Astoria Financial Corporation ( AF ) Q1 2010 Earnings Call Transcript April 22, 2010 10:00 am ET Executives George Engelke – Chairman and CEO Monte Redman – President and COO Frank Fusco – EVP, Treasurer and CFO Analysts Matthew Clark – KBW Bruce Harting – Barclays Capital David Hochstim – Buckingham Research Bob Ramsey – FBR Capital Markets Christopher Nolan – Maxim Group Matthew Kelley – Sterne Agee & Leach Collyn Gilbert – Stifel Nicolaus Tom Alonso – Macquarie Presentation Operator
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Last night evening, we reported that for the 2010 first quarter, net income totaled $12.9 million or $0.14 per share. Included in the first quarter is a $45 million provision for loan losses, 5 million less than the 50 million provisions in each of the last four quarters.In addition, we reported that the first quarter net interest income and net interest margin, both increased year-over-year, and on a linked quarter basis. The margin increased 24 basis points from the previous quarter, and 23 basis points from last year’s first quarter to 2.39%. And on a trailing quarter basis net interest income was up 9%, despite a smaller balance sheet. With respect to credit quality, although non-performing loans have increased slightly from the previous quarter to $419 million, as we anticipated. We are encouraged by the improving trends in early-stage delinquencies. Loans one and two months past due declined $21 million, or 7% from the previous quarter, and $53 million or 17% from the 2009 first quarter. While non-performing loan levels may remain elevated for some time as we work through the foreclosure process, it’s important to note that the loan potential remaining has been greatly reduced. We have already marked down and charged off as necessary over 70% of current residential non-performing loans to their adjusted fair value less selling costs. For more comprehensive details on credit quality please refer to pages three, four and 13 of our press release. During the first quarter, the balance sheet contracted at $191 million, as loan prepayments and amortization outpaced loan production. With respect to deposits, we continue to let high cost CD deposits run off. Total CD deposits decreased $208 million while low cost, passbook money market and checking accounts increased $81 million or 8% annualized. With respect to the outlook for 2010 while it appears that a moderate economic recovery is underway, the housing market remains soft and high unemployment persists, which may somewhat restrain the pace of the recovery.
The long-term outlook for credit is improving, which should translate into continued declining credit costs and improved financial performance. In terms of loan growth, as the mortgage rate for 30 year fixed-rate conforming loans increases, we anticipate that loan prepayments will decline, which should result in portfolio growth in the second half of this year.With that as an overview, I’d like to open the phone lines for your questions. Nicole, if you would take care of that please. Question-and-Answer Session Operator Thank you. The floor is now open for questions. (Operator Instructions) Please hold for your first question. Thank you. Our first question is coming from Matthew Clark of KBW. George Engelke Are you there Matt? Operator Mr. Clarke your line is open to speak. Matthew Clark – KBW Hello? George Engelke Hi Matt, good morning. Matthew Clark – KBW Good morning. Just first, can you talk about your expectation for growth and what that assumes for volume, with higher rates and mortgage rates ticking up, and it sounds like you think obviously prepays will slow. But just want to get a better sense for what kind of confidence you have that you are going to be able to regain some of the volume that’s been maybe going away from you with the government now involved and now uninvolved to some degree? George Engelke All right Matt. In terms of loan growth per se our pipeline as of the end of the first quarter is about $250 million less than what’s at the end of the year. So, we are looking at a loan portfolio reducing, as well as a balance sheet in the second quarter. I will say this about a 16% of our applications coming in are for purchase. So the applications we’ve been seeing over the last year have been mostly refinanced. So, I am not sure what the government programs are doing in terms of helping the overall purchase market. What we’re hoping is that the overall mortgage rate increases – a 30-year fixed rate increases, with the government out of the purchase more with backed security area, and that our refinance has actually slowdown and decrease, which were in the second half of the year, which will allow for portfolio growth. We are not going to push our rate on our loans or credit quality just to get loan growth. So if that does not happen, we will continue to shrink the balance sheet as necessary, just putting on good-quality loans at good rates. Read the rest of this transcript for free on seekingalpha.com