consolidation List" for quite some time, with analyst Fred Cannon rating the company "Market Perform," with a $9.00 price target. Darst said in July that he was "pleased with the company's expense management this quarter and improving credit trends but the margin and revenue decline likely offset the positive improvements, in our view."

Bank of America Merrill Lynch analyst Kenneth Bruce has a contrary opinion, rating Astoria "Underperform," with a price objective of $6.50, saying in July that "with no yield protection, we see more downside to AF, and question the viability of its traditional thrift business model in a prolonged harsh interest rate backdrop."

Bruce added that "despite the batch of optimism that has supported AF shares this year, we think it is neither a take-out candidate nor likely to exit the earnings trough anytime soon."

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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