Astoria Federal's focus returns to home loans.

Astoria Federal Savings and Loan, one of the largest thrifts in New York State, is going "back to basics."

After weathering a storm of credit woes in commercial real estate, the Lake Success-based institution is focusing anew on single-family home loans - and the effort appears to be paying off. Astoria, with assets of $3.8 billion, saw its net interest income jump 13% in the nine months through September, to $86.5 million. Meanwhile, nonperforming loans shrank from $208 million, or 6.8% of total assets, at Dec. 31, 1990, to $133.4 million, or 3.5% of assets, at Sept. 30.

Armed with the new strategy, Astoria last month went public, converting from mutual ownership. The stock, which came out at $25 a share, was trading at $28.50 early Wednesday in the over-the-counter market.

The 105-year-old thrift embarked on its latest era after jettisoning a bagful of problem multifamily, commercial real estate, and land loans acquired in the early to mid-1980s. While Astoria federal operated- in the black for most of its long history, it fell victim to its own expansionist zeal in commercial real estate.

"We were involved in some construction lending - primarily condominiums and some loans on land that was to be developed into condominiums - and in 1986, with the passage of the Tax Reform Act, Congress, with one stroke of it's miraculous pen, was able to ruin an entire marketplace," said George L. Engelke Jr., Astoria's president and chief executive.

"So," he continued, "while many of us were building condominiums, effectively the life got cut out of the investors in those properties. Then the stock market crash in 1987 stopped real estate activities in their tracks completely."

|Isolated the Problem Group'

He said Astoria Federal now has only about $200 million left in construction, commercial, and multifamily loans on its books. The multifamily loans, which include many of the six-family home loans in the bank's primary market, average only $140,000 while the commercial loans average only $340,000.

"We've totally isolated the problem group. What's left is the one-to-four family loans," Mr. Engelke said.

"In our mortgage lending right now, the strongest thing we have is refinancing with everybody reacting to lower interest rates," he added. "The majority of the lending we are doing right now is in fixed 10- and 15-year loans.

"Until we develop secondary-market capabilities, which we are working on right now, we are not competitive in the 30-year market and that's very popular at the moment," Mr. Engelke said.

In order to increase that capability, Astoria is outsourcing its entire data-processing effort.

"Part of the reason our secondary market wasn't there was because our software didn't accommodate it on an in-house basis, so we are acquiring that capability with both the origination and the servicing systems now being installed," he said.

Astoria's largest mortgage-lending area is the New York City borough of Queens, which comprises homeowners of all backgrounds and income levels.

Among the thrift's new products is an affordable loan for first-time homebuyers. "It's a five-year adjustable. The rate on the loan is fixed for the first five years, and the rate right now is 5%, with no points," said Thomas W. Drennan, senior vice president of mortgage services.

He said Astoria had recently begun to expand its marketing capabilities through the use of laptop computers. "If you want a mortgage loan, we come to your house or place of business, take your application, review your loan and your credit, and complete the entire application process in a relatively short time."

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