Commitments and Contingencies

Lease Commitments

At December 31, 2014, 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 $12.5 million for the year ended December 31, 2014, $13.5 million for the year ended December 31, 2013 and $11.1 million for the year ended December 31, 2012.

The minimum rental payments due under the terms of the non-cancelable operating leases at December 31, 2014, which have not been reduced by minimum sublease rentals of $4.1 million due in the future under non-cancelable subleases, are summarized below.



Year		Amount
	(In Thousands)
2015		$	12,323
2016		12,347
2017		10,858
2018		9,513
2019		8,619
2020 and thereafter		36,591
Total		$	90,251

Outstanding Commitments

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



	At December 31,
(In Thousands)	2014		2013
Mortgage loans:
Commitments to extend credit – adjustable rate	$	289,086	$	216,675
Commitments to extend credit – fixed rate (1)	74,157		50,303
Commitments to purchase – adjustable rate	10,334		8,521
Commitments to purchase – fixed rate	27,818		24,326
Commitments to extend credit on consumer and other loans	12,345		—
Unused lines of credit:
Home equity and other consumer loans	101,329		139,598
Commercial and industrial loans	64,074		38,372
Commitments to sell loans	20,904		19,114

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(1)	Includes commitments to originate loans held-for-sale totaling $14.8 million at December 31, 2014 and $9.2 million at December 31, 2013.

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.

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 were not required to repurchase any loans during 2014 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 $355.0 million at December 31, 2014 and $358.1 million at December 31, 2013. 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, 2014 and 2013.

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 contain usual and customary indemnification provisions protecting the purchaser from breaches of our representations, warranties and covenants. The indemnification protection expires 180 days after the closing. In addition, the loan sale agreements contain customary provisions obligating us to cure certain document deficiencies with respect to the loans that the purchaser identified to us prior to the closing. We have agreed that if we are unable to cure such deficiencies within 90 days after the closing or if we receive a valid indemnification claim with respect to a loan within 180 days after the closing, we will negotiate an adjustment to the purchase price for such loans, or, if we prefer, repurchase such loans. There were no adjustments to the purchase price for such loans or repurchases during 2014. The indemnification and document cure provisions are not expected to have a material impact on our liquidity, financial condition or results of operations. See Note 3 and Note 4 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 $1.2 million at December 31, 2014 and $513,000 at December 31, 2013. The fair values of these obligations were immaterial at December 31, 2014 and 2013.

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 two subsidiaries of Astoria Bank, Fidata Service Corp., or Fidata, and Astoria Federal Mortgage Corp., or AF Mortgage. We disagree with the assertion of the tax deficiencies. Hearings in this matter 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 are in the process of preparing and submitting briefs to the NYC Tax Appeals Tribunal and a hearing date for the appeal will be set after all briefs have been submitted. 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, 2014 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. This deficiency related to our operation of Fidata and AF Mortgage and the basis of the 2014 Notice is substantially the same as that of the 2010 and 2011 Notices. We disagree with the assertion of the tax deficiency and we filed a Petition for Hearing with the City of New York on February 13, 2015 to oppose the 2014 Notice. 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. Accordingly, no liability or reserve has been recognized in our consolidated statement of financial condition at December 31, 2014 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 2010, 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.