Shares of Astoria Financial Corp. declined more than 6% Thursday, to close at $12.24, after the Lake Success, N.Y., company reported second-quarter earnings that fell well short of analysts' estimates.

Late Wednesday, Astoria reported a profit of $16.8 million in the quarter that ended June 30, down 39% from the prior quarter. Diluted earnings per share fell 38%, to 18 cents, a nickel short of consensus analysts' estimates, according to Thomson Reuters.

The earnings miss was driven largely by an increase in Astoria's provision for loan losses and lower-than anticipated mortgage income. The $17 billion-asset company set aside $10 million for loan losses in the quarter, compared to $7 million three months earlier, as its total nonperforming loans ticked up slightly.

Meanwhile, income from mortgage banking fell by nearly 85% from the prior quarter, to just $370,000, as demand for home loans in its markets remained weak. The lackluster demand for mortgages was a large reason why Astoria's assets have decreased by nearly $1 billion since the end of 2010.

In a news release, Monte N. Redman, Astoria's president and chief executive officer, said that while he was "disappointed" with the second-quarter results, he is confident that the company will be able to grow its balance sheet in the second half of this year.

"The increase in out loan pipeline, coupled with the anticipated reduction in the expanded conforming loan limits in October 2011, should facilitate future loan and balance-sheet growth in 2011 and strong growth starting in 2012," Redman said.

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