Astoria Financial Corp.'s shares fell sharply Thursday after the Lake Success, N.Y., lender reported a 48% drop in its third-quarter earnings.

The $17 billion-asset company said after the stock market closed Wednesday that it earned $11.5 million in the quarter that ended Sept. 30, compared to $21.5 million in the same quarter last year. Its earnings per share fell 48%, to 12 cents, six cents shy of estimates of analysts polled by Thomson Reuters.

In heavy trading, Astoria's common stock fell 6.8% on Thursday, to $7.99 a share.

In a news release, Astoria President and Chief Executive Officer Monte N. Redman, attributed the dip in third-quarter profits to elevated prepayment activity, which reduced earnings assets by $400 million, and an increase in its Employee Stock Ownership Plan costs stemming from the nearly 40% drop in its stock price during the quarter.

On a more positive note, Redman said that the pace of the decline in its loan portfolio slowed significantly in the quarter and that its pipeline of one-to-four family and multi-family loans is growing. At Sept. 30, it had $1 billion of residential loans in its pipeline, up 28% from three months earlier, and nearly $253 million of loans in the multi-family pipeline, up from zero at June 30.

"We expect to see modest growth in the 2011 fourth quarter, accelerating further in 2012," Redman says.

--This article first appeared on American Banker