Astoria Financial 10-K 2015 FY Annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

	(Mark One)
[X]	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended December 31, 2015
[  ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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 incorporation or organization)		(I.R.S. Employer Identification Number)
One Astoria Bank Plaza, Lake Success, New York	11042-1085	(516) 327-3000
(Address of principal executive offices)	(Zip code)	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.01 per share	New York Stock Exchange
Depositary Shares, each representing a 1/40th interest in a share of 6.50% Non-Cumulative Perpetual Preferred Stock, Series C	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

YES   X     NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. 

YES    NO   X  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     X   

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 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  

The aggregate market value of Common Stock held by non-affiliates of the registrant as of June 30, 2015, based on the closing price for a share of the registrant’s Common Stock on that date as reported by the New York Stock Exchange, was $1.35 billion.

The number of shares of the registrant’s Common Stock outstanding as of February 16, 2016 was 101,404,957 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be utilized in connection with the 2016 Annual Meeting of Stockholders or any amendments to this Form 10-K, which will be filed with the Securities and Exchange Commission within 120 days from December 31, 2015, are incorporated by reference into Part  III.

ASTORIA FINANCIAL CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	3
Item 1A.	Risk Factors	39
Item 1B.	Unresolved Staff Comments	49
Item 2.	Properties	50
Item 3.	Legal Proceedings	50
Item 4.	Mine Safety Disclosures	51
Part II
Item 5.	Market for Astoria Financial Corporation’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	52
Item 6.	Selected Financial Data	54
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	56
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	97
Item 8.	Financial Statements and Supplementary Data	100
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	100
Item 9A.	Controls and Procedures	100
Item 9B.	Other Information	101
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	101
Item 11.	Executive Compensation	101
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	102
Item 13.	Certain Relationships and Related Transactions, and Director Independence	103
Item 14.	Principal Accountant Fees and Services	103
Part IV
Item 15.	Exhibits and Financial Statement Schedules	104
SIGNATURES		105

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PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT

This Annual Report on Form 10-K 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 Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Reform Act, and any actions regarding foreclosures;

• enhanced supervision and examination by the Office of the Comptroller of the Currency, or OCC, the Board of Governors of the Federal Reserve System, or the FRB, and the Consumer Financial Protection Bureau, or CFPB;

• 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 our proposed merger with and into New York Community Bancorp, Inc. 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 with and into New York Community Bancorp, Inc. on relationships with third parties, including customers, employees and competitors; and

• delays in closing the merger with and into New York Community Bancorp, Inc.

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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PART I

As used in this Form 10-K, “Astoria,” “we,” “us” and “our” refer to Astoria Financial Corporation and its consolidated subsidiaries, principally Astoria Bank, formerly known as Astoria Federal Savings and Loan Association.

ITEM 1. BUSINESS

General

We are a Delaware corporation organized in 1993 as the unitary savings and loan holding company of Astoria Bank and its consolidated subsidiaries, or Astoria Bank. We are headquartered in Lake Success, New York and our principal business is the operation of our wholly-owned subsidiary, Astoria Bank. Astoria Bank’s primary business is attracting retail deposits from the general public and businesses and investing those deposits, together with funds generated from operations, principal repayments on loans and securities and borrowings, primarily in multi-family and commercial real estate mortgage loans, one-to-four family, or residential, mortgage loans, and mortgage-backed securities. To a lesser degree, Astoria Bank also invests in consumer and other loans, U.S. government, government agency and government-sponsored enterprise, or GSE, securities and other investments permitted by federal banking laws and regulations.

Astoria Bank was established in 1888 as a local, community-oriented bank that delivered exceptional service, a core philosophy that remains our focus today. Since inception, we operated on a simple business model of providing residential mortgage loans funded primarily by retail deposits of the customers that live and work near our branch franchise. In 2011, we set forth on developing plans to transform our balance sheet, both the asset side and the liability side, through the expansion of the products and services we offer, as well as enhancements to the delivery channels, in the communities and to the customers we serve. Through these initiatives, during 2015 we have continued 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, money market 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, including our Long Island City, New York branch, which opened in late 2015, plus our dedicated business banking office in midtown Manhattan.

Our results of operations are dependent primarily on our net interest income, which is the difference between the interest earned on our assets, primarily our loan and securities portfolios, and the interest paid on our deposits and borrowings. Our net income is also affected by our provision for loan losses, non-interest income, non-interest expense (general and administrative expense) and income tax expense. Non-interest income includes customer service fees; other loan fees; net gain on sales of securities; mortgage banking income, net; income from bank owned life insurance, or BOLI; and other non-interest income. General and administrative expense consists of compensation and benefits expense; occupancy, equipment and systems expense; federal deposit insurance premium expense; advertising expense; and other operating expenses. Our earnings are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates and U.S. Treasury yield curves, government policies and actions of regulatory authorities.

In addition to Astoria Bank, Astoria Financial Corporation has one other direct wholly-owned subsidiary, AF Insurance Agency, Inc., which is consolidated with Astoria Financial Corporation for financial reporting purposes. AF Insurance Agency, Inc. is a licensed life insurance agency that makes insurance products available primarily to the customers of Astoria Bank through contractual agreements with various third parties.

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

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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, 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 and is subject to the receipt of customary shareholder and regulatory approvals, among other customary closing conditions. For additional information on the Merger and Bank Merger, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or “MD&A.”

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 Securities and Exchange Commission, or SEC. Such reports are also available on the SEC’s website at www.sec.gov/edgar/searchedgar/webusers.htm.

Lending Activities

General

Our loan portfolio is comprised primarily of mortgage loans. At December 31, 2015, 54% of our total loan portfolio was secured by residential properties and 44% was secured by multi-family properties and commercial real estate, compared to 58% secured by residential properties and 40% secured by multi-family properties and commercial real estate at December 31, 2014. The remainder of the loan portfolio consists of a variety of consumer and other loans, including commercial and industrial loans and home equity loans. At December 31, 2015, our net loan portfolio totaled $11.06 billion, or 73% of total assets.

We originate multi-family and commercial real estate mortgage loans either indirectly through commercial mortgage brokers or through direct solicitation by our banking officers in New York in connection with our business banking operations. We originate residential mortgage loans either directly through our banking and loan production offices in New York or indirectly through brokers and our third party loan origination program. Mortgage loan originations and purchases for portfolio totaled $1.51 billion for the year ended December 31, 2015 and $1.64 billion for the year ended December 31, 2014. At December 31, 2015, $6.45 billion, or 59%, of our total mortgage loan portfolio was secured by properties located in New York and $4.41 billion, or 41%, of our total mortgage loan portfolio was secured by properties located in 34 other states and the District of Columbia. In addition to New York, we have a concentration of 5% or greater of our total mortgage loan portfolio in Connecticut at 6% and in New Jersey at 5%.

We also originate mortgage loans for sale in the secondary market. Generally, we originate 15 and 30 year fixed rate residential mortgage loans that conform to GSE guidelines (conforming loans) for sale to various GSEs or other investors on a servicing released or retained basis. The sale of such loans is generally arranged through a master commitment on a mandatory delivery or best efforts basis. Originations of residential mortgage loans held-for-sale totaled $127.7 million in 2015 and $105.2 million in 2014, all of which were originated through our retail loan origination program. Loans serviced for others totaled $1.40 billion at December 31, 2015.

We outsource the servicing of our residential mortgage loan portfolio, including our portfolio of mortgage loans serviced for other investors, to an unrelated third party under a sub-servicing agreement.

Residential Mortgage Lending

Our primary residential lending emphasis is on the origination and purchase of first mortgage loans secured by properties that serve as the primary residence of the owner. We also originate a limited number of second home mortgage loans. At December 31, 2015, residential mortgage loans totaled $6.02 billion, or 54% of our total loan portfolio, of which

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$4.27 billion, or 71%, were hybrid adjustable rate mortgage, or ARM, loans and $1.75 billion, or 29%, were fixed rate loans.

Residential mortgage loan originations and purchases for portfolio totaled $616.9 million during 2015 and $455.9 million during 2014. Our residential retail loan origination program accounted for $311.3 million of portfolio originations during 2015 and $205.5 million during 2014. We also have a residential broker network covering four states, primarily along the East Coast. Our residential broker loan origination program consists of relationships with mortgage brokers and accounted for $78.6 million of portfolio originations during 2015 and $56.2 million during 2014. We purchase individual mortgage loans through our third party loan origination program which are subject to the same underwriting standards as our retail and broker originations. Our third party loan origination program includes relationships with other financial institutions and mortgage bankers covering 13 states and the District of Columbia and accounted for residential portfolio purchases of $227.0 million during 2015 and $194.2 million during 2014. Our various loan origination programs provide efficient and diverse delivery channels for deployment of our cash flows. Additionally, our broker and third party loan origination programs provide geographic diversification, reducing our exposure to concentrations of credit risk.

We offer amortizing hybrid ARM loans with terms up to 30 years which initially have a fixed rate for five, seven or ten years and convert into one year ARM loans at the end of the initial fixed rate period. Prior to 2014, we also offered amortizing hybrid ARM loans with terms up to 40 years and loans with an initial fixed rate period of three years. Our amortizing hybrid ARM loans require the borrower to make principal and interest payments during the entire loan term. Our portfolio of residential amortizing hybrid ARM loans totaled $3.53 billion, or 59% of our total residential mortgage loan portfolio, at December 31, 2015. Prior to the 2010 fourth quarter, we offered interest-only hybrid ARM loans with terms of up to forty years, which have an initial fixed rate for five or seven years and convert into one year interest-only ARM loans at the end of the initial fixed rate period. Our interest-only hybrid ARM loans 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. Our portfolio of residential interest-only hybrid ARM loans totaled $735.5 million, or 12% of our total residential mortgage loan portfolio, at December 31, 2015. 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. We do not originate negative amortization loans, payment option loans or other loans with short-term interest-only periods.

Within our residential mortgage loan portfolio we have reduced documentation loan products, substantially all of which are hybrid ARM loans (interest-only and amortizing). Reduced documentation loans are comprised primarily of SIFA (stated income, full asset) loans. To a lesser extent, our portfolio of reduced documentation loans also includes SISA (stated income, stated asset) loans. During the 2007 fourth quarter, we stopped offering reduced documentation loans. Reduced documentation loans in our residential mortgage loan portfolio totaled $885.2 million, or 15% of our total residential mortgage loan portfolio at December 31, 2015, and included $135.7 million of SISA loans.

Generally, ARM loans pose credit risks somewhat greater than the risks posed by fixed rate loans primarily because, as interest rates rise, the underlying payments of the borrower increase when the loan is beyond its initial fixed rate period, particularly if the interest rate during the initial fixed rate period was at a discounted rate, increasing the potential for default. Interest-only hybrid ARM loans have an additional potential risk element when the loan payments adjust after the tenth anniversary of the loan to include principal payments, resulting in a further increase in the underlying payments. Since our interest-only hybrid ARM loans have a relatively long period to the principal payment adjustment, we believe this alleviates some of the additional credit risk due to the longer period for the borrower’s income to adjust to anticipated higher future payments. Additionally, we consider these risk factors in our underwriting of such loans and we do not offer loans with initial rates at deep discounts to the fully indexed rate. At December 31, 2015, $1.36 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 $517.7 million were refinanced or converted to amortizing loans during 2015.

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Our reduced documentation loans have additional elements of risk since not all of the information provided by the borrower was verified. SIFA and SISA loans required a prospective borrower to complete a standard mortgage loan application. SIFA loans required the verification of a potential borrower’s asset information on the loan application, but not the income information provided. Our reduced documentation loan products required the receipt of an appraisal of the real estate used as collateral for the mortgage loan and a credit report on the prospective borrower. The loans were priced according to our internal risk assessment of the loan giving consideration to the loan-to-value ratio, the potential borrower’s credit scores and various other credit criteria.

We continue to manage the greater risk posed by our hybrid ARM loans through the application of sound underwriting policies and risk management procedures. Our risk management procedures and underwriting policies include a variety of factors and analyses. These include, but are not limited to, the determination of the markets in which we lend; the products we offer and the pricing of those products; the evaluation of potential borrowers and the characteristics of the property supporting the loan; the monitoring and analyses of the performance of our portfolio, in the aggregate and by segment, at various points in time and trends over time; and our collection efforts and marketing of delinquent and non-performing loans and foreclosed properties. We monitor our market areas and the performance and pricing of our various loan product offerings to determine the prudence of continuing to offer such loans and to determine what changes, if any, should be made to our product offerings and related underwriting.

The objective of our residential mortgage loan underwriting is to determine whether timely repayment of the debt can be expected and whether the property that secures the loan provides sufficient value to recover our investment in the event of a loan default. We review each loan individually utilizing such documents as the loan application, credit report, verification forms, tax returns and any other documents relevant and necessary to qualify the potential borrower for the loan. We analyze the credit and income profiles of potential borrowers and evaluate various aspects of the potential borrower’s credit history including credit scores. We do not base our underwriting decisions solely on credit scores. We consider the potential borrower’s income, liquidity, history of debt management and net worth. We perform income and debt ratio analyses as part of the credit underwriting process. Additionally, we obtain independent appraisals to establish collateral values to determine loan-to-value ratios. We use the same underwriting standards for our retail, broker and third party mortgage loan originations.

Our current policy on owner-occupied, residential mortgage loans in New York, Connecticut and Massachusetts is to lend up to 80% of the lesser of the purchase price or appraised value of the property securing the loan for loan amounts up to $1.0 million and up to 75% for loan amounts over $1.0 million and not more than $1.5 million. For select counties within New York, Connecticut and Massachusetts, our current policy is to lend up to 65% of the lesser of the purchase price or appraised value of the property securing the loan for loan amounts up to $2.0 million and up to 60% for loan amounts over $2.0 million and not more than $2.5 million. In all other approved states, our current policy on owner-occupied, residential mortgage loans is to lend up to 80% of the lesser of the purchase price or appraised value of the property securing the loan for loan amounts up to $1.0 million and up to 70% for loan amounts over $1.0 million and not more than $1.5 million. The exceptions to this policy are loans originated under our affordable housing program, which is consistent with our program for compliance with the Community Reinvestment Act, or CRA, loans originated under certain refinance programs offered only to existing qualified borrowers and loans originated for sale. See “Regulation and Supervision - Community Reinvestment” for further discussion of the CRA. Prior to the 2007 fourth quarter, our policy generally was to lend up to 80% of the appraised value of the property securing the loan and, for mortgage loans which had a loan-to-value ratio of greater than 80%, we required the mortgagor to obtain private mortgage insurance. In addition, we offered a variety of proprietary products which allowed the borrower to obtain financing of up to 90% loan-to-value without private mortgage insurance, through a combination of a first mortgage loan with an 80% loan-to-value and a home equity line of credit for the additional 10%. During the 2007 fourth quarter, we revised our policy on originations of owner-occupied, residential mortgage loans to discontinue lending amounts in excess of 80% of the appraised value of the property securing the loan and during the 2008 third quarter we revised our policy to discontinue lending amounts in excess of 75% of the appraised value of the property. During 2010, we revised our policy to the current limits, with certain exceptions, as noted above. We periodically review our loan product offerings and related underwriting and make changes as necessary in response to market conditions.

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All of our hybrid ARM loans have annual and lifetime interest rate ceilings and floors. Such loans have, at times, been offered with an initial interest rate which is less than the fully indexed rate for the loan at the time of origination, referred to as a discounted rate. We determine the initial interest rate in accordance with market and competitive factors giving consideration to the spread over our funding sources in conjunction with our overall interest rate risk, or IRR, management strategies. In 2006, to recognize the credit risks associated with interest-only hybrid ARM loans, we began underwriting such loans based on a fully amortizing loan (in effect underwriting interest-only hybrid ARM loans as if they were amortizing hybrid ARM loans). Prior to 2007, we would underwrite our interest-only hybrid ARM loans using the initial note rate, which may have been a discounted rate. We monitor credit risk on interest-only hybrid ARM loans that were underwritten at the initial note rate, which may have been a discounted rate, in the same manner as we monitor credit risk on all interest-only hybrid ARM loans. Our portfolio of residential interest-only hybrid ARM loans which were underwritten at the initial note rate, which may have been a discounted rate, totaled $388.0 million, or 6% of our total residential mortgage loan portfolio, at December 31, 2015. In 2007, we began underwriting our interest-only hybrid ARM loans at the higher of the fully indexed rate or the initial note rate. In 2009, we began underwriting our interest-only and amortizing hybrid ARM loans at the higher of the fully indexed rate, the initial note rate or 6.00%. During the 2010 second quarter, we reduced the underwriting interest rate floor from 6.00% to 5.00% to reflect the interest rate environment. During the 2010 third quarter we stopped offering interest-only loans.

In January 2014, we became subject to rules adding restrictions and requirements to mortgage origination and servicing practices. Under the rules, Qualified Mortgages are residential mortgage loans that meet standards prohibiting or limiting certain high risk products and features. Our current policy is to only originate mortgage loans that meet the requirements of a Qualified Mortgage. See “Regulation and Supervision - CFPB Regulation of Mortgage Origination and Servicing.”

Multi-Family and Commercial Real Estate Lending

Our primary multi-family and commercial real estate lending emphasis is on the origination of mortgage loans on rent controlled and rent stabilized apartment buildings located in the greater New York metropolitan area, including the five boroughs of New York City, Nassau, Suffolk and Westchester counties in New York, and parts of New Jersey and Connecticut. At December 31, 2015, multi-family mortgage loans totaled $4.02 billion, or 36% of our total loan portfolio, and commercial real estate loans totaled $819.5 million, or 7% of our total loan portfolio. The multi-family and commercial real estate loans in our portfolio consist of both fixed rate and adjustable rate loans which were originated at prevailing market rates. Multi-family and commercial real estate loans we currently offer generally include adjustable and fixed rate balloon loans with terms up to 15 years, amortized over 15 to 30 years. We also offer interest-only mortgage loans, primarily for loans secured by multi-family cooperative properties, to qualified borrowers, underwritten on an amortizing basis. Such loans generally require interest-only payments for the term of the loan, which generally ranges from five to ten years, and typically provide for a balloon payment at maturity. Interest-only loans represented less than 7% of our total multi-family and commercial real estate loan portfolio at December 31, 2015. Included in our multi-family and commercial real estate loan portfolios are mixed use loans secured by properties which are intended for both residential and commercial use. Mixed use loans are classified as multi-family or commercial real estate based on the respective percentage of income from residential and commercial uses.

Our policy generally has been to originate multi-family and commercial real estate mortgage loans in the New York metropolitan area, which includes New York, New Jersey and Connecticut. During 2009, due primarily to conditions in the real estate market and economic environment at that time, we suspended originations of multi-family and commercial real estate loans. During the 2011 third quarter, we resumed originations of such loans in the New York metropolitan area. Our current strategies include greater participation in the local multi-family and commercial real estate mortgage lending markets. Originations of multi-family and commercial real estate loans totaled $890.7 million during the year ended December 31, 2015 and $1.19 billion during the year ended December 31, 2014.

In originating multi-family and commercial real estate loans, we primarily consider the ability of the net operating income generated by the real estate to support the debt service, the financial resources, income level and managerial expertise of the borrower, the marketability of the property and our lending experience with the borrower. Our current policy for multi-family loans is to require a minimum debt service coverage ratio of 1.20 times and to finance up to

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75% of the lesser of the purchase price or appraised value of the property securing the loan on purchases or 75% of the appraised value on refinances. For commercial real estate loans, our current policy is to require a minimum debt service coverage ratio of 1.25 times and to finance up to 70% of the lesser of the purchase price or appraised value of the property securing the loan on purchases or 70% of the appraised value on refinances. In addition, we perform analyses to determine the ability of the net operating income generated by the real estate to meet the debt service obligation under various stress scenarios.

The majority of the multi-family loans in our portfolio are secured by five to fifty-unit apartment buildings and mixed use properties (containing both residential and commercial uses). Commercial real estate loans are typically secured by retail, office and mixed use properties (more commercial than residential uses). The average balance of multi-family and commercial real estate loans originated during 2015 was $2.6 million. At December 31, 2015, our single largest multi-family credit had an outstanding balance of $36.0 million, was current and was secured by a 432-unit cooperative apartment building with 22 retail units in the Bronx. At December 31, 2015, the average balance of loans in our multi-family portfolio was approximately $1.8 million. At December 31, 2015, our single largest commercial real estate credit had an outstanding principal balance of $14.3 million, was current and was secured by a building with 100% commercial tenancy in Manhattan. At December 31, 2015, the average balance of loans in our commercial real estate portfolio was approximately $1.6 million.

Multi-family and commercial real estate loans generally involve a greater degree of credit risk than residential loans because they typically have larger balances and are more affected by adverse conditions in the economy. As such, these loans require more ongoing evaluation and monitoring. Because payments on loans secured by multi-family properties and commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulation. As we continue to grow our multi-family and commercial real estate loan portfolio, we continue to implement enhanced risk management policies, procedures and controls commensurate with the shift in our business focus to become a more fully diversified, full-service community bank.

Consumer and Other Loans

At December 31, 2015, $252.7 million, or 2%, of our total loan portfolio, consisted of consumer and other loans. Included in consumer and other loans at December 31, 2015 were $160.8 million of home equity and other consumer loans and $91.9 million of commercial and industrial loans.

Home equity and other consumer loans consist primarily of home equity lines of credit. Other consumer loans in this portfolio include overdraft protection, lines of credit and passbook loans which are primarily offered on a fixed rate, short-term basis. Home equity lines of credit are adjustable rate loans which are indexed to the prime rate and generally reset monthly. Such lines of credit were underwritten based on our evaluation of the borrower’s ability to repay the debt. Prior to the 2007 fourth quarter, these lines of credit were generally limited to aggregate outstanding indebtedness secured by up to 90% of the appraised value of the property. During the 2007 fourth quarter, we revised our policy on originations of home equity lines of credit to limit aggregate outstanding indebtedness to 75% of the appraised value of the property and only for loans where we hold the first lien mortgage on the property. During the 2008 third quarter, we revised our policy to limit aggregate outstanding indebtedness to 60% of the appraised value of the property and only for properties located in New York. During the 2010 first quarter, we discontinued originating home equity lines of credit. In the 2014 fourth quarter, we resumed originations of home equity lines of credit, limited to an aggregate outstanding indebtedness secured by up to 80% of the appraised value of the property, up to a combined loan amount of $750,000 and up to 75% for loan amounts over $750,000 and not more than $1.0 million.

The underwriting standards we employ for consumer and other loans include a determination of the borrower’s payment history on other debts and an assessment of the borrower's ability to make payments on the proposed loan and other indebtedness. In addition to the creditworthiness of the borrower, the underwriting process also includes a review of the value of the collateral, if any, in relation to the proposed loan amount. In general, home equity and other consumer

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loans tend to have higher interest rates, shorter maturities and are considered to entail a greater risk of default than residential mortgage loans.

Commercial and industrial loans offered through our business banking operations primarily include secured lines of credit, equipment loans, letters of credit and term loans. Substantially all of our commercial and industrial loans at December 31, 2015 were originated since 2012 as part of our strategy to expand our business banking operations and diversify our earning assets. We focus on making commercial and industrial loans to small and medium-sized businesses, primarily located in our branch footprint, in a wide variety of industries. These loans are underwritten based upon the cash flow and earnings of the borrower and the value of the collateral securing such loans, if any.

Loan Approval Procedures and Authority

For individual loans with balances of $5.0 million or less or when the overall lending relationship is $60.0 million or less, loan approval authority has been delegated by the Board of Directors to various members of our underwriting and management staff. For individual loan amounts or overall lending relationships in excess of these amounts, loan approval authority has been delegated by the Board of Directors to members of our Executive Loan Committee, which consists of senior executive management.

For mortgage loans secured by residential properties, upon receipt of a completed application from a prospective borrower, we generally order a credit report, verify income and other information and, if necessary, obtain additional financial or credit related information. For mortgage loans secured by multi-family properties and commercial real estate, we obtain financial information concerning the operation of the property as well as credit information on the principal and borrower entity. Personal guarantees are generally not obtained with respect to multi-family and commercial real estate loans. An appraisal of the real estate used as collateral for mortgage loans is also obtained as part of the underwriting process. All appraisals are performed by licensed or certified appraisers, the majority of which are licensed independent third party appraisers. We have an internal appraisal review process to monitor third party appraisals. The Board of Directors annually reviews and approves our appraisal policy.

Pursuant to the terms of the Merger Agreement, we are limited in our ability to make loans or extensions of credit outside of the ordinary course of business or in excess of $10 million in a single transaction, in each case, without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

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Loan Portfolio Composition

The following table sets forth the composition of our loan portfolio in dollar amounts and percentages of the portfolio at the dates indicated.

	At December 31,
	2015					2014					2013					2012					2011
(Dollars in Thousands)	Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total
Mortgage loans (gross):
Residential	$	6,015,415		54.14	%	$	6,873,536		57.71	%	$	8,037,276		64.89	%	$	9,711,226		73.82	%	$	10,561,539		80.02	%
Multi-family	4,024,105			36.21		3,913,053			32.86		3,296,455			26.61		2,406,678			18.29		1,693,871			12.84
Commercial real estate	819,514			7.38		873,765			7.34		812,966			6.56		773,916			5.88		659,706			5.00
Total mortgage loans	10,859,034			97.73		11,660,354			97.91		12,146,697			98.06		12,891,820			97.99		12,915,116			97.86
Consumer and other loans (gross):
Home equity and other consumer	160,819			1.44		184,553			1.55		208,923			1.69		242,119			1.84		270,408			2.05
Commercial and industrial	91,874			0.83		64,815			0.54		30,758			0.25		21,975			0.17		12,036			0.09
Total consumer and other loans	252,693			2.27		249,368			2.09		239,681			1.94		264,094			2.01		282,444			2.14
Total loans (gross)	11,111,727			100.00	%	11,909,722			100.00	%	12,386,378			100.00	%	13,155,914			100.00	%	13,197,560			100.00	%
Net unamortized premiums and deferred loan origination costs	41,354					47,726					55,688					68,058					77,044
Loans receivable	11,153,081					11,957,448					12,442,066					13,223,972					13,274,604
Allowance for loan losses	(98,000		)			(111,600		)			(139,000		)			(145,501		)			(157,185		)
Loans receivable, net	$	11,055,081				$	11,845,848				$	12,303,066				$	13,078,471				$	13,117,419

Loan Maturity, Repricing and Activity

The following table shows the contractual maturities of our loafns receivable at December 31, 2015 and does not reflect the effect of prepayments or scheduled principal amortization.

	At December 31, 2015
(In Thousands)	Residential		Multi- Family		Commercial Real Estate			Consumer and Other			Total
Amount due:
Within one year	$	5,112	$	31,877		$	45,181		$	68,668	$	150,838
After one year:
Over one to three years	12,324		559,963			177,999			6,966		757,252
Over three to five years	18,524		596,155			196,217			13,308		824,204
Over five to ten years	206,736		1,551,209			190,658			11,379		1,959,982
Over ten to twenty years	2,244,291		1,272,287			208,366			99,286		3,824,230
Over twenty years	3,528,428		12,614			1,093			53,086		3,595,221
Total due after one year	6,010,303		3,992,228			774,333			184,025		10,960,889
Total amount due	$	6,015,415	$	4,024,105		$	819,514		$	252,693	$	11,111,727
Net unamortized premiums and deferred loan origination costs											41,354
Allowance for loan losses											(98,000		)
Loans receivable, net											$	11,055,081

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The following table sets forth at December 31, 2015, the dollar amount of our loans receivable contractually maturing after December 31, 2016, and whether such loans have fixed interest rates or adjustable interest rates.  Our interest-only and amortizing hybrid ARM loans are classified as adjustable rate loans.

	Maturing After December 31, 2016
(In Thousands)	Fixed		Adjustable		Total
Mortgage loans:
Residential	$	1,744,773	$	4,265,530	$	6,010,303
Multi-family	2,626,673		1,365,555		3,992,228
Commercial real estate	494,800		279,533		774,333
Consumer and other loans	29,223		154,802		184,025
Total	$	4,895,469	$	6,065,420	$	10,960,889

The following table sets forth our loan originations, purchases, sales and principal repayments for the periods indicated, including loans held-for-sale.

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Mortgage loans (gross) (1):
Balance at beginning of year	$	11,667,994		$	12,154,132		$	12,968,186
Originations:
Residential	517,618			366,792			848,607
Multi-family	784,063			1,012,150			1,319,837
Commercial real estate	106,616			174,341			233,330
Total originations	1,408,297			1,553,283			2,401,774
Purchases (2)	227,034			194,237			403,481
Principal repayments	(2,291,194		)	(1,887,465		)	(3,201,751		)
Sales	(135,365		)	(286,522		)	(341,219		)
Transfer of loans to real estate owned	(7,783		)	(43,448		)	(51,333		)
Net loans charged off	(993		)	(16,223		)	(25,006		)
Balance at end of year	$	10,867,990		$	11,667,994		$	12,154,132
Consumer and other loans (gross):
Balance at beginning of year	$	249,368		$	239,681		$	264,094
Originations and advances	162,943			109,208			77,597
Principal repayments	(159,083		)	(97,813		)	(100,914		)
Net loans charged off	(535		)	(1,708		)	(1,096		)
Balance at end of year	$	252,693		$	249,368		$	239,681

(1) Includes loans classified as held-for-sale totaling $9.0 million at December 31, 2015, $7.6 million at December 31, 2014 and $7.4 million at December 31, 2013, exclusive of valuation allowances totaling $54,000 at December 31, 2013.

(2) Purchases of mortgage loans represent third party loan originations and are secured by residential properties.

Asset Quality

General

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.

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The underlying credit quality of our loan portfolio is dependent primarily on each borrower’s ability to continue to make required loan payments and, in the event a borrower is unable to continue to do so, the value of the collateral securing the loan, if any. A borrower’s ability to pay typically is dependent, in the case of residential mortgage loans and consumer loans, primarily on employment and other sources of income, and in the case of multi-family and commercial real estate mortgage loans, on the cash flow generated by the property, which in turn is impacted by general economic conditions. Other factors, such as unanticipated expenditures or changes in the financial markets, may also impact a borrower’s ability to pay. Collateral values, particularly real estate values, are also impacted by a variety of factors including general economic conditions, demographics, natural disasters, maintenance and collection or foreclosure delays.

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. 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%. The national unemployment rate decreased to 5.0% for December 2015 compared to 5.6% for December 2014, and new job growth in 2015 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, though some competitor institutions in this market have offered rates and/or product terms at levels which we have chosen not to offer.

Pursuant to the terms of the Merger Agreement, we are limited in our ability to change in any material respect our risk and asset liability management policies without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

Non-performing Assets

Non-performing assets, which include non-performing loans and real estate owned, or REO, decreased $5.5 million to $158.0 million at December 31, 2015, from $163.5 million at December 31, 2014, reflecting a significant decline in REO, net, partially offset by an increase in non-performing loans. At December 31, 2015 REO, net, totaled $19.8 million, down $15.9 million from $35.7 million at December 31, 2014. Non-performing loans, which are comprised primarily of mortgage loans, include all non-accrual loans, and, to a lesser extent, mortgage loans past due 90 days or more and still accruing interest, and exclude loans held-for-sale and loans modified in a troubled debt restructuring, or TDR, which have been returned to accrual status. At December 31, 2015, non-performing loans totaled $138.2 million, up $10.4 million compared to $127.8 million at December 31, 2014. The ratio of non-performing assets to total assets was 1.05% at December 31, 2015, unchanged from December 31, 2014. The ratio of non-performing loans to total loans increased to 1.24% at December 31, 2015, from 1.07% at December 31, 2014. The allowance for loan losses as a percentage of total non-performing loans decreased to 70.90% at December 31, 2015, from 87.32% at December 31, 2014. For further discussion of our non-performing assets, non-performing loans and the allowance for loan losses, see Item 7, “MD&A.”

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, or bankruptcy loans, 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

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their delinquency status. Loans modified in a TDR which are included in non-performing loans totaled $61.0 million at December 31, 2015 and $68.4 million at December 31, 2014, of which $47.6 million at December 31, 2015 and $60.4 million at December 31, 2014 were current or less than 90 days past due. Loans modified in a TDR remain 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 $101.8 million at December 31, 2015 and $106.0 million at December 31, 2014. For further detail on loans modified in a TDR, see Note 1 and Note 5 in Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

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 earlier 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 past due 90 days or more, 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.

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 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.

We proactively manage our non-performing assets, in part, through the sale of certain individual delinquent and non-performing loans. During the year ended December 31, 2015, we sold $7.5 million, net of recoveries of $1.1 million, of delinquent and non-performing mortgage loans, primarily multi-family and commercial real estate mortgage loans. At December 31, 2015, included in loans held-for-sale, net, were non-performing mortgage loans totaling $1.6 million, which primarily consisted of multi-family mortgage loans. Such non-performing loans held-for-sale are excluded from non-performing loans, non-performing assets and related ratios.

In the 2014 second quarter, we conducted an evaluation of our residential mortgage loans 90 days or more past due for the purpose of determining whether a greater value could be derived in a potential bulk sale, should such be sought, in excess of that which we have realized in recent periods through our traditional approach of working loans out individually.  This evaluation indicated that market conditions at that time could be favorable for a potential bulk sale and, in June 2014, we sought indicative bid values on a designated pool of our non-performing residential mortgage loans from multiple potential investors, and at June 30, 2014 we designated the pool as non-performing loans held-for-sale. In connection with the designation of the pool of loans as held-for-sale, we recorded a charge-off of $8.7 million against the allowance for loan losses during the 2014 second quarter to write down the pool of loans from its immediately previous aggregate recorded investment of $195.0 million to its estimated fair value at the time of $186.3 million. As a result of our quarterly review of the adequacy of the allowance for loan losses as of June 30, 2014, $5.7

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million of reserves previously attributable to this pool of loans was deemed no longer required and was credited to the provision for loan losses as a reserve release in the 2014 second quarter. During the 2014 third quarter, we completed a bulk sale transaction of substantially all of the non-performing residential mortgage loans held-for-sale. The majority of the remaining loans from the pool designated as held-for-sale as of June 30, 2014 were either foreclosed upon and transferred to REO, or were satisfied via short sales or payoffs during the 2014 third quarter with the balance of the loans held-for-sale sold in a second transaction in September 2014, with the same counterparty as the bulk sale transaction. In 2015, no loans were sold in a bulk sale transaction.

REO represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and 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, through charges to earnings. Such charges are included in other non-interest expense along with any additional property maintenance and protection expenses incurred in owning the property. Fair value 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. At December 31, 2015 we held 50 properties in REO totaling $19.8 million, net of a valuation allowance of $1.3 million, $17.8 million of which were residential properties. At December 31, 2014 we held 111 properties in REO totaling $35.7 million, net of a valuation allowance of $839,000, substantially all of which were residential properties.

Criticized and Classified Assets

Our Asset Review Department reviews and classifies our assets and independently reports the results of its reviews to the Loan Committee of our Board of Directors quarterly. Our Asset Classification Committee establishes policy relating to the internal classification of loans and also provides input to the Asset Review Department in its review of our assets. Federal regulations and our policy require the classification of loans and other assets, such as debt and equity securities considered to be of lesser quality, as special mention, substandard, doubtful or loss. An asset criticized as special mention has potential weaknesses, which, if uncorrected, may result in the deterioration of the repayment prospects or in our credit position at some future date. An asset classified as substandard is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full satisfaction of the loan amount, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Those assets classified as substandard, doubtful or loss are considered adversely classified.

Impaired Loans

We evaluate loans individually for impairment in connection with our individual loan review and asset classification process. In addition, 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.

A loan is considered impaired when, based upon current information and events, it is probable 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

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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.

Impaired loans totaled $222.7 million, net of their related allowance for loan losses of $14.8 million, at December 31, 2015 and $228.7 million, net of their related allowance for loan losses of $19.7 million, at December 31, 2014. Interest income recognized on impaired loans amounted to $8.8 million for the year ended December 31, 2015. For further detail on our impaired loans, see Note 1 and Note 5 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

Allowance for Loan Losses

For a discussion of our accounting policy related to the allowance for loan losses, see “Critical Accounting Policies - Allowance for Loan Losses” in Item 7, “MD&A.”

In addition to the requirements of U.S. generally accepted accounting principles, or GAAP, related to loss contingencies, a federally chartered savings association’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OCC. The OCC, in conjunction with the other federal banking agencies, provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of adequate valuation allowances and guidance for banking agency examiners to use in determining the adequacy of valuation allowances. It is required that all institutions have effective systems and controls to identify, monitor and address asset quality problems, analyze all significant factors that affect the collectibility of the portfolio in a reasonable manner and establish acceptable allowance evaluation processes that meet the objectives of the federal regulatory agencies. While we believe that the allowance for loan losses has been established and maintained at adequate levels, future adjustments may be necessary if economic or other conditions differ substantially from the conditions used in making our estimates at December 31, 2015. In addition, there can be no assurance that the OCC or other regulators, as a result of reviewing our loan portfolio and/or allowance, will not request that we alter our allowance for loan losses, thereby affecting our financial condition and earnings.

Investment Activities

General

Our investment policy is designed to complement our lending activities, generate a favorable return within established risk guidelines which limit interest rate and credit risk, assist in the management of IRR and provide a source of liquidity. In establishing our investment strategies, we consider our business plans, the economic environment, our interest rate sensitivity position, the types of securities held and other factors.

Federally chartered savings associations have authority to invest in various types of assets, including U.S. Treasury obligations; securities of government agencies and GSEs; mortgage-backed securities, including collateralized mortgage obligations, or CMOs, and real estate mortgage investment conduits, or REMICs; certain certificates of deposit of insured banks and federally chartered savings associations; certain bankers acceptances; and, subject to certain limits, corporate securities, commercial paper and mutual funds. Our investment policy also permits us to invest in certain derivative financial instruments. We do not use derivatives for trading purposes. As a member of the Federal Home Loan Bank, or FHLB, of New York, or FHLB-NY, Astoria Bank is required to maintain a specified investment in the capital stock of the FHLB-NY. See “Regulation and Supervision - Federal Home Loan Bank System.”

Pursuant to the terms of the Merger Agreement, we are limited in our ability to (i) make material investments, (ii) transfer our material assets and (iii) materially restructure or change our investment portfolio or interest rate exposure, in each case, without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

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Securities

At December 31, 2015, our securities portfolio totaled $2.71 billion, or 18% of total assets, and was comprised primarily of mortgage-backed securities. At December 31, 2015, our mortgage-backed securities, which were primarily collateralized by residential mortgage loans, totaled $2.40 billion, or 89% of total securities, of which $2.13 billion, or 79% of total securities, were REMIC and CMO securities. Substantially all of our REMIC and CMO securities had fixed interest rates and were guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae as issuer, with the balance of this portfolio comprised of privately issued securities, which were primarily investment grade securities. In addition to our REMIC and CMO securities, at December 31, 2015, we had $272.0 million, or 10% of total securities, in mortgage-backed pass-through certificates guaranteed by either Fannie Mae, Freddie Mac or Ginnie Mae. These securities provide liquidity, collateral for borrowings and minimal credit risk while providing appropriate returns and are an attractive alternative to other investments due to the wide variety of maturity and repayment options available.

Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees that reduce credit risk and structured enhancements that reduce IRR. However, mortgage-backed securities are more liquid than individual mortgage loans and more easily used to collateralize our borrowings.In general, our mortgage-backed securities are weighted at no more than 20% for regulatory risk-based capital purposes, compared to the 50% risk weighting assigned to most non-securitized non-delinquent residential mortgage loans. While our mortgage-backed securities carry a reduced credit risk compared to our whole loans, they, along with whole loans, remain subject to the risk of a fluctuating interest rate environment. Changes in interest rates affect both the prepayment rate and estimated fair value of mortgage-backed securities and mortgage loans.

In addition to mortgage-backed securities, at December 31, 2015, we had $311.3 million of other securities, consisting primarily of obligations of GSEs which, by their terms, may be called by the issuer, typically after the passage of a fixed period of time. At December 31, 2015, the amortized cost of callable securities totaled $252.7 million. During the year ended December 31, 2015, eight securities with a carrying value of $108.4 million were called. In addition, we had $60.0 million of corporate debt securities that were all investment grade securities.

At December 31, 2015, our securities available-for-sale totaled $416.8 million and our securities held-to-maturity totaled $2.30 billion. For further discussion of our securities portfolio, see Item 7, “MD&A,” Note 1 and Note 3 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” and the tables that follow.

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The following table sets forth the composition of our available-for-sale and held-to-maturity securities portfolios at their respective carrying values in dollar amounts and percentages of the portfolios at the dates indicated.  Our available-for-sale securities portfolio is carried at estimated fair value and our held-to-maturity securities portfolio is carried at amortized cost.

	At December 31,
	2015				2014				2013
(Dollars in Thousands)	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Securities available-for-sale:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	330,539	79.31	%	$	268,998	69.99	%	$	286,074	71.22	%
Non-GSE issuance REMICs and CMOs	3,054		0.73		5,104		1.33		7,572		1.89
GSE pass-through certificates	11,264		2.70		13,557		3.53		16,888		4.20
Obligations of GSEs	71,939		17.26		96,698		25.16		91,153		22.69
Fannie Mae stock	2		—		2		—		3		—
Total securities available-for-sale	$	416,798	100.00	%	$	384,359	100.00	%	$	401,690	100.00	%
Securities held-to-maturity:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	1,361,907	59.30	%	$	1,575,402	73.83	%	$	1,474,506	79.73	%
Non-GSE issuance REMICs and CMOs	198		0.01		2,482		0.12		3,833		0.21
GSE pass-through certificates	260,707		11.35		281,685		13.20		282,473		15.27
Multi-family mortgage-backed securities:
GSE issuance REMICs	434,587		18.92		154,381		7.24		—		—
Obligations of GSEs	178,967		7.79		119,336		5.59		88,128		4.76
Corporate debt securities	60,000		2.61		—		—		—		—
Other	433		0.02		518		0.02		586		0.03
Total securities held-to-maturity	$	2,296,799	100.00	%	$	2,133,804	100.00	%	$	1,849,526	100.00	%

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The following contractual maturity table sets forth certain information regarding the amortized costs, estimated fair values and weighted average yields of our FHLB-NY stock, securities available-for-sale and securities held-to-maturity at December 31, 2015 and does not reflect the effect of prepayments or scheduled principal amortization on our REMICs, CMOs and pass-through certificates or the effect of callable features on our obligations of GSEs.

	Within One Year						Over One to Five Years						Over Five to Ten Years						Over Ten Years					Total Securities
(Dollars in Thousands)	Amortized Cost			Weighted Average Yield			Amortized Cost			Weighted Average Yield			Amortized Cost			Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Estimated Fair Value		Weighted Average Yield
FHLB-NY stock (1)(2)		$	—		—	%		$	—		—	%		$	—		—	%	$	131,137		4.10	%	$	131,137	$	131,137		4.10	%
Securities available-for-sale:
Residential REMICs and CMOs:
GSE issuance		$	—		—	%		$	1,016		4.25	%		$	6,700		3.76	%	$	323,383		2.48	%	$	331,099	$	330,539		2.51	%
Non-GSE issuance		—			—			2,986			3.29			62			2.77		—			—		3,048		3,054			3.28
GSE pass-through certificates		123			6.75			344			4.46			4,969			2.36		5,345			2.65		10,781		11,264			2.62
Obligations of GSEs (3)		—			—			—			—			73,701			2.17		—			—		73,701		71,939			2.17
Fannie Mae stock (1)(4)		—			—			—			—			—			—		15			—		15		2			—
Total securities available-for-sale		$	123		6.75	%		$	4,346		3.61	%		$	85,432		2.31	%	$	328,743		2.48	%	$	418,644	$	416,798		2.46	%
Securities held-to-maturity:
Residential REMICs and CMOs:
GSE issuance		$	—		—	%		$	2,340		1.30	%		$	36,855		3.09	%	$	1,322,712		2.45	%	$	1,361,907	$	1,355,914		2.47	%
Non-GSE issuance		—			—			—			—			—			—		198			4.75		198		193			4.75
GSE pass-through certificates		1			9.60			32			9.09			—			—		260,674			2.18		260,707		258,829			2.18
Multi-family REMICs - GSE issuance		—			—			—			—			—			—		434,587			2.57		434,587		433,508			2.57
Obligations of GSEs (3)		—			—			—			—			178,967			2.53		—			—		178,967		178,707			2.53
Corporate debt securities		—			—			—			—			50,000			3.51		10,000			4.00		60,000		58,507			3.59
Other		1			3.13			431			7.23			—			—		1			7.00		433		434			7.23
Total securities held-to-maturity		$	2		6.37	%		$	2,803		2.30	%		$	265,822		2.79	%	$	2,028,172		2.45	%	$	2,296,799	$	2,286,092		2.49	%

(1) Equity securities have no stated maturities and are therefore classified in the over ten years category.

(2) The carrying amount of FHLB-NY stock equals cost.  The weighted average yield represents the 2015 third quarter annualized dividend rate declared by the FHLB-NY in November 2015.

(3) Substantially all are callable in 2016 and at various times thereafter.

(4) The weighted average yield of Fannie Mae stock reflects the Federal Housing Finance Agency decision to suspend dividend payments indefinitely.

The following table sets forth the aggregate amortized cost and estimated fair value of our securities where the aggregate amortized cost of securities from a single issuer exceeds 10% of our stockholders’ equity at December 31, 2015.

(In Thousands)	Amortized Cost		Estimated Fair Value
Fannie Mae	$	1,140,434	$	1,129,301
Freddie Mac	830,816		831,185

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Sources of Funds

General

Our primary sources of funds are the cash flows provided by our deposit gathering activities and investing activities, including principal and interest payments on loans and securities. Our other sources of funds are provided by operating activities (primarily net income) and borrowing activities.

Deposits

We offer a variety of deposit accounts with a range of interest rates and terms. We presently offer NOW and demand deposit accounts, money market accounts, passbook and statement savings accounts and certificates of deposit. At December 31, 2015, our deposits totaled $9.11 billion. Of the total deposit balance, $849.0 million, or 9%, represent Individual Retirement Accounts. We held no brokered deposits at December 31, 2015.

The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates, pricing of deposits and competition. Our deposits are primarily obtained from areas surrounding our banking offices. We rely primarily on our sales and marketing efforts,including print advertising, competitive rates, quality service, our PEAK Process, new products, our business banking initiatives and long-standing customer relationships to attract and retain these deposits. When we determine the levels of our deposit rates, consideration is given to local competition, yields of U.S. Treasury securities and the rates charged for other sources of funds. Our strong level of core deposits has contributed to our low cost of funds.

Core deposits represented 78% of total deposits at December 31, 2015. Our deposit growth strategy includes expanding our business banking sales force and expanding our branch network into other prime locations on Long Island and in Manhattan. We opened a branch in Long Island City, New York in late 2015. We focus on small and middle market businesses within our market area in order to further increase core deposits. Total deposits included $1.05 billion of business deposits at December 31, 2015, an increase of 13% since December 31, 2014, substantially all of which were core deposits, reflecting the expansion of our business banking operations, a component of the strategic shift in our balance sheet.

For further discussion of our deposits, see Item 7, “MD&A,” Note 7 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” and the tables that follow.

The following table presents our deposit activity for the periods indicated.

	For the Year Ended December 31,
(Dollars in Thousands)	2015			2014			2013
Opening balance	$	9,504,909		$	9,855,310		$	10,443,958
Net withdrawals	(436,225		)	(401,756		)	(651,265		)
Interest credited	37,343			51,355			62,617
Ending balance	$	9,106,027		$	9,504,909		$	9,855,310
Net decrease	$	398,882		$	350,401		$	588,648
Percentage decrease	4.20		%	3.56		%	5.64		%

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The following table sets forth the maturity periods of our certificates of deposit in amounts of $100,000 or more at December 31, 2015.

(In Thousands)	Amount
Within three months	$	159,953
Over three to six months	56,591
Over six to twelve months	50,881
Over twelve months	323,161
Total	$	590,586

The following table sets forth the distribution of our average deposit balances for the periods indicated and the weighted average interest rates for each category of deposit presented.

	For the Year Ended December 31,
	2015							2014							2013
(Dollars in Thousands)	Average Balance		Percent of Total		Weighted Average Rate			Average Balance		Percent of Total		Weighted Average Rate			Average Balance		Percent of Total		Weighted Average Rate
NOW	$	1,342,958	14.60	%		0.06	%	$	1,236,760	12.82	%		0.06	%	$	1,221,094	12.00	%		0.06	%
Non-interest bearing NOW and demand deposit	928,022		10.09			—		897,517		9.30			—		873,151		8.58			—
Money market	2,459,170		26.73			0.26		2,187,718		22.68			0.25		1,824,729		17.93			0.31
Savings	2,186,704		23.77			0.05		2,364,679		24.52			0.05		2,659,433		26.13			0.05
Total	6,916,854		75.19			0.12		6,686,674		69.32			0.11		6,578,407		64.64			0.12
Certificates of deposit (1):
Within one year	404,862		4.40			0.07		508,160		5.27			0.07		705,385		6.93			0.07
Over one to three years	605,168		6.58			0.74		890,318		9.23			0.83		1,199,758		11.79			0.96
Over three to five years	1,267,179		13.78			1.91		1,552,188		16.09			2.33		1,677,391		16.48			2.56
Over five years	1,285		0.01			1.71		901		0.01			1.66		516		0.01			1.74
Jumbo	3,544		0.04			0.11		8,064		0.08			0.14		15,247		0.15			0.16
Total	2,282,038		24.81			1.27		2,959,631		30.68			1.48		3,598,297		35.36			1.53
Total deposits	$	9,198,892	100.00	%		0.41	%	$	9,646,305	100.00	%		0.53	%	$	10,176,704	100.00	%		0.62	%

(1) Terms indicated are original, not term remaining to maturity.

The following table presents, by rate categories, the remaining periods to maturity of our certificates of deposit outstanding at December 31, 2015 and the balances of our certificates of deposit outstanding at December 31, 2015, 2014 and 2013.

	Period to Maturity From December 31, 2015									At December 31,
(In Thousands)	Within One Year		Over One to Two Years		Over Two to Three Years			Over Three Years		2015		2014		2013
Certificates of deposit rate categories:
0.49% or less	$	487,362	$	69,274		$	134	$	—	$	556,770	$	763,913	$	949,313
0.50% to 0.99%	52,406		65,060			30,957		—		148,423		96,535		116,525
1.00% to 1.99%	76,044		258,278			153,742		489,994		978,058		910,355		1,024,184
2.00% to 2.99%	310,223		120			23		75		310,441		502,012		555,463
3.00% to 3.99%	206		12			103		39		360		422,391		646,118
4.00% and over	—		—			130		—		130		300		194
Total	$	926,241	$	392,744		$	185,089	$	490,108	$	1,994,182	$	2,695,506	$	3,291,797

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Borrowings

Borrowings are used as a complement to deposit gathering as a funding source for asset growth and are an integral part of our IRR management strategy. We utilize federal funds purchased and we enter into reverse repurchase agreements (securities sold under agreements to repurchase) with approved securities dealers and the FHLB-NY. Reverse repurchase agreements are accounted for as borrowings and are secured by the securities sold under the agreements. We also obtain overnight and term advances from the FHLB-NY. At December 31, 2015, FHLB-NY advances totaled $2.18 billion, or 55% of total borrowings. Such advances are generally secured by a blanket lien against, among other things, our residential mortgage loan portfolio and our investment in FHLB-NY stock. The maximum amount that the FHLB-NY will advance, for purposes other than for meeting withdrawals, fluctuates from time to time in accordance with the policies of the FHLB-NY. See “Regulation and Supervision - Federal Home Loan Bank System.” Occasionally, we will obtain funds through the issuance of unsecured debt obligations. These obligations are classified as other borrowings in our consolidated statements of financial condition. At December 31, 2015, borrowings totaled $3.96 billion.

Included in our borrowings are various obligations which, by their terms, may be called by the counterparty. At December 31, 2015, we had $1.95 billion of callable borrowings. At December 31, 2015, $1.00 billion of these borrowings were contractually callable by the counterparty within one year 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. The remaining $950.0 million of callable borrowings at December 31, 2015 are contractually callable by the counterparty in 2017.

For further information regarding our borrowings, including our borrowings outstanding, average borrowings, maximum borrowings and weighted average interest rates at and for each of the years ended December 31, 2015, 2014 and 2013, see Item 7, “MD&A,” and Note 8 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

Market Area and Competition

Astoria Bank has been, and continues to be, a community-oriented federally chartered savings association offering a variety of financial services to meet the needs of the communities it serves. Our retail banking network includes multiple delivery channels including full service banking offices, automated teller machines, or ATMs, and telephone, internet and mobile banking capabilities. We consider our strong retail banking network, together with our reputation for financial strength and customer service, as well as our competitive pricing, as our major strengths in attracting and retaining customers in our market areas. Our business banking operations also generate new core relationships within the communities we serve and deepen our existing relationships.

Astoria Bank’s deposit gathering sources are primarily concentrated in the communities surrounding Astoria Bank’s banking offices in Queens, Kings (Brooklyn), Nassau, Suffolk, Westchester and New York (Manhattan) counties of New York. Astoria Bank ranked eighth in deposit market share in the Long Island market, which includes the counties of Queens, Kings, Nassau and Suffolk, with a 4% market share based on the annual Federal Deposit Insurance Corporation, or FDIC, “Summary of Deposits - Market Share Report” dated June 30, 2015.

Astoria Bank originates multi-family and commercial real estate loans, primarily on rent controlled and rent stabilized apartment buildings located in the greater New York metropolitan area and originates residential mortgage loans through its banking and loan production offices in New York, through a broker network covering four states, primarily along the East Coast, and through a third party loan origination program covering 13 states and the District of Columbia. Our various loan origination programs provide efficient and diverse delivery channels for deployment of our cash flows. Additionally, our broker and third party residential loan origination programs provide geographic diversification, reducing our exposure to concentrations of credit risk.

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The New York metropolitan area has a high density of financial institutions, a number of which are significantly larger and have greater financial resources than we have. Our competition for loans, both locally and nationally, comes principally from commercial banks, savings banks, savings and loan associations, mortgage banking companies and credit unions. U.S. government activism in banking and mortgage banking, through regulation and examination, a sustained, low interest rate environment and rapidly evolving traditional and non-traditional competition in our marketplace, have combined to adversely impact current and projected operating results. The U.S. government's intervention in the mortgage and credit markets has resulted in a narrowing of mortgage spreads, lower yields and accelerated mortgage prepayments. We have expanded our multi-family and commercial real estate lending and business banking operations. These business lines are also being aggressively pursued by a number of competitors, both large and small. Our most direct competition for deposits comes from commercial banks, savings banks, savings and loan associations and credit unions. We also face competition for deposits from money market mutual funds and other corporate and government securities funds as well as from other financial intermediaries such as brokerage firms and insurance companies.

Subsidiary Activities

We have two direct wholly-owned subsidiaries, Astoria Bank and AF Insurance Agency, Inc., which are reported on a consolidated basis. AF Insurance Agency, Inc. is a licensed life insurance agency which, through contractual agreements with various third parties, makes insurance products available primarily to the customers of Astoria Bank.

At December 31, 2015, the following were wholly-owned subsidiaries of Astoria Bank and are reported on a consolidated basis.

AF Agency, Inc. was formed in 1990 and makes various annuity products available primarily to the customers of Astoria Bank through an unaffiliated third party vendor. Astoria Bank is reimbursed for expenses it incurs on behalf of AF Agency, Inc. Fees generated by AF Agency, Inc. totaled $2.3 million for the year ended December 31, 2015.

Astoria Federal Mortgage Corp., or AF Mortgage, is an operating subsidiary through which Astoria Bank engages in lending activities primarily outside the State of New York through our third party loan origination program.

Astoria Federal Savings and Loan Association Revocable Grantor Trust was formed in November 2000 in connection with the establishment of a BOLI program by Astoria Bank. Premiums paid to purchase BOLI in 2000 and 2002 totaled $350.0 million. The carrying amount of our investment in BOLI was $439.6 million, or 3% of total assets, at December 31, 2015. See Note 1 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” for further discussion of BOLI.

Fidata Service Corp., or Fidata, was incorporated in the State of New York in November 1982. Fidata qualified as a Connecticut passive investment company and for alternative tax treatment, through 2014, under Article 9A of the New York State, or NYS, tax law. Fidata maintains offices in Norwalk, Connecticut and invests in loans secured by real property which qualify as intangible investments permitted to be held by a Connecticut passive investment company. Fidata held mortgage loans totaling $2.88 billion at December 31, 2015.

Marcus I Inc. was incorporated in the State of New York in April 2006 and was formed to serve as assignee of certain loans in default and REO properties. Marcus I Inc. assets were not material to our financial condition at December 31, 2015.

Suffco Service Corporation, or Suffco, serves as document custodian for the loans of Astoria Bank and Fidata and certain loans being serviced for Fannie Mae and other investors.

Astoria Bank has four additional subsidiaries, one of which is a single purpose entity that has an interest in a real estate investment which is not material to our financial condition and the remaining three are inactive and have no assets.

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Personnel

As of December 31, 2015, we had 1,501 full-time employees and 100 part-time employees, or 1,551 full time equivalents.  The employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good.

Regulation and Supervision

General

Astoria Bank is subject to extensive regulation, examination and supervision by the OCC, as its primary federal regulator, and by the FDIC, as its deposit insurer. We, as a unitary savings and loan holding company, are regulated, examined and supervised by the FRB and are subject to FRB reporting requirements. Astoria Bank is a member of the FHLB-NY and its deposit accounts are insured up to applicable limits by the FDIC under the Deposit Insurance Fund, or DIF. Astoria Bank must file reports with the OCC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other financial institutions. The OCC periodically performs safety and soundness examinations of Astoria Bank and tests its compliance with various regulatory requirements. The FDIC reserves the right to do so as well. The OCC has primary enforcement responsibility over Astoria Bank and has substantial discretion to impose enforcement actions if Astoria Bank fails to comply with applicable regulatory requirements, particularly with respect to its capital requirements. In addition, the FDIC has the authority to recommend to the OCC that enforcement action be taken with respect to Astoria Bank and, if action is not taken by the OCC, the FDIC has authority to take such action under certain circumstances.

We are also subject to examination, regulation and supervision by the CFPB, which is authorized to supervise certain consumer financial services companies and insured depository institutions with more than $10 billion in total assets, such as Astoria Bank, for consumer protection purposes. The CFPB has exclusive examination and primary enforcement authority with respect to compliance with federal consumer financial protection laws and regulations by institutions under its supervision and is authorized to conduct investigations to determine whether any person is, or has, engaged in conduct that violates such laws or regulations.

This regulation and supervision establishes a comprehensive framework to regulate and control the activities in which we can engage and is intended primarily for the protection of the DIF, the depositors and other consumers. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulation, whether by the OCC, the FDIC, the CFPB, the FRB or U.S. Congress, could have a material adverse impact on Astoria Bank and our respective operations.

The description of statutory provisions and regulations applicable to federally chartered savings associations and their holding companies and of tax matters set forth in this document does not purport to be a complete description of all such statutes and regulations and their effects on Astoria Bank and us. Other than the disclosures noted in this section and in Item 1A, “Risk Factors,” there is no additional guidance from our banking regulators which is likely to have a material impact on our results of operations, liquidity, capital or financial position.

Federally Chartered Savings Association Regulation

Business Activities

Astoria Bank derives its lending and investment powers from the Home Owners’ Loan Act, as amended, or HOLA, and the regulations of the OCC thereunder. Under these laws and regulations, Astoria Bank may invest in mortgage loans secured by residential and non-residential real estate, commercial and consumer loans, certain types of debt securities and certain other assets. Astoria Bank may also establish service corporations that may engage in activities

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not otherwise permissible for Astoria Bank, including certain real estate equity investments and securities and insurance brokerage activities. These investment powers are subject to various limitations, including (1) a prohibition against the acquisition of any corporate debt security unless the debt securities may be sold with reasonable promptness at a price that corresponds reasonably to their fair value and such securities are investment grade, (2) a limit of 400% of an association’s capital on the aggregate amount of loans secured by non-residential real estate property, (3) a limit of 20% of an association’s assets on commercial loans, with the amount of commercial loans in excess of 10% of assets being limited to small business loans, (4) a limit of 35% of an association’s assets on the aggregate amount of consumer loans and acquisitions of certain debt securities, (5) a limit of 5% of assets on non-conforming loans (certain loans in excess of the specific limitations of HOLA), and (6) a limit of the greater of 5% of assets or an association’s capital on certain construction loans made for the purpose of financing what is or is expected to become residential property.

In October 2006, the federal bank regulatory agencies, or the Agencies, published the “Interagency Guidance on Nontraditional Mortgage Product Risks,” or the Nontraditional Mortgage Guidance. The Nontraditional Mortgage Guidance describes sound practices for managing risk, as well as marketing, originating and servicing nontraditional mortgage products, which include, among other things, interest-only loans. The Nontraditional Mortgage Guidance sets forth supervisory expectations with respect to loan terms and underwriting standards, portfolio and risk management practices and consumer protection.

In December 2006, the Agencies published guidance entitled “Interagency Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the CRE Guidance, to address concentrations of commercial real estate loans in savings associations. The CRE Guidance reinforces and enhances the OCC’s existing regulations and guidelines for real estate lending and loan portfolio management, but does not establish specific commercial real estate lending limits. However, the CRE Guidance states that an institution is potentially exposed to significant commercial real estate concentration risk, and should employ enhanced risk management practices, where (1) total commercial real estate loans represents 300% or more of its total capital and (2) the outstanding balance of such institution's commercial real estate loan portfolio has increased by 50% or more during the prior 36 months.

In June 2007, the Agencies issued the “Statement on Subprime Mortgage Lending,” or the Subprime Lending Statement, to address the growing concerns facing the subprime mortgage market, particularly with respect to rapidly rising subprime default rates that may indicate borrowers do not have the ability to repay adjustable rate subprime loans originated by financial institutions. In particular, the Agencies expressed concern in the Subprime Lending Statement that current underwriting practices do not take into account that many subprime borrowers are not prepared for “payment shock” and that the current subprime lending practices compound risk for financial institutions. The Subprime Lending Statement describes the prudent safety and soundness and consumer protection standards that financial institutions should follow to ensure borrowers obtain loans that they can afford to repay. The Subprime Lending Statement also reinforces the April 2007 Interagency Statement on Working with Mortgage Borrowers, in which the Agencies encouraged institutions to work constructively with residential borrowers who are financially unable or reasonably expected to be unable to meet their contractual payment obligations on their home loans.

In October 2009, the Agencies adopted a policy statement supporting prudent commercial real estate mortgage loan workouts, or the 2009 CRE Policy Statement. The 2009 CRE Policy Statement provides guidance for examiners, and for financial institutions that are working with commercial real estate mortgage loan borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. The 2009 CRE Policy Statement details risk-management practices for loan workouts that support prudent and pragmatic credit and business decision-making within the framework of financial accuracy, transparency, and timely loss recognition. Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers' financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined. The 2009 CRE Policy Statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing institutions’ risk-management practices for loan workout activities.

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In December 2015, the Agencies released a statement entitled “Statement on Prudent Risk Management for Commercial Real Estate Lending”, or the 2015 CRE Statement. In the 2015 CRE Statement, the Agencies express concerns about easing commercial real estate underwriting standards, direct financial institutions to maintain underwriting discipline and exercise risk management practices to identify, measure and monitor lending risks, and indicate that they will continue to pay special attention to commercial real estate lending activities and concentration going forward.

We have evaluated the Nontraditional Mortgage Guidance, the CRE Guidance, the Subprime Lending Statement, the 2009 CRE Policy Statement and the 2015 CRE Statement to determine our compliance and, as necessary, modified our risk management practices, underwriting guidelines and consumer protection standards. See “Lending Activities - Residential Mortgage Lending and Multi-Family and Commercial Real Estate Lending” for a discussion of our loan product offerings and related underwriting standards and “Asset Quality” in Item 7, “MD&A,” for information regarding our loan portfolio composition.

In January 2013, pursuant to the Reform Act, the Agencies issued final rules on appraisal requirements for higher-priced mortgage loans which became effective in January 2014. For mortgage loans with an annual percentage rate that exceeds a certain threshold, Astoria Bank must obtain an appraisal using a licensed or certified appraiser, subject to certain exemptions. The appraiser must prepare a written appraisal report based on a physical inspection of the interior of the property. Astoria Bank must also then disclose to applicants information about the purpose of the appraisal and provide them with a free copy of the appraisal report. Qualified Mortgages are exempt from these appraisal requirements.

In December 2013, the Agencies, the SEC and the Commodity Futures Trading Commission adopted final rules implementing Section 619 of the Reform Act. Section 619 and the final implementing rules are commonly known as the “Volcker Rule.” While Section 619 of the Reform Act provided that banking organizations were required to conform their activities and investments by July 21, 2014, in connection with issuing the final Volcker Rule, the FRB extended the conformance period until July 21, 2015. The FRB is permitted, by rule or order, to extend the conformance period for one year at a time, for a total of not more than 3 years. On December 18, 2014, the FRB issued an order, or the Extension Order, that further extends until July 21, 2016 the conformance period under the Volcker Rule. The FRB stated in the Extension Order that it intends to exercise its authority again and grant the final one-year extension in order to permit banking organizations until July 21, 2017 to conform to the requirements of the Volcker Rule.

The Volcker Rule prohibits banking entities from acquiring and retaining an ownership interest in, sponsoring, or having certain relationships with a “covered fund.” The Volcker Rule generally treats as a covered fund any entity that would be an investment company under the Investment Company Act of 1940, or the 1940 Act, but for the application of the exemptions from SEC registration set forth in Section 3(c)(1) (fewer than 100 beneficial owners) or Section 3(c)(7) (qualified purchasers) of the 1940 Act. In addition to prohibiting a banking entity from sponsoring or having an ownership interest in a covered fund, the Volcker Rule also limits the term of relationships between banking entities and covered funds and imposes new disclosure obligations for covered funds serviced by banking entities. The Volcker Rule also imposes corporate governance, compliance and control program, record keeping, regulatory reporting, training and audit requirements on banking entities. These requirements become more stringent and detailed based upon the size of the banking organization and scope and nature of its activities. Under the Volcker Rule, banking entities are also prohibited from engaging in proprietary trading.

We do not currently anticipate that the Volcker Rule will have a material effect on our operations as we do not engage in proprietary trading, do not have any ownership interest in any funds that are not permitted under the Volcker Rule and do not engage in any other of the activities prohibited by the Volcker Rule. As a depositary institution with over $10 billion in assets, we have adopted additional policies and systems to ensure compliance with the Volcker Rule.

Capital Requirements

At December 31, 2015, Astoria Bank exceeded each of its capital requirements with a Tier 1 leverage capital ratio of 11.29%, Common equity tier 1 risk-based capital ratio of 19.12%, Tier 1 risk-based capital ratio of 19.12% and Total risk-based capital ratio of 20.25%. At December 31, 2015, Astoria Financial Corporation also exceeded each of its

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capital requirements with a Tier 1 leverage capital ratio of 10.21% , Common equity tier 1 risk-based capital ratio of 16.00%, Tier 1 risk-based capital ratio of 17.37% and Total risk-based capital ratio of 18.51%.

Pursuant to the Reform Act, in July 2013, 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 doing so, the Final Capital Rules:

• Established a new minimum Common equity tier 1 risk-based capital ratio (common equity tier 1 capital to total risk-weighted assets) of 4.5% and increased the minimum Tier 1 risk-based capital ratio from 4.0% to 6.0%, while maintaining the minimum Total risk-based capital ratio of 8.0% and the minimum Tier 1 leverage capital ratio of 4.0%.

• Revised the rules for calculating risk-weighted assets to enhance their risk sensitivity.

• Phased out trust preferred securities and cumulative perpetual preferred stock as Tier 1 capital.

• 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 applied to the new Common equity tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio and the Total risk-based capital ratio, which means that 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%.

• Changed the definitions of capital categories for insured depository institutions for purposes of the Federal Deposit Insurance Corporation Improvement Act of 1991 prompt corrective action provisions.  Under these revised definitions, to be considered well-capitalized, an insured depository institution must have a Tier 1 leverage capital ratio of at least 5.0%, a Common equity tier 1 risk-based capital ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8.0% and a Total risk-based capital ratio of at least 10.0%.

The new minimum regulatory capital ratios and changes to the calculation of risk-weighted assets became effective for Astoria Bank and Astoria Financial Corporation on January 1, 2015. 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 established common equity Tier 1 capital as a new capital component. Common equity Tier 1 capital consists of common stock instruments that meet the eligibility criteria in the Final Capital Rules, retained earnings, accumulated other comprehensive income/loss and common equity Tier 1 minority interest. As a result, Tier 1 capital has two components: common equity Tier 1 capital and additional Tier 1 capital. The Final Capital Rules also revised the eligibility criteria for inclusion in additional Tier 1 and Tier 2 capital. As a result of these changes, certain non-qualifying capital instruments, including cumulative preferred stock and trust preferred securities, are excluded as a component of Tier 1 capital for institutions of our size.

The Final Capital Rules further require that certain items be deducted from common equity Tier 1 capital, including (1) goodwill and other intangible assets, other than mortgage servicing rights, or MSR, net of deferred tax liabilities, or DTLs; (2) deferred tax assets that arise from operating losses and tax credit carryforwards, net of valuation allowances and DTLs; (3) after-tax gain-on-sale associated with a securitization exposure; and (4) defined benefit pension fund assets held by a depository institution holding company, net of DTLs. In addition, banking organizations must deduct from common equity Tier 1 capital the amount of certain assets, including mortgage servicing assets, that exceed certain thresholds. The Final Capital Rules also allow all but the largest banking organizations to make a one-time election not to recognize unrealized gains and losses on available-for-sale debt securities in regulatory capital, as under prior capital rules.

The Final Capital Rules provide that the failure to maintain the minimum Conservation Buffer will result in restrictions on capital distributions and discretionary cash bonus payments to executive officers. If a banking organization’s

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Conservation Buffer is less than 0.625%, the banking organization may not make any capital distributions or discretionary cash bonus payments to executive officers. If the Conservation Buffer is greater than 0.625% but not greater than 1.25%, capital distributions and discretionary cash bonus payments are limited to 20% of net income for the four calendar quarters preceding the applicable calendar quarter (net of any such capital distributions), or Eligible Retained Income. If the Conservation Buffer is greater than 1.25% but not greater than 1.875%, the limit is 40% of Eligible Retained Income, and if the Conservation Buffer is greater than 1.875% but not greater than 2.5%, the limit is 60% of Eligible Retained Income. The preceding thresholds for the Conservation Buffer and related restrictions represent the fully phased in rules effective no later than January 1, 2019. Such thresholds will be phased in incrementally throughout the phase in period, with the lowest thresholds having become effective January 1, 2016. As a result, under the Final Capital Rules, if Astoria Bank fails to maintain the minimum Conservation Buffer, we will be subject to limits, and possibly prohibitions, on our ability to obtain capital distributions from Astoria Bank. If we do not receive sufficient cash dividends from Astoria Bank, then we may not have sufficient funds to pay dividends on our common and preferred stock, service our debt obligations or repurchase our common stock. In addition, if Astoria Bank fails to maintain the minimum Conservation Buffer, we may be limited in our ability to pay certain cash bonuses to our executive officers which may make it more difficult to retain key personnel.

In assessing an institution’s capital adequacy, the OCC takes into consideration not only these numeric factors but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where necessary. Astoria Bank, as a matter of prudent management, targets as its goal the maintenance of capital ratios that exceed these minimum requirements and that are consistent with Astoria Bank’s risk profile.

Stress Tests

The Reform Act requires national banks and federal savings associations with total consolidated assets of more than $10 billion to conduct annual stress tests. In October 2012, the OCC published its final rules requiring annual capital-adequacy stress tests for national banks and federal savings associations with consolidated assets of more than $10 billion, or the Stress Test Rule. Pursuant to the Stress Test Rule, Astoria Bank must conduct annual stress tests using financial data as of September 30, report the results of the stress test to the OCC on or before March 31 and publicly disclose a summary of the results of the stress test between June 15 and June 30.  The Stress Test Rule also requires each institution to establish and maintain a system of controls, oversight and documentation, including policies and procedures, designed to ensure that the stress testing processes used by the institution are effective in meeting the requirements of the rules. In December 2014, the OCC amended the Stress Test Rule to shift the dates of the annual stress testing cycle, or the Amended Stress Test Rule. In accordance with the Amended Stress Test Rule, commencing January 1, 2016, Astoria Bank must conduct its annual stress test using financial data as of December 31 of the prior year, report the results of the stress test to the OCC on or before July 31 and publicly disclose a summary of the results of its annual stress test between October 15 and October 31.

During the 2014 first quarter, the Agencies issued final guidance outlining high-level principles for implementation of the stress tests required by the Reform Act and the Stress Test Rule, or the Stress Test Guidance, which is applicable to all bank and savings and loan holding companies, national banks, state-member banks, state non-member banks, federal savings associations and state chartered savings associations with more than $10 billion but less than $50 billion in total consolidated assets. The Stress Test Guidance discusses supervisory expectations for stress test practices under the Stress Test Rule. The Stress Test Guidance states that a company is expected to ensure that projected balance sheet and risk-weighted assets remain consistent with regulatory and accounting changes, are applied consistently across the company, and are consistent with the economic scenarios provided by the OCC for use in the stress test and the company’s past history of managing through different business environments. Furthermore, the Stress Test Guidance states that a company must consider the results of stress testing in the company’s capital planning, assessment of capital adequacy and risk management practices.

In addition, in May 2012, the Agencies adopted final supervisory guidance which outlines high-level principles for general stress testing practices, or the May 2012 Guidance, which is applicable to all banking organizations with more than $10 billion in total consolidated assets. The May 2012 Guidance provides an overview of how a banking organization should structure its stress testing activities and ensure they fit into overall risk management. The May

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2012 Guidance outlines broad principles for a satisfactory stress testing framework and describes the manner in which stress testing should be employed as an integral component of risk management that is applicable at various levels of aggregation within a banking organization, as well as for contributing to capital and liquidity planning.

Interest Rate Risk

The Federal Deposit Insurance Corporation Improvement Act, or FDICIA, required that the Agencies revise their risk-based capital standards to take into account IRR concentration of risk and the risks of non-traditional activities. The OCC regulations do not include a specific IRR component of the risk based capital requirement. However, the OCC expects all federal savings associations to have an independent IRR measurement process in place that measures both earnings and capital at risk, as described in the Advisory on Interest Rate Risk Management, or the IRR Advisory, and a Joint Agency Policy Statement on IRR, or the 1996 IRR policy statement, each described below.

In June 1996, the Agencies adopted the 1996 IRR policy statement. The 1996 IRR policy statement provides guidance to examiners and bankers on sound practices for managing IRR. The 1996 IRR policy statement also outlines fundamental elements of sound management that have been identified in prior regulatory guidance and discusses the importance of these elements in the context of managing IRR. Specifically, the guidance emphasizes the need for active board of director and senior management oversight and a comprehensive risk management process that effectively identifies, measures and controls IRR.

In January 2010, the Agencies released the IRR Advisory to remind institutions of the supervisory expectations regarding sound practices for managing IRR. While some degree of IRR is inherent in the business of banking, the Agencies expect institutions to have sound risk management practices in place to measure, monitor and control IRR exposures, and IRR management should be an integral component of an institution’s risk management infrastructure. The Agencies expect all institutions to manage their IRR exposures using processes and systems commensurate with their earnings and capital levels, complexity, business model, risk profile and scope of operations, and the IRR Advisory reiterates the importance of effective corporate governance, policies and procedures, risk measuring and monitoring systems, stress testing, and internal controls related to the IRR exposures of institutions.

The IRR Advisory encourages institutions to use a variety of techniques to measure IRR exposure which includes simple maturity gap analysis, income measurement and valuation measurement for assessing the impact of changes in market rates as well as simulation modeling to measure IRR exposure. Institutions are encouraged to use the full complement of analytical capabilities of their IRR simulation models. The IRR Advisory also reminds institutions that stress testing, which includes both scenario and sensitivity analysis, is an integral component of IRR management. The IRR Advisory indicates that institutions should regularly assess IRR exposures beyond typical industry conventions, including changes in rates of greater magnitude (for example, up and down 300 and 400 basis points as compared to up and down 200 basis points which is the general practice) across different tenors to reflect changing slopes and twists of the yield curve.

The IRR Advisory emphasizes that effective IRR management not only involves the identification and measurement of IRR, but also provides for appropriate actions to control this risk. The adequacy and effectiveness of an institution’s IRR management process and the level of its IRR exposure are critical factors in the Agencies’ evaluation of an institution’s sensitivity to changes in interest rates and capital adequacy.

Prompt Corrective Regulatory Action

FDICIA established a system of prompt corrective action to resolve the problems of undercapitalized institutions. Under this system, the banking regulators are required to take certain, and authorized to take other, supervisory actions against undercapitalized institutions, based upon five categories of capitalization which FDICIA created: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized,” the severity of which depends upon the institution’s degree of capitalization. Generally, a capital restoration plan must be filed with the OCC within 45 days of the date an association receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” and the plan must be guaranteed

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by any parent holding company. In addition, various mandatory supervisory actions become immediately applicable to the institution, including restrictions on growth of assets and other forms of expansion.

Prior to January 1, 2015, under OCC regulations, an insured depository institution was considered well capitalized if its Total risk-based capital ratio was 10.0% or greater, its Tier 1 risk-based capital ratio was 6.0% or greater and its Tier 1 leverage capital ratio was 5.0% or greater, and it was not subject to any order or directive by the OCC to meet a specific capital level. Under the Final Capital Rules, described above, effective January 1, 2015, to be considered well capitalized, an insured depository institution must maintain a Total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a common equity Tier 1 risk-based capital ratio of 6.5% or greater and a Tier 1 leverage capital ratio of 5.0% or greater and not be subject to any order or directive by the OCC to meet a specific capital level. As of December 31, 2015, Astoria Bank’s capital ratios were above the minimum levels required to be considered well capitalized by the OCC, with a Total risk-based capital ratio of 20.25%, Tier 1 risk-based capital ratio of 19.12% and Tier 1 leverage capital ratio of 19.12%.

In addition to measures taken under the prompt corrective action provisions with respect to undercapitalized institutions, insured banks and their holding companies may be subject to potential enforcement actions by their regulators for unsafe and unsound practices in conducting their business or for violations of law or regulation, including the filing of a false or misleading regulatory report. Enforcement actions under this authority may include the issuance of cease and desist orders, the imposition of civil money penalties, the issuance of directives to increase capital, formal and informal agreements, or removal and prohibition orders against “institution-affiliated parties” (generally bank insiders). Further, the FRB may bring an enforcement action against a depository institution holding company either to address undercapitalization in the holding company or to require the holding company to take measures to remediate undercapitalization or other safety and soundness concerns in a depository institution subsidiary.

CFPB Regulation of Mortgage Origination and Servicing

Ability to Repay Rules. The CFPB adopted final rules, referred to as the “Ability to Repay Rules,” that (1) prohibit creditors, such as Astoria Bank, from extending mortgage loans without regard for the consumer’s ability to repay, (2) specify the types of income and assets that may be considered in the ability-to-repay determination, the permissible sources for verification, and the required methods of calculating a loan’s monthly payments and (3) establish certain protections from liability for loans that meet the requirements of a Qualified Mortgage. Previously, the Truth in Lending Act, or Regulation Z, prohibited creditors from extending higher-priced mortgage loans without regard for the consumer’s ability to repay. The Ability to Repay Rules extend application of this requirement to all loans secured by dwellings, not just higher-priced mortgages.

As defined by the CFPB, a Qualified Mortgage is a mortgage that meets the following standards prohibiting or limiting certain high risk products and features: (1) No excessive upfront points and fees - generally points and fees paid by the borrower must not exceed 3% of the total amount borrowed; (2) No toxic loan features - prohibited features include interest-only loans, negative-amortization loans, terms beyond 30 years and balloon loans; and (3) Limit on debt-to-income ratios - borrowers’ total debt-to-income ratios must be no higher than 43%, with certain limited exceptions for loans eligible for purchase, guarantee or insurance by the GSEs or a federal agency.

In October 2014, the CFPB published a final rule that allows lenders to cure loans that do not meet the “points and fees” test under the Qualified Mortgage definition, but that otherwise satisfy the requirements of a Qualified Mortgage. Pursuant to the final rule, lenders will be able to “cure” loans for which the points and fees exceed the 3% cap for Qualified Mortgages by refunding the points and fees that exceed the 3% cap, with interest within 210 days after closing of the loan. The cure mechanism is available for loans closed on or after November 3, 2014 and before January 10, 2021.

Lenders that generate Qualified Mortgage loans will receive specific protections against borrower lawsuits that could result from failing to satisfy the Ability to Repay Rules. There are two levels of liability protections for Qualified Mortgages: the Safe Harbor protection and the Rebuttable Presumption protection. Safe Harbor Qualified Mortgages are lower-priced loans with interest rates closer to the prime rate, issued to borrowers with high credit scores. Borrowers

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suing lenders under Safe Harbor Qualified Mortgages are faced with overcoming the pre-determined legal conclusion that the lender has satisfied the Ability to Repay Rules. Rebuttable Presumption Qualified Mortgages are loans at higher prices that are granted to borrowers with lower credit scores. Lenders generating Rebuttable Presumption Qualified Mortgages receive the protection of a presumption that they have legally satisfied the Ability to Repay Rules while the borrower can rebut that presumption by proving that the lender did not consider the borrower’s living expenses after their mortgage and other debts. In addition, Qualified Mortgages are exempt from the new appraisal requirement rules described under “Federally Chartered Savings Association Regulation - Business Activities.”

As a result of the adoption of the Ability to Repay Rules, we have changed our underwriting practices and, as of January 10, 2014, only originate mortgage loans that meet the requirements of a Qualified Mortgage.

Mortgage Servicing Rules. The CFPB also issued final rules concerning mortgage servicing standards, or the Mortgage Servicing Rules, which amend both the Real Estate Settlement Procedures Act, or Regulation X, and Regulation Z. The Regulation X rule requires servicers to provide certain information to borrowers, to provide protections to such borrowers in connection with force-placed insurance, to establish policies and procedures to achieve certain delineated objectives, to correct errors asserted by borrowers and to evaluate borrowers’ applications for available loss mitigation options. The Regulation Z rule requires creditors, assignees and servicers to provide interest rate adjustment notices for ARM loans, periodic statements for residential mortgage loans, prompt crediting of mortgage payments and responses to requests for payoff amounts.

In November 2014, the CFPB published proposed amendments to the Mortgage Servicing Rules, which would further amend both Regulation X and Regulation Z. The proposed rule would, among other things, require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan, expand consumer protections to surviving family members and other homeowners, require servicers to notify borrowers when loss mitigation applications are complete, clarify when a borrower becomes delinquent and provide more information to borrowers in bankruptcy.

Loan Originator Qualification and Compensation Rule. The CFPB also issued a final rule implementing requirements and restrictions imposed by the Reform Act concerning, among other things, qualifications of individual loan originators and the compensation practices with respect to such persons. The rule prohibits loan origination organizations from basing compensation for themselves or individual loan originators on any of the origination transaction’s terms or conditions and prohibits such persons from receiving compensation from another person in connection with the same transaction. The rule also imposes duties on loan originator organizations to ensure that their individual loan originators meet certain licensing or qualification standards and extends existing recordkeeping requirements.

Enforcement. The CFPB has exclusive examination and primary enforcement authority with respect to compliance with federal consumer financial protection laws and regulations by institutions under its supervision and is authorized, individually or jointly with the Agencies, to conduct investigations to determine whether any person is, or has, engaged in conduct that violates such laws or regulations. The CFPB may bring an administrative enforcement proceeding or civil action in Federal district court. In addition, in accordance with a memorandum of understanding entered into between the CFPB and the Department of Justice, or DOJ, the two agencies have agreed to coordinate efforts related to enforcing the fair lending laws, which includes information sharing and conducting joint investigations, and have done so on a number of occasions in the past year. As an independent bureau within the FRB, the CFPB may impose requirements more severe than the previous bank regulatory agencies.

Insurance of Deposit Accounts

Astoria Bank is a member of the DIF and pays its deposit insurance assessments to the DIF. In accordance with rules adopted by the FDIC in 2011 pursuant to the Reform Act, which became effective in April 2011, the assessment base for deposit insurance assessments was changed from an institution’s deposit base to its average consolidated total assets minus average tangible equity. In adopting such rules, the FDIC also established a new assessment rate schedule, as well as alternative rate schedules that become effective when the DIF reserve ratio reaches certain levels.

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In determining the deposit insurance assessments to be paid by insured depository institutions, the FDIC generally assigns an institution to one of four risk categories based on the institution’s most recent supervisory ratings and capital ratios. For example, for institutions within Risk Category I, assessment rates generally depend upon a combination of CAMELS (capital adequacy, asset quality, management, earnings, liquidity, sensitivity to market risk) component ratings and financial ratios. In addition, an institution’s base assessment rate is generally subject to following adjustments: (1) a decrease for the institution’s long-term unsecured debt, including most senior and subordinated debt, (2) an increase for brokered deposits above a threshold amount and (3) an increase for unsecured debt held that is issued by another insured depository institution.

However, for large insured depository institutions, generally defined as those with at least $10 billion in total assets, such as Astoria Bank, the FDIC has eliminated risk categories when calculating the initial base assessment rates and now combine CAMELS ratings and financial measures into two scorecards to calculate assessment rates, one for most large insured depository institutions and another for highly complex insured depository institutions (which are generally those with more than $50 billion in total assets that are controlled by a parent company with more than $500 billion in total assets). Each scorecard has two components - a performance score and loss severity score, which are combined and converted to an initial assessment rate. The FDIC has the ability to adjust a large or highly complex insured depository institution’s total score by a maximum of 15 points, up or down, based upon significant risk factors that are not captured by the scorecard. Under the current assessment rate schedule, the initial base assessment rate for large and highly complex insured depository institutions ranges from five to 35 basis points, and the total base assessment rate, after applying the unsecured debt and brokered deposit adjustments, ranges from two and one-half to 45 basis points.

The FDIC annually establishes for the DIF a designated reserve ratio, or DRR, of estimated insured deposits. The FDIC has announced that the DRR for 2016 will remain at 2.00%, which is the same ratio that has been in effect since January 1, 2011. The FDIC is authorized to change deposit insurance assessment rates as necessary to maintain the DRR, without further notice-and-comment rulemaking, provided that: (1) no such adjustment can be greater than three basis points from one quarter to the next, (2) adjustments cannot result in rates more than three basis points above or below the base rates and (3) rates cannot be negative.

As a result of the failures of a number of banks and thrifts during the financial crisis, there was a significant increase in the loss provisions of the DIF. This resulted in a decline in the actual DIF reserve ratio during 2008 below the then minimum DRR of 1.15%. As a result, the FDIC was required to establish a restoration plan to restore the reserve ratio to 1.15% within a period of eight years.

The Reform Act subsequently increased the minimum DRR for the DIF from 1.15% to 1.35% of insured deposits, which must be reached by September 30, 2020, and provides that in setting the assessment rates necessary to meet the new requirement, the FDIC shall offset the effect of this provision on insured depository institutions with total consolidated assets of less than $10 billion, so that more of the cost of raising the reserve ratio will be borne by the institutions with more than $10 billion in assets, such as Astoria Bank. In October 2010, the FDIC adopted a restoration plan to ensure that the DIF reserve ratio reaches 1.35% by September 30, 2020, as required by the Reform Act.

On October 22, 2015, the FDIC issued a proposal to increase the reserve ratio for the DIF to the minimum level of 1.35% as required by the Reform Act. The proposed rule would impose on Astoria Bank, as an insured depository institution with $10 billion or more in total consolidated assets, a quarterly surcharge equal to an annual rate of 4.5 basis points applied to Astoria Bank’s deposit insurance assessment base, after making certain adjustments. If the rule is adopted as proposed, the FDIC expects that these surcharges would commence in 2016 and continue for approximately eight quarters; however, if the reserve ratio for the DIF does not reach the required level by December 31, 2018, the FDIC would impose a shortfall assessment on March 31, 2019, which would be collected on June 30, 2019.

Our expense for FDIC deposit insurance assessments totaled $15.6 million in 2015 and $25.3 million in 2014. The FDIC deposit insurance assessments are in addition to the assessments for payments on the bonds issued in the late 1980s by the Financing Corporation to recapitalize the now defunct Federal Savings and Loan Insurance Corporation.

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The Financing Corporation payments will continue until the bonds mature in 2017 through 2019. Our expense for these payments totaled $822,000 in 2015 and $884,000 in 2014.

Loans to One Borrower

Under the HOLA, savings associations are generally subject to the national bank limits on loans to one borrower. Generally, savings associations may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of the institution's unimpaired capital and surplus. Additional amounts may be loaned, not in excess of 10% of unimpaired capital and surplus, if such loans or extensions of credit are secured by readily-marketable collateral. Astoria Bank is in compliance with the applicable loans to one borrower limitations. At December 31, 2015, Astoria Bank’s largest aggregate amount of loans to one borrower totaled $56.1 million. All of the loans for the largest borrower were performing in accordance with their terms and the borrower had no affiliation with Astoria Bank.

Qualified Thrift Lender Test

The HOLA requires savings associations to meet a Qualified Thrift Lender, or QTL, test. Under the QTL test, a savings association is required to maintain at least 65% of its “portfolio assets” (total assets less (1) specified liquid assets up to 20% of total assets, (2) intangibles, including goodwill, and (3) the value of property used to conduct business) in certain “qualified thrift investments” (primarily mortgage loans secured by one-to-four family and multi-family residential properties and related investments, including certain mortgage-backed securities, credit card loans, student loans, and small business loans) on a monthly basis during at least 9 out of every 12 months. As of December 31, 2015, Astoria Bank maintained in excess of 87% of its portfolio assets in qualified thrift investments and had more than 65% of its portfolio assets in qualified thrift investments for each of the 12 months in the year ended December 31, 2015. Therefore, Astoria Bank qualified under the QTL test.

A savings association that fails the QTL test will immediately be prohibited from: (1) making any new investment or engaging in any new activity not permissible for a national bank, (2) paying dividends, unless such payment would be permissible for a national bank, is necessary to meet the obligations of a company that controls the savings association, and is specifically approved by the OCC and the FRB, and (3) establishing any new branch office in a location not permissible for a national bank in the association's home state. A savings association that fails to meet the QTL test is deemed to have violated the HOLA and may be subject to OCC enforcement action. In addition, if the association does not requalify under the QTL test within three years after failing the test, the association would be prohibited from retaining any investment or engaging in any activity not permissible for a national bank.

Limitation on Capital Distributions

The OCC regulations impose limitations upon certain capital distributions by savings associations, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions charged against capital.

The OCC regulates all capital distributions by Astoria Bank directly or indirectly to us, including dividend payments. A subsidiary of a savings and loan holding company, such as Astoria Bank, must file a notice or seek affirmative approval from the OCC at least 30 days prior to each proposed capital distribution. Whether an application is required is based on a number of factors including whether the institution qualifies for expedited treatment under the OCC rules and regulations or if the total amount of all capital distributions (including each proposed capital distribution) for the applicable calendar year exceeds net income for that year to date plus the retained net income for the preceding two years. During 2015, Astoria Bank was required to file such applications with the OCC for proposed capital distributions, and such applications were approved by the OCC. In addition, as a subsidiary of a savings and loan holding company, Astoria Bank must provide notice to the FRB at least 30 days prior to declaring a dividend. Astoria Bank paid dividends to Astoria Financial Corporation totaling $63.4 million in 2015.

Astoria Bank may not pay dividends to us if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements or if the

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dividend would violate a prohibition contained in any statute, regulation or agreement. Under the Federal Deposit Insurance Act, or FDIA, an insured depository institution such as Astoria Bank is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is used in the FDIA). Payment of dividends by Astoria Bank also may be restricted at any time at the discretion of the OCC if it deems the payment to constitute an unsafe and unsound banking practice.

Liquidity

Astoria Bank maintains sufficient liquidity to ensure its safe and sound operation, in accordance with OCC regulations.

Assessments

The OCC charges assessments to recover the costs of examining savings associations and their affiliates. Our expense for these assessments totaled $2.8 million in 2015 and $2.3 million in 2014.

Branching

Federally chartered savings associations may branch nationwide to the extent allowed by federal statute. All of Astoria Bank’s branches are located in New York.

Community Reinvestment

Under the CRA, as implemented by OCC regulations, a federally chartered savings association has a continuing and affirmative obligation, consistent with its safe and sound operation, to ascertain and meet the credit needs of its entire community, including low and moderate income areas. The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community. The CRA requires the OCC, in connection with its examination of a federally chartered savings association, to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution. The assessment focuses on three tests: (1) a lending test, to evaluate the institution’s record of making loans, including community development loans, in its designated assessment areas; (2) an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and areas and small businesses; and (3) a service test, to evaluate the institution’s delivery of banking services throughout its CRA assessment area, including low and moderate income areas. The CRA also requires all institutions to make public disclosure of their CRA ratings. Astoria Bank was rated as “outstanding” in its last CRA examination. Regulations require that we publicly disclose certain agreements that are in fulfillment of CRA. We have no such agreements in place at this time.

Transactions with Related Parties

Astoria Bank is subject to the affiliate and insider transaction rules set forth in Sections 23A, 23B, 22(g) and 22(h) of the Federal Reserve Act, or FRA, and Regulation W and Regulation O issued by the FRB. These provisions, among other things, prohibit, limit or place restrictions upon a savings institution extending credit to, or entering into certain transactions with, its affiliates (which for Astoria Bank would include us and our non-federally chartered savings association subsidiaries, if any), principal stockholders, directors and executive officers. The Reform Act expands the affiliate transaction rules in Sections 23A and 23B of the FRA to broaden the definition of affiliate and to apply this definition to securities lending, repurchase agreement and derivatives activities that Astoria Bank may have with an affiliate. This expansion became effective in July 2012. In addition, the FRB regulations include additional restrictions on savings associations under Section 11 of HOLA, including provisions prohibiting a savings association from making a loan to an affiliate that is engaged in non-bank holding company activities and provisions prohibiting a savings association from purchasing or investing in securities issued by an affiliate that is not a subsidiary. The FRB regulations also include certain specific exemptions from these prohibitions. The FRB and the OCC require each depository

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institution that is subject to Sections 23A and 23B to implement policies and procedures to ensure compliance with Regulation W.

Section 402 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, prohibits the extension of personal loans to directors and executive officers of issuers (as defined in Sarbanes-Oxley). The prohibition, however, does not apply to loans advanced by an insured depository institution, such as Astoria Bank, that is subject to the insider lending restrictions of Section 22(h) of the FRA.

Standards for Safety and Soundness

Pursuant to the requirements of FDICIA, as amended by the Riegle Community Development and Regulatory Improvement Act of 1994, the Agencies adopted guidelines establishing general standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, IRR exposure, asset growth, asset quality, earnings, compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder. In addition, the OCC adopted regulations pursuant to FDICIA to require a savings association that is given notice by the OCC that it is not satisfying any of such safety and soundness standards to submit a compliance plan to the OCC. If, after being so notified, a savings association fails to submit an acceptable compliance plan or fails in any material respect to implement an accepted compliance plan, the OCC must issue an order directing corrective actions and may issue an order directing other actions of the types to which a significantly undercapitalized institution is subject under the “prompt corrective action” provisions of FDICIA. If a savings association fails to comply with such an order, the OCC may seek to enforce such order in judicial proceedings and to impose civil money penalties. For further discussion, see “Regulation and Supervision - Federally Chartered Savings Association Regulation - Prompt Corrective Regulatory Action.”

Insurance Activities

Astoria Bank is generally permitted to engage in certain insurance activities through its subsidiaries. However, Astoria Bank is subject to regulations prohibiting depository institutions from conditioning the extension of credit to individuals upon either the purchase of an insurance product or annuity or an agreement by the consumer not to purchase an insurance product or annuity from an entity that is not affiliated with the depository institution. The regulations also require prior disclosure of this prohibition to potential insurance product or annuity customers.

Privacy Protection

Astoria Bank is subject to OCC regulations implementing the privacy protection provisions of the Gramm-Leach Bliley Act, or Gramm-Leach. These regulations require Astoria Bank to disclose its privacy policy, including identifying with whom it shares “nonpublic personal information,” to customers at the time of establishing the customer relationship and annually thereafter. The regulations also require Astoria Bank to provide its customers with initial and annual notices that accurately reflect its privacy policies and practices. In addition, to the extent its sharing of such information is not covered by an exception, Astoria Bank is required to provide its customers with the ability to “opt-out” of having Astoria Bank share their nonpublic personal information with unaffiliated third parties.

Astoria Bank is subject to regulatory guidelines establishing standards for safeguarding customer information. These regulations implement certain provisions of Gramm-Leach. The guidelines describe the Agencies’ expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities. The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

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Anti-Money Laundering and Customer Identification

Astoria Bank is subject to regulations implementing the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act. The USA PATRIOT Act gives the federal government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements.  By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies.  Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.

Among other requirements, Title III of the USA PATRIOT Act and the related regulations impose the following requirements with respect to financial institutions:

• Establishment of anti-money laundering programs.

• Establishment of a program specifying procedures for obtaining identifying information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time.

• Establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering.

• Prohibition on correspondent accounts for foreign shell banks and compliance with recordkeeping obligations with respect to correspondent accounts of foreign banks.

In addition, bank regulators are directed to consider a holding company’s effectiveness in combating money laundering when ruling on Bank Holding Company Act and Bank Merger Act applications.

Federal Home Loan Bank System

Astoria Bank is a member of the FHLB System which consists of twelve regional FHLBs. The FHLB provides a central credit facility primarily for member institutions. Astoria Bank, as a member of the FHLB-NY, is currently required to acquire and hold shares of the FHLB-NY Class B stock. The Class B stock has a par value of $100 per share and is redeemable upon five years notice, subject to certain conditions. The Class B stock has two subclasses, one for membership stock purchase requirements and the other for activity-based stock purchase requirements. The minimum stock investment requirement in the FHLB-NY Class B stock is the sum of the membership stock purchase requirement, determined on an annual basis at the end of each calendar year, and the activity-based stock purchase requirement, determined on a daily basis. For Astoria Bank, the membership stock purchase requirement is 0.15% of the Mortgage-Related Assets, as defined by the FHLB-NY, which consists principally of residential mortgage loans and mortgage-backed securities including CMOs and REMICs, held by Astoria Bank. The activity-based stock purchase requirement for Astoria Bank is equal to the sum of: (1) 4.5% of outstanding borrowings from the FHLB-NY; (2) 4.5% of the outstanding principal balance of Acquired Member Assets, as defined by the FHLB-NY, and delivery commitments for Acquired Member Assets; (3) a specified dollar amount related to certain off-balance sheet items, which for Astoria Bank is zero; and (4) a specified percentage ranging from 0% to 5% of the carrying value on the FHLB-NY’s balance sheet of derivative contracts between the FHLB-NY and Astoria Bank, which for Astoria Bank is also zero. The FHLB-NY can adjust the specified percentages and dollar amount from time to time within the ranges established by the FHLB-NY capital plan.

Astoria Bank was in compliance with the FHLB-NY minimum stock investment requirements with an investment in FHLB-NY stock at December 31, 2015 of $131.1 million. Dividends from the FHLB-NY to Astoria Bank amounted to $5.8 million for the year ended December 31, 2015.

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Federal Reserve System

FRB regulations require federally chartered savings associations to maintain cash reserves against their transaction accounts (primarily NOW and demand deposit accounts). A reserve of 3% is to be maintained against aggregate transaction accounts between $15.2 million and $110.2 million (subject to adjustment by the FRB) plus a reserve of 10% (subject to adjustment by the FRB between 8% and 14%) against that portion of total transaction accounts in excess of $110.2 million. The first $15.2 million of otherwise reservable balances (subject to adjustment by the FRB) is exempt from the reserve requirements. Astoria Bank is in compliance with the foregoing requirements.

Required reserves must be maintained in the form of either vault cash, an account at a Federal Reserve Bank or a pass-through account as defined by the FRB. Pursuant to the Emergency Economic Stabilization Act of 2008, the Federal Reserve Banks pay interest on depository institutions’ required and excess reserve balances. The interest rate paid on required reserve balances is currently the average target federal funds rate over the reserve maintenance period. The rate on excess balances will be set equal to the lowest target federal funds rate in effect during the reserve maintenance period.

Savings and Loan Holding Company Regulation

We are a unitary savings and loan holding company within the meaning of the HOLA. As such, we are registered with the FRB and are subject to FRB regulation, examination, supervision and reporting requirements. In addition, the FRB has enforcement authority over us and our subsidiaries other than Astoria Bank. Among other things, this authority permits the FRB to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings association.

Gramm-Leach also restricts the powers of new unitary savings and loan holding companies. Unitary savings and loan holding companies that are “grandfathered,” i.e., unitary savings and loan holding companies in existence or with savings and loan holding company applications filed on or before May 4, 1999, such as us, retain their authority under the prior law. All other unitary savings and loan holding companies are limited to financially related activities permissible for financial holding companies, as defined under Gramm-Leach. Gramm-Leach also prohibits non-financial companies from acquiring grandfathered unitary savings and loan holding companies.

Except under limited circumstances, a savings and loan holding company is prohibited (directly or indirectly, or through one or more subsidiaries) from (1) acquiring control of another savings association or holding company thereof, or acquiring all or substantially all of the assets thereof, without prior written approval of the FRB; (2) acquiring or retaining, with certain exceptions, more than 5% of the voting shares of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by the HOLA; or (3) acquiring or retaining control of a depository institution that is not federally insured. In evaluating applications by holding companies to acquire savings associations, the FRB must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the DIF, the convenience and needs of the community and competitive factors.

We are currently required to file an application with the FRB prior to declaring any cash dividend on our capital stock. The application must evidence our compliance with applicable FRB guidance regarding payment of dividends. The supervisory guidance issued by the FRB states that we should either eliminate, defer or significantly reduce dividends if (1) our net income available to common shareholders over the past year is insufficient to fully fund a dividend, (2) our prospective rate of earnings retention is not consistent with our capital needs and our overall current or prospective financial condition or (3) we will not meet, or are in danger of not meeting, our minimum regulatory capital adequacy ratios.

In accordance with the Reform Act, the Agencies have established consolidated risk-based and leverage capital requirements for insured depository institutions, depository institution holding companies and systemically important nonbank financial companies. As a result, as discussed above, effective January 1, 2015, we became subject to

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consolidated capital requirements which we have not been subject to previously. In addition, pursuant to the Reform Act, we are required to serve as a source of strength for Astoria Bank.

In October 2012, the FRB published two final rules with stress testing requirements for certain bank holding companies, state member banks, and savings and loan holding companies. In accordance with these rules, we would have been required to conduct annual stress tests as of September 30 of each year, submit regulatory reports to the FRB on our stress tests by the following March 31 and publicly disclose a summary of the results of the stress test between June 15 and June 30, beginning with the stress test cycle commencing in the year after the year in which we became subject to consolidated capital requirements. In October 2014 and December 2015, the FRB published final rules that modified the start date of the stress test cycles such that we will be subject to the stress test requirements for the stress test cycle beginning January 1, 2017. Accordingly, we must conduct our first annual stress test using financial data as of December 31, 2016, report the results of the stress test to the FRB on or before July 31, 2017 and publicly disclose a summary of the results of the stress test between October 15 and October 31, 2017.

Federal Securities Laws

We are subject to the periodic reporting, proxy solicitation, tender offer, insider trading restrictions and other requirements under the Exchange Act.

Delaware Corporation Law

We are incorporated under the laws of the State of Delaware. Thus, we are subject to regulation by the State of Delaware and the rights of our shareholders are governed by the Delaware General Corporation Law.

Federal Taxation

General

We report our income on a calendar year basis using the accrual method of accounting and are subject to federal income taxation in the same manner as other corporations.

Corporate Alternative Minimum Tax

In addition to the regular income tax, corporations (including savings and loan associations) generally are subject to an alternative minimum tax, or AMT, in an amount equal to 20% of alternative minimum taxable income to the extent the AMT exceeds the corporation's regular tax. The AMT is available as a credit against future regular income tax. We do not expect to be subject to the AMT for federal tax purposes.

Tax Bad Debt Reserves

Effective for tax years commencing January 1, 1996, federal tax legislation modified the methods by which a thrift computes its bad debt deduction. As a result, Astoria Bank is required to claim a deduction equal to its actual loan loss experience, and the “reserve method” is no longer available. Any cumulative reserve additions (i.e., bad debt deductions) in excess of actual loss experience for tax years 1988 through 1995 have been fully recaptured over a six year period. Generally, reserve balances as of December 31, 1987 will only be subject to recapture upon distribution of such reserves to shareholders. For further discussion of bad debt reserves, see “Distributions.”

Distributions

To the extent that Astoria Bank makes “nondividend distributions” to shareholders, such distributions will be considered to result in distributions from Astoria Bank’s “base year reserve,” (i.e., its tax bad debt reserve as of December 31, 1987), to the extent thereof, and then from its supplemental tax-basis reserve for losses on loans, and an amount based on the amount distributed will be included in Astoria Bank’s taxable income. Nondividend distributions include

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distributions in excess of Astoria Bank’s current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock and distributions in partial or complete liquidation. However, dividends paid out of Astoria Bank’s current or accumulated earnings and profits will not constitute nondividend distributions and, therefore, will not be included in Astoria Bank’s taxable income.

The amount of additional taxable income created from a nondividend distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, approximately one and one-half times the nondividend distribution would be includable in gross income for federal income tax purposes, assuming a 35% federal corporate income tax rate.

Dividends Received Deduction and Other Matters

We may exclude from our income 100% of dividends received from Astoria Bank as a member of the same affiliated group of corporations. The corporate dividends received deduction is generally 70% in the case of dividends received from unaffiliated corporations with which we will not file a consolidated tax return, except that if we own more than 20% of the stock of a corporation distributing a dividend, 80% of any dividends received may be deducted.

State and Local Taxation

The following is a general discussion of taxation in NYS and New York City, which are the two principal tax jurisdictions affecting our operations.

NYS Taxation

For tax years ending on or before December 31, 2014, NYS imposed an annual franchise tax on banking corporations, based on net income allocable to NYS, at a rate of 7.1%. If, however, the application of an alternative minimum tax (based on taxable assets allocated to New York, “alternative” net income, or a flat minimum fee) resulted in a greater tax, such alternative minimum tax was imposed. We were subject to the alternative minimum tax for NYS for the year ended December 31, 2014. In addition, NYS imposed a tax surcharge of 17.0% of the NYS Franchise Tax, calculated using an annual franchise tax rate of 9.0% (which represented the 2000 annual franchise tax rate), allocable to business activities carried on in the Metropolitan Commuter Transportation District. The rules regarding the determination of net income allocated to NYS and alternative minimum taxes differed for our subsidiaries.

Our subsidiary Fidata qualified for alternative tax treatment under Article 9A of the NYS tax law, through 2014, as a Connecticut passive investment company. Fidata maintains an office in Norwalk, Connecticut and invests in loans secured by real property. Such loans constitute intangible investments permitted to be held by a Connecticut passive investment company.

NYS income tax legislation was enacted on March 31, 2014 in connection with the approval of the NYS 2014-2015 budget. Portions of the new legislation, or the 2014 NYS Tax Legislation, resulted in significant changes in the calculation of income taxes imposed on banks and thrifts operating in NYS, including changes to (1) future period NYS tax rates, (2) rules related to sourcing of revenue for NYS tax purposes and (3) the NYS taxation of entities within one corporate structure, among other provisions. The new legislation, among other things, removed the alternative method of taxation based on assets to which we were subject for tax years ending on and prior to December 31, 2014. The new legislation also removed the alternative tax treatment applicable to Fidata. Enactment of the 2014 NYS Tax Legislation in the first quarter of 2014 caused us to recognize temporary differences and net operating loss carryforward benefits which we had been unable to recognize for NYS tax purposes previously, resulting in an increase in our net deferred tax assets in our statement of financial condition.

Effective January 1, 2015, NYS imposes an annual franchise tax on corporations, based on net income allocable to NYS, at a rate of 7.1%. NYS also imposes a tax surcharge of 25.6% of the NYS Franchise Tax, allocable to business activities carried on in the Metropolitan Commuter Transportation District. This tax applies to us, Astoria Bank and certain of Astoria Bank’s subsidiaries.

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New York City Taxation

For tax years ending on or before December 31, 2014, Astoria was also subject to the New York City Financial Corporation Tax, calculated, subject to a New York City income and expense allocation, on a basis similar to that of the NYS Franchise Tax. A significant portion of Astoria Bank’s entire net income was derived from outside of the New York City jurisdiction, which had the effect of reducing the New York City taxable income of Astoria Bank. As was the case with NYS, for New York City we were subject to income taxes on an alternative method based on assets (which was similar to the NYS alternative minimum tax) through December 31, 2014.

On April 13, 2015, a package of additional legislation, or the 2015 NYS Tax Legislation, was signed into law in NYS that, among other things, largely conformed New York City banking income tax laws to the 2014 NYS Tax Legislation. The 2015 NYS Tax Legislation was made effective retroactively to tax years beginning on or after January 1, 2015. The enactment of the new legislation caused us to be able to recognize certain temporary differences and net operating loss carryforward benefits which we had been unable to recognize for New York City purposes previously. As a result the valuation allowance against the deferred tax asset for New York City purposes was reversed in the second quarter of 2015.

Effective January 1, 2015, New York City imposes an annual franchise tax on corporations, based on net income allocable to New York City, at a rate of 8.85%. This tax applies to us, Astoria Bank and certain of Astoria Bank’s subsidiaries.

ITEM 1A. RISK FACTORS

The following is a summary of risk factors relevant to our operations which should be carefully reviewed. These risk factors do not necessarily appear in the order of importance.

Changes in interest rates may reduce our net income.

Our earnings depend largely on the relationship between the yield on our interest-earning assets, primarily our mortgage loans and mortgage-backed securities, and the cost of our deposits and borrowings. This relationship, known as the interest rate spread, is subject to fluctuation and is affected by economic and competitive factors which influence market interest rates, the volume and mix of interest-earning assets and interest-bearing liabilities and the level of non-performing assets. Fluctuations in market interest rates affect customer demand for our products and services. We are subject to IRR to the degree that our interest-bearing liabilities reprice or mature more slowly or more rapidly or on a different basis than our interest-earning assets.

In addition, the actual amount of time before mortgage loans and mortgage-backed securities are repaid can be significantly impacted by changes in mortgage prepayment rates and market interest rates. Mortgage prepayment rates will vary due to a number of factors, including the regional economy in the area where the underlying mortgages were originated, seasonal factors, demographic variables and the assumability of the underlying mortgages. However, the major factors affecting prepayment rates are prevailing interest rates, related mortgage refinancing opportunities and competition.

At December 31, 2015, $900.0 million of our borrowings contain features that would allow them to be called during the 2016 first quarter and on a quarterly basis thereafter. This would generally occur during periods of rising interest rates. If this were to occur, we would need to either renew the borrowings at a potentially higher rate of interest, which would negatively impact our net interest income, or repay such borrowings. If we sell securities or other assets to fund the repayment of such borrowings, any decline in estimated market value with respect to the securities or assets sold would be realized and could result in a loss upon such sale.

Interest rates do and will continue to fluctuate. Although we cannot predict future FOMC or FRB actions or other factors that will cause rates to change, the FOMC reaffirmed its view that an accommodative monetary policy stance remains appropriate. Despite the December 2015 action by the FRB to raise short-term interest rates by 25 basis points,

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interest rates remain near historical lows and mortgage loan prepayments remain elevated. If long-term interest rates remain low, a flattening of the U.S. Treasury yield curve may continue and adversely impact our net interest rate spread and net interest margin. No assurance can be given that changes in interest rates or mortgage loan prepayments will not have a negative impact on our net interest income, net interest rate spread or net interest margin.

Our results of operations are affected by economic conditions in the New York metropolitan area and nationally.

Our retail banking and a significant portion of our lending business (approximately 47% of our residential mortgage loan portfolio and substantially all of our multi-family and commercial real estate mortgage loan portfolio at December 31, 2015) are concentrated in the New York metropolitan area. As a result of this geographic concentration, our results of operations largely depend upon economic conditions in this area, although they also depend on economic conditions in other areas.

We are operating in a challenging economic environment, both nationally and locally. Financial institutions are affected by softness in the housing and real estate markets. Depressed real estate values and home sales volumes and financial stress on borrowers as a result of the economic environment, including elevated unemployment levels, could have an adverse effect on our borrowers, which could adversely affect our results of operations, as well as adversely affect our financial condition. In addition, depressed real estate values could adversely affect the value of property used as collateral for our loans. At December 31, 2015, the average loan-to-value ratio of our mortgage loan portfolio was less than 52% based on current principal balances and original appraised values. However, no assurance can be given that the original appraised values are reflective of current market conditions as we have experienced significant declines in real estate values in all markets in which we lend.

As a residential lender, we are particularly vulnerable to the impact of a severe job loss recession. Significant increases in job losses and unemployment have a negative impact on the financial condition of residential borrowers and their ability to remain current on their mortgage loans. Continued weakness or deterioration in national and local economic conditions, including an accelerating pace of job losses, particularly in the New York metropolitan area, could have a material adverse impact on the quality of our loan portfolio, which could result in increases in delinquent loans, causing a decrease in our interest income as well as an adverse impact on our loan loss experience, causing an increase in our allowance for loan losses and related provision and a decrease in net income. Such deterioration could also adversely impact the demand for our products and services, and, accordingly, our results of operations.

Strong competition within our market areas could hurt our profits and slow growth.

Our profitability depends upon our continued ability to compete successfully in our market areas. The New York metropolitan area has a high density of financial institutions, a number of which are significantly larger and have greater financial resources than we have. We face intense competition both in making loans and attracting deposits. Our competition for loans, both locally and nationally, comes principally from commercial banks, savings banks, savings and loan associations, mortgage banking companies and credit unions. In recent years, we have expanded our multi-family and commercial real estate lending and business banking operations. These business lines are also being aggressively pursued by a number of competitors, both large and small. Our most direct competition for deposits comes from commercial banks, savings banks, savings and loan associations and credit unions. We also face competition for deposits from money market mutual funds and other corporate and government securities funds as well as from other financial intermediaries such as brokerage firms and insurance companies. Price competition for loans and deposits could result in earning less on our loans and paying more on our deposits, which would reduce our net interest income. Competition also makes it more difficult to grow our loan and deposit balances.

We may not be able to fully execute on our strategic initiatives which could have a material adverse effect on our financial condition or results of operations.

We have historically been a community-oriented retail bank offering traditional deposit products and focusing on residential mortgage lending. However, the economic environment over the past several years has made it difficult for us to profitably grow our business in the same manner as it has in the past. Accordingly, we continue to implement

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strategies to grow other loan categories to diversify earning assets and to increase low cost core deposits. These strategies include continued reliance on our multi-family and commercial real estate mortgage lending operations and expanding our business banking operations. Our business banking initiative includes focusing on small and middle market businesses, with an emphasis on attracting clients from larger competitors. There are costs, risks and uncertainties associated with the development, implementation and execution of these initiatives, including the investment of time and resources, the possibility that these initiatives will be unprofitable and the risk of additional liabilities associated with these initiatives. In addition, our ability to successfully execute on these new initiatives will depend in part on our ability to attract and retain talented individuals to help manage these initiatives and the existence of satisfactory market conditions that will allow us to profitably grow these businesses. Our potential inability to successfully execute these initiatives could have a material adverse effect on our business, financial condition or results of operations. We expect our non-interest expense to increase in connection with the increased staff related to these initiatives. We anticipate realizing these costs in advance of realizing increased revenues and deposit growth from these initiatives.

Multi-family and commercial real estate lending may expose us to increased lending risks.

Our policy generally has been to originate multi-family and commercial real estate mortgage loans in the New York metropolitan area. At December 31, 2015, multi-family mortgage loans totaled $4.02 billion, or 36% of our total loan portfolio, and commercial real estate mortgage loans totaled $819.5 million, or 7% of our total loan portfolio. Our combined multi-family and commercial real estate mortgage loan portfolio increased $56.8 million, or 1%, from December 31, 2014 to December 31, 2015. As a result of our growth of these portfolios in the past several years and planned future growth, these loans require more ongoing evaluation and monitoring and we are implementing enhanced risk management policies, procedures and controls. Multi-family and commercial real estate mortgage loans generally involve a greater degree of credit risk than residential mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by multi-family properties and commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulation. In recent years, commercial real estate markets have been experiencing substantial growth, and increased competitive pressures have contributed significantly to historically low capitalization rates and rising property values. Commercial real estate prices, according to many U.S. commercial real estate indices, are currently above the 2007 peak levels that contributed to the financial crisis. Accordingly, the Agencies have expressed concerns about weaknesses in the current commercial real estate market. Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses, from this portfolio. At December 31, 2015, non-performing multi-family and commercial real estate mortgage loans totaled $10.8 million, or 0.22% of our total portfolio of multi-family and commercial real estate mortgage loans.

The shift in the status of loans in our residential mortgage loan portfolio from interest-only to amortizing may expose us to increased risk of borrower delinquencies.

At December 31, 2015, our interest-only residential mortgage loan portfolio totaled $735.5 million, of which $324.8 million is scheduled to commence principal amortization during 2016. In addition, at December 31, 2015, $1.36 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 $517.7 million were refinanced or converted to amortizing loans during 2015. After a refinance or conversion to an amortizing loan, a borrower’s monthly payment may increase by a substantial amount and the borrower may not be able to afford the increased monthly payment, which could result in increased delinquencies and, accordingly, adversely affect our results of operations. At December 31, 2015 $80.9 million of interest-only residential mortgage loans that converted to amortizing loans were past due.

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Astoria Bank’s ability to pay dividends or lend funds to us is subject to regulatory limitations which, to the extent we need but are not able to access such funds, may prevent us from making future dividend payments or principal and interest payments due on our debt obligations.

We are a unitary savings and loan holding company currently regulated by the FRB and almost all of our operating assets are owned by Astoria Bank. We rely primarily on dividends from Astoria Bank to pay cash dividends to our stockholders, to engage in share repurchase programs and to pay principal and interest on our debt obligations. The OCC regulates all capital distributions by Astoria Bank directly or indirectly to us, including dividend payments. As the subsidiary of a savings and loan holding company, Astoria Bank must file a notice with the OCC at least 30 days prior to each capital distribution. If Astoria Bank does not qualify for expedited treatment under the OCC rules and regulations or if the total amount of all capital distributions (including each proposed capital distribution) for the applicable calendar year exceeds net income for that year to date plus the retained net income for the preceding two years, then Astoria Bank must file an application to receive the approval of the OCC for a proposed capital distribution. During 2015, Astoria Bank was required to file such applications for proposed capital distributions, and such applications were approved by the OCC. Astoria Bank must also provide notice to the FRB at least 30 days prior to declaring a dividend.

In addition, Astoria Bank may not pay dividends to us if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements or the OCC notified Astoria Bank that it was in need of more than normal supervision. Under the prompt corrective action provisions of the FDIA, an insured depository institution such as Astoria Bank is prohibited from making a capital distribution, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is used in the FDIA). Payment of dividends by Astoria Bank also may be restricted at any time at the discretion of the OCC if it deems the payment to constitute an unsafe or unsound banking practice. Furthermore, capital standards imposed on us and similarly situated institutions have been and continue to be refined by bank regulatory agencies under the Reform Act. Deterioration of economic conditions and further changes to regulatory guidance could result in revised capital standards that may indicate the need for us or Astoria Bank to maintain greater capital positions, which could lead to limitations in dividend payments to us by Astoria Bank.

There can be no assurance that Astoria Bank will be able to pay dividends at past levels, or at all, in the future. If we do not receive sufficient cash dividends or are unable to borrow from Astoria Bank, then we may not have sufficient funds to pay dividends to our shareholders, repurchase our common stock or service our debt obligations.

In addition to regulatory restrictions on the payment of dividends, Astoria Bank is subject to certain restrictions imposed by federal law on any extensions of credit it makes to its affiliates and on investments in stock or other securities of its affiliates. We are considered an affiliate of Astoria Bank. These restrictions prevent affiliates of Astoria Bank, including us, from borrowing from Astoria Bank, unless various types of collateral secure the loans. Federal law limits the aggregate amount of loans to and investments in any single affiliate to 10% of Astoria Bank’s capital stock and surplus and also limits the aggregate amount of loans to and investments in all affiliates to 20% of Astoria Bank’s capital stock and surplus.

The Reform Act imposes further restrictions on transactions with affiliates and extensions of credit to executive officers, directors and principal shareholders, by, among other things, expanding covered transactions to include securities lending, repurchase agreement and derivatives activities with affiliates.

We are subject to regulatory requirements and limitations that may impact our ability to pay future dividends.

We are currently required to file an application with the FRB prior to declaring a cash dividend on our capital stock. The application must evidence our compliance with applicable FRB guidance regarding payment of dividends. The supervisory guidance issued by the FRB states that we should either eliminate, defer or significantly reduce dividends if (1) our net income available to common shareholders over the past year is insufficient to fully fund a dividend, (2) our prospective rate of earnings retention is not consistent with our capital needs and our overall current or prospective

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financial condition or (3) we will not meet, or are in danger of not meeting, our minimum regulatory capital adequacy ratios.

We operate in a highly regulated industry, which limits the manner and scope of our business activities.

We are subject to extensive supervision, regulation and examination by the FRB, OCC, CFPB and FDIC. As a result, we are limited in the manner in which we conduct our business, undertake new investments and activities and obtain financing. This regulatory structure is designed primarily for the protection of the DIF and our depositors, as well as other consumers, and not to benefit our stockholders. This regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to capital levels, the timing and amount of dividend payments, the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. In addition, we must comply with significant anti-money laundering and anti-terrorism laws. Our failure to comply with applicable regulations, or the failure to develop, implement and comply with corrective action plans to address any identified areas of noncompliance, may result in the assessment of fines and penalties and the commencement of informal or formal regulatory enforcement actions against us. Other negative consequences also can result from such failures, including regulatory restrictions on our activities, reputational damage, restrictions on the ability of institutional investment managers to invest in our securities and increases in our costs of doing business. Increases in our costs of doing business may include increased salaries and benefits expenses associated with hiring additional employees, incurring fees and expenses for outside services, such as consulting and legal advice, and costs associated with enhancing or acquiring systems and technological infrastructure to strengthen our regulatory compliance program. The occurrence of one or more of these events may have a material adverse effect on our business, financial condition or results of operations.

Changes in laws, government regulation and monetary policy may have a material effect on our results of operations.

Financial institutions have been the subject of significant legislative and regulatory changes and may be the subject of further significant legislation or regulation in the future, none of which is within our control. Significant new laws or regulations or changes in, or repeals of, existing laws or regulations, including, but not limited to, those with respect to federal, state and local taxation, may increase our costs, limit our ability to pursue business opportunities or cause our results of operations to differ materially. In addition, the costs and burden of compliance have significantly increased and could adversely affect our ability to operate profitably. Further, federal monetary policy significantly affects credit conditions for Astoria Bank, as well as for our borrowers, particularly as implemented through the Federal Reserve System, primarily through open market operations in U.S. government securities, the discount rate for bank borrowings and reserve requirements. A material change in any of these conditions could have a material impact on Astoria Bank or our borrowers, and therefore on our results of operations.

New and future rulemaking from the CFPB may have a material effect on our operations and operating costs.

The CFPB has the authority to implement and enforce a variety of existing consumer protection statutes and to issue new regulations and, with respect to institutions of our size, has exclusive examination and primary enforcement authority with respect to such laws and regulations and is authorized, individually or jointly with the Agencies, to conduct investigations to determine whether any person is, or has, engaged in conduct that violates such laws or regulations. In addition, in accordance with a memorandum of understanding entered into between the CFPB and DOJ, the two agencies have agreed to coordinate efforts related to enforcing the fair lending laws, which includes information sharing and conducting joint investigations, and have done so on a number of occasions in the past year.

As an independent bureau within the FRB, the CFPB may impose requirements more severe than the previous bank regulatory agencies. The CFPB has initiated enforcement actions against a variety of bank and non-bank market participants with respect to a number of consumer financial products and services that has resulted in those participants expending significant time, money and resources to adjust to the initiatives being pursued by the CFPB. These enforcement actions may serve as precedent for how the CFPB interprets and enforces consumer protection laws with respect to all supervised institutions, which may result in the imposition of higher standards of compliance with such laws.

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As a result of the Reform Act and related rulemaking, we have become subject to more stringent capital requirements.

Pursuant to the Reform Act, the Agencies adopted the Final Capital Rules in July 2013 to update the Agencies’ general risk-based capital and leverage capital requirements to incorporate agreements reflected in the Basel III capital standards as well as the requirements of the Reform Act. Among other things, the Final Capital Rules established a new minimum common equity Tier 1 risk-based capital ratio of 4.5% and increased the minimum Tier 1 risk-based capital ratio from 4.0% to 6.0%. 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 and provided that the failure to maintain the minimum Conservation Buffer will result in restrictions on capital distributions and discretionary cash bonus payments to executive officers. The Final Capital Rules also subjected many savings and loan holding companies, such as Astoria Financial Corporation, to consolidated capital requirements. The Final Capital Rules are described in more detail in Item 1, “Business - Regulation and Supervision - Capital Requirements.” The new minimum regulatory capital ratios under the Final Capital Rules became effective for Astoria Bank and Astoria Financial Corporation on January 1, 2015. The failure to meet the established capital requirements could result in the FRB placing limitations or conditions on our activities or restricting the commencement of new activities, and such failure could subject us to a variety of enforcement remedies available to the federal regulatory authorities, including limiting our ability to pay dividends; issuing a directive to increase our capital; and terminating our FDIC deposit insurance.

Our ability to originate residential mortgage loans for portfolio has been adversely affected by the increased competition resulting from the unprecedented involvement of the U.S. government and GSEs in the residential mortgage market.

Over the past several years, we have faced increased competition for residential mortgage loans due to the unprecedented involvement of the GSEs in the mortgage market as a result of the economic crisis, which has caused the interest rate for 30 year fixed rate mortgage loans that conform to GSE guidelines to remain artificially low. In addition, the U.S. Congress has expanded the conforming loan limits in many of our operating markets, allowing larger balance loans to continue to be acquired by the GSEs. As a result, more loans in our portfolio qualified under the expanded conforming loan limits and were refinanced into conforming fixed rate mortgages which we originate but do not retain for portfolio. Our residential mortgage loan repayments have remained at elevated levels and outpaced our loan production as a result of these factors, making it difficult for us to grow our residential mortgage loan portfolio and balance sheet.

The ultimate resolution of Fannie Mae and Freddie Mac may materially impact our results of operations.

Both Fannie Mae and Freddie Mac are under conservatorship with the Federal Housing Finance Agency, or the FHFA. In February 2012, the FHFA delivered a strategic plan to U.S. Congress to wind down Fannie Mae and Freddie Mac over the next several years. This plan included building a new infrastructure for the secondary mortgage market, continuing to shrink Fannie Mae’s and Freddie Mac’s operations by reducing direct funding of mortgages, and maintaining foreclosure prevention activities and credit availability for new and refinanced mortgages. In addition, in August 2012, the FHFA and the U.S. Treasury announced further steps to expedite the winding down of Fannie Mae and Freddie Mac by accelerating the rate at which Fannie Mae’s and Freddie Mac’s investment portfolios will be reduced. Pursuant to these steps, Fannie Mae’s and Freddie Mac’s investment portfolios must be reduced to the agreed target four years earlier than previously scheduled. In May 2014, the FHFA set forth a new strategic plan which included maintaining and improving Fannie Mae’s and Freddie Mac’s foreclosure prevention activities and credit availability, reducing taxpayer risk through increasing the role of private capital in the mortgage market and building a new single-family securitization infrastructure for use by Fannie Mae and Freddie Mac, and adaptable for use by other participants in the secondary market. We cannot be certain if or when Fannie Mae and Freddie Mac will be wound down, if or when reform of the housing finance market will be implemented or what the future role of the U.S. government will be in the mortgage market, and, accordingly, we will not be able to determine the impact that any such reform may have on us until a definitive reform plan is adopted.

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Changes in the fair value of our securities may reduce our stockholders’ equity and net income.

At December 31, 2015, $416.8 million of our securities were classified as available-for-sale. The estimated fair value of our available-for-sale securities portfolio may increase or decrease depending on changes in interest rates. In general, as interest rates rise, the estimated fair value of our fixed rate securities portfolio will decrease. Our securities portfolio is comprised primarily of fixed rate securities. We increase or decrease stockholders’ equity by the amount of the change in the unrealized gain or loss (difference between the estimated fair value and the amortized cost) of our available-for-sale securities portfolio, net of the related tax effect, under the category of accumulated other comprehensive income/loss. Therefore, a decline in the estimated fair value of this portfolio will result in a decline in reported stockholders’ equity, as well as book value per common share and tangible book value per common share. This decrease will occur even though the securities are not sold. In the case of debt securities, if these securities are never sold, the decrease will be recovered over the life of the securities.

We conduct a periodic review and evaluation of the securities portfolio to determine if the decline in the fair value of any security below its cost basis is other-than-temporary. Factors which we consider in our analysis include, but are not limited to, the severity and duration of the decline in fair value of the security, the financial condition and near-term prospects of the issuer, whether the decline appears to be related to issuer conditions or general market or industry conditions, our intent and ability to not sell the security for a period of time sufficient to allow for any anticipated recovery in fair value and the likelihood of any near-term fair value recovery. We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience. If we deem such decline to be 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 other-than-temporary impairment, or OTTI, for a debt security that does not represent credit losses which is recognized in other comprehensive income/loss, net of applicable taxes.

We have, in the past, recorded OTTI charges. We continue to monitor the fair value of our securities portfolio as part of our ongoing OTTI evaluation process. No assurance can be given that we will not need to recognize OTTI charges related to securities in the future.

Declines in the market value of our common stock may have a material effect on the value of our reporting unit which could result in a goodwill impairment charge and adversely affect our results of operations.

At December 31, 2015, the carrying amount of our goodwill totaled $185.2 million. We performed our annual goodwill impairment test as of September 30, 2015 and determined there was no goodwill impairment as of our annual impairment test date. We would test our goodwill for impairment between 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. Our market capitalization is less than our total stockholders’ equity at December 31, 2015. We considered this and other factors in our goodwill impairment analyses. No assurance can be given that we will not record an impairment loss on goodwill in a subsequent period. However, our tangible capital ratio and Astoria Bank’s regulatory capital ratios would not be affected by this potential non-cash expense.

A natural disaster could harm our business.

Natural disasters can disrupt our operations, result in damage to our properties, reduce or destroy the value of the collateral for our loans and negatively affect the local economies in which we operate, which could have a material adverse effect on our results of operations and financial condition. The occurrence of a natural disaster could result in one or more of the following: (1) an increase in delinquent loans; (2) an increase in problem assets and foreclosures; (3) a decrease in the demand for our products and services; or (4) a decrease in the value of the collateral for loans, especially real estate, in turn reducing customers' borrowing power, the value of assets associated with problem loans and collateral coverage.

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The occurrence of any failure, breach or interruption in service involving our systems or those of our service providers, including as a result of a cyber attack, could damage our reputation, cause losses, increase our expenses and result in a loss of customers, an increase in regulatory scrutiny or expose us to civil litigation and possibly financial liability, any of which could adversely impact our financial condition, results of operations and the market price of our stock.

Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger, our deposits and our loans. In the normal course of our business, we collect, process, retain and transmit (by email and other electronic means) sensitive and confidential information regarding our customers, employees and others. We also outsource certain aspects of our data processing to certain third-party providers. In addition to confidential information regarding our customers, employees and others, we, and in some cases a third party, compile, process, transmit and store proprietary, non-public information concerning our business, operations, plans and strategies.

As a result, our business and operations depend on the secure processing, storage and transmission of confidential and other information in our computer systems and networks and those of our third party service providers. Although we devote significant resources and management focus to ensuring the integrity of our systems through information security measures and business continuity programs, our facilities, computer systems, software and networks, and those of our third party service providers, may be vulnerable to external or internal security breaches, acts of vandalism, unauthorized access, misuse, computer viruses or other malicious code and cyber attacks that could have a security impact. In addition, breaches of security may occur through intentional or unintentional acts by those having authorized or unauthorized access to our confidential or other information or the confidential or other information of our customers, clients or counterparties. While we regularly conduct security assessments on our third party service providers, there can be no assurance that their information security protocols are sufficient to withstand a cyber attack or other security breach.

Information security risks for financial institutions like us have increased recently in part because of new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers recently have engaged in attacks against large financial institutions, particularly denial of service attacks, that are designed to disrupt key business services, such as customer-facing web sites. We are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources.

We use a variety of physical, procedural and technological safeguards to prevent or limit the impact of system failures, interruptions and security breaches and to protect confidential information from mishandling, misuse or loss, including detection and response mechanisms designed to contain and mitigate security incidents. However, there can be no assurance that such events will not occur or that they will be promptly detected and adequately addressed if they do, and early detection of security breaches may be thwarted by sophisticated attacks and malware designed to avoid detection. If there is a failure in or breach of our computer systems or networks, or those of a third-party service provider, the confidential and other information processed and stored in, and transmitted through, such computer systems and networks could potentially be jeopardized, or could otherwise cause interruptions or malfunctions in our operations or the operations of our customers, clients or counterparties.

The occurrence of any of the foregoing could subject us to litigation or regulatory scrutiny, cause us significant reputational damage or erode confidence in the security of our systems, products and services, cause us to lose customers or have greater difficulty in attracting new customers, have an adverse effect on the value of our common stock or subject us to financial losses that are either not insured or not fully covered by insurance, any of which could have a material adverse effect on our business, financial condition or results of operations. Furthermore, as information security risks and cyber threats continue to evolve, we may be required to expend significant additional resources to

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further enhance or modify our information security measures and/or to investigate and remediate any information security vulnerabilities or other exposures arising from operational and security risks.

Our stress testing processes rely on analytical and forecasting models that may prove to be inadequate or inaccurate, which could adversely affect the effectiveness of our strategic planning and our ability to pursue certain corporate goals.

The processes we use to estimate the effects of changing interest rates, real estate values and economic indicators such as unemployment on our financial condition and results of operations depend upon the use of analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Furthermore, even if our assumptions are accurate predictors of future performance, the models they are based on may prove to be inadequate or inaccurate because of other flaws in their design or implementation. If the models we use in the process of managing our interest rate and other risks prove to be inadequate or inaccurate, we could incur increased or unexpected losses which, in turn, could adversely affect our earnings and capital. Furthermore, the assumptions we utilize for our stress tests may not meet with regulatory approval, which could result in our stress testing receiving a failing grade. In addition to adversely affecting our reputation, failing our stress tests could preclude or delay our ability to grow through acquisition and could lead to a reduction in our quarterly cash dividends.

Many aspects of our operations are dependent upon the soundness of other financial intermediaries.

The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading, execution of transactions or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which we interact on a daily basis, and therefore could adversely affect us.

The FDIC has issued a proposed rule regarding deposit insurance assessments that, if adopted, may increase our non-interest expense beginning in 2016 and may have a material effect on our results of operations.

On October 22, 2015, the FDIC issued a proposal to increase the reserve ratio for the DIF to the minimum level of 1.35% as required by the Reform Act. The proposed rule would impose on Astoria Bank, as an insured depository institution with $10 billion or more in total consolidated assets, a quarterly surcharge equal to an annual rate of 4.5 basis points applied to Astoria Bank’s deposit insurance assessment base, after making certain adjustments. If the rule is adopted as proposed, the FDIC expects that these surcharges would commence in 2016 and continue for approximately eight quarters; however, if the reserve ratio for the DIF does not reach the required level by December 31, 2018, the FDIC would impose a shortfall assessment on March 31, 2019, which would be collected on June 30, 2019. If adopted as proposed, this new rule could result in higher FDIC deposit insurance assessments, which would increase our non-interest expense commencing in 2016. We are continuing to review the impact that this proposed rulemaking will have on our financial condition and results of operations.

Astoria Financial Corporation will be subject to business uncertainties and contractual restrictions while the Merger is pending.

Uncertainty about the effect of the Merger on employees and customers may have an adverse effect on Astoria. These uncertainties may impair Astoria’s ability to attract, retain and motivate key personnel until the Merger is completed, and could cause customers and others that deal with Astoria to seek to change existing business relationships with Astoria. Retention of certain employees may be challenging during the pendency of the Merger, as certain employees may experience uncertainty about their future roles. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, Astoria’s business could be negatively impacted. In addition, the Merger Agreement restricts Astoria from making certain acquisitions and taking other specified actions until the Merger occurs without the consent of NYCB. These restrictions may prevent Astoria from pursuing attractive

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business opportunities that may arise prior to the completion of the Merger. In addition, the terms of the Merger Agreement limit our ability to pay quarterly cash dividends in excess of $0.04 per share of our common stock without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the Merger.

Before the Merger and the Bank Merger may be completed, NYCB must obtain approvals from the FRB, the FDIC and the New York State Department of Financial Services, or the DFS. Other approvals, waivers or consents from regulators may also be required. In determining whether to grant these approvals the regulators consider a variety of factors, including the regulatory standing of each party. An adverse development in either party’s regulatory standing or other factors could result in an inability to obtain approval or delay their receipt. These regulators may impose conditions on the completion of the Merger or the Bank Merger or require changes to the terms of the Merger or the Bank Merger. Such conditions or changes could have the effect of delaying or preventing completion of the Merger or the Bank Merger or imposing additional costs on or limiting the revenues of the combined company following the Merger or the Bank Merger, any of which might have an adverse effect on the combined company following the Merger.

The processing time for obtaining regulatory approvals for bank mergers, particularly for larger institutions, has increased since the financial crisis. Specifically, the Reform Act requires bank regulators to consider financial stability concerns when evaluating a proposed bank merger. Upon completion of the Merger, NYCB’s total consolidated assets will exceed $50 billion and NYCB will be treated as a systemically important financial institution for regulatory purposes.

In a recent approval order, the FRB has stated that if material weaknesses are identified by examiners before a banking organization applies to engage in expansionary activity, the FRB will not in the future allow the application to remain pending while the banking organization addresses its weaknesses. The FRB explained that, in the future, if issues arise during the processing of an application, it will require the applicant banking organization to withdraw its application pending resolution of any supervisory concerns. Accordingly, if there is an adverse development in either party’s regulatory standing, NYCB may be required to withdraw some or all of the applications for approval of the Merger and Bank Merger and, if possible, resubmit it after the applicable supervisory concerns have been resolved.

The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.

The Merger Agreement is subject to a number of conditions that must be fulfilled in order to complete the Merger. These conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may be delayed or may not be completed. In addition, if the Merger is not completed by December 31, 2016, either Astoria or NYCB may choose not to proceed with the Merger, and the parties can mutually decide to terminate the Merger Agreement at any time. In addition, NYCB and Astoria may elect to terminate the Merger Agreement in certain other circumstances and Astoria may be required to pay a termination fee.

Termination of the Merger Agreement could negatively impact Astoria Financial Corporation.

If the Merger Agreement is terminated, Astoria’s business may be adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Merger. In addition, if the Merger Agreement is terminated, the market price of Astoria Financial Corporation common stock, or Astoria Common Stock, might decline to the extent that the current market price reflects a market assumption that the Merger will be completed. If the Merger Agreement is terminated and Astoria’s Board of Directors seeks another merger or business combination, Astoria’s stockholders cannot be certain that Astoria will be able to find a party willing to offer equivalent or more attractive consideration than the consideration NYCB has agreed to provide in the Merger. If the Merger Agreement is terminated under certain circumstances, Astoria may be required to pay a termination fee of $69.5 million to NYCB.

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If the Merger is not completed, Astoria Financial Corporation will have incurred substantial expenses without realizing the expected benefits of the Merger.

Astoria has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. If the Merger is not completed, Astoria would have to recognize these expenses without realizing the expected benefits of the Merger.

Lawsuits that may be filed against Astoria Financial Corporation and NYCB could result in an injunction preventing the completion of the Merger, a judgment resulting in the payment of damages or substantial costs.

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. In addition, a seventh lawsuit was filed challenging the proposed transaction in the Delaware Court of Chancery. 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. These lawsuits seek, among other things, to enjoin completion of the Merger. Additional plaintiffs may also file lawsuits against Astoria or NYCB and/or their directors and officers in connection with the Merger. The outcome of any such litigation is uncertain. If the cases are not resolved, these lawsuits could prevent or delay completion of the Merger and result in substantial costs to Astoria, including any costs associated with the indemnification of directors and officers. One of the conditions to the closing of the Merger is that no order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect. As such, if plaintiffs are successful in obtaining an injunction prohibiting the completion of the Merger on the agreed-upon terms, then such injunction may prevent the Merger from being completed, or from being completed within the expected timeframe. 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. For additional information regarding the lawsuits, see Item 3, “Legal Proceedings.”

Because the market price of NYCB Common Stock fluctuates, Astoria stockholders cannot be certain of the precise value of the stock portion of the Merger consideration that they may receive in the Merger.

At the time the Merger is completed, each issued and outstanding share of Astoria Common Stock (except for certain shares specified in the Merger Agreement) will be converted into the right to receive the merger consideration, which is in the form of a combination of NYCB Common Stock and cash.

There will be a time lapse between each of the date of the mailing of the joint proxy statement/prospectus relating to the Merger, the date on which Astoria stockholders vote on a proposal to adopt the Merger Agreement at a special meeting of stockholders and the date on which Astoria stockholders entitled to receive NYCB Common Stock actually receive such shares. The market value of NYCB Common Stock may fluctuate during these periods as a result of a variety of factors, including general market and economic conditions, changes in NYCB’s businesses, operations and prospects and regulatory considerations. Many of these factors are outside the control of Astoria and NYCB. Consequently, at the time Astoria stockholders must decide whether to adopt the Merger Agreement, they will not know the actual market value of the NYCB Common Stock that they will be entitled to receive at the effective time of the Merger, or the Effective Time. The actual value of the NYCB Common Stock received by Astoria stockholders will depend on the market value of the NYCB Common Stock. This market value may differ, possibly materially, from the value used at the time that the Board of Directors of Astoria adopted and approved the Merger Agreement and at the time Astoria stockholders vote on whether to adopt the Merger Agreement. Astoria stockholders should obtain current stock quotations for NYCB Common Stock before voting their shares of Astoria Common Stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

We operate 88 full-service banking offices, of which 50 are owned and 38 are leased. We own our principal executive office located in Lake Success, New York. We are obligated under a lease commitment through 2017 for our residential mortgage operating facility in Mineola, New York. At December 31, 2015, approximately two-thirds of our Mineola facility was sublet. We are obligated under an operating lease commitment through 2021 for office space in Jericho, New York, at which our multi-family and commercial real estate lending and business banking departments and other operations are located, and under an operating lease commitment through 2017 for our business banking office in midtown Manhattan. We lease office facilities for our wholly-owned subsidiaries Fidata, in Norwalk, Connecticut, and Suffco, in Farmingdale, New York. We believe such facilities are suitable and adequate for our operational needs. For further information regarding our lease obligations, see Item 7, “MD&A,” and Note 10 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

ITEM 3. LEGAL PROCEEDINGS

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, and 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 have prepared and submitted briefs to the NYC Tax Appeals Tribunal and presented oral arguments on November 19, 2015. 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 December 31, 2015 with respect to this matter.

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 December 31, 2015 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

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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.

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 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 December 31, 2015 with respect to these matters.

Other potential plaintiffs may also file additional lawsuits challenging the proposed Merger. The outcome of the pending and any additional future litigation is uncertain. If the cases are not resolved, these lawsuits could result in substantial costs to Astoria, including any costs associated with the indemnification of Astoria’s directors and officers. 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.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR ASTORIA FINANCIAL CORPORATION’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the New York Stock Exchange, or NYSE, under the symbol “AF.”  The table below shows the high and low sale prices reported by the NYSE for our common stock during the periods indicated.

	2015				2014
	High		Low		High		Low
First Quarter	$	13.44	$	12.20	$	14.67	$	12.48
Second Quarter	14.10		12.67		14.23		12.44
Third Quarter	17.16		13.34		13.95		12.33
Fourth Quarter	18.13		15.15		13.70		11.96

As of February 16, 2016, we had 2,936 shareholders of record.  As of December 31, 2015, there were 100,721,358 shares of common stock outstanding.

The following schedule summarizes the cash dividends paid per common share for the periods indicated.

	2015		2014
First Quarter	$	0.04	$	0.04
Second Quarter	0.04		0.04
Third Quarter	0.04		0.04
Fourth Quarter	0.04		0.04

On January 27, 2016, our Board of Directors declared a quarterly cash dividend of $0.04 per common share, payable on March 1, 2016, to common stockholders of record as of the close of business on February 12, 2016. As in the past, our Board of Directors reviews the payment of dividends quarterly and plans to continue to maintain a regular quarterly dividend in the future, dependent upon our earnings, financial condition and other factors. 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 without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

We are subject to the laws of the State of Delaware which generally limit dividends on capital stock to an amount equal to the excess of our net assets (the amount by which total assets exceed total liabilities) over our statutory capital, or if there is no such excess, to our net profits for the current and/or immediately preceding fiscal year. Additionally, no dividend shall be declared, paid or set aside for payment on our common stock unless the full dividends for the most recently completed dividend period have been declared and paid on our Series C Preferred Stock. Prior to declaring a dividend, we are required to seek the approval of the FRB. Our payment of dividends is dependent, in large part, upon receipt of dividends from Astoria Bank. Astoria Bank is subject to certain restrictions which may limit its ability to pay us dividends. See Item 1, “Business - Regulation and Supervision,” for an explanation of regulatory requirements with respect to Astoria Bank’s and Astoria Financial Corporation’s ability to pay dividends. We are also subject to certain financial covenants and other limitations pursuant to the terms of various debt instruments that have been issued by us, which could have an impact on our ability to pay dividends in certain circumstances. See Item 7, “MD&A - Liquidity and Capital Resources,” for further discussion of such financial covenants and other limitations. See Item 1, “Business - Federal Taxation,” and Note 11 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” for an explanation of the tax impact of the unlikely event that Astoria Bank (1) makes distributions in excess of current and accumulated earnings and profits, as calculated for federal income tax purposes; (2) redeems its stock; or (3) liquidates.

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

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transactions. At December 31, 2015, 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.

On June 1, 2015, our Chief Executive Officer submitted his annual certification to the NYSE indicating that he was not aware of any violation by Astoria Financial Corporation of NYSE corporate governance listing standards as of the June 1, 2015 certification date.

Stock Performance Graph

The following graph shows a comparison of cumulative total shareholder return on Astoria Common Stock, during the five fiscal years ended December 31, 2015, with the cumulative total returns of both a broad market index, the Standard & Poor’s, or S&P, 500 Stock Index, and a peer group index, the S&P Midcap 400 Financials Index. The comparison assumes $100 was invested on December 31, 2010 in Astoria Common Stock and in each of the S&P indices and assumes that all of the dividends were reinvested.

Astoria Common Stock, Market and Peer Group Indices
	Astoria Common Stock			S&P 500 Stock Index			S&P Midcap 400 Financials Index
December 31, 2010		$	100.00		$	100.00		$	100.00
December 31, 2011		64.01			102.11			95.02
December 31, 2012		72.59			118.45			111.88
December 31, 2013		108.80			156.82			139.93
December 31, 2014		106.38			178.28			160.90
December 31, 2015		127.61			180.75			169.15

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ITEM 6. SELECTED FINANCIAL DATA

Set forth below are our selected consolidated financial and other data.  This financial data is derived in part from, and should be read in conjunction with, our consolidated financial statements and related notes.

	At December 31,
(In Thousands)	2015		2014		2013		2012		2011
Selected Financial Data:
Total assets	$	15,076,211	$	15,640,021	$	15,793,722	$	16,496,642	$	17,022,055
Securities available-for-sale	416,798		384,359		401,690		336,300		344,187
Securities held-to-maturity	2,296,799		2,133,804		1,849,526		1,700,141		2,130,804
Loans receivable, net	11,055,081		11,845,848		12,303,066		13,078,471		13,117,419
Deposits	9,106,027		9,504,909		9,855,310		10,443,958		11,245,614
Borrowings, net	3,964,222		4,187,691		4,137,161		4,373,496		4,121,573
Stockholders’ equity	1,663,448		1,580,070		1,519,513		1,293,989		1,251,198

	For the Year Ended December 31,
(In Thousands, Except Per Share Data)	2015			2014			2013		2012		2011
Selected Operating Data:
Interest income	$	473,416		$	492,350		$	518,430	$	600,509	$	695,248
Interest expense	133,127			150,062			176,528		252,240		319,822
Net interest income	340,289			342,288			341,902		348,269		375,426
Provision for loan losses (credited) charged to operations	(12,072		)	(9,469		)	19,601		40,400		37,000
Net interest income after provision for loan losses	352,361			351,757			322,301		307,869		338,426
Non-interest income	54,596			54,848			69,572		73,235		68,915
General and administrative expense	289,083			284,410			287,531		300,133		301,417
Income before income tax expense	117,874			122,195			104,342		80,971		105,924
Income tax expense	29,799			26,279			37,749		27,880		38,715
Net income	88,075			95,916			66,593		53,091		67,209
Preferred stock dividends	8,775			8,775			7,214		—		—
Net income available to common shareholders	$	79,300		$	87,141		$	59,379	$	53,091	$	67,209
Basic earnings per common share	$	0.79		$	0.88		$	0.60	$	0.55	$	0.70
Diluted earnings per common share	$	0.79		$	0.88		$	0.60	$	0.55	$	0.70

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	At or For the Year Ended December 31,
	2015			2014			2013			2012			2011
Selected Financial Ratios and Other Data:
Return on average assets (1)	0.57		%	0.61		%	0.41		%	0.31		%	0.39		%
Return on average common stockholders’ equity (1)	5.31			6.06			4.50			4.15			5.31
Return on average tangible common stockholders’ equity (1)(2)	6.07			6.96			5.23			4.86			6.22
Average stockholders’ equity to average assets	10.59			10.04			8.79			7.47			7.28
Stockholders’ equity to total assets	11.03			10.10			9.62			7.84			7.35
Common stockholders’ equity to total assets	10.17			9.27			8.80			7.84			7.35
Tangible common stockholders’ equity to tangible assets (tangible common equity ratio) (2)(3)	9.06			8.19			7.72			6.80			6.33
Net interest rate spread (4)	2.29			2.25			2.17			2.09			2.23
Net interest margin (5)	2.36			2.32			2.25			2.16			2.30
Average interest-earning assets to average interest-bearing liabilities	1.08		x	1.08		x	1.06		x	1.05		x	1.04		x
General and administrative expense to average assets	1.89		%	1.82		%	1.78		%	1.75		%	1.73		%
Efficiency ratio (6)	73.21			71.62			69.88			71.21			67.83
Cash dividends paid per common share	$	0.16		$	0.16		$	0.16		$	0.25		$	0.52
Dividend payout ratio	20.25		%	18.18		%	26.67		%	45.45		%	74.29		%
Asset Quality Ratios:
Non-performing loans to total loans (7)	1.24		%	1.07		%	2.67		%	2.38		%	2.51		%
Non-performing loans to total assets (7)	0.92			0.82			2.10			1.91			1.96
Non-performing assets to total assets (8)	1.05			1.05			2.37			2.08			2.24
Allowance for loan losses to non-performing loans (7)	70.90			87.32			41.87			46.18			47.22
Allowance for loan losses to total loans	0.88			0.93			1.12			1.10			1.18
Other Data:
Number of deposit accounts	475,272			510,363			557,625			613,871			703,454
Mortgage loans serviced for others (in thousands)	$	1,404,480		$	1,452,645		$	1,504,654		$	1,443,672		$	1,446,646
Full service banking offices	88			87			85			85			85
Full time equivalent employees	1,551			1,594			1,540			1,530			1,636

_______________________________

(1) Returns on average assets are calculated using net income.  Returns on average common stockholders’ equity and average tangible common stockholders’ equity are calculated using net income available to common shareholders.

(2) Tangible common stockholders’ equity represents common stockholders’ equity less goodwill.

(3) Tangible assets represent assets less goodwill.

(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.

(6) Efficiency ratio represents general and administrative expense divided by the sum of net interest income plus non-interest income.

(7) Non-performing loans, substantially all of which are non-accrual loans, included loans modified in a TDR totaling $61.0 million at December 31, 2015, $68.4 million at December 31, 2014, $109.8 million at December 31, 2013, $32.8 million at December 31, 2012 and $18.8 million at December 31, 2011. Non-performing loans exclude loans held-for-sale and loans which have been modified in a TDR that have been returned to accrual status.

(8) Non-performing assets consist of all non-performing loans and REO.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Notes to Consolidated Financial Statements presented elsewhere in this report.

Executive Summary

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

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 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, including our Long Island City, New York branch, which opened in late 2015, 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. 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 FMOC 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%. The national unemployment rate decreased to 5.0% for December 2015 compared to 5.6% for December 2014, and new job growth in 2015 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, though some competitor institutions in this market have offered rates and/or product terms at levels which we have chosen not to offer.

Net income available to common shareholders for the year ended December 31, 2015 decreased compared to the year ended December 31, 2014 reflecting a decrease in net interest income and increases in general and administrative expenses and income tax expense.

The provision for loan losses credited to operations for the year ended December 31, 2015 totaled $12.1 million. This compares to a provision for loan losses credited to operations of $9.5 million for the year ended December 31, 2014. The allowance for loan losses totaled $98.0 million at December 31, 2015, compared to $111.6 million at December 31, 2014. The reduction in the allowance for loan losses at December 31, 2015 compared to December 31, 2014, and the provision credited to operations for 2015, reflects the results of our quarterly reviews of the adequacy of the allowance for loan losses. Changes in the composition and size of our loan portfolio resulted in reduced reserve needs in 2015. In the second quarter of 2014, we designated the majority of our non-performing residential mortgage loans at that time as held-for-sale and marked them to market, with a charge of $8.7 million, based upon prices indicated. As a result, previously established reserves in the amount of $5.7 million applicable to these loans were released and credited to operations. 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 the improved asset quality in our loan portfolio as a result of reductions in the balances of certain loan classes we believe bear higher risk, the quality of our loan originations and the contraction of the overall loan portfolio.

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Net interest income decreased for the year ended December 31, 2015, compared to the year ended December 31, 2014. 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 lower funding costs primarily in our certificates of deposit.

Non-interest income was lower in 2015 compared to 2014, reflecting declines in customer service fees and other loan fees, partially offset by higher mortgage banking income and the impact of a loss incurred during 2014 from the bulk sale of certain non-performing residential real estate loans. Non-interest expense increased in 2015 compared to 2014, primarily due to expenses related to the pending merger with NYCB, as well as increased compensation and benefits expense unrelated to the merger and increased occupancy and equipment expense reflecting the addition of two branch offices in 2014 and one new branch office in 2015, partially offset by a decrease in FDIC expense.

Income tax expense after adjusting for the impact of NYS and NYC tax law changes in 2015 and 2014 was relatively unchanged in 2015 compared to 2014. Included in the 2015 full year results is a reduction in income tax expense of $11.4 million primarily related to the impact of the NYC tax law changes. Included in the 2014 full year results were reductions in income tax expense related to the impact of changes in NYS income tax legislation and resolution of an income tax matter with NYS of $15.7 million. For additional information regarding our income tax expense, see "Comparison of Financial Condition and Operating Results for the Years Ended December 31, 2015 and 2014 - Income Tax Expense."

Total assets declined during the year ended December 31, 2015, due primarily to a decrease in our residential mortgage loan portfolio, partially offset by growth in our multi-family and commercial real estate mortgage loan portfolio as well as our securities portfolio. At December 31, 2015, our multi-family and commercial real estate mortgage loan portfolio represented 44% of our total loan portfolio, up from 40% at December 31, 2014, reflecting our continued focus on the strategic shift in our balance sheet. The decline in our residential mortgage loan portfolio reflects an excess of loan repayments over originations and purchases during 2015.

Total deposits declined during the year ended December 31, 2015 as a result of a decrease in certificates of deposit, partially offset by a net increase in our core deposits. The growth in core deposits reflected increases in money market and checking accounts which more than offset a decline in savings accounts. At December 31, 2015, core deposits represented 78% of total deposits, up from 72% at December 31, 2014. Total deposits included $1.05 billion of business deposits at December 31, 2015, an increase of 13% since December 31, 2014, substantially all of which were core deposits, reflecting the expansion of our business banking operations, a component of the strategic shift in our balance sheet. We expect that the continued growth of our business banking operations should allow us to continue to grow our low cost core deposits.

Stockholders’ equity increased as of December 31, 2015 compared to December 31, 2014. The increase was primarily the result of earnings in excess of dividends on our common and preferred stock, stock-based compensation recognized and capital raised from the issuance of common stock pursuant to the Astoria Financial Corporation Dividend Reinvestment and Stock Purchase Plan, or the Stock Purchase Plan, during the year ended December 31, 2015.

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.

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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 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. 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.

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.

Critical Accounting Policies

Note 1 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” 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 postretirement 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 is a description of these critical accounting policies and an explanation of the methods and assumptions underlying their application.

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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 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. Prior to the fourth quarter of 2014, loan reviews were performed by our Asset Review Department quarterly for all loans individually classified by our Asset Classification Committee and were performed annually for multi-family and commercial real estate mortgage loans modified in a TDR, multi-family and commercial real estate mortgage loans with balances of $5.0 million or greater and commercial and industrial loans with balances of $500,000 or greater. In addition, our Asset Review Department reviewed annually borrowing relationships whose combined outstanding balance were $5.0 million or greater, with such reviews covering approximately 50% of the outstanding principal balance of the loans to such relationships.

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

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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.

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 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

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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 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 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 $98.0 million was appropriate at December 31, 2015, compared to $111.6 million at December 31, 2014. The provision for loan losses credited to operations totaled $12.1 million for the year ended December 31, 2015.

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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) Charged to Operations” and “Asset Quality.”

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. 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.

We assess impairment of our MSR based on the estimated fair value of those rights on a stratum-by-stratum basis with any impairment recognized through a valuation allowance for each impaired stratum. We stratify our MSR by underlying loan type (primarily fixed and adjustable) and interest rate. The estimated fair values of each MSR stratum are 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. Individual allowances for each stratum are then adjusted in subsequent periods to reflect changes in the measurement of impairment. All assumptions are reviewed for reasonableness on a quarterly basis to ensure they reflect current and anticipated market conditions.

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. At December 31, 2014, our MSR had a carrying value of $11.4 million, net of a valuation allowance of $2.7 million, which approximated the estimated fair value based on expected future cash flows considering a weighted average discount rate of 9.48%, a weighted average constant prepayment rate on mortgages of 12.35% and a weighted average life of 5.7 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.

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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 December 31, 2015, 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 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 December 31, 2015. Non-GSE issuance mortgage-backed securities at December 31, 2015 comprised less than 1% of our securities portfolio and had an amortized cost of $3.2 million, with 94% classified as available-for-sale and 6% 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 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 December 31, 2015, we held 129 securities with an estimated fair value totaling $1.55 billion which had an unrealized loss totaling $26.6 million. Of the securities in an unrealized loss position at December 31, 2015, $444.1 million, with an unrealized loss of $14.4 million, had been in a continuous unrealized loss position for twelve months or longer. At December 31, 2015, 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.

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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 NYS 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 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. At December 31, 2015, we had recorded deferred tax assets, net of deferred tax liabilities, of $101.5 million compared to $103.5 million at December 31, 2014, net of a valuation allowance of $7.2 million. 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.

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

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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 Item 8, “Financial Statements and Supplementary Data.”

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. As mortgage interest rates increase, customers’ refinance activities tend to decelerate causing the cash flow from both our mortgage loan portfolio and our mortgage-backedsecurities portfolio to decrease. When mortgage rates decrease, the opposite tends to occur. Principal payments on loans and securities totaled $3.04 billion for the year ended December 31, 2015 and $2.37 billion for the year ended December 31, 2014. Loan and securities repayments increased for the year ended December 31, 2015, compared to the year ended December 31, 2014, 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 $107.2 million for the year ended December 31, 2015 and $134.1 million for the year ended December 31, 2014. Deposits decreased $398.9 million during the year ended December 31, 2015 and decreased $350.4 million during the year ended December 31, 2014 due to decreases in certificates of deposit, partially offset by net increases in core deposits. During the years ended December 31, 2015 and 2014, we continued to allow high cost certificates of deposit to run off. Total deposits included business deposits of $1.05 billion at December 31, 2015, an increase of 13% since December 31, 2014, reflecting the expansion of our business banking operations, a component of the strategic shift in our balance sheet, which included enhanced marketing efforts and the addition of two branches in 2014 and one branch in 2015. At December 31, 2015, core deposits represented 78% of total deposits, up from 72% at December 31, 2014. This reflects our 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 $223.5 million during the year ended December 31, 2015 and increased $50.5 million during the year ended December 31, 2014. The decrease in net borrowings during the year ended December 31, 2015 was due to decreases in FHLB-NY advances and federal funds purchased. The increase in net borrowings during the year ended December 31, 2014 was due to an increase in federal funds purchased, partially offset by a decrease in FHLB-NY advances.

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 year ended December 31, 2015 declined to $1.51 billion, compared to $1.64 billion during the year ended December 31, 2014, reflecting a decline in multi-family and commercial real estate mortgage loan production, partially offset by an increase in residential mortgage loan production. Residential mortgage loan originations and purchases for portfolio totaled $616.9 million during the year ended December 31, 2015, of which $389.9 million were originations and $227.0 million were purchases of

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individual residential mortgage loans through our third party loan origination program, compared to $455.9 million during the year ended December 31, 2014, of which $261.7 million were originations and $194.2 million were 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. Although residential mortgage loan originations and purchases increased during 2015, they did not keep pace with the level of repayments during the same period resulting in a net reduction of $858.1 million in that portfolio. Multi-family and commercial real estate loan originations declined to $890.7 million during the year ended December 31, 2015, compared to $1.19 billion during the year ended December 31, 2014, despite our continued commitment to grow these portfolios, as we maintained our disciplined approach in this challenging lending environment, while some competitor institutions offered rates and/or product terms at levels which we have chosen not to offer. Purchases of securities totaled $811.6 million during the year ended December 31, 2015 and $655.8 million during the year ended December 31, 2014.

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 and to be prepared for the possibility of adverse conditions which could result in the need for additional liquidity. 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 $200.5 million at December 31, 2015 and $143.2 million at December 31, 2014. At December 31, 2015, we had $1.77 billion of borrowings with a weighted average interest rate of 0.78% maturing over the next twelve 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 December 31, 2015, we had $1.95 billion of callable borrowings, of which $1.00 billion were contractually callable by the counterparty within twelve 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 December 31, 2015, FHLB-NY advances totaled $2.18 billion, or 55% of total borrowings. We do not believe any of our borrowing counterparty concentrations represent a material risk to our liquidity. In addition, we had $926.2 million in certificates of deposit at December 31, 2015 with a weighted average interest rate of 1.06% maturing over the next twelve 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 December 31, 2015.

	Borrowings						Certificates of Deposit
				Weighted Average Rate					Weighted Average Rate
(Dollars in Millions)	Amount						Amount
Contractual Maturity:
2016	$	1,765			0.78	%	$	926		1.06	%
2017	250				5.00		393			0.94
2018	200		(1)		3.03		185			1.08
2019	600		(1)		3.73		184			1.46
2020 and thereafter	1,150		(2)		3.53		306			1.60
Total	$	3,965			2.40	%	$	1,994		1.16	%

(1) Callable by the counterparty within the next three months and on a quarterly basis thereafter.

(2) Includes $200.0 million of borrowings, with a weighted average interest rate of 3.86%, which are callable by the counterparty in 2016 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 $506.2 million at December 31, 2015. 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 December 31, 2015, we had pledged as collateral with the Federal Reserve Bank of New York securities with an amortized cost of $150.8 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 2015 and 2014, 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 December 31, 2015, the Bank had residential mortgage loans pledged to the FHLB-NY sufficient to support additional borrowings of approximately $2.31 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 December 31, 2015, the Bank had approximately $1.36 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, debt securities, warrants to purchase common stock, preferred stock or debt securities 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 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.

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We have outstanding $250.0 million of 5.00% senior unsecured notes included in other borrowings which mature on June 19, 2017. The terms of these notes restrict our ability to sell, transfer or pledge as collateral the shares of Astoria Bank and restrict our ability to permit Astoria Bank to issue additional shares of voting stock, unless, in either case, we will continue to own at least 80% of Astoria Bank’s voting stock. Such terms also restrict our ability to permit Astoria Bank to merge or consolidate with any person or sell or transfer all or substantially all of the assets of Astoria Bank to another person unless, in either case, such other person is Astoria Financial Corporation or we will own at least 80% of the voting stock of such other person. We may redeem all or part of these notes at any time, subject to a 30 day minimum notice requirement, at par together with accrued and unpaid interest to the redemption date. For further discussion of our debt obligations, see Note 8 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

We also have outstanding 5,400,000 depositary shares, each representing a 1/40^th interest in a share of our 6.50% Non-Cumulative Perpetual Preferred Stock, Series C, $1.00 par value per share, $1,000 liquidation preference per share (equivalent to $25 per depositary share). We issued 135,000 shares of the Series C Preferred Stock in connection with the sale of the depositary shares in a registered public offering in 2013. The aggregate proceeds from the offering, net of underwriting discounts and other issuance costs, were approximately $129.8 million. The Series C Preferred Stock, and corresponding depositary shares, may be redeemed at our option, in whole or in part, on April 15, 2018, or on any dividend payment date occurring thereafter, at a redemption price of $1,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends (without accumulation of any undeclared dividends). The Series C Preferred Stock may also be redeemed in whole, but not in part, at any time upon the occurrence of a “regulatory capital treatment event,” as defined in the certificate of designations included in the registration statement on Form 8-A filed with the SEC on March 19, 2013. The holders of the Series C Preferred Stock, and the corresponding depositary shares, do not have the right to require the redemption or repurchase of the Series C Preferred Stock. Dividends are payable on the Series C Preferred Stock when, as and if declared by our Board of Directors, on a non-cumulative basis quarterly in arrears on January 15, April 15, July 15 and October 15 of each year at an annual rate of 6.50% on the liquidation preference of $1,000 per share. No dividend shall be declared, paid, or set aside for payment on our common stock unless the full dividends for the most recently completed dividend period have been declared and paid on our Series C Preferred Stock.

On January 7, 2014, we adopted the Stock Purchase Plan and terminated the previously existing plan. The Stock Purchase Plan 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. 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 Stock Purchase Plan. During the year ended December 31, 2015, 482,460 shares of our common stock were purchased pursuant to the Stock Purchase Plan directly from us from treasury shares for net proceeds totaling $6.2 million.

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 year ended December 31, 2015, Astoria Financial Corporation paid dividends on common and preferred stock totaling $24.9 million and paid interest on its debt obligations totaling $12.5 million. On December 17, 2015, 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 October 15, 2015 through and including January 14, 2016, which was paid on January 15, 2016 to stockholders of record as of December 31, 2015. On January 27, 2016, our Board of Directors declared a quarterly cash dividend of $0.04 per share on shares of our common stock payable on March 1, 2016 to stockholders of record as of February 12, 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. During 2015, Astoria Bank paid dividends to Astoria Financial Corporation totaling $63.4 million. Since Astoria Bank is a federally chartered savings association, there are regulatory limits on its ability to make distributions to Astoria Financial Corporation. During 2015, Astoria Bank was required to file applications with the OCC for proposed capital distributions, and such applications were approved by the OCC.

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Astoria Bank must also provide notice to the FRB at least 30 days prior to declaring a dividend. For further discussion of limitations on capital distributions from Astoria Bank, see Item 1, “Business - Regulation and Supervision.”

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

At December 31, 2015, our tangible common equity ratio, which represents common stockholders’ equity less goodwill divided by total assets less goodwill, was 9.06%. 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.” At December 31, 2015, 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.

At December 31, 2015, Astoria Financial Corporation's Tier 1 leverage capital ratio was 10.21%, Common equity tier 1 risk-based capital ratio was 16.00%, Tier 1 risk-based capital ratio was 17.37% and Total risk-based capital ratio was 18.51%, and Astoria Bank’s Tier 1 leverage capital ratio was 11.29%, Common equity tier 1 risk-based and Tier 1 risk-based capital ratios were 19.12% and Total risk-based capital ratio was 20.25%. For additional information on the regulatory capital ratios of Astoria Financial Corporation and Astoria Bank at December 31, 2015, see Note 17 of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and supplementary Data."

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 IRR 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 as described below.

Lending commitments include commitments to originate and purchase loans and commitments to fund unused lines of credit.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  We evaluate creditworthiness on a case-by-case basis.  Our maximum exposure to credit risk is represented by the contractual amount of the instruments.

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 $29.8 million at December 31, 2015 and represent obligations to sell residential mortgage loans either servicing retained or servicing released on a mandatory delivery or best efforts basis.  We enter into commitments to sell loans as an economic hedge against our pipeline of conforming fixed rate loans which we originate primarily for sale into the secondary market.  The fair values of our mortgage banking derivative financial instruments are immaterial to our financial condition and results of operations.

In addition to our lending commitments, we have contractual obligations related to operating lease commitments.  Operating lease commitments are obligations under various non-cancelable operating leases on buildings and land used for office space and banking purposes.

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The following table details our contractual obligations at December 31, 2015.

	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	$	2,875,000	$	675,000		$	450,000	$	1,750,000	$	—
Off-balance sheet contractual obligations:
Minimum rental payments due under non-cancelable operating leases	82,082		12,704			21,180		17,503		30,695
Commitments to originate and purchase loans (1)	398,788		398,788			—		—		—
Commitments to fund unused lines of credit (2)	186,744		186,744			—		—		—
Total	$	3,542,614	$	1,273,236		$	471,180	$	1,767,503	$	30,695

(1) Includes commitments to originate loans held-for-sale of $15.4 million.

(2) Includes commitments to fund commercial and industrial lines of credit of $107.6 million, home equity lines of credit of $45.1 million and other consumer lines of credit of $34.0 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 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 Item 8, “Financial Statements and Supplementary Data.”  Similarly, we have an obligation related to our investments in affordable housing limited partnerships totaling $12.9 million at December 31, 2015 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 four years, cannot be estimated.

We also have contingent liabilities related to assets sold with recourse and standby letters of credit.  We are obligated under various recourse provisions associated with certain first mortgage loans we sold in the secondary market.  Generally the loans we sell in the secondary market are subject to recourse for fraud and adherence to underwriting or quality control guidelines.  We were required to repurchase one loan during 2015 as a result of these recourse provisions.  The principal balance of loans sold in the secondary market with recourse provisions in addition to fraud and adherence to underwriting or quality control guidelines amounted to $344.2 million at December 31, 2015.  We estimate the liability for such loans sold with recourse based on an analysis of our loss experience related to similar loans sold with recourse.  The carrying amount of this liability was immaterial at December 31, 2015.  Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party.  The guarantees generally extend for a term of up to one year and are fully collateralized.  For each guarantee issued, if the customer defaults on a payment or performance to the third party, we would have to perform under the guarantee. Outstanding standby letters of credit totaled $3.3 million at December 31, 2015.

On July 31, 2014, we completed a bulk sale transaction of certain non-performing residential mortgage loans that had a carrying value of $173.7 million. On September 12, 2014, we completed a second sale transaction, with the same counterparty as the bulk sale transaction, in which we sold additional non-performing residential mortgage loans with a carrying value of $4.0 million. The loan sale agreements governing the sale transactions contained usual and customary document cure provisions and indemnification provisions protecting the purchaser from breaches of our representations, warranties and covenants. These provisions expired in 2015 without any material claims presented. Accordingly, there were no adjustments to the purchase price for such loans, repurchases or indemnification payments during 2015 and 2014.

See Note 10 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our commitments and contingent liabilities.

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Comparison of Financial Condition and Operating Results for the Years Ended December 31, 2015 and 2014

Financial Condition

Total assets decreased $563.8 million to $15.08 billion at December 31, 2015, from $15.64 billion at December 31, 2014, primarily reflecting a decrease in our residential mortgage loan portfolio, partially offset by increases in our multi-family and commercial real estate mortgage loan portfolio and our securities portfolio.

Loans receivable decreased $804.4 million to $11.15 billion at December 31, 2015, from $11.96 billion at December 31, 2014, and represented 74% of total assets at December 31, 2015. The growth in our multi-family mortgage loan portfolio was more than offset by the declines in our residential and commercial real estate mortgage loan portfolios resulting in a net decline of $801.3 million in our total mortgage loan portfolio to $10.86 billion at December 31, 2015, compared to $11.66 billion at December 31, 2014. At December 31, 2015, our residential mortgage loan portfolio represented 54% of our total loan portfolio, down from 58% at December 31, 2014, and our multi-family and commercial real estate mortgage loan portfolio represented 44% of our total loan portfolio, up from 40% at December 31, 2014. This reflects our continued focus on repositioning the asset mix of our balance sheet. Gross mortgage loans originated and purchased for portfolio during the year ended December 31, 2015 declined to $1.51 billion, compared to $1.64 billion during the year ended December 31, 2014, reflecting a decrease in the multi-family and commercial real estate mortgage loan production, partially offset by an increase in the residential mortgage loan production. Mortgage loan repayments increased to $2.29 billion for the year ended December 31, 2015, compared to $1.89 billion for the year ended December 31, 2014, primarily due to an increase in multi-family and commercial real estate mortgage loan prepayments.

Our residential mortgage loan portfolio decreased $858.1 million to $6.02 billion at December 31, 2015, from $6.87 billion at December 31, 2014. Residential mortgage loan repayments increased during 2015, compared to 2014, and continued to outpace our origination and purchase volume during the year ended December 31, 2015, reflecting the reduced interest rate environment that prevailed for a significant portion of 2015. Residential mortgage loan originations and purchases for portfolio totaled $616.9 million for the year ended December 31, 2015, of which $389.9 million were originations and $227.0 million were purchases, compared to $455.9 million for the year ended December 31, 2014, of which $261.7 million were originations and $194.2 million were purchases. During the year ended December 31, 2015, the loan-to-value ratio of our residential mortgage loan originations and purchases for portfolio, at the time of origination or purchase, averaged approximately 61% and the loan amount averaged approximately $608,000.

Our multi-family mortgage loan portfolio increased $111.1 million to $4.02 billion at December 31, 2015, from $3.91 billion at December 31, 2014, and represented 36% of our total loan portfolio at December 31, 2015. Our commercial real estate mortgage loan portfolio decreased $54.3 million to $819.5 million at December 31, 2015, from $873.8 million at December 31, 2014, and represented 7% of our total loan portfolio at December 31, 2015. Multi-family and commercial real estate loan originations totaled $890.7 million during the year ended December 31, 2015, compared to $1.19 billion during the year ended December 31, 2014. Our levels of originations reflect our continued commitment to grow these portfolios while maintaining our disciplined approach. However, our commercial real estate originations did not keep pace with the level of repayments, resulting in a decline in that portfolio. During the year ended December 31, 2015, our multi-family and commercial real estate mortgage loan originations reflected loan balances averaging approximately $2.6 million with a weighted average loan-to-value ratio, at the time of origination, of approximately 45% and a weighted average debt service coverage ratio of approximately 1.49.

Our securities portfolio increased $195.4 million to $2.71 billion at December 31, 2015, from $2.52 billion at December 31, 2014, and represented 18% of total assets at December 31, 2015. This increase reflected purchases totaling $811.6 million which were in excess of repayments of $586.2 million and sales of $19.0 million during the year ended December 31, 2015. At December 31, 2015, our securities portfolio was comprised primarily of fixed rate REMIC and CMO securities which had an amortized cost totaling $2.13 billion, a weighted average coupon of 2.80%, a weighted average collateral coupon of 4.09% and a weighted average life of 4.1 years.

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Total liabilities declined $647.2 million to $13.41 billion at December 31, 2015, from $14.06 billion at December 31, 2014, primarily due to a decline in deposits and borrowings, net. Deposits totaled $9.11 billion at December 31, 2015, or 68% of total liabilities, a decline of $398.9 million compared to $9.50 billion at December 31, 2014. The decrease in deposits reflected a decline of $701.3 million in certificates of deposit, partially offset by a net increase of $302.4 million in core deposits. At December 31, 2015, core deposits totaled $7.11 billion and represented 78% of total deposits, up from 72% at December 31, 2014. This reflected our efforts to reposition the liability mix of our balance sheet. The net increase in core deposits at December 31, 2015, compared to December 31, 2014, reflected increases in NOW and demand deposit accounts and money market accounts, partially offset by a decline in savings accounts. NOW and demand deposit accounts increased $215.0 millionsince December 31, 2014 to $2.41 billion at December 31, 2015. Money market accounts increased $186.7 million since December 31, 2014 to $2.56 billion at December 31, 2015. Savings accounts decreased $99.3 million since December 31, 2014 to $2.14 billion at December 31, 2015. The net increase in core deposits during the year ended December 31, 2015 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 $223.5 million to $3.96 billion at December 31, 2015, from $4.19 billion at December 31, 2014. The decrease in borrowings was due to a decrease of $204.0 million in FHLB-NY advances, coupled with a decrease of $20.0 million in federal funds purchased.

Stockholders' equity increased $83.4 million to $1.66 billion at December 31, 2015, from $1.58 billion at December 31, 2014. The increase in stockholders’ equity was primarily due to net income of $88.1 million, stock based compensation of $11.4 million, a decrease in accumulated other comprehensive loss of $7.3 million and capital raised through our Stock Purchase Plan of $6.2 million, partially offset by dividends on common and preferred stock totaling $24.9 million and common stock repurchases (resulting from the transfer of vested restricted common stock awards by the recipients back to us to facilitate the withholding of individual income taxes related to the vesting of such awards) of $6.9 million.

Results of Operations

General

Net income available to common shareholders for the year ended December 31, 2015 decreased $7.8 million to $79.3 million, compared to $87.1 million for the year ended December 31, 2014. The decline was largely due to an increase in non-interest expense of $4.7 million, an increase in income tax expense of $3.5 million and a decrease in net interest income of $2.0 million, which was partly offset by increase of $2.6 million in the provision for loan losses credited to operations. Diluted earnings per common share, or EPS, decreased to $0.79 per common share for the year ended December 31, 2015, from $0.88 per common share for the year ended December 31, 2014. Return on average assets decreased to 0.57% for the year ended December 31, 2015, compared to 0.61% for the year ended December 31, 2014, due to the reduction in net income, partially offset by a decrease in average assets. Return on average common stockholders’ equity decreased to 5.31% for the year ended December 31, 2015, compared to 6.06% for the year ended December 31, 2014. Return on average tangible common stockholders’ equity, which represents average common stockholders’ equity less average goodwill, decreased to 6.07% for the year ended December 31, 2015, compared to 6.96% for the year ended December 31, 2014. The decreases in the returns on average common stockholders’ equity and average tangible common stockholders’ equity for the year ended December 31, 2015, compared to the year ended December 31, 2014, were due to the decrease in net income available to common shareholders, coupled with an increase in average common stockholders’ equity.

Our results of operations for the year ended December 31, 2015 included a reduction in income tax expense of $11.4 million related to the 2015 NYS income tax legislation enacted in the 2015 second quarter. For the year ended December 31, 2015, this reduction in income tax expense increased diluted EPS by $0.12 per common share, return on average common stockholders’ equity by 76 basis points, return on average tangible common stockholders’ equity by 88 basis points and return on average assets by 7 basis points.

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Our results of operations for the year ended December 31, 2014 included reductions in income tax expense of $15.7 million, of which $11.5 million related to the 2014 NYS income tax legislation enacted on March 31, 2014 and $4.2 million related to a fourth quarter 2014 resolution of an income tax matter with NYS. For the year ended December 31, 2014, this reduction in income tax expense increased diluted EPS by $0.16 per common share, return on average common stockholders’ equity by 109 basis points, return on average tangible common stockholders’ equity by 126 basis points and return on average assets by 10 basis points.

See “Income Tax Expense” below for further discussion of the impact of the 2015 NYS legislation and the 2014 NYS legislation.

Income and expense and related financial ratios adjusted to exclude the effect of the aforementioned change in income tax legislation represent non-GAAP financial measures which we believe provide investors with a meaningful comparison for effectively evaluating our operating results. Non-GAAP financial ratios are calculated by substituting non-GAAP net income, non-GAAP net income available to common shareholders and non-GAAP income tax expense for net income, net income available to common shareholders and income tax expense in the corresponding calculation.

The following table provides a reconciliation between the non-GAAP financial measures to the comparable GAAP measures as reported in our consolidated statement of income for the periods indicated and related financial ratios.

	For the Years ended December 31,
	2015									2014
(In Thousands, Except Per Share Data)	As Reported			Effect of Change in Tax Legislation			Non-GAAP			As Reported			Effect of Change in Tax Legislation			Non-GAAP
Income before income tax expense	$	117,874		$	—		$	117,874		$	122,195		$	—		$	122,195
Income tax expense	29,799			11,404			41,203			26,279			15,709			41,988
Net income	88,075			(11,404		)	76,671			95,916			(15,709		)	80,207
Preferred stock dividends	8,775			—			8,775			8,775			—			8,775
Net income available to common shareholders	$	79,300		$	(11,404	)	$	67,896		$	87,141		$	(15,709	)	$	71,432
Basic earnings per common share	$	0.79		$	(0.11	)	$	0.68		$	0.88		$	(0.16	)	$	0.72
Diluted earnings per common share	$	0.79		$	(0.12	)	$	0.67		$	0.88		$	(0.16	)	$	0.72
Return on average:
Common stockholders’ equity	5.31		%	(0.76		)%	4.55		%	6.06		%	(1.09		)%	4.97		%
Tangible common stockholders’ equity	6.07			(0.88		)	5.19			6.96			(1.26		)	5.70
Assets	0.57			(0.07		)	0.50			0.61			(0.10		)	0.51
Effective tax rate	25.28			9.68			34.96			21.51			12.85			34.36

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 Item 7A, “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 totaled $340.3 million for the year ended December 31, 2015, a small decrease compared to $342.3 million for the year ended December 31, 2014. During 2015, the repositioning of our balance sheet continued as our residential mortgage loan portfolio continued to decline while our combined multi-family and commercial real estate loan portfolio increased, but not at the same pace as the reduction in the residential portfolio, resulting in a net decline

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in interest-earning assets. In addition, the investment securities portfolio increased as mortgage-backed securities and high quality corporate bonds were added to the portfolio. As a result of the continued low rate environment, the average rate earned on our interest-earning assets declined 5 basis points to 3.29% in 2015 from 3.34% in 2014. On the liability side, deposits decreased as higher cost certificates of deposit were allowed to run-off while net core deposits increased, resulting in a decrease in the cost of deposits and borrowed funds to 1.00% in 2015 from 1.09% in 2014. The continued low interest rate environment, coupled with the changing mix of our interest-earning assets and interest-bearing liabilities, has resulted in the average cost of interest-bearing liabilities declining more than the average yield on interest-earning assets for the year ended December 31, 2015, compared to the year ended December 31, 2014, resulting in improvements in both our net interest rate spread and our net interest margin. The net interest rate spread increased 4 basis points to 2.29% for the year ended December 31, 2015, from 2.25% for the year ended December 31, 2014. The net interest margin increased 4 basis points to 2.36% for the year ended December 31, 2015, from 2.32% for the year ended December 31, 2014. The average balance of net interest-earning assets increased $80.7 million to $1.12 billion for the year ended December 31, 2015, compared to $1.04 billion for the year ended December 31, 2014.

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 Year Ended December 31,
	2015							2014							2013
(Dollars in Thousands)	Average Balance		Interest		Average Yield/ Cost			Average Balance		Interest		Average Yield/ Cost			Average Balance			Interest		Average Yield/ Cost
Assets:
Interest-earning assets:
Mortgage loans (1):
Residential	$	6,481,319	$	203,950		3.15	%	$	7,509,317	$	241,417		3.21	%	$	8,810,950		$	289,790		3.29	%
Multi-family and commercial real estate	4,800,044		191,643			3.99		4,401,493		178,795			4.06		3,680,551			163,352			4.44
Consumer and other loans (1)	251,181		8,870			3.53		241,556		8,532			3.53		253,465			8,797			3.47
Total loans	11,532,544		404,463			3.51		12,152,366		428,744			3.53		12,744,966			461,939			3.62
Mortgage-backed and other securities (2)	2,586,882		62,754			2.43		2,342,486		57,065			2.44		2,211,700			49,563			2.24
Interest-earning cash accounts	148,359		418			0.28		107,977		321			0.30		95,892			263			0.27
FHLB-NY stock	134,434		5,781			4.30		142,782		6,220			4.36		154,478			6,665			4.31
Total interest-earning assets	14,402,219		473,416			3.29		14,745,611		492,350			3.34		15,207,036			518,430			3.41
Goodwill	185,151							185,151							185,151
Other non-interest-earning assets	732,611							682,583							748,080
Total assets	$	15,319,981						$	15,613,345						$	16,140,267
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
NOW and demand deposit (3)	$	2,270,980	778			0.03		$	2,134,277	706			0.03		$	2,094,245		691			0.03
Money market	2,459,170		6,496			0.26		2,187,718		5,527			0.25		1,824,729			5,646			0.31
Savings	2,186,704		1,093			0.05		2,364,679		1,182			0.05		2,659,433			1,329			0.05
Total core deposits	6,916,854		8,367			0.12		6,686,674		7,415			0.11		6,578,407			7,666			0.12
Certificates of deposit	2,282,038		28,976			1.27		2,959,631		43,940			1.48		3,598,297			54,951			1.53
Total deposits	9,198,892		37,343			0.41		9,646,305		51,355			0.53		10,176,704			62,617			0.62
Borrowings	4,081,488		95,784			2.35		4,058,192		98,707			2.43		4,115,259			113,911			2.77
Total interest-bearing liabilities	13,280,380		133,127			1.00		13,704,497		150,062			1.09		14,291,963			176,528			1.24
Non-interest-bearing liabilities	417,480							341,246							428,920
Total liabilities	13,697,860							14,045,743							14,720,883
Stockholders’ equity	1,622,121							1,567,602							1,419,384
Total liabilities and stockholders’ equity	$	15,319,981						$	15,613,345						$	16,140,267
Net interest income/ net interest rate spread (4)			$	340,289		2.29	%			$	342,288		2.25	%				$	341,902		2.17	%
Net interest-earning assets/ net interest margin (5)	$	1,121,839				2.36	%	$	1,041,114				2.32	%	$	915,073					2.25	%
Ratio of interest-earning assets to interest-bearing liabilities	1.08x							1.08x							1.06		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 $928.0 million, $897.5 million and $873.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

(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 Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014									Increase (Decrease) for the Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013
(In Thousands)	Volume			Rate			Net			Volume			Rate			Net
Interest-earning assets:
Mortgage loans:
Residential	$	(32,966	)	$	(4,501	)	$	(37,467	)	$	(41,536	)	$	(6,837	)	$	(48,373	)
Multi-family and commercial real estate	15,969			(3,121		)	12,848			30,214			(14,771		)	15,443
Consumer and other loans	338			—			338			(416		)	151			(265		)
Mortgage-backed and other securities	5,925			(236		)	5,689			2,989			4,513			7,502
Interest-earning cash accounts	119			(22		)	97			31			27			58
FHLB-NY stock	(355		)	(84		)	(439		)	(520		)	75			(445		)
Total	(10,970		)	(7,964		)	(18,934		)	(9,238		)	(16,842		)	(26,080		)
Interest-bearing liabilities:
NOW and demand deposit	72			—			72			15			—			15
Money market	733			236			969			1,049			(1,168		)	(119		)
Savings	(89		)	—			(89		)	(147		)	—			(147		)
Certificates of deposit	(9,238		)	(5,726		)	(14,964		)	(9,299		)	(1,712		)	(11,011		)
Borrowings	530			(3,453		)	(2,923		)	(1,544		)	(13,660		)	(15,204		)
Total	(7,992		)	(8,943		)	(16,935		)	(9,926		)	(16,540		)	(26,466		)
Net change in net interest income	$	(2,978	)	$	979		$	(1,999	)	$	688		$	(302	)	$	386

Interest Income

Interest income decreased $19.0 million to $473.4 million for the year ended December 31, 2015, from $492.4 million for the year ended December 31, 2014, due to a decrease of $343.4 million in the average balance of interest-earning assets to $14.40 billion for the year ended December 31, 2015, from $14.75 billion for the year ended December 31, 2014, coupled with the decline in yield on interest-earning assets. The decrease in the average balance of interest-earning assets primarily reflected declines in the average balance of residential mortgage loans, partially offset by increases in the average balances of multi-family and commercial real estate mortgage loans and mortgage-backed and other securities. The decrease in the average yield on interest-earning assets reflects the continued low interest rate environment.

Interest income on residential mortgage loans decreased $37.4 million to $204.0 million for the year ended December 31, 2015, from $241.4 million for the year ended December 31, 2014, due to a decrease of $1.03 billion in the average balance of such loans to $6.48 billion for the year ended December 31, 2015, from $7.51 billion for the year ended December 31, 2014, coupled with a decrease in the average yield to 3.15% for the year ended December 31, 2015, from 3.21% for the year ended December 31, 2014. The decrease in the average balance of residential mortgage loans reflected the continued decline in this portfolio as repayments outpaced our originations over the past year. The decrease in the average yield was primarily due to new originations at lower interest rates than the rates on loans repaid over the past year, partially offset by a decline in amortization of net premium and deferred loan origination cost and

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the impact of the upward repricing of our ARM loans. Net premium and deferred loan origination cost amortization decreased slightly to $10.7 million for the year ended December 31, 2015, from $10.9 million for the year ended December 31, 2014.

Interest income on multi-family and commercial real estate mortgage loans increased $12.8 million to $191.6 million for the year ended December 31, 2015, from $178.8 million for the year ended December 31, 2014, due to an increase of $398.6 million in the average balance to $4.80 billion for the year ended December 31, 2015, from $4.40 billion for the year ended December 31, 2014, partially offset by a decrease in the average yield to 3.99% for the year ended December 31, 2015, from 4.06% for the year ended December 31, 2014. The increase in the average balance of multi-family and commercial real estate loans was attributable to the levels of originations of such loans which exceeded repayments over the past year. The decrease in the average yield reflected the lower interest rate environment resulting in new originations at interest rates below the weighted average rate of the portfolio and the interest rates on loans repaid, partially offset by larger prepayment penalties collected. Prepayment penalties totaled $12.3 million for the year ended December 31, 2015, compared to $6.5 million for the year ended December 31, 2014.

Interest income on mortgage-backed and other securities increased $5.7 million to $62.8 million for the year ended December 31, 2015, from $57.1 million for the year ended December 31, 2014, due to an increase of $244.4 million in the average balance of the portfolio to $2.59 billion for the year ended December 31, 2015, from $2.34 billion for the year ended December 31, 2014. The increase in the average balance reflected securities purchased over the past year in excess of repayments and sales. The average yield declined slightly to 2.43% for the year ended December 31, 2015, from 2.44% for the year ended December 31, 2014.

Interest Expense

Interest expense decreased $17.0 million to $133.1 million for the year ended December 31, 2015, from $150.1 million for the year ended December 31, 2014, due to a decrease in the average cost of interest-bearing liabilities to 1.00% for the year ended December 31, 2015, from 1.09% for the year ended December 31, 2014, coupled with a decrease of $424.1 million in the average balance of interest-bearing liabilities to $13.28 billion for the year ended December 31, 2015, from $13.70 billion for the year ended December 31, 2014. The decrease in the average cost of interest-bearing liabilities primarily reflected decreases in the average cost of certificates of deposit and borrowings. The decrease in the average balance of interest-bearing liabilities was primarily due to a decrease in the average balance of certificates of deposit.

Interest expense on total deposits decreased $14.1 million to $37.3 million for the year ended December 31, 2015, from $51.4 million for the year ended December 31, 2014, primarily due to a decrease in interest expense on certificates of deposit. The average balance of total deposits decreased $447.4 million to $9.20 billion for the year ended December 31, 2015, from $9.65 billion for the year ended December 31, 2014, reflecting declines in the average balances of certificates of deposit and savings accounts, partially offset by increases in the average balance of money market and NOW and demand deposit accounts. The average cost of total deposits decreased to 0.41% for the year ended December 31, 2015, from 0.53% for the year ended December 31, 2014, primarily due to the decrease in the average cost of certificates of deposit.

Interest expense on certificates of deposit decreased $14.9 million to $29.0 million for the year ended December 31, 2015, from $43.9 million for the year ended December 31, 2014, due to a decrease of $677.6 million in the average balance to $2.28 billion for the year ended December 31, 2015, from $2.96 billion for the year ended December 31, 2014, coupled with a decrease in the average cost to 1.27% for the year ended December 31, 2015, from 1.48% for the year ended December 31, 2014. The decrease in the average balance of certificates of deposit was primarily the result of our efforts to reposition the liability mix of our balance sheet to increase our core deposits and reduce certificates of deposit. The decrease in the average cost of certificates of deposit reflected the impact of certificates of deposit at higher rates maturing and being replaced at lower interest rates. During the year ended December 31, 2015, $2.01 billion of certificates of deposit with a weighted average interest rate of 1.14% and a weighted average maturity at inception of 28 months matured and $1.28 billion of certificates of deposit were issued or repriced with a weighted average interest rate of 0.48% and a weighted average maturity at inception of 19 months.

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Interest expense on borrowings decreased $2.9 million to $95.8 million for the year ended December 31, 2015, from $98.7 million for the year ended December 31, 2014, primarily due to a decrease in the average cost to 2.35% for the year ended December 31, 2015, from 2.43% for the year ended December 31, 2014. The decrease in the average cost of borrowings was primarily due to the restructuring of $600.0 million of borrowings, primarily in the 2014 fourth quarter, which resulted in a reduction of the weighted average interest rate on such borrowings from 4.19% to 3.73% and an extension of terms from a weighted average remaining term at the time of the restructuring of approximately 2.5 years to approximately 4.5 years.

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 $12.1 million for the year ended December 31, 2015, compared to a provision for loan losses credited to operations of $9.5 million for the year ended December 31, 2014. Net loan charge-offs totaled $1.5 million, or one basis point of average loans outstanding, for the year ended December 31, 2015, compared to $17.9 million, or 15 basis points of average loans outstanding, for the year ended December 31, 2014. Net loan charge-offs for the year ended December 31, 2014 include $8.7 million related to the designation of the pool of non-performing residential mortgage loans as held-for-sale as of June 30, 2014. Given an overall decline in our loan portfolio of $798.0 million since December 31, 2014, coupled with reduced losses reflected through net charge-offs, our allowance for loan losses decreased to $98.0 million at December 31, 2015, representing 0.88% of total loans, compared to $111.6 million at December 31, 2014, or 0.93% of total loans at December 31, 2014. 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 the improved asset quality in our loan portfolio as a result of reductions in the balances of certain loan classes we believe bear higher risk, such as residential interest-only mortgage 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.”

Non-Interest Income

Non-interest income decreased $252,000 to $54.6 million for the year ended December 31, 2015, from $54.8 million for the year ended December 31, 2014. This decrease reflects lower customer service fees and other loan fees, partially offset by higher mortgage banking income and the impact of a loss incurred in 2014 on the sale of certain non-performing loans in the third quarter of 2014.

Customer service fees decreased $2.9 million to $32.8 million for the year ended December 31, 2015, from $35.7 million for the year ended December 31, 2014, primarily due to the discontinuation of a customer value program in the third quarter of 2015 and decreases in checking account charges, including inactivity fees and overdraft charges related to transaction accounts, commissions on sales of annuities and ATM fees.

Mortgage banking 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, increased $896,000 to $4.2 million for the year ended December 31, 2015, from $3.3 million for the year ended December 31, 2014. The increase in mortgage banking

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income, net, was primarily due to a recovery of the value of mortgage servicing rights and amortization of MSR as long-term interest rates increased year over year.

Other non-interest income increased $1.6 million to $6.3 million for the year ended December 31, 2015, compared to $4.7 million for the year ended December 31 2014. The increase was primarily attributable to a loss of $920,000 related to the sale of non-performing residential mortgage loans in the third quarter of 2014.

Non-Interest Expense

Non-interest expense increased $4.7 million to $289.1 million for the year ended December 31, 2015, from $284.4 million for the year ended December 31, 2014, primarily due to expenses related to the pending Merger with NYCB. These expenses included investment banking fees, legal fees and certain compensation items that were recognized in 2015 instead of their normal vesting date of 2016 and related payroll taxes. Excluding these Merger-related expenses, non-interest expense in 2015 would have been substantially the same as the 2014 level.

Compensation and benefits expense increased $14.7 million to $152.9 million for the year ended December 31, 2015, from $138.2 million for the year ended December 31, 2014, reflecting higher salaries and fringe benefits including pension and other postretirement benefit costs, stock-based compensation costs and incentive compensation in 2015 compared to 2014. The increase also included a $2.4 million charge related to the accelerated vesting in December 2015 of stock awards that would have contractually vested in 2016 and $600,000 for payroll taxes related to those stock awards vested and to the accelerated payment in December 2015 of cash incentive awards that would have otherwise been paid in early 2016. The accelerated vesting of stock awards and the early cash incentive award payments were related to tax planning initiatives related to the Merger. Occupancy, equipment and systems expense increased $4.9 million to $76.8 million for the year ended December 31, 2015, compared to $71.9 million for the year ended December 31, 2014. The increase in 2015 included a full-year of rental expense for the Manhattan and Melville branches which were opened during 2014, and increases in office building expense for repairs at various branches and increases in equipment expenses, data processing charges and depreciation expense. Federal deposit insurance premium expense decreased $9.8 million to $16.4 million for the year ended December 31, 2015, compared to $26.2 million for the year ended December 31, 2014. The decline reflected reductions in both our assessment base and assessment rate during 2015. Advertising expense decreased $2.4 million to $10.1 million for the year ended December 31, 2015 compared to $12.5 million for the year ended December 31, 2014, reflecting a leveling off of our advertising and promotion efforts.

Income Tax Expense

For the year ended December 31, 2015, income tax expense increased to $29.8 million, compared to $26.3 million for the year ended December 31, 2014. Both periods' results were impacted by changes in tax legislation that reduced income tax by $11.4 million for the year ended December 31, 2015 and by $11.5 million for the year ended December 31, 2014. The 2014 year was also impacted by a favorable settlement of a tax matter with NYS that resulted in a $4.2 million reduction in income tax expense.

On April 13, 2015, the 2015 NYS legislation was signed into law in NYS that, among other things, conformed New York City banking income tax laws to the 2014 NYS legislation. The 2015 NYS legislation is effective retroactively to tax years beginning on or after January 1, 2015. In addition, on June 30, 2015, the State of Connecticut enacted tax legislation which, for us, results in an increased apportionment of income subject to Connecticut taxation. The impact of these 2015 legislative changes partially offset our income tax expense resulting from current operations of $41.2 million for the year ended December 31, 2015, representing an effective tax rate of 35.0%. The nature of the changes in the 2014 NYS legislation resulted in the recognition of certain deferred tax assets, with a corresponding reduction of income tax expense for the year ended December 31, 2014. Prior to the effective date of the 2014 NYS legislation, we were subject to taxation in NYS under an alternative taxation method based on assets. The 2014 NYS legislation, among other things, removed that alternative method. Enactment of the new law caused us to recognize temporary differences and net operating loss carry-forward benefits in 2014 which we were unable to recognize previously. In addition, during the 2014 fourth quarter we resolved an income tax matter with NYS. The impact of the 2014 changes

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in the NYS income tax legislation, including the effects of the 2014 fourth quarter resolution of the matter with NYS, partially offset our income tax expense resulting from current operations of $42.0 million for the year ended December 31, 2014, representing an effective tax rate of 34.4%, For additional information regarding income taxes, see Item 1, "Business - State and Local Taxation" and Note 11 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.” See "Results of Operations - General" for a reconciliation of income tax expense as reported and income tax expense excluding the impact of the 2015 and 2014 changes in the NYS income tax legislation and the 2014 settlement with NYS which is a non-GAAP financial measure.

Comparison of Financial Condition and Operating Results for the Years Ended December 31, 2014 and 2013

Financial Condition

Total assets decreased $153.7 million to $15.64 billion at December 31, 2014, from $15.79 billion at December 31, 2013, primarily reflecting a decrease in our residential mortgage loan portfolio which was partially offset by increases in our multi-family and commercial real estate mortgage loan portfolio and our securities portfolio.

Loans receivable decreased $484.6 million to $11.96 billion at December 31, 2014, from $12.44 billion at December 31, 2013, and represented 76% of total assets at December 31, 2014. The growth in our multi-family and commercial real estate mortgage loan portfolio was more than offset by the decline in our residential mortgage loan portfolio resulting in a net decline of $486.3 million in our total mortgage loan portfolio to $11.66 billion at December 31, 2014, compared to $12.15 billion at December 31, 2013. At December 31, 2014, our residential mortgage loan portfolio represented 58% of our total loan portfolio, down from 65% at December 31, 2013, and our combined multi-family and commercial real estate mortgage loan portfolio represented 40% of our total loan portfolio, up from 33% at December 31, 2013. This reflects our continued focus on repositioning the asset mix of our balance sheet. Gross mortgage loans originated and purchased for portfolio during the year ended December 31, 2014 declined to $1.64 billion, compared to $2.55 billion during the year ended December 31, 2013, reflecting declines in both residential and multi-family and commercial real estate mortgage loan production. Mortgage loan repayments decreased to $1.89 billion for the year ended December 31, 2014, compared to $3.20 billion for the year ended December 31, 2013, primarily due to a decline in residential mortgage loan prepayments.

Our residential mortgage loan portfolio decreased $1.16 billion to $6.87 billion at December 31, 2014, from $8.04 billion at December 31, 2013. Residential mortgage loan repayments declined during 2014, compared to 2013, but continued to outpace our origination and purchase volume during the year ended December 31, 2014, resulting in a decline in the portfolio. Contributing to the decline in our residential mortgage loan portfolio during 2014 was the sale of loans, representing a significant portion of our non-performing residential mortgage loans, completed in the 2014 third quarter. Residential mortgage loan originations and purchases for portfolio totaled $455.9 million for the year ended December 31, 2014, of which $261.7 million were originations and $194.2 million were purchases, compared to $996.0 million for the year ended December 31, 2013, of which $592.5 million were originations and $403.5 million were purchases. During the year ended December 31, 2014, the loan-to-value ratio of our residential mortgage loan originations and purchases for portfolio, at the time of origination or purchase, averaged approximately 69% and the loan amount averaged approximately $580,000.

Our multi-family mortgage loan portfolio increased $616.6 million to $3.91 billion at December 31, 2014, from $3.30 billion at December 31, 2013, and represented 33% of our total loan portfolio at December 31, 2014. Our commercial real estate mortgage loan portfolio increased $60.8 million to $873.8 million at December 31, 2014, from $813.0 million at December 31, 2013, and represented 7% of our total loan portfolio at December 31, 2014. These increases reflected our continued commitment to grow these portfolios while operating in a very competitive lending environment. Multi-family and commercial real estate loan originations totaled $1.19 billion during the year ended December 31, 2014, compared to $1.55 billion during the year ended December 31, 2013. During the year ended December 31, 2014, our multi-family and commercial real estate mortgage loan originations reflected loan balances averaging approximately $2.6 million with a weighted average loan-to-value ratio, at the time of origination, of approximately 51% and a weighted average debt service coverage ratio of approximately 1.64.

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Our securities portfolio increased $266.9 million to $2.52 billion at December 31, 2014, from $2.25 billion at December 31, 2013, and represented 16% of total assets at December 31, 2014. This increase reflected purchases totaling $655.8 million which were in excess of repayments of $379.6 million and sales of $14.3 million during the year ended December 31, 2014. At December 31, 2014, our securities portfolio was comprised primarily of fixed rate REMIC and CMO securities which had an amortized cost totaling $2.00 billion, a weighted average current coupon of 2.88%, a weighted average collateral coupon of 4.22% and a weighted average life of 3.9 years.

Total liabilities declined $214.3 million to $14.06 billion at December 31, 2014, from $14.27 billion at December 31, 2013, primarily due to a decline in deposits, partially offset by increases in accrued expenses and other liabilities, primarily related to pension plans and other post retirement benefits, and borrowings, net. Deposits totaled $9.50 billion at December 31, 2014, or 68% of total liabilities, a decline of $350.4 million compared to $9.86 billion at December 31, 2013. The decrease in deposits reflected a decline of $596.3 million in certificates of deposit, partially offset by a net increase of $245.9 million in core deposits. At December 31, 2014, core deposits totaled $6.81 billion and represented 72% of total deposits, up from 67% at December 31, 2013. This reflected our efforts to reposition the liability mix of our balance sheet. The net increase in core deposits at December 31, 2014, compared to December 31, 2013, reflected increases in money market and NOW and demand deposit accounts, partially offset by a decline in savings accounts. Money market accounts increased $401.3 million since December 31, 2013 to $2.37 billion at December 31, 2014. NOW and demand deposit accounts increased $101.3 million since December 31, 2013 to $2.20 billion at December 31, 2014. Savings accounts decreased $256.7 million since December 31, 2013 to $2.24 billion at December 31, 2014. The net increase in core deposits during the year ended December 31, 2014 appears to reflect customer preference for the liquidity these types of deposits provide, as well as our efforts to expand our business banking customer base, which included enhanced marketing efforts and the addition of two branches in 2014. At December 31, 2014, total deposits included $930.5 million of business deposits, substantially all of which were core deposits, an increase of 43% since December 31, 2013.

Stockholders' equity increased $60.6 million to $1.58 billion at December 31, 2014, from $1.52 billion at December 31, 2013. The increase in stockholders’ equity was primarily due to the net income of $95.9 million, stock based compensation of $8.7 million and capital raised through our Stock Purchase Plan of $8.1 million, partially offset by an increase in accumulated other comprehensive loss of $27.7 million and dividends on common and preferred stock totaling $24.6 million. The increase in accumulated other comprehensive loss was primarily due to declines in the discount rates used to calculate the present value of our benefit obligations for our defined benefit pension and other postretirement benefit plans at December 31, 2014, compared to December 31, 2013, which resulted in an increase in the unfunded status of the plans.

Results of Operations

General

Net income available to common shareholders for the year ended December 31, 2014 increased $27.7 million to $87.1 million, compared to $59.4 million for the year ended December 31, 2013. The increase was largely due to a provision for loan losses credited to operations of $9.5 million for 2014 compared to a provision for loans losses charged to operations of $19.6 million for 2013, coupled with a reduction in income tax expense for 2014 compared to 2013. The reduction in income tax expense was primarily attributable to the impact of the NYS income tax legislation enacted on March 31, 2014 which resulted in a reduction in income tax expense of $15.7 million. Lower non-interest income for 2014, compared to 2013, partially offset these increases. Diluted EPS, increased to $0.88 per common share for the year ended December 31, 2014, compared to $0.60 per common share for the year ended December 31, 2013. Return on average assets increased to 0.61% for the year ended December 31, 2014, compared to 0.41% for the year ended December 31, 2013, due to the increase in net income, coupled with a decline in average assets. Return on average common stockholders’ equity increased to 6.06% for the year ended December 31, 2014, compared to 4.50% for the year ended December 31, 2013. Return on average tangible common stockholders’ equity, which represents average common stockholders’ equity less average goodwill, increased to 6.96% for the year ended December 31, 2014, compared to 5.23% for the year ended December 31, 2013. The increases in the returns on average common stockholders’ equity and average tangible common stockholders’ equity for the year ended December 31, 2014,

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compared to the year ended December 31, 2013, were due to the increase in net income available to common shareholders, partially offset by an increase in average common stockholders’ equity.

As indicated above, our results of operations for the year ended December 31, 2014 included a reduction in income tax expense of $15.7 million related to the NYS income tax legislation. For the year ended December 31, 2014, this reduction in income tax expense increased diluted EPS by $0.16 per common share, return on average common stockholders’ equity by 109 basis points, return on average tangible common stockholders’ equity by 126 basis points and return on average assets by 10 basis points. See “Income Tax Expense” below for further discussion of the impact of the NYS income tax legislation.

Income and expense and related financial ratios adjusted to exclude the effect of the aforementioned change in income tax legislation represent non-GAAP financial measures which we believe provide investors with a meaningful comparison for effectively evaluating our operating results. Non-GAAP financial ratios are calculated by substituting non-GAAP net income, non-GAAP net income available to common shareholders and non-GAAP income tax expense for net income, net income available to common shareholders and income tax expense in the corresponding calculation.

The following table provides a reconciliation between the non-GAAP financial measures to the comparable GAAP measures as reported in our consolidated statement of income for the year ended December 31, 2014 and related financial ratios.

(In Thousands, Except Per Share Data)	As Reported				Effect of Change in Tax Legislation				Non-GAAP
Income before income tax expense		$	122,195			$	—			$	122,195
Income tax expense		26,279				15,709				41,988
Net income		95,916				(15,709		)		80,207
Preferred stock dividends		8,775				—				8,775
Net income available to common shareholders		$	87,141			$	(15,709	)		$	71,432
Basic and diluted earnings per common share		$	0.88			$	(0.16	)		$	0.72
Return on average:
Common stockholders’ equity		6.06		%		(1.09		)%		4.97		%
Tangible common stockholders’ equity		6.96				(1.26		)		5.70
Assets		0.61				(0.10		)		0.51
Effective tax rate		21.51				12.85				34.36

Net Interest Income

Net interest income totaled $342.3 million for the year ended December 31, 2014, a slight increase compared to $341.9 million for the year ended December 31, 2013. During 2014, we continued to see the benefit of the restructuring of borrowings which occurred primarily in the 2013 second quarter and the prepayment of our junior subordinated debentures in the 2013 second quarter, resulting in a significant reduction in interest expense on borrowings in 2014 compared to 2013. This reduction in interest expense on borrowings, coupled with increases in interest earned on our multi-family and commercial real estate mortgage loan portfolio and our securities portfolio and a decline in interest expense on certificates of deposit, outpaced the decline in interest earned on our residential mortgage loan portfolio, resulting in the slight increase in net interest income for 2014, compared to 2013. The continued low interest rate environment, coupled with the changing mix of our interest-earning assets and interest-bearing liabilities and the 2013 restructuring of borrowings and prepayment of the junior subordinated debentures, has resulted in the average cost of interest-bearing liabilities declining more than the average yield on interest-earning assets for the year ended December 31, 2014, compared to the year ended December 31, 2013, resulting in improvements in both our net interest rate spread and our net interest margin. The net interest rate spread increased eight basis points to 2.25% for the year ended December 31, 2014, from 2.17% for the year ended December 31, 2013. The net interest margin increased seven basis points to 2.32% for the year ended December 31, 2014, from 2.25% for the year ended December 31, 2013.

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The average balance of net interest-earning assets increased $126.0 million to $1.04 billion for the year ended December 31, 2014, compared to $915.1 million for the year ended December 31, 2013.

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.”

Interest Income

Interest income decreased $26.0 million to $492.4 million for the year ended December 31, 2014, from $518.4 million for the year ended December 31, 2013, due to a decrease in the average yield on interest-earning assets to 3.34% for the year ended December 31, 2014, from 3.41% for the year ended December 31, 2013, coupled with a decrease of $461.4 million in the average balance of interest-earning assets to $14.75 billion for the year ended December 31, 2014, from $15.21 billion for the year ended December 31, 2013. The decrease in the average yield on interest-earning assets was primarily due to lower average yields on mortgage loans, partially offset by an increase in the average yield on mortgage-backed and other securities. The decrease in the average balance of interest-earning assets primarily reflected declines in the average balance of residential mortgage loans, partially offset by increases in the average balances of multi-family and commercial real estate mortgage loans and mortgage-backed and other securities.

Interest income on residential mortgage loans decreased $48.4 million to $241.4 million for the year ended December 31, 2014, from $289.8 million for the year ended December 31, 2013, due to a decrease of $1.30 billion in the average balance of such loans to $7.51 billion for the year ended December 31, 2014, from $8.81 billion for the year ended December 31, 2013, coupled with a decrease in the average yield to 3.21% for the year ended December 31, 2014, from 3.29% for the year ended December 31, 2013. The decrease in the average balance of residential mortgage loans reflected the continued decline in this portfolio as repayments outpaced our originations over the past year and, to a lesser extent, the sale of certain non-performing residential mortgage loans in the 2014 third quarter. The decrease in the average yield was primarily due to new originations at lower interest rates than the rates on loans repaid over the past year and the impact of the downward repricing of our ARM loans, partially offset by a decline in amortization of net premium and deferred loan origination cost. Net premium and deferred loan origination cost amortization decreased $8.5 million to $10.9 million for the year ended December 31, 2014, from $19.4 million for the year ended December 31, 2013.

Interest income on multi-family and commercial real estate mortgage loans increased $15.4 million to $178.8 million for the year ended December 31, 2014, from $163.4 million for the year ended December 31, 2013, due to an increase of $720.9 million in the average balance to $4.40 billion for the year ended December 31, 2014, from $3.68 billion for the year ended December 31, 2013, partially offset by a decrease in the average yield to 4.06% for the year ended December 31, 2014, from 4.44% for the year ended December 31, 2013. The increase in the average balance of multi-family and commercial real estate loans was attributable to the levels of originations of such loans which exceeded repayments over the past year. The decrease in the average yield reflected the lower interest rate environment resulting in new originations at interest rates below the weighted average rate of the portfolio and the interest rates on loans repaid and the downward repricing of our ARM loans, coupled with an increase in competition. Prepayment penalties totaled $6.5 million for the year ended December 31, 2014, essentially unchanged compared to the year ended December 31, 2013.

Interest income on mortgage-backed and other securities increased $7.5 million to $57.1 million for the year ended December 31, 2014, from $49.6 million for the year ended December 31, 2013, due to an increase in the average yield to 2.44% for the year ended December 31, 2014, from 2.24% for the year ended December 31, 2013, coupled with an increase of $130.8 million in the average balance of the portfolio. The increase in the average yield on mortgage-backed and other securities was primarily due to a decline in net premium amortization. Net premium amortization decreased $6.8 million to $8.5 million for the year ended December 31, 2014, from $15.3 million for the year ended December 31, 2013. The increase in the average balance reflected securities purchased over the past year in excess of repayments and sales.

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Interest Expense

Interest expense decreased $26.4 million to $150.1 million for the year ended December 31, 2014, from $176.5 million for the year ended December 31, 2013, due to a decrease in the average cost of interest-bearing liabilities to 1.09% for the year ended December 31, 2014, from 1.24% for the year ended December 31, 2013, coupled with a decrease of $587.5 million in the average balance of interest-bearing liabilities to $13.70 billion for the year ended December 31, 2014, from $14.29 billion for the year ended December 31, 2013. The decrease in the average cost of interest-bearing liabilities primarily reflected a decrease in the average cost of borrowings and, to a lesser extent, decreases in the average costs of certificates of deposit and money market accounts. The decrease in the average balance of interest-bearing liabilities was primarily due to a decrease in the average balance of certificates of deposit.

Interest expense on total deposits decreased $11.2 million to $51.4 million for the year ended December 31, 2014, from $62.6 million for the year ended December 31, 2013, primarily due to a decrease in interest expense on certificates of deposit. The average balance of total deposits decreased $530.4 million to $9.65 billion for the year ended December 31, 2014, from $10.18 billion for the year ended December 31, 2013, reflecting declines in the average balances of certificates of deposit and savings accounts, partially offset by increases in the average balance of money market and NOW and demand deposit accounts. The average cost of total deposits decreased to 0.53% for the year ended December 31, 2014, from 0.62% for the year ended December 31, 2013, primarily due to decreases in the average costs of certificates of deposit and money market accounts.

Interest expense on certificates of deposit decreased $11.1 million to $43.9 million for the year ended December 31, 2014, from $55.0 million for the year ended December 31, 2013, due to a decrease of $638.7 million in the average balance to $2.96 billion for the year ended December 31, 2014, from $3.60 billion for the year ended December 31, 2013, coupled with a decrease in the average cost to 1.48% for the year ended December 31, 2014, from 1.53% for the year ended December 31, 2013. The decrease in the average balance of certificates of deposit was primarily the result of our reduced focus on certificates of deposit, reflecting our efforts to reposition the liability mix of our balance sheet to increase our core deposits and reduce certificates of deposit. The decrease in the average cost of certificates of deposit reflected the impact of certificates of deposit at higher rates maturing and being replaced at lower interest rates. During the year ended December 31, 2014, $1.96 billion of certificates of deposit with a weighted average interest rate of 0.73% and a weighted average maturity at inception of 18 months matured and $1.32 billion of certificates of deposit were issued or repriced with a weighted average interest rate of 0.31% and a weighted average maturity at inception of 14 months.

Interest expense on borrowings decreased $15.2 million to $98.7 million for the year ended December 31, 2014, from $113.9 million for the year ended December 31, 2013, primarily due to a decrease in the average cost to 2.43% for the year ended December 31, 2014, from 2.77% for the year ended December 31, 2013. The decrease in the average cost of borrowings was primarily the result of the restructuring of $1.35 billion of borrowings and the prepayment of our junior subordinated debentures in 2013 and increased utilization of short-term borrowings, such as federal funds purchased and FHLB-NY advances, in 2014 compared to 2013. During 2013, primarily in the second and third quarters, we restructured $1.35 billion of borrowings which resulted in a reduction of the weighted average interest rate on such borrowings from 4.40% to 3.46% and an extension of terms from a weighted average remaining term at the time of the restructuring of approximately 4 years to approximately 7 years. During 2014, primarily in the fourth quarter, we restructured $600.0 million of borrowings which resulted in a reduction of the weighted average interest rate on such borrowings from 4.19% to 3.73% and an extension of terms from a weighted average remaining term at the time of the restructuring of approximately 2.5 years to approximately 4.5 years.

Provision for Loan Losses (Credited) Charged 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

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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 $9.5 million for the year ended December 31, 2014, compared to a provision for loan losses charged to operations of $19.6 million for the year ended December 31, 2013. Net loan charge-offs totaled $17.9 million, or 15 basis points of average loans outstanding, for the year ended December 31, 2014, compared to $26.1 million, or 20 basis points of average loans outstanding, for the year ended December 31, 2013. Net loan charge-offs for the year ended December 31, 2014 include the aforementioned $8.7 million charge-off related to the designation of the pool of loans as held-for-sale as of June 30, 2014. The allowance for loan losses declined to $111.6 million at December 31, 2014, compared to $139.0 million at December 31, 2013. The allowance for loan losses as a percentage of total loans was 0.93% at December 31, 2014, compared to 1.12% at December 31, 2013. The reduction in the allowance for loan losses at December 31, 2014 compared to December 31, 2013, and the provision credited to operations for the year ended December 31, 2014, reflected the results of our quarterly reviews of the adequacy of the allowance for loan losses and included the release of $5.7 million of reserves as of June 30, 2014 which were previously attributable to a pool of non-performing residential mortgage loans designated as held-for-sale discussed below, substantially all of which were sold during the 2014 third quarter. We continue to maintain our allowance for loan losses at a level which we believe is appropriate given the significant reduction in non-performing loans and continued improvement in our loan loss experience, as well as the improved asset quality in our loan portfolio as a result of reductions in the balances of certain loan classes we believe bear higher risk, such as residential interest-only loans and loans originated prior to 2008 and multi-family and commercial real estate mortgage loans originated prior to 2011, the high quality of our loan originations and the contraction of the overall loan portfolio.

At June 30, 2014, we designated a pool of non-performing residential mortgage loans, substantially all of which were 90 days or more past due, as held-for-sale. In connection with the designation of the pool of loans as held-for-sale, we recorded a loan charge-off of $8.7 million against the allowance for loan losses during the 2014 second quarter to write down the pool of loans from its immediately previous aggregate recorded investment of $195.0 million to its estimated fair value at that time of $186.3 million. As a result of our quarterly review of the adequacy of the allowance for loan losses as of June 30, 2014, $5.7 million of reserves previously attributable to this pool of loans was deemed no longer required and was credited to the provision for loan losses as a reserve release in the 2014 second quarter. During the 2014 third quarter, we completed a bulk sale transaction of substantially all of the non-performing residential mortgage loans held-for-sale. The majority of the remaining loans from the pool designated as held-for-sale as of June 30, 2014 were either foreclosed upon and transferred to REO or were satisfied via short sales or payoffs during the 2014 third quarter with the balance of the loans held-for-sale sold in a second sale transaction, with the same counterparty as the bulk sale transaction, in September 2014. For additional information on the designation of the non-performing residential mortgage loans as held-for-sale as of June 30, 2014 and the 2014 third quarter dispositions of such loans, see "Asset Quality" and Note 4 of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data."

Non-performing loans, which are comprised primarily of mortgage loans and exclude loans held-for-sale, totaled $127.8 million, or 1.07% of total loans, at December 31, 2014, up $18.1 million compared to $109.7 million, or 0.91% of total loans, at June 30, 2014 and down $204.2 million compared to $332.0 million, or 2.67% of total loans, at December 31, 2013. The allowance for loan losses as a percentage of non-performing loans was 87.32% at December 31, 2014, compared to 108.09% at June 30, 2014 and 41.87% at December 31, 2013. The increase in non-performing loans and related ratio at December 31, 2014 compared to June 30, 2014 was primarily attributable to an increase in non-performing residential mortgage loans. The decline in non-performing loans and related ratio at December 31, 2014 compared to December 31, 2013 reflects, in large part, the sale of the non-performing residential mortgage loans during the 2014 third quarter discussed above. 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.

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When analyzing our asset quality trends and coverage ratios, consideration is given to the accounting for non-performing loans, particularly when reviewing our allowance for loan losses to non-performing loans ratio. Included in our non-performing loans are residential mortgage loans which are 180 days or more past due for which we update our estimates of collateral values annually. We record a charge-off for the portion of the recorded investment in these loans in excess of the estimated fair value of the underlying collateral less estimated selling costs. Therefore, certain losses inherent in our non-performing residential mortgage loans are being recognized through a charge-off at 180 days past due and annually thereafter. The impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the allowance for loan losses required on these loans. Therefore, when reviewing the adequacy of the allowance for loan losses as a percentage of non-performing loans, the impact of these charge-offs is considered. Non-performing residential mortgage loans which were 180 days or more past due at December 31, 2014 totaled $23.8 million, net of $2.1 million in charge-offs related to such loans, compared to $7.8 million, net of $2.2 million in charge-offs related to such loans, at June 30, 2014 and $202.7 million, net of $60.6 million in charge-offs related to such loans, at December 31, 2013. The decline since December 31, 2013 was primarily attributable to the aforementioned sale of non-performing residential mortgage loans during the 2014 third quarter.

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 2014 fourth 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 26%, unchanged from our 2014 third quarter analysis and down from approximately 30% in our 2013 fourth quarter analysis. Our analysis in the 2014 fourth quarter involved a review of residential REO sales, short sales and the aforementioned sale of the non-performing residential mortgage loans which occurred during the twelve months ended September 30, 2014 and included both full documentation and reduced documentation loans in a variety of states with varying years of origination. Our 2014 fourth quarter analysis of charge-offs on multi-family and commercial real estate mortgage loans, during the twelve months ended September 30, 2014, which generally related to certain delinquent and non-performing loans transferred to held-for-sale, loans modified in a TDR or loans foreclosed upon and transferred to REO, indicated an average loss severity of approximately 28%, compared to approximately 27% in our 2014 third quarter analysis and approximately 19% in our 2013 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 significant 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 87% at December 31, 2014, 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.

There are no material assumptions relied on by management which have not been made apparent in our disclosures or reflected in our asset quality ratios and activity in the allowance for loan losses. We believe our allowance for loan losses has been established and maintained at levels that reflect the risks inherent in our loan portfolio, giving consideration to 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. The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at December 31, 2014 and December 31, 2013.

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.”

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Non-Interest Income

Non-interest income decreased $14.8 million to $54.8 million for the year ended December 31, 2014, from $69.6 million for the year ended December 31, 2013. This decrease reflects lower mortgage banking income, net, other non-interest income, gain on sales of securities and customer service fees.

Customer service fees decreased $1.1 million to $35.7 million for the year ended December 31, 2014, from $36.8 million for the year ended December 31, 2013, primarily due to decreases in checking account charges, including inactivity fees, check printing fees and overdraft charges, and ATM fees, partially offset by an increase in safe deposit box rental fees.

Gain on sales of securities declined $1.9 million to $141,000 for the year ended December 31, 2014, compared to $2.1 million for the year ended December 31, 2013. These gains were the result of sales of mortgage-backed securities from the available-for-sale securities portfolio with an amortized cost of $14.3 million during the year ended December 31, 2014 and $39.5 million during the year ended December 31, 2013.

Mortgage banking 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, decreased $9.9 million to $3.3 million for the year ended December 31, 2014, from $13.2 million for the year ended December 31, 2013. The decrease in mortgage banking income, net, was primarily due to a recovery recorded in the valuation allowance for the impairment of MSR of $5.4 million for the year ended December 31, 2013 and a decline in net gain on sales of loans for the year ended December 31, 2014 compared to the year ended December 31, 2013. The recovery recorded in 2013 was primarily the result of a significant decrease in the estimated weighted average constant prepayment rate on mortgages and a corresponding increase in the estimated weighted average life of the servicing portfolio at December 31, 2013 compared to December 31, 2012 as long-term interest rates moved higher in the latter part of the 2013 second quarter and into the remainder of 2013. Net gain on sales of loans totaled $1.8 million for the year ended December 31, 2014, compared to $6.9 million for the year ended December 31, 2013. The decline in net gain on sales of loans primarily reflected a decrease in the volume of loans sold during the year ended December 31, 2014, compared to the year ended December 31, 2013, attributable to a decline in the levels of originations of such loans in 2014 compared to 2013. In addition, during the 2013 first quarter, we eliminated a backlog of loan sale closings that existed at December 31, 2012, resulting from delays in the 2012 fourth quarter as the New York metropolitan area recovered from Hurricane Sandy, which elevated the volume of loans sold and net gains on the sale of loans during 2013.

Other non-interest income declined $2.2 million to $4.7 million for the year ended December 31, 2014, compared to $6.9 million for the year ended December 31 2013. The decline was primarily attributable to a loss recognized in the 2014 third quarter on the sale of non-performing residential mortgage loans held-for-sale with a carrying value of $4.0 million that were not sold in the bulk sale transaction that closed on July 31, 2014 and were not otherwise resolved through either foreclosure and transfer to REO or satisfaction via short sales or payoffs. For additional information on the 2014 third quarter dispositions of the non-performing residential mortgage loans held-for-sale, see "Asset Quality" and Note 5 of Notes to Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data." Also contributing to the decline in non-interest income were decreases in rental income, income from real estate joint ventures and a gain recognized in 2013 related to insurance proceeds from an individual life insurance policy on a former executive.

Non-Interest Expense

Non-interest expense decreased $3.1 million to $284.4 million for the year ended December 31, 2014, from $287.5 million for the year ended December 31, 2013, primarily due to a reduction in federal deposit insurance premium expense in 2014 compared to 2013 and a $4.3 million prepayment charge for the early extinguishment of our junior subordinated debentures recognized in 2013, partially offset by increases in advertising expense, compensation and benefits expense and occupancy, equipment and systems expense in 2014 compared to 2013. Our percentage of general and administrative expense to average assets increased to 1.82% for the year ended December 31, 2014, compared to

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1.78% for the year ended December 31, 2013, reflecting the decline in average assets, partially offset by the decline in general and administrative expense for 2014 compared to 2013.

Compensation and benefits expense increased $4.5 million to $138.2 million for the year ended December 31, 2014, from $133.7 million for the year ended December 31, 2013, reflecting higher salaries and fringe benefits, stock-based compensation costs and incentive compensation in 2014 compared to 2013 and a $3.1 million reduction in compensation and benefits expense in the 2013 first quarter to reflect changes in certain compensation policies related to compensated absences which became effective January 1, 2013. The absence of costs related to the Employee Stock Ownership Plan, or ESOP, and lower pension related expenses in 2014 compared to 2013 partially offset these increases. There were no ESOP related expenses in 2014 as a result of the final allocation of shares to participant accounts as of December 31, 2013, compared to $11.2 million for the year ended December 31, 2013. Effective April 1, 2014, the ESOP was merged into the Astoria Bank 401(k) Plan, or the 401(k) Plan. The decline in pension related expenses in 2014 reflected the recognition of a net periodic benefit for our defined benefit pension plans of $2.8 million for the year ended December 31, 2014 compared to a net periodic cost of $146,000 for the year ended December 31, 2013, primarily due to an improvement in the expected return on pension plan assets, coupled with lower other postretirement benefit plan costs.

Occupancy, equipment and systems expense increased $1.2 million to $71.9 million for the year ended December 31, 2014, compared to $70.7 million for the year ended December 31, 2013. The increase in 2014 included rental expense for our Manhattan branch which opened on March 31, 2014 and our Melville branch which opened on December 1, 2014, and increases in equipment expenses, data processing charges and depreciation expense. These increases were partially offset by a one-time charge of $2.5 million in 2013 to conform to a straight-line basis the rental expense on operating leases for certain branch locations.

Federal deposit insurance premium expense decreased $11.0 million to $26.2 million for the year ended December 31, 2014, compared to $37.2 million for the year ended December 31, 2013. The decline reflected reductions in both our assessment base and assessment rate during 2014, particularly in the 2014 fourth quarter as a result of the sales of non-performing residential mortgage loans in the 2014 third quarter.

Advertising expense increased $6.1 million to $12.5 million for the year ended December 31, 2014 compared to $6.4 million for the year ended December 31, 2013. The increase reflected our continued advertising and branding expenses primarily related to our continued focus on growing our business banking operations, including the opening of our Manhattan branch on March 31, 2014 and our Melville, New York branch on December 1, 2014, and included significant brand awareness advertising in one of the busiest commuter travel hubs, Pennsylvania Station in New York City, during the entire month of September 2014.

Income Tax Expense

For the year ended December 31, 2014, income tax expense declined to $26.3 million, compared to $37.7 million for the year ended December 31, 2013. This decline was primarily attributable to NYS income tax legislation enacted on March 31, 2014 in connection with the approval of the NYS 2014-2015 budget. Portions of the new legislation result in significant changes in the calculation of income taxes imposed on banks and thrifts operating in NYS, including changes to (1) future period NYS tax rates, (2) rules related to sourcing of revenue for NYS tax purposes and (3) the NYS taxation of entities within one corporate structure, among other provisions. In recent years, we have been subject to taxation in NYS under an alternative taxation method based on assets. The new legislation, among other things, removes that alternative method. Further, the new law (1) requires that we will be taxed in a manner that we believe may result in an increase in our tax expense beginning in 2015 and (2) caused us to recognize temporary differences and net operating loss carryforward benefits in 2014 which we were unable to recognize previously. In addition, during the 2014 fourth quarter we resolved an income tax matter with NYS. The impact of the 2014 changes in the NYS income tax legislation, including the effects of the 2014 fourth quarter resolution of the matter with NYS, was an increase in our net deferred tax asset in the statement of financial condition with a corresponding reduction in income tax expense of $15.7 million in 2014. Excluding the impact of the 2014 changes in the NYS income tax legislation, our income tax expense resulting from current operations for the year ended December 31, 2014 totaled $42.0 million, representing an effective tax rate of 34.4%, compared to an effective tax rate of 36.2% for the year ended December 31,

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2013. The decline in the effective tax rate for the year ended December 31, 2014, compared to the year ended December 31, 2013, primarily reflects the absence of ESOP expense in 2014, a portion of which is not deductible for tax purposes. We anticipate that our effective tax rate will increase in 2015 and 2016 as the provisions of the 2014 NYS income tax legislation become applicable to us. For additional information regarding income taxes, see Item 1, "Business - State and Local Taxation" and Note 11 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.” See "Results of Operations - General" for a reconciliation of income tax expense as reported and income tax expense excluding the impact of the 2014 changes in the NYS income tax legislation which is a non-GAAP financial measure.

Asset Quality

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 portfolios and a decline in our residential mortgage loan portfolio over the past few years. Our multi-family mortgage loan portfolio increased to represent 36% of our total loan portfolio at December 31, 2015, compared to 33% at December 31, 2014. In contrast, our residential mortgage loan portfolio decreased to represent 54% of our total loan portfolio at December 31, 2015, compared to 58% at December 31, 2014. At December 31, 2015 and 2014, 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. In 2006, we began underwriting our residential interest-only hybrid ARM loans based on a fully amortizing loan (in effect, underwriting interest-only hybrid ARM loans as if they were amortizing hybrid ARM loans). Prior to 2007, we would underwrite our residential interest-only hybrid ARM loans using the initial note rate, which may have been a discounted rate. In 2007, we began underwriting our residential interest-only hybrid ARM loans at the higher of the fully indexed rate or the initial note rate. In 2009, we began underwriting our residential interest-only and amortizing hybrid ARM loans at the higher of the fully indexed rate, the initial note rate or 6.00%. During the 2010 second quarter, we reduced the underwriting interest rate floor from 6.00% to 5.00% to reflect the interest rate environment. During the 2010 third quarter, we stopped offering interest-only loans. At December 31, 2015, $1.36 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 $517.7 million were refinanced or converted to amortizing loans during 2015. Non-performing amortizing residential mortgage loans at December 31, 2015 included $56.2 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 loan portfolio are comprised primarily of SIFA loans. To a lesser extent, reduced documentation loans in our portfolio also include SISA loans. During the 2007 fourth quarter, we stopped offering reduced documentation loans.

Effective January 2014, we became subject to rules adding restrictions and requirements to mortgage origination and servicing practices and establishing certain protections from liability for loans that meet the requirements of a Qualified Mortgage. Under the rules, Qualified Mortgages are residential mortgage loans that meet standards prohibiting or limiting certain high risk products and features. Our current policy is to only originate mortgage loans that meet the requirements of a Qualified Mortgage. For additional information, see Item 1, “Business - Regulation and Supervision - CFPB Regulation of Mortgage Origination and Servicing.”

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Full documentation loans comprised 92% of our total mortgage loan portfolio at December 31, 2015, compared to 91% at December 31, 2014, and comprised 85% of our residential mortgage loan portfolio at December 31, 2015 and 2014. 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 December 31,
	2015				2014
(Dollars in Thousands)	Amount		Percent of Total		Amount		Percent of Total
Residential mortgage loans:
Full documentation interest-only (1)	$	432,288	7.19	%	$	854,182	12.43	%
Full documentation amortizing	4,697,966		78.10		5,003,693		72.79
Reduced documentation interest-only (1)(2)	303,231		5.04		611,008		8.89
Reduced documentation amortizing (2)	581,930		9.67		404,653		5.89
Total residential mortgage loans	$	6,015,415	100.00	%	$	6,873,536	100.00	%

(1) Includes interest-only hybrid ARM loans originated prior to 2007which were underwritten at the initial note rate, which may have been a discounted rate, totaling $388.0 million at December 31, 2015 and $1.06 billion at December 31, 2014.

(2) Includes SISA loans totaling $135.7 million at December 31, 2015 and $148.9 million at December 31, 2014.

Non-Performing Assets

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

	At December 31,
(Dollars in Thousands)	2015			2014			2013			2012			2011
Non-performing loans (1) (2):
Mortgage loans:
Residential	$	120,336		$	100,155		$	305,626		$	291,051		$	317,867
Multi-family	6,833			13,646			12,539			10,658			8,022
Commercial real estate	3,939			7,971			7,857			6,869			900
Consumer and other loans	7,108			6,040			5,980			6,508			6,068
Total non-performing loans	138,216			127,812			332,002			315,086			332,857
REO, net (3)	19,798			35,723			42,636			28,523			48,059
Total non-performing assets	$	158,014		$	163,535		$	374,638		$	343,609		$	380,916
Non-performing loans to total loans	1.24		%	1.07		%	2.67		%	2.38		%	2.51		%
Non-performing loans to total assets	0.92			0.82			2.10			1.91			1.96
Non-performing assets to total assets	1.05			1.05			2.37			2.08			2.24

(1) Non-performing loans, substantially all of which are non-accrual loans, included loans modified in a TDR totaling $61.0 million at December 31, 2015, $68.4 million at December 31, 2014, $109.8 million at December 31, 2013, $32.8 million at December 31, 2012 and $18.8 million at December 31, 2011. 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 past due 90 days or more, primarily as to their maturity date but not their interest due, and still accruing interest totaling $332,000 at December 31, 2015, $4.1 million at December 31, 2014, $384,000 at December 31, 2013, $328,000 at December 31, 2012 and $162,000 at December 31, 2011.

(3) REO, substantially all of which are residential properties, is net of a valuation allowance totaling $1.3 million at December 31, 2015, $839,000 at December 31, 2014, $834,000 at December 31, 2013, $1.6 million at December 31, 2012 and $2.5 million at December 31, 2011.

Total non-performing assets decreased $5.5 million to $158.0 million at December 31, 2015 compared to $163.5 million at December 31, 2014, primarily due to a decrease in REO, net, partially offset by an increase in non-performing loans. The ratio of non-performing assets to total assets was 1.05% at December 31, 2015, unchanged from December 31, 2014. REO, net, decreased $15.9 million to $19.8 million at December 31, 2015, compared to $35.7 million at

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December 31, 2014, 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 year ended December 31, 2015.

Non-performing loans, which consist primarily of mortgage loans and exclude loans held-for-sale, increased $10.4 million to $138.2 million at December 31, 2015, compared to $127.8 million at December 31, 2014. The ratio of non-performing loans to total loans was 1.24% at December 31, 2015, compared to 1.07% at December 31, 2014. The increase in non-performing loans at December 31, 2015 compared to December 31, 2014 was primarily attributable to an increase in non-performing residential mortgage loans, partially offset by a decrease in non-performing multi-family mortgage loans, due in large part to the sale of a group of related loans to an unrelated third party at a price that approximated the recorded investment in the loans, and a decrease in non-performing 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.

In the 2014 second quarter, we conducted an evaluation of our residential mortgage loans 90 days or more past due for the purpose of determining whether a greater value could be derived in a potential bulk sale, should such be sought, in excess of that which we have realized in recent periods through our traditional approach of working loans out individually.  This evaluation indicated that market conditions at that time could be favorable for a potential bulk sale and, in June 2014, we sought indicative bid values on a designated pool of our non-performing residential mortgage loans from multiple potential investors, and we designated the pool as non-performing loans held-for-sale.

In connection with the designation of the pool of loans as held-for-sale, we recorded a loan charge-off of $8.7 million against the allowance for loan losses during the 2014 second quarter to write down the pool of loans from its immediately previous aggregate recorded investment of $195.0 million to its estimated fair value at that time of $186.3 million. As a result of our quarterly review of the adequacy of the allowance for loan losses as of June 30, 2014, $5.7 million of reserves previously attributable to this pool of loans was deemed no longer required and was credited to the provision for loan losses as a reserve release in the 2014 second quarter. On July 31, 2014, we completed a bulk sale transaction of substantially all of the non-performing residential mortgage loans held-for-sale at terms approximating their carrying value at June 30, 2014. Total loans sold in that transaction had a carrying value of $173.7 million, reflecting the previous write down to the estimated fair value through June 30, 2014. The majority of the remaining loans from the pool designated as held-for-sale as of June 30, 2014 were either foreclosed upon and transferred to REO or were satisfied via short sales or payoffs during the 2014 third quarter with no material impact on our financial condition or results of operations. On September 12, 2014, we completed a second sale transaction, with the same counterparty as the bulk sale transaction, in which we sold all of the remaining non-performing residential mortgage loans held-for-sale with a carrying value of $4.0 million, reflecting the previous write down to the estimated fair value through June 30, 2014, and recorded a loss on the sale of such loans in the 2014 third quarter of $920,000, which is included in other non-interest income in the consolidated statement of income for the year ended December 31, 2014. In 2015, no loans were sold in a bulk sale transaction.

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 $61.0 million at December 31, 2015 and $68.4 million at December 31, 2014, of which $47.6 million at December 31, 2015 and $60.4 million at December 31, 2014 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. As a result of the migration of restructured loans from non-accrual to accrual status as borrowers complied with the terms of their restructure agreement for a satisfactory period of time, restructured accruing loans increased to $101.8 million at

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December 31, 2015, compared to $106.0 million at December 31, 2014, $100.5 million at December 31, 2013, $98.7 million at December 31, 2012 and $73.7 million at December 31, 2011.

If all non-accrual loans at December 31, 2015, 2014 and 2013 had been performing in accordance with their original terms, we would have recorded interest income, with respect to such loans, of $5.4 million for the year ended December 31, 2015, $5.6 million for the year ended December 31, 2014 and $15.6 million for the year ended December 31, 2013. The decline in interest income that would have been recorded with respect to such loans for the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily reflects the reduction in the level of non-accrual loans at December 31, 2014 due in large part to the previously discussed sale of non-performing residential mortgage loans in 2014. Actual payments recorded as interest income, with respect to such loans, totaled $3.4 million for the year ended December 31, 2015, $3.6 million for the year ended December 31, 2014 and $6.2 million for the year ended December 31, 2013.

In addition to non-performing loans, we had $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, compared to $132.8 million of potential problem loans at December 31, 2014, including $85.3 million of residential mortgage loans and $46.5 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 48% of non-performing residential mortgage loans at December 31, 2015. 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 December 31,
	2015				2014
(Dollars in Thousands)	Amount		Percent of Total		Amount		Percent of Total
Non-performing residential mortgage loans:
Full documentation interest-only	$	18,375	15.27	%	$	28,027	27.98	%
Full documentation amortizing	44,529		37.01		21,813		21.78
Reduced documentation interest-only	27,572		22.91		42,584		42.52
Reduced documentation amortizing	29,860		24.81		7,731		7.72
Total non-performing residential mortgage loans (1)	$	120,336	100.00	%	$	100,155	100.00	%

(1) Includes $46.5 million of loans less than 90 days past due at December 31, 2015, of which $37.7 million were current, and includes $55.2 million of loans less than 90 days past due at December 31, 2014, of which $49.1 million were current.

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The following table provides details on the geographic composition of both our total and non-performing residential mortgage loans as of December 31, 2015.

		Residential Mortgage Loans At December 31, 2015
(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		$	1,819.2		30.2	%		$	12.9		10.7	%		0.71	%
Connecticut		589.9			9.8			11.8			9.8			2.00
Massachusetts		505.0			8.4			4.7			3.9			0.93
Illinois		495.3			8.2			14.9			12.4			3.01
Virginia		463.5			7.7			12.6			10.5			2.72
New Jersey		426.6			7.1			20.6			17.1			4.83
Maryland		393.6			6.5			17.9			14.9			4.55
California		322.3			5.4			11.1			9.2			3.44
Washington		203.3			3.4			—			—			—
Texas		150.5			2.5			—			—			—
All other states (2) (3)		646.2			10.8			13.8			11.5			2.14
Total		$	6,015.4		100.0	%		$	120.3		100.0	%		2.00	%

(1) Includes$46.5 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 total loans of$106.4 million, of which $5.1 million were non-performing loans.

At December 31, 2015, 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.

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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 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		%
At December 31, 2014:
Mortgage loans:
Residential		255	$	73,326			70	$	21,290			148	$	44,989
Multi-family		26	4,294				11	2,568				26	8,917
Commercial real estate		7	2,476				1	493				2	2,888
Consumer and other loans		58	2,430				17	962				52	6,040
Total delinquent loans		346	$	82,526			99	$	25,313			228	$	62,834
Delinquent loans to total loans			0.69		%			0.21		%			0.53		%
At December 31, 2013:
Mortgage loans:
Residential		316	$	96,302			62	$	22,393			784	$	234,378
Multi-family		52	13,844				6	1,327				24	9,054
Commercial real estate		6	2,659				3	1,690				3	1,154
Consumer and other loans		76	3,177				24	1,340				48	5,948
Total delinquent loans		450	$	115,982			95	$	26,750			859	$	250,534
Delinquent loans to total loans			0.93		%			0.21		%			2.01		%

Delinquent loans totaled $199.9 million at December 31, 2015, an increase of $29.2 million compared to $170.7 million at December 31, 2014. The increase in total delinquent loans at December 31, 2015 compared to December 31, 2014 includes an increase of $40.0 million in delinquent residential mortgage loans primarily due to an increase in loans which were 90 days or more past due, coupled with an increase in loans which were 30-59 days past due. The increase in delinquent residential mortgage loans at December 31, 2015 compared to December 31, 2014 was primarily attributable to interest-only loans that converted to amortizing loans, partially offset by a decrease of $11.4 million in delinquent multi-family and commercial real estate mortgage loans due primarily to a decline in loans which were 90 days or more past due, coupled with a decline in loans which were 30-59 days past due.

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Allowance for Loan Losses

The following table sets forth the changes in our allowance for loan losses for the years indicated.

	At or For the Year Ended December 31,
(Dollars in Thousands)	2015			2014			2013			2012			2011
Balance at beginning of year	$	111,600		$	139,000		$	145,501		$	157,185		$	201,499
Provision (credited) charged to operations	(12,072		)	(9,469		)	19,601			40,400			37,000
Charge-offs:
Residential	(6,149		)	(19,868		)	(26,644		)	(49,794		)	(64,834		)
Multi-family	(907		)	(4,365		)	(4,732		)	(6,275		)	(22,160		)
Commercial real estate	(302		)	(3,283		)	(3,748		)	(2,607		)	(4,138		)
Consumer and other loans	(912		)	(2,073		)	(1,916		)	(2,541		)	(1,665		)
Total charge-offs	(8,270		)	(29,589		)	(37,040		)	(61,217		)	(92,797		)
Recoveries:
Residential	3,297			9,278			8,346			8,407			10,844
Multi-family	1,981			1,575			1,237			206			502
Commercial real estate	1,087			440			535			1			—
Consumer and other loans	377			365			820			519			137
Total recoveries	6,742			11,658			10,938			9,133			11,483
Net charge-offs (1) (2) (3)	(1,528		)	(17,931		)	(26,102		)	(52,084		)	(81,314		)
Balance at end of year	$	98,000		$	111,600		$	139,000		$	145,501		$	157,185
Net charge-offs to average loans outstanding	0.01		%	0.15		%	0.20		%	0.39		%	0.60		%
Allowance for loan losses to total loans	0.88			0.93			1.12			1.10			1.18
Allowance for loan losses to non-performing loans	70.90			87.32			41.87			46.18			47.22

(1) Includes net charge-offs related to reduced documentation residential mortgage loans totaling $609,000 and net recoveries related to certain delinquent and non-performing loans transferred to held-for-sale totaling $677,000 for the year ended December 31, 2015

(2) Includes a charge-off of $8.7 million related to the pool of non-performing residential mortgage loans designated as held-for-sale at June 30, 2014, net recoveries of $63,000 related to reduced documentation residential mortgage loans and net charge-offs of $243,000 related to certain delinquent and non-performing loans transferred to held-for-sale for the year ended December 31, 2014.

(3) Includes net charge-offs related to reduced documentation residential mortgage loans totaling $6.2 million, $18.6 million and $28.7 million for the years ended December 31, 2013, 2012 and 2011, respectively, and net charge-offs related to certain delinquent and non-performing loans transferred to held-for-sale totaling $4.6 million, $1.7 million and $21.6 million for the years ended December 31, 2013, 2012 and 2011, respectively.

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 2015 fourth 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%, compared to approximately 26% in both our 2015 third quarter and our 2014 fourth quarter analysis.

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The following table sets forth the changes in our valuation allowance for REO for the years indicated.

	At or For the Year Ended December 31,
(In Thousands)	2015			2014			2013			2012			2011
Balance at beginning of year	$	839		$	834		$	1,555		$	2,499		$	1,513
Provision charged to operations	1,584			1,356			1,298			2,914			4,039
Charge-offs	(1,605		)	(1,759		)	(2,421		)	(4,428		)	(3,248		)
Recoveries	446			408			402			570			195
Balance at end of year	$	1,264		$	839		$	834		$	1,555		$	2,499

The following table sets forth our allocation of the allowance for loan losses by loan category and the percent of loans in each category to total loans receivable at the dates indicated.

	At December 31,
	2015					2014					2013					2012					2011
(Dollars in Thousands)	Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans			Amount		Percent of Loans to Total Loans
Residential	$	44,951		54.14	%	$	46,283		57.71	%	$	80,337		64.89	%	$	89,267		73.82	%	$	105,991		80.02	%
Multi-family	35,544			36.21		39,250			32.86		36,703			26.61		35,514			18.29		35,422			12.84
Commercial real estate	11,217			7.38		17,242			7.34		13,136			6.56		14,404			5.88		11,972			5.00
Consumer and other loans	6,288			2.27		8,825			2.09		8,824			1.94		6,316			2.01		3,800			2.14
Total allowance for loan losses	$	98,000		100.00	%	$	111,600		100.00	%	$	139,000		100.00	%	$	145,501		100.00	%	$	157,185		100.00	%

The allowance for loan losses is allocated by loan category, but the portion of the allowance for loan losses 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. The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at December 31, 2015, 2014, 2013, 2012 and 2011.

There are no material assumptions relied on by management which have not been made apparent in our disclosures or reflected in our asset quality ratios and activity in the allowance for loan losses. We believe our allowance for loan losses has been established and maintained at levels that reflect the risks inherent in our loan portfolio, giving consideration to 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. The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at December 31, 2015 and December 31, 2014.

Impact of Recent Accounting Standards and Interpretations

In June 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2014-12, “Compensation — Stock Compensation (Topic 718) — Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” which applies to all entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period.  The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  As such, the performance target should not be reflected in estimating the grant date fair value of the award.  The amendments in ASU 2014-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and may be applied either prospectively to all awards granted or modified after the effective date, or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.  Early adoption is permitted. The terms of our share-based payment awards currently do not provide that

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a performance target that affects vesting could be achieved after the requisite service period. Therefore, this guidance is not expected to have an impact on our financial condition or results of operations.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. Therefore this guidance will not have an impact on our financial condition or results of operations. The amendments in ASU 2015-03 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, and must be adopted on a retrospective basis. Early adoption is permitted for financial statements that have not been previously issued. At December 31, 2015 and 2014, our debt issuance costs are presented as a direct reduction from the carrying amount of that debt liability in the consolidated statements of financial condition.

Impact of Inflation and Changing Prices

The consolidated financial statements and notes thereto presented herein have been prepared in accordance with GAAP, which require the measurement of our financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation.  The impact of inflation is reflected in the increased cost of our operations.  Unlike industrial companies, nearly all of our assets and liabilities are monetary in nature.  As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation.  Interest rates do not necessarily move in the same direction or, to the same extent, as the price of goods and services.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a financial institution, the primary component of our market risk is IRR. Net interest income is the primary component of our net income. Net interest income is the difference between the interest earned on our loans, securities and other interest-earning assets and the interest expense incurred on our deposits and borrowings. The yields, costs and volumes of loans, securities, deposits and borrowings are directly affected by the levels of and changes in market interest rates. Additionally, changes in interest rates also affect the related cash flows of our assets and liabilities as the option to prepay assets or withdraw liabilities remains with our customers, in most cases without penalty. The objective of our IRR 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 IRR modeling is done by Astoria Bank in conformity with regulatory requirements. In conjunction with performing these analyses we also consider related factors including, but not limited to, our overall credit profile, non-interest income and non-interest expense. We do not enter into financial transactions or hold financial instruments for trading purposes.

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.  The following table, referred to as the Gap Table, sets forth the amount of interest-earning assets and interest-bearing liabilities outstanding at December 31, 2015 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 actual duration of mortgage loans and mortgage-backed securities can be significantly impacted by changes in mortgage prepayment activity.  The major factors affecting mortgage prepayment rates are prevailing interest rates and related mortgage refinancing opportunities.  Prepayment rates will also vary due to a number of other factors, including the regional economy in the area where the underlying collateral is located, seasonal factors, demographic variables and the assumability of the underlying mortgages.

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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 yields and costs of the assets and liabilities or the projected yields and costs to replace or retain those assets and liabilities.  Callable features of certain assets and liabilities, in addition to the foregoing, may also cause actual experience to vary from the analysis.  The uncertainty and volatility of interest rates, economic conditions and other markets which affect the value of these call options, as well as the financial condition and strategies of the holders of the options, increase the difficulty and uncertainty in predicting when the call options may be exercised.  Among the factors considered in our estimates are current trends and historical repricing experience with respect to similar products.  As a result, different assumptions may be used at different points in time.

The Gap Table includes $1.00 billion of borrowings callable within one year and on a quarterly basis thereafter, classified according to their maturity dates in the more than three years to five years category, and $950.0 million of borrowings callable in more than one year to three years, classified according to their maturity dates primarily in the more than three years to five years category. In addition, the Gap Table includes callable securities with an amortized cost of $252.7 million, substantially 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 dates is based on our experience with, and expectations of, the behavior of these types of instruments in the current interest rate environment.

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As indicated in the Gap Table, our one-year cumulative gap at December 31, 2015 was positive 2.19% compared to negative 1.87% at December 31, 2014. The change in our one-year cumulative gap primarily reflects a decline in the balance of maturing certificates of deposit and increases in securities and loans repricing within one year, partially offset by an increase in borrowings maturing within one year at December 31, 2015, compared to December 31, 2014.

	At December 31, 2015
(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)	$	3,887,320		$	2,872,229		$	2,088,317		$	1,976,597		$	10,824,463
Consumer and other loans (1)	220,877			12,742			7,308			5,270			246,197
Interest-earning cash accounts	168,757			—			—			—			168,757
Securities available-for-sale (2)	66,250			74,426			44,119			233,849			418,644
Securities held-to-maturity	360,999			470,542			287,922			1,177,336			2,296,799
FHLB-NY stock	—			—			—			131,137			131,137
Total interest-earning assets	4,704,203			3,429,939			2,427,666			3,524,189			14,085,997
Interest-bearing liabilities:
Savings	311,039			399,480			293,989			1,133,310			2,137,818
Money market	1,280,102			767,997			512,105			—			2,560,204
NOW and demand deposit	90,754			224,536			201,881			1,896,652			2,413,823
Certificates of deposit	927,542			577,703			488,937			—			1,994,182
Borrowings, net (3)	1,765,000			849,222			1,350,000			—			3,964,222
Total interest-bearing liabilities	4,374,437			2,818,938			2,846,912			3,029,962			13,070,249
Interest rate sensitivity gap	329,766			611,001			(419,246		)	494,227			$	1,015,748
Cumulative interest rate sensitivity gap	$	329,766		$	940,767		$	521,521		$	1,015,748
Cumulative interest rate sensitivity gap as a percentage of total assets	2.19		%	6.24		%	3.46		%	6.74		%
Cumulative net interest-earning assets as a percentage of interest-bearing liabilities	107.54		%	113.08		%	105.19		%	107.77		%

(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.

Net Interest Income Sensitivity Analysis

In managing IRR, 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,

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through quarterly parallel increments of 50 basis points, our projected net interest income for the twelve month period beginning January 1, 2016 would decrease by approximately 2.09% from the base projection. At December 31, 2014, in the up 200 basis point scenario, our projected net interest income for the twelve month period beginning January 1, 2015 would have decreased by approximately 7.18% 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 upon historical observation, our projected net interest income for the twelve month period beginning January 1, 2016 would decrease by approximately 2.12% from the base projection. At December 31, 2014, in the down 100 basis point scenario, our projected net interest income for the twelve month period beginning January 1, 2015 would have decreased by approximately 2.66% from the base projection. The December 31, 2014 analysis did not include the floor assumptions used in the December 31, 2015 analysis.

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 IRR 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 BOLI 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 twelve month period beginning January 1, 2016 would increase by approximately $2.9 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 twelve month period beginning January 1, 2016 would decrease by approximately $2.2 million with respect to these items alone.

For information regarding our credit risk, see “Asset Quality,” in Item 7, “MD&A.”

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

For our Consolidated Financial Statements, see the index on page A - 1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. 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 December 31, 2015.  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 December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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See page A - 2 for our Management Report on Internal Control Over Financial Reporting and page A - 3 for the related Report of Independent Registered Public Accounting Firm.

The Sarbanes-Oxley Act Section 302 Certifications regarding the quality of our public disclosures have been filed with the SEC as Exhibit 31.1 and Exhibit 31.2 to this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding directors and executive officers who are not directors of Astoria Financial Corporation is presented in the tables under the headings “Board Nominees, Directors and Executive Officers,” “Committees and Meetings of the Board” and “Additional Information - Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement to be utilized in connection with our 2016 Annual Meeting of Shareholders or will be included in an amendment or amendments to this Form 10-K, which will be filed with the SEC within 120 days from December 31, 2015, and is incorporated herein by reference.

Audit Committee Financial Expert

Information regarding the audit committee of our Board of Directors, including information regarding an audit committee financial expert serving on the audit committee, is presented under the heading “Committees and Meetings of the Board” in our definitive Proxy Statement to be utilized in connection with our 2016 Annual Meeting of Shareholders or will be included in an amendment or amendments to this Form 10-K, which will be filed with the SEC within 120 days from December 31, 2015, and is incorporated herein by reference.

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer and principal financial officer, which is available on our investor relations website at http://ir.astoriabank.com under the heading “Corporate Governance.” In addition, copies of our code of business conduct and ethics will be provided upon written request to Astoria Financial Corporation, Investor Relations Department, One Astoria Bank Plaza, Lake Success, New York 11042 at no charge.

Corporate Governance

Our Corporate Governance Guidelines and Nominating and Corporate Governance Committee Charter are available on our investor relations website at http://ir.astoriabank.com under the heading “Corporate Governance.” In addition, copies of such documents will be provided to shareholders upon written request to Astoria Financial Corporation, Investor Relations Department, One Astoria Bank Plaza, Lake Success, New York 11042 at no charge.

During the year ended December 31, 2015, there were no material changes to procedures by which security holders may recommend nominees to our Board of Directors.

ITEM 11. EXECUTIVE COMPENSATION

Information relating to executive (and director) compensation is included under the headings “Transactions with Certain Related Persons,” “Compensation Discussion and Analysis,” “Summary Compensation Table,” “Grants of Plan Based Awards Table,” “Outstanding Equity Awards at Fiscal Year-End Table,” “Stock Vested Table,” “Pension Benefits Table,” “Other Potential Post-Employment Payments” and “Director Compensation,” including related narratives, “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report,” in our

101

definitive Proxy Statement to be utilized in connection with our 2016 Annual Meeting of Shareholders or will be included in an amendment or amendments to this Form 10-K, which will be filed with the SEC within 120 days from December 31, 2015, and is incorporated herein by reference.

The Compensation Committee Charter is available on our investor relations website at http://ir.astoriabank.com under the heading “Corporate Governance.” In addition, copies of our Compensation Committee Charter will be provided to shareholders upon written request to Astoria Financial Corporation, Investor Relations Department, One Astoria Bank Plaza, Lake Success, New York 11042 at no charge.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information relating to security ownership of certain beneficial owners and management is included under the headings “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management,” and related narrative, in our definitive Proxy Statement to be utilized in connection with our 2016 Annual Meeting of Shareholders or will be included in an amendment or amendments to this Form 10-K, which will be filed with the SEC within 120 days from December 31, 2015, and is incorporated herein by reference.

The following table provides information as of December 31, 2015 with respect to compensation plans, including individual compensation agreements, under which equity securities of Astoria Financial Corporation are authorized for issuance.

Plan Category (1)	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		763,500		$	29.76		3,360,624
Equity compensation plans not approved by security holders		—		—			—
Total (2)		763,500		$	29.76		3,360,624

(1) Excluded is any employee benefit plan that is intended to meet the qualification requirements of Section 401(a) of the Internal Revenue Code, such as the 401(k) Plan. Also excluded are 100,040 shares of our common stock which represent unvested restricted stock awards made pursuant to the 2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation, or the 2005 Employee Stock Plan, 198,777 shares of our common stock which represent unvested restricted stock awards made pursuant to the 2014 Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation, or the 2014 Employee Stock Plan, and 76,000 shares of our common stock which represent unvested restricted stock awards made pursuant to the Astoria Financial Corporation 2007 Non-Employee Directors Stock Plan, as amended, or the 2007 Director Stock Plan, since such shares, while unvested, were issued and outstanding as of December 31, 2015. The only equity security issuable under the equity compensation plans referenced in the table is our common stock. The only equity compensation plans are stock option plans or arrangements which provide for the issuance of our common stock upon the exercise of options, the 2005 Employee Stock Plan and the 2014 Employee Stock Plan which provide for the grant of equity settled stock appreciation rights and awards of restricted stock or equity settled restricted stock units and the 2007 Director Stock Plan which provides for awards of restricted stock. The securities to be issued upon exercise of outstanding options, warrants and rights would be issued on the exercise of options granted under the 1999 Directors Option Plan. Of the number of securities remaining available for future issuance in the above table, 3,310,991 were authorized pursuant to the 2014 Employee Stock Plan and 49,633 were authorized pursuant to the 2007 Director Stock Plan. Both plans provide for automatic adjustments to outstanding options or grants upon certain changes in capitalization. In the event of any stock split, stock dividend or other event generally affecting the number of shares of our common stock held by each person who is then a record holder of our common stock, the number of shares covered by each outstanding option, grant or award and the number of shares available for grant under the plans shall be adjusted to account for such event.

(2) Included in the number of securities to be issued upon exercise of outstanding options, warrants and rights in column (a) are options to acquire 12,000 shares of our common stock with a weighted average exercise price of $29.76 shown in column (b) and 751,500 shares of our common stock covered by unvested performance-based restricted stock units which are not included in the weighted average exercise price shown in column (b).

102

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

Information regarding certain relationships and related transactions and director independence is included under the headings “Transactions with Certain Related Persons,” “Compensation Committee Interlocks and Insider Participation” and “Director Independence” in our definitive Proxy Statement to be utilized in connection with our 2016 Annual Meeting of Shareholders or will be included in an amendment or amendments to this Form 10-K, which will be filed with the SEC within 120 days from December 31, 2015, and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information regarding principal accountant fees and services and the pre-approval of such services and fees is included under the headings “Audit Fees,” “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” and in the related narrative, in our definitive Proxy Statement to be utilized in connection with our 2016 Annual Meeting of Shareholders or will be included in an amendment or amendments to this Form 10-K, which will be filed with the SEC within 120 days from December 31, 2015, and is incorporated herein by reference.

103

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)	1.	Financial Statements
		See Index to Consolidated Financial Statements on page A - 1.
	2.	Financial Statement Schedules
		Financial Statement Schedules have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto under Item 8, “Financial Statements and Supplementary Data.”
(b)		Exhibits
		See Index of Exhibits on page B - 1.

104

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

/s/	Monte N. Redman	Date:	February 29, 2016
	Monte N. Redman
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

	NAME	DATE
/s/	Ralph F. Palleschi	February 29, 2016
	Ralph F. Palleschi
	Chairman
/s/	Monte N. Redman	February 29, 2016
	Monte N. Redman
	President, Chief Executive Officer and Director
/s/	Frank E. Fusco	February 29, 2016
	Frank E. Fusco
	Senior Executive Vice President and
	Chief Financial Officer
/s/	John F. Kennedy	February 29, 2016
	John F. Kennedy
	Senior Vice President and
	Chief Accounting Officer
/s/	Gerard C. Keegan	February 29, 2016
	Gerard C. Keegan
	Vice Chairman, Senior Executive Vice President and
	Chief Operating Officer

105

/s/	John R. Chrin	February 29, 2016
	John R. Chrin
	Director
/s/	John J. Corrado	February 29, 2016
	John J. Corrado
	Director
/s/	Robert Giambrone	February 29, 2016
	Robert Giambrone
	Director
/s/	Brian M. Leeney	February 29, 2016
	Brian M. Leeney
	Director
/s/	Patricia M. Nazemetz	February 29, 2016
	Patricia M. Nazemetz
	Director

106

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

INDEX

	Page
Management Report on Internal Control Over Financial Reporting	A  -  2
Reports of Independent Registered Public Accounting Firm	A  -  3
Consolidated Statements of Financial Condition at December 31, 2015 and 2014	A  -  5
Consolidated Statements of Income for the years ended December 31, 2015, 2014 and 2013	A  -  6
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013	A  -  7
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013	A  -  8
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013	A  -  9
Notes to Consolidated Financial Statements	A - 10

A - 1

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Astoria Financial Corporation is responsible for establishing and maintaining adequate internal control over financial reporting.  Astoria Financial Corporation’s internal control system is a process designed to provide reasonable assurance to the company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of Astoria Financial Corporation; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Astoria Financial Corporation’s assets that could have a material effect on our financial statements.

All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Astoria Financial Corporation management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2015.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).  Based on our assessment we believe that, as of December 31, 2015, the company’s internal control over financial reporting is effective based on those criteria.

Astoria Financial Corporation’s independent registered public accounting firm has issued an audit report on the effectiveness of the company’s internal control over financial reporting as of December 31, 2015.  This report appears on page A - 3.

A - 2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Astoria Financial Corporation:

We have audited the internal control over financial reporting of Astoria Financial Corporation and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of Astoria Financial Corporation and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated February 29, 2016 expressed an unqualified opinion on those consolidated financial statements.

New York, New York

February 29, 2016

A - 3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Astoria Financial Corporation:

We have audited the accompanying consolidated statements of financial condition of Astoria Financial Corporation and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Astoria Financial Corporation and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 29, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

New York, New York

February 29, 2016

A - 4

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	At December 31,
(In Thousands, Except Share Data)	2015			2014
ASSETS:
Cash and due from banks	$	200,538		$	143,185
Available-for-sale securities:
Encumbered	81,481			110,784
Unencumbered	335,317			273,575
Total available-for-sale securities	416,798			384,359
Held-to-maturity securities, fair value of $2,286,092, and $2,131,371, respectively:
Encumbered	1,123,480			1,147,991
Unencumbered	1,173,319			985,813
Total held-to-maturity securities	2,296,799			2,133,804
Federal Home Loan Bank of New York stock, at cost	131,137			140,754
Loans held-for-sale, net	8,960			7,640
Loans receivable	11,153,081			11,957,448
Allowance for loan losses	(98,000		)	(111,600		)
Loans receivable, net	11,055,081			11,845,848
Mortgage servicing rights, net	11,014			11,401
Accrued interest receivable	34,996			36,628
Premises and equipment, net	109,758			111,622
Goodwill	185,151			185,151
Bank owned life insurance	439,646			430,768
Real estate owned, net	19,798			35,723
Other assets	166,535			173,138
Total assets	$	15,076,211		$	15,640,021
LIABILITIES:
Deposits	$	9,106,027		$	9,504,909
Borrowings, net	3,964,222			4,187,691
Mortgage escrow funds	115,435			115,400
Accrued expenses and other liabilities	227,079			251,951
Total liabilities	13,412,763			14,059,951
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 100,721,358 and 99,940,399 shares outstanding, respectively)	1,665			1,665
Additional paid-in capital	902,349			897,049
Retained earnings	2,045,391			1,992,833
Treasury stock (65,773,530 and 66,554,489 shares, at cost, respectively)	(1,357,136		)	(1,375,322		)
Accumulated other comprehensive loss	(58,617		)	(65,951		)
Total stockholders’ equity	1,663,448			1,580,070
Total liabilities and stockholders’ equity	$	15,076,211		$	15,640,021

See accompanying Notes to Consolidated Financial Statements.

A - 5

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	For the Year Ended December 31,
(In Thousands, Except Share Data)	2015			2014			2013
Interest income:
Residential mortgage loans	$	203,950		$	241,417		$	289,790
Multi-family and commercial real estate mortgage loans	191,643			178,795			163,352
Consumer and other loans	8,870			8,532			8,797
Mortgage-backed and other securities	62,754			57,065			49,563
Interest-earning cash accounts	418			321			263
Federal Home Loan Bank of New York stock	5,781			6,220			6,665
Total interest income	473,416			492,350			518,430
Interest expense:
Deposits	37,343			51,355			62,617
Borrowings	95,784			98,707			113,911
Total interest expense	133,127			150,062			176,528
Net interest income	340,289			342,288			341,902
Provision for loan losses (credited) charged to operations	(12,072		)	(9,469		)	19,601
Net interest income after provision for loan losses	352,361			351,757			322,301
Non-interest income:
Customer service fees	32,833			35,710			36,786
Other loan fees	2,284			2,493			2,230
Gain on sales of securities	72			141			2,057
Mortgage banking income, net	4,222			3,326			13,241
Income from bank owned life insurance	8,878			8,476			8,404
Other	6,307			4,702			6,854
Total non-interest income	54,596			54,848			69,572
Non-interest expense:
General and administrative:
Compensation and benefits	152,924			138,177			133,689
Occupancy, equipment and systems	76,801			71,948			70,711
Federal deposit insurance premium	16,421			26,179			37,188
Advertising	10,052			12,450			6,400
Extinguishment of debt	—			—			4,266
Other	32,885			35,656			35,277
Total non-interest expense	289,083			284,410			287,531
Income before income tax expense	117,874			122,195			104,342
Income tax expense	29,799			26,279			37,749
Net income	88,075			95,916			66,593
Preferred stock dividends	8,775			8,775			7,214
Net income available to common shareholders	$	79,300		$	87,141		$	59,379
Basic earnings per common share	$	0.79		$	0.88		$	0.60
Diluted earnings per common share	$	0.79		$	0.88		$	0.60
Basic weighted average common shares outstanding	99,612,473			98,384,443			97,121,497
Diluted weighted average common shares outstanding	99,969,838			98,384,443			97,121,497

See accompanying Notes to Consolidated Financial Statements.

A - 6

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Net income	$	88,075		$	95,916		$	66,593
Other comprehensive income (loss), net of tax:
Net unrealized (loss) gain on securities available-for-sale:
Net unrealized holding (loss) gain on securities arising during the year	(1,816		)	9,143			(10,485		)
Reclassification adjustment for gain on sales of securities included in net income	(43		)	(91		)	(1,332		)
Net unrealized (loss) gain on securities available-for-sale	(1,859		)	9,052			(11,817		)
Net actuarial loss adjustment on pension plans and other postretirement benefits:
Net actuarial loss adjustment arising during the year	7,309			(37,467		)	44,180
Reclassification adjustment for net actuarial loss included in net income	1,771			591			2,335
Net actuarial loss adjustment on pension plans and other postretirement benefits	9,080			(36,876		)	46,515
Reclassification adjustment for prior service cost on pension plans and other postretirement benefits included in net income	113			123			142
Total other comprehensive income (loss), net of tax	7,334			(27,701		)	34,840
Comprehensive income	$	95,409		$	68,215		$	101,433

See accompanying Notes to Consolidated Financial Statements.

A - 7

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

(In Thousands, Except Share Data)	Total			Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss				Unallocated Common Stock Held by ESOP
Balance at December 31, 2012	$	1,293,989		$	—	$	1,665	$	884,689		$	1,891,022		$	(1,406,755	)		$	(73,090	)		$	(3,542	)
Net income	66,593			—		—		—			66,593			—				—				—
Other comprehensive income, net of tax	34,840			—		—		—			—			—				34,840				—
Issuance of Preferred Stock, Series C (135,000 shares)	129,796			129,796		—		—			—			—				—				—
Dividends on preferred stock ($53.44 per share)	(7,214		)	—		—		—			(7,214		)	—				—				—
Dividends on common stock ($0.16 per share)	(15,667		)	—		—		—			(15,667		)	—				—				—
Restricted stock grants (536,110 shares)	—			—		—		(5,200		)	(5,878		)	11,078				—				—
Forfeitures of restricted stock (113,468 shares)	—			—		—		1,234			1,110			(2,344		)		—				—
Stock-based compensation	6,969			—		—		6,909			60			—				—				—
Net tax benefit shortfall from stock-based compensation	(800		)	—		—		(800		)	—			—				—				—
Allocation of ESOP stock	11,007			—		—		7,465			—			—				—				3,542
Balance at December 31, 2013	1,519,513			129,796		1,665		894,297			1,930,026			(1,398,021		)		(38,250		)		—
Net income	95,916			—		—		—			95,916			—				—				—
Other comprehensive loss, net of tax	(27,701		)	—		—		—			—			—				(27,701		)		—
Dividends on preferred stock ($65.00 per share)	(8,775		)	—		—		—			(8,775		)	—				—				—
Dividends on common stock ($0.16 per share)	(15,868		)	—		—		—			(15,868		)	—				—				—
Sales of treasury stock (615,340 shares)	8,121			—		—		—			(4,595		)	12,716				—				—
Restricted stock grants (514,507 shares)	—			—		—		(6,472		)	(4,160		)	10,632				—				—
Forfeitures of restricted stock (31,408 shares)	—			—		—		374			275			(649		)		—				—
Stock-based compensation	8,672			—		—		8,658			14			—				—				—
Net tax benefit excess from stock-based compensation	192			—		—		192			—			—				—				—
Balance at December 31, 2014	1,580,070			129,796		1,665		897,049			1,992,833			(1,375,322		)		(65,951		)		—
Net income	88,075			—		—		—			88,075			—				—				—
Other comprehensive income, net of tax	7,334			—		—		—			—			—				7,334				—
Dividends on preferred stock ($65.00 per share)	(8,775		)	—		—		—			(8,775		)	—				—				—
Dividends on common stock ($0.16 per share)	(16,081		)	—		—		—			(16,081		)	—				—				—
Sales of treasury stock (482,460 shares)	6,168			—		—		—			(3,802		)	9,970				—				—
Common Stock repurchased (431,707 shares)	(6,869		)	—		—		—			—			(6,869		)		—				—
Restricted stock units vesting (366,400 shares)	—			—		—		(3,378		)	(4,189		)	7,567				—				—
Restricted stock grants (429,752 shares)	—			—		—		(5,608		)	(3,273		)	8,881				—				—
Forfeitures of restricted stock (65,946 shares)	—			—		—		777			586			(1,363		)		—				—
Stock-based compensation	11,411			—		—		11,394			17			—				—				—
Net tax benefit excess from stock-based compensation	2,115			—		—		2,115			—			—				—				—
Balance at December 31, 2015	$	1,663,448		$	129,796	$	1,665	$	902,349		$	2,045,391		$	(1,357,136	)		$	(58,617	)		$	—

See accompanying Notes to Consolidated Financial Statements.

A - 8

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Cash flows from operating activities:
Net income	$	88,075		$	95,916		$	66,593
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization on loans	11,625			11,738			20,511
Net amortization on securities and borrowings	8,921			9,021			15,794
Net provision for loan and real estate losses (credited) charged to operations	(10,488		)	(8,113		)	20,899
Depreciation and amortization	13,069			11,872			11,566
Net gain on sales of loans and securities	(2,070		)	(1,012		)	(9,059		)
Mortgage servicing rights amortization and valuation allowance adjustments, net	1,739			2,522			(2,172		)
Stock-based compensation and allocation of ESOP stock	11,411			8,672			17,976
Deferred income tax (benefit) expense	(2,686		)	4,811			9,503
Originations of loans held-for-sale	(127,746		)	(105,176		)	(256,048		)
Proceeds from sales and principal repayments of loans held-for-sale	128,537			104,947			325,088
Decrease in accrued interest receivable	1,632			1,298			3,762
Bank owned life insurance income and insurance proceeds received, net	(8,878		)	(7,393		)	(5,220		)
Decrease (increase) in other assets	4,301			(15,218		)	41,728
(Decrease) increase in accrued expenses and other liabilities	(10,233		)	20,191			(28,257		)
Net cash provided by operating activities	107,209			134,076			232,664
Cash flows from investing activities:
Originations of loans receivable	(1,446,856		)	(1,560,090		)	(2,228,450		)
Loan purchases through third parties	(229,419		)	(196,283		)	(407,532		)
Principal payments on loans receivable	2,450,264			1,985,246			3,302,519
Proceeds from sales of delinquent and non-performing loans	7,483			181,295			19,511
Purchases of securities held-to-maturity	(685,918		)	(630,366		)	(850,716		)
Purchases of securities available-for-sale	(125,674		)	(25,479		)	(221,080		)
Principal payments on securities held-to-maturity	515,441			338,691			687,902
Principal payments on securities available-for-sale	70,799			40,906			95,687
Proceeds from sales of securities available-for-sale	19,026			14,447			41,640
Net redemptions of Federal Home Loan Bank of New York stock	9,617			11,453			18,987
Redemption of Astoria Capital Trust I common securities	—			—			3,866
Proceeds from sales of real estate owned, net	22,895			49,089			35,949
Purchases of premises and equipment, net of proceeds from sales	(11,225		)	(10,961		)	(9,621		)
Net cash provided by investing activities	596,433			197,948			488,662
Cash flows from financing activities:
Net decrease in deposits	(398,882		)	(350,401		)	(588,648		)
Net (decrease) increase in borrowings with original terms of three months or less	(394,000		)	200,000			317,000
Proceeds from borrowings with original terms greater than three months	470,000			—			—
Repayments of borrowings with original terms greater than three months	(300,000		)	(150,000		)	(553,866		)
Net increase (decrease) in mortgage escrow funds	35			5,942			(3,643		)
Proceeds from sales of treasury stock	6,168			8,121			—
Cost to repurchase common stock	(6,869		)	—			—
Proceeds from issuance of preferred stock	—			—			135,000
Cash payments for preferred stock issuance costs	—			—			(5,204		)
Cash dividends paid to stockholders	(24,856		)	(24,643		)	(20,688		)
Net tax benefit excess (shortfall) from stock-based compensation	2,115			192			(800		)
Net cash used in financing activities	(646,289		)	(310,789		)	(720,849		)
Net increase in cash and cash equivalents	57,353			21,235			477
Cash and cash equivalents at beginning of year	143,185			121,950			121,473
Cash and cash equivalents at end of year	$	200,538		$	143,185		$	121,950
Supplemental disclosures:
Interest paid	$	132,687		$	150,026		$	180,871
Income taxes paid	$	35,925		$	21,658		$	28,820
Additions to real estate owned	$	8,554		$	43,532		$	51,360
Loans transferred to held-for-sale	$	8,948		$	190,594		$	16,605

See accompanying Notes to Consolidated Financial Statements.

A - 9

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)    Summary of Significant Accounting Policies

The following significant accounting and reporting policies of Astoria Financial Corporation and subsidiaries conform to U.S. generally accepted accounting principles, or GAAP, and are used in preparing and presenting these consolidated financial statements.

(a)    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.  AF Insurance Agency, Inc. is a licensed life insurance agency which, through contractual agreements with various third parties, makes insurance products available primarily to the customers of Astoria Bank.  As used in this annual 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 addition to Astoria Bank and AF Insurance Agency, Inc., we had another subsidiary, Astoria Capital Trust I, which was not consolidated with Astoria Financial Corporation for financial reporting purposes.  On May 14, 2013, we filed a Certificate of Cancellation of Certificate of Trust of Astoria Capital Trust I with the Delaware Secretary of State.  See Note 8 for further discussion of Astoria Capital Trust I.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues, expenses and other comprehensive income/loss during the reporting periods.  The estimate of our allowance for loan losses, the valuation of mortgage servicing rights, or MSR, judgments regarding goodwill and securities impairment and the estimates related to our income taxes and pension plans and other postretirement benefits are particularly critical 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.  Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

(b)    Cash and Cash Equivalents

For the purpose of reporting cash flows, cash and cash equivalents include cash and due from banks and repurchase agreements with original maturities of three months or less.  We may purchase securities under agreements to resell (repurchase agreements).  These agreements represent short-term loans and are reflected as an asset in the consolidated statements of financial condition. There were no repurchase agreements outstanding at December 31, 2015 and 2014.

Astoria Bank is required by the Federal Reserve System to maintain cash reserves equal to a percentage of certain deposits.  The reserve requirement totaled $45.8 million at December 31, 2015 and $42.2 million at December 31, 2014.

(c)    Securities

Securities are classified as held-to-maturity, available-for-sale or trading.  Management determines the appropriate classification of securities at the time of acquisition.  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.  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.  Premiums and discounts are recognized as adjustments to interest income using the interest method over the remaining period to contractual maturity, adjusted for prepayments.  Gains and losses on the sale of all securities are determined using the specific identification method and are reflected in earnings when realized.  For the years ended December 31, 2015, 2014 and 2013, we did not maintain a trading securities portfolio.  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.  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.

A - 10

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(d)    Federal Home Loan Bank of New York Stock

As a member of the Federal Home Loan Bank of New York, or FHLB-NY, we are required to acquire and hold shares of the FHLB-NY Class B stock.  Our holding requirement varies based on our activities, primarily our outstanding borrowings, with the FHLB-NY.  Our investment in FHLB-NY stock is carried at cost.  We conduct a periodic review and evaluation of our FHLB-NY stock to determine if any impairment exists.

(e)    Loans Held-for-Sale

Loans held-for-sale, net, includes 15 and 30 year fixed rate one-to-four family, or residential, mortgage loans originated for sale that conform to government-sponsored enterprise, or GSE, guidelines (conforming loans), as well as certain delinquent and non-performing mortgage loans.

Generally, we originate 15 and 30 year conforming fixed rate residential mortgage loans for sale to various GSEs or other investors on a servicing released or retained basis.  The sale of such loans is generally arranged through a master commitment on a mandatory delivery or best efforts basis.  Loans held-for-sale are carried at the lower of cost or estimated fair value.  Net unrealized losses, if any, are recognized in a valuation allowance through charges to earnings.  Premiums and discounts and origination fees and costs on loans held-for-sale are deferred and recognized as a component of the gain or loss on sale.  Gains and losses on sales of loans held-for-sale are included in mortgage banking income, net, recognized on settlement dates and are determined by the difference between the sale proceeds and the carrying value of the loans.  These transactions are accounted for as sales based on our satisfaction of the criteria for such accounting which provide that, as transferor, we have surrendered control over the loans.

Upon our decision to sell certain delinquent and non-performing mortgage loans held in portfolio, we transfer them to held-for-sale at the lower of cost or fair value, less estimated selling costs.  Reductions in carrying values are reflected as a write-down of the recorded investment in the loans resulting in a new cost basis, with credit-related losses charged to the allowance for loan losses.  Such loans are assessed for impairment based on fair value at each reporting date.  Lower of cost or market write-downs, if any, are recognized in a valuation allowance through charges to earnings.  Increases in the fair value of non-performing loans held-for-sale are recognized only up to the amount of the previously recognized valuation allowances.  Lower of cost or market write-downs and recoveries are included in other non-interest income along with gains and losses recognized on sales of such loans.  Our delinquent and non-performing loans are sold without recourse, except as discussed in Note 10, and we do not provide financing.

(f)    Loans Receivable and Allowance for Loan Losses

Loans receivable are carried at the unpaid principal balances, net of unamortized premiums and discounts and deferred loan origination costs and fees, which are recognized as yield adjustments using the interest method.  We amortize these amounts over the contractual life of the related loans, adjusted for prepayments.  Our loans receivable represent our financing receivables.

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 troubled debt restructuring, or 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 past due 90 days or more, 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.

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 loans and are initially placed on non-accrual status regardless of their delinquency status.  Loans modified in a TDR remain 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

A - 11

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

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.

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.

We segment our residential mortgage loan portfolio by interest-only and amortizing loans, full documentation and reduced documentation loans, and origination time periods, and we 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 except of multi-family and commercial real estate loans originated

A - 12

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 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.

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. The balance of our allowance for loan losses represents management’s best estimate of the probable inherent losses in our loan portfolio at December 31, 2015 and 2014.  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.

(g)    Mortgage Servicing Rights

We recognize as separate assets the rights to service mortgage loans.  The right to service loans for others is generally obtained through the sale of residential mortgage loans with servicing retained.  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 measurements of our MSR.  MSR are assessed for impairment based on fair value at each reporting date.  MSR impairment, if any, is recognized in a valuation allowance through charges to earnings.  Increases in the fair value of impaired MSR are recognized only up to the amount of the previously recognized valuation allowance.  Fees earned for servicing loans are reported as income, as a component of mortgage banking income, net, in the consolidated statements of income, when the related mortgage loan payments are collected.

We assess impairment of our MSR based on the estimated fair value of those rights on a stratum-by-stratum basis with any impairment recognized through a valuation allowance for each impaired stratum.  We stratify our MSR by underlying loan type (primarily fixed and adjustable) and interest rate.  Individual allowances for each stratum are then adjusted in subsequent periods to reflect changes in the measurement of impairment.

We outsource the servicing of our residential mortgage loan portfolio, including our portfolio of mortgage loans serviced for other investors, to an unrelated third party under a sub-servicing agreement.  Fees paid under the sub-servicing agreement are reported as a component of occupancy, equipment and systems expense in the consolidated statements of income.

(h)    Premises and Equipment

Land is carried at cost.  Buildings and improvements, leasehold improvements and furniture, fixtures and equipment are carried at cost, less accumulated depreciation and amortization. Premises and equipment at cost totaled $305.0 million with accumulated depreciation and amortization totaling $195.2 million at December 31, 2015, and totaled $315.5 million with accumulated depreciation and amortization totaling $203.9 million at December 31, 2014.  Buildings and improvements and furniture, fixtures and equipment are depreciated using the straight-line method over the estimated useful lives of the assets.  Leasehold improvements

A - 13

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

are amortized using the straight-line method over the shorter of the term of the related leases or the estimated useful lives of the improved property.

(i)    Goodwill

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 our average stock price, 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 December 31, 2015, 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 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.

(j)    Bank Owned Life Insurance

Bank owned life insurance, or BOLI, is carried at the amount that could be realized under our life insurance contract as of the date of the statement of financial condition and is classified as a non-interest-earning asset.  Increases in the carrying value are recorded as non-interest income and insurance proceeds received are recorded as a reduction of the carrying value.  The carrying value consisted of a cash surrender value of $409.4 million and a claims stabilization reserve of $30.3 million at December 31, 2015 and a cash surrender value of $402.1 million and a claims stabilization reserve of $28.7 million at December 31, 2014.  Repayment of the claims stabilization reserve (funds transferred from the cash surrender value to provide for future death benefit payments) is guaranteed by the insurance carrier provided that certain conditions are met at the date of a contract surrender.  We satisfied these conditions at December 31, 2015 and 2014.

(k)    Real Estate Owned

Real estate owned, or REO, represents real estate acquired through foreclosure or by deed in lieu of foreclosure and 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, through charges to earnings.  Such charges are included in other non-interest expense along with any additional property maintenance and protection expenses incurred in owning the property.  REO totaled $19.8 million, which is net of a valuation allowance of $1.3 million, at December 31, 2015 and $35.7 million, which is net of a valuation allowance of $839,000, at December 31, 2014.

(l)    Reverse Repurchase Agreements (Securities Sold Under Agreements to Repurchase)

We enter into sales of securities under agreements to repurchase with selected dealers and banks (reverse repurchase agreements).  Such agreements are accounted for as secured financing transactions since we maintain effective control over the transferred securities and the transfer meets the other criteria for such accounting.  Obligations to repurchase securities sold are reflected as a liability in our consolidated statements of financial condition.  The securities underlying the agreements are delivered to a custodial account for the benefit of the dealer or bank with whom each transaction is executed.  The dealers or banks, who may sell, loan or otherwise dispose of such securities to other parties in the normal course of their operations, agree to resell us the same securities at the maturities of the agreements.  We retain the right of substitution of collateral throughout the terms of the agreements.  The securities underlying the agreements are classified as encumbered securities in our consolidated statements of financial condition.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(m)    Derivative Financial Instruments

As part of our interest rate risk management, we may utilize, from time-to-time, derivative financial instruments which are recorded as either assets or liabilities in the consolidated statements of financial condition at fair value.  Changes in the fair values of derivatives are reported in our results of operations or other comprehensive income/loss depending on the use of the derivative and whether it qualifies for hedge accounting.  We may enter into derivative financial instruments with no hedging designation.  Changes in the fair values of these derivatives are recognized currently in our results of operations, generally in other non-interest expense.  We do not use derivatives for trading purposes.

(n)    Income Taxes

We use the asset and liability method to provide for income taxes on all transactions recorded in the consolidated financial statements.  Income tax expense consists of income taxes that are currently payable and deferred income taxes.  Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates, applicable to future years, to 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.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.  Certain tax benefits attributable to stock options, restricted stock and restricted stock units, including the tax benefit related to dividends paid on unvested restricted stock awards, are credited to additional paid-in-capital.  We 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.

(o)    Earnings Per Common Share

Basic earnings per common share, or EPS, is computed pursuant to the two-class method by dividing net income available to common shareholders less dividends paid on participating securities (unvested shares of restricted common stock) and any undistributed earnings attributable to participating securities by the weighted average common shares outstanding during the year.  The weighted average common shares outstanding includes the weighted average number of shares of common stock outstanding less the weighted average number of unvested shares of restricted common stock and, through December 31, 2013, unallocated common shares held by the Employee Stock Ownership Plan, or ESOP.  For EPS calculations, unallocated ESOP shares that had been committed to be released were considered outstanding.  ESOP shares that had not been committed to be released were excluded from outstanding shares on a weighted average basis for EPS calculations.  As of December 31, 2013, there were no remaining unallocated ESOP shares.

Diluted EPS is computed using the same method as basic EPS, but includes the effect of dilutive potential common shares during the period, such as unexercised stock options and unvested restricted stock units, calculated using the treasury stock method.  However, unvested restricted stock units are excluded from the denominator for both the basic and diluted EPS computations until the performance conditions are satisfied.

(p)    Employee Benefits

Astoria Bank has a qualified, non-contributory defined benefit pension plan, or the Astoria Bank Pension Plan, covering employees meeting specified eligibility criteria.  Astoria Bank’s policy is to fund pension costs in accordance with the minimum funding requirement.  In addition, Astoria Bank has non-qualified and unfunded supplemental retirement plans covering certain officers and directors including the Astoria Bank Excess Benefit Plan and the Astoria Bank Supplemental Benefit Plan, or the Astoria Excess and Supplemental Benefit Plans, and the Astoria Bank Directors’ Retirement Plan, or the Astoria Directors’ Retirement Plan.  Effective April 30, 2012, the Astoria Bank Pension Plan, the Astoria Excess and Supplemental Benefit Plans and the Astoria Directors’ Retirement Plan 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 for all of the aforementioned plans effective April 30, 2012.  These amendments resulted in a significant reduction in net periodic cost for our defined benefit pension plans for periods subsequent to April 30, 2012.

We also sponsor a health care plan that provides for postretirement medical and dental coverage to select individuals.  The costs of postretirement benefits are accrued during an employee’s active working career.

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

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

Prior to January 1, 2014, we recorded compensation expense related to the ESOP at an amount equal to the shares allocated by the ESOP multiplied by the average fair value of our common stock during the year of allocation, plus the cash contributions made to participant accounts.  The difference between the fair value of shares for the period and the cost of the shares allocated by the ESOP was recorded as an adjustment to additional paid-in capital. As of December 31, 2013 all shares in the ESOP were allocated to participants and the plan was frozen. On April 1, 2014, the ESOP was merged into the Astoria Bank 401(k) Plan, or the 401(k) Plan, and all participant balances under the ESOP were transferred to participant accounts under the 401(k) Plan.

(q)    Stock Incentive Plans

We recognize the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of awards.  Stock-based compensation expense is recognized on a straight-line basis over the requisite service period which is the earlier of the awards’ stated vesting date or the employees’ or non-employee directors’ retirement eligibility date for awards that have accelerated vesting provisions upon retirement.  For awards which have performance-based conditions, recognition of stock-based compensation expense begins when the achievement of the performance conditions is probable.  The fair value of restricted common stock and restricted stock unit awards are based on the closing market value of our common stock as reported on the New York Stock Exchange on the grant date, reduced by the present value of the expected dividend stream during the vesting period for restricted stock unit awards using a risk-free interest rate.

(r)    Segment Reporting

As a community-oriented financial institution, substantially all of our operations involve the delivery of loan and deposit products to customers. We make operating decisions and assess performance based on an ongoing review of these community banking operations, which constitute our only operating segment for financial reporting purposes.

(s)    Impact of Recent Accounting Standards and Interpretations

In June 2014, the Financial Accounting Standard Board, or FASB, issued Accounting Standards Update, or ASU, 2014-12, “Compensation — Stock Compensation (Topic 718) — Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” which applies to all entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period.  The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  As such, the performance target should not be reflected in estimating the grant date fair value of the award.  The amendments in ASU 2014-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and may be applied either prospectively to all awards granted or modified after the effective date, or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.  Early adoption is permitted. The terms of our share-based payment awards currently do not provide that a performance target that affects vesting could be achieved after the requisite service period. Therefore, this guidance is not expected to have an impact on our financial condition or results of operations.

In April 2015, the FASB issued ASU 2015-03, “Interest — Imputation of Interest (Subtopic 835-30) — Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. Therefore this guidance will not have an impact on our financial condition or results of operations. The amendments in ASU 2015-03 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, and must be adopted on a retrospective basis. Early adoption is permitted for financial statements that have not been previously issued. At December 31, 2015 and 2014, our debt issuance costs are presented as a direct reduction from the carrying amount of that debt liability in the consolidated statements of financial condition.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(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.

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 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. For additional information regarding our preferred stock, see Note 9.

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 the FRB, the Federal Deposit Insurance Corporation and the New York State Department of Financial Services (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. 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.

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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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(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 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 (1)	$	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

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

	At December 31, 2014
(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	$	266,946		$	3,608		$	(1,556	)	$	268,998
Non-GSE issuance REMICs and CMOs	5,071			34			(1		)	5,104
GSE pass-through certificates	12,919			640			(2		)	13,557
Total residential mortgage-backed securities	284,936			4,282			(1,559		)	287,659
Obligations of GSEs	98,680			—			(1,982		)	96,698
Fannie Mae stock	15			—			(13		)	2
Total securities available-for-sale	$	383,631		$	4,282		$	(3,554	)	$	384,359
Held-to-maturity:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	1,575,402		$	14,536		$	(14,041	)	$	1,575,897
Non-GSE issuance REMICs and CMOs	2,482			31			(7		)	2,506
GSE pass-through certificates	281,685			2,442			(3,877		)	280,250
Total residential mortgage-backed securities	1,859,569			17,009			(17,925		)	1,858,653
Multi-family mortgage-backed securities:
GSE issuance REMICs	154,381			554			(590		)	154,345
Obligations of GSEs	119,336			42			(1,523		)	117,855
Other	518			—			—			518
Total securities held-to-maturity	$	2,133,804		$	17,605		$	(20,038	)	$	2,131,371

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 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	)

	At December 31, 2014
	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	$	20,587		$	(159	)	$	75,444		$	(1,397	)	$	96,031		$	(1,556	)
Non-GSE issuance REMICs and CMOs	—			—			96			(1		)	96			(1		)
GSE pass-through certificates	53			(1		)	64			(1		)	117			(2		)
Obligations of GSEs	24,586			(395		)	72,112			(1,587		)	96,698			(1,982		)
Fannie Mae stock	—			—			2			(13		)	2			(13		)
Total temporarily impaired securities available-for-sale	$	45,226		$	(555	)	$	147,718		$	(2,999	)	$	192,944		$	(3,554	)
Held-to-maturity:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	121,861		$	(302	)	$	500,348		$	(13,739	)	$	622,209		$	(14,041	)
Non-GSE issuance REMICs and CMOs	—			—			294			(7		)	294			(7		)
GSE pass-through certificates	—			—			164,453			(3,877		)	164,453			(3,877		)
Multi-family mortgage backed securities:
GSE issuance REMICs	100,355			(590		)	—			—			100,355			(590		)
Obligations of GSEs	—			—			79,413			(1,523		)	79,413			(1,523		)
Total temporarily impaired securities held-to-maturity	$	222,216		$	(892	)	$	744,508		$	(19,146	)	$	966,724		$	(20,038	)

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Our securities portfolio is comprised primarily of fixed rate mortgage-backed securities guaranteed by a GSE as issuer.  Our non-GSE issuance securities are primarily investment grade securities and have performed similarly to our GSE issuance securities.  Credit quality concerns have not impacted the performance of our non-GSE securities or our ability to obtain reliable prices.

We held 129 securities which had an unrealized loss at December 31, 2015 and 80 which had an unrealized loss at December 31, 2014.  At December 31, 2015 and 2014, substantially all of the securities in an unrealized loss position had a fixed interest rate and the cause of the temporary impairment was directly related to changes in interest rates.  We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience.  None of the unrealized losses are related to credit losses.  Therefore, at December 31, 2015 and 2014, 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.

Proceeds from sales of securities from the available-for-sale portfolio totaled $19.0 million, resulting in gross realized gains of $72,000, during the year ended December 31, 2015, $14.4 million, resulting in gross realized gains of $141,000, during the year ended December 31, 2014 and $41.6 million, resulting in gross realized gains of $2.1 million, during the year ended December 31, 2013.

At December 31, 2015, available-for-sale debt securities, excluding mortgage-backed securities, had an amortized cost of $73.7 million, an estimated fair value of $71.9 million and contractual maturities in 2021 and 2022.  At December 31, 2015, held-to-maturity debt securities, excluding mortgage-backed securities, had an amortized cost of $239.4 million, an estimated fair value of $237.6 million and contractual maturities between 2021 and 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 December 31, 2015, the amortized cost of callable securities in our portfolio totaled $252.7 million, of which $236.3 million are callable within one year and at various times thereafter.

The balance of accrued interest receivable for securities totaled $7.4 million at December 31, 2015 and $6.7 million at December 31, 2014.

(4)    Loans Held-for-Sale

Non-performing loans held-for-sale, net of valuation allowances, included in loans held-for-sale, net, totaled $1.6 million at December 31, 2015 and $153,000 at December 31, 2014.  Non-performing loans held-for-sale consisted primarily of multi-family mortgage loans at December 31, 2015. All of the non-performing loans held-for-sale at December 31, 2014 were multi-family mortgage loans.

We sold certain delinquent and non-performing mortgage loans, primarily multi-family and commercial real estate loans, totaling $7.5 million, net of recoveries of $1.1 million during the year ended December 31, 2015, $4.9 million, net of charge-offs of $517,000, during the year ended December 31, 2014 and $19.4 million, net of charge-offs of $5.2 million, during the year ended December 31, 2013.In addition, during the 2014 third quarter we sold a pool of non-performing residential mortgage loans, substantially all of which were 90 days or more past due, which were designated as held-for-sale at June 30, 2014. For additional information on this pool of loans, see Note 5.

Net loss on sales of non-performing loans held-for-sale totaled $23,000 for the year ended December 31, 2015 and $892,000 for the year ended December 31, 2014. Net gain on sales of non-performing loans held-for-sale totaled $122,000 for the year ended December 31, 2013. There were no lower of cost or market write-downs on non-performing loans held-for-sale for the year ended December 31, 2015 and December 31, 2014. We recorded net lower of cost or market write-downs on non-performing loans held-for-sale totaling $87,000 for the year ended December 31, 2013.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(5)    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 December 31, 2015
	Past Due
	30-59		60-89		90 Days		Total
(In Thousands)	Days		Days		or More		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

A - 21

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

	At December 31, 2014
	Past Due
	30-59		60-89		90 Days		Total
(In Thousands)	Days		Days		or More		Past Due		Current		Total
Accruing loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	13,943	$	7,332	$	—	$	21,275	$	804,880	$	826,155
Full documentation amortizing	25,878		7,611		144		33,633		4,948,391		4,982,024
Reduced documentation interest-only	18,490		2,584		—		21,074		547,350		568,424
Reduced documentation amortizing	11,024		1,648		—		12,672		384,250		396,922
Total residential	69,335		19,175		144		88,654		6,684,871		6,773,525
Multi-family	3,646		2,222		1,790		7,658		3,893,539		3,901,197
Commercial real estate	1,686		493		2,159		4,338		863,615		867,953
Total mortgage loans	74,667		21,890		4,093		100,650		11,442,025		11,542,675
Consumer and other loans (gross):
Home equity and other consumer	2,430		962		—		3,392		175,121		178,513
Commercial and industrial	—		—		—		—		64,815		64,815
Total consumer and other loans	2,430		962		—		3,392		239,936		243,328
Total accruing loans	$	77,097	$	22,852	$	4,093	$	104,042	$	11,681,961	$	11,786,003
Non-accrual loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	2,371	$	358	$	11,502	$	14,231	$	13,796	$	28,027
Full documentation amortizing	204		238		14,211		14,653		7,016		21,669
Reduced documentation interest-only	820		453		16,289		17,562		25,022		42,584
Reduced documentation amortizing	596		1,066		2,843		4,505		3,226		7,731
Total residential	3,991		2,115		44,845		50,951		49,060		100,011
Multi-family	648		346		7,127		8,121		3,735		11,856
Commercial real estate	790		—		729		1,519		4,293		5,812
Total mortgage loans	5,429		2,461		52,701		60,591		57,088		117,679
Consumer and other loans (gross):
Home equity and other consumer	—		—		6,040		6,040		—		6,040
Commercial and industrial	—		—		—		—		—		—
Total consumer and other loans	—		—		6,040		6,040		—		6,040
Total non-accrual loans	$	5,429	$	2,461	$	58,741	$	66,631	$	57,088	$	123,719
Total loans:
Mortgage loans (gross):
Residential:
Full documentation interest-only	$	16,314	$	7,690	$	11,502	$	35,506	$	818,676	$	854,182
Full documentation amortizing	26,082		7,849		14,355		48,286		4,955,407		5,003,693
Reduced documentation interest-only	19,310		3,037		16,289		38,636		572,372		611,008
Reduced documentation amortizing	11,620		2,714		2,843		17,177		387,476		404,653
Total residential	73,326		21,290		44,989		139,605		6,733,931		6,873,536
Multi-family	4,294		2,568		8,917		15,779		3,897,274		3,913,053
Commercial real estate	2,476		493		2,888		5,857		867,908		873,765
Total mortgage loans	80,096		24,351		56,794		161,241		11,499,113		11,660,354
Consumer and other loans (gross):
Home equity and other consumer	2,430		962		6,040		9,432		175,121		184,553
Commercial and industrial	—		—		—		—		64,815		64,815
Total consumer and other loans	2,430		962		6,040		9,432		239,936		249,368
Total loans	$	82,526	$	25,313	$	62,834	$	170,673	$	11,739,049	$	11,909,722
Net unamortized premiums and
deferred loan origination costs											47,726
Loans receivable											11,957,448
Allowance for loan losses											(111,600		)
Loans receivable, net											$	11,845,848

A - 22

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Our residential mortgage loans consist primarily of interest-only and amortizing hybrid ARM loans.  We offer amortizing hybrid ARM loans which initially have a fixed rate for five, seven or ten years and convert into one year ARM loans at the end of the initial fixed rate period and require the borrower to make principal and interest payments during the entire loan term.  Prior to 2014, we also offered amortizing hybrid ARM loans with an initial fixed rate period of three years. Prior to the 2010 fourth quarter, we offered interest-only hybrid ARM loans, which have an initial fixed rate for five or seven years and convert into one year interest-only ARM loans at the end of the initial fixed rate period.  Our interest-only hybrid ARM loans 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.  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.  Our hybrid ARM loans may be offered with an initial interest rate which is less than the fully indexed rate for the loan at the time of origination, referred to as a discounted rate.  We determine the initial interest rate in accordance with market and competitive factors giving consideration to the spread over our funding sources in conjunction with our overall interest rate risk management strategies.  Residential interest-only hybrid ARM loans originated prior to 2007 were underwritten at the initial note rate which may have been a discounted rate.  Such loans totaled $388.0 million at December 31, 2015 and $1.06 billion at December 31, 2014.  We do not originate negative amortization loans, payment option loans or other loans with short-term interest-only periods.

Within our residential mortgage loan portfolio we have reduced documentation loan products, which totaled $885.2 million at December 31, 2015 and $1.02 billion at December 31, 2014.  Reduced documentation loans 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, which totaled $135.7 million at December 31, 2015 and $148.9 million at December 31, 2014.  SIFA and SISA loans require a prospective borrower to complete a standard mortgage loan application.  Reduced documentation loans require the receipt of an appraisal of the real estate used as collateral for the mortgage loan and a credit report on the prospective borrower.  In addition, SIFA loans require the verification of a potential borrower’s asset information on the loan application, but not the income information provided.  During the 2007 fourth quarter, we stopped offering reduced documentation loans.

Included in loans receivable are loans in the process of foreclosure collateralized by residential real estate property with a recorded investment of $51.0 million at December 31, 2015 and $24.7 million at December 31, 2014. At June 30, 2014, we designated a pool of non-performing residential mortgage loans, substantially all of which were 90 days or more past due, as held-for-sale. In connection with the designation of the pool of loans as held-for-sale, we recorded a loan charge-off of $8.7 million against the allowance for loan losses during the 2014 second quarter to write down the pool of loans from its immediately previous aggregate recorded investment of $195.0 million to its estimated fair value at the time of $186.3 million. As a result of our quarterly review of the adequacy of the allowance for loan losses as of June 30, 2014, $5.7 million of reserves previously attributable to this pool of loans was deemed no longer required and was credited to the provision for loan losses as a reserve release in the 2014 second quarter. On July 31, 2014, we completed a bulk sale transaction of substantially all of the non-performing residential mortgage loans held-for-sale at terms approximating their carrying value at June 30, 2014. Total loans sold in that transaction had a carrying value of $173.7 million, reflecting the previous write down to the estimated fair value through June 30, 2014. The majority of the remaining loans from the pool designated as held-for-sale as of June 30, 2014 were either foreclosed upon and transferred to REO or were satisfied via short sales or payoffs during the 2014 third quarter with no material impact on our financial condition or results of operations. On September 12, 2014, we completed a second sale transaction, with the same counterparty as the bulk sale transaction, in which we sold all of the remaining non-performing residential mortgage loans held-for-sale with a carrying value of $4.0 million, reflecting the previous write down to the estimated fair value through June 30, 2014, and recorded a loss on the sale of such loans in the 2014 third quarter of $920,000. In 2015, no loans were sold in a bulk sale transaction.

Accrued interest receivable on all loans totaled $27.6 million at December 31, 2015 and $29.9 million at December 31, 2014. If all non-accrual loans at December 31, 2015, 2014 and 2013 had been performing in accordance with their original terms, we would have recorded interest income, with respect to such loans, of $5.4 million for the year ended December 31, 2015, $5.6 million for the year ended December 31, 2014 and $15.6 million for the year ended December 31, 2013.  This compares to actual payments recorded as interest income, with respect to such loans, of $3.4 million for the year ended December 31, 2015, $3.6 million for the year ended December 31, 2014 and $6.2 million for the year ended December 31, 2013.

A - 23

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table sets forth the changes in our allowance for loan losses by loan receivable segment for the years indicated.

		Mortgage Loans										Consumer and Other Loans
(In Thousands)	Residential				Multi- Family			Commercial Real Estate								Total
Balance at December 31, 2012		$	89,267		$	35,514			$	14,404			$	6,316		$	145,501
Provision charged to operations		9,368			4,684				1,945				3,604			19,601
Charge-offs		(26,644		)	(4,732		)		(3,748		)		(1,916		)	(37,040		)
Recoveries		8,346			1,237				535				820			10,938
Balance at December 31, 2013		80,337			36,703				13,136				8,824			139,000
Provision (credited) charged to operations		(23,464		)	5,337				6,949				1,709			(9,469		)
Charge-offs		(19,868		)	(4,365		)		(3,283		)		(2,073		)	(29,589		)
Recoveries		9,278			1,575				440				365			11,658
Balance at December 31, 2014		46,283			39,250				17,242				8,825			111,600
Provision charged (credited) to operations		1,520			(4,780		)		(6,810		)		(2,002		)	(12,072		)
Charge-offs		(6,149		)	(907		)		(302		)		(912		)	(8,270		)
Recoveries		3,297			1,981				1,087				377			6,742
Balance at December 31, 2015		$	44,951		$	35,544			$	11,217			$	6,288		$	98,000

The following table sets forth the balances of our residential interest-only mortgage loans at December 31, 2015 by the year in which such loans are scheduled to enter their amortization period.

(In Thousands)	Recorded Investment
Amortization scheduled to begin in:
2016	$	324,772
2017	344,356
2018	42,549
2019 and thereafter	23,842
Total	$	735,519

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 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
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

		At December 31, 2014
		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
Performing		$	826,155	$	4,981,880		$	568,424		$	396,922		$	178,513		$	64,815
Non-performing:
Current or past due less than 90 days		16,525		7,458			26,295			4,888			—			—
Past due 90 days or more		11,502		14,355			16,289			2,843			6,040			—
Total		$	854,182	$	5,003,693		$	611,008		$	404,653		$	184,553		$	64,815

A - 24

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 December 31,
		2015						2014
(In Thousands)	Multi-Family			Commercial Real Estate			Multi-Family			Commercial Real Estate
Not criticized		$	3,981,050		$	769,029		$	3,850,068		$	817,404
Criticized:
Special mention		14,931			20,441			30,975			22,584
Substandard		28,124			30,044			31,264			32,664
Doubtful		—			—			746			1,113
Total		$	4,024,105		$	819,514		$	3,913,053		$	873,765

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 December 31, 2015
	Mortgage Loans								Consumer and Other Loans
(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

	At December 31, 2014
	Mortgage Loans								Consumer and Other Loans
(In Thousands)	Residential		Multi-Family			Commercial Real Estate						Total
Loans:
Individually evaluated for impairment	$	181,402		$	42,611		$	19,270		$	5,153	$	248,436
Collectively evaluated for impairment	6,692,134			3,870,442			854,495			244,215		11,661,286
Total loans	$	6,873,536		$	3,913,053		$	873,765		$	249,368	$	11,909,722
Allowance for loan losses:
Individually evaluated for impairment	$	10,304		$	3,172		$	2,446		$	3,810	$	19,732
Collectively evaluated for impairment	35,979			36,078			14,796			5,015		91,868
Total allowance for loan losses	$	46,283		$	39,250		$	17,242		$	8,825	$	111,600

A - 25

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

	At December 31,
	2015											2014
(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	$	37,454		$	30,631	$	(4,051	)		$	26,580	$	55,352		$	46,331	$	(3,391	)		$	42,940
Full documentation amortizing	69,242			63,223		(2,534		)		60,689		43,044			39,994		(1,425		)		38,569
Reduced documentation interest-only	55,939			46,540		(4,253		)		42,287		90,171			76,960		(4,661		)		72,299
Reduced documentation amortizing	57,955			52,520		(2,310		)		50,210		19,463			18,117		(827		)		17,290
Multi-family	8,029			7,950		(456		)		7,494		34,972			28,109		(3,172		)		24,937
Commercial real estate	6,651			6,723		(788		)		5,935		24,991			19,270		(2,446		)		16,824
Consumer and other loans:
Home equity lines of credit	5,295			4,968		(421		)		4,547		5,436			5,153		(3,810		)		1,343
Without an allowance recorded:
Mortgage loans:
Multi-family	19,523			16,693		—				16,693		16,308			14,502		—				14,502
Commercial real estate	11,104			8,270		—				8,270		—			—		—				—
Total impaired loans	$	271,192		$	237,518	$	(14,813	)		$	222,705	$	289,737		$	248,436	$	(19,732	)		$	228,704

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 years indicated.

		For the Year Ended December 31,
		2015									2014									2013
(In Thousands)	Average Recorded Investment			Interest Income Recognized			Cash Basis Interest Income			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		$	39,506		$	860		$	877		$	84,264		$	1,860		$	1,920		$	106,720		$	2,938		$	3,068
Full documentation amortizing		52,426			1,893			1,920			38,340			1,491			1,498			30,790			948			974
Reduced documentation interest-only		66,321			1,910			1,923			112,172			3,646			3,671			145,490			4,179			4,371
Reduced documentation amortizing		30,310			1,927			1,936			22,137			655			653			25,460			696			729
Multi-family		14,390			415			417			30,291			1,320			1,339			19,130			737			789
Commercial real estate		11,875			333			348			17,341			1,065			1,154			8,112			367			377
Consumer and other loans:
Home equity lines of credit		5,585			48			54			5,202			45			54			—			—			—
Without an allowance recorded:
Mortgage loans:
Residential:
Full documentation interest-only		—			—			—			—			—			—			11,547			—			—
Full documentation amortizing		—			—			—			365			—			—			3,517			—			—
Reduced documentation interest-only		—			—			—			—			—			—			1,669			—			—
Multi-family		16,935			857			862			17,225			632			633			33,193			1,606			1,671
Commercial real estate		5,632			522			528			2,853			—			—			10,947			745			698
Total impaired loans		$	242,980		$	8,765		$	8,865		$	330,190		$	10,714		$	10,922		$	396,575		$	12,216		$	12,677

A - 26

ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table sets forth information about our mortgage loans receivable by segment and class at December 31, 2015, 2014 and 2013 which were modified in a TDR during the years indicated.

		Modifications During the Year Ended December 31,
		2015								2014								2013
(Dollars In Thousands)	Number of Loans		Pre- Modification Recorded Investment			Recorded Investment at December 31, 2015			Number of Loans		Pre- Modification Recorded Investment			Recorded Investment at December 31, 2014			Number of Loans		Pre- Modification Recorded Investment			Recorded Investment at December 31, 2013
Residential:
Full documentation interest-only		12		$	4,620		$	4,496		21		$	9,244		$	8,726		26		$	6,760		$	6,730
Full documentation amortizing		19		5,063			4,894			4		889			812			11		3,753			3,734
Reduced documentation interest-only		10		3,431			3,429			19		6,819			6,774			37		12,199			12,227
Reduced documentation amortizing		7		2,911			2,902			5		809			745			11		3,404			3,325
Multi-family		—		—			—			4		2,501			1,981			8		6,751			5,888
Commercial real estate		2		2,902			2,835			3		2,482			2,433			7		10,232			9,104
Total		50		$	18,927		$	18,556		56		$	22,744		$	21,471		100		$	43,099		$	41,008

The following table sets forth information about our mortgage loans receivable by segment and class at December 31, 2015, 2014 and 2013 which were modified in a TDR during the years ended December 31, 2015, 2014 and 2013 and had a payment default subsequent to the modification during the years indicated.

		During the Year Ended December 31,
		2015					2014					2013
(Dollars In Thousands)	Number of Loans		Recorded Investment at December 31, 2015			Number of Loans		Recorded Investment at December 31, 2014			Number of Loans		Recorded Investment at December 31, 2013
Residential:
Full documentation interest-only		6		$	2,240		1		$	621		11		$	2,191
Full documentation amortizing		6		1,749			2		319			4		1,334
Reduced documentation interest-only		2		380			3		1,123			17		4,190
Reduced documentation amortizing		2		606			—		—			3		788
Multi-family		—		—			3		1,400			2		1,018
Total		16		$	4,975		9		$	3,463		37		$	9,521

The following table details the percentage of our total residential mortgage loans at December 31, 2015 by state where we have a concentration of greater than 5% of our total residential mortgage loans or total non-performing residential mortgage loans.

State	Percent of Total Residential Loans			Percent of Total Non-Performing Residential Loans
New York		30.2	%		10.7	%
Connecticut		9.8			9.8
Massachusetts		8.4			3.9
Illinois		8.2			12.4
Virginia		7.7			10.5
New Jersey		7.1			17.1
Maryland		6.5			14.9
California		5.4			9.2

At December 31, 2015, 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, which includes New York, New Jersey and Connecticut.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(6)    Mortgage Servicing Rights

We own rights to service mortgage loans for investors with aggregate unpaid principal balances of $1.40 billion at December 31, 2015 and $1.45 billion at December 31, 2014, which are not reflected in the accompanying consolidated statements of financial condition.  As described in Note 1, we outsource our residential mortgage loan servicing to a third party under a sub-servicing agreement.

The estimated fair value of our MSR was $11.0 million at December 31, 2015 and $11.4 million at December 31, 2014.  The fair value of MSR is highly sensitive to changes in assumptions.  See Note 18 for a description of the assumptions used to estimate the fair value of MSR.

The following table summarizes MSR activity for the years indicated.

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Carrying amount before valuation allowance at beginning of year	$	14,136		$	15,595		$	15,143
Additions – servicing obligations that result from transfers of financial assets	1,352			1,123			3,681
Amortization	(2,307		)	(2,582		)	(3,229		)
Carrying amount before valuation allowance at end of year	13,181			14,136			15,595
Valuation allowance at beginning of year	(2,735		)	(2,795		)	(8,196		)
Recovery of valuation allowance	568			60			5,401
Valuation allowance at end of year	(2,167		)	(2,735		)	(2,795		)
Net carrying amount at end of year	$	11,014		$	11,401		$	12,800

The following table summarizes mortgage banking income, net, for the years indicated.

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Loan servicing fees	$	3,940		$	4,085		$	4,189
Net gain on sales of loans	2,021			1,763			6,880
Amortization of MSR	(2,307		)	(2,582		)	(3,229		)
Recovery of valuation allowance on MSR	568			60			5,401
Total mortgage banking income, net	$	4,222		$	3,326		$	13,241

At December 31, 2015, estimated future MSR amortization through 2020 was as follows: $1.8 million for 2016, $1.6 million for 2017, $1.4 million for 2018, $1.2 million for 2019 and $1.1 million for 2020.  Actual results will vary depending upon the level of repayments on the loans currently serviced.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(7)    Deposits

The following table summarizes deposits at the dates indicated.

	At December 31,
				2015							2014
(Dollars in Thousands)	Weighted Average Rate			Balance		Percent of Total		Weighted Average Rate			Balance		Percent of Total
Core deposits:
NOW		0.06	%	$	1,415,430	15.54	%		0.06	%	$	1,331,345	14.01	%
Non-interest bearing NOW and demand deposit		—		998,393		10.96			—		867,432		9.13
Money market		0.26		2,560,204		28.12			0.24		2,373,484		24.96
Savings		0.05		2,137,818		23.48			0.05		2,237,142		23.54
Total core deposits		0.12		7,111,845		78.10			0.11		6,809,403		71.64
Certificates of deposit		1.16		1,994,182		21.90			1.47		2,695,506		28.36
Total deposits		0.35	%	$	9,106,027	100.00	%		0.50	%	$	9,504,909	100.00	%

The aggregate amount of certificates of deposit with balances equal to or greater than $100,000 was $590.6 million at December 31, 2015 and $871.2 million at December 31, 2014.  There were no brokered certificates of deposit at December 31, 2015 and 2014.

The following table details the scheduled maturities of our certificates of deposit at December 31, 2015.

Year	Weighted Average Rate				Balance		Percent of Total
				(In Thousands)
2016		1.06	%		$	926,241	46.45	%
2017		0.94			392,744		19.69
2018		1.08			185,089		9.28
2019		1.46			183,596		9.21
2020		1.60			305,363		15.31
2021 and thereafter		1.70			1,149		0.06
Total		1.16	%		$	1,994,182	100.00	%

The following table summarizes interest expense on deposits for the years indicated.

	For the Year Ended December 31,
(In Thousands)	2015		2014		2013
Interest-bearing NOW	$	778	$	706	$	691
Money market	6,496		5,527		5,646
Savings	1,093		1,182		1,329
Certificates of deposit	28,976		43,940		54,951
Total interest expense on deposits	$	37,343	$	51,355	$	62,617

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(8)    Borrowings

The following table summarizes our borrowings at the dates indicated.

	At December 31,
	2015					2014
(Dollars in Thousands)	Amount		Weighted Average Rate			Amount		Weighted Average Rate
Federal funds purchased	$	435,000		0.57	%	$	455,000		0.31	%
Reverse repurchase agreements	1,100,000			3.62		1,100,000			3.62
FHLB-NY advances	2,180,000			1.86		2,384,000			1.72
Other borrowings, net	249,222			5.00		248,691			5.00
Total borrowings, net	$	3,964,222		2.40	%	$	4,187,691		2.26	%

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 $506.2 million at December 31, 2015. 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 December 31, 2015, we had pledged as collateral with the Federal Reserve Bank of New York securities with an amortized cost of $150.8 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 2015 and 2014, we did not utilize this source.

Federal Funds Purchased

The outstanding federal funds purchased at December 31, 2015 and 2014 were due overnight. During the year ended December 31, 2015, federal funds purchased averaged $481.9 million with a weighted average interest rate of 0.33% and the maximum amount outstanding at any month end was $660.0 million. During the year ended December 31, 2014, federal funds purchased averaged $377.1 million with a weighted average interest rate of 0.30% and the maximum outstanding at any month end was $455.0 million.  During the year ended December 31, 2013, federal funds purchased averaged $209.4 million with a weighted average interest rate of 0.28% and the maximum outstanding at any month end was $335.0 million.

Reverse Repurchase Agreements

The outstanding reverse repurchase agreements at December 31, 2015 and 2014 were fixed rate, had original contractual maturities ranging from four to seven years and were collateralized by GSE securities, of which 83% were residential mortgage-backed securities and 17% were obligations of GSEs. Securities collateralizing these agreements had an amortized cost of $1.21 billion and an estimated fair value of $1.20 billion, including accrued interest, at December 31, 2015 and an amortized cost of $1.26 billion and an estimated fair value of $1.26 billion, including accrued interest, at December 31, 2014 and 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, criteria for eligible counterparties has been established and excess collateral pledged is monitored to minimize our exposure.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table summarizes information relating to reverse repurchase agreements.

	At or For the Year Ended December 31,
(Dollars in Thousands)	2015			2014			2013
Average balance during the year	$	1,100,000		$	1,100,000		$	1,100,000
Maximum balance at any month end during the year	1,100,000			1,100,000			1,100,000
Balance outstanding at end of year	1,100,000			1,100,000			1,100,000
Weighted average interest rate during the year	3.62		%	3.82		%	4.06		%
Weighted average interest rate at end of year	3.62			3.62			3.87

The following table details the contractual maturities of our reverse repurchase agreements at December 31, 2015.

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.

FHLB-NY Advances

Pursuant to a blanket collateral agreement with the FHLB-NY, advances are secured by all of our stock in the FHLB-NY, certain qualifying mortgage loans and mortgage-backed and other securities not otherwise pledged.

The following table summarizes information relating to FHLB-NY advances.

	At or For the Year Ended December 31,
(Dollars in Thousands)	2015			2014			2013
Average balance during the year	$	2,250,592		$	2,332,718		$	2,512,425
Maximum balance at any month end during the year	2,515,000			2,617,000			2,881,000
Balance outstanding at end of year	2,180,000			2,384,000			2,454,000
Weighted average interest rate during the year	1.79		%	1.78		%	2.00		%
Weighted average interest rate at end of year	1.86			1.72			1.79

The following table details the contractual maturities of FHLB-NY advances at December 31, 2015.

Year	Amount
	(In Thousands)
2016		$	1,330,000	(1	)
2020		850,000		(2	)
Total		$	2,180,000

(1) Includes $210.0 million of borrowings due overnight, $220.0 million of borrowings due in less than 30 days, $225.0 million of borrowings due after 30 to 90 days and $675.0 million of borrowings due after 90 days.

(2) Callable in 2017.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Other Borrowings

On June 19, 2012, we completed the sale of $250.0 million aggregate principal amount of 5.00% senior unsecured notes due 2017, or 5.00% Senior Notes.  The notes are registered with the Securities and Exchange Commission, or SEC, bear a fixed rate of interest of 5.00% and mature on June 19, 2017.  We may redeem all or part of the 5.00% Senior Notes at any time, subject to a 30 day minimum notice requirement, at par together with accrued and unpaid interest to the redemption date.  The carrying amount of the notes was $249.2 million at December 31, 2015 and $248.7 million at December 31, 2014.  The terms of these notes subject us to certain debt covenants.We were in compliance with such covenants at December 31, 2015.

Our former finance subsidiary, Astoria Capital Trust I, was formed for the purpose of issuing $125.0 million aggregate liquidation amount of 9.75% Capital Securities due November 1, 2029, or Capital Securities, and $3.9 million of common securities (which were the only voting securities of Astoria Capital Trust I and were owned by Astoria Financial Corporation) and used the proceeds to acquire 9.75% Junior Subordinated Debentures, due November 1, 2029, issued by Astoria Financial Corporation totaling $128.9 million.  The Junior Subordinated Debentures were the sole assets of Astoria Capital Trust I.  The Junior Subordinated Debentures were prepayable, in whole or in part, at our option at declining premiums to November 1, 2019, after which the Junior Subordinated Debentures were prepayable at par value.  The Capital Securities had the same prepayment provisions as the Junior Subordinated Debentures.  On May 10, 2013, we prepaid in whole our Junior Subordinated Debentures, which were included in other borrowings, net, pursuant to the optional prepayment provisions of the indenture at a prepayment price of 103.413% of the $128.9 million aggregate principal amount, plus accrued and unpaid interest to, but not including, the date of repayment.  As a result of the prepayment in whole of the Junior Subordinated Debentures, Astoria Capital Trust I simultaneously applied the proceeds of such prepayment to redeem its Capital Securities, as well as the common securities owned by Astoria Financial Corporation.  The prepayment of the Junior Subordinated Debentures resulted in a $4.3 million prepayment charge in the 2013 second quarter for the early extinguishment of this debt.

The following table summarizes interest expense on borrowings for the years indicated.

	For the Year Ended December 31,
(In Thousands)	2015		2014		2013
Federal funds purchased	$	1,590	$	1,139	$	587
Reverse repurchase agreements	40,373		42,626		45,272
FHLB-NY advances	40,790		41,911		50,654
Other borrowings	13,031		13,031		17,398
Total interest expense on borrowings	$	95,784	$	98,707	$	113,911

(9)    Stockholders’ Equity

We have an automatic shelf registration statement on Form S-3 on file with the SEC, 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, debt securities, warrants to purchase common stock, preferred stock or debt securities 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. 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.

On March 19, 2013, in a public offering, we sold 5,400,000 depositary shares, each representing a 1/40th interest in a share of our 6.50% Non-Cumulative Perpetual Preferred Stock, Series C, $1.00 par value per share, $1,000 liquidation preference per share (equivalent to $25 per depositary share), or Series C Preferred Stock.  We issued 135,000 shares of the Series C Preferred Stock in connection with the sale of the depositary shares.  The aggregate proceeds from the offering, net of underwriting discounts and other issuance costs, were approximately $129.8 million.

The Series C Preferred Stock, and corresponding depositary shares, may be redeemed at our option, in whole or in part, on April 15, 2018, or on any dividend payment date occurring thereafter, at a redemption price of $1,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends (without accumulation of any undeclared dividends). The Series C

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Preferred Stock may also be redeemed in whole, but not in part, at any time upon the occurrence of a “regulatory capital treatment event,” as defined in the certificate of designations included in the registration statement on Form 8-A filed with the SEC on March 19, 2013.  The holders of the Series C Preferred Stock, and the corresponding depositary shares, do not have the right to require the redemption or repurchase of the Series C Preferred Stock.

Dividends are payable on the Series C Preferred Stock when, as and if declared by our Board of Directors, on a non-cumulative basis quarterly in arrears on January 15, April 15, July 15 and October 15 of each year at an annual rate of 6.50% on the liquidation preference of $1,000 per share.  No dividend shall be declared, paid, or set aside for payment on our common stock unless the full dividends for the most recently completed dividend period have been declared and paid on our Series C Preferred Stock.

On January 7, 2014, we adopted the Astoria Financial Corporation Dividend Reinvestment and Stock Purchase Plan, or the Stock Purchase Plan, and terminated the previously existing plan.  The Stock Purchase Plan 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. We have registered 1,500,000 shares of our common stock under the Securities Act of 1933, as amended, for offer and sale from time to time pursuant to the Stock Purchase Plan. During the year ended December 31, 2015, 482,460 shares of our common stock were purchased pursuant to the Stock Purchase Plan directly from us from treasury shares for net proceeds totaling $6.2 million.

On April 18, 2007, our Board of Directors approved our twelfth stock repurchase plan authorizing the purchase of 10,000,000 shares, or approximately 10% of our common stock then outstanding in open-market or privately negotiated transactions.  At December 31, 2015, 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. In December 2015, to facilitate the withholding of individual income taxes related to the vesting of restricted common stock awards in that month, a portion of the vested restricted stock awards was transferred by the recipients back to us. This transaction is presented in our Consolidated Statements of Changes in Stockholders' Equity as a repurchase of common stock, which increases treasury stock.

We are subject to the laws of the State of Delaware which generally limit dividends on capital stock to an amount equal to the excess of our net assets (the amount by which total assets exceed total liabilities) over our statutory capital, or if there is no such excess, to our net profits for the current and/or immediately preceding fiscal year.  We are also required to seek the approval of the FRB prior to declaring a dividend.  Our ability to pay dividends, service our debt obligations and repurchase our common stock is dependent primarily upon receipt of dividend payments from Astoria Bank.  Our primary banking regulator, the Office of the Comptroller of the Currency, or OCC, regulates all capital distributions by Astoria Bank directly or indirectly to us, including dividend payments.  Astoria Bank must file an application to receive approval from the OCC for a proposed capital distribution if it does not qualify for expedited treatment under the OCC rules and regulations orif the total amount of all capital distributions (including each proposed capital distribution) for the applicable calendar year exceeds net income for that year-to-date plus the retained net income for the preceding two years.  During 2015, Astoria Bank was required to file such applications, and such applications were approved by the OCC.  Astoria Bank may not pay dividends to us if: (1) after paying those dividends, it would fail to meet applicable regulatory capital requirements; (2) the payment would violate any statute, regulation, regulatory agreement or condition; or (3) after making such distribution, the institution would become “undercapitalized” (as such term is used in the Federal Deposit Insurance Act).  Payment of dividends by Astoria Bank also may be restricted at any time at the discretion of the OCC if it deems the payment to constitute an unsafe and unsound banking practice.  Astoria Bank must also provide notice to the FRB at least 30 days prior to declaring a dividend.  Astoria Bank paid dividends to Astoria Financial Corporation totaling $63.4 million during 2015. In addition, pursuant to the terms of the Merger Agreement, we may not pay quarterly cash dividends in excess of $0.04 per share on our common stock without the consent of NYCB. NYCB has agreed not to unreasonably withhold any such consent.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(10)    Commitments and Contingencies

Lease Commitments

At December 31, 2015, we were obligated through 2035 under various non-cancelable operating leases on buildings and land used for office space and banking purposes.  These operating leases contain escalation clauses which provide for increased rental expense, based primarily on increases in real estate taxes and cost-of-living indices.  Rent expense under the operating leases totaled $12.9 million for the year ended December 31, 2015, $12.5 million for the year ended December 31, 2014 and $13.5 million for the year ended December 31, 2013.

The minimum rental payments due under the terms of the non-cancelable operating leases at December 31, 2015, which have not been reduced by minimum sublease rentals of $2.3 million due in the future under non-cancelable subleases, are summarized below.

Year		Amount
	(In Thousands)
2016		$	12,704
2017		11,256
2018		9,924
2019		9,045
2020		8,458
2021 and thereafter		30,695
Total		$	82,082

Outstanding Commitments

The following table summarizes our outstanding commitments at the dates indicated.

	At December 31,
(In Thousands)	2015		2014
Mortgage loans:
Commitments to extend credit – adjustable rate	$	227,966	$	289,086
Commitments to extend credit – fixed rate (1)	131,641		74,157
Commitments to purchase – adjustable rate	3,339		10,334
Commitments to purchase – fixed rate	19,685		27,818
Commitments to extend credit on consumer and other loans	16,157		12,345
Unused lines of credit:
Home equity and other consumer loans	79,119		101,329
Commercial and industrial loans	107,625		64,074
Commitments to sell loans	29,754		20,904

_______________________________

(1) Includes commitments to originate loans held-for-sale totaling $15.4 million at December 31, 2015 and $14.8 million at December 31, 2014.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  We evaluate creditworthiness on a case-by-case basis.  Our maximum exposure to credit risk is represented by the contractual amount of the instruments.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Assets Sold with Recourse

We are obligated under various recourse provisions associated with certain first mortgage loans we sold in the secondary market.  Generally the loans we sell in the secondary market are subject to recourse for fraud and adherence to underwriting or quality control guidelines.  We repurchased one loan during 2015 as a result of these recourse provisions.  The principal balance of loans sold in the secondary market with recourse provisions in addition to fraud and adherence to underwriting or quality control guidelines amounted to $344.2 million at December 31, 2015 and $355.0 million at December 31, 2014.  We estimate the liability for such loans sold with recourse based on an analysis of our loss experience related to similar loans sold with recourse.  The carrying amount of this liability was immaterial at December 31, 2015 and 2014.

On July 31, 2014, we completed a bulk sale transaction of certain non-performing residential mortgage loans that had a carrying value of $173.7 million. On September 12, 2014, we completed a second sale transaction, with the same counterparty as the bulk sale transaction, in which we sold additional non-performing residential mortgage loans with a carrying value of $4.0 million. The loan sale agreements governing the sale transactions contained usual and customary document cure provisions and indemnification provisions protecting the purchaser from breaches of our representations, warranties and covenants. These provisions expired in 2015 without any material claims presented. Accordingly, there were no adjustments to the purchase price for such loans, repurchases or indemnification payments during 2015 and 2014. See Notes 4 and 5 for additional information regarding these loan sales.

Guarantees

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party.  The guarantees generally extend for a term of up to one year and are fully collateralized.  For each guarantee issued, if the customer defaults on a payment or performance to the third party, we would have to perform under the guarantee.  Outstanding standby letters of credit totaled $3.3 million at December 31, 2015 and $1.2 million at December 31, 2014.  The fair values of these obligations were immaterial at December 31, 2015 and 2014.

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 have submitted briefs to the NYC Tax Appeals Tribunal and presented oral arguments on November 19, 2015. 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 December 31, 2015 with respect to this matter.

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,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 December 31, 2015 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 plantiffs 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.

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 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 December 31, 2015 with respect to these matters.

Other potential plaintiffs may also file additional lawsuits challenging the proposed Merger. The outcome of the pending and any additional future litigation is uncertain. If the cases are not resolved, these lawsuits could result in substantial costs to Astoria, including any costs associated with the indemnification of Astoria’s directors and officers. 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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(11)    Income Taxes

The following table summarizes income tax expense for the years indicated.

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Current:
Federal	$	30,410		$	17,435		$	24,524
State and local	2,075			4,033			3,722
Total current	32,485			21,468			28,246
Deferred:
Federal	13,573			27,452			9,496
State and local	(16,259		)	(22,641		)	7
Total deferred	(2,686		)	4,811			9,503
Total income tax expense	$	29,799		$	26,279		$	37,749

The following is a reconciliation of income tax expense computed by applying the federal income tax rate to income before income tax expense to income tax expense included in the consolidated statements of income for the years indicated.

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Expected income tax expense at statutory federal rate	$	41,256		$	42,768		$	36,520
State and local taxes, net of federal tax effect	(9,220		)	(12,096		)	2,424
Tax exempt income (principally on BOLI)	(3,107		)	(2,970		)	(2,945		)
Non-deductible ESOP compensation	—			—			2,613
Low income housing tax credit	(1,036		)	(1,676		)	(1,676		)
Other, net	1,906			253			813
Total income tax expense	$	29,799		$	26,279		$	37,749

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The following table summarizes the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at the dates indicated.

	At December 31,
(In Thousands)	2015			2014
Deferred tax assets:
Allowances for losses	$	41,924		$	48,243
Compensation and benefits (principally pension and other postretirement benefit plans)	40,072			45,849
Mortgage loans (principally deferred loan origination costs)	2,548			981
Net unrealized loss on securities available-for-sale	194			—
State and local net operating loss carryforwards	16,341			16,122
Other deductible temporary differences	4,568			4,540
Total gross deferred tax assets	105,647			115,735
Less valuation allowance	—			(7,220		)
Deferred tax assets, net of valuation allowance	105,647			108,515
Deferred tax liabilities:
Premises and equipment	(3,665		)	(3,102		)
Net unrealized gain on securities available-for-sale	—			(1,035		)
MSR	(438		)	(910		)
Total gross deferred tax liabilities	(4,103		)	(5,047		)
Net deferred tax assets (included in other assets)	$	101,544		$	103,468

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.

NYS income tax legislation, or the 2014 NYS legislation, was enacted on March 31, 2014 in connection with the approval of the NYS 2014-2015 budget. Portions of the new legislation result in significant changes in the calculation of income taxes imposed on banks and thrifts operating in NYS, including changes to (1) future period NYS tax rates, (2) rules related to sourcing of revenue for NYS tax purposes and (3) the NYS taxation of entities within one corporate structure, among other provisions. In recent years, we have been subject to taxation in NYS under an alternative taxation method based on assets. Deferred tax items related to net operating loss carryforwards and temporary differences could not be utilized under the alternative taxation method and were not anticipated to become utilizable in the future. As such, no deferred tax assets were previously established for these items. The new legislation, among other things, removed that alternative method. Further, the new law (1) resulted in an increase in our tax expense beginning in 2015 and (2) caused us to recognize temporary differences and net operating loss carryforward benefits in 2014 which we were unable to recognize previously. The impact of the 2014 changes in the NYS income tax legislation, including the effects of a 2014 fourth quarter resolution of an income tax matter with NYS, was an increase in our net deferred tax asset in the statement of financial condition with a corresponding reduction in income tax expense of $15.7 million in 2014. As was the case with NYS, for New York City we had been subject to income taxes on an alternative method based on assets through December 31, 2014 which similarly precluded recognition of deferred tax items. As such, we established a full valuation allowance and no deferred tax assets were recognized for New York City purposes at December 31, 2014.

On April 13, 2015, a package of additional NYS legislation, or the 2015 NYS legislation, was signed into law that, among other things, largely conformed New York City banking income tax laws to the 2014 NYS legislation. The 2015 NYS legislation is effective retroactively to tax years beginning on or after January 1, 2015. In addition, on June 30, 2015, the State of Connecticut enacted tax legislation that changed the method for calculating Connecticut income taxes, resulting in the recognition of certain deferred tax assets. The impacts of the legislation resulted in the reversal of our valuation allowance and an increase in our net deferred tax asset in the statement of financial condition with a corresponding reduction in income tax expense of $11.4 million in the second quarter of 2015.

At December 31, 2015, we have available a NYS net operating loss carryforward of $202.3 million which expires in 2035. Utilization of this net operating loss carryforward, and the ability to carryover any remaining unused amount to subsequent years,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

is subject to certain limitations as well as elections that may be made by us. In addition, we have available New York City net operating loss carryforwards of $74.7 million, which expire in various years from 2026 through 2034.

We file income tax returns in the United States federal jurisdiction and in NYS and New York City jurisdictions, as well as various other state jurisdictions in which we do business.  With few exceptions, we are no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2013.

The following is a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits for the years indicated.  The amounts have not been reduced by the federal deferred tax effects of unrecognized state tax benefits.

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Unrecognized tax benefits at beginning of year	$	2,155		$	4,009		$	3,428
Additions as a result of a tax position taken during the current period	830			675			600
Reductions as a result of tax positions taken during a prior period	—			—			(19		)
Reductions relating to settlement with taxing authorities	(1,500		)	(2,529		)	—
Unrecognized tax benefits at end of year	$	1,485		$	2,155		$	4,009

If realized, all of our unrecognized tax benefits at December 31, 2015 would affect our effective income tax rate.  After the related federal tax effects, realization of those benefits would reduce income tax expense by $973,000.

In addition to the above unrecognized tax benefits, we have accrued liabilities for interest and penalties related to uncertain tax positions totaling $437,000 at December 31, 2015, $469,000 at December 31, 2014 and $1.1 million at December 31, 2013. We accrued interest and penalties on uncertain tax positions as an element of our income tax expense, net of the related federal tax effects, totaling $194,000 during the year ended December 31, 2015, $247,000 during the year ended December 31, 2014 and $224,000 during the year ended December 31, 2013.  Realization of all of our unrecognized tax benefits would result in a further reduction in income tax expense of $329,000 for the reversal of accrued interest and penalties, net of the related federal tax effects.

Astoria Bank’s retained earnings at December 31, 2015 and 2014 includes base-year bad debt reserves, created for tax purposes prior to 1988, totaling $165.8 million.  A related deferred federal income tax liability of $58.0 million has not been recognized.  Base-year reserves are subject to recapture in the unlikely event that Astoria Bank (1) makes distributions in excess of current and accumulated earnings and profits, as calculated for federal income tax purposes, (2) redeems its stock, or (3) liquidates.

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(12)    Earnings Per Common Share

The following table is a reconciliation of basic and diluted EPS for the years indicated.

	For the Year Ended December 31,
(In Thousands, Except Share Data)	2015			2014			2013
Net income	$	88,075		$	95,916		$	66,593
Preferred stock dividends	(8,775		)	(8,775		)	(7,214		)
Net income available to common shareholders	79,300			87,141			59,379
Income allocated to participating securities	(726		)	(973		)	(720		)
Net income allocated to common shareholders	$	78,574		$	86,168		$	58,659
Basic weighted average common shares outstanding	99,612,473			98,384,443			97,121,497
Dilutive effect of stock options and restricted stock units (1) (2)	357,365			—			—
Diluted weighted average common shares outstanding	99,969,838			98,384,443			97,121,497
Basic EPS	$	0.79		$	0.88		$	0.60
Diluted EPS	$	0.79		$	0.88		$	0.60

(1) Excludes options to purchase 14,167 shares of common stock which were outstanding during the year ended December 31, 2015; options to purchase 962,783 shares of common stock which were outstanding during the year ended December 31, 2014; and options to purchase 2,096,708 shares of common stock which were outstanding during the year ended December 31, 2013 because their inclusion would be anti-dilutive.

(2) Excludes 644,319 unvested restricted stock units which were outstanding during the year ended December 31, 2015; 758,792 unvested restricted stock units which were outstanding during the year ended December 31, 2014; and 387,791 unvested restricted stock units outstanding during the year ended December 31, 2013 because their inclusion would be anti-dilutive.

(13)    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 years ended December 31, 2015 and 2014.

(In Thousands)	At   December 31, 2014				Other Comprehensive Income (Loss)				At   December 31, 2015
Net unrealized gain (loss) on securities available-for-sale		$	4,686			$	(1,859	)		$	2,827
Net actuarial loss on pension plans and other postretirement benefits		(67,476		)		9,080				(58,396		)
Prior service cost on pension plans and other postretirement benefits		(3,161		)		113				(3,048		)
Accumulated other comprehensive loss		$	(65,951	)		$	7,334			$	(58,617	)

(In Thousands)	At   December 31, 2013				Other Comprehensive  Income (Loss)				At   December 31, 2014
Net unrealized (loss) gain on securities available-for-sale		$	(4,366	)		$	9,052			$	4,686
Net actuarial loss on pension plans and other postretirement benefits		(30,600		)		(36,876		)		(67,476		)
Prior service cost on pension plans and other postretirement benefits		(3,284		)		123				(3,161		)
Accumulated other comprehensive loss		$	(38,250	)		$	(27,701	)		$	(65,951	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table sets forth the components of other comprehensive income/loss for the years indicated.

(In Thousands)	Before Tax Amount			Tax (Expense) Benefit			After Tax Amount
For the Year Ended December 31, 2015
Net unrealized loss on securities available-for-sale:
Net unrealized holding loss on securities arising during the year	$	(3,048	)	$	1,232		$	(1,816	)
Reclassification adjustment for gain on sales of securities included in net income	(72		)	29			(43		)
Net unrealized loss on securities available-for-sale	(3,120		)	1,261			(1,859		)
Net actuarial loss adjustment on pension plans and other postretirement benefits:
Net actuarial loss adjustment arising during the year	12,265			(4,956		)	7,309
Reclassification adjustment for net actuarial loss included in net income	2,973			(1,202		)	1,771
Net actuarial loss adjustment on pension plans and other postretirement benefits	15,238			(6,158		)	9,080
Reclassification adjustment for prior service cost on pension plans and other post retirement benefits included in net income	190			(77		)	113
Other comprehensive income	$	12,308		$	(4,974	)	$	7,334
For the Year Ended December 31, 2014
Net unrealized gain on securities available-for-sale:
Net unrealized holding gain on securities arising during the year	$	14,134		$	(4,991	)	$	9,143
Reclassification adjustment for gain on sales of securities included in net income	(141		)	50			(91		)
Net unrealized gain on securities available-for-sale	13,993			(4,941		)	9,052
Net actuarial loss adjustment on pension plans and other postretirement benefits:
Net actuarial loss adjustment arising during the year	(60,583		)	23,116			(37,467		)
Reclassification adjustment for net actuarial loss included in net income	913			(322		)	591
Net actuarial loss adjustment on pension plans and other postretirement benefits	(59,670		)	22,794			(36,876		)
Reclassification adjustment for prior service cost on pension plans and other post retirement benefits included in net income	190			(67		)	123
Other comprehensive loss	$	(45,487	)	$	17,786		$	(27,701	)
For the Year Ended December 31, 2013
Net unrealized loss on securities available-for-sale:
Net unrealized holding loss on securities arising during the year	$	(16,202	)	$	5,717		$	(10,485	)
Reclassification adjustment for gain on sales of securities included in net income	(2,057		)	725			(1,332		)
Net unrealized loss on securities available-for-sale	(18,259		)	6,442			(11,817		)
Net actuarial loss adjustment on pension plans and other postretirement benefits:
Net actuarial loss adjustment arising during the year	68,150			(23,970		)	44,180
Reclassification adjustment for net actuarial loss included in net income	3,610			(1,275		)	2,335
Net actuarial loss adjustment on pension plans and other postretirement benefits	71,760			(25,245		)	46,515
Reclassification adjustment for prior service cost on pension plans and other post retirement benefits included in net income	213			(71		)	142
Other comprehensive income	$	53,714		$	(18,874	)	$	34,840

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table sets forth information about amounts reclassified from accumulated other comprehensive loss to, and the affected line items in, the consolidated statement of income for the years indicated.

(In Thousands)	For the Year Ended December 31,								Income Statement Line Item
	2015				2014
Reclassification adjustment for gain on sales of securities		$	72			$	141		Gain on sales of securities
Reclassification adjustment for net actuarial loss (1)		(2,973		)		(913		)	Compensation and benefits
Reclassification adjustment for prior service cost (1)		(190		)		(190		)	Compensation and benefits
Total reclassifications, before tax		(3,091		)		(962		)
Income tax effect		1,250				339			Income tax expense
Total reclassifications, net of tax		$	(1,841	)		$	(623	)	Net income

(1) These other comprehensive income/loss components are included in the computations of net periodic (benefit) cost for our defined benefit pension plans and other postretirement benefit plan.  See Note 14 for additional details.

(14)    Benefit Plans

Pension Plans and Other Postretirement Benefits

The following table sets forth information regarding our defined benefit pension plans and other postretirement benefit plan at and for the periods indicated.

		Pension Benefits							Other Postretirement Benefits
	At or For the Year Ended December 31,							At or For the Year Ended December 31,
(In Thousands)		2015			2014				2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year		$	270,272		$	230,361			$	28,545		$	18,766
Service cost		—			—				2,129			1,241
Interest cost		9,929			10,450				1,004			930
Actuarial (gain) loss		(16,739		)	48,633				(6,179		)	8,371
Benefits paid		(11,111		)	(19,172		)		(554		)	(763		)
Benefit obligation at end of year		252,351			270,272				24,945			28,545
Change in plan assets:
Fair value of plan assets at beginning of year		187,074			189,367				—			—
Actual return on plan assets		3,881			11,264				—			—
Employer contribution		543			5,615				554			763
Benefits paid		(11,111		)	(19,172		)		(554		)	(763		)
Fair value of plan assets at end of year		180,387			187,074				—			—
Funded status at end of year		$	(71,964	)	$	(83,198	)		$	(24,945	)	$	(28,545	)

The underfunded pension benefits and other postretirement benefits at December 31, 2015 and 2014 are included in other liabilities in our consolidated statements of financial condition.

We did not make a contribution to the Astoria Bank Pension Plan in 2015 and we do not expect to make a contribution in 2016. No pension plan assets are expected to be returned to us.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table sets forth the pre-tax components of accumulated other comprehensive loss related to pension plans and other postretirement benefits at the dates indicated.  We expect that $2.7 million in net actuarial loss and $190,000 in prior service cost will be recognized as components of net periodic cost in 2016.

	Pension Benefits				Other Postretirement Benefits
	At December 31,				At December 31,
(In Thousands)	2015		2014		2015			2014
Net actuarial loss (gain)	$	99,078	$	108,137	$	(5,408	)	$	771
Prior service cost	4,760		4,950		—			—
Total accumulated other comprehensive loss (income)	$	103,838	$	113,087	$	(5,408	)	$	771

The accumulated benefit obligation for all defined benefit pension plans was $252.4 million at December 31, 2015 and $270.3 million at December 31, 2014.  Included in the tables of pension benefits are the Astoria Excess and Supplemental Benefit Plans, Astoria Directors’ Retirement Plan, the Greater New York Savings Bank, or Greater, Directors’ Retirement Plan and the Long Island Bancorp, Inc., or LIB, Directors’ Retirement Plan, which are unfunded plans.  The projected benefit obligation and accumulated benefit obligation for these plans each totaled $14.4 million at December 31, 2015 and $15.1 million at December 31, 2014.

The following table presents thediscount rates used to determine the benefit obligations at the dates indicated.

	At December 31,
	2015		2014
Pension Benefit Plans:
Astoria Bank Pension Plan	4.09	%	3.77	%
Astoria Excess and Supplemental Benefit Plans	3.86		3.60
Astoria Directors’ Retirement Plan	3.67		3.47
Greater Directors’ Retirement Plan	3.30		3.12
LIB Directors’ Retirement Plan	0.95		0.59
Other Postretirement Benefit Plan:
Astoria Bank Retiree Health Care Plan	4.25		3.89

The following table summarizes thecomponents of net periodic (benefit)cost for the years indicated.

	Pension Benefits									Other Postretirement Benefits
	For the Year Ended December 31,									For the Year Ended December 31,
(In Thousands)	2015			2014			2013			2015		2014			2013
Service cost	$	—		$	—		$	—		$	2,129	$	1,241		$	1,578
Interest cost	9,929			10,450			9,549			1,004		930			1,279
Expected return on plan assets	(14,534		)	(14,843		)	(12,754		)	—		—			—
Recognized net actuarial loss (gain)	2,973			1,401			3,138			—		(488		)	472
Amortization of prior service cost	190			190			213			—		—			—
Net periodic (benefit) cost	$	(1,442	)	$	(2,802	)	$	146		$	3,133	$	1,683		$	3,329

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table sets forth the assumptions used to determine the net periodic (benefit)cost for the years ended December 31, 2015 and 2014.

	Discount Rate				Expected Return on Plan Assets
	2015		2014		2015		2014
Pension Benefit Plans:
Astoria Bank Pension Plan	3.77	%	4.66	%	8.00	%	8.00	%
Astoria Excess and Supplemental Benefit Plans	3.60		4.39		N/A		N/A
Astoria Directors’ Retirement Plan	3.47		4.23		N/A		N/A
Greater Directors’ Retirement Plan	3.12		3.64		N/A		N/A
LIB Directors’ Retirement Plan	0.59		0.50		N/A		N/A
Other Postretirement Benefit Plan:
Astoria Bank Retiree Health Care Plan	3.89		4.80		N/A		N/A

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.

The following table presents theassumed health care cost trend rates at the dates indicated.

	At December 31,
	2015		2014
Health care cost trend rate assumed for the next year:
Pre-age 65	7.50	%	6.70	%
Post-age 65	8.00	%	9.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.75	%	5.00	%
Year that the rate reaches the ultimate trend rate	2026		2021

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan.  The following table presents the effects of aone-percentage point change in assumed health care cost trend rates.

(In Thousands)	One Percentage  Point Increase			One Percentage  Point Decrease
Effect on total service and interest cost components		$	736		$	(560	)
Effect on the postretirement benefit obligation		4,518			(3,524		)

The following table summarizes total benefits expected to be paid under our defined benefit pension plans and other postretirement benefit plan as of December 31, 2015, which reflect expected future service as appropriate.

Year	Pension Benefits		Other Postretirement Benefits
	(In Thousands)
2016	$	15,589		$	883
2017	13,875			932
2018	12,999			976
2019	13,501			1,043
2020	13,162			1,131
2021-2025	69,927			6,625

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The Astoria Bank Pension Plan’s assets are measured at estimatedfair value on a recurring basis.  The Astoria Bank Pension Plan groups its assets 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 described in Note 18.  Other than the Astoria Bank Pension Plan’s investment in Astoria Financial Corporation common stock, the assets are managed by Prudential Retirement Insurance and Annuity Company, or PRIAC.

The following tables set forth the carrying values of the Astoria Bank Pension Plan’s assets measured at estimated fair value on a recurring basisand the level within the fair value hierarchy in which the fair value measurements fall at the dates indicated.

	Carrying Value at December 31, 2015
(In Thousands)	Total		Level 1		Level 2		Level 3
PRIAC Pooled Separate Accounts (1)	$	155,215	$	—	$	155,215	$	—
Astoria Financial Corporation common stock	14,880		14,880		—		—
PRIAC Guaranteed Deposit Account	10,288		—		—		10,288
Cash and cash equivalents	4		4		—		—
Total	$	180,387	$	14,884	$	155,215	$	10,288

(1) Consists of 44% large-cap equity securities, 33% debt securities, 11% international equities, 7% small-cap equity securities and 5% mid-cap equity securities.

	Carrying Value at December 31, 2014
(In Thousands)	Total		Level 1		Level 2		Level 3
PRIAC Pooled Separate Accounts (1)	$	162,808	$	—	$	162,808	$	—
Astoria Financial Corporation common stock	12,404		12,404		—		—
PRIAC Guaranteed Deposit Account	11,858		—		—		11,858
Cash and cash equivalents	4		4		—		—
Total	$	187,074	$	12,408	$	162,808	$	11,858

(1) Consists of 41% large-cap equity securities, 38% debt securities, 9% international equities, 7% small-cap equity securities and 5% mid-cap equity securities.

The following table sets forth a summary of changes in the estimatedfair value of the Astoria Bank Pension Plan’s Level 3 assets for the years indicated.

	For the Year Ended December 31,
(In Thousands)		2015			2014
Fair value at beginning of year		$	11,858		$	6,299
Total net (loss) gain, realized and unrealized, included in change in net assets (1)		(1		)	191
Purchases		9,000			23,925
Sales		(10,569		)	(18,557		)
Fair value at end of year		$	10,288		$	11,858

(1) Includes unrealized gain related to assets held at December 31, 2015 of $210,000 for the year ended December 31, 2015 and unrealized gain related to assets held at December 31, 2014 of $477,000 for the year ended December 31, 2014.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table presents information about significant unobservable inputs related to the Astoria Bank Pension Plan’s investment in Level 3 assets at the dates indicated.

	PRIAC Guaranteed Deposit Account Range at December 31,
	2015				2014
Significant unobservable inputs:
Composite market value factor		0.996	-	1.137		1.018	-	1.081
Gross guaranteed crediting rate (1)		2.85%	-	3.35%		2.50%	-	4.00%

_______________________________

(1) Gross guaranteed crediting rates must be greater than or equal to contractual minimum crediting rate.

The overall strategy of the Astoria Bank Pension Plan investment policy is to have a diverse investment portfolio that reasonably spans established risk/return levels, preserves liquidity and provides long-term investment returns equal to or greater than the actuarial assumptions.  The strategy allows for a moderate risk approach in order to achieve greater long-term asset growth.  The asset mix within the various insurance company pooled separate accounts and trust company trust funds can vary but should not be more than 80% in equity securities, 50% in debt securities and 25% in liquidity funds. Within equity securities, the mix is further clarified to have ranges not to exceed 10% in any one company, 30% in any one industry, 50% in funds that mirror the S&P 500, 50% in large-cap equity securities, 20% in mid-cap equity securities, 20% in small-cap equity securities and 10% in international equities.  In addition, up to 15% of total plan assets may be held in Astoria Financial Corporation common stock.  However, the Astoria Bank Pension Plan will not acquire Astoria Financial Corporation common stock to the extent that, immediately after the acquisition, such common stock would represent more than 10% of total plan assets.

The following is a description of valuation methodologies used for the Astoria Bank Pension Plan's assets measured at estimatedfair value on a recurring basis.

PRIAC Pooled Separate Accounts

The fair value of the Astoria Bank Pension Plan’s investments in the PRIAC Pooled Separate Accounts is based on the fair value of the underlying securities included in the pooled separate accounts which consist of equity securities and bonds.  Investments in these accounts are represented by units and a per unit value.  The unit values are calculated by PRIAC and fair value is reported at unit value as a practical expedient for fair value.  For the underlying equity securities, PRIAC obtains closing market prices for those securities traded on a national exchange.  For bonds, PRIAC obtains prices from a third party pricing service using inputs such as benchmark yields, reported trades, broker/dealer quotes and issuer spreads.  Prices are reviewed by PRIAC and are challenged if PRIAC believes the price is not reflective of fair value.  There are no restrictions as to the redemption of these pooled separate accounts nor does the Astoria Bank Pension Plan have any contractual obligations to further invest in any of the individual pooled separate accounts.  These investments are classified as Level 2.

Astoria Financial Corporation common stock

The fair value of the Astoria Bank Pension Plan’s investment in Astoria Financial Corporation common stock is obtained from a quoted market price in an active market and, as such, is classified as Level 1.

PRIAC Guaranteed Deposit Account

The fair value of the Astoria Bank Pension Plan’s investment in the PRIAC Guaranteed Deposit Account is calculated by PRIAC and approximates the fair value of the underlying investments by discounting expected future investment cash flows from both investment income and repayment of principal for each investment purchased directly for the general account.  The discount rates assumed in the calculation reflect both the current level of market rates and spreads appropriate to the quality, average life and type of investment being valued.  PRIAC calculates a contract-specific composite market value factor, which is determined by summing the product of each investment year's market value factor as of the plan year end by the particular contract's balance within the investment year and dividing the result by the contract's total investment year balance. This contract-specific market value factor is then multiplied by the contract value, which represents deposits made to the contract, plus earnings at the guaranteed crediting rates, less withdrawals and fees, to arrive at the estimated fair value. This investment is classified as Level 3.

Cash and cash equivalents

The fair value of the Astoria Bank Pension Plan’s cash and cash equivalents represents the amount available on demand and, as such, are classified as Level 1.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Incentive Savings Plan

Astoria Bank maintains the 401(k) Plan which provides for contributions by both Astoria Bank and its participating employees.  Under the 401(k) Plan, which is a qualified, defined contribution pension plan, participants may contribute up to 30% of their pre-tax base salary, generally not to exceed $18,000 for the calendar year ended December 31, 2015.  Effective January 1, 2013, Astoria Bank made matching contributions equal to 50% of each employee's contributions not in excess of 6% of each employee's compensation, for a maximum contribution of 3% of a participating employee's compensation. Effective January 1, 2015, Astoria Bank makes matching contributions equal to 100% of each employee's contributions up to 3% of each employee's compensation plus 50% of each employee's contributions over 3% but not in excess of 6% of each employee's compensation for a maximum contribution of 4.5% of a participating employee's compensation.  Matching contributions totaled $3.9 million for the year ended December 31, 2015 and $2.2 million for the year ended December 31, 2014.  Participants vest immediately in their own contributions and after a period of one year for Astoria Bank contributions.

Employee Stock Ownership Plan

Astoria Bank maintained an ESOP for its eligible employees, which was a defined contribution pension plan.  To fund the purchase of the ESOP shares, the ESOP borrowed funds from us.  Astoria Bank made contributions to fund debt service.  The ESOP loans were prepaid in full on December 20, 2013. Shares purchased by the ESOP were held in trust for allocation among participants as the loans were repaid. As a result of the prepayment of the ESOP loans in full on December 20, 2013, the remaining 967,013 unallocated shares were released from the pledge agreement and allocated to participants as of December 31, 2013. Effective December 31, 2013 the ESOP was frozen and on April 1, 2014, the ESOP was merged into the 401(k) Plan. Compensation expense related to the ESOP totaled $11.2 million for the year ended December 31, 2013.

(15)    Stock Incentive Plans

On May 21, 2014, our shareholders approved the 2014 Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation, or the 2014 Employee Stock Plan, which amended and restated the 2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation, or the 2005 Employee Stock Plan, as of that date.  The 2014 Employee Stock Plan authorized 3,250,000 shares of common stock for future grants to officers and employees on and after May 21, 2014.  In addition, immediately prior to the approval of the 2014 Employee Stock Plan, there remained 507,925 shares available for future grants under the 2005 Employee Stock Plan which were carried over to the 2014 Employee Stock Plan and no further grants may be made under the 2005 Employee Stock Plan. Accordingly, under the 2014 Employee Stock Plan, a total of 3,757,925 shares of common stock were reserved for options, restricted stock, restricted stock units and/or stock appreciation right grants, of which 3,310,991 shares remain available for issuance of future grants at December 31, 2015.

Employee grants generally occur annually, upon approval by our Board of Directors, on the third business day after we issue a press release announcing annual financial results for the prior year.  Discretionary grants may be made to eligible employees from time to time upon approval by our Board of Directors.  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 and the 2005 Employee Stock Plan, all options and restricted common stock granted pursuant to such plans immediately vest, except for a performance-based restricted common stock award granted in 2011 which, in the event of death or disability prior to vesting, will remain outstanding subject to satisfaction of the performance and vesting conditions, unless otherwise settled.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table summarizes employee restricted common stock grant awards by year for grant years with unvested shares outstanding at December 31, 2015 and the remaining vesting schedule.

	2015	2014		2013		2012	2011
Number of shares of restricted common stock:
Granted during the year	401,520	482,001		494,420		155,000	663,530
Unvested at December 31, 2015	170,390	63,427		—		—	65,000
Scheduled to vest during the year ending:
December 31, 2016	44,020	35,040	(2)	—	(2)	—	65,000	(1)
December 31, 2017	126,370	28,387		—		—	—

______________________________

(1) Shares of restricted common stock granted under a performance-based award which will vest on June 30, 2016 if the performance conditions are met.

(2) In December 2015, vesting conditions were accelerated for the remaining 2013 and certain 2014 restricted common stock grant awards, totaling 200,797 shares, otherwise scheduled to vest in 2016.

In addition to the restricted common stock grants detailed in the table above, performance-based restricted stock units were granted to select officers under the 2014 Employee Stock Plan during the year ended December 31, 2015 and under the 2005 Employee Stock Plan during the years ended December 31, 2014 and 2013.  Each restricted stock unit granted represents a right to receive one share of our common stock in the future, subject to meeting certain criteria.  The restricted stock units have specified performance objectives within a specified performance measurement period and no voting or dividend rights prior to vesting and delivery of shares.  Shares will be issued on the vest date at a specified percentage of units granted, ranging from 0% to 125%, based on actual performance of the Company during the performance measurement period, as defined by the grant.  However, in the event of a change in control prior to the end of the performance measurement period, the restricted stock units will vest on the change in control date and shares will be issued at 100% of units granted.  Absent a change in control, if a grantee’s employment terminates prior to the end of the performance measurement period all restricted stock units will be forfeited.  In the event the grantee's employment terminates during the period on or after the end of the performance measurement period through the vest date due to death, disability, retirement or a change in control, the grantee will remain entitled to the shares otherwise earned.

The following table summarizes restricted stock units awarded by year for grant years with unvested units outstanding at December 31, 2015.

	2015		2014		2013
Number of shares of restricted stock units:
Granted during the year		409,800		395,900		432,300
Unvested at December 31, 2015		400,600		350,900		—	(1)
Vest date	February 1, 2018		February 1, 2017		February 1, 2016
Performance measurement period:
Fiscal year ended	December 31, 2017		December 31, 2016		December 31, 2015

______________________________

(1) In December 2015 vesting conditions for the remaining 366,400 shares of the 2013 restricted stock units granted were deemed to have been achieved.

Under the Astoria Financial Corporation 2007 Non-Employee Directors Stock Plan, as amended, or the 2007 Director Stock Plan, 240,080 shares of common stock were reserved for restricted stock grants, of which 28,232 shares of restricted common stock were granted in 2015 and 49,633 shares remain available at December 31, 2015 for issuance of future grants.  Annual awards and discretionary grants, as such terms are defined in the plan, are authorized under the 2007 Director Stock Plan.  Annual awards to non-employee directors occur on the third business day after we issue a press release announcing annual financial results for the prior year.  Discretionary grants may be made to eligible directors from time to time as consideration for services rendered or promised to be rendered.  Such grants are made on such terms and conditions as determined by a committee of independent directors.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Under the 2007 Director Stock Plan, restricted common stock granted vests approximately three years after the grant date, although awards immediately vest upon death, disability, mandatory retirement, involuntary termination or a change in control, as such terms are defined in the plan.  Shares awarded will be forfeited in the event a recipient ceases to be a director prior to the vest date for any reason other than death, disability, mandatory retirement, involuntary termination or a change in control, as defined in the plan.

The following table summarizes restricted common stock and performance-based restricted stock unit activity in our stock incentive plans for the year ended December 31, 2015.

	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 beginning of year	752,701			$	11.90		776,500			$	10.66
Granted	429,752			13.05			409,800			12.64
Vested	(741,690	)	(1)	(12.18		)	(366,400	)	(2)	(9.22		)
Forfeited	(65,946	)		(11.77		)	(68,400	)		(11.03		)
Unvested at end of year	374,817			12.68			751,500			12.41

(1) Includes 200,797 shares originally scheduled to vest at various times during 2016 that had a compensation expense of $2.4 million.

(2) Shares originally scheduled to vest in February 2016.

The aggregate fair value on the vest date of restricted common stock awards which vested totaled $11.7 million during the year ended December 31, 2015, $6.6 million during the year ended December 31, 2014 and $9.6 million during the year ended December 31, 2013. The weighted average grant date fair value of restricted common stock was $13.05 per share during the year ended December 31, 2015, $12.58 per share during the year ended December 31, 2014 and $9.70 per share during the year ended December 31, 2013.

Options outstanding at December 31, 2015, granted under plans other than the 2014 Employee Stock Plan, 2005 Employee Stock Plan and 2007 Director Stock Plan, have a maximum term of ten years and were granted in tandem with limited stock appreciation rights exercisable only in the event we experience a change in control, as defined by the plans.  Common shares are issued from treasury stock upon the exercise of stock options.  No options were exercised during the years ended December 31, 2015, 2014 and 2013.  We have an adequate number of shares available in treasury stock for future stock option exercises.

The following table summarizes option activity in our stock incentive plans for the year ended December 31, 2015.

	Number of Options		Weighted Average Exercise Price
Outstanding at beginning of year	36,000			$	28.58
Expired	(24,000	)		(27.99		)
Outstanding and exercisable at end of year	12,000			29.76

At December 31, 2015, options outstanding and exercisable had no intrinsic value and a weighted average remaining contractual term of approximately 7 months.

Stock-based compensation expense totaled $6.8 million, net of taxes of $4.6 million, for the year ended December 31, 2015, $5.6 million, net of taxes of $3.1 million, for the year ended December 31, 2014 and $4.5 million, net of taxes of $2.5 million, for the year ended December 31, 2013.  At December 31, 2015, pre-tax compensation cost related to all unvested awards of restricted common stock and restricted stock units not yet recognized totaled $6.3 million and will be recognized over a weighted average period of approximately 1.8 years which excludes $4.5 million of pre-tax compensation cost related to 65,000 shares of performance-based restricted common stock granted in 2011 and 288,025 performance-based restricted stock units granted in 2014 and 2015, for which compensation cost will begin to be recognized when the achievement of the performance conditions becomes probable.

(16)    Investments in Affordable Housing Limited Partnerships

Effective January 1, 2015, we adopted the guidance in ASU 2014-01, “Investments - Equity Method and Joint Ventures (Topic 323) Accounting for Investments in Qualified Affordable Housing Projects,” which applies to all reporting entities that invest in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments in this update modify the conditions that a reporting entity must meet to be eligible to use a method other than the equity or cost methods to account for qualified affordable housing project investments. If the modified conditions are met, the amendments permit an entity to use the proportional amortization method to amortize the initial cost of the investment in proportion to the amount of tax credits and other tax benefits received and recognize the net investment performance in the income statement as a component of income tax expense (benefit). We have not elected to use the proportional amortization method for our investments in qualified affordable housing projects. Therefore, our adoption of this guidance did not have an impact on our financial condition or results of operations. Additionally, the amendments introduce new recurring disclosures about all investments in qualified affordable housing projects which are presented below.

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 $17.2 million at December 31, 2015 and $18.3 million at December 31, 2014. Our funding obligation related to such investments, reflected in other liabilities in the consolidated statements of financial condition, totaled $12.9 million at December 31, 2015 and $15.0 million at December 31, 2014. 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 $1.1 million for the year ended December 31, 2015, $1.5 million for the year ended December 31, 2014 and $1.5 million for the year ended December 31, 2013. Affordable housing tax credits and other tax benefits recognized as a component of income tax expense in the consolidated statements of income totaled $1.4 million for the year ended December 31, 2015, $2.2 million for the year ended December 31, 2014 and $2.2 million for the year ended December 31, 2013.

(17)    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 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.  In doing so, the Final Capital Rules:

• Established a new minimum Common equity tier 1 risk-based capital ratio (common equity tier 1 capital to total risk-weighted assets) of 4.5% and increased the minimum Tier 1 risk-based capital ratio from 4.0% to 6.0%, while maintaining the minimum Total risk-based capital ratio of 8.0% and the minimum Tier 1 leverage capital ratio of 4.0%.

• Revised the rules for calculating risk-weighted assets to enhance their risk sensitivity.

• Phased out trust preferred securities and cumulative perpetual preferred stock as Tier 1 capital.

• 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 applied to the new Common equity tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio and the Total risk-based capital ratio, which means that 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%.

• Changed the definitions of capital categories for insured depository institutions for purposes of the Federal Deposit Insurance Corporation Improvement Act of 1991 prompt corrective action provisions. Under these revised definitions, to be considered well-capitalized, an insured depository institution must have a Tier 1 leverage capital ratio of at least 5.0% a Common equity tier 1 risk-based capital ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8.0% and a Total risk-based capital ratio of at least 10.0%.

The new minimum regulatory capital ratios and changes to the calculation of risk-weighted assets became effective for Astoria Financial Corporation and Astoria Bank on January 1, 2015. 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 rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum Conservation Buffer is not met.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

At December 31, 2015, 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 following table sets forth information regarding the regulatory capital requirements applicable to Astoria Financial Corporation and Astoria Bank at December 31, 2015.

	At December 31, 2015
	Actual				Minimum Capital Requirements					To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in Thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Astoria Financial Corporation:
Tier 1 leverage	$	1,521,367	10.21	%		$	596,022	4.00	%		$	745,027	5.00	%
Common equity tier 1 risk-based	1,401,376		16.00			394,092		4.50			569,244		6.50
Tier 1 risk-based	1,521,367		17.37			525,456		6.00			700,608		8.00
Total risk-based	1,620,612		18.51			700,608		8.00			875,760		10.00
Astoria Bank:
Tier 1 leverage	$	1,670,312	11.29	%		$	591,787	4.00	%		$	739,734	5.00	%
Common equity tier 1 risk-based	1,670,312		19.12			393,153		4.50			567,888		6.50
Tier 1 risk-based	1,670,312		19.12			524,204		6.00			698,939		8.00
Total risk-based	1,769,557		20.25			698,939		8.00			873,674		10.00

At December 31, 2014 Astoria Bank was in compliance with all regulatory capital requirements then in effect. The following table sets forth information regarding the regulatory capital requirements applicable to Astoria Bank at December 31, 2014.

	At December 31, 2014
	Actual				Minimum Capital Requirements					To be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in Thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tangible	$	1,632,390	10.62	%		$	230,633	1.50	%		N/A		N/A
Tier 1 leverage	1,632,390		10.62			615,022		4.00			$	768,777	5.00	%
Tier 1 risk-based	1,632,390		17.55			372,118		4.00			558,177		6.00
Total risk-based	1,744,905		18.76			744,236		8.00			930,295		10.00

(18)    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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

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 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

	Carrying Value at December 31, 2014
(In Thousands)	Total		Level 1			Level 2
Securities available-for-sale:
Residential mortgage-backed securities:
GSE issuance REMICs and CMOs	$	268,998		$	—	$	268,998
Non-GSE issuance REMICs and CMOs	5,104			—		5,104
GSE pass-through certificates	13,557			—		13,557
Obligations of GSEs	96,698			—		96,698
Fannie Mae stock	2			2		—
Total securities available-for-sale	$	384,359		$	2	$	384,357

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

Residential mortgage-backed securities

Residential mortgage-backed securities comprised 83% of our securities available-for-sale portfolio at December 31, 2015 and 75% at December 31, 2014.  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 December 31, 2015 and 98% at December 31, 2014.

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 discounted cash flow models and third

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

Obligations of GSEs

Obligations of GSEs comprised 17% of our securities available-for-sale portfolio at December 31, 2015 and 25% at December 31, 2014 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 and integrates relative credit information, observed market movements and sector news into their pricing applications and models.  Spread scales, representing credit risk, are created and are based on the new issue market, secondary trading and dealer quotes.  Option adjusted spread, or OAS, models are incorporated to adjust spreads of issues that have early redemption features.  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 MSR, loans receivable, certain loans held-for-sale and 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 at December 31,
(In Thousands)		2015		2014
Non-performing loans held-for-sale, net		$	1,582	$	153
Impaired loans		134,910		140,663
MSR, net		11,014		11,401
REO, net		16,307		19,375
Total		$	163,813	$	171,592

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

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Non-performing loans held-for-sale, net (1)	$	(445	)	$	—		$	(520	)
Impaired loans (2)	(4,284		)	(6,311		)	(21,992		)
MSR, net (3)	568			60			5,401
REO, net (4)	(824		)	(1,654		)	(3,788		)
Total	$	(4,985	)	$	(7,905	)	$	(20,899	)

(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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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)

Fair values of non-performing loans held-for-sale 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 December 31, 2015, non-performing loans held for sale were comprised of 80% multi-family mortgage loans and 20% residential mortgage loans. At December 31, 2014, we held-for-sale one non-performing multi-family mortgage loan.

Loans receivable, net (impaired loans)

Impaired loans were comprised of 81% residential mortgage loans, 17% multi-family and commercial real estate mortgage loans and 2% home equity lines of credit at December 31, 2015 and 73% residential mortgage loans, 25% multi-family and commercial real estate mortgage loans and 2% home equity lines of credit at December 31, 2014.  Impaired loans for which a fair value adjustment was recognized were comprised of 80% residential mortgage loans, 19% multi-family and commercial real estate mortgage loans and 1% home equity lines of credit at December 31, 2015 and 69% residential mortgage loans, 30% multi-family and commercial real estate mortgage loans and 1% home equity lines of credit at December 31, 2014.  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.  Adjustments to final appraised values obtained from independent third party appraisers and automated valuation models are not made.  The fair values of impaired loans cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the loan and, as such, are classified as Level 3.

MSR, net

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 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.  At December 31, 2014, our MSR were valued based on expected future cash flows considering a weighted average discount rate of 9.48%, a weighted average constant prepayment rate on mortgages of 12.35% and a weighted average life of 5.7 years.  Management reviews the assumptions used to estimate the fair value of MSR to ensure they reflect current and anticipated market conditions.

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.

REO, net

At December 31, 2015, REO totaled $19.8 million, including residential properties with a carrying value of $17.8 million. At December 31, 2014, REO totaled $35.7 million, including residential properties with a carrying value of $33.7 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

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 December 31, 2015
	Carrying Value		Estimated Fair Value
(In Thousands)			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		—

	At December 31, 2014
	Carrying Value		Estimated Fair Value
(In Thousands)			Total		Level 2		Level 3
Financial Assets:
Securities held-to-maturity	$	2,133,804	$	2,131,371	$	2,131,371	$	—
FHLB-NY stock	140,754		140,754		140,754		—
Loans held-for-sale, net (1)	7,640		7,955		—		7,955
Loans receivable, net (1)	11,845,848		11,967,608		—		11,967,608
MSR, net (1)	11,401		11,406		—		11,406
Financial Liabilities:
Deposits	9,504,909		9,534,918		9,534,918		—
Borrowings, net	4,187,691		4,395,604		4,395,604		—

_______________________________

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

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.

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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(19)    Condensed Parent Company Only Financial Statements

The following condensed parent company only financial statements reflect our investments in our wholly-owned consolidated subsidiaries, Astoria Bank and AF Insurance Agency, Inc., using the equity method of accounting.

Astoria Financial Corporation - Condensed Statements of Financial Condition

	At December 31,
(In Thousands)	2015		2014
Assets:
Cash	$	102,338	$	75,199
Other assets	760		711
Investment in Astoria Bank	1,812,393		1,755,078
Investment in AF Insurance Agency, Inc.	952		1,134
Total assets	$	1,916,443	$	1,832,122
Liabilities and stockholders’ equity:
Other borrowings, net	$	249,222	$	248,691
Other liabilities	3,773		3,361
Stockholders’ equity	1,663,448		1,580,070
Total liabilities and stockholders’ equity	$	1,916,443	$	1,832,122

Astoria Financial Corporation - Condensed Statements of Income

	For the Year Ended December 31,
(In Thousands)	2015		2014		2013
Interest income:
ESOP loans receivable	$	—	$	—	$	344
Total interest income	—		—		344
Interest expense on borrowings	13,031		13,031		17,398
Net interest expense	13,031		13,031		17,054
Cash dividends from subsidiaries	64,524		40,620		45,150
Non-interest expense:
Compensation and benefits	2,820		2,925		3,261
Extinguishment of debt	—		—		4,266
Other	4,927		3,262		3,148
Total non-interest expense	7,747		6,187		10,675
Income before income taxes and equity in undistributed earnings of subsidiaries	43,746		21,402		17,421
Income tax benefit	8,056		6,662		9,644
Income before equity in undistributed earnings of subsidiaries	51,802		28,064		27,065
Equity in undistributed earnings of subsidiaries	36,273		67,852		39,528
Net income	88,075		95,916		66,593
Preferred stock dividends	8,775		8,775		7,214
Net income available to common shareholders	$	79,300	$	87,141	$	59,379

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Astoria Financial Corporation - Condensed Statements of Cash Flows

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Cash flows from operating activities:
Net income	$	88,075		$	95,916		$	66,593
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries	(36,273		)	(67,852		)	(39,528		)
Amortization of deferred costs	531			531			531
Increase in other assets, net of other liabilities and amounts due to subsidiaries	(1,752		)	(484		)	(998		)
Net cash provided by operating activities	50,581			28,111			26,598
Cash flows from investing activities:
Principal payments on ESOP loans receivable	—			—			5,908
Redemption of Astoria Capital Trust I common securities	—			—			3,866
Net cash provided by investing activities	—			—			9,774
Cash flows from financing activities:
Repayment of borrowings with original terms greater than three months	—			—			(128,866		)
Proceeds from issuance of common and preferred stock	6,168			8,121			135,000
Common stock repurchases	(6,869		)	—			—
Cash payments for preferred stock issuance costs	—			—			(5,204		)
Cash dividends paid to stockholders	(24,856		)	(24,643		)	(20,688		)
Net tax benefit excess (shortfall) from stock-based compensation	2,115			192			(800		)
Net cash used in financing activities	(23,442		)	(16,330		)	(20,558		)
Net increase in cash and cash equivalents	27,139			11,781			15,814
Cash and cash equivalents at beginning of year	75,199			63,418			47,604
Cash and cash equivalents at end of year	$	102,338		$	75,199		$	63,418
Supplemental disclosure:
Cash paid during the year for interest	$	12,500		$	12,500		$	18,898

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QUARTERLY RESULTS OF OPERATIONS (Unaudited)

	For the Year Ended December 31, 2015
(In Thousands, Except Per Share Data)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Interest income	$	120,325		$	119,034		$	117,418		$	116,639
Interest expense	34,604			33,884			32,684			31,955
Net interest income	85,721			85,150			84,734			84,684
Provision for loan losses credited to operations	(343		)	(2,967		)	(4,439		)	(4,323		)
Net interest income after provision for loan losses	86,064			88,117			89,173			89,007
Non-interest income	12,933			15,342			12,852			13,469
Total income	98,997			103,459			102,025			102,476
General and administrative expense	70,112			71,876			72,589			74,506
Income before income tax expense	28,885			31,583			29,436			27,970
Income tax expense (1)	9,578			152			10,530			9,539
Net income	19,307			31,431			18,906			18,431
Preferred stock dividends	2,194			2,194			2,194			2,193
Net income available to common shareholders	$	17,113		$	29,237		$	16,712		$	16,238
Basic earnings per common share	$	0.17		$	0.29		$	0.17		$	0.16
Diluted earnings per common share	$	0.17		$	0.29		$	0.17		$	0.16

	For the Year Ended December 31, 2014
(In Thousands, Except Per Share Data)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Interest income	$	126,009		$	123,380		$	122,215		$	120,746
Interest expense	38,039			37,606			37,595			36,822
Net interest income	87,970			85,774			84,620			83,924
Provision for loan losses charged (credited) to operations	1,631			(5,742		)	(3,042		)	(2,316		)
Net interest income after provision for loan losses	86,339			91,516			87,662			86,240
Non-interest income	13,669			13,845			13,753			13,581
Total income	100,008			105,361			101,415			99,821
General and administrative expense	70,223			71,593			72,351			70,243
Income before income tax expense	29,785			33,768			29,064			29,578
Income tax (benefit) expense (2)	(1,764		)	11,468			10,256			6,319
Net income	31,549			22,300			18,808			23,259
Preferred stock dividends	2,194			2,194			2,194			2,193
Net income available to common shareholders	$	29,355		$	20,106		$	16,614		$	21,066
Basic earnings per common share	$	0.30		$	0.20		$	0.17		$	0.21
Diluted earnings per common share	$	0.30		$	0.20		$	0.17		$	0.21

_______________________________

(1) Includes net tax benefit of $11.4 million recognized in the 2015 second quarter related to the impact of income tax legislation enacted in the second quarter of 2015.

(2) Includes net tax benefits of $11.5 million recognized in the 2014 first quarter and $4.2 million recognized in the 2014 fourth quarter related to the impact of the changes in the NYS income tax legislation enacted on March 31, 2014, including the effects of the 2014 fourth quarter resolution of an income tax matter with NYS.

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ASTORIA FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX OF EXHIBITS

Exhibit No.	Identification of Exhibit
2.1	Agreement and Plan of Merger by and between Astoria Financial Corporation and New York Community Bancorp, Inc., dated October 28, 2015. (1)
3.1	Certificate of Incorporation of Astoria Financial Corporation, as amended effective as of June 3, 1998 and as further amended on September 6, 2006 and September 20, 2006. (2)
3.2	Bylaws of Astoria Financial Corporation, as amended March 19, 2008. (3)
3.3	Certificate of Designations of 6.50% Non-Cumulative Perpetual Preferred Stock, Series C of Astoria Financial Corporation. (4)
4.1	Astoria Financial Corporation Specimen Stock Certificate. (5)
4.2	Federal Stock Charter of Astoria Bank. (6)
4.3	Bylaws of Astoria Federal Savings and Loan Association n/k/a Astoria Bank, as amended effective January 29, 2014. (7)
4.4	Indenture, dated as of June 19, 2012, between Astoria Financial Corporation and Wilmington Trust, National Association, as Trustee. (8)
4.5	Form of 5.00% Senior Notes due 2017. (8)
4.6	Deposit Agreement, dated as of March 19, 2013, by and among Astoria Financial Corporation, Computershare Shareholder Services, LLC, as depositary, and the holders from time to time of the depositary receipts described therein. (4)
4.7	Form of depositary receipt representing the depositary shares of 6.50% Non-Cumulative Perpetual Preferred Stock, Series C of Astoria Financial Corporation. (4)
4.8	Form of Certificate representing the 6.50% Non-Cumulative Perpetual Preferred Stock, Series C of Astoria Financial Corporation. (4)
4.9	Astoria Financial Corporation Dividend Reinvestment and Stock Purchase Plan. (9)
	Exhibits 10.1 through 10.59 are management contracts or compensatory plans or arrangements required to be filed as exhibits to this Form 10-K pursuant to Item 15(b) of this report.
10.1	Astoria Federal Savings and Loan Association n/k/a Astoria Bank and Astoria Financial Corporation Directors’ Retirement Plan, as amended and restated effective February 15, 2012. (10)
10.2	The Long Island Bancorp, Inc., Non-Employee Directors Retirement Benefit Plan, as amended June 24, 1997 and as further Amended December 31, 2008. (11)
10.3	Astoria Financial Corporation Death Benefit Plan for Outside Directors. (5)
10.4	Astoria Financial Corporation Death Benefit Plan for Outside Directors - Amendment No. 1. (11)
10.5	Deferred Compensation Plan for Directors of Astoria Financial Corporation as Amended Effective January 1, 2009. (11)
10.6	1999 Stock Option Plan for Outside Directors of Astoria Financial Corporation, as amended December 29, 2005. (12)
10.7	2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. (13)

B - 1

Exhibit No.	Identification of Exhibit
10.8	Amendment No. 1 to the 2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. (14)
10.9	Amendment No. 2 to the 2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. (15)
10.10	2014 Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. (16)
10.11	Astoria Financial Corporation 2007 Non-Employee Director Stock Plan. (17)
10.12	Amendment No. 1 to the Astoria Financial Corporation 2007 Non-Employee Director Stock Plan. (18)
10.13	Amendment No. 2 to the Astoria Financial Corporation 2007 Non-Employee Director Stock Plan. (19)
10.14	Form of Performance-Based Restricted Stock Award Notice and General Terms and Conditions by and between Astoria Financial Corporation and Award Recipients utilized in connection with the award to Monte N. Redman dated July 1, 2011 pursuant to the 2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation, as amended. (20)
10.15	Restricted Stock Award Notice and General Terms and Conditions by and between Astoria Financial Corporation and award recipients utilized in connection with awards pursuant to the 2005 Re-designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. (21)
10.16	Restricted Stock Award Notice and General Terms and Conditions by and between Astoria Financial Corporation and award recipients utilized in connection with awards pursuant to the Astoria Financial Corporation 2007 Non-employee Director Stock Plan. (21)
10.17	Form of Restricted Stock Award Notice and General Terms and Conditions by and between Astoria Financial Corporation and award recipients utilized in connection with awards pursuant to the 2014 Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. (6)
10.18	Astoria Federal Savings and Loan Association n/k/a Astoria Bank Annual Incentive Plan for Select Executives. (22)
10.19	Amendment No. 1 to the Astoria Federal Savings and Loan Association n/k/a Astoria Bank Annual Incentive Plan for Select Executives effective December 31, 2008, dated November 12, 2009. (23)
10.20	Astoria Financial Corporation Executive Officer Annual Incentive Plan, as amended March 19, 2014. (16)
10.21	Astoria Financial Corporation Amended and Restated Employment Agreement with Monte N. Redman, entered into as of October 16, 2014. (24)
10.22	Astoria Bank Amended and Restated Employment Agreement with Monte N. Redman, entered into as of October 16, 2014. (24)

B - 2

Exhibit No.	Identification of Exhibit
10.23	Astoria Financial Corporation Amended and Restated Employment Agreement with Gerard C. Keegan, entered into as of October 16, 2014. (24)
10.24	Astoria Bank Amended and Restated Employment Agreement with Gerard C. Keegan, entered into as of October 16, 2014. (24)
10.25	Astoria Financial Corporation Amended and Restated Employment Agreement with Alan P. Eggleston, entered into as of October 16, 2014. (24)
10.26	Astoria Bank Amended and Restated Employment Agreement with Alan P. Eggleston, entered into as of October 16, 2014. (24)
10.27	Astoria Financial Corporation Amended and Restated Employment Agreement with Frank E. Fusco, entered into as of October 16, 2014. (24)
10.28	Astoria Bank Amended and Restated Employment Agreement with Frank E. Fusco, entered into as of October 16, 2014. (24)
10.29	Letter Agreement, entered into as of September 14, 2014, by and between Astoria Bank and Hugh J. Donlon. (25)
10.30	Astoria Financial Corporation Employment Agreement with Hugh J. Donlon, entered into as of October 14, 2014. (24)
10.31	Astoria Bank Employment Agreement with Hugh J. Donlon, entered into as of October 14, 2014. (24)
10.32	Employment Agreement by and between Astoria Financial Corporation and Josie Callari, entered into as of January 1, 2012. (26)
10.33	Employment Agreement by and between Astoria Federal Savings and Loan Association n/k/a Astoria Bank and Josie Callari, entered into as of January 1, 2012. (26)
10.34	Employment Agreement by and between Astoria Financial Corporation and Robert J. DeStefano, entered into as of January 1, 2012. (27)
10.35	Employment Agreement by and between Astoria Federal Savings and Loan Association n/k/a Astoria Bank and Robert J. DeStefano, entered into as of January 1, 2012. (27)
10.36	Employment Agreement by and between Astoria Financial Corporation and Brian T. Edwards, entered into as of January 1, 2012. (26)
10.37	Employment Agreement by and between Astoria Federal Savings and Loan Association n/k/a Astoria Bank and Brian T. Edwards, entered into as of January 1, 2012. (26)
10.38	Employment Agreement by and between Astoria Financial Corporation and Stephen J. Sipola, entered into as of January 1, 2013. (28)
10.39	Employment Agreement by and between Astoria Federal Savings and Loan Association n/k/a Astoria Bank and Stephen J. Sipola, entered into as of January 1, 2013. (28)
10.40	Confirmation and acknowledgement of Bonus Schedule by Astoria Financial Corporation and Stephen J. Sipola as of March 5, 2013. (28) (29)

B - 3

Exhibit No.	Identification of Exhibit
10.41	Confirmation and acknowledgement of Bonus Schedule by Astoria Federal Savings and Loan Association n/k/a Astoria Bank and Stephen J. Sipola as of March 5, 2013. (28) (29)
10.42	Amended and Restated Change of Control Severance Agreement, entered into as of January 1, 2009, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and William J. Mannix, Jr. (11)
10.43	Amendment No. 1 to Amended and Restated Change of Control Severance Agreement by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and William J. Mannix, Jr. dated as of April 21, 2010. (30)
10.44	Change of Control Severance Agreement, entered into as of January 1, 2011, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Peter M. Finn. (31)
10.45	Change of Control Severance Agreement, entered into as of January 1, 2012, by and among Astoria Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Teresa A. Rotondo. (10)
10.46	Change of Control Severance Agreement, entered into as of February 15, 2012, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and John F. Kennedy. (10)
10.47	Change of Control Severance Agreement, entered into as of April 19, 2012, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Kevin Corbett. (10)
10.48	Change of Control Severance Agreement, entered into as of December 10, 2012, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Daniel F. Dougherty. (32)
10.49	Change of Control Severance Agreement, entered into as of January 1, 2013, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Rise Jacobs. (32)
10.50	Change of Control Severance Agreement, entered into as of January 1, 2013, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Rosina Manzi. (32)
10.51	Change of Control Severance Agreement, entered into as of January 1, 2013, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Nancy Tomich. (32)
10.52	Change of Control Severance Agreement, entered into as of January 7, 2013, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Mayra DiRico. (32)
10.53	Change of Control Severance Agreement, entered into as of September 18, 2013, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Barbara Glasser. (7)
10.54	Change of Control Severance Agreement, entered into as of April 16, 2014, by and among Astoria Federal Savings and Loan Association n/k/a Astoria Bank, Astoria Financial Corporation and Javier L. Evans. (33)
10.55	Change of Control Severance Agreement, entered into as of January 1, 2015, by and among Astoria Bank, Astoria Financial Corporation and David J. DeBaun. (6)

B - 4

Exhibit No.	Identification of Exhibit
10.56	Change of Control Severance Agreement, entered into as of January 1, 2015, by and among Astoria Bank, Astoria Financial Corporation and Michele M. Weber. (6)
10.57	Astoria Federal Savings and Loan Association n/k/a Astoria Bank Excess Benefit Plan, as amended effective April 30, 2012. (10)
10.58	Astoria Federal Savings and Loan Association n/k/a Astoria Bank Supplemental Benefit Plan, as amended effective April 30, 2012. (10)
10.59	Astoria Federal Savings and Loan Association’s n/k/a Astoria Bank Amended and Restated Retirement Medical and Dental Benefit Policy for Senior Officers (Vice Presidents & Above). (11)
12.1	Statement regarding computation of ratios. (*)
21.1	Subsidiaries of Astoria Financial Corporation. (*)
23.1	Consent of Independent Registered Public Accounting Firm. (*)
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 Securities and Exchange Commission rules, this exhibit will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, 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.LAB	XBRL Taxonomy Extension Labels Linkbase Document (*)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (*)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (*)

_______________________________

(*) Filed herewith.  Copies of exhibits other than Exhibit No. 101, the Interactive Data (XBRL) files which are not available in paper form, will be provided to shareholders upon written request to Astoria Financial Corporation, Investor Relations Department, One Astoria Bank Plaza, Lake Success, New York 11042 at a charge of $0.10 per page.  Copies are also available at no charge through the Securities and Exchange Commission’s website at www.sec.gov/edgar/searchedgar/webusers.htm.

(1) Incorporated by reference to Astoria Financial Corporation’s Current Report on Form 8-K, dated October 28, 2015, filed with the Securities and Exchange Commission on October 29, 2015 (File Number 001-11967) (Film Number 151183783).

B - 5

(2) Incorporated by reference to (i) Astoria Financial Corporation’s Quarterly Report on Form 10-Q/A for the quarter ended June 30, 1998, filed with the Securities and Exchange Commission on September 10, 1998 (File Number 000-22228), (ii) Astoria Financial Corporation’s Current Report on Form 8-K, dated September 6, 2006, filed with the Securities and Exchange Commission on September 11, 2006 (File Number 001-11967) and (iii) Astoria Financial Corporation’s Current Report on Form 8-K, dated September 20, 2006, filed with the Securities and Exchange Commission on September 22, 2006 (File Number 001-11967).

(3) Incorporated by reference to Astoria Financial Corporation’s Current Report on Form 8-K, dated March 19, 2008, filed with the Securities and Exchange Commission on March 20, 2008 (File Number 001-11967).

(4) Incorporated by reference to Astoria Financial Corporation’s Registration Statement on Form 8-A dated and filed with the Securities and Exchange Commission on March 19, 2013 (File Number 001-11967).

(5) Incorporated by reference to Astoria Financial Corporation’s Registration Statement on Form S-3 dated and filed with the Securities and Exchange Commission on May 19, 2010 (File Number 333-166957).

(6) Incorporated by reference to Astoria Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on February 27, 2015 (File Number 001-11967).

(7) Incorporated by reference to Astoria Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the Securities and Exchange Commission on February 27, 2014 (File Number 001-11967).

(8) Incorporated by reference to Astoria Financial Corporation’s Current Report on Form 8-K, dated June 14, 2012, filed with the Securities Exchange Commission on June 20, 2012 (File Number 001-11967).

(9) Incorporated by reference to Form 424B5 Prospectus Supplement, filed with the Securities and Exchange Commission on May 29, 2015 (File Number 333-204555).

(10) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed with the Securities and Exchange Commission on May 10, 2012 (File Number 001-11967).

(11) Incorporated by reference to Astoria Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission on February 27, 2009 (File Number 001-11967).

(12) Incorporated by reference to Astoria Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission on March 10, 2006 (File Number 001-11967).

(13) Incorporated by reference to Astoria Financial Corporation’s Schedule 14A Definitive Proxy Statement filed with the Securities and Exchange Commission on April 11, 2005 (File Number 001-11967).

(14) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the Securities and Exchange Commission on May 6, 2011 (File Number 001-11967).

(15) Incorporated by reference to Astoria Financial Corporation’s Schedule 14A Definitive Proxy Statement, filed with the Securities and Exchange Commission on April 11, 2011 (File Number 001-11967).

B - 6

(16) Incorporated by reference to Astoria Financial Corporation’s Schedule 14A Definitive Proxy Statement, filed with the Securities and Exchange Commission on April 11, 2014 (File Number 001-11967).

(17) Incorporated by reference to Astoria Financial Corporation’s Schedule 14A Definitive Proxy Statement, filed with the Securities and Exchange Commission on April 10, 2007 (File Number 001-11967).

(18) Incorporated by reference to Astoria Financial Corporation’s Schedule 14A Definitive Proxy Statement, filed with the Securities and Exchange Commission on April 12, 2010 (File Number 001-11967).

(19) Incorporated by reference to Astoria Financial Corporation’s Form S-8, filed with the Securities and Exchange Commission on November 30, 2010 (File No. 333-170874).

(20) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the Securities and Exchange Commission on August 5, 2011 (File Number 001-11967).

(21) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed with the Securities and Exchange Commission on May 8, 2009 (File Number 001-11967).

(22) Incorporated by reference to Astoria Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the Securities and Exchange Commission on March 24, 1999 (File Number 000-22228).

(23) Incorporated by reference to Astoria Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the Securities and Exchange Commission on February 26, 2010 (File Number 001-11967).

(24) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the Securities and Exchange Commission on November 6, 2014 (File Number 001-11967).

(25) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the Securities and Exchange Commission on May 8, 2015 (File Number 001-11967).

(26) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed with the Securities and Exchange Commission on August 7, 2012 (File Number 001-11967).

(27) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed with the Securities and Exchange Commission on November 7, 2012 (File Number 001-11967).

(28) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, filed with the Securities and Exchange Commission on May 8, 2013 (File Number 001-11967).

(29) Portions of these exhibits have been omitted pursuant to a request for confidential treatment.

(30) Incorporated by reference to Astoria Financial Corporation’s Current Report on Form 8-K dated and filed with the Securities and Exchange Commission on April 22, 2010 (File Number 001-11967).

B - 7

(31) Incorporated by reference to Astoria Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the Securities and Exchange Commission on February 25, 2011 (File Number 001-11967).

(32) Incorporated by reference to Astoria Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the Securities and Exchange Commission on February 27, 2013 (File Number 001-11967).

(33) Incorporated by reference to Astoria Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed with the Securities and Exchange Commission on May 8, 2014 (File Number 001-11967).

B - 8