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Astoria CEO: Lack of clarity led to NYCB deal termination

Lake Success, N.Y.-based Astoria Financial Corp.'s President and CEO Monte Redman said the decision to mutually terminate the company's deal with Westbury, N.Y.-based New York Community Bancorp Inc. was a result of regulatory hangups on New York Community's part.

Redman chose his words carefully on the the company's fourth-quarter 2016 earnings call, but he said hesitation came after New York Community Bancorp told Astoria the company wouldn't receive regulatory approval to close the deal in 2016.

"At that point, we tried to clarify the situation, but [if] the deal was not going to close within 14 months, how long would it take?" Redman said.

During New York Community Bancorp's Jan. 25 earnings call, management didn't say who backed away first, but blamed the "environment" for breaking up its acquisition of Astoria. The deal was valued at approximately $2 billion, and would have pushed New York Community over the $50 billion-asset threshold, subjecting the company to additional regulatory scrutiny and stress testing.

Redman didn't comment on whether Astoria will continue searching for a partner, but said the company is "reviewing its strategic plan" and taking into account expected changes to the interest rate environment and regulatory compliance measures.

Analysts on the call questioned if Astoria's decline in hiring — down 174 people year over year — was a result of the planned merger. Redman said the company retained a "core part" of its team throughout the deal process, and implied that about half of the decline was planned before the merger announcement.

"Still, again [we're an] institution focused on creating value and seizing opportunities," Redman said. "We will have selected hires to make in the future to enhance our team, but that core part of our team has remained throughout the process."

Total deposits were $8.9 billion at the end of 2016, a decrease of $229.0 million from year-end 2015. Redman said he doesn't expect the pipeline to grow in the first quarter, but will build during the remainder of the year. He added that without the New York Community merger pending, the company will focus on growing its multifamily commercial real estate portfolio, and generating new business banking and lending clients.

Astoria reported net income available to common shareholders of $13.7 million, or 14 cents per share, compared to $16.2 million, or 16 cents per share, in the year-ago period. The company's earnings release noted the change was primarily due to a decrease in its loan portfolio, which was down $735.9 million from a year ago, to a total of $10.4 billion. The company's multifamily commercial loan portfolio, which represents 46% of the total loan portfolio, was $4.8 billion at the end of the fourth quarter of 2016. The portfolio decreased by $67.7 million from Dec. 31, 2015.