March 15 (The following statement was released by the rating agency) Fitch Ratings has assigned a 'B' rating to Astoria Financial Corporation's (AF) $135 million non-cumulative perpetual preferred issuance. Fitch's current Long-term Issuer Default Rating and Viability Rating (VR) for AF are 'BBB-' and 'bbb-', respectively; the Rating Outlook is Stable. The securities will bear an annual coupon of 6.50%, payable quarterly. The securities are perpetual but callable in 2018. The proceeds from the issuance will be used to repay trust preferred securities and for general corporate purposes. RATING ACTION RATIONALE Bank hybrid securities, such as this preferred issuance, are notched down from the issuing entity's VR. The five-notch differential reflects three notches for incremental non-performance risk and two notches for loss severity of the preferred issuance relative to the average recoveries assumed for a typical bank senior debt instrument. KEY RATING DRIVERS The ratings of the preferred stock are directly tied to the performance of AF, which is embodied by its VR. In particular, deteriorating asset quality metrics, aggressive capital management or excessive loan growth in the multi-family business could lead to negative ratings pressure. Conversely, positive rating action is unlikely in the near term given AF's funding profile, profitability and concentrations.