ASTORIA FINANCIAL CORP - FORM 10-Q

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EX-31.1 - EXHIBIT 31.1 - ASTORIA FINANCIAL CORP	af20160331ex31d1.htm
EX-31.2 - EXHIBIT 31.2 - ASTORIA FINANCIAL CORP	af20160331ex31d2.htm
EX-32.1 - EXHIBIT 32.1 - ASTORIA FINANCIAL CORP	af20160331ex32d1.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-11967

ASTORIA FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		11-3170868
(State or other jurisdiction of		(I.R.S. Employer Identification
incorporation or organization)		Number)

One Astoria Bank Plaza, Lake Success, New York		11042-1085
(Address of principal executive offices)		(Zip Code)

(516) 327-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as these items are defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨ NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



	Classes of Common Stock		Number of Shares Outstanding, April 29, 2016
	$0.01 Par Value		101,406,677

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		Page

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Consolidated Statements of Financial Condition at March 31, 2016 and December 31, 2015	2

	Consolidated Statements of Income for the Three Months Ended March 31, 2016 and 2015	3

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015	4

	Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2016 and 2015	5

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	65

Item 4.	Controls and Procedures	68

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	68

Item 1A.	Risk Factors	70

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70

Item 3.	Defaults Upon Senior Securities	70

Item 4.	Mine Safety Disclosures	71

Item 5.	Other Information	71

Item 6.	Exhibits	71

Signatures		72

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition



		(Unaudited)
(In Thousands, Except Share Data)	At March 31, 2016				At December 31, 2015
Assets:
Cash and due from banks		$	186,051			$	200,538
Available-for-sale securities:
Encumbered		82,444				81,481
Unencumbered		306,434				335,317
Total available-for-sale securities		388,878				416,798
Held-to-maturity securities, fair value of $2,469,458 and $2,286,092, respectively:
Encumbered		1,112,134				1,123,480
Unencumbered		1,331,369				1,173,319
Total held-to-maturity securities		2,443,503				2,296,799
Federal Home Loan Bank of New York stock, at cost		131,582				131,137
Loans held-for-sale, net		7,672				8,960
Loans receivable		11,005,081				11,153,081
Allowance for loan losses		(94,200		)		(98,000		)
Loans receivable, net		10,910,881				11,055,081
Mortgage servicing rights, net		9,900				11,014
Accrued interest receivable		36,139				34,996
Premises and equipment, net		108,172				109,758
Goodwill		185,151				185,151
Bank owned life insurance		441,935				439,646
Real estate owned, net		12,691				19,798
Other assets		160,982				166,535
Total assets		$	15,023,537			$	15,076,211
Liabilities:
Deposits:
NOW and demand deposit		$	2,482,665			$	2,413,823
Money market		2,635,057				2,560,204
Savings		2,136,721				2,137,818
Certificates of deposit		1,797,096				1,994,182
Total deposits		9,051,539				9,106,027
Federal funds purchased		355,000				435,000
Reverse repurchase agreements		1,100,000				1,100,000
Federal Home Loan Bank of New York advances		2,195,000				2,180,000
Other borrowings, net		249,354				249,222
Mortgage escrow funds		163,231				115,435
Accrued expenses and other liabilities		227,612				227,079
Total liabilities		13,341,736				13,412,763
Stockholders’ Equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized:
Series C (150,000 shares authorized; and 135,000 shares issued and outstanding)		129,796				129,796
Common stock, $0.01 par value (200,000,000 shares authorized; 166,494,888 shares issued; and 101,406,550 and 100,721,358 shares outstanding, respectively)		1,665				1,665
Additional paid-in capital		893,648				902,349
Retained earnings		2,053,897				2,045,391
Treasury stock (65,088,338 and 65,773,530 shares, at cost, respectively)		(1,342,998		)		(1,357,136		)
Accumulated other comprehensive loss		(54,207		)		(58,617		)
Total stockholders’ equity		1,681,801				1,663,448
Total liabilities and stockholders’ equity		$	15,023,537			$	15,076,211

See accompanying Notes to Consolidated Financial Statements.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)



	For the Three Months Ended March 31,
(In Thousands, Except Share Data)	2016			2015
Interest income:
Residential mortgage loans	$	47,375		$	53,962
Multi-family and commercial real estate mortgage loans	46,805			47,492
Consumer and other loans	2,372			2,190
Mortgage-backed and other securities	16,904			15,070
Interest-earning cash accounts	120			89
Federal Home Loan Bank of New York stock	1,421			1,522
Total interest income	114,997			120,325
Interest expense:
Deposits	7,462			10,729
Borrowings	24,283			23,875
Total interest expense	31,745			34,604
Net interest income	83,252			85,721
Provision for loan losses credited to operations	(3,127		)	(343		)
Net interest income after provision for loan losses	86,379			86,064
Non-interest income:
Customer service fees	6,988			8,211
Other loan fees	534			553
Gain on sales of securities	86			—
Mortgage banking (loss) income, net	(37		)	327
Income from bank owned life insurance	2,289			2,197
Other	1,541			1,645
Total non-interest income	11,401			12,933
Non-interest expense:
General and administrative:
Compensation and benefits	38,253			36,281
Occupancy, equipment and systems	19,391			19,658
Federal deposit insurance premium	3,530			4,201
Advertising	1,453			2,264
Other	6,895			7,708
Total non-interest expense	69,522			70,112
Income before income tax expense	28,258			28,885
Income tax expense	9,693			9,578
Net income	18,565			19,307
Preferred stock dividends	2,194			2,194
Net income available to common shareholders	$	16,371		$	17,113

Basic earnings per common share	$	0.16		$	0.17
Diluted earnings per common share	$	0.16		$	0.17

Basic weighted average common shares outstanding	100,368,931			99,252,031
Diluted weighted average common shares outstanding	100,368,931			99,252,031

See accompanying Notes to Consolidated Financial Statements.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)



	For the Three Months Ended March 31,
(In Thousands)	2016			2015

Net income	$	18,565		$	19,307

Other comprehensive income, net of tax:
Net unrealized gain on securities available-for-sale:
Net unrealized holding gain on securities arising during the period	4,036			1,993
Reclassification adjustment for gain on sales of securities included in net income	(51		)	—
Net unrealized gain on securities available-for-sale	3,985			1,993

Reclassification adjustment for net actuarial loss on pension plans and other postretirement benefits included in net income	397			469

Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income	28			29

Total other comprehensive income, net of tax	4,410			2,491

Comprehensive income	$	22,975		$	21,798

See accompanying Notes to Consolidated Financial Statements.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

For the Three Months Ended March 31, 2016 and 2015



(In Thousands, Except Share Data)	Total			Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss

Balance at December 31, 2015	$	1,663,448		$	129,796	$	1,665	$	902,349		$	2,045,391		$	(1,357,136	)		$	(58,617	)

Net income	18,565			—		—		—			18,565			—				—
Other comprehensive income, net of tax	4,410			—		—		—			—			—				4,410
Dividends on preferred stock ($16.25 per share)	(2,194		)	—		—		—			(2,194		)	—				—
Dividends on common stock ($0.04 per share)	(4,053		)	—		—		—			(4,053		)	—				—
Sales of treasury stock (2,710 shares)	41			—		—		—			(15		)	56				—
Restricted stock grants (685,872 shares)	—			—		—		(10,329		)	(3,823		)	14,152				—
Forfeitures of restricted stock (3,390 shares)	—			—		—		45			25			(70		)		—
Stock-based compensation	1,581			—		—		1,580			1			—				—
Net tax benefit excess from stock-based compensation	3			—		—		3			—			—				—

Balance at March 31, 2016	$	1,681,801		$	129,796	$	1,665	$	893,648		$	2,053,897		$	(1,342,998	)		$	(54,207	)

Balance at December 31, 2014	$	1,580,070		$	129,796	$	1,665	$	897,049		$	1,992,833		$	(1,375,322	)		$	(65,951	)

Net income	19,307			—		—		—			19,307			—				—
Other comprehensive income, net of tax	2,491			—		—		—			—			—				2,491
Dividends on preferred stock ($16.25 per share)	(2,194		)	—		—		—			(2,194		)	—				—
Dividends on common stock ($0.04 per share)	(3,995		)	—		—		—			(3,995		)	—				—
Sales of treasury stock (471,680 shares)	6,009			—		—		—			(3,739		)	9,748				—
Restricted stock grants (26,232 shares)	—			—		—		(330		)	(212		)	542				—
Forfeitures of restricted stock (41,404 shares)	—			—		—		478			378			(856		)		—
Stock-based compensation	1,608			—		—		1,597			11			—				—
Net tax benefit shortfall from stock-based compensation	(6		)	—		—		(6		)	—			—				—

Balance at March 31, 2015	$	1,603,290		$	129,796	$	1,665	$	898,788		$	2,002,389		$	(1,365,888	)		$	(63,460	)

See accompanying Notes to Consolidated Financial Statements.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)



	For the Three Months Ended March 31,
(In Thousands)	2016				2015
Cash flows from operating activities:
Net income		$	18,565			$	19,307
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization on loans		2,310				2,883
Net amortization on securities and borrowings		1,822				2,322
Net provision for loan and real estate losses credited to operations		(2,918		)		(181		)
Depreciation and amortization		3,694				3,024
Net gain on sales of loans and securities		(518		)		(463		)
Mortgage servicing rights amortization and valuation allowance adjustments, net		1,404				1,130
Stock-based compensation		1,581				1,608
Deferred income tax expense		75				1,191
Originations of loans held-for-sale		(27,258		)		(27,463		)
Proceeds from sales and principal repayments of loans held-for-sale		28,288				27,585
Increase in accrued interest receivable		(1,143		)		(580		)
Bank owned life insurance income and insurance proceeds received, net		(2,289		)		(2,197		)
Decrease in other assets		2,572				2,457
Increase (decrease) in accrued expenses and other liabilities		1,219				(1,847		)
Net cash provided by operating activities		27,404				28,776
Cash flows from investing activities:
Originations of loans receivable		(309,871		)		(389,387		)
Loan purchases through third parties		(29,048		)		(49,855		)
Principal payments on loans receivable		482,897				563,529
Proceeds from sales of delinquent and non-performing loans		400				5,806
Purchases of securities held-to-maturity		(354,392		)		(93,428		)
Purchases of securities available-for-sale		—				(37,049		)
Principal payments on securities held-to-maturity		206,196				105,752
Principal payments on securities available-for-sale		11,447				10,949
Proceeds from sales of securities available-for-sale		23,065				—
Net purchases of Federal Home Loan Bank of New York stock		(445		)		(868		)
Proceeds from sales of real estate owned, net		7,863				6,670
Purchases of premises and equipment, net of proceeds from sales		(2,108		)		(2,977		)
Net cash provided by investing activities		36,004				119,142
Cash flows from financing activities:
Net decrease in deposits		(54,488		)		(97,880		)
Net decrease in borrowings with original terms of three months or less		(270,000		)		(74,000		)
Repayments of borrowings with original terms greater than three months		(345,000		)		—
Proceeds from borrowings with terms greater than three months		550,000				—
Net increase in mortgage escrow funds		47,796				46,729
Proceeds from sales of treasury stock		41				6,009
Cash dividends paid to stockholders		(6,247		)		(6,189		)
Net tax benefit excess (shortfall) from stock-based compensation		3				(6		)
Net cash used in financing activities		(77,895		)		(125,337		)
Net (decrease) increase in cash and cash equivalents		(14,487		)		22,581
Cash and cash equivalents at beginning of period		200,538				143,185
Cash and cash equivalents at end of period		$	186,051			$	165,766

Supplemental disclosures:
Interest paid		$	27,977			$	31,708
Income taxes paid		$	4,613			$	1,477
Additions to real estate owned		$	965			$	1,269
Loans transferred to held-for-sale		$	—			$	6,205

See accompanying Notes to Consolidated Financial Statements.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

The accompanying consolidated financial statements include the accounts of Astoria Financial Corporation and its wholly-owned subsidiaries: Astoria Bank and its subsidiaries, referred to as Astoria Bank, and AF Insurance Agency, Inc. As used in this quarterly report, "Astoria," “we,” “us” and “our” refer to Astoria Financial Corporation and its consolidated subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

In our opinion, the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial condition as of March 31, 2016 and December 31, 2015, our results of operations and other comprehensive income for the three months ended March 31, 2016 and 2015, changes in our stockholders’ equity for the three months ended March 31, 2016 and 2015 and our cash flows for the three months ended March 31, 2016 and 2015. In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities for the consolidated statements of financial condition as of March 31, 2016 and December 31, 2015, and amounts of revenues, expenses and other comprehensive income in the consolidated statements of income and comprehensive income for the three months ended March 31, 2016 and 2015. The results of operations and other comprehensive income for the three months ended March 31, 2016 are not necessarily indicative of the results of operations and other comprehensive income to be expected for the remainder of the year. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or GAAP, have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC.

These consolidated financial statements should be read in conjunction with our December 31, 2015 audited consolidated financial statements and related notes included in our 2015 Annual Report on Form 10-K.

2. Merger Agreement with New York Community Bancorp, Inc.

On October 28, 2015, Astoria entered into an Agreement and Plan of Merger, or the Merger Agreement, with New York Community Bancorp, Inc., a Delaware corporation, or NYCB. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Astoria will merge with and into NYCB, with NYCB as the surviving corporation, such merger referred to as the Merger. Immediately following the Merger, Astoria’s wholly owned subsidiary, Astoria Bank, will merge with and into NYCB’s wholly owned subsidiary, New York Community Bank, such merger referred to as the Bank Merger. New York Community Bank will be the surviving entity in the Bank Merger. The Merger Agreement was unanimously approved and adopted by the Board of Directors of each of Astoria and NYCB.

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Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, or the Effective Time, Astoria stockholders will have the right to receive one share of common stock, par value $0.01 per share, of NYCB, or NYCB Common Stock, and $0.50 in cash for each share of common stock, par value $0.01 per share, of Astoria Financial Corporation, or Astoria Common Stock. Also in the Merger, each share of Astoria 6.50% Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, with a liquidation preference of $1,000 per share, issued and outstanding immediately prior to the Effective Time will be automatically converted into the right to receive one share of NYCB 6.50% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share.

The Merger Agreement contains customary representations and warranties from both Astoria and NYCB, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of Astoria’s and NYCB’s businesses during the interim period between the execution of the Merger Agreement and the Effective Time, (2) the obligation of NYCB to call a meeting of its stockholders to adopt the Merger Agreement and approve an amendment to its charter to increase the authorized shares of NYCB Common Stock from 600 million to 900 million, and, subject to certain exceptions, to recommend that its stockholders adopt the Merger Agreement and the transactions contemplated thereby, (3) the obligation of Astoria to call a meeting of its stockholders to adopt the Merger Agreement, and, subject to certain exceptions, to recommend that its stockholders adopt the Merger Agreement, and (4) Astoria’s non-solicitation obligations relating to alternative acquisition proposals. Astoria and NYCB have agreed to use their reasonable best efforts to prepare and file all applications, notices, and other documents to obtain all necessary consents and approvals for consummation of the transactions contemplated by the Merger Agreement.

The completion of the Merger is subject to customary conditions, including (1) adoption of the Merger Agreement by Astoria’s stockholders, (2) adoption of the Merger Agreement and approval of the NYCB charter amendment by NYCB’s stockholders, (3) authorization for listing on the New York Stock Exchange of the shares of NYCB Common Stock to be issued in the Merger, (4) the receipt of required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System, or FRB, the Federal Deposit Insurance Corporation, or FDIC, and the New York State Department of Financial Services, or DFS, (5) effectiveness of the registration statement on Form S-4 for the NYCB Common Stock to be issued in the Merger, and (6) the absence of any order, injunction or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal. The registration statement on Form S-4 for the NYCB Common Stock to be issued in the Merger became effective on March 16, 2016, and special meetings of Astoria’s and NYCB’s respective stockholders were held on April 26, 2016, at which Astoria’s stockholders adopted the Merger Agreement and NYCB’s stockholders adopted the Merger Agreement and approved the NYCB charter amendment. In addition, all applications and notices necessary to obtain the required regulatory approvals to complete the Merger have been submitted or sent by Astoria or NYCB.

Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (1) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (2) performance in all material respect by the other party of its obligations under the Merger Agreement and (3) receipt by such party of an opinion from its counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

The Merger Agreement also provides certain termination rights for both Astoria and NYCB and further provides that a termination fee of $69.5 million will be payable by either Astoria or NYCB, as applicable, upon termination of the Merger Agreement under certain circumstances.

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3. Securities

The following tables set forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at the dates indicated.



	At March 31, 2016
(In Thousands)	Amortized Cost		Gross Unrealized Gains			Gross Unrealized Losses				Estimated Fair Value
Available-for-sale:
Residential mortgage-backed securities:
GSE (1) issuance REMICs and CMOs (2)	$	297,400		$	4,846		$	(459	)	$	301,787
Non-GSE issuance REMICs and CMOs	2,612			7			(2		)	2,617
GSE pass-through certificates	10,292			454			(2		)	10,744
Total residential mortgage-backed securities	310,304			5,307			(463		)	315,148
Obligations of GSEs	73,701			28			—			73,729
Fannie Mae stock	15			—			(14		)	1
Total securities available-for-sale	$	384,020		$	5,335		$	(477	)	$	388,878
Held-to-maturity:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	1,305,818		$	20,083		$	(3,049	)	$	1,322,852
Non-GSE issuance REMICs and CMOs	197			—			(7		)	190
GSE pass-through certificates	250,658			3,420			(881		)	253,197
Total residential mortgage-backed securities	1,556,673			23,503			(3,937		)	1,576,239
Multi-family mortgage-backed securities:
GSE issuance REMICs	613,877			8,381			(171		)	622,087
Obligations of GSEs	192,541			483			(87		)	192,937
Corporate Debt securities	80,000			214			(2,432		)	77,782
Other	412			1			—			413
Total securities held-to-maturity	$	2,443,503		$	32,582		$	(6,627	)	$	2,469,458


(1)	Government-sponsored enterprise


(2)	Real estate mortgage investment conduits and collateralized mortgage obligations

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	At December 31, 2015
(In Thousands)	Amortized Cost		Gross Unrealized Gains			Gross Unrealized Losses				Estimated Fair Value
Available-for-sale:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	331,099		$	2,374		$	(2,934	)	$	330,539
Non-GSE issuance REMICs and CMOs	3,048			13			(7		)	3,054
GSE pass-through certificates	10,781			485			(2		)	11,264
Total residential mortgage-backed securities	344,928			2,872			(2,943		)	344,857
Obligations of GSEs	73,701			—			(1,762		)	71,939
Fannie Mae stock	15			—			(13		)	2
Total securities available-for-sale	$	418,644		$	2,872		$	(4,718	)	$	416,798
Held-to-maturity:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	1,361,907		$	8,135		$	(14,128	)	$	1,355,914
Non-GSE issuance REMICs and CMOs	198			—			(5		)	193
GSE pass-through certificates	260,707			1,535			(3,413		)	258,829
Total residential mortgage-backed securities	1,622,812			9,670			(17,546		)	1,614,936
Multi-family mortgage-backed securities:
GSE issuance REMICs	434,587			1,255			(2,334		)	433,508
Obligations of GSEs	178,967			220			(480		)	178,707
Corporate debt securities	60,000			—			(1,493		)	58,507
Other	433			1			—			434
Total securities held-to-maturity	$	2,296,799		$	11,146		$	(21,853	)	$	2,286,092

The following tables set forth the estimated fair values of securities with gross unrealized losses at the dates indicated, segregated between securities that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve months or longer at the dates indicated.



	At March 31, 2016
	Less Than Twelve Months						Twelve Months or Longer						Total
(In Thousands)	Estimated Fair Value		Gross Unrealized Losses				Estimated Fair Value		Gross Unrealized Losses				Estimated Fair Value		Gross Unrealized Losses
Available-for-sale:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	19,950		$	(131	)	$	23,962		$	(328	)	$	43,912		$	(459	)
Non-GSE issuance REMICs and CMOs	109			(1		)	63			(1		)	172			(2		)
GSE pass-through certificates	16			(1		)	99			(1		)	115			(2		)
Fannie Mae stock	—			—			1			(14		)	1			(14		)
Total temporarily impaired securities available-for-sale	$	20,075		$	(133	)	$	24,125		$	(344	)	$	44,200		$	(477	)
Held-to-maturity:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	51,103		$	(149	)	$	234,606		$	(2,900	)	$	285,709		$	(3,049	)
Non-GSE issuance REMICs and CMOs	—			—			190			(7		)	190			(7		)
GSE pass-through certificates	—			—			104,675			(881		)	104,675			(881		)
Multi-family mortgage-backed securities:
GSE issuance REMICs	79,344			(171		)	—			—			79,344			(171		)
Obligations of GSEs	24,888			(87		)	—			—			24,888			(87		)
Corporate debt securities	67,569			(2,432		)	—			—			67,569			(2,432		)
Total temporarily impaired securities held-to-maturity	$	222,904		$	(2,839	)	$	339,471		$	(3,788	)	$	562,375		$	(6,627	)

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	At December 31, 2015
	Less Than Twelve Months						Twelve Months or Longer						Total
(In Thousands)	Estimated Fair Value		Gross Unrealized Losses				Estimated Fair Value		Gross Unrealized Losses				Estimated Fair Value		Gross Unrealized Losses
Available-for-sale:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	189,364		$	(2,934	)	$	—		$	—		$	189,364		$	(2,934	)
Non-GSE issuance REMICs and CMOs	75			(2		)	64			(5		)	139			(7		)
GSE pass-through certificates	97			(1		)	103			(1		)	200			(2		)
Obligations of GSEs	24,602			(390		)	47,337			(1,372		)	71,939			(1,762		)
Fannie Mae stock	—			—			2			(13		)	2			(13		)
Total temporarily impaired securities available-for-sale	$	214,138		$	(3,327	)	$	47,506		$	(1,391	)	$	261,644		$	(4,718	)
Held-to-maturity:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	395,659		$	(3,972	)	$	289,645		$	(10,156	)	$	685,304		$	(14,128	)
Non-GSE issuance REMICs and CMOs	—			—			193			(5		)	193			(5		)
GSE pass-through certificates	56,503			(586		)	106,738			(2,827		)	163,241			(3,413		)
Multi-family mortgage-backed securities:
GSE issuance REMICs	276,601			(2,334		)	—			—			276,601			(2,334		)
Obligations of GSEs	107,824			(480		)	—			—			107,824			(480		)
Corporate debt securities	58,507			(1,493		)	—			—			58,507			(1,493		)
Total temporarily impaired securities held-to-maturity	$	895,094		$	(8,865	)	$	396,576		$	(12,988	)	$	1,291,670		$	(21,853	)

We held 61 securities which had an unrealized loss at March 31, 2016 and 129 securities which had an unrealized loss at December 31, 2015. Securities in unrealized loss positions are analyzed as part of our ongoing assessment of other-than-temporary impairment. Our assertion regarding our intent not to sell, or that it is not more likely than not that we will be required to sell a security before its anticipated recovery, is based on a number of factors, including a quantitative estimate of the expected recovery period (which may extend to maturity), and our intended strategy with respect to the identified security or portfolio. If we do have the intent to sell, or believe it is more likely than not that we will be required to sell the security before its anticipated recovery, the unrealized loss is charged directly to earnings in the Consolidated Statements of Income and Comprehensive Income. Other factors considered in determining whether or not an impairment is temporary include the severity of the impairment; the duration of the impairment; the cause of the impairment; the near-term prospects of the issuer; and the estimated recovery period. The unrealized losses on our residential and multi-family mortgage-backed securities and GSE obligations at March 31, 2016 were primarily caused by movements in market interest rates subsequent to the purchase of such securities or obligations. The unrealized losses on our corporate debt obligations was primarily due to the observed credit spread widening that occurred during the first quarter of 2016, which we attribute to the contemporaneous broad-based equity market volatility. We do not consider the resulting unrealized losses to be anything other than temporary impairment.

During the three months ended March 31, 2016, proceeds from sales of securities from the available-for-sale portfolio totaled $23.1 million, resulting in gross realized gains of $86,000. There were no sales of securities from the available-for-sale portfolio during the three months ended March 31, 2015.

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At March 31, 2016, available-for-sale debt securities, excluding mortgage-backed securities, had an amortized cost of $73.7 million, an estimated fair value of $73.7 million and contractual maturities in 2021 and 2022. At March 31, 2016, held-to-maturity debt securities, excluding mortgage-backed securities, had an amortized cost of $273.0 million, an estimated fair value of $271.1 million and contractual maturities primarily in 2016 through 2027. Actual maturities may differ from contractual maturities because issuers may have the right to prepay or call obligations with or without prepayment penalties.

At March 31, 2016, the amortized cost of callable securities in our portfolio totaled $211.3 million, of which $194.9 million are callable within one year and at various times thereafter. The balance of accrued interest receivable for securities totaled $7.2 million at March 31, 2016 and $7.4 million at December 31, 2015.

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4. Loans Receivable and Allowance for Loan Losses

The following tables set forth the composition of our loans receivable portfolio, and an aging analysis by accruing and non-accrual loans, by segment and class at the dates indicated.



	At March 31, 2016
	Past Due
(In Thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current		Total
Accruing loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	3,802	$	1,490	$	—	$	5,292	$	356,324	$	361,616
Full documentation amortizing	31,902		9,725		433		42,060		4,498,438		4,540,498
Reduced documentation interest-only	7,111		2,405		—		9,516		202,030		211,546
Reduced documentation amortizing	16,404		3,679		—		20,083		556,416		576,499
Total residential	59,219		17,299		433		76,951		5,613,208		5,690,159
Multi-family	6,632		2,609		484		9,725		4,060,832		4,070,557
Commercial real estate	—		859		2,239		3,098		805,136		808,234
Total mortgage loans	65,851		20,767		3,156		89,774		10,479,176		10,568,950
Consumer and other loans (gross):
Home equity and other consumer	1,259		125		—		1,384		147,666		149,050
Commercial and industrial	—		—		—		—		100,237		100,237
Total consumer and other loans	1,259		125		—		1,384		247,903		249,287
Total accruing loans	$	67,110	$	20,892	$	3,156	$	91,158	$	10,727,079	$	10,818,237
Non-accrual loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	1,238	$	951	$	12,380	$	14,569	$	4,687	$	19,256
Full documentation amortizing	2,012		792		38,184		40,988		5,764		46,752
Reduced documentation interest-only	217		135		14,634		14,986		9,179		24,165
Reduced documentation amortizing	1,979		47		24,004		26,030		14,143		40,173
Total residential	5,446		1,925		89,202		96,573		33,773		130,346
Multi-family	1,168		383		1,855		3,406		4,470		7,876
Commercial real estate	1,321		—		585		1,906		769		2,675
Total mortgage loans	7,935		2,308		91,642		101,885		39,012		140,897
Consumer and other loans (gross):
Home equity and other consumer	—		—		5,595		5,595		—		5,595
Commercial and industrial	—		—		574		574		—		574
Total consumer and other loans	—		—		6,169		6,169		—		6,169
Total non-accrual loans	$	7,935	$	2,308	$	97,811	$	108,054	$	39,012	$	147,066
Total loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	5,040	$	2,441	$	12,380	$	19,861	$	361,011	$	380,872
Full documentation amortizing	33,914		10,517		38,617		83,048		4,504,202		4,587,250
Reduced documentation interest-only	7,328		2,540		14,634		24,502		211,209		235,711
Reduced documentation amortizing	18,383		3,726		24,004		46,113		570,559		616,672
Total residential	64,665		19,224		89,635		173,524		5,646,981		5,820,505
Multi-family	7,800		2,992		2,339		13,131		4,065,302		4,078,433
Commercial real estate	1,321		859		2,824		5,004		805,905		810,909
Total mortgage loans	73,786		23,075		94,798		191,659		10,518,188		10,709,847
Consumer and other loans (gross):
Home equity and other consumer	1,259		125		5,595		6,979		147,666		154,645
Commercial and industrial	—		—		574		574		100,237		100,811
Total consumer and other loans	1,259		125		6,169		7,553		247,903		255,456
Total loans	$	75,045	$	23,200	$	100,967	$	199,212	$	10,766,091	$	10,965,303
Net unamortized premiums and deferred loan origination costs											39,778
Loans receivable											11,005,081
Allowance for loan losses											(94,200		)
Loans receivable, net											$	10,910,881

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	At December 31, 2015
	Past Due
(In Thousands)	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current		Total
Accruing loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	10,045	$	2,382	$	—	$	12,427	$	401,486	$	413,913
Full documentation amortizing	40,151		10,346		332		50,829		4,602,940		4,653,769
Reduced documentation interest-only	7,254		2,321		—		9,575		266,084		275,659
Reduced documentation amortizing	20,135		4,369		—		24,504		527,566		552,070
Total residential	77,585		19,418		332		97,335		5,798,076		5,895,411
Multi-family	1,662		2,069		—		3,731		4,013,541		4,017,272
Commercial real estate	246		1,689		—		1,935		813,640		815,575
Total mortgage loans	79,493		23,176		332		103,001		10,625,257		10,728,258
Consumer and other loans (gross):
Home equity and other consumer	2,358		502		—		2,860		151,554		154,414
Commercial and industrial	—		—		—		—		91,171		91,171
Total consumer and other loans	2,358		502		—		2,860		242,725		245,585
Total accruing loans	$	81,851	$	23,678	$	332	$	105,861	$	10,867,982	$	10,973,843
Non-accrual loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	1,182	$	—	$	11,359	$	12,541	$	5,834	$	18,375
Full documentation amortizing	3,579		603		32,535		36,717		7,480		44,197
Reduced documentation interest-only	257		579		15,285		16,121		11,451		27,572
Reduced documentation amortizing	2,238		365		14,322		16,925		12,935		29,860
Total residential	7,256		1,547		73,501		82,304		37,700		120,004
Multi-family	725		623		2,441		3,789		3,044		6,833
Commercial real estate	241		—		572		813		3,126		3,939
Total mortgage loans	8,222		2,170		76,514		86,906		43,870		130,776
Consumer and other loans (gross):
Home equity and other consumer	—		—		6,405		6,405		—		6,405
Commercial and industrial	—		—		703		703		—		703
Total consumer and other loans	—		—		7,108		7,108		—		7,108
Total non-accrual loans	$	8,222	$	2,170	$	83,622	$	94,014	$	43,870	$	137,884
Total loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	11,227	$	2,382	$	11,359	$	24,968	$	407,320	$	432,288
Full documentation amortizing	43,730		10,949		32,867		87,546		4,610,420		4,697,966
Reduced documentation interest-only	7,511		2,900		15,285		25,696		277,535		303,231
Reduced documentation amortizing	22,373		4,734		14,322		41,429		540,501		581,930
Total residential	84,841		20,965		73,833		179,639		5,835,776		6,015,415
Multi-family	2,387		2,692		2,441		7,520		4,016,585		4,024,105
Commercial real estate	487		1,689		572		2,748		816,766		819,514
Total mortgage loans	87,715		25,346		76,846		189,907		10,669,127		10,859,034
Consumer and other loans (gross):
Home equity and other consumer	2,358		502		6,405		9,265		151,554		160,819
Commercial and industrial	—		—		703		703		91,171		91,874
Total consumer and other loans	2,358		502		7,108		9,968		242,725		252,693
Total loans	$	90,073	$	25,848	$	83,954	$	199,875	$	10,911,852	$	11,111,727
Net unamortized premiums and deferred loan origination costs											41,354
Loans receivable											11,153,081
Allowance for loan losses											(98,000		)
Loans receivable, net											$	11,055,081

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We segment our one-to-four family, or residential, mortgage loan portfolio by interest-only and amortizing loans, full documentation and reduced documentation loans, and origination time periods, and analyze our historical loss experience and delinquency levels and trends of these segments. We analyze multi-family and commercial real estate mortgage loans by portfolio using predictive modeling techniques for loans originated after 2010 and by geographic location for loans originated prior to 2011. We analyze our consumer and other loan portfolio by home equity lines of credit, commercial and industrial loans and other consumer loans and perform similar historical loss analyses.

We analyze our historical loss experience over 12, 15, 18 and 24 month periods. The loss history used in calculating our quantitative allowance coverage percentages varies based on loan type. Also, for a particular loan type, we may not have sufficient loss history to develop a reasonable estimate of loss and in these instances we may consider our loss experience for other, similar loan types and may evaluate those losses over a longer period than two years. Additionally, multi-family and commercial real estate loss experience may be adjusted based on the composition of the losses (loan sales, short sales and partial charge-offs). Our evaluation of loss experience factors considers trends in such factors over the prior three years, as well as an estimate of the average amount of time from an event signaling the potential inability of a borrower to continue to pay as agreed to the point at which a loss is confirmed, for substantially all of the loan portfolio, with the exception of multi-family and commercial real estate mortgage loans originated after 2010, for which our evaluation includes detailed modeling techniques. These modeling techniques utilize data inputs for each loan in the portfolio, including credit facility terms and performance to date, property details and borrower financial performance data. The model also incorporates real estate market data from an established real estate market database company to forecast future performance of the properties, and includes a loan loss predictive model based on studies of defaulted commercial real estate loans. The model then generates a probability of default, loss given default and ultimately an estimated loss for each loan quarterly over the remaining life of the loan. The appropriate timeframe from which to assign an estimated loss percentage to the pool of loans is assessed by management. We update our historical loss analyses, as well as our predictive model, quarterly and evaluate the need to modify our quantitative allowances as a result of our updated charge-off and loss analyses. We also consider qualitative factors with the purpose of assessing the adequacy of the overall allowance for loan losses as well as the allocation of the allowance for loan losses by loan category.

The following tables set forth the changes in our allowance for loan losses by loan receivable segment for the periods indicated.



		For the Three Months Ended March 31, 2016
		Mortgage Loans										Consumer and Other Loans
					Multi-Family			Commercial Real Estate
(In Thousands)	Residential				Multi-Family			Commercial Real Estate								Total
Balance at January 1, 2016		$	44,951		$	35,544			$	11,217			$	6,288		$	98,000
Provision charged (credited) to operations		138			(3,257		)		(849		)		841			(3,127		)
Charge-offs		(1,665		)	(310		)		—				(765		)	(2,740		)
Recoveries		954			1,043				—				70			2,067
Balance at March 31, 2016		$	44,378		$	33,020			$	10,368			$	6,434		$	94,200

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		For the Three Months Ended March 31, 2015
		Mortgage Loans										Consumer and Other Loans
					Multi-Family			Commercial Real Estate
(In Thousands)	Residential				Multi-Family			Commercial Real Estate								Total
Balance at January 1, 2015		$	46,283		$	39,250			$	17,242			$	8,825		$	111,600
Provision (credited) charged to operations		(1,851		)	256				18				1,234			(343		)
Charge-offs		(1,757		)	(242		)		(142		)		(349		)	(2,490		)
Recoveries		806			818				—				109			1,733
Balance at March 31, 2015		$	43,481		$	40,082			$	17,118			$	9,819		$	110,500

The following table sets forth the balances of our residential interest-only mortgage loans at March 31, 2016 by the period in which such loans are scheduled to enter their amortization period.



(In Thousands)	Recorded Investment
Amortization scheduled to begin in:
12 months or less	$	309,631
13 to 24 months	256,659
25 to 36 months	29,120
Over 36 months	21,173
Total	$	616,583

The following tables set forth the balances of our residential mortgage and consumer and other loan receivable segments by class and credit quality indicator at the dates indicated.



		At March 31, 2016
		Residential Mortgage Loans									Consumer and Other Loans
		Full Documentation					Reduced Documentation				Home Equity and Other Consumer			Commercial and Industrial
(In Thousands)	Interest-only			Amortizing		Interest-only			Amortizing		Home Equity and Other Consumer			Commercial and Industrial
Performing		$	361,616	$	4,540,065		$	211,546	$	576,499		$	149,050	$	100,237
Non-performing:
Current or past due less than 90 days		6,876		8,568			9,531		16,169			—		—
Past due 90 days or more		12,380		38,617			14,634		24,004			5,595		574
Total		$	380,872	$	4,587,250		$	235,711	$	616,672		$	154,645	$	100,811

		At December 31, 2015
		Residential Mortgage Loans									Consumer and Other Loans
		Full Documentation					Reduced Documentation				Home Equity and Other Consumer			Commercial and Industrial
(In Thousands)	Interest-only			Amortizing		Interest-only			Amortizing		Home Equity and Other Consumer			Commercial and Industrial
Performing		$	413,913	$	4,653,437		$	275,659	$	552,070		$	154,414	$	91,171
Non-performing:
Current or past due less than 90 days		7,016		11,662			12,287		15,538			—		—
Past due 90 days or more		11,359		32,867			15,285		14,322			6,405		703
Total		$	432,288	$	4,697,966		$	303,231	$	581,930		$	160,819	$	91,874

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The following table sets forth the balances of our multi-family and commercial real estate mortgage loan receivable segments by credit quality indicator at the dates indicated.



		At March 31, 2016						At December 31, 2015
				Commercial Real Estate						Commercial Real Estate
(In Thousands)	Multi-Family			Commercial Real Estate			Multi-Family			Commercial Real Estate
Not criticized		$	4,037,071		$	770,883		$	3,981,050		$	769,029
Criticized:
Special mention		16,630			12,215			14,931			20,441
Substandard		24,732			27,811			28,124			30,044
Doubtful		—			—			—			—
Total		$	4,078,433		$	810,909		$	4,024,105		$	819,514

The following tables set forth the balances of our loans receivable and the related allowance for loan loss allocation by segment and by the impairment methodology followed in determining the allowance for loan losses at the dates indicated.



	At March 31, 2016
	Mortgage Loans							Consumer and Other Loans
			Multi-Family		Commercial Real Estate
(In Thousands)	Residential		Multi-Family		Commercial Real Estate					Total
Loans:
Individually evaluated for impairment	$	196,365	$	15,733		$	13,168	$	4,537	$	229,803
Collectively evaluated for impairment	5,624,140		4,062,700			797,741		250,919		10,735,500
Total loans	$	5,820,505	$	4,078,433		$	810,909	$	255,456	$	10,965,303
Allowance for loan losses:
Individually evaluated for impairment	$	13,337	$	173		$	85	$	381	$	13,976
Collectively evaluated for impairment	31,041		32,847			10,283		6,053		80,224
Total allowance for loan losses	$	44,378	$	33,020		$	10,368	$	6,434	$	94,200



	At December 31, 2015
	Mortgage Loans							Consumer and Other Loans
			Multi-Family		Commercial Real Estate
(In Thousands)	Residential		Multi-Family		Commercial Real Estate					Total
Loans:
Individually evaluated for impairment	$	192,914	$	24,643		$	14,993	$	4,968	$	237,518
Collectively evaluated for impairment	5,822,501		3,999,462			804,521		247,725		10,874,209
Total loans	$	6,015,415	$	4,024,105		$	819,514	$	252,693	$	11,111,727
Allowance for loan losses:
Individually evaluated for impairment	$	13,148	$	456		$	788	$	421	$	14,813
Collectively evaluated for impairment	31,803		35,088			10,429		5,867		83,187
Total allowance for loan losses	$	44,951	$	35,544		$	11,217	$	6,288	$	98,000

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The following table summarizes information related to our impaired loans by segment and class at the dates indicated.



	At March 31, 2016									At December 31, 2015
(In Thousands)	Unpaid Principal Balance		Recorded Investment		Related Allowance			Net Investment		Unpaid Principal Balance		Recorded Investment		Related Allowance			Net Investment
With an allowance recorded:
Mortgage loans:
Residential:
Full documentation interest-only	$	34,525	$	28,292	$	(3,724	)	$	24,568	$	37,454	$	30,631	$	(4,051	)	$	26,580
Full documentation amortizing	73,169		66,492		(3,021		)	63,471		69,242		63,223		(2,534		)	60,689
Reduced documentation interest-only	47,328		39,696		(3,720		)	35,976		55,939		46,540		(4,253		)	42,287
Reduced documentation amortizing	69,004		61,885		(2,872		)	59,013		57,955		52,520		(2,310		)	50,210
Multi-family	5,791		5,676		(173		)	5,503		8,029		7,950		(456		)	7,494
Commercial real estate	942		1,027		(85		)	942		6,651		6,723		(788		)	5,935
Consumer and other loans:
Home equity lines of credit	4,896		4,537		(381		)	4,156		5,595		4,968		(421		)	4,547
Without an allowance recorded:
Mortgage loans:
Multi-family	11,761		10,057		—			10,057		19,523		16,693		—			16,693
Commercial real estate	14,975		12,141		—			12,141		11,104		8,270		—			8,270
Total impaired loans	$	262,391	$	229,803	$	(13,976	)	$	215,827	$	271,492	$	237,518	$	(14,813	)	$	222,705

The following table sets forth the average recorded investment, interest income recognized and cash basis interest income related to our impaired loans by segment and class for the periods indicated.



	For the Three Months Ended March 31,
	2016						2015
(In Thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
With an allowance recorded:
Mortgage loans:
Residential:
Full documentation interest-only	$	29,462	$	189	$	186	$	44,759	$	349	$	353
Full documentation amortizing	64,858		494		478		43,989		395		386
Reduced documentation interest-only	43,118		391		385		76,396		730		737
Reduced documentation amortizing	57,203		525		529		18,948		162		162
Multi-family	6,813		67		79		24,542		260		268
Commercial real estate	3,875		6		7		19,400		268		286
Consumer and other loans:
Home equity lines of credit	4,753		5		9		5,829		6		16
Without an allowance recorded:
Mortgage loans:
Multi-family	13,375		152		149		13,759		154		155
Commercial real estate	10,206		166		171		—		—		—
Total impaired loans	$	233,663	$	1,995	$	1,993	$	247,622	$	2,324	$	2,363

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The following table sets forth information about our mortgage loans receivable by segment and class at March 31, 2016 and 2015 which were modified in a troubled debt restructuring, or TDR, during the periods indicated.



	Modifications During the Three Months Ended March 31,
	2016								2015
(Dollars In Thousands)	Number of Loans		Pre- Modification Recorded Investment			Recorded Investment at March 31, 2016			Number of Loans		Pre- Modification Recorded Investment			Recorded Investment at March 31, 2015
Residential:
Full documentation interest-only		4		$	888		$	889		4		$	2,035		$	2,030
Full documentation amortizing		2		591			589			6		2,059			2,016
Reduced documentation interest-only		3		1,691			1,686			4		1,687			1,687
Reduced documentation amortizing		3		995			985			—		—			—
Commercial real estate		—		—			—			2		2,902			2,878
Total		12		$	4,165		$	4,149		16		$	8,683		$	8,611

The following table sets forth information about our mortgage loans receivable by segment and class at March 31, 2016 and 2015 which were modified in a TDR during the twelve month periods ended March 31, 2016 and 2015 and had a payment default subsequent to the modification during the periods indicated.



	For the Three Months Ended March 31,
	2016					2015
(Dollars In Thousands)	Number of Loans		Recorded Investment at March 31, 2016			Number of Loans		Recorded Investment at March 31, 2015
Residential:
Full documentation interest-only		2		$	533		1		$	648
Full documentation amortizing		2		408			2		854
Reduced documentation interest-only		4		1,947			2		1,314
Reduced documentation amortizing		1		288			—		—
Multi-family		—		—			3		1,387
Total		9		$	3,176		8		$	4,203

Included in loans receivable at March 31, 2016 are loans in the process of foreclosure collateralized by residential real estate property with a recorded investment of $61.0 million.

For additional information regarding our loans receivable and allowance for loan losses, see “Asset Quality” and “Critical Accounting Policies” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or “MD&A.”

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5. Reverse Repurchase Agreements

The following table details the remaining contractual maturities of our reverse repurchase agreements at March 31, 2016.



Year		Amount
	(In Thousands)
2018		$	200,000	(1	)
2019		600,000		(1	)
2020		300,000		(2	)
Total		$	1,100,000


(1)	Callable in 2016.


(2)	Includes $200.0 million of borrowings which are callable in 2016 and $100.0 million of borrowings which are callable in 2017.

The outstanding reverse repurchase agreements at March 31, 2016 were fixed rate and collateralized by GSE securities, of which 84% were residential mortgage-backed securities and 16% were obligations of GSEs. Securities collateralizing these agreements are classified as encumbered securities in the consolidated statements of financial condition. The amount of excess collateral required is governed by each individual contract. The primary risk associated with these secured borrowings is the requirement to pledge a market value based balance of collateral in excess of the borrowed amount. The excess collateral pledged represents an unsecured exposure to the lending counterparty. As the market value of the collateral changes, both through changes in discount rates and spreads as well as related cash flows, additional collateral may need to be pledged. In accordance with our policies, eligible counterparties are defined and monitored to minimize our exposure.

6. Earnings Per Common Share

The following table is a reconciliation of basic and diluted earnings per common share, or EPS.



	For the Three Months Ended March 31,
(In Thousands, Except Share Data)		2016						2015
Net income		$	18,565					$	19,307
Preferred stock dividends		(2,194				)		(2,194				)
Net income available to common shareholders		16,371						17,113
Income allocated to participating securities		(135				)		(114				)
Net income allocated to common shareholders		$	16,236					$	16,999

Basic weighted average common shares outstanding	100,368,931						99,252,031
Dilutive effect of stock options and restricted stock units (1) (2)	—						—
Diluted weighted average common shares outstanding	100,368,931						99,252,031

Basic EPS				$	0.16					$	0.17
Diluted EPS				$	0.16					$	0.17


(1)	Excludes options to purchase 6,989 shares of common stock which were outstanding during the three months ended March 31, 2016 and options to purchase 20,667 shares of common stock which were outstanding during the three months ended March 31, 2015 because their inclusion would be anti-dilutive.


(2)	Excludes 747,132 unvested restricted stock units which were outstanding during the three months ended March 31, 2016 and 762,038 unvested restricted stock units which were outstanding during the three months ended March 31, 2015 because the performance conditions have not been satisfied.

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7. Other Comprehensive Income/Loss

The following tables set forth the components of accumulated other comprehensive loss, net of related tax effects, at the dates indicated and the changes during the three months ended March 31, 2016 and 2015.



(In Thousands)	At December 31, 2015				Other Comprehensive Income			At March 31, 2016
Net unrealized gain on securities available-for-sale		$	2,827			$	3,985		$	6,812
Net actuarial loss on pension plans and other postretirement benefits		(58,396		)		397			(57,999		)
Prior service cost on pension plans and other postretirement benefits		(3,048		)		28			(3,020		)
Accumulated other comprehensive loss		$	(58,617	)		$	4,410		$	(54,207	)

(In Thousands)	At December 31, 2014				Other Comprehensive Income			At March 31, 2015
Net unrealized gain on securities available-for-sale		$	4,686			$	1,993		$	6,679
Net actuarial loss on pension plans and other postretirement benefits		(67,476		)		469			(67,007		)
Prior service cost on pension plans and other postretirement benefits		(3,161		)		29			(3,132		)
Accumulated other comprehensive loss		$	(65,951	)		$	2,491		$	(63,460	)

The following tables set forth the components of other comprehensive income for the periods indicated.



		For the Three Months Ended March 31, 2016
(In Thousands)	Before Tax Amount				Income Tax Expense				After Tax Amount
Net unrealized gain on securities available-for-sale:
Net unrealized holding gain on securities available-for-sale arising during the period		$	6,774			$	(2,738	)		$	4,036
Reclassification adjustment for gain on sales of securities included in net income		(86		)		35				(51		)
Net unrealized gain on securities available-for-sale		6,688				(2,703		)		3,985
Reclassification adjustment for net actuarial loss on pension plans and other postretirement benefits included in net income		667				(270		)		397
Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income		47				(19		)		28
Other comprehensive income		$	7,402			$	(2,992	)		$	4,410



		For the Three Months Ended March 31, 2015
(In Thousands)	Before Tax Amount			Income Tax Expense				After Tax Amount
Net unrealized holding gain on securities available-for-sale arising during the period		$	3,223		$	(1,230	)		$	1,993
Reclassification adjustment for net actuarial loss on pension plans and other postretirement benefits included in net income		757			(288		)		469
Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income		47			(18		)		29
Other comprehensive income		$	4,027		$	(1,536	)		$	2,491

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The following tables set forth information about amounts reclassified from accumulated other comprehensive loss to the affected line items in the consolidated statements of income for the periods indicated.



	For the Three Months Ended March 31,							Income Statement Line Item
(In Thousands)		2016			2015			Income Statement Line Item
Reclassification adjustment for gain on sales of securities		$	86		$	—		Gain on sales of securities
Reclassification adjustment for net actuarial loss (1)		(667		)	(757		)	Compensation and benefits
Reclassification adjustment for prior service cost (1)		(47		)	(47		)	Compensation and benefits
Total reclassifications, before tax		(628		)	(804		)
Income tax effect		254			306			Income tax expense
Total reclassifications, net of tax		$	(374	)	$	(498	)	Net income


(1)	These other comprehensive income components are included in the computations of net periodic (benefit) cost for our defined benefit pension plans and other postretirement benefit plan. See Note 8 for additional details.

8. Pension Plans and Other Postretirement Benefits

The following tables set forth information regarding the components of net periodic cost (benefit) for our defined benefit pension plans and other postretirement benefit plan for the periods indicated.



		Pension Benefits							Other Postretirement Benefits
	For the Three Months Ended March 31,							For the Three Months Ended March 31,
(In Thousands)		2016			2015				2016			2015
Service cost		$	—		$	—			$	472		$	469
Interest cost		2,536			2,510				263			276
Expected return on plan assets		(3,058		)	(3,633		)		—			—
Recognized net actuarial loss (gain)		734			757				(67		)	—
Amortization of prior service cost		47			47				—			—
Net periodic cost (benefit)		$	259		$	(319	)		$	668		$	745

9. Stock Incentive Plans

During the three months ended March 31, 2016, 663,960 shares of restricted common stock were granted to select officers under the 2014 Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation, or the 2014 Employee Stock Plan, of which 663,510 shares remain outstanding at March 31, 2016 and all of which vest one-third per year on or about December 14, beginning December 2016. In the event the grantee terminates his/her employment due to death or disability, or in the event we experience a change in control, as defined and specified in the 2014 Employee Stock Plan, all restricted common stock granted pursuant to such plan immediately vests.

During the three months ended March 31, 2016, 21,912 shares of restricted common stock were granted to directors under the Astoria Financial Corporation 2007 Non-Employee Directors Stock Plan, as amended, all of which remain outstanding at March 31, 2016 and vest 100% in February 2019, although awards immediately vest upon death, disability, mandatory retirement, involuntary termination or a change in control, as such terms are defined in the plan.

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The following table summarizes restricted common stock and performance-based restricted stock unit activity in our stock incentive plans for the three months ended March 31, 2016.



	Restricted Common Stock							Restricted Stock Units
	Number of Shares			Weighted Average Grant Date Fair Value				Number of Units			Weighted Average Grant Date Fair Value
Unvested at January 1, 2016		374,817			$	12.68			751,500			$	12.41
Granted		685,872			15.06				—			—
Vested		(30,350	)		(9.72		)		—			—
Forfeited		(3,390	)		(13.24		)		(5,500	)		(12.45		)
Unvested at March, 2016		1,026,949			14.36				746,000			12.41

Stock-based compensation expense is recognized on a straight-line basis over the vesting period and totaled $942,000, net of taxes of $639,000, for the three months ended March 31, 2016 and $995,000, net of taxes of $614,000, for the three months ended March 31, 2015. At March 31, 2016, pre-tax compensation cost related to all nonvested awards of restricted common stock and restricted stock units not yet recognized totaled $15.0 million and will be recognized over a weighted average period of approximately 2.3 years, which excludes $4.4 million of pre-tax compensation cost related to 65,000 shares of performance-based restricted common stock and 285,800 performance-based restricted stock units, for which compensation cost will begin to be recognized when the achievement of the performance conditions becomes probable.

10. Investments in Affordable Housing Limited Partnerships

As part of our community reinvestment initiatives, we invest in affordable housing limited partnerships that make equity investments in multi-family affordable housing properties. We receive affordable housing tax credits and other tax benefits for these investments.

Our investment in affordable housing limited partnerships, reflected in other assets in the consolidated statements of financial condition, totaled $16.8 million at March 31, 2016 and $17.2 million at December 31, 2015. Our funding obligation related to such investments, reflected in other liabilities in the consolidated statements of financial condition, totaled $12.8 million at March 31, 2016 and $12.9 million at December 31, 2015. Funding installments are due on an "as needed" basis, currently projected over the next three years, the timing of which cannot be estimated.

Expense related to our investments in affordable housing limited partnerships, included in other non-interest expense in the consolidated statements of income, totaled $352,000 for the three months ended March 31, 2016 and $257,000 for the three months ended March 31, 2015. Affordable housing tax credits and other tax benefits recognized as a component of income tax expense in the consolidated statements of income totaled $390,000 for the three months ended March 31, 2016 and $358,000 for the three months ended March 31, 2015.

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11. Regulatory Matters

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Reform Act, in July 2013, the federal bank regulatory agencies, or the Agencies, issued final rules, or the Final Capital Rules, that subjected many savings and loan holding companies, including Astoria Financial Corporation, to consolidated capital requirements effective January 1, 2015. The Final Capital Rules also revised the quantity and quality of required minimum risk-based and leverage capital requirements, consistent with the Reform Act and the Third Basel Accord adopted by the Basel Committee on Banking Supervision, or Basel III capital standards. In addition, the Final Capital Rules added a requirement to maintain a minimum Conservation Buffer, composed of Common equity tier 1 capital, of 2.5% of risk-weighted assets, to be phased in over three years and applied to the Common equity tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio and the Total risk-based capital ratio. Accordingly, banking organizations, on a fully phased in basis no later than January 1, 2019, must maintain a minimum Common equity tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5% and a minimum Total risk-based capital ratio of 10.5%.

The required minimum Conservation Buffer began to be phased in incrementally, starting at 0.625% on January 1, 2016 and will increase to 1.25% on January 1, 2017, 1.875% on January 1, 2018 and 2.5% on January 1, 2019. The Final Capital Rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum Conservation Buffer is not met.

At March 31, 2016, the capital levels of both Astoria Financial Corporation and Astoria Bank exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes. The capital levels of both Astoria Financial Corporation and Astoria Bank at March 31, 2016 also exceeded the minimum capital requirements shown in the table below including the currently applicable Conservation Buffer of 0.625%. The following table sets forth information regarding the regulatory capital requirements applicable to Astoria Financial Corporation and Astoria Bank.



	At March 31, 2016
	Actual				Minimum Capital Requirements					Minimum Capital Requirements with Conservation Buffer					To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in Thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Astoria Financial Corporation:
Tier 1 leverage	$	1,536,901	10.35	%		$	593,791	4.00	%		N/A		N/A			$	742,238	5.00	%
Common equity tier 1 risk-based	1,413,001		16.48			385,796		4.50			$	439,379	5.125	%		557,261		6.50
Tier 1 risk-based	1,536,901		17.93			514,395		6.00			567,978		6.625			685,860		8.00
Total risk-based	1,632,143		19.04			685,860		8.00			739,443		8.625			857,325		10.00

Astoria Bank:
Tier 1 leverage	$	1,676,272	11.37	%		$	589,580	4.00	%		N/A		N/A			$	736,975	5.00	%
Common equity tier 1 risk-based	1,676,272		19.60			384,778		4.50			$	438,219	5.125	%		555,790		6.50
Tier 1 risk-based	1,676,272		19.60			513,037		6.00			566,479		6.625			684,050		8.00
Total risk-based	1,771,514		20.72			684,050		8.00			737,491		8.625			855,062		10.00

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12. Fair Value Measurements

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. We group our assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:


•	Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.


•	Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

•

Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

We base our fair values on the estimated price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, with additional considerations when the volume and level of activity for an asset or liability have significantly decreased and on identifying circumstances that indicate a transaction is not orderly. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Recurring Fair Value Measurements

Our securities available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. Additionally, in connection with our mortgage banking activities we have commitments to fund loans held-for-sale and commitments to sell loans, which are considered free-standing derivative financial instruments, the fair values of which are not material to our financial condition or results of operations.

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The following tables set forth the carrying values of our assets measured at estimated fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at the dates indicated.



	Carrying Value at March 31, 2016
(In Thousands)	Total		Level 1		Level 2
Securities available-for-sale:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	301,787	$	—	$	301,787
Non-GSE issuance REMICs and CMOs	2,617		—		2,617
GSE pass-through certificates	10,744		—		10,744
Obligations of GSEs	73,729		—		73,729
Fannie Mae stock	1		1		—
Total securities available-for-sale	$	388,878	$	1	$	388,877

	Carrying Value at December 31, 2015
(In Thousands)	Total		Level 1		Level 2
Securities available-for-sale:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	330,539	$	—	$	330,539
Non-GSE issuance REMICs and CMOs	3,054		—		3,054
GSE pass-through certificates	11,264		—		11,264
Obligations of GSEs	71,939		—		71,939
Fannie Mae stock	2		2		—
Total securities available-for-sale	$	416,798	$	2	$	416,796

The following is a description of valuation methodologies used for assets measured at fair value on a recurring basis.

Residential mortgage-backed securities

Residential mortgage-backed securities comprised 81% of our securities available-for-sale portfolio at March 31, 2016 and 83% at December 31, 2015. The fair values for these securities are obtained from an independent nationally recognized pricing service. Our pricing service uses various modeling techniques to determine pricing for our mortgage-backed securities, including options based pricing and discounted cash flow models. The inputs to these models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, reference data, monthly payment information and collateral performance. GSE securities, for which an active market exists for similar securities making observable inputs readily available, comprised 99% of our available-for-sale residential mortgage-backed securities portfolio at March 31, 2016 and December 31, 2015.

We review changes in the pricing service fair values from month to month taking into consideration changes in market conditions including changes in mortgage spreads, changes in treasury yields and changes in pricing on 15 and 30 year pass-through mortgage-backed securities. Significant month over month price changes are analyzed further using option based pricing, discounted cash flow models and third party quotes. Based upon our review of the prices provided by our pricing service, the estimated fair values incorporate observable market inputs commonly used by buyers and sellers of these types of securities at the measurement date in orderly transactions between market participants, and, as such, are classified as Level 2.

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Obligations of GSEs

Obligations of GSEs comprised 19% of our securities available-for-sale portfolio at March 31, 2016 and 17% at December 31, 2015 and consisted of debt securities issued by GSEs. The fair values for these securities are obtained from an independent nationally recognized pricing service. Our pricing service gathers information from market sources, including new issue and secondary markets, and integrates relative credit information, observed market movements and sector news into their pricing applications and models. Based upon our review of the prices provided by our pricing service, the estimated fair values incorporate observable market inputs commonly used by buyers and sellers of these types of securities at the measurement date in orderly transactions between market participants, and, as such, are classified as Level 2.

Fannie Mae stock

The fair value of the Fannie Mae stock in our available-for-sale securities portfolio is obtained from quoted market prices for identical instruments in active markets and, as such, is classified as Level 1.

Non-Recurring Fair Value Measurements

From time to time, we may be required to record at fair value assets or liabilities on a non-recurring basis, such as mortgage servicing rights, or MSR, loans receivable, certain loans held-for-sale and real estate owned, or REO. These non-recurring fair value adjustments involve the application of lower of cost or market accounting or impairment write-downs of individual assets.

The following table sets forth the carrying values of those of our assets which were measured at fair value on a non-recurring basis at the dates indicated. The fair value measurements for all of these assets fall within Level 3 of the fair value hierarchy.



		Carrying Value
(In Thousands)	At March 31, 2016			At December 31, 2015
Non-performing loans held-for-sale, net		$	914		$	1,582
Impaired loans		126,349			134,910
MSR, net		9,900			11,014
REO, net		9,758			16,307
Total		$	146,921		$	163,813

The following table provides information regarding the gains (losses) recognized on our assets measured at fair value on a non-recurring basis for the periods indicated.



	For the Three Months Ended March 31,
(In Thousands)		2016			2015
Non-performing loans held-for-sale, net (1)		$	—		$	(188	)
Impaired loans (2)		(1,858		)	(1,964		)
MSR, net (3)		(877		)	(513		)
REO, net (4)		(250		)	(304		)
Total		$	(2,985	)	$	(2,969	)


(1)	Losses are charged against the allowance for loan losses in the case of a write-down upon the transfer of a loan to held-for-sale. Losses subsequent to the transfer of a loan to held-for-sale are charged to other non-interest income.


(2)	Losses are charged against the allowance for loan losses.


(3)	Gains (losses) are credited/charged to mortgage banking income, net.


(4)	Gains (losses) are credited/charged to the allowance for loan losses upon the transfer of a loan to REO. Losses subsequent to the transfer of a loan to REO are charged to REO expense which is a component of other non-interest expense.

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The following is a description of valuation methodologies used for assets measured at fair value on a non-recurring basis.

Loans held-for-sale, net (non-performing loans held-for-sale)

Included in loans held-for-sale, net, are non-performing loans held-for-sale for which fair values are estimated through either preliminary bids from potential purchasers of the loans or the estimated fair value of the underlying collateral discounted for factors necessary to solicit acceptable bids, and adjusted as necessary based on management’s experience with sales of similar types of loans and, as such, are classified as Level 3. At March 31, 2016, non-performing loans held for sale were comprised of 72% multi-family mortgage loans and 28% residential mortgage loans. At December 31, 2015, non-performing loans held for sale were comprised of 80% multi-family mortgage loans and 20% residential mortgage loans.

Loans receivable, net (impaired loans)

Loans which meet certain criteria are evaluated individually for impairment. A loan is considered impaired when, based upon current information and events, it is probable that we will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. Impaired loans were comprised of 85% residential mortgage loans, 13% multi-family and commercial real estate mortgage loans and 2% home equity lines of credit at March 31, 2016 and 81% residential mortgage loans, 17% multi-family and commercial real estate mortgage loans and 2% home equity lines of credit at December 31, 2015. Impaired loans for which a fair value adjustment was recognized were comprised of 86% residential mortgage loans, 13% multi-family and commercial real estate mortgage loans and 1% home equity lines of credit at March 31, 2016 and 80% residential mortgage loans, 19% multi-family and commercial real estate mortgage loans and 1% home equity lines of credit at December 31, 2015. Our impaired loans are generally collateral dependent and, as such, are generally carried at the estimated fair value of the underlying collateral less estimated selling costs.

We obtain updated estimates of collateral values on residential mortgage loans at 180 days past due and earlier in certain instances, including for loans to borrowers who have filed for bankruptcy, and, to the extent the loans remain delinquent, annually thereafter. Updated estimates of collateral value on residential loans are obtained primarily through automated valuation models. Additionally, our loan servicer performs property inspections to monitor and manage the collateral on our residential loans when they become 45 days past due and monthly thereafter until the foreclosure process is complete. We obtain updated estimates of collateral value using third party appraisals on non-performing multi-family and commercial real estate mortgage loans when the loans initially become non-performing and annually thereafter and multi-family and commercial real estate loans modified in a TDR at the time of the modification and annually thereafter. Appraisals on multi-family and commercial real estate loans are reviewed by our internal certified appraisers. We analyze our home equity lines of credit when such loans become 90 days past due and consider our lien position, the estimated fair value of the underlying collateral value and the results of recent property inspections in determining the need for an individual valuation allowance. Adjustments to final appraised values obtained from independent third party appraisers and automated valuation models are not made. The fair values of impaired loans are based upon unobservable inputs and may not be realized in an actual sale or immediate settlement of the loan and, as such, are classified as Level 3.

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MSR, net

The right to service loans for others is generally obtained through the sale of residential mortgage loans with servicing retained. MSR are carried at the lower of cost or estimated fair value. The estimated fair value of MSR is obtained through independent third party valuations through an analysis of future cash flows, incorporating estimates of assumptions market participants would use in determining fair value including market discount rates, prepayment speeds, servicing income, servicing costs, default rates and other market driven data, including the market’s perception of future interest rate movements and, as such, are classified as Level 3. At March 31, 2016, our MSR were valued based on expected future cash flows considering a weighted average discount rate of 9.96%, a weighted average constant prepayment rate on mortgages of 11.07% and a weighted average life of 5.8 years. At December 31, 2015, our MSR were valued based on expected future cash flows considering a weighted average discount rate of 9.97%, a weighted average constant prepayment rate on mortgages of 10.47% and a weighted average life of 6.1 years. Management reviews the assumptions used to estimate the fair value of MSR to ensure they reflect current and anticipated market conditions.

REO, net

REO represents real estate acquired through foreclosure or by deed in lieu of foreclosure. At March 31, 2016, REO totaled $12.7 million, all of which were residential properties. At December 31, 2015, REO totaled $19.8 million, including residential properties with a carrying value of $17.8 million. REO is initially recorded at estimated fair value less estimated selling costs. Thereafter, we maintain a valuation allowance representing decreases in the properties' estimated fair value. The fair value of REO is estimated through current appraisals, in conjunction with a drive-by inspection and comparison of the REO property with similar properties in the area by either a licensed appraiser or real estate broker. As these properties are actively marketed, estimated fair values are periodically adjusted by management to reflect current market conditions and, as such, are classified as Level 3.

Fair Value of Financial Instruments

Quoted market prices available in formal trading marketplaces are typically the best evidence of the fair value of financial instruments. In many cases, financial instruments we hold are not bought or sold in formal trading marketplaces. Accordingly, fair values are derived or estimated based on a variety of valuation techniques in the absence of quoted market prices. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates do not reflect any possible tax ramifications, estimated transaction costs, or any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument. Because no market exists for a certain portion of our financial instruments, fair value estimates are based on judgments regarding future loss experience, current economic conditions, risk characteristics and other such factors. These estimates are subjective in nature, involve uncertainties and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. For these reasons and others, the estimated fair value disclosures presented herein do not represent our entire underlying value. As such, readers are cautioned in using this information for purposes of evaluating our financial condition and/or value either alone or in comparison with any other company.

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The following tables set forth the carrying values and estimated fair values of our financial instruments which are carried in the consolidated statements of financial condition at either cost or at lower of cost or fair value in accordance with GAAP, and are not measured or recorded at fair value on a recurring basis, and the level within the fair value hierarchy in which the fair value measurements fall at the dates indicated.



	At March 31, 2016
	Carrying Value		Estimated Fair Value
(In Thousands)	Carrying Value		Total		Level 2		Level 3
Financial Assets:
Securities held-to-maturity	$	2,443,503	$	2,469,458	$	2,469,458	$	—
FHLB-NY stock	131,582		131,582		131,582		—
Loans held-for-sale, net (1)	7,672		7,819		—		7,819
Loans receivable, net (1)	10,910,881		11,004,964		—		11,004,964
MSR, net (1)	9,900		9,901		—		9,901
Financial Liabilities:
Deposits	9,051,539		9,083,402		9,083,402		—
Borrowings, net	3,899,354		4,091,603		4,091,603		—



	At December 31, 2015
	Carrying Value		Estimated Fair Value
(In Thousands)	Carrying Value		Total		Level 2		Level 3
Financial Assets:
Securities held-to-maturity	$	2,296,799	$	2,286,092	$	2,286,092	$	—
FHLB-NY stock	131,137		131,137		131,137		—
Loans held-for-sale, net (1)	8,960		9,037		—		9,037
Loans receivable, net (1)	11,055,081		11,112,709		—		11,112,709
MSR, net (1)	11,014		11,017		—		11,017
Financial Liabilities:
Deposits	9,106,027		9,123,740		9,123,740		—
Borrowings, net	3,964,222		4,132,940		4,132,940		—

_______________________________________________________


(1)	Includes assets measured at fair value on a non-recurring basis.

The following is a description of the methods and assumptions used to estimate fair values of our financial instruments which are not measured or recorded at fair value on a recurring or non-recurring basis.

Securities held-to-maturity

The fair values for substantially all of our securities held-to-maturity are obtained from an independent nationally recognized pricing service using similar methods and assumptions as used for our securities available-for-sale which are measured at fair value on a recurring basis.

Federal Home Loan Bank of New York, or FHLB-NY, stock

The fair value of FHLB-NY stock is based on redemption at par value.

Loans held-for-sale, net

Included in loans held-for-sale, net, are 15 and 30 year fixed rate residential mortgage loans originated for sale that conform to GSE guidelines (conforming loans) for which fair values are estimated using market reference rates and spreads, credit spread adjustments, discounted cash flow analysis, benchmark pricing and option based pricing, as appropriate.

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Loans receivable, net

Fair values of loans are estimated using market reference rates and spreads, credit spread adjustments, discounted cash flow analysis, benchmark pricing and option based pricing, as appropriate.

This technique of estimating fair value is extremely sensitive to the assumptions and estimates used. While we have attempted to use assumptions and estimates which are the most reflective of the loan portfolio and the current market, a greater degree of subjectivity is inherent in determining these fair values than for fair values obtained from formal trading marketplaces. In addition, our valuation method for loans, which is consistent with accounting guidance, does not fully incorporate an exit price approach to fair value.

Deposits

The fair values of deposits with no stated maturity, such as NOW and demand deposit (checking), money market and savings accounts, are equal to the amount payable on demand. The fair values of certificates of deposit are based on discounted contractual cash flows using the weighted average remaining life of the portfolio discounted by the corresponding Swap Curve.

Borrowings, net

The fair values of borrowings are based upon an industry standard option adjusted spread, or OAS, model. This OAS model is calibrated to available counter party dealers' market quotes, as necessary.

Outstanding commitments

Outstanding commitments include commitments to extend credit and unadvanced lines of credit for which fair values were estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions. The fair values of these commitments are immaterial to our financial condition.

13. Litigation

In the ordinary course of our business, we are routinely made a defendant in or a party to pending or threatened legal actions or proceedings which, in some cases, seek substantial monetary damages from or other forms of relief against us. In our opinion, after consultation with legal counsel, we believe it unlikely that such actions or proceedings will have a material adverse effect on our financial condition, results of operations or liquidity.

City of New York Notice of Determination

By “Notice of Determination” dated September 14, 2010 and August 26, 2011, or the 2010 and 2011 Notices, the City of New York notified us of alleged tax deficiencies in the amount of $13.3 million, including interest and penalties, related to our 2006 through 2008 tax years. The deficiencies related to our operation of Fidata Service Corp., or Fidata, and Astoria Federal Mortgage Corp., or AF Mortgage, subsidiaries of Astoria Bank. We disagree with the assertion of the tax deficiencies. Hearings on the 2010 and 2011 Notices were held before the New York City Tax Appeals Tribunal, or the NYC Tax Appeals Tribunal, in March and April 2013. On October 29, 2014, the NYC Tax Appeals Tribunal issued a decision favorable to us canceling the 2010 and 2011 Notices. The City of New York appealed the decision of the NYC Tax Appeals Tribunal. The parties presented oral arguments on November 19, 2015 and are now awaiting a decision from the NYC Tax Appeals Tribunal. At this time, management believes it is more likely than not that we will succeed in defending against the City of New York’s appeal. Accordingly, no liability or reserve has been recognized in our consolidated statement of financial condition at March 31, 2016 with respect to this matter.

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By “Notice of Determination” dated November 19, 2014, or the 2014 Notice, the City of New York notified us of an alleged tax deficiency in the amount of $6.1 million, including interest and penalties, related to our 2009 and 2010 tax years, and by "Notice of Determination" dated August 5, 2015, or the 2015 Notice, the City of New York notified us of an alleged tax deficiency in the amount of $2.1 million, including interest and penalties, related to our 2011 through 2013 tax years. These deficiencies related to our operation of Fidata and AF Mortgage and the bases of the 2014 Notice and the 2015 Notice are substantially the same as that of the 2010 and 2011 Notices. We disagree with the assertion of the tax deficiencies, and we filed Petitions for Hearing with the City of New York on February 13, 2015 and September 9, 2015 to oppose the 2014 Notice and the 2015 Notice, respectively. By notice dated June 4, 2015, the NYC Tax Appeals Tribunal informed the parties that the proceedings relating to the 2014 Notice were adjourned pending the resolution of the proceedings with respect to the 2010 and 2011 Notices, the outcome of which may be determinative of some or all of the issues in this matter. On September 17, 2015, the NYC Tax Appeals Tribunal informed the parties that, barring the filing of an objection, the September 2015 Petition for Hearing would be consolidated with the February 2015 Petition and thus also adjourned pending resolution of the proceedings related to the 2010 and 2011 Notices. At this time, management believes it is more likely than not that we will succeed in refuting the City of New York’s position asserted in the 2014 Notice and the 2015 Notice. Accordingly, no liability or reserve has been recognized in our consolidated statement of financial condition at March 31, 2016 with respect to this matter.

No assurance can be given as to whether or to what extent we will be required to pay the amount of the tax deficiencies asserted by the City of New York, whether additional tax will be assessed for years subsequent to 2013, that these matters will not be costly to oppose, that these matters will not have an impact on our financial condition or results of operations or that, ultimately, any such impact will not be material.

Merger-related Litigation

Following the announcement of the execution of the Merger Agreement, six lawsuits challenging the proposed Merger were filed in the Supreme Court of the State of New York, County of Nassau. These actions are captioned: (1) Sandra E. Weiss IRA v. Chrin, et al., Index No. 607132/2015 (filed November 4, 2015); (2) Raul v. Palleschi, et al., Index No. 607238/2015 (filed November 6, 2015); (3) Lowinger v. Redman, et al., Index No. 607268/2015 (filed November 9, 2015); (4) Minzer v. Astoria Fin. Corp., et al., Index No. 607358/2015 (filed November 12, 2015); (5) MSS 12-09 Trust v. Palleschi, et al., Index No. 607472/2015 (filed November 13, 2015); and (6) The Firemen’s Retirement System of St. Louis v. Keegan, et al., Index No. 607612/2015 (filed November 23, 2015). On January 15, 2016, the court consolidated the New York lawsuits under the caption In re Astoria Financial Corporation Shareholders Litigation, Index No. 607132/2015, and on January 29, 2016 the lead plaintiffs filed an amended consolidated complaint. In addition, a seventh lawsuit was filed challenging the proposed transaction in the Delaware Court of Chancery, captioned O’Connell v. Astoria Financial Corp., et al., Case No. 11928 (filed January 22, 2016). The plaintiff in this case filed an amended complaint on February 17, 2016. Each of the lawsuits is a putative class action filed on behalf of the stockholders of Astoria and names as defendants Astoria, its directors and NYCB, or collectively, the defendants.

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because they improperly agreed to deal protection devices that allegedly preclude other bidders from making a successful competing offer for Astoria, including a no solicitation provision that allegedly prevents other buyers from participating in discussions which may lead to a superior proposal, a matching rights provision that allows NYCB to match any competing proposal in the event one is made and a provision that requires Astoria to pay NYCB a termination fee of $69.5 million under certain circumstances. In addition, the lawsuit filed in Delaware also alleges that Astoria’s directors breached their fiduciary duties by causing a false and materially misleading Form S-4 Registration Statement to be filed with the SEC. Each of the complaints further alleges that NYCB aided and abetted the alleged fiduciary breaches by the Astoria directors.

Each of the actions seek, among other things, an order enjoining completion of the proposed Merger and an award of costs and attorneys’ fees. Certain of the actions also seek compensatory damages arising from the alleged breaches of fiduciary duty. The defendants believe these actions are without merit. Accordingly, no liability or reserve has been recognized in our consolidated statement of financial condition at March 31, 2016 with respect to these matters.

On April 6, 2016, the defendants and lead plaintiffs for the consolidated New York lawsuits entered into a memorandum of understanding, or the MOU, which provides for the settlement of the New York lawsuits. The MOU contemplates, among other things, that Astoria will make certain supplemental disclosures relating to the Merger. Although the defendants deny the allegations made in the New York lawsuits (including the amended consolidated complaint) and believe that no supplemental disclosure is required under applicable laws, in order to avoid the burden and expense of further litigation, Astoria agreed to make such supplemental disclosures pursuant to the terms of the MOU. The supplemental disclosures were made available to Astoria’s shareholders on April 8, 2016 through a filing with the SEC by Astoria on a Current Report on Form 8-K.

The settlement contemplated by the MOU is subject to confirmatory discovery and customary conditions, including court approval following notice to Astoria’s stockholders. A hearing will be scheduled at which the Supreme Court of the State of New York will consider the fairness, reasonableness and adequacy of the settlement. If the settlement is finally approved by the court, it will resolve and release all claims by stockholders of Astoria challenging any aspect of the Merger, the Merger Agreement, and any disclosure made in connection therewith, pursuant to terms that will be disclosed to stockholders prior to final approval of the settlement. There can be no assurance that the court will approve the settlement contemplated by the MOU. If the court does not approve the settlement, or if the settlement is otherwise disallowed, the proposed settlement as contemplated by the MOU may be terminated. If the MOU is terminated, no assurance can be given at this time that the litigation against us will be resolved in our favor, that this litigation will not be costly to defend, that this litigation will not have an impact on our financial condition or results of operations or that, ultimately, any such impact will not be material.

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14. Impact of Accounting Standards and Interpretations

In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-02, "Leases (Topic 842)", which requires lessees to recognize most leases, including operating leases, on-balance sheet via a right-to-use asset and lease liability. This will require many companies, to include more existing leases on-balance sheet. For banks, this could impact branch leases or other equipment leases. The new standard is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within fiscal years. We are currently evaluating the impact of ASU 2016-02 on our accounting and have not yet concluded on the impact ASU 2016-02 will have on our financial condition, results of operations or cash flows.

In March 2016, the FASB, issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718) — Improvements to Employee Share-Based Payment Accounting,” which applies to all entities that issue share-based payment awards to their employees. The amendments involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments are part of FASB's Simplification Initiative, the stated objective of which is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments in ASU 2016-09 for public business entities are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted for any entity in any interim or annual period and if so elected, adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. An entity that elects early adoption must adopt all of the amendments in the same period. We are currently evaluating the impact of ASU 2016-09 on our accounting and do not expect this guidance to have a significant impact on our financial condition, results of operations or cash flow.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements may be identified by the use of the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions.

Forward-looking statements are based on various assumptions and analyses made by us in light of our management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following:


•	the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond our control;


•	increases in competitive pressure among financial institutions or from non-financial institutions;


•	changes in the interest rate environment;


•	changes in deposit flows, loan demand or collateral values;


•	changes in accounting principles, policies or guidelines;


•	changes in general economic conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate or securities markets or the banking industry;


•	legislative or regulatory changes, including the implementation of the Reform Act and any actions regarding foreclosures;


•	enhanced supervision and examination by the Office of the Comptroller of the Currency, the FRB and the Consumer Financial Protection Bureau;


•	effects of changes in existing U.S. government or government-sponsored mortgage programs;


•	our ability to successfully implement technological changes;


•	our ability to successfully consummate new business initiatives;


•	litigation or other matters before regulatory agencies, whether currently existing or commencing in the future;


•	our ability to implement enhanced risk management policies, procedures and controls commensurate with shifts in our business strategies and regulatory expectations;


•	the actual results of the proposed Merger could vary materially as a result of a number of factors, including the possibility that various closing conditions for the transaction may not be satisfied or waived, and the Merger Agreement could be terminated under certain circumstances;


•	the potential impact of the announcement of the proposed Merger on relationships with third parties, including customers, employees and competitors; and


•	delays in closing the Merger.

We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.

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Executive Summary

The following overview should be read in conjunction with our MD&A in its entirety.

Astoria Financial Corporation is a Delaware corporation organized as the unitary savings and loan holding company of Astoria Bank. As the premier Long Island community bank, Astoria Bank offers a wide range of financial services and solutions designed to meet customers’ personal, family and business banking needs. Our goals are to enhance shareholder value while continuing to strengthen and expand our position as a more fully diversified, full service community bank. We focus on growing our core businesses of mortgage portfolio lending and deposit gathering while maintaining strong asset quality and controlling operating expenses. We continue to implement our strategies to diversify earning assets and to increase low cost NOW and demand deposit (checking), money market and and savings accounts, or core deposits. These strategies include a greater level of participation in the local multi-family and commercial real estate mortgage lending markets and expanding our array of business banking products and services, focusing on small and middle market businesses with an emphasis on attracting clients from larger competitors. Our physical presence consists presently of our branch network of 88 locations, plus our dedicated business banking office in midtown Manhattan.

We are impacted by both national and regional economic factors, with residential mortgage loans from various regions of the country held in our portfolio and our multi-family and commercial real estate mortgage loan portfolio concentrated in the New York metropolitan area, which includes New York, New Jersey and Connecticut. Although the U.S. economy has shown signs of modest improvement, the operating environment continues to remain challenging. Interest rates have been at or near historical lows, and despite the December 2015 action by the Federal Open Market Committee, or FOMC, to raise the federal funds interest rate by 25 basis points and the FOMC's economic projections implying several additional increases in 2016, the federal funds futures market appears to be discounting such actions. Long term interest rates have been volatile during the past year and sensitive to varied economic data, the uncertainty of the impact of the FOMC's first rate hike in almost a decade and the divergence in monetary policy of the FOMC and its global counterparts. The ten-year U.S. Treasury rate started 2015 at 2.17% and ended the year at 2.27%, while ranging between a low of 1.68% and a high of 2.50% and was 1.77% at the end of March 2016. The national unemployment rate was 5.0% for March 2016 and December 2015, and new job growth in 2016 has continued its slow pace. We believe market conditions remain favorable in the New York metropolitan area with respect to our multi-family mortgage loan origination activities.

Net income available to common shareholders for the three months ended March 31, 2016 decreased modestly compared to the three months ended March 31, 2015. This decrease was primarily attributable to decreases in net interest income and non-interest income, partially offset by an increase in the provision for loan losses credited to operations in the 2016 first quarter.

The provision for loan losses credited to operations for the three months ended March 31, 2016 totaled $3.1 million compared to a provision for loan losses credited to operations of $343,000 for the three months ended March 31, 2015. The allowance for loan losses totaled $94.2 million at March 31, 2016, compared to $98.0 million at December 31, 2015. The reduction in the allowance for loan losses at March 31, 2016 compared to December 31, 2015, and the provision credited to operations for the three months ended March 31, 2016, reflects the results of our quarterly review of the adequacy of the allowance for loan losses. Changes in the composition and size of our loan portfolio have resulted in reduced reserve needs in the 2016 first quarter. We continue to maintain our allowance for loan losses at a level which we believe is appropriate given the continued improvement in our loan loss experience, as well as reductions in the balances of certain loan

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classes we believe bear higher risk, the quality of our loan originations and the contraction of the overall loan portfolio.

Net interest income for the three months ended March 31, 2016 decreased compared to the three months ended March 31, 2015. The decline was primarily due to a lower level of interest earning assets, principally in our residential mortgage loan portfolio, that was partly offset by an increase in our net interest margin.

Non-interest income decreased for the three months ended March 31, 2016 compared to the three months ended March 31, 2015, primarily due to lower customer service fees. Non-interest expense decreased slightly for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 as decreases in other non-interest expense, advertising expense and federal deposit insurance premium were partially offset by an increase in compensation and fringe benefits expense.

Total assets declined during the three months ended March 31, 2016 primarily due to a decrease in total mortgage loans, partially offset by an increase in total securities. The decrease in mortgage loans was due to a decline in residential mortgage loans, partially offset by growth in our multi-family and commercial real estate mortgage loan portfolio, which represented 45% of our total loan portfolio at March 31, 2016, compared to 44% at December 31, 2015. The decline in our residential mortgage loan portfolio reflects an excess of loan repayments over originations and purchases during the 2016 first quarter.

While total deposits declined during the three months ended March 31, 2016 as a result of a decline in certificates of deposit, core deposits increased during the 2016 first quarter. At March 31, 2016, core deposits represented 80% of total deposits, up from 78% at December 31, 2015. Total deposits included $1.13 billion of business deposits at March 31, 2016, up $80.2 million from December 31, 2015, substantially all of which were core deposits.

Merger Agreement with New York Community Bank

On October 28, 2015, Astoria entered into the Merger Agreement with NYCB. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Astoria will merge with and into NYCB, with NYCB as the surviving corporation in the Merger. Immediately following the Merger, Astoria’s wholly owned subsidiary, Astoria Bank, will merge with and into NYCB’s wholly owned subsidiary, New York Community Bank. New York Community Bank will be the surviving entity in the Bank Merger. The Merger Agreement was unanimously approved and adopted by the Board of Directors of each of Astoria and NYCB.

Subject to the terms and conditions of the Merger Agreement, at the Effective Time of the Merger, Astoria stockholders will have the right to receive one share of common stock, par value $0.01 per share, of NYCB, or NYCB Common Stock, and $0.50 in cash for each share of common stock, par value $0.01 per share, of Astoria Common Stock.

Also in the Merger, each share of Astoria 6.50% Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, with a liquidation preference of $1,000 per share, issued and outstanding immediately prior to the Effective Time will be automatically converted into the right to receive one share of NYCB 6.50% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share.

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The completion of the Merger is subject to customary conditions, including (1) adoption of the Merger Agreement by Astoria’s stockholders, (2) adoption of the Merger Agreement and approval of the NYCB charter amendment by NYCB’s stockholders, (3) authorization for listing on the NYSE of the shares of NYCB Common Stock to be issued in the Merger, (4) the receipt of required regulatory approvals, including the approval of the FRB, the FDIC, and the DFS, (5) effectiveness of the registration statement on Form S-4 for the NYCB Common Stock to be issued in the Merger, and (6) the absence of any order, injunction or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal. The registration statement on Form S-4 for the NYCB Common Stock to be issued in the Merger became effective on March 16, 2016, and special meetings of Astoria’s and NYCB’s respective stockholders were held on April 26, 2016, at which Astoria’s stockholders adopted the Merger Agreement and NYCB’s stockholders adopted the Merger Agreement and approved the NYCB charter amendment. In addition, all applications and notices necessary to obtain the regulatory approvals required to complete the Merger have been submitted or sent by Astoria or NYCB.

Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (1) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (2) performance in all material respects by the other party of its obligations under the Merger Agreement and (3) receipt by such party of an opinion from its counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

Available Information

Our internet website address is www.astoriabank.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports can be obtained free of charge from our investor relations website at http://ir.astoriabank.com. The above reports are available on our website as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC. Such reports are also available on the SEC’s website at www.sec.gov/edgar/searchedgar/webusers.htm.

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Critical Accounting Policies

Note 1 of Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of our 2015 Annual Report on Form 10-K, as supplemented by this report, contains a summary of our significant accounting policies. Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Our policies with respect to the methodologies used to determine the allowance for loan losses, the valuation of MSR, judgments regarding goodwill and securities impairment and the estimates related to income taxes and our pension plans and other post-retirement benefits are our most critical accounting policies because they are important to the presentation of our financial condition and results of operations, involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions and estimates about highly uncertain matters. Actual results may differ from our assumptions, estimates and judgments. The use of different assumptions, estimates and judgments could result in material differences in our results of operations or financial condition. These critical accounting policies are reviewed quarterly with the Audit Committee of our Board of Directors. The following description of these policies should be read in conjunction with the corresponding section of our 2015 Annual Report on Form 10-K.

Allowance for Loan Losses

We establish and maintain an allowance for loan losses based on our evaluation of the probable inherent losses in our loan portfolio. Loan charge-offs in the period the loans, or portions thereof, are deemed uncollectible reduce the allowance for loan losses. Recoveries of amounts previously charged-off increase the allowance for loan losses in the period they are received. The allowance is adjusted to an appropriate level through provisions for loan losses charged or credited to operations to increase or decrease the allowance based on a comprehensive analysis of our loan portfolio. We evaluate the adequacy of the allowance on a quarterly basis. The allowance is comprised of both valuation allowances related to individual loans and general valuation allowances, although the total allowance for loan losses is available for losses applicable to the entire loan portfolio. In estimating specific allocations of the allowance, we review loans deemed to be impaired and measure impairment losses based on either the fair value of the collateral, the observable market price of the loan or the present value of expected future cash flows. A loan is considered impaired when, based upon current information and events, it is probable that we will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include the financial condition of the borrower, payment history, delinquency status, collateral value, our lien position and the probability of collecting principal and interest payments when due. When an impairment analysis indicates the need for a specific allocation of the allowance on an individual loan, such allocation would be established sufficient to cover probable incurred losses at the evaluation date based on the facts and circumstances of the loan. When available information confirms that specific loans, or portions thereof, are uncollectible, these amounts are charged-off against the allowance for loan losses. For loans individually classified as impaired, the portion of the recorded investment in the loan in excess of either the estimated fair value of the underlying collateral less estimated selling costs, for collateral dependent loans, the observable market price of the loan or the present value of the discounted cash flows of a modified loan, is generally charged-off.

Our Asset Review Department utilizes a risk-based loan review approach for multi-family and commercial real estate mortgage loans and commercial and industrial loans with balances of $250,000 or greater. Under this approach, individual loans are selected by a combination of individual loan reviews, targeted loan reviews, concentration of credit reviews and reviews of loans to one borrower to achieve, at a minimum on an annual basis, a review coverage rate of the outstanding principal balance of 30% for the multi-family mortgage loan

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portfolio, 40% for the commercial real estate mortgage loan portfolio and 60% for the commercial and industrial loan portfolio. Further, multi-family and commercial real estate management personnel also perform annual reviews for certain multi-family and commercial real estate mortgage loans and recommend further review by our Credit and Asset Review Departments as appropriate. The residential mortgage loan portfolio, home equity and other consumer loan portfolio and commercial and industrial loans with balances of less than $250,000 are reviewed collectively by delinquency and net loss trends.

Our residential mortgage loans are individually evaluated for impairment at 180 days past due and earlier in certain instances, including for loans to borrowers who have filed for bankruptcy, and, to the extent the loans remain delinquent, annually thereafter. Updated estimates of collateral values on residential loans are obtained primarily through automated valuation models. Additionally, our loan servicer performs property inspections to monitor and manage the collateral on our residential loans when they become 45 days past due and monthly thereafter until the foreclosure process is complete. We obtain updated estimates of collateral value using third party appraisals on non-performing multi-family and commercial real estate mortgage loans when the loans initially become non-performing and annually thereafter and multi-family and commercial real estate loans modified in a TDR at the time of the modification and annually thereafter. Appraisals on multi-family and commercial real estate loans are reviewed by our internal certified appraisers. We analyze our home equity lines of credit when such loans become 90 days past due and consider our lien position, the estimated fair value of the underlying collateral value and the results of recent property inspections in determining the need for an individual valuation allowance. We also obtain updated estimates of collateral value for certain other loans when the Asset Classification Committee believes repayment of such loans may be dependent on the value of the underlying collateral. Adjustments to final appraised values obtained from independent third party appraisers and automated valuation models are not made.

Other current and anticipated economic conditions on which our individual valuation allowances rely are the impact that national and/or local economic and business conditions may have on borrowers, the impact that local real estate markets may have on collateral values, the level and direction of interest rates and their combined effect on real estate values and the ability of borrowers to service debt. For multi-family and commercial real estate loans, additional factors specific to a borrower or the underlying collateral are considered. These factors include, but are not limited to, the composition of tenancy, occupancy levels for the property, location of the property, cash flow estimates and, to a lesser degree, the existence of personal guarantees. We also review all regulatory notices, bulletins and memoranda with the purpose of identifying upcoming changes in regulatory conditions which may impact our calculation of individual valuation allowances. Our primary banking regulator periodically reviews our reserve methodology during regulatory examinations and any comments regarding changes to reserves or loan classifications are considered by management in determining valuation allowances.

The determination of the loans on which full collectibility is not reasonably assured, the estimates of the fair value of the underlying collateral and the assessment of economic and regulatory conditions are subject to assumptions and judgments by management. Individual valuation allowances and charge-off amounts could differ materially as a result of changes in these assumptions and judgments.

Estimated losses for loans that are not individually deemed to be impaired are determined on a loan pool basis using our historical loss experience and various other qualitative factors and comprise our general valuation allowances. General valuation allowances represent loss allowances that have been established to recognize the inherent risks associated with our lending activities which, unlike individual valuation allowances, have not been allocated to particular loans. The determination of the adequacy of the general valuation allowances takes into consideration a variety of factors.

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We segment our residential mortgage loan portfolio by interest-only and amortizing loans, full documentation and reduced documentation loans, and origination time periods, and analyze our historical loss experience and delinquency levels and trends of these segments. We analyze multi-family and commercial real estate mortgage loans by portfolio using predictive modeling techniques for loans originated after 2010 and by geographic location for loans originated prior to 2011. We analyze our consumer and other loan portfolio by home equity lines of credit, commercial and industrial loans and other consumer loans and perform similar historical loss analyses. In our analysis of non-performing loans, we consider our aggregate historical loss experience with respect to the ultimate disposition of the underlying collateral along with the migration of delinquent loans based on the portfolio segments noted above. These analyses and the resulting loss rates are used as an integral part of our judgment in developing estimated loss percentages to apply to the loan portfolio segments. We monitor credit risk on interest-only hybrid adjustable rate mortgage, or ARM, loans that were underwritten at the initial note rate, which may have been a discounted rate, in the same manner that we monitor credit risk on all interest-only hybrid ARM loans. We monitor interest rate reset dates of our loan portfolio, in the aggregate, and the current interest rate environment and consider the impact, if any, on borrowers’ ability to continue to make timely principal and interest payments in determining our allowance for loan losses. We also consider the size, composition, risk profile and delinquency levels of our loan portfolio, as well as our credit administration and asset management procedures. We monitor property value trends in our market areas by reference to various industry and market reports, economic releases and surveys, and our general and specific knowledge of the real estate markets in which we lend, in order to determine what impact, if any, such trends may have on the level of our general valuation allowances. In addition, we evaluate and consider the impact that current and anticipated economic and market conditions may have on the loan portfolio and known and inherent risks in the portfolio. We update our analyses quarterly and refine our evaluations as experience provides clearer guidance, our product offerings change and as economic conditions evolve.

We analyze our historical loss experience over 12, 15, 18 and 24 month periods. The loss history used in calculating our quantitative allowance coverage percentages varies based on loan type. Also, for a particular loan type, we may not have sufficient loss history to develop a reasonable estimate of loss and in these instances we may consider our loss experience for other, similar loan types and may evaluate those losses over a longer period than two years. Additionally, multi-family and commercial real estate loss experience may be adjusted based on the composition of the losses (loan sales, short sales and partial charge-offs). Our evaluation of loss experience factors considers trends in such factors over the prior three years, as well as an estimate of the average amount of time from an event signaling the potential inability of a borrower to continue to pay as agreed to the point at which a loss is confirmed, for substantially all of the loan portfolio, with the exception of multi-family and commercial real estate mortgage loans originated after 2010, for which our evaluation includes predictive modeling techniques. These modeling techniques utilize data inputs for each loan in the portfolio, including credit facility terms and performance to date, property details and borrower financial performance data. The model also incorporates real estate market data from an established real estate market database company to forecast future performance of the properties, and includes a loan loss predictive model based on studies of defaulted commercial real estate loans. The model then generates a probability of default, loss given default and ultimately an estimated loss for each loan quarterly over the remaining life of the loan. The appropriate timeframe from which to assign an estimated loss percentage to the pool of loans is assessed by management. We update our historical loss analyses, as well as our predictive model, quarterly and evaluate the need to modify our quantitative allowances as a result of our updated charge-off and loss analyses.

We consider qualitative factors with the purpose of assessing the adequacy of the overall allowance for loan losses as well as the allocation of the allowance for loan losses by loan category. The qualitative factors we consider generally include, but are not limited to, changes in (1) lending policies and procedures, (2) economic

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and business conditions and developments that affect collectibility of our loan portfolio, (3) the nature and volume of our loan portfolio and in the terms of loans, (4) the experience, ability and depth of lending management and other staff, (5) the volume and severity of past due, non-accrual and adversely classified loans, (6) the quality of the loan review system, (7) the value of underlying collateral, (8) the existence or effect of any credit concentrations and (9) external factors such as competition and legal or regulatory requirements. In addition to the nine qualitative factors noted, we also review certain analytical information such as our coverage ratios and peer analysis.

We use ratio analyses as a supplemental tool for evaluating the overall reasonableness and adequacy of the allowance for loan losses. As such, we consider our asset quality ratios as well as the allowance ratios and coverage percentages set forth in both peer group and regulatory agency data. We also consider any comments from our primary banking regulator resulting from their review of our general valuation allowance methodology during regulatory examinations. We consider the observed trends in our asset quality ratios in combination with our primary focus on our historical loss experience and the impact of current economic conditions. After evaluating these variables, we determine appropriate allowance coverage percentages for each of our portfolio segments and the appropriate level of our allowance for loan losses. We do not determine the appropriate level of our allowance for loan losses based exclusively on a single factor or asset quality ratio. We periodically review the actual performance and charge-off history of our loan portfolio and compare that to our previously determined allowance coverage percentages and individual valuation allowances. In doing so, we evaluate the impact the previously mentioned variables may have had on the loan portfolio to determine which changes, if any, should be made to our assumptions and analyses.

Allowance adequacy calculations are adjusted quarterly, based on the results of our quantitative and qualitative analyses, to reflect our current estimates of the amount of probable losses inherent in our loan portfolio. Allocations of the allowance to each loan category are adjusted quarterly to reflect probable inherent losses using the same quantitative and qualitative analyses used in connection with the overall allowance adequacy calculations. The portion of the allowance allocated to each loan category does not represent the total available to absorb losses which may occur within the loan category, since the total allowance for loan losses is available for losses applicable to the entire loan portfolio.

Based on our evaluation of the composition and size of our loan portfolio, the levels and composition of delinquent and non-performing loans, our loss history, the housing and real estate markets and the current economic environment, we determined that an allowance for loan losses of $94.2 million was appropriate at March 31, 2016, compared to $98.0 million at December 31, 2015. The provision for loan losses credited to operations totaled $3.1 million for the three months ended March 31, 2016.

The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at the reporting dates. Actual results could differ from our estimates as a result of changes in economic or market conditions. Changes in estimates could result in a material change in the allowance for loan losses. While we believe that the allowance for loan losses has been established and maintained at levels that reflect the risks inherent in our loan portfolio, future adjustments may be necessary if portfolio performance or economic or market conditions differ substantially from the conditions that existed at the time of the initial determinations.

For additional information regarding our allowance for loan losses, see “Provision for Loan Losses Credited to Operations” and “Asset Quality” in this document and Part II, Item 7, “MD&A,” in our 2015 Annual Report on Form 10-K.

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Valuation of MSR

The initial asset recognized for originated MSR is measured at fair value. The fair value of MSR is estimated by reference to current market values of similar loans sold servicing released. MSR are amortized in proportion to and over the period of estimated net servicing income. We apply the amortization method for measurement of our MSR. MSR are assessed for impairment based on fair value at each reporting date. Impairment exists if the carrying value of MSR exceeds the estimated fair value. The estimated fair value of MSR is obtained through independent third party valuations. MSR impairment, if any, is recognized in a valuation allowance with a corresponding charge to earnings. Increases in the fair value of impaired MSR are recognized only up to the amount of the previously recognized valuation allowance.

At March 31, 2016, our MSR had a carrying value of $9.9 million, net of a valuation allowance of $3.0 million, which approximated the estimated fair value based on expected future cash flows considering a weighted average discount rate of 9.96%, a weighted average constant prepayment rate on mortgages of 11.07% and a weighted average life of 5.8 years. At December 31, 2015, our MSR had a carrying value of $11.0 million, net of a valuation allowance of $2.2 million, which approximated the estimated fair value based on expected future cash flows considering a weighted average discount rate of 9.97%, a weighted average constant prepayment rate on mortgages of 10.47% and a weighted average life of 6.1 years.

The fair value of MSR is highly sensitive to changes in assumptions. Changes in prepayment speed assumptions generally have the most significant impact on the fair value of our MSR. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of MSR. As interest rates rise, mortgage loan prepayments slow down, which results in an increase in the fair value of MSR. Thus, any measurement of the fair value of our MSR is limited by the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different point in time.

Goodwill Impairment

Goodwill is presumed to have an indefinite useful life and is tested, at least annually, for impairment at the reporting unit level. If the estimated fair value of the reporting unit exceeds its carrying amount, further evaluation is not necessary. However, if the fair value of the reporting unit is less than its carrying amount, further evaluation is required to compare the implied fair value of the reporting unit’s goodwill to its carrying amount to determine if a write-down of goodwill is required. Impairment exists when the carrying amount of goodwill exceeds its implied fair value.

For purposes of our goodwill impairment testing, we have identified a single reporting unit. We consider the quoted market price of our common stock on our impairment testing date as an initial indicator of estimating the fair value of our reporting unit. We also consider the average price of our common stock, both before and after our impairment test date, as well as market-based control premiums in determining the estimated fair value of our reporting unit. In addition to our internal goodwill impairment analysis, we periodically obtain a goodwill impairment analysis from an independent third party valuation firm. The independent third party utilizes multiple valuation approaches including comparable transactions, control premium, public market peers and discounted cash flow. Management reviews the assumptions and inputs used in the third party analysis for reasonableness.

At March 31, 2016, the carrying amount of our goodwill totaled $185.2 million. As of September 30, 2015, we performed our annual goodwill impairment test internally and obtained an independent third party analysis and concluded there was no goodwill impairment. We would test our goodwill for impairment between

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annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount. No events have occurred and no circumstances have changed since our annual impairment test date that would more likely than not reduce the fair value of our reporting unit below its carrying amount. The identification of additional reporting units, the use of other valuation techniques or changes to the input assumptions used in our analysis or the analysis by our third party valuation firm could result in materially different evaluations of impairment.

Securities Impairment

Our available-for-sale securities portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. Debt securities which we have the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost. The fair values for our securities are obtained from an independent nationally recognized pricing service.

Our securities portfolio is comprised primarily of fixed rate mortgage-backed securities guaranteed by a GSE as issuer. GSE issuance mortgage-backed securities comprised 88% of our securities portfolio at March 31, 2016. Non-GSE issuance mortgage-backed securities at March 31, 2016 comprised less than 1% of our securities portfolio and had an amortized cost of $2.8 million, with 93% classified as available-for-sale and 7% classified as held-to-maturity. Our non-GSE issuance securities are primarily investment grade securities and have performed similarly to our GSE issuance securities. Credit quality concerns have not significantly impacted the performance of our non-GSE securities or our ability to obtain reliable prices. The balance of our securities portfolio is primarily comprised of debt securities issued by GSEs.

The fair value of our securities portfolio is primarily impacted by changes in interest rates. We conduct a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. Our evaluation of other-than-temporary impairment, or OTTI, considers the duration and severity of the impairment, our assessments of the reason for the decline in value, the likelihood of a near-term recovery and our intent and ability to hold the securities. We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience. If such decline is deemed other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged to earnings as a component of non-interest income, except for the amount of the total OTTI for a debt security that does not represent credit losses which is recognized in other comprehensive income/loss, net of applicable taxes. At March 31, 2016, we held 61 securities with an estimated fair value totaling $606.6 million which had an unrealized loss totaling $7.1 million. Of the securities in an unrealized loss position at March 31, 2016, $363.6 million, with an unrealized loss of $4.1 million, had been in a continuous unrealized loss position for 12 months or longer. At March 31, 2016, the impairments were deemed temporary based on (1) the direct relationship of the decline in fair value to movements in interest rates, (2) the estimated remaining life and high credit quality of the investments and (3) the fact that we had no intention to sell these securities and it was not more likely than not that we would be required to sell these securities before their anticipated recovery of the remaining amortized cost basis and we expected to recover the entire amortized cost basis of the security.

Income Taxes

Our provision for income tax expense is based on our income, statutory tax rates and other provisions of tax law applicable to us in various jurisdictions. We file income tax returns in the United States federal jurisdiction and in New York State and New York City jurisdictions, as well as various other state jurisdictions in which we do business. In establishing a provision for income tax expense, we must make judgments and

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interpretations about the application of these inherently complex tax laws to our business activities, as well as the timing of when certain items may affect taxable income. Our interpretations may be subject to review during examination by taxing authorities and disputes may arise over our tax positions. We attempt to resolve these disputes during the tax examination and audit process and ultimately through the court systems when applicable. Changes to our income tax estimates can occur due to changes in tax rates, implementation of new business strategies, resolution of matters with taxing authorities regarding previously taken tax positions and newly enacted statutory, judicial and regulatory guidance. Such changes could affect the amount of our provision for income taxes and could be material to our financial condition or results of operations.

Our income tax expense consists of income taxes that are currently payable and deferred income taxes. We also maintain a reserve related to certain tax positions and strategies that management believes contain an element of uncertainty and evaluate each of our tax positions and strategies to determine whether the reserve continues to be appropriate. Accruals of interest and penalties related to unrecognized tax benefits are recognized in income tax expense. Our current income tax expense approximates taxes to be paid or refunded for the current period. Our deferred income tax expense results from changes in our deferred tax assets and liabilities between periods. Deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of future reversals of temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities and net operating loss carryforwards. We assess our deferred tax assets and establish a valuation allowance if realization of a deferred tax asset is not considered to be more likely than not. We evaluate the recoverability of these future tax deductions by assessing the adequacy of expected taxable income from all sources, including taxable income in carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of taxable income rely heavily on estimates and we use our historical experience and our short- and long-range business forecasts in making such estimates. We have recorded deferred tax assets, net of deferred tax liabilities and valuation allowances, of $98.6 million at March 31, 2016, compared to $101.5 million at December 31, 2015. We believe that our historical and future results of operations, and tax planning strategies which could be employed, will more likely than not generate sufficient taxable income to enable us to realize our net deferred tax assets. If changes in circumstances lead us to change our judgment about our ability to realize deferred tax assets in future years, we would adjust our valuation allowances in the period that our change in judgment occurs and record a corresponding increase or charge to income.

Pension Benefits and Other Postretirement Benefit Plans

Astoria Bank has a qualified, non-contributory defined benefit pension plan covering employees meeting specified eligibility criteria. In addition, Astoria Bank has non-qualified and unfunded supplemental retirement plans covering certain officers and directors. In 2012, all such plans were amended to, among other things, change the manner in which benefits were computed for service through April 30, 2012 and to suspend accrual of additional benefits effective April 30, 2012. We also sponsor a health care plan that provides for postretirement medical and dental coverage to select individuals.

We recognize the overfunded or underfunded status of our defined benefit pension plans and other postretirement benefit plan, which is measured as the difference between plan assets at fair value and the benefit obligation at the measurement date, in other assets or other liabilities in our consolidated statements of financial condition. Changes in the funded status are recognized through other comprehensive income/loss in the period in which the changes occur. Astoria Bank’s policy is to fund pension costs in accordance with the minimum funding requirement.

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There are several key assumptions which we provide our actuary which have a significant impact on the pension benefits and other postretirement benefit obligations as well as benefits expense. These include the discount rate and the expected return on plan assets. We continually review and evaluate all actuarial assumptions affecting the pension benefits and other postretirement benefit plans. We monitor these rates in relation to the current market interest rate environment and update our actuarial analysis accordingly.

The discount rate is used to calculate the present value of the benefit obligations at the measurement date and the expense to be recorded in the following period. A lower discount rate will result in a higher benefit obligation and expense, while a higher discount rate will result in a lower benefit obligation and expense. Discount rate assumptions are determined by reference to the Citigroup Pension Discount Curve, adjusted for Astoria Bank benefit plan specific cash flows. We compare these rates to other yield curves and market indices, such as the Mercer Mature Plan Index and Bloomberg AA Discount Curve, for reasonableness and make adjustments, as necessary, so the discount rates used reflect current market data and trends.

To determine the expected return on plan assets, we consider the long-term historical return information on plan assets, the mix of investments that comprise plan assets and the historical returns on indices comparable to the fund classes in which the plan invests.

For further information on the actuarial assumptions used for our pension benefits and other postretirement benefit plans, see Note 14 of Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2015 Annual Report on Form 10-K.

Liquidity and Capital Resources

Our primary source of funds is cash provided by principal and interest payments on loans and securities. The most significant liquidity challenge we face is the variability in cash flows as a result of changes in mortgage refinance activity. Principal payments on loans and securities increased to $700.5 million for the three months ended March 31, 2016, compared to $680.2 million for the three months ended March 31, 2015, due primarily to the relative level of market interest rates and other factors.

In addition to cash provided by principal and interest payments on loans and securities, our other sources of funds include cash provided by operating activities, deposits and borrowings. Net cash provided by operating activities totaled $27.4 million for the three months ended March 31, 2016 and $28.8 million for the three months ended March 31, 2015. Deposits decreased $54.5 million during the three months ended March 31, 2016 and $97.9 million during the three months ended March 31, 2015, due to decreases in certificates of deposit, partially offset by increases in core deposits. During the three months ended March 31, 2016 and 2015, we continued to allow high cost certificates of deposit to run off. Total deposits included business deposits of $1.13 billion at March 31, 2016, an increase of $80.2 million since December 31, 2015. At March 31, 2016, core deposits represented 80% of total deposits, up from 78% at December 31, 2015. This reflects our continued efforts to reposition the liability mix of our balance sheet, reducing the balance of high cost certificates of deposit and increasing the balance of low cost core deposits. Net borrowings decreased $64.9 million during the three months ended March 31, 2016 and decreased $73.9 million during the three months ended March 31, 2015. The decrease in net borrowings for the three months ended March 31, 2016 and March 31, 2015 were due to a decrease in federal funds purchased, partially offset by an increase in FHLB-NY borrowings.

Our primary use of funds is for the origination and purchase of mortgage loans and, to a lesser degree, for the purchase of securities. Gross mortgage loans originated and purchased for portfolio during the three months ended March 31, 2016 totaled $306.9 million, of which $217.4 million were multi-family and

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commercial real estate mortgage loan originations, $60.8 million were residential mortgage loan originations and $28.7 million were purchases of individual residential mortgage loans through our third party loan origination program. This compares to gross mortgage loans originated and purchased for portfolio during the three months ended March 31, 2015 totaling $400.4 million, of which $259.9 million were multi-family and commercial real estate mortgage loan originations, $91.2 million were residential mortgage loan originations and $49.3 million were residential mortgage loan purchases. Given the low interest rate environment, and consistent with our strategy to diversify our earning assets, we have focused on multi-family and commercial real estate mortgage lending and our business banking operations, with reduced emphasis on the origination and purchase of residential mortgage loans. Multi-family and commercial real estate mortgage loan originations declined for the three months ended March 31, 2016 compared to the three months ended 2015 despite our continued commitment to grow these portfolios, as we maintained our disciplined approach in this challenging lending environment. Purchases of securities totaled $354.4 million during the three months ended March 31, 2016 and $130.5 million during the three months ended March 31, 2015.

Our policies and procedures with respect to managing funding and liquidity risk are established to ensure our safe and sound operation in compliance with applicable bank regulatory requirements. Our liquidity management process is sufficient to meet our daily funding needs and cover both expected and unexpected deviations from normal daily operations. Processes are in place to appropriately identify, measure, monitor and control liquidity and funding risk. The primary tools we use for measuring and managing liquidity risk include cash flow projections, diversified funding sources, key risk indicators, stress testing, a cushion of liquid assets and an up to date contingency funding plan.

We maintain liquidity levels to meet our operational needs in the normal course of our business. The levels of our liquid assets during any given period are dependent on our operating, investing and financing activities. Cash and due from banks totaled $186.1 million at March 31, 2016 and $200.5 million at December 31, 2015. At March 31, 2016, we had $1.70 billion of borrowings with a weighted average interest rate of 0.81% maturing over the next 12 months. We have the flexibility to either repay or rollover these borrowings as they mature. Included in our borrowings are various obligations which, by their terms, may be called by the counterparty. At March 31, 2016, we had $1.95 billion of callable borrowings, of which $1.00 billion were contractually callable by the counterparty within the next 12 months and on a quarterly basis thereafter. We believe the potential for these borrowings to be called does not present a liquidity concern as they have above current market coupons and, as such, are not likely to be called absent a significant increase in market interest rates. In addition, to the extent such borrowings were to be called, we believe we can readily obtain replacement funding, although such funding may be at higher rates. At March 31, 2016, FHLB-NY advances totaled $2.20 billion, or 56% of total borrowings. We do not believe any of our borrowing counterparty concentrations represent a material risk to our liquidity. In addition, we had $765.0 million of certificates of deposit at March 31, 2016 with a weighted average interest rate of 0.68% maturing over the next 12 months. We believe we have the ability to retain or replace a significant portion of such deposits based on our pricing and historical experience.

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The following table details our borrowing and certificate of deposit maturities and their weighted average interest rates at March 31, 2016.



	Borrowings					Certificates of Deposit
				Weighted Average Rate				Weighted Average Rate

(Dollars in Millions)	Amount					Amount
Contractual Maturity:
12 months or less	$	1,700		0.81	%	$	765	0.68	%
13 to 36 months	650		(1)	4.03		520		1.05
37 to 60 months	1,550		(2)	3.58		511		1.53
Over 60 months	—			—		1		1.75
Total	$	3,900		2.45	%	$	1,797	1.03	%


(1)	Includes $400.0 million of borrowings, with a weighted average interest rate of 3.43%, which are callable by the counterparty within the next 3 months and on a quarterly basis thereafter.


(2)	Includes $600.0 million of borrowings, with a weighted average interest rate of 3.74%, which are callable by the counterparty within the next 12 months and on a quarterly basis thereafter, and $950.0 million of borrowings, with a weighted average interest rate of 3.47%, which are callable by the counterparty in 2017.

Through the Federal Reserve Bank of New York discount window we have the ability to borrow additional funds should the need arise on a short-term basis, primarily overnight. Our borrowing capacity through the discount window totaled approximately $521.2 million at March 31, 2016. In order to have the ability to borrow through the discount window, the Federal Reserve Bank of New York requires that collateral is pledged. In accordance with such requirements, at March 31, 2016 we had pledged as collateral with the Federal Reserve Bank of New York securities with an amortized cost of $167.7 million and commercial real estate mortgage loans with an unpaid principal balance of $899.9 million. We view the discount window as a secondary source of liquidity and, during the three months ended March 31, 2016, we did not utilize this source.

Through its membership in the FHLB-NY, the Bank has access to borrowings on an overnight and term basis to the extent that it has qualifying collateral in place at the FHLB-NY. At March 31, 2016, the Bank had residential mortgage loans pledged to the FHLB-NY sufficient to support additional borrowings of approximately $2.28 billion.

The Bank also has the ability to use its portfolio of unencumbered investment securities available for sale and held to maturity as collateral for borrowings from the Federal Reserve Bank of New York, the FHLB-NY and repurchase agreement counterparties. At March 31, 2016, the Bank had approximately $1.47 billion (amortized cost) of investment securities available to be pledged to support borrowings.

Additional sources of liquidity at the holding company level have included public and private issuances of debt and equity securities into the capital markets. Holding company debt obligations are included in other borrowings. We have a shelf registration statement on Form S-3 on file with the SEC that we renewed in the 2015 second quarter, which allows us to periodically offer and sell, from time to time, in one or more offerings, individually or in any combination, common stock, preferred stock, depositary shares, senior notes, subordinated notes, warrants to purchase common stock or preferred stock and units consisting of one or more of the foregoing. This shelf registration statement provides us with greater capital management flexibility and enables us to more readily access the capital markets in order to pursue growth opportunities that may become available to us in the future or should there be any changes in the regulatory environment that call for increased capital requirements. Although the shelf registration statement does not limit the amount of the foregoing items that we may offer and sell, our ability and any decision to do so is subject to market conditions and our capital needs. Our ability to continue to access the capital markets for additional

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financing at favorable terms may be limited by, among other things, market conditions, interest rates, our capital levels, Astoria Bank’s ability to pay dividends to Astoria Financial Corporation, our credit profile and ratings and our business model. In addition, pursuant to the terms of the Merger Agreement, we are limited in our ability to issue or sell our capital stock without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

We have registered 1,500,000 shares of our common stock under the Securities Act for offer and sale from time to time pursuant to the Astoria Financial Corporation Dividend Reinvestment and Stock Purchase Plan, or the Stock Purchase Plan, which allows our shareholders to automatically reinvest the cash dividend paid on all or a portion of their shares of our common stock into additional shares of our common stock and make optional cash purchases, up to $10,000 per month, of additional shares of our common stock, unless we grant a waiver permitting a higher amount of optional cash purchases. Shares of common stock may be purchased either directly from us from authorized but unissued shares or from treasury shares, or on the open market. During the three months ended March 31, 2016, 2,710 shares of our common stock were purchased pursuant to the dividend reinvestment provisions of the Stock Purchase Plan directly from us from treasury shares for net proceeds totaling $41,000.

Astoria Financial Corporation’s primary uses of funds include payment of dividends on common and preferred stock and payment of interest on its debt obligations. During the three months ended March 31, 2016, Astoria Financial Corporation paid dividends on common and preferred stock totaling $6.2 million. On March 17, 2016, our Board of Directors declared a quarterly cash dividend on the Series C Preferred Stock aggregating $2.2 million, or $16.25 per share, for the quarterly period from January 15, 2016 through and including April 14, 2016, which was paid on April 15, 2016 to stockholders of record as of March 31, 2016. On April 21, 2016, our Board of Directors declared a quarterly cash dividend of $0.04 per share on shares of our common stock payable on May 17, 2016 to stockholders of record as of May 6, 2016.

Our ability to pay dividends, service our debt obligations and repurchase common stock is dependent primarily upon receipt of capital distributions from Astoria Bank. Astoria Bank paid dividends to Astoria Financial Corporation totaling $18.7 million during the three months ended March 31, 2016. Since Astoria Bank is a federally chartered savings association, there are regulatory limits on its ability to make distributions to Astoria Financial Corporation. See Part I, Item 1, “Business - Regulation and Supervision - Limitations on Capital Distributions,” in our 2015 Annual Report on Form 10-K for further discussion of limitations on capital distributions from Astoria Bank. In addition, pursuant to the terms of the Merger Agreement, we may not pay quarterly cash dividends in excess of $0.04 per share of our common stock or repurchase shares of our common stock without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

See “Financial Condition” for further discussion of the changes in stockholders’ equity.

At March 31, 2016, our tangible common equity ratio, which represents common stockholders’ equity less goodwill divided by total assets less goodwill, was 9.21%. Pursuant to the Reform Act, in July 2013, the Agencies issued Final Capital Rules that subjected many savings and loan holding companies, including Astoria Financial Corporation, to consolidated capital requirements effective January 1, 2015. The Final Capital Rules also revised the quantity and quality of required minimum risk-based and leverage capital requirements, consistent with the Reform Act and the Basel III capital standards. For a more detailed description of these rules, see Part I, Item 1, “Business - Regulation and Supervision - Capital Requirements,” in our 2015 Annual Report on Form 10-K. At March 31, 2016, the capital levels of both Astoria Financial Corporation and Astoria Bank exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes and above

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the minimum levels required to satisfy the newly applicable capital Conservation Buffer imposed pursuant to the Reform Act.

At March 31, 2016, Astoria Financial Corporation's Tier 1 leverage capital ratio was 10.3532%, Common equity tier 1 risk-based capital ratio was 16.4815%, Tier 1 risk-based capital ratio was 17.9267% and Total risk-based capital ratio was 19.0376%, and Astoria Bank’s Tier 1 leverage capital ratio was 11.3726%, Common equity tier 1 risk-based and Tier 1 risk-based capital ratios were 19.6041% and Total risk-based capital ratio was 20.7180%. For additional information on the regulatory capital ratios of Astoria Financial Corporation and Astoria Bank at March 31, 2016, see Note 11 of Notes to Consolidated Financial Statements (Unaudited) in Part I, Item 1, "Financial Statements (Unaudited)."

Off-Balance Sheet Arrangements and Contractual Obligations

We are a party to financial instruments with off-balance sheet risk in the normal course of our business in order to meet the financing needs of our customers and in connection with our overall interest rate risk management strategy. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are either not recorded in the consolidated financial statements or are recorded in amounts that differ from the notional amounts. Such instruments primarily include lending commitments and lease commitments.

Lending commitments include commitments to originate and purchase loans and commitments to fund unused lines of credit. We also have commitments to fund loans held-for-sale and commitments to sell loans in connection with our mortgage banking activities which are considered derivative financial instruments. Commitments to sell loans totaled $23.5 million at March 31, 2016. The fair values of our mortgage banking derivative financial instruments are immaterial to our financial condition and results of operations.

The following table details our contractual obligations at March 31, 2016.



	Payments Due by Period
(In Thousands)	Total		Less than One Year		Over One to Three Years			Over Three to Five Years		More than Five Years
On-balance sheet contractual obligations:
Borrowings with original terms greater than three months	$	3,900,000	$	1,700,000		$	650,000	$	1,550,000		$	—
Off-balance sheet contractual obligations: (1)
Commitments to originate and purchase loans (2)	430,844		430,844			—		—			—
Commitments to fund unused lines of credit (3)	188,512		188,512			—		—			—
Total	$	4,519,356	$	2,319,356		$	650,000	$	1,550,000		$	—


(1)	Excludes contractual obligations related to operating lease commitments which have not changed significantly since December 31, 2015.


(2)	Includes commitments to originate loans held-for-sale of $18.0 million.


(3)	Includes commitments to fund commercial and industrial lines of credit of $110.2 million, home equity lines of credit of $44.6 million, and other consumer lines of credit of $33.7 million.

In addition to the contractual obligations previously discussed, we have liabilities for gross unrecognized tax benefits and interest and penalties related to uncertain tax positions which have not changed significantly from December 31, 2015 and are not included in the table above as the amounts and timing of their resolution cannot be estimated. For further information regarding these liabilities, see Note 11 of Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” in our 2015 Annual Report on Form 10-K. Similarly, we have an obligation related to our investments in affordable housing limited partnerships totaling $12.8 million at March 31, 2016 which is not included in the table above as the timing of funding installments, which are due on an "as needed" basis, currently projected over the next three

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years, cannot be estimated. We also have contingent liabilities related to assets sold with recourse and standby letters of credit which have not changed significantly from December 31, 2015.

For further information regarding our off-balance sheet arrangements and contractual obligations, see Part II, Item 7, “MD&A,” in our 2015 Annual Report on Form 10-K.

Comparison of Financial Condition as of March 31, 2016 and December 31, 2015 and Operating Results for the Three Months Ended March 31, 2016 and 2015

Financial Condition

Total assets declined $52.7 million to $15.02 billion at March 31, 2016, from $15.08 billion at December 31, 2015, primarily attributable to a net decline in our loan portfolio, partially offset by an increase in our securities portfolio. Loans receivable decreased $148.0 million to $11.01 billion at March 31, 2016, from $11.15 billion at December 31, 2015, and represented 73% of total assets at March 31, 2016. The decline in our mortgage loan portfolio reflects repayments of $455.2 million which were in excess of originations and purchases of $306.9 million during the three months ended March 31, 2016.

Our residential mortgage loan portfolio decreased $194.9 million to $5.82 billion at March 31, 2016, from $6.02 billion at December 31, 2015, and represented 53% of our total loan portfolio at March 31, 2016. Residential mortgage loan repayments continued to outpace our origination and purchase volume during the three months ended March 31, 2016, reflecting the reduced interest rate environment that has prevailed for a significant portion of 2015 and into 2016 and our reduced emphasis on the origination and purchase of residential mortgage loans for portfolio. Residential mortgage loan originations and purchases for portfolio totaled $89.5 million during the three months ended March 31, 2016, of which $60.8 million were originations and $28.7 million were purchases. During the three months ended March 31, 2016, the loan-to-value ratio of our residential mortgage loan originations and purchases for portfolio, at the time of origination or purchase, averaged approximately 59% and the loan amount averaged approximately $543,000.

Our multi-family mortgage loan portfolio increased $54.3 million and totaled $4.08 billion at March 31, 2016, from $4.02 billion at December 31, 2015, and represented 38% of our total loan portfolio at March 31, 2016. Our commercial real estate mortgage loan portfolio decreased $8.6 million to $810.9 million at March 31, 2016 compared to $819.5 million at December 31, 2015 and represented 7% of our total loan portfolio at March 31, 2016. Multi-family and commercial real estate loan originations totaled $217.4 million during the three months ended March 31, 2016. Our levels of originations reflect our continued commitment to grow these portfolios while maintaining our disciplined approach. During the three months ended March 31, 2016, our multi-family and commercial real estate mortgage loan originations reflected loan balances averaging approximately $2.7 million with a weighted average loan-to-value ratio, at the time of origination, of approximately 42% and a weighted average debt service coverage ratio of approximately 1.41.

Our securities portfolio increased $118.8 million to $2.83 billion at March 31, 2016 compared to $2.71 billion at December 31, 2015 and represented 19% of total assets at March 31, 2016. Purchases totaling $354.4 million were in excess of repayments of $217.6 million and sales of $23.0 million during the three months ended March 31, 2016. At March 31, 2016, our securities portfolio was comprised primarily of fixed rate REMIC and CMO securities which had an amortized cost of $2.22 billion, a weighted average current coupon of 2.77%, a weighted average collateral coupon of 4.04% and a weighted average life of 3.9 years.

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Total liabilities declined $71.0 million to $13.34 billion at March 31, 2016, from $13.41 billion at December 31, 2015, primarily due to declines in deposits and borrowings, net. Deposits totaled $9.05 billion at March 31, 2016, or 68% of total liabilities, a decline of $54.5 million compared to $9.11 billion at December 31, 2015. While total deposits declined, primarily as a result of a decrease of $197.1 million in certificates of deposit, core deposits increased $142.6 million. At March 31, 2016, core deposits totaled $7.25 billion and represented 80% of total deposits, up from 78% at December 31, 2015. This reflects our efforts to reposition the liability mix of our balance sheet. The net increase in core deposits at March 31, 2016, compared to December 31, 2015, primarily reflected an increase of $74.9 million in money market accounts to $2.64 billion and an increase of $68.8 million in NOW and demand deposit accounts to $2.48 billion at March 31, 2016. The net increase in core deposits during the three months ended March 31, 2016 reflects our efforts to grow our core deposits, including our efforts to expand our business banking customer base, as well as customers' preference for the liquidity these types of deposits provide.

Total borrowings, net, decreased $64.9 million to $3.90 billion at March 31, 2016, from $3.96 billion at December 31, 2015. The decrease in borrowings was due to a decrease of $80.0 million in federal funds purchased, partially offset by a $15.0 million increase in FHLB-NY advances.

Stockholders' equity increased $18.4 million to $1.68 billion at March 31, 2016, from $1.66 billion at December 31, 2015. The increase in stockholders’ equity was primarily due to net income of $18.6 million, a decrease in accumulated other comprehensive loss of $4.4 million, stock-based compensation of $1.6 million and sale of treasury stock of $41,000, partially offset by dividends on common and preferred stock totaling $6.2 million.

Results of Operations

General

Net income available to common shareholders for the three months ended March 31, 2016 decreased $742,000 to $16.4 million, or $0.16 diluted EPS, compared to $17.1 million, or $0.17 diluted EPS, for the three months ended March 31, 2015. The decrease in net income available to common shareholders for the 2016 first quarter compared to the 2015 first quarter was due to decreases in net interest income and non-interest income, partially offset by an increase in the provision for loan losses credited to operations.

Return on average common stockholders’ equity decreased to 4.25% for the three months ended March 31, 2016, compared to 4.69% for the three months ended March 31, 2015. Return on average tangible common stockholders’ equity, which represents average common stockholders’ equity less average goodwill, decreased to 4.82% for the three months ended March 31, 2016, compared to 5.37% for the three months ended March 31, 2015. The decreases in the returns on average common stockholders’ equity and average tangible common stockholders’ equity were due to the decrease in net income available to common shareholders, coupled with the increase in average common stockholders’ equity for the three months ended March 31, 2016, compared to the three months ended March 31, 2015. Return on average assets decreased to 0.49% for the three months ended March 31, 2016, compared to 0.50% for the three months ended March 31, 2015, reflecting the decrease in net income, partially offset by a reduction in average assets, for the 2016 first quarter, compared to the 2015 first quarter.

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Net Interest Income

Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends primarily upon the volume of interest-earning assets and interest-bearing liabilities and the corresponding interest rates earned or paid. Our net interest income is significantly impacted by changes in interest rates and market yield curves and their related impact on cash flows. See Part I, Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” for further discussion of the potential impact of changes in interest rates on our results of operations.

Net interest income decreased $2.4 million to $83.3 million for the three months ended March 31, 2016, compared to $85.7 million for the three months ended March 31, 2015, reflecting an overall decrease in our balance sheet, partially offset by an increase in the net interest margin. The net interest rate spread increased two basis points to 2.28% for the three months ended March 31, 2016, from 2.26% for the three months ended March 31, 2015. The net interest margin increased two basis points to 2.36% for the three months ended March 31, 2016, from 2.34% for the three months ended March 31, 2015. The decrease in net interest income for the 2016 first quarter, compared to the 2015 first quarter, reflected a decline in interest income, partially offset by a decline in interest expense. The decrease in interest income for the 2016 first quarter, compared to the 2015 first quarter, reflected a significant decline in the average balance of our residential mortgage loan portfolio as well as a decline in the average yield of multi-family and commercial real estate mortgage loans, partially offset by an increase in the average balances of mortgage-backed and other securities. The decrease in interest expense for the 2016 first quarter, compared to the same period a year ago, was primarily due to a decline in the average balance and average cost of our certificates of deposit, coupled with a decrease in the average balance of borrowings, partially offset by an increase in the average cost of borrowings. The average balance of net interest-earning assets increased $61.7 million to $1.14 billion for the three months ended March 31, 2016, from $1.08 billion for the three months ended March 31, 2015.

The changes in average interest-earning assets and interest-bearing liabilities and their related yields and costs are discussed in greater detail under “Interest Income” and “Interest Expense.”

Analysis of Net Interest Income

The following table sets forth certain information about the average balances of our assets and liabilities and their related yields and costs for the periods indicated. Average yields are derived by dividing income by the average balance of the related assets and average costs are derived by dividing expense by the average balance of the related liabilities, for the periods shown. Average balances are derived from average daily balances. The yields and costs include amortization of fees, costs, premiums and discounts which are considered adjustments to interest rates.

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	For the Three Months Ended March 31,
	2016							2015
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost
					(Annualized)							(Annualized)
Assets:
Interest-earning assets:
Mortgage loans (1):
Residential	$	5,961,860	$	47,375		3.18	%	$	6,817,565	$	53,962		3.17	%
Multi-family and commercial real estate	4,878,436		46,805			3.84		4,832,043		47,492			3.93
Consumer and other loans (1)	253,518		2,372			3.74		255,392		2,190			3.43
Total loans	11,093,814		96,552			3.48		11,905,000		103,644			3.48
Mortgage-backed and other securities (2)	2,729,321		16,904			2.48		2,504,112		15,070			2.41
Interest-earning cash accounts	162,233		120			0.30		130,744		89			0.27
FHLB-NY stock	132,896		1,421			4.28		144,495		1,522			4.21
Total interest-earning assets	14,118,264		114,997			3.26		14,684,351		120,325			3.28
Goodwill	185,151							185,151
Other non-interest-earning assets	743,391							721,508
Total assets	$	15,046,806						$	15,591,010

Liabilities and stockholders’ equity:
Interest-bearing liabilities:
NOW and demand deposit (3)	$	2,375,285	$	195		0.03		$	2,208,170	$	189		0.03
Money market	2,608,009		1,765			0.27		2,378,929		1,555			0.26
Savings	2,125,860		265			0.05		2,230,405		275			0.05
Total core deposits	7,109,154		2,225			0.13		6,817,504		2,019			0.12
Certificates of deposit	1,904,346		5,237			1.10		2,550,291		8,710			1.37
Total deposits	9,013,500		7,462			0.33		9,367,795		10,729			0.46
Borrowings	3,962,709		24,283			2.45		4,236,228		23,875			2.25
Total interest-bearing liabilities	12,976,209		31,745			0.98		13,604,023		34,604			1.02
Non-interest-bearing liabilities	398,179							397,005
Total liabilities	13,374,388							14,001,028
Stockholders’ equity	1,672,418							1,589,982
Total liabilities and stockholders’ equity	$	15,046,806						$	15,591,010

Net interest income/ net interest rate spread (4)			$	83,252		2.28	%			$	85,721		2.26	%

Net interest-earning assets/ net interest margin (5)	$	1,142,055				2.36	%	$	1,080,328				2.34	%

Ratio of interest-earning assets to interest-bearing liabilities	1.09 x							1.08 x

__________________________________


(1)	Mortgage loans and consumer and other loans include loans held-for-sale and non-performing loans and exclude the allowance for loan losses.


(2)	Securities available-for-sale are included at average amortized cost.


(3)	NOW and demand deposit accounts include non-interest bearing accounts with an average balance of $1.00 billion for the three months ending March 31, 2016 and $883.4 million for the three months ended March 31, 2015.


(4)	Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.


(5)	Net interest margin represents net interest income divided by average interest-earning assets.

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Rate/Volume Analysis

The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to (1) the changes attributable to changes in volume (changes in volume multiplied by prior rate), (2) the changes attributable to changes in rate (changes in rate multiplied by prior volume), and (3) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.



	Increase (Decrease) for the Three Months ended March 31, 2016 Compared to the Three Months ended March 31, 2015
(In Thousands)	Volume			Rate			Net
Interest-earning assets:
Mortgage loans:
Residential	$	(6,758	)	$	171		$	(6,587	)
Multi-family and commercial real estate	439			(1,126		)	(687		)
Consumer and other loans	(16		)	198			182
Mortgage-backed and other securities	1,386			448			1,834
Interest-earning cash accounts	21			10			31
FHLB-NY stock	(125		)	24			(101		)
Total	(5,053		)	(275		)	(5,328		)
Interest-bearing liabilities:
NOW and demand deposit	6			—			6
Money market	150			60			210
Savings	(10		)	—			(10		)
Certificates of deposit	(1,953		)	(1,520		)	(3,473		)
Borrowings	(1,082		)	1,490			408
Total	(2,889		)	30			(2,859		)
Net change in net interest income	$	(2,164	)	$	(305	)	$	(2,469	)

Interest Income

Interest income decreased $5.3 million to $115.0 million for the three months ended March 31, 2016, from $120.3 million for the three months ended March 31, 2015, due to a decrease of $566.1 million in the average balance of interest-earning assets to $14.12 billion for the three months ended March 31, 2016, from $14.68 billion for the three months ended March 31, 2015, coupled with a decrease in the average yield on interest-earning assets to 3.26% for the three months ended March 31, 2016, from 3.28% for the three months ended March 31, 2015. The decrease in the average balance of interest-earning assets was primarily due to a significant decline in the average balance of residential mortgage loans, partially offset by increases in the average balances of mortgage-backed and other securities and multi-family and commercial real estate mortgage loans. The decrease in the average yield on interest-earning assets was primarily due to a lower average yield on multi-family and commercial real estate mortgage loans.

Interest income on residential mortgage loans decreased $6.6 million to $47.4 million for the three months ended March 31, 2016, from $54.0 million for the three months ended March 31, 2015, due to a decrease of $855.7 million in the average balance to $5.96 billion for the three months ended March 31, 2016, from $6.82 billion for the three months ended March 31, 2015, partially offset by a slight increase in the average yield to 3.18% for the three months ended March 31, 2016, from 3.17% for the three months ended March 31,

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2015. The decrease in the average balance of residential mortgage loans reflected the continued decline of this portfolio as repayments outpaced our originations over the past year. The increase in the average yield was primarily due to the impact of the upward repricing of our ARM loans, reflecting slightly higher short-term market interest rates, and the decrease in net premium and deferred loan origination cost amortization to $2.1 million for the three months ended March 31, 2016, from $2.6 million for the three months ended March 31, 2015, offset by new originations at lower interest rates than the interest rates on loans repaid over the past year.

Interest income on multi-family and commercial real estate mortgage loans decreased $687,000 to $46.8 million for the three months ended March 31, 2016, from $47.5 million for the three months ended March 31, 2015, due to a decrease in the average yield to 3.84% for the three months ended March 31, 2016, from 3.93% for the three months ended March 31, 2015, partially offset by an increase of $46.4 million in the average balance to $4.88 billion for the three months ended March 31, 2016, from $4.83 billion for the three months ended March 31, 2015. The increase in the average balance of multi-family and commercial real estate loans was attributable to originations of such loans which exceeded repayments over the past year. The decrease in the average yield was primarily due to new originations at interest rates below the weighted average interest rate of the portfolio as well as the interest rates on loans repaid and lower prepayment penalties collected in the three months ended March 31, 2016 compared to the three months ended March 31, 2015. Prepayment penalties decreased to $2.0 million for the three months ended March 31, 2016, compared to $2.2 million for the three months ended March 31, 2015.

Interest income on mortgage-backed and other securities increased $1.8 million to $16.9 million for the three months ended March 31, 2016, from $15.1 million for the three months ended March 31, 2015, primarily due to an increase of $225.2 million in the average balance of the portfolio to $2.73 billion for the three months ended March 31, 2016, from $2.50 billion for the three months ended March 31, 2015, reflecting securities purchases over the past year in excess of repayments and sales.

Interest Expense

Interest expense decreased $2.9 million to $31.7 million for the three months ended March 31, 2016, from $34.6 million for the three months ended March 31, 2015, due to a decrease of $627.8 million in the average balance of interest-bearing liabilities to $12.98 billion for the three months ended March 31, 2016, from $13.60 billion for the three months ended March 31, 2015, coupled with a decrease in the average cost of interest-bearing liabilities to 0.98% for the three months ended March 31, 2016, from 1.02% for the three months ended March 31, 2015. The decrease in the average balance of interest-bearing liabilities is primarily due to the decrease in the average balance of certificates of deposit and borrowings. The decrease in the average cost of interest-bearing liabilities primarily reflected decreases in the average cost of certificates of deposit, partially offset by an increase in the average cost of borrowings.

Interest expense on total deposits decreased $3.2 million to $7.5 million for the three months ended March 31, 2016, from $10.7 million for the three months ended March 31, 2015, due to a decrease of $354.3 million in the average balance of total deposits to $9.01 billion for the three months ended March 31, 2016, from $9.37 billion for the three months ended March 31, 2015, coupled with a decrease in the average cost to 0.33% for the three months ended March 31, 2016, from 0.46% for the three months ended March 31, 2015. The decreases in the average balance and average cost of total deposits was primarily due to decreases in the average balance and average cost of certificates of deposit, partially offset by an increase in the average balance of money market accounts. The decrease in the average balance of certificates of deposit and the increase in the average balance of money market accounts were reflective of our efforts to reposition the liability mix of our balance sheet to increase our core deposits and reduce certificates of deposit.

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Interest expense on certificates of deposit decreased $3.5 million to $5.2 million for the three months ended March 31, 2016, from $8.7 million for the three months ended March 31, 2015, due to a decrease of $645.9 million in the average balance, coupled with a decrease in the average cost to 1.10% for the three months ended March 31, 2016, from 1.37% for the three months ended March 31, 2015. The decrease in the average cost of certificates of deposit reflects the impact of certificates of deposit at higher interest rates maturing and being replaced at lower interest rates. During the three months ended March 31, 2016, $464.0 million of certificates of deposit, with a weighted average interest rate of 1.25% and a weighted average maturity at inception of 32 months, matured and $261.7 million of certificates of deposit were issued or repriced, with a weighted average interest rate of 0.43% and a weighted average maturity at inception of 20 months.

Interest expense on borrowings increased $408,000 to $24.3 million for the three months ended March 31, 2016, from $23.9 million for the three months ended March 31, 2015, due to an increase in the average cost to 2.45% for the three months ended March 31, 2016, from 2.25% for the three months ended March 31, 2015, partially offset by a decrease of $273.5 million in the average balance to $3.96 billion for the three months ended March 31, 2016, from $4.24 billion for the three months ended March 31, 2015. The increase in the average cost of borrowings for the 2016 first quarter compared to the 2015 first quarter was primarily due to an increase in short term interest rates, resulting from the increase in the federal funds rate in December 2015.

Provision for Loan Losses Credited to Operations

We review our allowance for loan losses on a quarterly basis. Material factors considered during our quarterly review are the composition and size of our loan portfolio, the levels and composition of delinquent and non-performing loans, our loss history and our evaluation of the housing and real estate markets and the current economic environment. We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. We are impacted by both national and regional economic factors, with residential mortgage loans from various regions of the country held in our portfolio and our multi-family and commercial real estate mortgage loan portfolio concentrated in the New York metropolitan area.

We recorded a provision for loan losses credited to operations of $3.1 million for the three months ended March 31, 2016, compared to a provision for loan losses credited to operations of $343,000 for the three months ended March 31, 2015. We had net loan charge-offs of $673,000 for the three months ended March 31, 2016, compared to net loan charge-offs of $757,000 for the three months ended March 31, 2015. Given the overall decline in our loan portfolio from December 31, 2015, coupled with reduced losses reflected through net charge-offs, our allowance for loan losses decreased to $94.2 million at March 31, 2016, representing 0.86% of total loans, compared to $98.0 million, or 0.88% of total loans, at December 31, 2015. We continue to maintain our allowance for loan losses at a level which we believe is appropriate given the continued improvement in our loan loss experience, as well as reductions in the balances of certain loan classes we believe bear higher risk, such as residential interest-only loans, residential mortgage loans originated prior to 2008 and multi-family and commercial real estate mortgage loans originated prior to 2011, the quality of our loan originations and the contraction of the overall loan portfolio.

For further discussion of the methodology used to determine the allowance for loan losses, see “Critical Accounting Policies-Allowance for Loan Losses” and for further discussion of our loan portfolio composition and non-performing loans, see “Asset Quality” and Note 4 of Notes to Consolidated Financial Statements (Unaudited) in Part I, Item 1, “Financial Statements (Unaudited).”

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Non-Interest Income

Non-interest income decreased $1.5 million to $11.4 million for the three months ended March 31, 2016, from $12.9 million for the three months ended March 31, 2015, primarily due to decreases in customer service fees and mortgage banking (loss) income, net.

Customer service fees decreased $1.2 million to $7.0 million for the three months ended March 31, 2016, from $8.2 million for the three months ended March 31, 2015, primarily due to the discontinuation of one of our deposit programs in the middle of the third quarter of 2015 and lower commissions on sales of annuity and insurance products and checking account charges, including overdraft charges.

Mortgage banking (loss) income, net, which includes loan servicing fees, net gain on sales of loans, amortization of MSR and valuation allowance adjustments for the impairment of MSR valuation, decreased $364,000 to net loss of $37,000 for the three months ended March 31, 2016, from net income of $327,000 for the three months ended March 31, 2015. This decrease was primarily due to a higher provision for the MSR valuation in the 2016 first quarter compared to the 2015 first quarter. The provision recorded in 2016 was reflective of a decrease in the weighted average discount rate along with a decrease in the estimated weighted average life of the servicing portfolio, partially offset by an increase in the weighted average constant prepayment rate on mortgages at March 31, 2016, compared to December 31, 2015, primarily attributable to the decrease in the U.S. Treasury rates in the 2016 first quarter.

Non-Interest Expense

Non-interest expense decreased $590,000 to $69.5 million for the three months ended March 31, 2016, from $70.1 million for the three months ended March 31, 2015, reflecting decreases in other non-interest expense, advertising expense and federal deposit insurance premium expense, which were largely offset by an increase in compensation and benefits expense. Our percentage of general and administrative expense to average assets, annualized, was 1.85% for the three months ended March 31, 2016, compared to 1.80% for the three months ended March 31, 2015.

Compensation and benefits expense increased $2.0 million to $38.3 million for the three months ended March 31, 2016, from $36.3 million for the three months ended March 31, 2015, reflective, in part, of growth in our business banking and certain risk management and systems departments. The increases included higher salaries, pension and other postretirement benefit costs and employer matching contributions for the 401(k) plan for the three months ended March 31, 2016, compared to the three months ended March 31, 2015. Net periodic cost for our defined benefit pension plans and other postretirement benefit plan totaled $927,000 for the three months ended March 31, 2016, compared to a net periodic cost of $426,000 for the three months ended March 31, 2015. This increase was primarily attributable to an increase in recognized net actuarial loss.

Federal deposit insurance premium expense decreased $671,000 to $3.5 million for the three months ended March 31, 2016, compared to $4.2 million for the three months ended March 31, 2015, primarily due to a reduction in our assessment rate. Advertising expense decreased $811,000 to $1.5 million for the three months ended March 31, 2016, compared to $2.3 million for the three months ended March 31, 2015. Other non-interest expense decreased $813,000 to $6.9 million for the three months ended March 31, 2016, compared to $7.7 million for the three months ended March 31, 2015, primarily due to a decline in other REO related expenses, checking account expense related to the customer value program discontinued in 2015, and consulting fees expense.

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Income Tax Expense

For the three months ended March 31, 2016, income tax expense totaled $9.7 million, representing an effective tax rate of 34.3%. This compares to income tax expense of $9.6 million for the three months ended March 31, 2015, representing an effective tax rate of 33.2%.

Asset Quality

One of our key operating objectives has been and continues to be to maintain a high level of asset quality. We continue to employ sound underwriting standards for new loan originations. Through a variety of strategies, including, but not limited to, collection efforts and the marketing of delinquent and non-performing loans and foreclosed properties, we have been proactive in addressing problem and non-performing assets which, in turn, has helped to maintain the strength of our financial condition.

As a result of our continuing efforts to reposition the asset mix of our balance sheet, we have experienced increases in our multi-family and commercial real estate mortgage loan portfolio and declines in our residential mortgage loan portfolio over the past few years. Our multi-family mortgage loan portfolio increased to represent 38% of our total loan portfolio at March 31, 2016, compared to 36% at December 31, 2015. In contrast, our residential mortgage loan portfolio decreased to represent 53% of our total loan portfolio at March 31, 2016, compared to 54% at December 31, 2015. At March 31, 2016 and December 31, 2015, our commercial real estate mortgage loan portfolio represented 7% of our total loan portfolio and the remaining 2% of our total loan portfolio was comprised of consumer and other loans.

We continue to adhere to prudent underwriting standards. We underwrite our residential mortgage loans primarily based upon our evaluation of the borrower’s ability to pay. We do not originate negative amortization loans, payment option loans or other loans with short-term interest-only periods. Additionally, we do not originate one-year ARM loans. The ARM loans in our portfolio which currently reprice annually represent hybrid ARM loans (interest-only and amortizing) which have passed their initial fixed rate period. Interest-only loans in our portfolio require the borrower to pay interest only during the first ten years of the loan term. After the tenth anniversary of the loan, principal and interest payments are required to amortize the loan over the remaining loan term. During the 2010 third quarter, we stopped offering interest-only loans. At March 31, 2016, $1.41 billion of residential mortgage loans originated in prior years as interest-only loans were included in our portfolio of amortizing residential mortgage loans as a result of a refinance with us or through the conversion to amortizing loans at the end of their initial interest-only period, of which $115.7 million were refinanced or converted to amortizing loans during the three months ended March 31, 2016. Non-performing amortizing residential mortgage loans at March 31, 2016 included $70.1 million of loans originated as interest-only loans that are amortizing as a result of a refinance with us or through the conversion to amortizing at the end of their initial interest-only period. Reduced documentation loans in our portfolio are comprised primarily of SIFA (stated income, full asset) loans. To a lesser extent, reduced documentation loans in our portfolio also include SISA (stated income, stated asset) loans. During the 2007 fourth quarter, we stopped offering reduced documentation loans.

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The following table provides further details on the composition of our residential mortgage loan portfolio in dollar amounts and percentages of the portfolio at the dates indicated.



	At March 31, 2016				At December 31, 2015
(Dollars in Thousands)	Amount		Percent of Total		Amount		Percent of Total
Residential mortgage loans:
Full documentation interest-only (1)	$	380,872	6.54	%	$	432,288	7.19	%
Full documentation amortizing	4,587,250		78.82		4,697,966		78.10
Reduced documentation interest-only (1)(2)	235,711		4.05		303,231		5.04
Reduced documentation amortizing (2)	616,672		10.59		581,930		9.67
Total residential mortgage loans	$	5,820,505	100.00	%	$	6,015,415	100.00	%


(1)	Includes interest-only hybrid ARM loans originated prior to 2007 which were underwritten at the initial note rate, which may have been a discounted rate, totaling $282.1 million at March 31, 2016 and $388.0 million at December 31, 2015.


(2)	Includes SISA loans totaling $130.2 million at March 31, 2016 and $135.7 million at December 31, 2015.

Non-Performing Assets

The following table sets forth information regarding non-performing assets at the dates indicated.



(Dollars in Thousands)	At March 31, 2016				At December 31, 2015
Non-performing loans (1) (2):
Mortgage loans:
Residential		$	130,779			$	120,336
Multi-family		8,360				6,833
Commercial real estate		4,914				3,939
Consumer and other loans		6,169				7,108
Total non-performing loans		150,222				138,216
REO, net (3)		12,691				19,798
Total non-performing assets		$	162,913			$	158,014
Non-performing loans to total loans		1.37		%		1.24		%
Non-performing loans to total assets		1.00				0.92
Non-performing assets to total assets		1.08				1.05
Allowance for loan losses to non-performing loans		62.71				70.90
Allowance for loan losses to total loans		0.86				0.88

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(1)	Non-performing loans, substantially all of which are non-accrual loans, included loans modified in a TDR totaling $59.2 million at March 31, 2016 and $61.0 million at December 31, 2015. Non-performing loans exclude loans held-for-sale and loans which have been modified in a TDR that have been returned to accrual status.


(2)	Includes mortgage loans 90 days or more past due, primarily as to their maturity date but not their interest due, and still accruing interest totaling $3.2 million at March 31, 2016 and $332,000 at December 31, 2015.


(3)	At March 31, 2016, REO, all of which were residential properties, is net of a valuation allowance of $889,500. At December 31, 2015, REO is net of a valuation allowance of $1.3 million and included residential properties with a carrying value of $17.8 million.

Total non-performing assets increased $4.9 million to $162.9 million at March 31, 2016 compared to $158.0 million at December 31, 2015, due to an increase in non-performing loans, partially offset by a decrease in REO, net. The ratio of non-performing assets to total assets increased to 1.08% at March 31, 2016, compared to 1.05% at December 31, 2015, primarily due to the increase in non-performing assets.

Non-performing loans, which are comprised primarily of mortgage loans and exclude loans held-for-sale, increased $12.0 million to $150.2 million at March 31, 2016, compared to $138.2 million at December 31, 2015. The ratio of non-performing loans to total loans was 1.37% at March 31, 2016, compared to 1.24% at December 31, 2015. The increase in non-performing loans at March 31, 2016 compared to December 31, 2015 was primarily attributable to an increase in non-performing residential mortgage loans, comprised

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primarily of loans recently converted from interest-only to amortizing, as well as, to a lesser degree, an increase in non-performing multi-family and commercial real estate mortgage loans. The changes in non-performing loans during any period are taken into account when determining the allowance for loan losses because the allowance coverage percentages related to our non-performing loans are generally higher than the allowance coverage percentages related to our performing loans. In evaluating our allowance coverage percentages for non-performing loans, we consider our aggregate historical loss experience with respect to the ultimate disposition of the underlying collateral. REO, net, decreased $7.1 million to $12.7 million at March 31, 2016, compared to $19.8 million at December 31, 2015, reflecting an excess of the volume of REO sold over the volume of loans that shifted from non-performing delinquent loans to REO through the completion of the foreclosure process during the three months ended March 31, 2016.

We may agree, in certain instances, to modify the contractual terms of a borrower’s loan. In cases where such modifications represent a concession to a borrower experiencing financial difficulty, the modification is considered a TDR. Modifications as a result of a TDR may include, but are not limited to, interest rate modifications, payment deferrals, restructuring of payments to interest-only from amortizing and/or extensions of maturity dates. Modifications which result in insignificant payment delays and payment shortfalls are generally not classified as a TDR. Residential mortgage loans discharged in a Chapter 7 bankruptcy filing are also reported as loans modified in a TDR as relief granted by a court is also viewed as a concession to the borrower in the loan agreement. Loans modified in a TDR are individually classified as impaired and are initially placed on non-accrual status regardless of their delinquency status and reported as non-performing loans. Loans modified in a TDR which are included in non-performing loans totaled $59.2 million at March 31, 2016 and $61.0 million at December 31, 2015, of which $42.4 million at March 31, 2016 and $47.6 million at December 31, 2015 were current or less than 90 days past due. Loans modified in a TDR remain as non-performing loans in non-accrual status until we determine that future collection of principal and interest is reasonably assured. Where we have agreed to modify the contractual terms of a borrower’s loan, we require the borrower to demonstrate performance according to the restructured terms, generally for a period of at least six months, prior to returning the loan to accrual status. Loans modified in a TDR which have been returned to accrual status are excluded from non-performing loans, but remain classified as impaired. Restructured accruing loans totaled $95.9 million at March 31, 2016 and $101.8 million at December 31, 2015.

We discontinue accruing interest on loans when they become 90 days past due as to their payment due date and at the time a loan is deemed a TDR. We may also discontinue accruing interest on certain other loans because of deterioration in financial or other conditions of the borrower. In addition, we reverse all previously accrued and uncollected interest through a charge to interest income. While loans are in non-accrual status, interest due is monitored and, presuming we deem the remaining recorded investment in the loan to be fully collectible, income is recognized only to the extent cash is received until a return to accrual status is warranted. In some circumstances, we may continue to accrue interest on mortgage loans 90 days or more past due, primarily as to their maturity date but not their interest due. In other cases, we may defer recognition of income until the principal balance has been recovered. If all non-accrual loans at March 31, 2016 and 2015 had been performing in accordance with their original terms, we would have recorded interest income, with respect to such loans, of $1.5 million for the three months ended March 31, 2016 and $1.3 million for the three months ended March 31, 2015. Actual payments recorded as interest income, with respect to such loans, totaled $607,000 for both the three months ended March 31, 2016 and and $691,000 for the three months ended March 31, 2015.

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In addition to non-performing loans, we had $117.1 million of potential problem loans at March 31, 2016, including $75.1 million of residential mortgage loans and $41.8 million of multi-family and commercial real estate mortgage loans, compared to $131.5 million of potential problem loans at December 31, 2015, including $80.1 million of residential mortgage loans and $50.9 million of multi-family and commercial real estate mortgage loans. Such loans include loans 60-89 days past due and accruing interest and certain other internally adversely classified loans.

Non-performing residential mortgage loans continue to include a greater concentration of reduced documentation loans as compared to the entire residential mortgage loan portfolio. Reduced documentation loans represented only 15% of the residential mortgage loan portfolio, yet represented 49% of non-performing residential mortgage loans at March 31, 2016. The following table provides further details on the composition of our non-performing residential mortgage loans in dollar amounts and percentages of the portfolio, at the dates indicated.



	At March 31, 2016				At December 31, 2015
(Dollars in Thousands)	Amount		Percent of Total		Amount		Percent of Total
Non-performing residential mortgage loans:
Full documentation interest-only	$	19,256	14.72	%	$	18,375	15.27	%
Full documentation amortizing	47,185		36.08		44,529		37.01
Reduced documentation interest-only	24,165		18.48		27,572		22.91
Reduced documentation amortizing	40,173		30.72		29,860		24.81
Total non-performing residential mortgage loans (1)	$	130,779	100.00	%	$	120,336	100.00	%


(1)	Includes $41.1 million of loans less than 90 days past due at March 31, 2016, of which $33.8 million were current, and includes $46.5 million of loans less than 90 days past due at December 31, 2015, of which $37.7 million were current.

The following table provides details on the geographic composition of both our total and non-performing residential mortgage loans at March 31, 2016.



	Residential Mortgage Loans At March 31, 2016
(Dollars in Millions)	Total Loans			Percent of Total Loans			Total Non-Performing Loans (1)			Percent of Total Non-Performing Loans			Non-Performing Loans as Percent of State Totals
State:
New York		$	1,767.7		30.4	%		$	13.9		10.6	%		0.79	%
Connecticut		568.8			9.8			14.4			11.0			2.53
Massachusetts		484.0			8.3			3.9			3.0			0.81
Illinois		475.6			8.2			16.5			12.6			3.47
Virginia		450.3			7.7			17.6			13.5			3.91
New Jersey		418.7			7.2			24.8			19.0			5.92
Maryland		379.8			6.5			18.5			14.1			4.87
California		311.1			5.3			10.0			7.6			3.21
Washington		198.5			3.4			—			—			—
Texas		143.1			2.5			—			—			—
All other states (2)(3)		622.9			10.7			11.2			8.6			1.80
Total		$	5,820.5		100.0	%		$	130.8		100.0	%		2.25	%


(1)	Includes $41.1 million of loans which were current or less than 90 days past due.


(2)	Includes 25 states and Washington, D.C.


(3)	Includes Florida with $99.3 million of total loans, of which $3.0 million were non-performing loans.

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At March 31, 2016, substantially all of our multi-family and commercial real estate mortgage loans and non-performing multi-family and commercial real estate mortgage loans were secured by properties located in the New York metropolitan area.

Delinquent Loans

The following table shows a comparison of delinquent loans at the dates indicated. Delinquent loans are reported based on the number of days the loan payments are past due.



		30-59 Days Past Due					60-89 Days Past Due					90 Days or More Past Due
(Dollars in Thousands)	Number of Loans		Amount			Number of Loans		Amount			Number of Loans		Amount
At March 31, 2016:
Mortgage loans:
Residential		217	$	64,665			61	$	19,224			277	$	89,635
Multi-family		36	7,800				9	2,992				10	2,339
Commercial real estate		3	1,321				3	859				3	2,824
Consumer and other loans		34	1,259				11	125				50	6,169
Total delinquent loans		290	$	75,045			84	$	23,200			340	$	100,967
Delinquent loans to total loans			0.68		%			0.21		%			0.92		%

At December 31, 2015:
Mortgage loans:
Residential		270	$	84,841			68	$	20,965			244	$	73,833
Multi-family		20	2,387				11	2,692				14	2,441
Commercial real estate		2	487				2	1,689				1	572
Consumer and other loans		76	2,358				22	502				50	7,108
Total delinquent loans		368	$	90,073			103	$	25,848			309	$	83,954
Delinquent loans to total loans			0.81		%			0.23		%			0.75		%

Delinquent loans totaled $199.2 million at March 31, 2016, a decrease of $663,000 compared to $199.9 million at December 31, 2015. The decrease in total delinquent loans at March 31, 2016 compared to December 31, 2015 includes a decrease of $6.1 million in delinquent residential mortgage loans primarily due to a decrease in loans which were 30-89 days past due, partially offset by an increase in loans which were 90 days or more past due. The decrease in delinquent residential mortgage loans was partially offset by an increase of $5.6 million in delinquent multi-family mortgage loans due primarily to an increase in loans which were 30-59 days past due.

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Allowance for Loan Losses

The following table summarizes activity in the allowance for loan losses.



(In Thousands)	For the Three Months Ended March 31, 2016
Balance at January 1, 2016		$	98,000
Provision credited to operations		(3,127		)
Charge-offs:
Residential		(1,665		)
Multi-family		(310		)
Consumer and other loans		(765		)
Total charge-offs		(2,740		)
Recoveries:
Residential		954
Multi-family		1,043
Consumer and other loans		70
Total recoveries		2,067
Net charge-offs		(673		)
Balance at March 31, 2016		$	94,200

While ratio analyses are used as a supplemental tool for evaluating the overall reasonableness of the allowance for loan losses, the adequacy of the allowance for loan losses is ultimately determined by the actual losses and charges recognized in the portfolio. We update our loss analyses quarterly to ensure that our allowance coverage percentages are adequate and the overall allowance for loan losses is our best estimate of loss as of a particular point in time. Our 2016 first quarter analysis of loss severity on residential mortgage loans, defined as the ratio of net write-downs taken through disposition of the asset (typically the sale of REO or a short sale) to the loan’s original principal balance, indicated an average loss severity of approximately 27%, unchanged from our 2015 fourth quarter analysis. Our analysis in the 2016 first quarter involved a review of residential REO sales and short sales which occurred during the 12 months ended December 31, 2015, and included both full documentation and reduced documentation loans in a variety of states with varying years of origination. Our 2016 first quarter analysis of charge-offs on multi-family and commercial real estate mortgage loans, which generally related to certain delinquent and non-performing loans transferred to held-for-sale and loans modified in a TDR during the 12 months ended December 31, 2015, indicated an average loss severity of approximately 29%, compared to approximately 27% in our 2015 fourth quarter analysis. We consider our average loss severity experience as a gauge in evaluating the overall adequacy of our allowance for loan losses. However, the uniqueness of each multi-family and commercial real estate loan, particularly multi-family loans within New York City, many of which are rent stabilized, is also factored into our analyses. We also consider the growth in our multi-family and commercial real estate mortgage loan portfolio in evaluating the adequacy of the allowance for loan losses. The ratio of the allowance for loan losses to non-performing loans was approximately 63% at March 31, 2016, which exceeds our average loss severity experience for our mortgage loan portfolios, supporting our determination that our allowance for loan losses is adequate to cover potential losses.

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

As a financial institution, the primary component of our market risk is interest rate risk. The objective of our interest rate risk management policy is to maintain an appropriate mix and level of assets, liabilities and off-balance sheet items to enable us to meet our earnings and/or growth objectives, while maintaining specified minimum capital levels as required by our primary banking regulator and as established by our Board of Directors. We use a variety of analyses to monitor, control and adjust our asset and liability positions, primarily interest rate sensitivity gap analysis, or gap analysis, and net interest income sensitivity analysis. Additional interest rate risk modeling is done by Astoria Bank in conformity with regulatory requirements.

Gap Analysis

Gap analysis measures the difference between the amount of interest-earning assets anticipated to mature or reprice within specific time periods and the amount of interest-bearing liabilities anticipated to mature or reprice within the same time periods. Gap analysis does not indicate the impact of general interest rate movements on our net interest income because the actual repricing dates of various assets and liabilities will differ from our estimates and it does not give consideration to the runoff and repricing rates of the assets and liabilities. In addition to the foregoing, the exercise of embedded call options modeled in the Gap analysis may differ from actual experience.

The following table, referred to as the Gap Table, sets forth the amount of interest-earning assets and interest-bearing liabilities outstanding at March 31, 2016 that we anticipate will reprice or mature in each of the future time periods shown using certain assumptions based on our historical experience and other market-based data available to us. The Gap Table includes $1.00 billion of borrowings, which are callable within one year and on a quarterly basis thereafter, and $950.0 million of borrowings, callable in more than one year to three years, classified according to their maturity dates, primarily all of which are in the more than three years to five years category. In addition, the Gap Table includes callable securities with an amortized cost of $144.9 million, maturing in five years or more, classified according to their projected call dates within one year and includes $66.4 million, primarily all of which are callable within one year and at various times thereafter, classified according to their maturity dates in the more than five years category. The classification of callable borrowings and securities according to their maturity or projected call dates is based on the market value analytics of our interest rate risk model. As indicated in the Gap Table, our one-year interest rate sensitivity gap at March 31, 2016 was positive 5.37% compared to positive 2.19% at December 31, 2015.

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	At March 31, 2016
(Dollars in Thousands)	One Year or Less			More than One Year to Three Years			More than Three Years to Five Years			More than Five Years			Total
Interest-earning assets:
Mortgage loans (1)	$	4,037,936		$	2,803,363		$	1,932,745		$	1,882,802		$	10,656,846
Consumer and other loans (1)	223,427			13,449			7,660			5,449			249,985
Interest-earning cash accounts	153,331			—			—			—			153,331
Securities available-for-sale (2)	122,269			67,179			37,485			157,087			384,020
Securities held-to-maturity	483,394			498,130			291,598			1,170,381			2,443,503
FHLB-NY stock	—			—			—			131,582			131,582
Total interest-earning assets	5,020,357			3,382,121			2,269,488			3,347,301			14,019,267
Interest-bearing liabilities:
Savings	330,391			416,264			290,915			1,099,151			2,136,721
Money market	1,317,529			790,451			527,077			—			2,635,057
NOW and demand deposit	99,920			227,560			206,749			1,948,436			2,482,665
Certificates of deposit	765,794			520,234			511,068			—			1,797,096
Borrowings, net (3)	1,700,000			849,354			1,350,000			—			3,899,354
Total interest-bearing liabilities	4,213,634			2,803,863			2,885,809			3,047,587			12,950,893
Interest rate sensitivity gap	806,723			578,258			(616,321		)	299,714			$	1,068,374
Cumulative interest rate sensitivity gap	$	806,723		$	1,384,981		$	768,660		$	1,068,374

Cumulative interest rate sensitivity gap as a percentage of total assets	5.37		%	9.22		%	5.12		%	7.11		%
Cumulative net interest-earning assets as a percentage of interest-bearing liabilities	119.15		%	119.74		%	107.76		%	108.25		%

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(1)	Mortgage loans and consumer and other loans include loans held-for-sale and exclude non-accrual loans, except non-accrual residential mortgage loans which are current or less than 90 days past due, and the allowance for loan losses.


(2)	At amortized cost.


(3)	Classified according to projected repricing, maturity or call date.

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Net Interest Income Sensitivity Analysis

In managing interest rate risk, we also use an internal income simulation model for our net interest income sensitivity analyses. These analyses measure changes in projected net interest income over various time periods resulting from hypothetical changes in interest rates. The interest rate scenarios most commonly analyzed reflect gradual and reasonable changes over a specified time period, which is typically one or two years. The base net interest income projection utilizes assumptions similar to those reflected in the Gap Table, assumes that cash flows are reinvested in similar assets and liabilities and that interest rates as of the reporting date remain constant over the projection period. For each alternative interest rate scenario, corresponding changes in the forecasted cash flows and repricing characteristics of each financial instrument, consisting of all our interest-earning assets and interest-bearing liabilities are made to determine the impact on net interest income.

We perform analyses of interest rate increases and decreases of up to 400 basis points (when reasonably practical) over various time horizons although changes in interest rates of 200 basis points over a one year horizon is a more common and reasonable scenario for analytical purposes. Assuming the entire yield curve was to increase 200 basis points, through quarterly parallel increments of 50 basis points, our projected net interest income for the 12 month period beginning April 1, 2016 would decrease by approximately 1.09% from the base projection. At December 31, 2015, in the up 200 basis point scenario, our projected net interest income for the 12 month period beginning January 1, 2016 would have decreased by approximately 2.09% from the base projection. The current low interest rate environment prevents us from performing an income simulation for a decline in interest rates of the same magnitude and timing as our rising interest rate simulation, since certain asset yields, liability costs and related indices are below 2.00%. However, assuming the entire yield curve was to decrease 100 basis points through quarterly parallel decrements of 25 basis points, subject to floors, that have been established based on historical observation, our projected net interest income for the 12 month period beginning April 1, 2016 would decrease by approximately 1.56% from the base projection. At December 31, 2015, in the down 100 basis point scenario, our projected net interest income for the 12 month period beginning January 1, 2016 would have decreased by approximately 2.12% from the base projection.

Various shortcomings are inherent in both gap analyses and net interest income sensitivity analyses. Certain assumptions may not reflect the manner in which actual yields and costs respond to market changes. Similarly, prepayment estimates and similar assumptions are subjective in nature, involve uncertainties and, therefore, cannot necessarily be determined with precision. Changes in interest rates may also affect our operating environment and operating strategies as well as those of our competitors. Accordingly, although our net interest income sensitivity analyses may provide an indication of our interest rate risk exposure, such analyses may not provide a precise forecast of the effect of changes in market interest rates on our net interest income and our actual results may differ. Additionally, certain assets, liabilities and items of income and expense which may be affected by changes in interest rates, albeit to a much lesser degree, and which do not affect net interest income, are excluded from this analysis. These include income from bank owned life insurance and changes in the fair value of MSR. With respect to these items alone, and assuming the entire yield curve was to increase 200 basis points, through quarterly parallel increments of 50 basis points, our projected net income for the 12 month period beginning April 1, 2016 would increase by approximately $3.5 million. Conversely, assuming the entire yield curve was to decrease 100 basis points, through quarterly parallel decrements of 25 basis points, our projected net income for the 12 month period beginning April 1, 2016 would decrease by approximately $2.6 million with respect to these items alone.

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For further information regarding our market risk and the limitations of our gap analysis and net interest income sensitivity analysis, see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” included in our 2015 Annual Report on Form 10-K.

ITEM 4. Controls and Procedures

Monte N. Redman, our President and Chief Executive Officer, and Frank E. Fusco, our Senior Executive Vice President and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2016. Based upon their evaluation, they each found that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

City of New York Notice of Determination

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Petitions for Hearing with the City of New York on February 13, 2015 and September 9, 2015 to oppose the 2014 Notice and the 2015 Notice, respectively. By notice dated June 4, 2015, the NYC Tax Appeals Tribunal informed the parties that the proceedings relating to the 2014 Notice were adjourned pending the resolution of the proceedings with respect to the 2010 and 2011 Notices, the outcome of which may be determinative of some or all of the issues in this matter. On September 17, 2015, the NYC Tax Appeals Tribunal informed the parties that, barring the filing of an objection, the September 2015 Petition for Hearing would be consolidated with the February 2015 Petition and thus also adjourned pending resolution of the proceedings related to the 2010 and 2011 Notices. At this time, management believes it is more likely than not that we will succeed in refuting the City of New York’s position asserted in the 2014 Notice and the 2015 Notice. Accordingly, no liability or reserve has been recognized in our consolidated statement of financial condition at March 31, 2016 with respect to this matter.

Merger-related Litigation

The various complaints generally allege that the directors of Astoria breached their fiduciary duties in connection with their approval of the Merger Agreement because they failed to properly value Astoria and to take steps to maximize value to Astoria’s public stockholders, resulting in inadequate merger consideration. The complaints further allege that the directors of Astoria approved the Merger through a flawed and unfair sales process, alleging the absence of a competitive sales process and that the process was tainted by certain alleged conflicts of interest on the part of the Astoria directors regarding certain personal and financial benefits they will receive upon consummation of the proposed transaction that public stockholders of Astoria will not receive. The complaints also variously allege that the Astoria directors breached their fiduciary duties because they improperly agreed to deal protection devices that allegedly preclude other bidders from making a successful competing offer for Astoria, including a no solicitation provision that allegedly prevents other buyers from participating in discussions which may lead to a superior proposal, a matching rights provision that allows NYCB to match any competing proposal in the event one is made and a provision that requires Astoria to pay NYCB a termination fee of $69.5 million under certain circumstances. In addition, the lawsuit filed in Delaware also alleges that Astoria’s directors breached their fiduciary duties by causing a false and

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materially misleading Form S-4 Registration Statement to be filed with the SEC. Each of the complaints further alleges that NYCB aided and abetted the alleged fiduciary breaches by the Astoria directors.

ITEM 1A. Risk Factors

For a summary of risk factors relevant to our operations, see Part I, Item 1A, “Risk Factors,” in our 2015 Annual Report on Form 10-K. There were no material changes in risk factors relevant to our operations since December 31, 2015.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Our twelfth stock repurchase plan, approved by our Board of Directors on April 18, 2007, authorized the purchase of 10,000,000 shares, or approximately 10% of our common stock then outstanding, in open-market or privately negotiated transactions. At March 31, 2016, a maximum of 7,675,593 shares may yet be purchased under this plan. Pursuant to the terms of the Merger Agreement, we may not repurchase shares of our common stock without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

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ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

Not applicable.

ITEM 6. Exhibits

See Index of Exhibits on page 73.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



				Astoria Financial Corporation


Dated:	May 6, 2016	By:	/s/	Monte N. Redman
				Monte N. Redman
				President and Chief Executive Officer


Dated:	May 6, 2016	By:	/s/	Frank E. Fusco
				Frank E. Fusco
				Senior Executive Vice President and
				Chief Financial Officer
				(Principal Accounting Officer)


Dated:	May 6, 2016	By:	/s/	John F. Kennedy
				John F. Kennedy
				Senior Vice President and
				Chief Accounting Officer

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX OF EXHIBITS



Exhibit No.		Identification of Exhibit

31.1		Certifications of Chief Executive Officer.

31.2		Certifications of Chief Financial Officer.

32.1		Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC rules, this exhibit will not be deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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