Summary of ASTORIA FINANCIAL CORP

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q 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 may be subject to circumstances beyond our control;

· there may be increases in competitive pressure among financial institutions or from non-financial institutions;

· changes in the interest rate environment may reduce interest margins or affect the value of our investments;

· changes in deposit flows, loan demand or real estate values may adversely affect our business;

· changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently;

· 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 may be less favorable than we currently anticipate;

· legislative or regulatory changes may adversely affect our business;

· technological changes may be more difficult or expensive than we anticipate;

· success or consummation of new business initiatives may be more difficult or expensive than we anticipate; or

· litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may be determined adverse to us or may delay the occurrence or non-occurrence of events longer than we anticipate.

We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.

Executive Summary

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

Astoria Financial Corporation is a Delaware corporation organized as the unitary savings and loan association holding company of Astoria Federal. Our primary business is the operation of Astoria Federal. Astoria Federal's principal business is attracting retail deposits from the general public and investing those deposits, together with funds generated from operations, principal

repayments on loans and securities and borrowings, primarily in one-to-four family mortgage loans, multi-family mortgage loans, commercial real estate loans and mortgage-backed securities. 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 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.

During the nine months ended September 30, 2009, the national economy remained in a recession, with continued weakness in the housing and real estate markets and rising unemployment. During the nine months ended September 30, 2009, job losses totaled 4.1 million and the unemployment rate increased to 9.8% for September 2009. Although there was continued weakness in the economy during the 2009 third quarter, the nine months ended September 30, 2009 have shown a gradual improvement over the 2008 fourth quarter, during which time the disruption and volatility in the financial and capital markets reached a crisis level as national and global credit markets ceased to function effectively. Concern for the stability of the banking and financial systems reached a magnitude which resulted in unprecedented government intervention including, but not limited to, the passage of the Emergency Economic Stabilization Act of 2008 and the implementation of the Capital Purchase Program, or CPP, the Temporary Liquidity Guarantee Program, or TLGP, the Troubled Asset Relief Program, the Commercial Paper Funding Facility, the Capital Assistance Program, the Supervisory Capital Assessment Program and the Public-Private Investment Program, which are described in greater detail in Part II, Item 1A. "Risk Factors" in our June 30, 2009 Quarterly Report on Form 10-Q and in Item 1. "Business" of our 2008 Annual Report on Form 10-K. During 2009, some of these programs were expanded to stimulate the economy and stabilize the housing market.

The Federal Open Market Committee, or FOMC, has responded with monetary stimulus as well. The FOMC reduced the federal funds rate by 400+ basis points in 2008, bringing the target rate to 0.00% to 0.25%, where it remained through September 30, 2009.

As the premier Long Island community bank, our goals are to enhance shareholder value while building a solid banking franchise. We focus on growing our core businesses of mortgage portfolio lending and retail banking while maintaining strong asset quality and controlling operating expenses. We also provide returns to shareholders through dividends and stock repurchases although we have currently suspended our stock repurchase program and reduced our dividend to preserve capital and increase our capital ratios during this period of widespread economic distress.

Total assets decreased during the nine months ended September 30, 2009, primarily due to decreases in our loan and securities portfolios. The decrease in our loan portfolio was primarily due to decreases in each of our mortgage loan portfolios, primarily one-to-four family and multi-family loans, resulting from repayments outpacing origination and purchase volume. Repayments remained at elevated levels as interest rates on thirty year fixed rate mortgages declined and more loans in our portfolio qualified under the expanded loan amount limits that conform to GSE guidelines, or the expanded conforming loan limits, and were refinanced into fixed rate mortgages. During the 2009 second quarter, in response to declining customer demand for adjustable rate products, we began originating and retaining for portfolio jumbo fifteen year mortgage loans. The decrease in our securities portfolio was primarily the result of cash flow from repayments and sales exceeding securities purchased.

Total deposits decreased during the nine months ended September 30, 2009. This decrease was primarily due to decreases in certificates of deposit and Liquid CDs, partially offset by increases in savings, money market and NOW and demand deposit accounts. The increases in low cost savings, money market and NOW and demand deposit accounts reflect the decrease in competition for core community deposits, from that which we experienced during 2008, as credit markets have eased somewhat and larger institutions have utilized these alternative funding sources. Deposits decreased during the 2009 third quarter as we reduced our focus on certificates of deposit to offset the impact of accelerated prepayment activity in our loan and securities portfolios. Cash flows from mortgage loan and securities repayments, coupled with deposit growth during the first half of 2009, in excess of mortgage loan originations and purchases and securities purchases enabled us to repay a portion of our matured borrowings during the first half of 2009, which resulted in a decrease in our borrowings portfolio from December 31, 2008.

Net income increased for the three months ended September 30, 2009, compared to a net loss for the three months ended September 30, 2008. This increase is primarily due to a decrease in OTTI charges resulting from a $77.7 million, pre-tax, OTTI charge recorded in the 2008 third quarter related to our investment in two issues of Freddie Mac perpetual preferred securities, discussed in Note 2 of Notes to Consolidated Financial Statements in Item 1, "Financial Statements (Unaudited)," partially offset by increases in the provision for loan losses and non-interest expense and a decrease in net interest income. Net income for the nine months ended September 30, 2009 decreased compared to the nine months ended September 30, 2008. This decrease was primarily due to increases in the provision for loan losses and non-interest expense, partially offset by a decrease in OTTI charges and an increase in net interest income.

Net interest income decreased for the three months ended September 30, 2009, compared to the three months ended September 30, 2008, due to a decrease in interest income, substantially offset by a decrease in interest expense. For the nine months ended September 30, 2009, net interest income increased, compared to the nine months ended September 30, 2008, as a result of a decrease in interest expense, partially offset by a decrease in interest income. The net interest margin and the net interest rate spread for the three and nine months ended September 30, 2009 increased compared to the three and nine months ended September 30, 2008. The decreases in interest income were primarily due to decreases in the average yields on interest-earning assets, due in part to increases in our non-performing loans, and decreases in the average balances of mortgage-backed and other securities and multi-family, commercial real estate and construction loans, which, for the nine months ended September 30, 2009, were partially offset by an increase in the average balance of one-to-four family mortgage loans. The decreases in interest expense were primarily due to decreases in the average costs of our certificates of deposit and Liquid CDs and decreases in the average balances of borrowings and Liquid CDs, partially offset by increases in the average balances of certificates of deposit. Also contributing to the decrease in interest expense for the nine months ended September 30, 2009 was a decrease in the average cost of our borrowings.

The provisions for loan losses recorded during the three and nine months ended September 30, 2009 reflect the increase in and composition of our loan delinquencies, non-performing loans and net loan charge-offs, as well as our evaluation of the continued weakness in the housing and real estate markets and overall economy, particularly the continued pace of job losses. As a primarily residential lender, we are vulnerable to the impact of a severe job loss recession, due to its negative impact on the financial condition of residential borrowers and their ability to remain current on their mortgage loans. Non-interest income increased primarily due to the decreases in OTTI charges, coupled with increases in gain on sales of securities and mortgage banking

income, net, partially offset by decreases in other non-interest income, income from BOLI and customer service fees. The increase in non-interest expense for the three months ended September 30, 2009 was primarily due to a significant increase in regular Federal Deposit Insurance Corporation, or FDIC, insurance premiums, partially offset by a decrease in advertising expense. For the nine months ended September 30, 2009, the increase in non-interest expense was primarily due to a significant increase in regular FDIC insurance premiums, the second quarter $9.9 million FDIC special assessment and an increase in compensation and benefits expense, primarily pension expense, partially offset by decreases in occupancy, equipment and systems expense and advertising expense.

Although the economy is beginning to show signs of improvement, we continue to face challenges associated with high unemployment and depressed real estate values. We expect that job losses and economic weakness will continue to strain the financial condition of prime residential borrowers and their ability to remain current on their mortgage loans and the ability of tenants to pay rent in multi-family properties. This may result in somewhat higher non-performing loans and total delinquencies, although total loan delinquencies have recently shown signs of stabilizing. We are encouraged by the consecutive quarterly decline in 30 to 89 day loan delinquencies. If this trend continues, it should have a positive impact on future credit costs. In the near term, as a result of low interest rates for thirty year conforming mortgage loans, which we do not retain for our portfolio, coupled with the expanded conforming loan limits in many of the markets we operate in, loan prepayments will remain elevated and temper loan growth. We expect modest increases in the net interest margin going forward as we begin to realize the benefit from the reduction in excess liquidity and the significant certificate of deposit repricing opportunities in the 2009 fourth quarter and 2010 first quarter.

Available Information

Our internet website address is www.astoriafederal.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.astoriafederal.com. The above reports are available on our website immediately after they are electronically filed with or furnished to the SEC. Such reports are also available on the SEC's website at www.sec.gov/edgar/searchedgar/webusers.htm.

Critical Accounting Policies