Astoria Financial's (NYSE:AF) Balance Sheet Needs to Grow for More Earnings Visibility

Astoria Financial (NYSE:AF) continued to improve in the fourth quarter of 2010, according to FBR, but until they start to grow their balance sheet again, earnings will be difficult to project.

FBR says, "Credit progress continued in 4Q10, causing EPS to exceed our expectation; however, falling revenues reflected an acceleration in loan run-off. Given the recent uptick in mortgage rates, management expects less portfolio shrinkage in 2011 and a stable margin. Falling provision expense should enable Astoria to continue to earn $0.20 to $0.25 per quarter, but it is tough to see much upside to earnings until it begins to grow its balance sheet again. We reiterate our respective 2011 and 2012 operating EPS estimates of $0.90 and $0.95. GSE reform may be a long-term catalyst for Astoria, but in the near term it will be difficult for Astoria to boost its pre-provision earnings power."

FBR Capital maintains a "Market Perform" on Astoria Financial (AF), which closed Thursday at $14.81, up $0.91, or 6.47 percent. FBR has a price target of $15 on Astoria.