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.

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 the discount 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 the components 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

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 the assumed 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 a one-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

The Astoria Bank Pension Plan’s assets are measured at estimated fair 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 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		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 estimated fair 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.

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 estimated fair 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.

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.