Astoria Financial (AF) could be a likely takeover target because of its recent emphasis on multifamily lending and a stock that is trading at a discount.

That's the view of Mark Fitzgibbon, an analyst at Sandler O'Neill & Partners. He wrote in a Tuesday note to his clients that the $17 billion-asset company could be a "tempting morsel" for several bigger banks to acquire. The thrift company's attractive credit profile could appeal to potential acquirers such as BankUnited (BKU), M&T Bank (MTB), People's United Financial (PBCT) and Toronto-Dominion Bank's TD Bank.

"We suspect (those companies) and others would have serious interest in the Astoria franchise if they waive the white flag," Fitzgibbon wrote. "In one fell swoop, a would-be acquirer would become a major player in New York City Metro."

Fitzgibbon's note also sought to dispel a number of "myths" surrounding Astoria. Unlike Hudson City Bancorp (HCBK), which agreed to sell itself to M&T in August, Astoria is not over-extended in single-family residential lending, he wrote. Astoria has rapidly expanded in multifamily lending, originating $1.2 billion of multifamily and commercial real estate loans this year. That has increased the percentage of multifamily loans in Astoria's overall loan portfolio, Fitzgibbon wrote.

Astoria's management set the table earlier this year for a possible sale, by reducing the size of Astoria's dividend, rather than raising capital and diluting existing shareholders, Fitzgibbon wrote. They also froze salaries and compensation for senior managers. Fitzgibbon wrote that insiders own 17% of Astoria, higher than the 3% average of similar banks. Astoria's employees are the company's second-biggest shareholder group as of April 6, owning about 11% of the company.

Astoria has a cheaper cost of deposits than Hudson City, Fitzgibbon wrote. Core deposits made up nearly 60% of Astoria's core deposits this month, compared to 51% at the end of last year. The Lake Success, N.Y., company has opportunities to lower deposit costs even more because it has a large book of high-priced certificates of deposits set are set to soon roll off its books.

Astoria could not be reached for comment. But in an October interview, Monte Redman, Astoria's president and chief executive, dismissed speculation that the company was for sale, saying that he intended to pursue more commercial loans and retail deposits along Long Island.

A spokesman for TD Bank said the company does not comment on speculation. Calls to BankUnited, M&T and People's United were not immediately returned.

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