Commitments and Contingencies

Lease Commitments

At December 31, 2016, 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 $13.1 million for the year ended December 31, 2016, $12.9 million for the year ended December 31, 2015 and $12.5 million for the year ended December 31, 2014.

The minimum rental payments due under the terms of the non-cancelable operating leases at December 31, 2016, which have not been reduced by minimum sublease rentals of $470,000 due in 2017 under non-cancelable subleases, are summarized below.



Year		Amount
	(In Thousands)
2017		$	11,610
2018		10,260
2019		9,382
2020		8,795
2021		7,561
2022 and thereafter		24,819
Total		$	72,427

Outstanding Commitments

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



	At December 31,
(In Thousands)	2016		2015
Mortgage loans:
Commitments to extend credit – adjustable rate	$	180,144	$	227,966
Commitments to extend credit – fixed rate (1)	61,404		131,641
Commitments to purchase – adjustable rate	6,099		3,339
Commitments to purchase – fixed rate	49,109		19,685
Commitments to extend credit on consumer and other loans	5,820		16,157
Unused lines of credit:
Home equity and other consumer loans	68,902		79,119
Commercial and industrial loans	148,899		107,625
Commitments to sell loans	36,158		29,754

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(1)	Includes commitments to originate loans held-for-sale totaling $21.9 million at December 31, 2016 and $15.4 million at December 31, 2015.

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. No loans were repurchased during 2016 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 $312.3 million at December 31, 2016 and $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, 2016 and 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. See 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 $5.0 million at December 31, 2016 and $3.3 million at December 31, 2015. The fair values of these obligations were immaterial at December 31, 2016 and 2015.

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.

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 were 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. Each of the lawsuits was a putative class action filed on behalf of the stockholders of Astoria and named as defendants Astoria, its directors and NYCB, or collectively, the defendants.

The complaints generally alleged 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 stockholders, resulting in inadequate merger consideration, and improperly agreed to deal protection devices that allegedly precluded other bidders from making a successful competing offer for Astoria. The complaints further alleged that the directors of Astoria approved the Merger through a flawed and unfair sales process tainted by certain alleged conflicts of interest on the part of the Astoria directors.

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

On April 6, 2016, the defendants and lead plaintiffs entered into a memorandum of understanding, or the MOU, which provided for the settlement of the consolidated New York lawsuits. The MOU contemplated, among other things, that Astoria would make certain supplemental disclosures relating to the Merger, which supplemental disclosures were made on April 8, 2016 through a filing with the SEC by Astoria on a Current Report on Form 8-K.

The settlement contemplated by the MOU was subject to the consummation of the Merger and became null and void and of no further effect upon the termination of the Merger Agreement. In light of the termination of the Merger Agreement and the voidance of the MOU, on February 23, 2017, the defendants and the plaintiffs agreed to voluntarily discontinue the consolidated lawsuits without prejudice and without any costs to any party.