Aberdeen Amboy Amityville Annadale Astoria Auburndale Babylon Baldwin Bay Ridge Bay Shore Bay Terrace Bayonne Bayside
Bayville Bedford-Stuyvesant Bellerose Bellmore Bensonhurst Bethpage Boro Park Brentwood Brick Bronx Brooklyn Bulls Head
Caldwell Castleton Corners Centereach Clark College Point Commack Co-op City Corona Corona Heights Cranford Deepdale
Deer Park Ditmars Dongan Hills Dyker Heights East Islip East Meadow East Newark East Northport East Rockaway East Windsor
Elizabeth Eltingville Essex Fairfield Farmingdale Flushing Forest Hills Franklin Square Freehold Freeport Fresh Meadows Garden
City Gowanus Grasmere Gravesend Great Kills Greenvale Harrison Hauppauge Hewlett Hicksville Holbrook Homecrest Howard
Beach Howell Hudson Huntington Station Iselin Islandia Islip Jackson Heights Jericho Kenilworth Kew Gardens Hills Lake Success
L awrence Linden Lit tle Neck
Marine Park Marlboro Massapequa
Melville Mercer Merrick Middlesex
Montclair Morganville Murray Hill
New Springville New York City Newark
Yonkers Ocean Oceanside Old Bridge
Plainview Port Jefferson Port
H eig h t s Q u e e n s R e g o P a r k
R o nko nko m a R o s elan d R o sl y n
Smithtown South Richmond Hill
St. James Starrett City Staten Island
Syosset Toms River Tottenville Union
Washington Heights West Babylon
Hempstead West Orange Westbury
Livingston Long Island City Manhattan
Massapequa Park Matawan Medford
Mineola Monmouth Monroe
Nassau New Dorp New Hyde Park
North Babylon North Brunswick North
Ozone Park Park Slope Patchogue
Richmond Port Washington Prospect
Richmond Ridgewood Rockaway Park
Rossville Sayreville Seaford Shirley
Spotswood Springfield Gardens
Steinway Suffolk Summit Sunnyside
Upper Montclair Valley Stream Verona
West Brighton West Caldwell West
Westchester Westerleigh Whitestone
Woodbury Woodhaven Woodside Yonkers Aberdeen Amboy Amityville Annadale Astoria Auburndale Babylon Baldwin Bay Ridge
Bay Shore Bay Terrace Bayonne Bayside Bayville Bedford-Stuyvesant Bellerose Bellmore Bensonhurst Bethpage Boro Park Brentwood
Brick Bronx Brooklyn Bulls Head Caldwell Castleton Corners Centereach Clark College Point Commack Co-op City Corona Corona
Heights Cranford Deepdale Deer Park Ditmars Dongan Hills Dyker Heights East Islip East Meadow East Newark East Northport
East Rockaway East Windsor Elizabeth Eltingville Essex Fairfield Farmingdale Flushing Forest Hills Franklin Square Freehold Freeport
Fresh Meadows Garden City Gowanus Grasmere Gravesend Great Kills Greenvale Harrison Hauppauge Hewlett Hicksville Holbrook
Homecrest Howard Beach Howell Hudson Huntington Station Iselin Islandia Islip Jackson Heights Jericho Kenilworth Kew Gardens
Hills Lake Success Lawrence Linden Little Neck Livingston Long Island City Manhattan Marine Park Marlboro Massapequa
Massapequa Park Matawan Medford Melville Mercer Merrick Middlesex Mineola Monmouth Monroe Montclair Morganville
Murray Hill Nassau New Dorp New Hyde Park New Springville New York City Newark North Babylon North Brunswick North Yonkers
Ocean Oceanside Old Bridge Ozone Park Park Slope Patchogue Plainview Port Jefferson Port Richmond Port Washington
Prospect Heights Queens Rego Park Richmond Ridgewood Rockaway Park Ronkonkoma Roseland Roslyn Rossville Sayreville Seaford
Shirley Smithtown South Richmond Hill Spotswood Springfield Gardens St. James Starrett City Staten Island Steinway Suffolk
Summit Sunnyside Syosset Toms River Tottenville Union Upper Montclair Valley Stream Verona Washington Heights West Babylon
West Brighton West Caldwell West Hempstead West Orange Westbury Westchester Westerleigh Whitestone Woodbury Woodhaven
Woodside Yonkers Aberdeen Amboy Amityville Annadale Astoria Auburndale Babylon Baldwin Bay Ridge Bay Shore Bay Terrace
Bayonne Bayside Bayville Bedford-Stuyvesant Bellerose Bellmore Bensonhurst Bethpage Boro Park Brentwood Brick Bronx Brooklyn
Bulls Head Caldwell Castleton Corners Centereach Clark College Point Commack Co-op City Corona Corona Heights Cranford
Westchester
Manhattan
Bronx
Suffolk
Essex
Hudson
Union
Kings
Middlesex
Richmond
Queens
Nassau
New York
Monmouth
Mercer
New Jersey
Ocean
TM
New York Community Bank
New York Commercial Bank
Our growth has been driven by organic loan production and by eight accretive
acquisitions in as many years.
(dollars in billions)
12/31/99
w/ Haven
Bancorp, Inc.
(HAVN)
12/31/00
w/ Richmond County
Financial Corp.
(RCBK)
12/31/01
w/ Roslyn
Bancorp, Inc.
(RSLN)
12/31/03
w/ Long Island
Financial
Corp.
(LICB)
12/31/05
w/ Atlantic
Bank of
New York
(ABNY)
12/31/06
w/ PennFed
Financial
Services, Inc.
(PFSB),
Synergy
Financial
Group, Inc.
(SYNF), and
Doral Bank,
FSB (Doral)(a)
12/31/07
Compound
Annual
Growth
Rate
Number of branches
Multi-family loans
Total loans
Total assets
Core deposits
Total deposits
(a) In addition to acquiring PennFed Financial Services, Inc. and Synergy Financial Group, Inc. in 2007, we acquired 11 branches and certain assets and liabilities from Doral Bank, FSB.
40.9%
34.0
37.3
41.5
40.2
36.7
139
$ 7.4
10.5
23.4
6.0
10.3
152
$12.9
17.0
26.3
6.9
12.1
166
$14.5
19.7
28.5
6.7
12.6
217
$14.1
20.4
30.6
6.2
13.2
14
$1.3
1.6
1.9
0.4
1.0
86
$1.9
3.6
4.7
1.4
3.3
120
$3.3
5.4
9.2
3.0
5.5
Westchester
Manhattan
Bronx
Suffolk
Queens
Nassau
Essex
Hudson
Union
Kings
Middlesex
Richmond
New York
Monmouth
Mercer
New Jersey
Ocean
Company profile
With assets of $30.6 billion at December 31, 2007, new york Community
Bancorp, inc. (NYSE: NYB) is a leading financial institution in the dynamic
Metro New York/New Jersey region, and the fifth largest publicly traded bank
holding company headquartered in New York State.
We serve the region’s consumers and businesses through two primary
subsidiaries: New York Community Bank, a New York State-chartered savings
bank with 179 branches in New York City, Long Island, Westchester County, and
New Jersey; and New York Commercial Bank, a New York State-chartered commercial
bank with 38 branches in Manhattan, Queens, Brooklyn, Westchester County,
and Long Island.
In a market where the number of banks and thrifts now exceeds 200, we are
the second largest depository in the New York City borough of Staten Island,
and the fifth largest depository in the borough of Queens. On Long Island, we
rank fifth among all banks and thrifts in Nassau County and sixth in Suffolk
County. In New Jersey, where we expanded our Community Bank franchise
through two acquisitions in 2007, our rank among thrift depositories rose from
18th to fifth.
We also rank among the region’s leading multi-family lenders, with a $14.1
billion multi-family loan portfolio at December 31st. The majority of our
multi-family loans are secured by rent-regulated buildings in New York City,
a niche that has supported our historical record of solid asset quality. Non-
performing assets represented 0.07% of total assets at the end of December;
moreover, 2007 was our 28th consecutive year without a loss within our
multi-family niche.
Our 2007 performance was not only distinguished by the quality of our
assets, but also by the stability provided by our tangible capital strength. Tangible
stockholders’ equity represented 5.83% of tangible assets at December 31, 2007,
a 36-basis point increase from the year-earlier measure and a key factor in our
ability to maintain our $1.00 per share annualized cash dividend.
Our performance was also distinguished by a year-over-year increase in
both our net interest income and non-interest income, and by the year-over-year
expansion of our net interest margin. These achievements were largely a tribute
to the consistency of our business model, which not only calls for the production
of quality loans, with an emphasis on multi-family lending, but also for
the growth of the Company through accretive acquisitions and the strategic
repositioning of our post-acquisition balance sheet.
We invite you to learn more about the discernable differences that distin-
guished us throughout 2007, and that we expect will continue to set us apart,
favorably, in 2008.
aBout our Cover
The cover of our Annual Report highlights the discernable differences that distinguished
our performance in 2007: the quality of our assets, the consistency of our business model,
and the stability provided by our tangible capital strength. In the background are the
communities throughout Metro New York and New Jersey that are home to our
217 branch offices.
2007 Annual Report
Communit y Bank Divisions
R O O S E V E L T S A V I N G S B A N K D I V I S I O N
CommerCial Bank Division
1
Fellow Shareholders:
Quality. Consistency. Stability.
At no other time in our public life have these qualities been more important
to bank investors—or more indicative of the differences between
New York Community Bancorp and our industry peers.
Accordingly, I’d like to devote this letter to discussing the unique features that distinguished our per-
formance in 2007 and, I expect, will continue to do so in 2008.
Quality
In a year when deteriorating credit quality and rising foreclosures led to widespread industry losses,
we maintained the solid quality of our assets and marked our 28th consecutive year without a loss within our
primary lending niche.
We are, and have for decades been, a leading producer of multi-family loans on rent-regulated buildings
in New York City, and have based our loans on the cash flows produced by the properties collateralizing
these loans.
The borrowers we lend to are typically long-term owners of properties that have been in their families
for decades, and who consistently use the funds we provide to improve these properties. The improvements
they make enable them to increase the rent rolls produced by their buildings, and those rent rolls represent a
steady and reliable income stream. In the best—and in the worst—of times, these buildings tend to retain
their tenants and their value. They also provide the foundation for our record of asset quality.
Largely reflecting this lending niche, and our conservative underwriting standards, non-performing
assets represented 0.07% of total assets at year-end 2007, an improvement from 0.08% at year-end 2006.
Notably, the ratio of charge-offs to average loans has been less than 0.002% in each of the past 13 quarters,
and all of the loans charged off during this time were produced by banks that we acquired. In addition, the
fourth quarter of 2007 was our 52nd consecutive quarter without a loss on any loan that we produced
organically.
Aside from our primary lending niche and our prudent credit standards, we attribute our asset quality
to a high level of discipline. In the past few years, when lending more would have required us to compromise
our standards, we chose to limit our lending at the expense of earnings growth. Similarly, when opportunities
to acquire other banks arose, we consistently stepped away from the table when the target’s loan portfolio was
2
TOTAL ORIGINATIONS:
$677
$616
$1,150
$2,560
$4,330
$6,041
$6,332
$4,971
$4,853
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1.0
0.8
0.6
0.4
0.2
0.0
25000
20000
15000
10000
5000
0
15000
12000
9000
6000
3000
0
3000
2500
2000
1500
1000
500
0
3000
2400
1800
1200
600
0
0.25
0.20
0.15
0.10
0.05
0.00
3000
2500
2000
1500
1000
500
0
2007 Annual Report
Asset Quality Measures 12/31/07
Non-performing Assets + Loans 90 Days
Past Due/Total Assets
1.01%
0.55%
0.07%
Non-performing Loans/Total Loans
Net Charge-offs/Average Loans
1.08%
0.68%
0.25%
0.13%
0.11%
0.002%
SNL Bank and Thrift Index(a) N.Y. & N.J. Banks & Thrifts(a) NYB
(a) SNL DataSource
Loan Growth (in millions)
at odds with our aversion to credit risk. In the process of conducting due diligence, our focus on asset quality
Multi-family loans: 34.0% CAGR
Total loans: 37.3% CAGR
consistently trumps our focus on franchise growth.
Notwithstanding the distinctive features of our lending niche and the conservative nature of our credit
standards, we do not expect to remain immune to the current downturn in the credit cycle. Nonetheless, we
$12,854
do believe that these unique characteristics will continue to distinguish our performance as the cycle evolves.
$3,131
w/ RSLN
$7,368
$3,557
$9,839
w/ PFSB, SYNF, & Doral
w/ ABNY
w/ LICB
$5,125
$6,314
$4,175
$14,529
$14,052
$263
$1,348
w/ HAVN
$1,690
$1,946
w/ RCBK
$995
$2,150
Consistency
$4,494
$3,255
In a year when market volatility proved a distraction for most financial institutions, we maintained our
12/31/02
focus on what has always mattered to us most: enhancing the value of your shares by producing multi-family
$5,489
TOTAL LOANS:
loans in accordance with our prudent underwriting standards, maintaining an efficient operation, and enhancing
$20,366
$19,654
$17,029
$13,396
$10,499
12/31/06
12/31/05
12/31/04
12/31/03
12/31/01
12/31/99
12/31/00
12/31/07
$3,636
$1,611
$5,405
Multi-family Loans Outstanding All Other Loans Outstanding
the Company’s earnings through strategic acquisitions and the subsequent repositioning of our balance sheet.
While the earnings of many banks were diminished last year by significant losses, we were pleased to
realize an increase in our earnings and diluted earnings per share. In 2007, our earnings rose $46.5 million, or
Deposit Growth (in millions)
20.0%, to $279.1 million, equivalent to a $0.09, or 11.1%, increase in diluted earnings per share to $0.90.
w/ PFSB, SYNF, & Doral
Our performance was largely attributable to our consistent business model—a model we have pursued
$1,273
with discipline throughout our public life. Our focus on multi-family loans predates our conversion to stock
w/ ABNY
$1,123
form. With few exceptions, the same can be said of our underwriting standards, and the process we follow
$5,551
$739
Total deposits: 36.7% CAGR
Core deposits: 40.2% CAGR
Demand deposits: 54.1% CAGR
in appraising the properties collateralizing our loans. We continue to rank among the most efficient banks
$5,911
in the nation. And our acquisition strategy has been designed to enhance both our value and our earnings,
w/ RSLN
$720
$5,247
while strengthening our franchise and our ability to perform in the face of economic adversity.
$5,945
$4,971
$6,913
w/ RCBK
$455
$465
w/ HAVN
$171
$2,587
$2,842
$4,362
$3,752
w/ LICB
$846
$6,012
$5,247
A Disciplined Approach to Lending
$40
$378
$658
$1,212
$1,874
$2,408
$1,949
Reflecting acquired assets and organic loan production, our loan portfolio grew to $20.4 billion over
the course of 2007, with multi-family loans representing $14.1 billion, or 69.0%, of the total, and commercial
12/31/06
12/31/05
12/31/04
12/31/03
12/31/02
12/31/99
12/31/01
12/31/00
12/31/07
real estate loans representing $3.8 billion, or 18.8%. The average multi-family loan featured a loan-to-value
TOTAL DEPOSITS:
$13,157
$12,619
$12,105
$10,402
$10,329
$3,257
$1,076
$5,256
$5,450
ratio of 64.5%, well below our limit; similarly, the average commercial real estate loan had an LTV of 56.9%.
CDs NOW, MMAs, and Savings Demand deposits
The remainder of our portfolio consisted of construction loans, primarily made to seasoned developers of
Total Return on Investment (from 11/23/93(a) through the date noted)
SINCE OUR IPO:
The total return on investment on our shares has grown
at a compound annual growth rate of 39.2%.
Our quarterly cash dividend has increased 8,900%.
As a result of nine stock splits in a span of 10 years,
our charter shareholders have 2,700 shares of NYB
stock for each 100 shares originally purchased.
2,474%
2,873%
3
718%
518%
244%
885%
610%
669%
454%
12/31/99
12/31/06
12/31/07
SNL Bank and Thrift Index(b) N.Y. & N.J. Banks & Thrifts(b) NYB(c)
(a) Our IPO date
(b) SNL Financial
(c) Bloomberg
TOTAL ORIGINATIONS:
$677
$616
$1,150
$2,560
$4,330
$6,041
$6,332
$4,971
$4,853
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1.0
0.8
0.6
0.4
0.2
0.0
25000
20000
15000
10000
5000
0
15000
12000
9000
6000
3000
0
3000
2500
2000
1500
1000
500
0
3000
2400
1800
1200
600
0
0.25
0.20
0.15
0.10
0.05
0.00
3000
2500
2000
1500
1000
500
0
Asset Quality Measures 12/31/07
Non-performing Assets + Loans 90 Days
Past Due/Total Assets
1.01%
0.55%
Non-performing Loans/Total Loans
Net Charge-offs/Average Loans
1.08%
0.68%
0.25%
0.13%
0.07%
28SNL Bank and Thrift Index(a) N.Y. & N.J. Banks & Thrifts(a) NYB
years
2007 was our 28th consecutive year without a loss in our
multi-family lending niche.
(a) SNL DataSource
0.11%
0.002%
Loan Growth (in millions)
Multi-family loans: 34.0% CAGR
Total loans: 37.3% CAGR
$263
$1,348
w/ HAVN
$1,690
$1,946
w/ RCBK
$2,150
$3,255
$995
$4,494
12/31/99
12/31/00
12/31/01
12/31/02
TOTAL LOANS:
$1,611
$3,636
$5,405
$5,489
Multi-family Loans Outstanding All Other Loans Outstanding
w/ PFSB, SYNF, & Doral
w/ ABNY
$5,125
$6,314
$14,529
$14,052
w/ LICB
$4,175
$12,854
w/ RSLN
$3,131
$7,368
$3,557
$9,839
12/31/03
$10,499
12/31/04
$13,396
12/31/05
$17,029
12/31/06
$19,654
12/31/07
$20,366
Total deposits: 36.7% CAGR
Core deposits: 40.2% CAGR
Demand deposits: 54.1% CAGR
multi-family buildings and residential tract projects, and commercial and industrial loans made to small and
Deposit Growth (in millions)
mid-size businesses within our marketplace. One- to four-family loans accounted for less than 2% of our loans
w/ PFSB, SYNF, & Doral
outstanding, and consisted almost entirely of loans we’ve acquired in our merger transactions with other banks.
$1,273
We are not, nor have we been, a subprime or Alt-A mortgage lender; nor have we acquired any subprime
or Alt-A loans in connection with our growth-through-acquisition strategy. Furthermore, none of our securities
are backed by subprime- or Alt-A-related issues. In the current market, it is critical that the distinction between
our balance sheet and the balance sheets of those who produced and invested in such assets be not only
$465
w/ RCBK
$455
w/ RSLN
$720
$5,247
$739
$5,911
$4,971
$6,913
w/ LICB
$846
$6,012
w/ ABNY
$1,123
$5,551
w/ HAVN
emphasized, but also understood.
$171
$2,587
$2,842
Acquisition-driven Growth
$40
$378
$658
$1,212
$1,874
$2,408
$1,949
$4,362
$3,752
$5,247
$5,945
In the eight years since we embarked on our series of acquisitions, we’ve acquired five savings
12/31/07
banks, two commercial banks, and a branch network. Three of these transactions took place in the last
TOTAL DEPOSITS:
twelve months.
$13,157
$12,619
$12,105
$10,402
$10,329
12/31/05
12/31/04
12/31/03
12/31/02
12/31/99
12/31/06
12/31/01
12/31/00
$1,076
$3,257
$5,256
$5,450
CDs NOW, MMAs, and Savings Demand deposits
In April 2007, our acquisition of PennFed Financial Services, Inc. added 24 branches to our Community
Bank franchise in New Jersey. In October, the acquisition of Synergy Financial Group, Inc. increased that
franchise from 32 to 53 branches, further augmenting our share of deposits in the central part of the state.
With the acquisition of 11 branches from Doral Bank, FSB in July of last year, we expanded our Commercial
Total Return on Investment (from 11/23/93(a) through the date noted)
Bank franchise from 27 to 38 branches, and heightened our visibility in the New York City boroughs of
Manhattan, Brooklyn, and Queens. The acquisition also provided us with new headquarters for our Atlantic
SINCE OUR IPO:
2,873%
Bank division, together with certain assets and liabilities.
The total return on investment on our shares has grown
at a compound annual growth rate of 39.2%.
2,474%
Our quarterly cash dividend has increased 8,900%.
In a year when declining liquidity caused many competitors to exit our market, we enjoyed a contrasting
upsurge in liquidity. Our three acquisitions and the subsequent sale of certain acquired assets provided us with
the cash flows to capitalize on market conditions, enabling us to increase the yields on our interest-earning
As a result of nine stock splits in a span of 10 years,
our charter shareholders have 2,700 shares of NYB
stock for each 100 shares originally purchased.
718%
885%
610%
669%
454%
assets and, at the same time, to contain our funding costs.
518%
244%
Moreover, an increase in refinancing activity and property sales in the multi-family market resulted in
a significant rise in prepayment penalty income. As a result, we realized a year-over-year increase in our net
12/31/99
12/31/07
12/31/06
SNL Bank and Thrift Index(b) N.Y. & N.J. Banks & Thrifts(b) NYB(c)
(a) Our IPO date
(b) SNL Financial
(c) Bloomberg
4
TOTAL ORIGINATIONS:
$677
$616
$1,150
$2,560
$4,330
$6,041
$6,332
$4,971
$4,853
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1.0
0.8
0.6
0.4
0.2
0.0
25000
20000
15000
10000
5000
0
15000
12000
9000
6000
3000
0
3000
2500
2000
1500
1000
500
0
3000
2400
1800
1200
600
0
0.25
0.20
0.15
0.10
0.05
0.00
3000
2500
2000
1500
1000
500
0
Non-performing Assets + Loans 90 Days
Non-performing Loans/Total Loans
Net Charge-offs/Average Loans
1.08%
0.68%
0.25%
0.13%
0.11%
0.002%
SNL Bank and Thrift Index(a) N.Y. & N.J. Banks & Thrifts(a) NYB
Asset Quality Measures 12/31/07
Past Due/Total Assets
1.01%
0.55%
0.07%
(a) SNL DataSource
Loan Growth (in millions)
Multi-family loans: 34.0% CAGR
Total loans: 37.3% CAGR
w/ PFSB, SYNF, & Doral
w/ ABNY
$5,125
$6,314
$14,529
$14,052
w/ LICB
$4,175
$12,854
2007 Annual Report
w/ RSLN
$3,131
$7,368
$3,557
$9,839
12/31/03
$10,499
12/31/04
$13,396
12/31/05
$17,029
12/31/06
$19,654
12/31/07
$20,366
$263
$1,348
w/ HAVN
$1,690
$1,946
w/ RCBK
$2,150
$3,255
$995
$4,494
12/31/99
12/31/00
12/31/01
12/31/02
TOTAL LOANS:
$1,611
$3,636
$5,405
$5,489
Multi-family Loans Outstanding All Other Loans Outstanding
Deposit Growth (in millions)
Total deposits: 36.7% CAGR
Core deposits: 40.2% CAGR
Demand deposits: 54.1% CAGR
w/ HAVN
$171
$1,212
$1,874
12/31/00
$3,257
$40
$378
$658
12/31/99
$1,076
TOTAL DEPOSITS:
w/ LICB
$846
$6,012
w/ ABNY
$1,123
$5,551
$5,247
$5,945
w/ PFSB, SYNF, & Doral
$1,273
$4,971
$6,913
w/ RSLN
$720
$5,247
$739
$5,911
$4,362
$3,752
w/ RCBK
$455
$2,587
$465
$2,842
$2,408
$1,949
12/31/01
$5,450
12/31/02
$5,256
12/31/03
$10,329
12/31/04
$10,402
12/31/05
$12,105
12/31/06
$12,619
12/31/07
$13,157
CDs NOW, MMAs, and Savings Demand deposits
interest margin, and a 9.8% increase in our net interest income, our primary earnings source. While the average
Total Return on Investment (from 11/23/93(a) through the date noted)
industry margin declined 18 basis points over the course of 2007, our margin, in comparison, rose 11 basis points.
Our acquisition strategy has also resulted in an infusion of deposits, and with it, a marked improve-
SINCE OUR IPO:
2,873%
ment in our deposit market share. Moreover, as retail funding costs spiraled upward in an overheated
2,474%
The total return on investment on our shares has grown
at a compound annual growth rate of 39.2%.
market, the volume of deposits we acquired enabled us to step back from the competition and thus contain
Our quarterly cash dividend has increased 8,900%.
our deposit costs.
As a result of nine stock splits in a span of 10 years,
Furthermore, while the expansion of our franchise contributed to an increase in operating expenses,
our charter shareholders have 2,700 shares of NYB
stock for each 100 shares originally purchased.
our efficiency ratio continued to rank among the industry’s best. In 2007, the average ratio was 67.68% for
518%
718%
669%
610%
885%
the SNL Bank and Thrift Index; in contrast, our efficiency ratio was a substantially lower, and therefore
244%
454%
preferable, 41.17%.
12/31/99
12/31/06
12/31/07
SNL Bank and Thrift Index(b) N.Y. & N.J. Banks & Thrifts(b) NYB(c)
Stability
(a) Our IPO date
(b) SNL Financial
(c) Bloomberg
loan loss provisions, our measures of capital reflected continued strength and stability. At the end of last year,
In a year when the capital measures of many banks were weakened by mounting losses and increased
our adjusted tangible stockholders’ equity represented 5.88% of adjusted tangible assets—a 22-basis point
increase from the measure recorded at year-end 2006. Including mark-to-market adjustments on securities,
our ratio of tangible stockholders’ equity to tangible assets rose 36 basis points year-over-year to 5.83%.
The stability that continues to stem from the Company’s capital measures is supported by the capital
strength of our bank subsidiaries. Both New York Community Bank and New York Commercial Bank are well
capitalized institutions—with Tier 1 capital ratios of 11.29% and 11.91%, for example—and have maintained
this designation while paying meaningful dividends to the Company.
While credit losses have forced a number of banks to substantially reduce or cease their dividend
payments, we distributed dividends of $310.2 million to our investors in 2007, in the form of an annualized
dividend of $1.00 per share. Given our earnings and capital growth, and the potential for continued expansion,
we remain confident in our commitment to this dividend.
5
TOTAL ORIGINATIONS:
$677
$616
$1,150
$2,560
$4,330
$6,041
$6,332
$4,971
$4,853
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1.0
0.8
0.6
0.4
0.2
0.0
25000
20000
15000
10000
5000
0
15000
12000
9000
6000
3000
0
3000
2500
2000
1500
1000
500
0
3000
2400
1800
1200
600
0
0.25
0.20
0.15
0.10
0.05
0.00
3000
2500
2000
1500
1000
500
0
Non-performing Assets + Loans 90 Days
Non-performing Loans/Total Loans
Net Charge-offs/Average Loans
1.08%
0.68%
0.25%
0.13%
0.11%
0.002%
SNL Bank and Thrift Index(a) N.Y. & N.J. Banks & Thrifts(a) NYB
Asset Quality Measures 12/31/07
Past Due/Total Assets
1.01%
0.55%
0.07%
(a) SNL DataSource
Loan Growth (in millions)
Multi-family loans: 34.0% CAGR
Total loans: 37.3% CAGR
w/ PFSB, SYNF, & Doral
w/ ABNY
$5,125
$6,314
$14,529
$14,052
w/ LICB
$4,175
$12,854
w/ RSLN
$3,131
$7,368
$3,557
$9,839
$263
$1,348
w/ HAVN
$1,690
$1,946
w/ RCBK
$2,150
$3,255
$995
$4,494
12/31/99
12/31/00
12/31/01
12/31/02
TOTAL LOANS:
$1,611
$3,636
$5,405
$5,489
Multi-family Loans Outstanding All Other Loans Outstanding
12/31/03
$10,499
12/31/04
$13,396
12/31/05
$17,029
12/31/06
$19,654
12/31/07
$20,366
Deposit Growth (in millions)
Total deposits: 36.7% CAGR
Core deposits: 40.2% CAGR
Demand deposits: 54.1% CAGR
w/ RCBK
$455
$2,587
$465
$2,842
$2,408
$1,949
w/ HAVN
$171
$1,212
$1,874
$40
$378
$658
w/ LICB
$846
$6,012
w/ ABNY
$1,123
$5,551
$5,247
$5,945
w/ PFSB, SYNF, & Doral
$1,273
$4,971
$6,913
w/ RSLN
$720
$5,247
$739
$5,911
$4,362
$3,752
TOTAL DEPOSITS:
12/31/99
12/31/00
12/31/01
12/31/02
12/31/03
12/31/04
12/31/05
12/31/06
12/31/07
$1,076
CDs NOW, MMAs, and Savings Demand deposits
2,873% From the time of our IPO through December 31, 2007, our
shares provided a total return on investment of 2,873%.
$13,157
$12,105
$10,402
$10,329
$12,619
$3,257
$5,256
$5,450
Total Return on Investment (from 11/23/93(a) through the date noted)
SINCE OUR IPO:
The total return on investment on our shares has grown
at a compound annual growth rate of 39.2%.
Our quarterly cash dividend has increased 8,900%.
As a result of nine stock splits in a span of 10 years,
our charter shareholders have 2,700 shares of NYB
stock for each 100 shares originally purchased.
2,474%
2,873%
718%
518%
244%
885%
610%
669%
454%
12/31/99
12/31/06
12/31/07
SNL Bank and Thrift Index(b) N.Y. & N.J. Banks & Thrifts(b) NYB(c)
(a) Our IPO date
(b) SNL Financial
(c) Bloomberg
Looking Forward
I often have said that our motivation for becoming a public institution was the belief that our business
model would earn money for investors in both the best—and worst—of times. Last year’s return on invest-
ment served to validate this expectation. While the total return provided by banks and thrifts declined by an
average of 23.7% in 2007, the total return to our investors rose 15.8% during this time.
In the first three months of 2008, our shares produced a 5.1% total return on investment; during
this time, the industry average was a negative 8.9%. We believe the discernable differences in our balance
sheet, together with our solid 2007 performance, have been critical factors in the performance of our
shares year-to-date.
In the midst of the current adversity in the financial markets, we continue to receive calls and requests for
meetings from prospective investors—investors whose interest has been triggered by the quality of our assets,
the consistency of our business model, and the stability provided by our tangible capital strength. We will
continue to seize opportunities to discuss our unique qualities with investors throughout the U.S. and Europe,
while maintaining our focus on delivering a distinctive performance over the course of 2008 and beyond.
So what can you expect from us as the current year progresses? You can expect us to originate multi-family
loans, as well as other credits, in accordance with the conservative standards that have supported our historical
record of asset quality. You can expect us to assess opportunities for acquisition-driven expansion, and to
proceed with such transactions when they meet our criteria for value enhancement, earnings growth, and the
maintenance of our asset quality. You can expect that the preservation of capital will loom large on our agenda,
coupled with our commitment to maintaining our dividend at the current amount.
You can expect us to build on the positive trends that drove our 2007 performance, and to capitalize on
the changes in our marketplace when we can do so prudently. At the present time, we would expect to see an
increase in loans, after two years of contraction, coupled with an increase in the spread above our funding
costs. We also expect to maintain an efficient operation, while enhancing the products and services we provide
to our customers.
In sum, you can count on us to uphold the qualities that distinguished us in 2007—qualities that have
made all the difference to the Company and to those who own our shares.
6
2007 Annual Report
Our Management Team
PIC T u r E D A B Ov E F r OM L E F T T O r Igh T
robert Wann, Senior Executive Vice President and Chief Operating Officer
Joseph r. ficalora, Chairman, President, and Chief Executive Officer
James J. Carpenter, Senior Executive Vice President and Chief Lending Officer
thomas r. Cangemi, Senior Executive Vice President and Chief Financial Officer
In Closing
In closing, I would like to convey my thanks to our directors, officers, and employees for their limitless
energy and dedication. Your efforts have been essential to the successful operation of our franchise, and to the
growth of the Company in a year of significant challenges and demands.
To those of you who are customers, I would like to convey my gratitude for banking with us. We
look forward to providing you with greater service and convenience as we embark on the integration of our
Community and Commercial Bank systems, augment our product menu, and—of particular benefit for our
newest customers in New Jersey—consolidate all our branches in the state under a single name: Garden State
Community Bank.
On behalf of our Board of Directors and management team, I would like to thank each of you, our
shareholders, for your loyalty and investment, and for the opportunity to lead this Company as it continues
to evolve.
With sincere appreciation,
Joseph r. ficalora
Chairman, President, and
Chief Executive Officer
April 16, 2008
7
sHareHolder referenCe
Corporate Headquarters
615 Merrick Avenue
Westbury, NY 11590
Phone: (516) 683-4100
Fax: (516) 683-8385
www.myNYCB.com
investor relations
Shareholders, analysts, and others seeking information
about New York Community Bancorp, Inc. are invited to
contact our Investor Relations Department at:
Phone: (516) 683-4420
Fax: (516) 683-4424
E-mail: ir@myNYCB.com
Copies of our earnings releases and other financial
publications, including our Annual Report on SEC
Form 10-K filed with the U.S. Securities and Exchange
Commission, are available without charge upon request.
Information about our financial performance may
also be found on the Investor Relations portion of our
web site, www.myNYCB.com. Earnings releases, dividend
announcements, and other press releases are typically
available at this site upon issuance, and SEC documents
are typically available within minutes of being filed. In
addition, shareholders wishing to receive e-mail notifi-
cation each time a press release, SEC filing, or corporate
event has been posted to our web site may arrange to do
so by visiting the web site and following the instructions
listed under “E-mail Notification.”
online delivery of proxy materials
To arrange to receive next year’s Annual Report to
Shareholders and proxy materials electronically, rather
than in hard copy, please visit the Investor Relations
portion of our web site, www.myNYCB.com, click on
“Online Delivery of Proxy Materials,” and then follow
the prompts.
sHareHolder aCCount inquiries
To review the status of your shareholder account,
expedite a change of address, transfer shares, or perform
various other account-related functions, please contact
our stock registrar, transfer agent, and dividend dis-
bursement agent, BNY Mellon Shareowner Services
(“BNY Mellon”), directly.
BNY Mellon is available to assist you 24 hours a day,
seven days a week, through its toll-free Interactive Voice
Response (IVR) system or through its online service,
Investor ServiceDirect®. In addition, customer service
representatives are available to assist you Monday
through Friday, 9:00 a.m. to 7:00 p.m. (Eastern Time),
except for bank holidays in the State of New York.
You may contact BNY Mellon in any of the
follow ing ways:
online:
www.bnymellon.com/shareowner/isd
via e-mail:
shrrelations@bnymellon.com
By phone:
In the U.S. & Canada: (866) 293-6077
International: (201) 680-6578
tdd lines for hearing-impaired investors:
In the U.S. & Canada: (866) 231-5469
International: (201) 680-6610
By regular mail:
P.O. Box 358015
Pittsburgh, PA 15252-8015
8
By overnight mail:
480 Washington Blvd.
Jersey City, NJ 07310-1900
In all correspondence with BNY Mellon, be sure to
mention New York Community Bancorp and to provide
your name as it appears on your shareholder account,
along with your assigned Investor ID number, daytime
phone number, and current address.
dividend poliCy
We typically pay a quarterly cash dividend on or
about the 15th day of February, May, August, and
November to shareholders of record on or about the
5th day of those months. Dividends are typically
declared on the fourth Tuesday of January, April, July,
and October and announced the following day. As dec-
laration, record, and payable dates are subject to change,
you may wish to confirm them by visiting our web site,
clicking on “Investor Relations,” and then on “Dividends.”
Dividend Reinvestment and Stock Purchase Plan
Under our Dividend Reinvestment and Stock Purchase
Plan, registered shareholders may purchase additional
shares of New York Community Bancorp by reinvesting
their cash dividends, and by making optional cash pur-
chases ranging from a minimum of $50 per transaction
to a maximum of $100,000 per calendar year. In addition,
new investors may purchase their initial shares through
the Plan. For more information about the Plan, contact
BNY Mellon at the web site or phone numbers provided
under Shareholder Account Inquiries.
Direct Deposit of Dividends
Through our Direct Deposit Service, registered
shareholders may arrange to have their quarterly cash
dividends deposited directly into their checking or savings
accounts on the payable date. For more information
about our Direct Deposit Service, contact BNY Mellon
at the web site or phone numbers provided under
Shareholder Account Inquiries.
annual meeting of sHareHolders
Our 2008 Annual Meeting of Shareholders will be
held at 10:00 a.m. Eastern Time on Wednesday, June
11th, at the Sheraton LaGuardia East Hotel, 135-20 39th
Avenue, in Flushing, New York. Shareholders of record
as of April 16, 2008 will be eligible to receive notice of,
and to vote at, the 2008 Annual Meeting.
independent registered puBliC
aCCounting firm
KPMG LLP
345 Park Avenue
New York, NY 10154
stoCk listing
Shares of New York Community Bancorp common
stock are traded under the symbol “NYB” on the
New York Stock Exchange. Price information appears
daily in The Wall Street Journal under “NY CmntyBcp” and
in other major newspapers under similar abbreviations
of the Company’s name.
The Bifurcated Option Note Unit SecuritiES
(BONUSESSM Units) issued through the Company’s
subsidiary, New York Community Capital Trust V, also
trade on the New York Stock Exchange, under the
symbol “NYB U.”
CorporATe DireCTorY
NEW YORK COMMUNITY
BANCORP, INC.
Board of directors*
Joseph r. ficalora
Chairman, President, and
Chief Executive Officer
donald M. Blake
President and Chief Executive Officer
Joseph J. Blake & Associates, Inc.
dominick ciampa
Principal
The Ciampa Organization
Maureen e. clancy
Chief Financial Officer and Owner
Clancy & Clancy Brokerage Ltd.
Hanif “Wally” dahya
Chief Executive Officer
The Y Company LLC
robert s. farrell
President
H. S. Farrell, Inc.
William c. frederick, M.d.
Surgeon (retired)
St. Vincent’s Hospital
Max L. Kupferberg
Chairman of the Board of Directors
Kepco, Inc.
Michael J. Levine
President, Norse Realty
Group, Inc. & Affiliates
Partner, Levine & Schmutter, CPAs
Hon. Guy V. Molinari
Richmond County Borough
President (retired)
Former U.S. Congressman
and New York State Assemblyman
James J. o’donovan
Senior Executive Vice President
and Chief Lending Officer (retired)
New York Community Bank
John a. Pileski
Partner (retired)
KPMG LLP
John M. tsimbinos, Jr.
Chairman and
Chief Executive Officer (retired)
TR Financial Corp. and
Roosevelt Savings Bank
spiros J. Voutsinas
President and Chief Executive Officer
Atlantic Bank Division
New York Commercial Bank
robert Wann
Senior Executive Vice President
and Chief Operating Officer
executiVe officers
Joseph r. ficalora
Chairman, President,
and Chief Executive Officer
robert Wann
Senior Executive Vice President
and Chief Operating Officer
thomas r. cangemi
Senior Executive Vice President
and Chief Financial Officer
James J. carpenter
Senior Executive Vice President
and Chief Lending Officer
ilene a. angarola
Executive Vice President
and Director, Investor Relations
robert d. Brown
Executive Vice President
and Chief Information Officer
andrew Kaplan
Executive Vice President and
Director, Financial Solutions Group;
President, CFS Investments, Inc.
anthony M. Lewis
Executive Vice President
and Director, Regulatory Oversight Group
John J. Pinto
Executive Vice President
and Chief Accounting Officer
r. Patrick Quinn, esq.
Executive Vice President,
Chief Corporate Governance Officer,
and Corporate Secretary
Louis riccio
Executive Vice President
and Director, Retail Banking
Administration and Operations
Bernard a. terlizzi
Executive Vice President
and Director, Human Resources
robert J. tolomer
Executive Vice President
and Director, Credit Oversight
Barbara tosi-renna
Executive Vice President,
Director, Operational Risk & Control,
and Assistant to the Chief Operating Officer
* Directors of New York Community
Bancorp, Inc. also serve as directors
of New York Community Bank and
New York Commercial Bank.
affiLiate officers
NEW YORK
COMMERCIAL BANK
spiros J. Voutsinas
President and Chief Executive Officer
Atlantic Bank Division
dennis d. Jurs
Executive Vice President
and Chief Lending Officer
Kenneth M. scheriff
Executive Vice President
and Regional Manager,
Commercial Lending
PETER B. CANNELL
& CO., INC.
Joseph B. Werner
Chairman, President, and
Chief Executive Officer
STANDARD
FUNDING CORP.
angelo J. Mangia
President and Chief Executive Officer
diVisionaL BanK directors
Joseph r. ficalora
Chairman
Queens County Savings Bank Division
Michael f. Manzulli
Chairman
Richmond County Savings Bank Division
John r. Bransfield, Jr.
President
The Roslyn Savings Bank Division
spiros J. Voutsinas
President
Atlantic Bank Division
nicolas Bornozis
President
Capital Link Inc.
thomas J. calabrese, Jr.
Vice President, Operations
Daniel Gale Agency
Godfrey H. carstens, Jr.
President and Owner
Carstens Electrical Supply
John catsimatidis
Chairman and Chief Executive Officer
Red Apple Group
andre Gregory
President
Sete Consultants & Services, Inc.
Msgr. thomas J. Hartman
Director of Radio and Television
for the Diocese of Rockville Centre
andrew J. Jacovides
Former Ambassador, Cyprus
James L. Kelley, esq.
Partner
Lahr, Dillon, Manzulli, Kelley
& Penett, P.C.
savas Konstantinides
President and Chief Executive Officer
Omega Brokerage
Venetia Kontogouris
Managing Director
Trident Capital
spiros Milonas
President
Ionian Management Inc.
richard H. o’neill
Financial Consultant;
Executive Vice President,
Finance (retired)
New York Shipping Association, Inc.
Mitchell rutter
President
Essex Capital Partners
Hon. claire shulman
Queens Borough President (retired)
John M. tsimbinos, Jr.
Chairman and
Chief Executive Officer (retired)
TR Financial Corp. and
Roosevelt Savings Bank
2007 Annual Report
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D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 2007
Commission File Number 1-31565
NEW YORK COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
06-1377322
(I.R.S. Employer
Identification No.)
615 Merrick Avenue, Westbury, New York 11590
(Zip code)
(Address of principal executive offices)
(Registrant’s telephone number, including area code) (516) 683-4100
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value
and
Bifurcated Option Note Unit SecuritiESSM
(Title of Class)
Haven Capital Trust II 10.25% Capital Securities
(Title of Class)
New York Stock Exchange
(Name of exchange on which registered)
The NASDAQ Stock Market, LLC
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ⌧ No (cid:133)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes(cid:133) No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No (cid:133)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:133)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-
2 of the Exchange Act. Large Accelerated Filer ⌧ Accelerated Filer (cid:133) Non-Accelerated Filer (cid:133) Smaller Reporting Company (cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes(cid:133) No ⌧
As of June 30, 2007, the aggregate market value of the shares of common stock outstanding of the registrant was $5.1 billion,
excluding 16,241,542 shares held by all directors and executive officers of the registrant. This figure is based on the closing price of
the registrant’s common stock on June 30, 2007, $17.02, as reported by the New York Stock Exchange.
The number of shares of the registrant’s common stock outstanding as of February 25, 2008 was 324,840,346 shares.
Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 11, 2008 are incorporated by
reference into Part III.
Documents Incorporated by Reference
CROSS REFERENCE INDEX
Forward-looking Statements and Associated Risk Factors
Glossary
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases
of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
Certifications
Page
1
3
6
25
31
31
32
32
33
36
38
76
80
133
133
134
135
135
135
135
136
136
139
For the purpose of this Annual Report on Form 10-K, the words “we,” “us,” “our,” and the “Company” are
used to refer to New York Community Bancorp, Inc. and our consolidated subsidiaries, including New York
Community Bank and New York Commercial Bank (the “Community Bank” and the “Commercial Bank,”
respectively, and collectively, the “Banks.”)
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK FACTORS
This report, like many written and oral communications presented by New York Community Bancorp, Inc.
and our authorized officers, may contain certain forward-looking statements regarding our prospective performance
and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995,
and are including this statement for purposes of said safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and
expectations of the Company, are generally identified by use of the words “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “will,” “would,”
“should,” “could,” “may,” or similar expressions. Our ability to predict results or the actual effects of our plans or
strategies is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.
There are a number of factors, many of which are beyond our control, that could cause actual conditions,
events, or results to differ significantly from those described in our forward-looking statements. These factors
include, but are not limited to:
• General economic conditions and trends, either nationally or in some or all of the areas in which we and
our customers conduct our respective businesses;
• Conditions in the securities markets or the banking industry;
• Changes in interest rates, which may affect our net income, prepayment penalties, and other future cash
flows, or the market value of our assets;
• Changes in deposit flows and wholesale borrowing facilities;
• Changes in the demand for deposit, loan, and investment products and other financial services in the
markets we serve;
• Changes in our credit ratings;
• Changes in the financial or operating performance of our customers’ businesses;
• Changes in real estate values, which could impact the quality of the assets securing the loans in our
portfolio;
• Changes in the quality or composition of our loan or investment portfolios;
• Changes in competitive pressures among financial institutions or from non-financial institutions;
• Changes in our customer base;
• Potential exposure to unknown or contingent liabilities of companies we target for acquisition;
• Our ability to retain key members of management;
• Our timely development of new lines of business and competitive products or services in a changing
environment, and the acceptance of such products or services by our customers;
• Any interruption or breach of security resulting in failures or disruptions in customer account management,
general ledger, deposit, loan, or other systems;
• Any interruption in customer service due to circumstances beyond our control;
• The outcome of pending or threatened litigation, or of other matters before regulatory agencies, or of
matters resulting from regulatory exams, whether currently existing or commencing in the future;
• Environmental conditions that exist or may exist on properties owned by, leased by, or mortgaged to the
Company;
• Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant
regulatory and accounting requirements;
• Changes in legislation, regulation, and policies, including, but not limited to, those pertaining to banking,
securities, tax, environmental protection, and insurance, and the ability to comply with such changes in a
timely manner;
• Changes in accounting principles, policies, practices, or guidelines;
• Operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to
industry changes in information technology systems, on which we are highly dependent;
1
• The ability to keep pace with, and implement on a timely basis, technological changes;
• Changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S.
Treasury and the Federal Reserve Board;
• War or terrorist activities; and
• Other economic, competitive, governmental, regulatory, and geopolitical factors affecting our operations,
pricing, and services.
In addition, it should be noted that we routinely evaluate opportunities to expand through acquisition and
frequently conduct due diligence activities in connection with such opportunities. As a result, acquisition discussions
and, in some cases, negotiations, may take place at any time, and acquisitions involving cash, debt, or equity
securities may occur.
Furthermore, the timing and occurrence or non-occurrence of events may be subject to circumstances beyond
our control.
Please see Item 1A, “Risk Factors,” for a further discussion of factors that could affect the actual outcome of
future events.
Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which
speak only as of the date of this report. Except as required by applicable law or regulation, we undertake no
obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on
which such statements were made.
2
GLOSSARY
BASIS POINT
Throughout this filing, the year-over-year or linked-quarter changes that occur in certain financial measures
are reported in terms of basis points. Each basis point is equal to one hundredth of a percentage point, or 0.01%. For
example, our ratio of non-performing assets to total assets improved by one basis point year-over-year, to 0.07%
from 0.08%.
BOOK VALUE PER SHARE
As we define it, book value per share refers to the amount of stockholders’ equity attributable to each
outstanding share of common stock, after the unallocated shares held by our Employee Stock Ownership Plan
(“ESOP”) have been subtracted from the total number of shares outstanding. Book value per share is determined by
dividing total stockholders’ equity at the end of a period by the adjusted number of shares at the same date. The
following table indicates the number of shares outstanding both before and after the total number of unallocated
ESOP shares have been subtracted at December 31,
Shares outstanding
Less: Unallocated ESOP shares
Shares used for book value
per share computation
CHARGE-OFFS
2007
323,812,639
(977,800)
2006
295,350,936
(1,460,564)
2005
269,776,791
(2,182,398)
2004
265,190,635
(4,656,851)
2003
256,649,073
(5,068,648)
322,834,839
293,890,372
267,594,393
260,533,784
251,580,425
Refers to loan balances that have been written off against the allowance for loan losses.
CORE DEPOSIT INTANGIBLE (“CDI”)
Refers to the intangible asset related to the value of core deposit accounts acquired in a merger or acquisition.
CORE DEPOSITS
All deposits other than certificates of deposit are collectively referred to as core deposits.
COST OF FUNDS
The interest expense associated with interest-bearing liabilities, typically expressed as a ratio of interest
expense to the average balance of interest-bearing liabilities for a given period.
DIVIDEND PAYOUT RATIO
The percentage of our earnings that is paid out to shareholders in the form of dividends, determined by
dividing the dividend paid per share during a period by our diluted earnings per share during the same period of
time.
DIVIDEND YIELD
Refers to the yield generated on a shareholder’s investment in the form of dividends. The current dividend
yield is calculated by annualizing the current quarterly cash dividend and dividing that amount by the current stock
price.
EFFICIENCY RATIO
Measures total operating expenses as a percentage of the sum of net interest income and non-interest income
(loss).
GAAP
This abbreviation is used to refer to U.S. generally accepted accounting principles, on the basis of which
financial statements are prepared and presented.
GOODWILL
Refers to the difference between the purchase price and the fair market value of an acquired company’s assets,
net of the liabilities assumed. Goodwill is reflected as an asset on the balance sheet and is tested at least annually for
impairment.
3
GOVERNMENT-SPONSORED ENTERPRISES (“GSEs”)
Refers to a group of financial services corporations that were created by the United States Congress to
enhance the availability, and reduce the cost, of credit to certain targeted borrowing sectors, including home finance.
The GSEs include, but are not limited to, the Federal National Mortgage Association (“Fannie Mae”), the Federal
Home Loan Mortgage Corporation (“Freddie Mac”), and the twelve Federal Home Loan Banks.
GSE OBLIGATIONS
Refers to GSE mortgage-related securities (both certificates and collateralized mortgage obligations) and GSE
debentures.
INTEREST RATE SENSITIVITY
Refers to the likelihood that the interest earned on assets and the interest paid on liabilities will change as a
result of fluctuations in market interest rates.
INTEREST RATE SPREAD
The difference between the yield earned on average interest-earning assets and the cost of average interest-
bearing liabilities.
LOAN-TO-VALUE RATIO
Measures the current balance of a loan as a percentage of the original appraised value of the underlying
property.
MULTI-FAMILY LOAN
A mortgage loan secured by a rental or cooperative apartment building with more than four units.
NET INTEREST INCOME
The difference between the interest and dividends earned on interest-earning assets and the interest paid or
payable on interest-bearing liabilities.
NET INTEREST MARGIN
Measures net interest income as a percentage of average interest-earning assets.
NON-ACCRUAL LOAN
A loan generally is classified as a “non-accrual” loan when it is 90 days past due. When a loan is placed on
non-accrual status, we cease the accrual of interest owed, and previously accrued interest is reversed and charged
against interest income. A loan generally is returned to accrual status when the loan is less than 90 days past due and
we have reasonable assurance that the loan will be fully collectible.
NON-PERFORMING ASSETS
Consists of non-accrual loans, loans 90 days or more delinquent and still accruing interest, and other real
estate owned.
RENT-CONTROLLED/RENT-STABILIZED BUILDINGS
In New York City, where the vast majority of the properties securing our multi-family loans are located, the
amount of rent that tenants may be charged in certain buildings is restricted under certain “rent-control” or “rent-
stabilization” laws. Rent-control laws apply to buildings constructed prior to February 1947. An apartment is said to
be “rent-controlled” if the tenant has been living continuously in the apartment for a period of time beginning prior
to July 1971. When a rent-controlled apartment is vacated, it typically becomes “rent-stabilized.” Rent-stabilized
apartments are generally located in buildings with six or more units that were built between February 1947 and
January 1974. Apartments in rent-controlled and -stabilized buildings tend to be more affordable to live in because
of the applicable regulations, and are therefore less likely to experience vacancies in times of economic adversity.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts for the sale of securities owned or borrowed by the Banks with an
agreement to repurchase those securities at an agreed-upon price and date. The Banks’ repurchase agreements are
primarily collateralized by GSE obligations and other mortgage-related securities, and are entered into with either
the Federal Home Loan Bank of New York (the “FHLB-NY”) or selected brokerage firms.
4
RETURN ON AVERAGE ASSETS
A measure of profitability determined by dividing net income by average assets.
RETURN ON AVERAGE STOCKHOLDERS’ EQUITY
A measure of profitability determined by dividing net income by average stockholders’ equity.
WHOLESALE BORROWINGS
Refers to advances drawn by the Banks against their respective lines of credit with the FHLB-NY, their
repurchase agreements with the FHLB-NY and various brokerage firms, and federal funds purchased.
YIELD
The interest income associated with interest-earning assets, typically expressed as a ratio of interest income to
the average balance of interest-earning assets for a given period.
YIELD CURVE
Considered a key economic indicator, the yield curve is a graph that illustrates the difference between long-
term and short-term interest rates over a period of time. The greater the difference, the steeper the yield curve; the
lesser the difference, the flatter the yield curve. When short-term interest rates exceed long-term interest rates, the
result is an “inverted” yield curve.
5
ITEM 1.
BUSINESS
General
PART I
With total assets of $30.6 billion at December 31, 2007, we are the fourth largest publicly traded bank holding
company headquartered in the New York metropolitan region, and one of its leading depositories. We currently have
217 banking offices serving customers in all five boroughs of New York City, Long Island, and Westchester County
in New York, and Essex, Hudson, Mercer, Middlesex, Monmouth, Ocean, and Union counties in New Jersey.
We are organized under Delaware Law as a multi-bank holding company and have two primary subsidiaries:
New York Community Bank and New York Commercial Bank (hereinafter referred to as the “Community Bank”
and the “Commercial Bank,” respectively, and collectively as the “Banks”).
Established in 1859, the Community Bank is a New York State-chartered savings bank with 179 locations that
currently operate through ten divisional banks. Our three largest divisions are Roslyn Savings Bank, with 57
locations on Long Island, a suburban market east of New York City comprised of Nassau and Suffolk counties;
Queens County Savings Bank, with 34 locations in the New York City borough of Queens; and Richmond County
Savings Bank, with 23 locations in the New York City borough of Staten Island. In Brooklyn, we operate eight
branches through our Roosevelt Savings Bank division, and in the Bronx and Westchester County, we currently
operate three branches under the name CFS Bank. In March 2008, the three CFS Bank branches will commence
operations under the name New York Community Bank, bringing the total number of such namesake branches in the
Bronx and Westchester County to four.
In New Jersey, our Community Bank franchise grew from eight to 53 branches in 2007 as a result of our
acquisition of PennFed Financial Services, Inc. (“PennFed”), the parent of Penn Federal Savings Bank, on
April 2nd, and our acquisition of Synergy Financial Group, Inc. (“Synergy”), the parent of Synergy Bank, on
October 1st. At December 31, 2007, we operated our New Jersey branches through five divisions: Ironbound Bank,
with two branches each in Essex and Union counties; First Savings Bank of New Jersey, with four branches in the
Hudson County city of Bayonne; Penn Federal Savings Bank, with 24 branches in Essex, Hudson, Middlesex,
Monmouth, Ocean, and Union Counties; Synergy Bank, with 19 branches in Middlesex, Monmouth, and Union
counties; and Garden State Community Bank, with one branch each in Mercer and Monmouth counties.
The latter two branches were acquired in the Synergy transaction, and operated under the Synergy Bank name
until December 3rd. The Garden State Community Bank division was established on that date to reflect our
expanded franchise in New Jersey, and to better serve our growing customer base. In March 2008, the 32 branches
of Penn Federal Savings Bank, First Savings Bank of New Jersey, and Ironbound Bank will be consolidated into the
Garden State Community Bank division. The remaining Synergy Bank branches will commence operations under
the Garden State Community Bank name in the second half of the year.
We compete for customers by emphasizing convenience and service, and by offering a full range of traditional
and non-traditional products and services. All but five of our Community Bank branches feature weekend hours,
including 46 branches that are located inside supermarkets or drugstores. The combination of traditional and in-store
branches enables us to offer 70 to 80 hours a week of banking service in many of the communities we serve. The
Community Bank also offers 24-hour banking at 169 of our 190 ATM locations, as well as 24-hour Internet banking
and banking by phone.
The Commercial Bank is a New York State-chartered commercial bank with 38 branches serving Manhattan,
Queens, Brooklyn, Westchester County, and Long Island, including ten branches that were acquired in connection
with our acquisition of Long Island Financial Corp. (“Long Island Financial”) on December 30, 2005, and 17
branches that were acquired in connection with our acquisition of Atlantic Bank of New York (“Atlantic Bank”) on
April 28, 2006. The remaining branches of our Commercial Bank franchise were added on July 26, 2007 through
our acquisition of the New York City-based branch network of Doral Bank, FSB (“Doral”). At the present time, 19
of our 38 branches operate through our Atlantic Bank division and the remaining 19 operate under the name New
York Commercial Bank.
6
The Commercial Bank competes for customers by emphasizing personal service and by addressing the needs
of small and mid-size businesses, professional associations, and government agencies with a comprehensive menu
of business solutions, including installment loans, revolving lines of credit, and cash management services. In
addition to featuring up to 52.5 hours per week of in-branch service, the Commercial Bank offers 24-hour banking at
35 of its 44 ATM locations, and, like the Community Bank, 24-hour banking online and by phone.
We also serve our customers through our websites, www.myNYCB.com, www.NewYorkCommercialBank.com,
and www.NYCBfamily.com. In addition to providing our customers with 24-hour access to their accounts, and
information regarding our products and services, hours of service, and locations, these web sites provide extensive
information about the Company for current and prospective investors. Earnings releases, dividend announcements,
and other press releases are typically available at these sites upon issuance. In addition, our filings with the U.S.
Securities and Exchange Commission (the “SEC”) (including our annual report on Form 10-K; our quarterly reports
on Form 10-Q; and our current reports on Form 8-K), and all amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available without charge at our web
sites, typically within minutes of being filed. The web sites also provide information regarding inside ownership and
our corporate governance policies. Information that appears on our web sites should not be considered to be a part of
this filing.
Overview
Multi-family Lending: Multi-family loans are our principal asset. We are a leading producer of multi-family
loans in New York City, with a focus on loans secured by rent-controlled and rent-stabilized buildings, which
represent approximately 52% of the City’s rental housing market. The loans we produce are typically based on the
cash flows produced by the buildings, and are generally made to long-term property owners with a history of
growing cash flows over time. The property owners typically use the funds we provide to make improvements to the
buildings and the apartments within them, thus increasing their value and the rents that may be charged. As
improvements are made, the building’s rent roll increases, prompting the borrower to seek additional funds by
refinancing the loan. While our typical loan has a term of ten years, with a fixed rate of interest in years one through
five and a rate that adjusts in each year that follows, the majority of our loans tend to refinance within the first five
years. Loans that prepay in the first five years generate prepayment penalties ranging from five percentage points to
one percentage point of the then-current loan balance, depending on the remaining term of the loan. Reflecting the
structure of our multi-family credits, the average multi-family loan had an expected weighted average life of 3.6
years at December 31, 2007. In addition, the quality of these assets has been consistently solid: We have not had a
loss of principal within this niche for twenty-eight years.
At December 31, 2007, our portfolio of multi-family loans totaled $14.1 billion, representing 69.0% of loans
outstanding at that date.
Commercial Real Estate Lending: Like our multi-family loans, the commercial real estate loans we produce
are typically intermediate-term in nature and have a solid record of asset quality, with no charge-offs recorded
against the loan loss allowance for more than ten years. Our commercial real estate loans are largely secured by
properties in New York City, New Jersey, and Long Island, with Manhattan accounting for the largest share. At
December 31, 2007, commercial real estate loans totaled $3.8 billion, and represented 18.8% of our total loan
portfolio.
Construction Lending: Our construction loan portfolio largely consists of loans of 18 to 24 months duration
for land acquisition, development, and construction of multi-family and residential tract projects in New York City
and Long Island, and, to a lesser extent, for the construction of owner-occupied one- to four-family homes and
commercial properties. In anticipation of the downward turn in the credit cycle, the Company slowed its
construction lending in the second half of the year. As a result, construction loans rose modestly in 2007, to $1.1
billion, representing 5.6% of total loans at December 31 2007.
Commercial and Industrial (“C&I”) Lending: Reflecting both acquired loans and organic loan production,
C&I loans totaled $705.8 million at December 31, 2007, representing 73.1% of other loans and 3.5% of total loans.
A broad range of loans is available to small and mid-size businesses for working capital (including inventory and
receivables), business expansion, and for the purchase of equipment and machinery. C&I loans are included in
“other loans” in the Company’s Consolidated Statements of Condition.
7
Loan Production: Originations totaled $4.9 billion in 2007, including multi-family loans of $2.5 billion,
commercial real estate loans of $695.3 million, construction loans of $548.4 million, and $1.0 billion of C&I loans.
Reflecting the volume of loans produced, and loans contributed by the PennFed, Doral, and Synergy transactions,
the loan portfolio totaled $20.4 billion at December 31, 2007 and represented 66.6% of total assets, as compared to
$19.7 billion, representing 69.0% of total assets, at December 31, 2006. During the year, we recorded repayments,
including sales, of $6.9 billion, which limited the growth of our loan portfolio.
Funding Sources: The growth of our loan portfolio has primarily been fueled by the following funding
sources: cash flows produced by the repayment of loans; cash flows produced by securities repayments and sales;
the deposits we’ve added through our acquisitions or gathered organically through our branch network; and the use
of wholesale funding sources, primarily in the form of Federal Home Loan Bank of New York (“FHLB-NY”)
advances and repurchase agreements with the FHLB-NY and various brokerage firms.
Largely reflecting the repositioning of the balance sheet pursuant to our various acquisitions, loan repayments
generated cash flows of $6.9 billion in 2007, while securities repayments provided cash flows of $3.0 billion.
Deposits rose from $12.6 billion at year-end 2006 to $13.2 billion at year-end 2007, as the deposits acquired in the
PennFed, Synergy, and Doral transactions enabled us to engage in a strategic run-off of certain higher-cost
certificates of deposit (“CDs”) and NOW and money market accounts, both of which included brokered deposits.
CDs represented $6.9 billion, or 52.5%, of total deposits at December 31, 2007, with core deposits (defined as NOW
and money market accounts, savings accounts, and non-interest-bearing accounts) representing the remaining $6.2
billion, or 47.5%.
Primarily reflecting our various acquisitions, wholesale borrowings rose $1.1 billion year-over-year, to $12.2
billion at December 31, 2007.
Asset Quality: At December 31, 2007, non-performing assets equaled a modest 0.07% of total assets, a one-
basis point improvement from the year-earlier measure, despite a modest increase in non-performing loans. Non-
performing assets rose $306,000 year-over-year to $22.9 million, the net effect of a $989,000 rise in non-performing
loans to $22.2 million and a $683,000 reduction in other real estate owned to $658,000. The increase in non-
performing assets and loans was primarily attributable to certain loans that were acquired in the Synergy transaction
that were determined to be non-performing at December 31, 2007.
Another indication of the continuing quality of our assets was the level of charge-offs recorded during the
twelve-month period. Charge-offs totaled $431,000 and represented 0.002% of average loans in 2007, comparable to
the $420,000 of loans charged off in 2006. Notably, the charge-offs recorded in the past two years consisted of loans
that were added in our various acquisitions. The quality of our assets reflects the active involvement of our Board of
Directors in the loan approval process, the rigorous nature of our underwriting standards, the structure of our loan
portfolio, and the nature of our multi-family lending niche. It also reflects our general practice of selling certain of
the loans we acquire in our business combinations.
In view of the consistent quality of our assets, and our assessment of the adequacy of the loan loss allowance,
we did not record a provision for loan losses in 2007 or 2006. Nonetheless, the allowance for loan losses rose $7.4
million year-over-year, to $92.8 million, as the PennFed and Synergy transactions added $7.8 million to the loan
loss allowance, more than offsetting the charge-offs recorded during the year. The allowance for loan losses
represented 418.14% of non-performing loans at December 31, 2007, an increase from 402.72% at December 31,
2006.
Although the impact of the recent credit crisis on our market has not approached the magnitude that it has in
other parts of the country, certain economic data indicates that our region has not been immune to the deterioration
in the subprime lending market, the reduction in real estate values, and the subsequent decline in the general
economy. For example, notwithstanding an increase in private sector jobs in New York City and Long Island, the
unemployment rate rose from 4.0% to 5.2% in New York City over the course of 2007, and from 3.2% to 3.8% on
Long Island during the same time. In New Jersey, an increase in private sector jobs was also overshadowed by an
increase in the unemployment rate, from 3.9% to 4.1%. The Metro New York/New Jersey economy was further
weakened over the course of 2007 by a decline in real estate values, with an annual decline in home prices of 5.6%
through December 2007.
8
Although we have no subprime or Alt-A loans in our loan portfolio, and no subprime- or Alt-A- backed issues
among our securities, the subprime crisis may affect us indirectly, albeit to a lesser extent than it will likely impact
those banks and thrifts that produced and retained significant portfolios of such loans. While we believe that the
nature of our multi-family lending niche and the conservative nature of our underwriting standards will limit the
impact of the downward turn in the credit cycle on the quality of our assets—particularly in comparison with those
institutions that were involved in subprime and Alt-A lending—the downturn in the credit cycle could result in our
experiencing an increase in charge-offs and/or our setting aside provisions for loan losses, which would have an
adverse impact on our results of operations.
Efficiency: Our efficiency has also been a distinguishing Company characteristic. Notwithstanding the impact
of adding 56 branches to our franchise, we continued to rank among the nation’s most efficient banks and thrifts,
with an efficiency ratio of 41.17% for the twelve months ended December 31, 2007. While several factors contribute
to the efficiency of our operation, two are chief among them: our ability to contain the costs involved in processing
and servicing our loans, which consist primarily of multi-family credits, and the expansion of our retail banking
franchise primarily through accretive merger transactions.
Accretive Merger Transactions: In addition to organic loan production, the asset growth we accomplished in
2007 was fueled by two acquisitions in New Jersey and the acquisition of a branch network in New York.
With the acquisitions of PennFed on April 2nd and Synergy on October 1st in 2007, we expanded our
Community Bank franchise in New Jersey, and thus increased our deposit market share in the Garden State.
Between them, the PennFed and Synergy transactions added 45 branches to our franchise, strengthening our share of
market in Essex, Hudson, and Union counties, and extending our footprint into Mercer, Middlesex, Monmouth, and
Ocean counties in the central part of the state.
On July 26, 2007, we further expanded our Commercial Bank franchise through the acquisition of Doral’s
branch network in New York City. Although the Doral branches previously operated under a savings bank charter,
the acquired branches were a logical extension of our Commercial Bank franchise, boosting the number of branches
to 38 in total, and the number of branches in Manhattan, Queens, and Brooklyn to seven, eleven, and six,
respectively. The transaction also provided us with a new location for our Atlantic Bank headquarters in Manhattan
following the sale of our original headquarters building in the third quarter of the year.
Post-Merger Repositioning of the Balance Sheet: Subsequent to the completion of our merger transactions,
we have typically engaged in a strategic balance sheet repositioning, selling certain securities and loans that were
acquired in our transactions to generate cash flows for investment in higher-yielding assets or to reduce our higher-
cost funds. In 2007, for example, we sold $1.4 billion of loans that were acquired in the PennFed transaction, and
utilized the cash flows to invest in government-sponsored enterprise (“GSE”) debentures and mortgage-related
obligations, and to pay down certain of our wholesale borrowings.
Revenues: Our primary source of income is net interest income, which is the difference between the interest
income generated by the loans we produce and the securities we invest in, and the interest expense generated by our
interest-bearing deposits and borrowed funds. The level of net interest income we generate is influenced by a variety
of factors, some of which are within our control (e.g., our mix of interest-earning assets and interest-bearing
liabilities); and some of which are not (e.g., the level of prepayment penalty income we receive, the level of short-
term interest rates and market rates of interest, and the degree of competition we face for deposits and loans).
While net interest income is our primary source of income, it is supplemented by the non-interest income we
produce. The fee income we generate on deposits and, to a lesser extent, loans is complemented by revenues from a
variety of sources, including the sale of third-party investment products and the sale of one- to four-family loans to a
third-party conduit. We also generate other income through our investment in bank-owned life insurance (“BOLI”)
and through our investment advisory firm, Peter B. Cannell & Co., Inc., which had $1.7 billion of assets under
management at December 31, 2007.
Market Area and Competition
The combined population of our marketplace is 16.5 million, including 4.1 million residents of Nassau,
Queens, and Richmond Counties, where 103 of our branch offices are located and where we enjoy the fourth largest
share of deposits among all banks and thrifts, combined. With the expansion of our Community Bank franchise in
9
New Jersey through the PennFed and Synergy acquisitions, we now serve seven of the state’s 21 counties, with a
combined population of 4.4 million residents.
The drive to compete for deposits is influenced by our need for funding and by the level of interest rates. We
generally vie for deposits by emphasizing convenience and service, and by offering our customers access to a
multitude of traditional and non-traditional products and services. We have a significant presence in the New York
metropolitan region and the central and northern parts of New Jersey, with 217 branches in total at the present time.
Of this number, 179 are branches of the Community Bank and 38 are branches of the Commercial Bank. We are
committed to providing our customers with easy access to their money: In addition to providing banking hours at
least six days a week in 198 of our branches, we offer our customers 24-hour banking online, by phone, and through
204 locations featuring 24-hour ATMs.
The success of our efforts is reflected in our deposit market share. For example, in Richmond County, we have
a 17.5% share of deposits; in Nassau and Queens counties, our share of deposits is 9.2% and 7.4%, respectively. In
Essex County, New Jersey, we have a 5.8% share of deposits, largely reflecting the benefit of our acquisition of
PennFed.
We also are recognized as a leading producer of multi-family loans in New York City, and compete on the
basis of timely service and the expertise that stems from being a specialist in our field. The majority of our multi-
family loans are secured by rent-regulated buildings, a niche that we have focused on for more than 30 years.
With more than 200 banks and thrifts serving our region, we face a significant level of competition for
deposits and for loans. We not only vie for business with the many banks, thrifts, and credit unions within our local
market, but also with such non-traditional financial service providers as mortgage banks, insurance companies,
brokerage firms, and investment banks. We also face competition for loans and deposits on a nationwide basis from
companies that solicit business over the Internet. Many of the institutions we compete with have greater financial
resources and serve a broader market than we do, enabling them to promote their products more extensively than we
can.
Our ability to compete has also been affected by industry consolidation. As the acquirer of five thrifts, two
commercial banks, and a branch network, we have been an active participant in, and beneficiary of, the trend toward
consolidation. Merger transactions have enabled us to expand our branch network, strengthen our management team,
and augment our product menu, while enhancing our asset mix and providing us with additional funding to grow our
loan portfolio. With the acquisitions of PennFed, Synergy, and Doral’s New York City-based branch network in
2007, we have augmented the presence of the Community Bank in New Jersey and that of the Commercial Bank in
New York.
In the past few years, we also have faced increased competition as a multi-family lender, particularly from the
entrance of conduit lenders who use the loans they originate to collateralize their mortgage-backed securities.
However, with the disruption of the conduit market in August 2007, our ability to compete for product was
enhanced in the latter part of the year. In addition, two of our major competitors were acquired in 2006—one in June
and one in December—further enabling us to increase our lending when market conditions improved.
While we anticipate that competition for multi-family loans will continue in the future, the level of loans
produced in the last year, and that are in our current pipeline, are indicative of our continued ability to compete
effectively. That said, no assurances can be made that we will be able to sustain our leadership role in the multi-
family lending market, given that loan production may be influenced not only by competition, but also by such other
factors as the level of market interest rates, the availability and cost of funding, real estate market conditions, and the
local economy.
Unlike larger financial institutions that serve a broader market, we are focused on serving customers in the
Metro New York region and New Jersey. Accordingly, our success is substantially tied to the economic health of
New York City, Long Island, Westchester County, and the seven counties in New Jersey we serve. Local economic
conditions have a significant impact on loan demand, the value of the collateral securing our credits, and the ability
of our borrowers to repay their loans. In addition, our ability to attract and retain deposits is not only a function of
short-term interest rates, but also the competitiveness of the rates being offered by other financial institutions within
our marketplace.
10
Environmental Issues
We encounter certain environmental risks in our lending activities. The existence of hazardous materials may
make it unattractive for a lender to foreclose on the properties securing its loans. In addition, under certain
conditions, under federal and state environmental laws, lenders may become liable for costs of cleaning up
hazardous materials found on such properties. We attempt to control such environmental risks by requiring either
that a borrower take environmental insurance on a property or that an appropriate environmental site assessment be
completed as part of our underwriting review on the initial granting of all commercial real estate and construction
loans, regardless of location, and all out-of-state multi-family loans. In addition, we often maintain ownership of
specific commercial real estate properties we acquire through foreclosure in separately incorporated subsidiaries.
Our attention to environmental risks also applies to the properties and facilities that house our bank
operations. Prior to acquiring a large-scale property, a Phase 1 Environmental Property Assessment is performed by
a licensed professional engineer to determine the integrity of, and/or the potential risk associated with, the facility
and the property on which it is built. Properties and facilities of a smaller scale are evaluated by qualified in-house
assessors, as well as by industry experts in environmental testing and remediation. This two-pronged approach
identifies potential risks associated with asbestos-containing material, above and underground storage tanks, radon,
electrical transformers (PCBs), ground water flow, storm and sanitary discharge, and mold, among other
environmental risks. These processes assist us in mitigating environmental risk by enabling us to identify potential
issues prior to, and following, our acquisition of bank properties.
11
Subsidiary Activities
The Community Bank has formed, or acquired through merger transactions, 37 active subsidiary corporations.
Of these, 22 are direct subsidiaries of the Community Bank and 15 are subsidiaries of Community Bank-owned
entities.
The 22 direct subsidiaries of the Community Bank are:
Jurisdiction of
Organization
Name
NYCB Community Development Corp. Delaware
Delaware
RSB Mt. Sinai Ventures, LLC
RSB RNMC Re, Inc.
Delaware
Roslyn National Mortgage Corporation Delaware
Woodhaven Investments, Inc.
Delaware
Pacific Urban Renewal, Inc.
Somerset Manor Holding Corp.
New Jersey
New Jersey
1400 Corp.
BSR 1400 Corp.
Bellingham Corp.
Blizzard Realty Corp.
CFS Investments, Inc.
Main Omni Realty Corp.
RCBK Mortgage Corp.
RCSB Corporation
RSB Agency, Inc.
RSB O.B. Ventures, LLC
Richmond Enterprises, Inc.
Penn Savings Insurance Agency, Inc.
Eagle Rock Investment Corp.
New York
New York
New York
New York
New York
New York
New York
New York
New York
New York
New York
New Jersey
New Jersey
PennFed Title Service Corporation
New Jersey
Synergy Capital Investments, Inc.
New Jersey
Purpose
Formed to invest in community development activities
Holding company for Mt. Sinai Ventures, LLC
Holding company for RNMC Re, Inc.
Formerly operated as a mortgage loan originator and
servicer and currently holds an interest in its former
office space
Holding company for Roslyn Real Estate Asset Corp.
and Ironbound Investment Company, Inc.
Owns a branch building
Holding company for four subsidiaries that owned and
operated two assisted-living facilities in New Jersey in
2005
Manages properties acquired by foreclosure while
they are being marketed for sale
Holds bank facilities and leases thereon
A real estate holding company
A real estate holding company
Sells non-deposit investment products
Owns foreclosed and investment properties
Holds multi-family loans
Owns a branch building and Ferry Development
Holding Company
Sells non-deposit investment products
Holding company for O.B. Ventures, LLC
Holding company for Peter B. Cannell & Co., Inc.
Sells non-deposit investment products
Formed to hold and manage investment portfolios for
the Company
Formed to participate in the ownership of a title
insurance agency
Formed to hold and manage investment portfolios for
the Company
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The 15 subsidiaries of Community Bank-owned entities are:
Name
Columbia Preferred Capital Corporation Delaware
Jurisdiction of
Organization
Mt. Sinai Ventures, LLC
Delaware
Peter B. Cannell & Co., Inc.
RNMC Re, Inc.
Delaware
Delaware
Roslyn Real Estate Asset Corp.
Delaware
Ferry Development Holding Company
Delaware
Ironbound Investment Company, Inc.
New Jersey
Somerset Manor North Realty Holding
Company, LLC
Somerset Manor South Realty Holding
Company, LLC
Somerset Manor North Operating
Company, LLC
Somerset Manor South Operating
Company, LLC
O.B. Ventures, LLC
New Jersey
New Jersey
New Jersey
New Jersey
New York
Richmond County Capital Corporation
New York
The Hamlet at Olde Oyster Bay, LLC
New York
The Hamlet at Willow Creek, LLC
New York
Purpose
A real estate investment trust (“REIT”) organized for
the purpose of investing in mortgage-related assets
A joint venture partner in the development,
construction, and sale of a 177-unit golf course
community in Mt. Sinai, New York, all the units of
which were sold by December 31, 2006
Advises high net worth individuals and institutions on
the management of their assets
A captive re-insurance company which reinsures
mortgage impairment policies underwritten by
principal carriers
A REIT organized for the purpose of investing in
mortgage-related assets
Formed to hold and manage investment portfolios for
the Company
A REIT organized for the purpose of investing in
mortgage-related assets that also is the principal
shareholder of Richmond County Capital Corp.
Established to own or operate assisted-living facilities
in New Jersey which were sold in 2005
Established to own or operate assisted-living facilities
in New Jersey which were sold in 2005
Established to own or operate assisted-living facilities
in New Jersey which were sold in 2005
Established to own or operate assisted-living facilities
in New Jersey which were sold in 2005
A joint venture partner in a 370-unit residential
community in Plainview, New York, all the units of
which were sold by December 31, 2004
A REIT organized for the purpose of investing in
mortgage-related assets that also is the principal
shareholder of Columbia Preferred Capital Corp.
Organized as a joint venture, part-owned by O.B.
Ventures, LLC
Organized as a joint venture, part-owned by Mt. Sinai
Ventures, LLC
In addition, the Community Bank maintains one inactive corporation, Bayonne Service Corp., which is
organized in New Jersey, and the following inactive corporations which are organized in New York: MFO Holding
Corp.; Queens County Capital Management, Inc.; Columbia Resources Corp.; CFSB Funding Corporation;
Residential Mortgage Banking, Inc.; Old Northern Co. Ltd.; Richmond REO, LLC; Columbia Travel Services, Inc.;
and VBF Holding Corporation.
The Commercial Bank has six active subsidiary corporations, two of which are subsidiaries of Commercial
Bank-owned entities.
The four direct subsidiaries of the Commercial Bank are:
Name
Standard Funding Corp.
Gramercy Leasing Services, Inc.
Long Island Commercial Capital Corp.
Jurisdiction of
Organization
New York
New York
New York
Beta Investments, Inc.
Delaware
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Purpose
Provides insurance premium financing
Provides equipment lease financing
A REIT organized for the purpose of investing in
mortgage-related assets
Holding company for Omega Commercial Mortgage
Corp.
The two subsidiaries of Commercial Bank-owned entities are:
Name
Standard Funding of California, Inc.
Omega Commercial Mortgage Corp.
Jurisdiction of
Organization
California
Delaware
Purpose
Provides insurance premium financing
A REIT organized for the purpose of investing in
mortgage-related assets
The Company owns nine active special business trusts that were formed for the purpose of issuing capital and
common securities and investing the proceeds thereof in the junior subordinated debentures issued by the Company.
Included in this number are New York Community Capital Trust XI, which was formed on April 15, 2007, and
PennFed Capital Trust II and PennFed Capital Trust III, which were assumed by the Company in connection with
the acquisition of PennFed. Please see Note 8 to the Consolidated Financial Statements, “Borrowed Funds,” within
Item 8, “Financial Statements and Supplementary Data,” for a further discussion of the Company’s special business
trusts.
The Company also has four non-banking subsidiaries: two that were acquired in the Long Island Financial
transaction to provide private banking and insurance services; one that was acquired in the Synergy transaction to
sell non-deposit investment products; and one that was established in connection with the acquisition of Atlantic
Bank.
Personnel
At December 31, 2007, the number of full-time equivalent employees was 2,834, as compared to 2,431 at
December 31, 2006. Our employees are not represented by a collective bargaining unit, and we consider our
relationship with our employees to be good.
Federal, State, and Local Taxation
Federal Taxation
General. The Company and its subsidiaries, excluding its Real Estate Investment Trust (“REIT”) subsidiaries,
report their income on a consolidated basis for tax purposes, using a calendar year and the accrual method of
accounting, and, with some minor exceptions, are subject to federal income taxation in the same manner as other
corporations. An entity that satisfies certain statutory requirements can elect to be taxed as a REIT. A deduction can
be claimed for the dividend distribution of taxable earnings. The shareholders of a REIT must include such
dividends in federal taxable income without any offsetting dividend-received deduction.
The following discussion of tax matters is intended only as a summary and does not purport to be a
comprehensive description of the tax rules applicable to the Company, the Community Bank, the Commercial Bank,
or other subsidiaries.
Bad Debt Reserves. Commercial banks and thrift institutions with assets in excess of $500 million deduct loan
losses when realized, and are not permitted a deduction based on a “reserve” method. Prior to 1996, thrift
institutions such as the Community Bank were permitted to establish tax reserves for bad debts. Such institutions
maintain a frozen reserve equal to the balance of their bad debt reserves as of December 31, 1987. This frozen
reserve is subject to recapture in certain circumstances, as described below.
If the Community Bank makes “non-dividend distributions” to the Parent Company (i.e., the Company on a
stand-alone basis), such distributions will be considered to have been made from the Community Bank’s
unrecaptured federal tax bad debt reserves to the extent thereof, and approximately one and one-half times the
amount of such distribution (but not in excess of the amount of such reserves) will be included in the Community
Bank’s taxable income. Non-dividend distributions include distributions in excess of the Community Bank’s current
and accumulated earnings and profits, as calculated for federal income tax purposes; distributions in redemption of
stock; and distributions in partial or complete liquidation. Dividends paid from the Community Bank’s current or
accumulated earnings and profits will not be so included in the Community Bank’s taxable income.
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See “Regulation and Supervision” elsewhere in this report for limits on the payment of dividends by the
Community Bank. The Community Bank does not intend to pay dividends that would result in a recapture of any
portion of its tax bad debt reserves.
Corporate Alternative Minimum Tax. In addition to the regular income tax, the Internal Revenue Code of
1986, as amended (the “Code”) imposes an alternative minimum tax (“AMT”) in an amount equal to 20% of
alternative minimum taxable income (“AMTI”) to the extent that the AMT exceeds the taxpayer’s regular income
tax. AMTI is regular taxable income as modified by certain adjustments and tax preference items. The AMT is
available as a credit against future regular income tax. The AMT credit can be carried forward indefinitely. The
Company does not expect to be subject to the AMT in the foreseeable future.
State and Local Taxation
New York State Taxation. The Company, the Community Bank, the Commercial Bank, and certain of their
subsidiaries are subject to the New York State Franchise Tax (the “Franchise Tax”) on banking corporations in an
annual amount equal to the greater of (a) 7.1% of “entire net income” allocable to New York State, or (b) the
applicable alternative tax. The alternative tax is generally the greater of (a) 0.01% of the value of the taxable assets
allocable to New York State with certain modifications; (b) 3% of “alternative entire net income” allocable to New
York State; or (c) $250. Entire net income is similar to federal taxable income, subject to certain modifications, and
alternative entire net income is equal to entire net income without certain adjustments. Income is allocated to New
York State based upon three factors: receipts, wages, and deposits. The Company, the Community Bank, the
Commercial Bank, and certain of their subsidiaries file a New York State combined return.
The New York State tax law on banking corporations allows a deduction for net operating losses sustained in
tax years beginning on or after January 1, 2001. The deduction may not exceed the allowable net operating loss
deduction determined by applying federal tax rules of Code Section 172 augmented by the excess of the New York
State bad debt deduction over the federal bad debt deduction. No carryback of these losses is allowed. However, the
losses may be carried forward for the same 20-year period allowed under federal tax law.
The Company does business within the Metropolitan Transportation Business Tax District (the “District”). A
tax surcharge is imposed on banking corporations and business corporations doing business within the District and
has been applied since 1982. The District tax rate is 17% on the Franchise Tax. However, if the Franchise Tax paid
to New York State is based on entire net income, then that District surcharge is equal to 17% of a specially
recomputed Franchise Tax using a 9% rate. The District tax surcharge is scheduled to expire for tax years ending on
or after December 31, 2009. However, legislation to extend the surcharge is anticipated.
In 2007, a new law was enacted that phases out, over a four-year period, the favorable adjustment to taxable
income received from subsidiary capital, where such income is attributable to a controlled REIT subsidiary. This
new law is effective for tax years beginning in 2007. In January 2008, the Governor of the State of New York
released a budget proposal which included a related tax provision that, if enacted, might adversely impact the New
York State tax liability of the Company. For additional information regarding the proposed tax provision, please see
the discussion of “Income Tax Expense” in Item 7 of this report.
Bad Debt Reserves. For purposes of computing their New York State entire net income, the Community Bank
and the Commercial Bank are permitted a deduction for an addition to the reserve for loan losses. The New York
State tax bad debt reserve of the Community Bank is subject to recapture for “non-dividend distributions” in a
manner similar to the recapture of the federal tax bad debt reserve for such distributions. Also, the New York State
tax bad debt reserve is subject to recapture in the event that the Community Bank fails a definitional test which
includes maintaining a minimum level of qualifying assets (the “60% Test”), which it presently satisfies. Qualifying
assets for this test include loans secured by residential, multi-family, and mixed-use properties (where the residential
portion exceeds 80% of total use), mortgage-related securities, cash, and other specified investments which are not
significant for the Community Bank. Although there can be no assurance that the Community Bank will satisfy the
60% Test in the future, management believes that the requisite level of qualifying assets will be maintained by the
Community Bank.
City of New York Taxation. The Company, the Community Bank, the Commercial Bank, and certain of their
subsidiaries are also subject to a New York City banking corporation tax in an annual amount equal to the greater of
(a) 9% of entire net income allocable to New York City, or (b) the applicable alternative tax. The applicable
15
alternative tax is the greater of (a) 0.01% of the value of taxable assets allocable to New York City with certain
modifications; (b) 3% of alternative entire net income allocable to New York City; or (c) $125. Allocated entire net
income and alternative net income are calculated in accordance with rules that are similar to the rules for calculating
the Franchise Tax, including the allowance of a deduction for an addition to the tax bad debt reserve. The New York
City tax law does not permit a deduction for net operating losses and does not phase out the favorable adjustment for
income from subsidiary capital attributable to a controlled REIT subsidiary. The Company, the Community Bank,
the Commercial Bank, and certain of their subsidiaries file a New York City combined return.
Other State Taxes. Taxes paid by the Company and its subsidiaries to states other than New York are not
material to its consolidated financial condition or results of operations.
Regulation and Supervision
General
The Community Bank is a New York State-chartered savings bank and its deposit accounts are insured under
the Deposit Insurance Fund (the “DIF”) up to applicable legal limits. The Commercial Bank is a New York State-
chartered commercial bank and its deposit accounts also are insured by the DIF up to applicable legal limits. Both
the Community Bank and the Commercial Bank are subject to extensive regulation and supervision by the New
York State Banking Department (the “Banking Department”), as their chartering agency, and by the Federal Deposit
Insurance Corporation (the “FDIC”), as their insurer of deposits. Both institutions must file reports with the Banking
Department and the FDIC concerning their activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other depository
institutions. Furthermore, the Banks are periodically examined by the Banking Department and the FDIC to assess
compliance with various regulatory requirements, including safety and soundness considerations. This regulation
and supervision establishes a comprehensive framework of activities in which a savings bank and a commercial
bank can engage, and is intended primarily for the protection of the insurance fund and depositors. The regulatory
structure also gives the regulatory authorities extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with respect to the classification of assets and the
establishment of adequate loan loss allowances for regulatory purposes. Any change in such regulation, whether by
the Banking Department, the FDIC, or through legislation, could have a material adverse impact on the Company,
the Community Bank, the Commercial Bank, and their operations, and the Company’s shareholders. The Company
is required to file certain reports under, and otherwise comply with, the rules and regulations of the Federal Reserve
Board (the “FRB”), the FDIC, the Banking Department, and the SEC under federal securities laws. In addition, the
FRB periodically examines the Company. Certain of the regulatory requirements applicable to the Community
Bank, the Commercial Bank, and the Company are referred to below or elsewhere herein. However, such discussion
is not meant to be a complete explanation of all laws and regulations and is qualified in its entirety by reference to
the actual laws and regulations.
New York Law
The Community Bank and the Commercial Bank derive their lending, investment, and other authority
primarily from the applicable provisions of New York State Banking Law and the regulations of the Banking
Department, as limited by FDIC regulations. Under these laws and regulations, banks, including the Community
Bank and the Commercial Bank, may invest in real estate mortgages, consumer and commercial loans, certain types
of debt securities (including certain corporate debt securities, and obligations of federal, state, and local
governments and agencies), certain types of corporate equity securities, and certain other assets. The lending powers
of New York savings banks and commercial banks are not subject to percentage of assets or capital limitations,
although there are limits applicable to loans to individual borrowers.
Under the statutory authority for investing in equity securities, a savings bank may directly invest up to 7.5%
of its assets in certain corporate stock, and may also invest up to 7.5% of its assets in certain mutual fund securities.
Investment in the stock of a single corporation is limited to the lesser of 2% of the issued and outstanding stock of
such corporation or 1% of the savings bank’s assets, except as set forth below. Such equity securities must meet
certain earnings ratios and other tests of financial performance. Commercial banks may invest in certain equity
securities up to 2% of the stock of a single issuer and are subject to a general overall limit of the lesser of 2% of the
bank’s assets or 20% of capital and surplus.
16
Pursuant to the “leeway” power, a savings bank may also make investments not otherwise permitted under
New York State Banking Law. This power permits a bank to make investments that would otherwise be
impermissible. Up to 1% of a bank’s assets may be invested in any single such investment, subject to certain
restrictions; the aggregate limit for all such investments is 5% of a bank’s assets. Additionally, savings banks are
authorized to elect to invest under a “prudent person” standard in a wide range of debt and equity securities in lieu of
investing in such securities in accordance with, and reliance upon, the specific investment authority set forth in New
York State Banking Law. Although the “prudent person” standard may expand a savings bank’s authority, in the
event that a savings bank elects to utilize the “prudent person” standard, it may be unable to avail itself of the other
provisions of New York State Banking Law and regulations which set forth specific investment authority.
New York State savings banks may also invest in subsidiaries under a service corporation power. A savings
bank may use this power to invest in corporations that engage in various activities authorized for savings banks, plus
any additional activities which may be authorized by the Banking Department. Investment by a savings bank in the
stock, capital notes, and debentures of its service corporation is limited to 3% of the savings bank’s assets, and such
investments, together with the savings bank’s loans to its service corporations, may not exceed 10% of the savings
bank’s assets. Savings banks and commercial banks may invest in operating subsidiaries that engage in activities
permissible for the institution directly. Under New York law, the New York State Banking Board has the authority
to authorize savings banks to engage in any activity permitted under federal law for federal savings associations and
the insurance powers of national banks. Commercial banks may be authorized to engage in any activity permitted
under federal law for national banks.
The exercise by an FDIC-insured savings bank or commercial bank of the lending and investment powers
under New York State Banking Law is limited by FDIC regulations and other federal laws and regulations. In
particular, the applicable provision of New York State Banking Law and regulations governing the investment
authority and activities of an FDIC-insured state-chartered savings bank and commercial bank have been effectively
limited by the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and the FDIC
regulations issued pursuant thereto.
With certain limited exceptions, a New York State-chartered savings bank may not make loans or extend
credit for commercial, corporate, or business purposes (including lease financing) to a single borrower, the
aggregate amount of which would be in excess of 15% of the bank’s net worth or up to 25% for loans secured by
collateral having an ascertainable market value at least equal to the excess of such loans over the bank’s net worth.
A commercial bank is subject to similar limits on all of its loans. The Community Bank and the Commercial Bank
currently comply with all applicable loans-to-one-borrower limitations.
Under New York State Banking Law, a New York State-chartered stock-form savings bank and commercial
bank may declare and pay dividends out of its net profits, unless there is an impairment of capital, but approval of
the Superintendent of Banks (the “Superintendent”) is required if the total of all dividends declared in a calendar
year would exceed the total of its net profits for that year combined with its retained net profits for the preceding two
years less prior dividends paid.
New York State Banking Law gives the Superintendent authority to issue an order to a New York State-
chartered banking institution to appear and explain an apparent violation of law, to discontinue unauthorized or
unsafe practices, and to keep prescribed books and accounts. Upon a finding by the Banking Department that any
director, trustee, or officer of any banking organization has violated any law, or has continued unauthorized or
unsafe practices in conducting the business of the banking organization after having been notified by the
Superintendent to discontinue such practices, such director, trustee, or officer may be removed from office after
notice and an opportunity to be heard. The Superintendent also has authority to appoint a conservator or a receiver
for a savings or commercial bank under certain circumstances.
FDIC Regulations
Capital Requirements. The FDIC has adopted risk-based capital guidelines to which the Community Bank and
the Commercial Bank are subject. The guidelines establish a systematic analytical framework that makes regulatory
capital requirements sensitive to differences in risk profiles among banking organizations. The Community Bank
and the Commercial Bank are required to maintain certain levels of regulatory capital in relation to regulatory risk-
weighted assets. The ratio of such regulatory capital to regulatory risk-weighted assets is referred to as a “risk-based
capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance-sheet items to
17
four risk-weighted categories ranging from 0% to 100%, with higher levels of capital being required for the
categories perceived as representing greater risk.
These guidelines divide an institution’s capital into two tiers. The first tier (“Tier I”) includes common equity,
retained earnings, certain non-cumulative perpetual preferred stock (excluding auction rate issues) and minority
interests in equity accounts of consolidated subsidiaries, less goodwill and other intangible assets (except mortgage
servicing rights and purchased credit card relationships subject to certain limitations). Supplementary (“Tier II”)
capital includes, among other items, cumulative perpetual and long-term limited-life preferred stock, mandatorily
convertible securities, certain hybrid capital instruments, term subordinated debt, and the allowance for loan losses,
subject to certain limitations, and up to 45% of pre-tax net unrealized gains on equity securities with readily
determinable fair market values, less required deductions. Savings banks and commercial banks are required to
maintain a total risk-based capital ratio of 8%, of which at least 4% must be Tier I capital.
In addition, the FDIC has established regulations prescribing a minimum Tier I leverage capital ratio (the ratio
of Tier I capital to adjusted average assets as specified in the regulations). These regulations provide for a minimum
Tier I leverage capital ratio of 3% for institutions that meet certain specified criteria, including that they have the
highest examination rating and are not experiencing or anticipating significant growth. All other institutions are
required to maintain a Tier I leverage capital ratio of at least 4%. The FDIC may, however, set higher leverage and
risk-based capital requirements on individual institutions when particular circumstances warrant. Institutions
experiencing or anticipating significant growth are expected to maintain capital ratios, including tangible capital
positions, well above the minimum levels.
As of December 31, 2007, the Community Bank and the Commercial Bank were deemed to be well
capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, a
bank must maintain a minimum Tier I leverage capital ratio of 5%, a minimum Tier I risk-based capital ratio of 6%,
and a minimum total risk-based capital ratio of 10%. A summary of the regulatory capital ratios of the Banks at
December 31, 2007 appears in Note 16 to the Consolidated Financial Statements, “Regulatory Matters” in Item 8,
“Financial Statements and Supplementary Data.”
The regulatory capital regulations of the FDIC and other federal banking agencies provide that the agencies
will take into account the exposure of an institution’s capital and economic value to changes in interest rate risk in
assessing capital adequacy. According to the agencies, applicable considerations include the quality of the
institution’s interest rate risk management process, overall financial condition, and the level of other risks at the
institution for which capital is needed. Institutions with significant interest rate risk may be required to hold
additional capital. The agencies have issued a joint policy statement providing guidance on interest rate risk
management, including a discussion of the critical factors affecting the agencies’ evaluation of interest rate risk in
connection with capital adequacy. Institutions that engage in specified amounts of trading activity may be subject to
adjustments in the calculation of the risk-based capital requirement to assure sufficient additional capital to support
market risk.
Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe, for the
depository institutions under its jurisdiction, standards that relate to, among other things, internal controls;
information and audit systems; loan documentation; credit underwriting; the monitoring of interest rate risk; asset
growth; compensation; fees and benefits; and such other operational and managerial standards as the agency deems
appropriate. The federal banking agencies adopted final regulations and Interagency Guidelines Establishing
Standards for Safety and Soundness (the “Guidelines”) to implement these safety and soundness standards. The
Guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address
problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking
agency determines that an institution fails to meet any standard prescribed by the Guidelines, the agency may
require the institution to submit to the agency an acceptable plan to achieve compliance with the standard, as
required by the Federal Deposit Insurance Act, as amended, (the “FDI Act”). The final regulations establish
deadlines for the submission and review of such safety and soundness compliance plans.
Real Estate Lending Standards. The FDIC and the other federal banking agencies have adopted regulations
that prescribe standards for extensions of credit that (i) are secured by real estate, or (ii) are made for the purpose of
financing construction or improvements on real estate. The FDIC regulations require each institution to establish and
maintain written internal real estate lending standards that are consistent with safe and sound banking practices and
appropriate to the size of the institution and the nature and scope of its real estate lending activities. The standards
18
also must be consistent with accompanying FDIC Guidelines, which include loan-to-value limitations for the
different types of real estate loans. Institutions are also permitted to make a limited amount of loans that do not
conform to the proposed loan-to-value limitations so long as such exceptions are reviewed and justified
appropriately. The Guidelines also list a number of lending situations in which exceptions to the loan-to-value
standard are justified.
On December 12, 2006, the FDIC, the Office of the Comptroller of the Currency, and the Board of Governors
of the Federal Reserve System (collectively, the “Agencies”) issued joint guidance entitled “Concentrations in
Commercial Real Estate Lending, Sound Risk Management Practices” (the “CRE Guidance”). The CRE Guidance,
which addresses land development, construction, and certain multi-family loans, as well as commercial real estate
loans, does not establish specific lending limits but, rather, reinforces and enhances the Agencies’ existing
regulations and guidelines for such lending and portfolio management.
Dividend Limitations. The FDIC has authority to use its enforcement powers to prohibit a savings bank or
commercial bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or
unsound practice. Federal law prohibits the payment of dividends that will result in the institution failing to meet
applicable capital requirements on a pro forma basis. The Community Bank and the Commercial Bank are also
subject to dividend declaration restrictions imposed by New York law as previously discussed under “New York
Law.”
Investment Activities
Since the enactment of FDICIA, all state-chartered financial institutions, including savings banks, commercial
banks, and their subsidiaries, have generally been limited to such activities as principal and equity investments of the
type and in the amount authorized for national banks. State law, FDICIA, and FDIC regulations permit certain
exceptions to these limitations. For example, certain state-chartered savings banks, such as the Community Bank,
may, with FDIC approval, continue to exercise state authority to invest in common or preferred stocks listed on a
national securities exchange and in the shares of an investment company registered under the Investment Company
Act of 1940, as amended. Such banks may also continue to sell Savings Bank Life Insurance. In addition, the FDIC
is authorized to permit institutions to engage in state authorized activities or investments not permitted for national
banks (other than non-subsidiary equity investments) for institutions that meet all applicable capital requirements if
it is determined that such activities or investments do not pose a significant risk to the insurance fund. The Gramm-
Leach-Bliley Act of 1999 and FDIC regulations impose certain quantitative and qualitative restrictions on such
activities and on a bank’s dealings with a subsidiary that engages in specified activities.
The Community Bank received grandfathering authority from the FDIC in 1993 to invest in listed stock and/or
registered shares subject to the maximum permissible investments of 100% of Tier I Capital, as specified by the
FDIC’s regulations, or the maximum amount permitted by New York State Banking Law, whichever is less. Such
grandfathering authority is subject to termination upon the FDIC’s determination that such investments pose a safety
and soundness risk to the Community Bank or in the event that the Community Bank converts its charter or
undergoes a change in control.
Prompt Corrective Regulatory Action
Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective
action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the law
establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized.
The FDIC has adopted regulations to implement prompt corrective action. Among other things, the regulations
define the relevant capital measure for the five capital categories. An institution is deemed to be “well capitalized” if
it has a total risk-based capital ratio of 10% or greater, a Tier I risk-based capital ratio of 6% or greater, and a
leverage capital ratio of 5% or greater, and is not subject to a regulatory order, agreement, or directive to meet and
maintain a specific capital level for any capital measure. An institution is deemed to be “adequately capitalized” if it
has a total risk-based capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4% or greater, and generally a
leverage capital ratio of 4% or greater. An institution is deemed to be “undercapitalized” if it has a total risk-based
capital ratio of less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a leverage capital ratio of
less than 4%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio
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of less than 6%, a Tier I risk-based capital ratio of less than 3%, or a leverage capital ratio of less than 3%. An
institution is deemed to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%.
“Undercapitalized” institutions are subject to growth, capital distribution (including dividend), and other
limitations and are required to submit a capital restoration plan. An institution’s compliance with such plan is
required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the
lesser of 5.0% of the bank’s total assets when deemed undercapitalized or the amount necessary to achieve the status
of adequately capitalized. If an undercapitalized institution fails to submit an acceptable plan, it is treated as if it is
“significantly undercapitalized.” Significantly undercapitalized institutions are subject to one or more additional
restrictions including, but not limited to, an order by the FDIC to sell sufficient voting stock to become adequately
capitalized; requirements to reduce total assets, cease receipt of deposits from correspondent banks, or dismiss
directors or officers; and restrictions on interest rates paid on deposits, compensation of executive officers, and
capital distributions by the parent holding company.
“Critically undercapitalized” institutions also may not, beginning 60 days after becoming critically
undercapitalized, make any payment of principal or interest on certain subordinated debt, or extend credit for a
highly leveraged transaction, or enter into any material transaction outside the ordinary course of business. In
addition, subject to a narrow exception, the appointment of a receiver is required for a critically undercapitalized
institution.
Transactions with Affiliates
Under current federal law, transactions between depository institutions and their affiliates are governed by
Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W promulgated thereunder. An affiliate
of a savings bank or commercial bank is any company or entity that controls, is controlled by, or is under common
control with the institution, other than a subsidiary. Generally, an institution’s subsidiaries are not treated as
affiliates unless they are engaged in activities as principal that are not permissible for national banks. In a holding
company context, at a minimum, the parent holding company of an institution, and any companies that are
controlled by such parent holding company, are affiliates of the institution. Generally, Section 23A limits the extent
to which the institution or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount
equal to 10% of the institution’s capital stock and surplus, and contains an aggregate limit on all such transactions
with all affiliates to an amount equal to 20% of such capital stock and surplus. The term “covered transaction”
includes the making of loans or other extensions of credit to an affiliate; the purchase of assets from an affiliate; the
purchase of, or an investment in, the securities of an affiliate; the acceptance of securities of an affiliate as collateral
for a loan or extension of credit to any person; or issuance of a guarantee, acceptance, or letter of credit on behalf of
an affiliate. Section 23A also establishes specific collateral requirements for loans or extensions of credit to, or
guarantees, or acceptances on letters of credit issued on behalf of, an affiliate. Section 23B requires that covered
transactions and a broad list of other specified transactions be on terms substantially the same as, or no less
favorable to, the institution or its subsidiary as similar transactions with non-affiliates.
The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and
directors. However, the Sarbanes-Oxley Act contains a specific exemption for loans by an institution to its executive
officers and directors in compliance with federal banking laws. Section 22(h) of the Federal Reserve Act, and FRB
Regulation O adopted thereunder, governs loans by a savings bank or commercial bank to directors, executive
officers, and principal shareholders. Under Section 22(h), loans to directors, executive officers, and shareholders
who control, directly or indirectly, 10% or more of voting securities of an institution, and certain related interests of
any of the foregoing, may not exceed, together with all other outstanding loans to such persons and affiliated
entities, the institution’s total capital and surplus. Section 22(h) also prohibits loans above amounts prescribed by the
appropriate federal banking agency to directors, executive officers, and shareholders who control 10% or more of
the voting securities of an institution, and their respective related interests, unless such loan is approved in advance
by a majority of the board of the institution’s directors. Any “interested” director may not participate in the voting.
The loan amount (which includes all other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or any loans aggregating over $500,000.
Further, pursuant to Section 22(h), loans to directors, executive officers, and principal shareholders must be made on
terms substantially the same as those offered in comparable transactions to other persons. There is an exception for
loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution
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and does not give preference to executive officers over other employees. Section 22(g) of the Federal Reserve Act
places additional limitations on loans to executive officers.
Enforcement
The FDIC has extensive enforcement authority over insured banks, including the Community Bank and the
Commercial Bank. This enforcement authority includes, among other things, the ability to assess civil money
penalties, to issue cease and desist orders, and to remove directors and officers. In general, these enforcement
actions may be initiated in response to violations of laws and regulations and unsafe or unsound practices.
The FDIC has authority under federal law to appoint a conservator or receiver for an insured institution under
certain circumstances. The FDIC is required, with certain exceptions, to appoint a receiver or conservator for an
insured institution if that institution was critically undercapitalized on average during the calendar quarter beginning
270 days after the date on which the institution became critically undercapitalized. For this purpose, “critically
undercapitalized” means having a ratio of tangible equity to total assets of less than 2%. See “Prompt Corrective
Regulatory Action” earlier in this report.
The FDIC may also appoint a conservator or receiver for an insured institution on the basis of the institution’s
financial condition or upon the occurrence of certain events, including (i) insolvency (whereby the assets of the bank
are less than its liabilities to depositors and others); (ii) substantial dissipation of assets or earnings through
violations of law or unsafe or unsound practices; (iii) existence of an unsafe or unsound condition to transact
business; (iv) likelihood that the bank will be unable to meet the demands of its depositors or to pay its obligations
in the normal course of business; and (v) insufficient capital, or the incurrence or likely incurrence of losses that will
deplete substantially all of the institution’s capital with no reasonable prospect of replenishment of capital without
federal assistance.
Insurance of Deposit Accounts
The deposits of the Community Bank and the Commercial Bank are insured up to applicable limits by the DIF
of the FDIC. The DIF is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund,
which were merged in 2006. The FDIC amended its risk-based assessment system for 2007 to implement authority
granted by the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”). Under the revised system,
insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital
levels and certain other factors. An institution’s assessment rate depends upon the category to which it is assigned.
Risk Category I, which contains the least risky depository institutions, is expected to include more than 90% of all
institutions. Unlike the other categories, Risk Category I contains further risk differentiation based on the FDIC’s
analysis of financial ratios, examination component ratings and other information. Assessment rates are determined
by the FDIC and currently range from five to seven basis points for the healthiest institutions (Risk Category I) to 43
basis points of assessable deposits for the riskiest (Risk Category IV). The FDIC may adjust rates uniformly from
one quarter to the next, except that no single adjustment can exceed three basis points. No institution may pay a
dividend if it is in default of its FDIC assessment.
The Reform Act also provided a one-time credit for eligible institutions based on their assessment base as of
December 31, 1996. Subject to certain limitations, credits could be used beginning in 2007 to offset assessments.
The one-time credits for the Community Bank and the Commercial Bank, combined, were $8.9 million at December
31, 2007. In 2007, we utilized $7.1 million of the combined one-time credit to fully offset our assessments for the
year. The remaining one-time credits are expected to be exhausted in 2008. In addition, the Reform Act also
provided for the possibility that the FDIC may pay dividends to insured institutions once the DIF reserve ratio
equals or exceeds 1.35% of estimated insured deposits.
In addition to the assessment for deposit insurance, institutions are required to make payments on bonds
issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. That
payment is established quarterly, and during the calendar year ending December 31, 2007, averaged 1.18 basis
points of assessable deposits.
The Reform Act provided the FDIC with authority to adjust the DIF ratio to insured deposits within a range of
1.15% and 1.50%, in contrast to the prior statutorily fixed ratio of 1.25%. The ratio, which is viewed by the FDIC as
the level that the fund should achieve, has been established by the agency at 1.25% for 2008, unchanged from 2007.
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The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums
would likely have an adverse effect on the operating expenses and results of operations of the Community Bank and
the Commercial Bank. Management cannot predict what insurance assessment rates will be in the future.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe
or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC. Management does not know of any practice, condition, or
violation that might lead to termination of deposit insurance of either of the Banks.
Community Reinvestment Act
Federal Regulation. Under the Community Reinvestment Act (the “CRA”), as implemented by FDIC
regulations, an institution has a continuing and affirmative obligation consistent with its safe and sound operation to
help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial institutions nor does it limit an
institution’s discretion to develop the types of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the FDIC, in connection with its examinations, to assess
the institution’s record of meeting the credit needs of its community and to take such record into account in its
evaluation of certain applications by such institution. The CRA requires public disclosure of an institution’s CRA
rating and further requires the FDIC to provide a written evaluation of an institution’s CRA performance utilizing a
four-tiered descriptive rating system. The Community Bank’s latest CRA rating from the FDIC was “outstanding”
and the Commercial Bank’s latest CRA rating was “satisfactory.”
New York Regulation. The Community Bank and the Commercial Bank are also subject to provisions of the
New York State Banking Law which impose continuing and affirmative obligations upon a banking institution
organized in New York to serve the credit needs of its local community (the “NYCRA”). Such obligations are
substantially similar to those imposed by the CRA. The NYCRA requires the Banking Department to make a
periodic written assessment of an institution’s compliance with the NYCRA, utilizing a four-tiered rating system,
and to make such assessment available to the public. The NYCRA also requires the Superintendent to consider the
NYCRA rating when reviewing an application to engage in certain transactions, including mergers, asset purchases,
and the establishment of branch offices or ATMs, and provides that such assessment may serve as a basis for the
denial of any such application. The latest NYCRA rating received by the Community Bank was “outstanding” and
the latest rating received by the Commercial Bank was “satisfactory.”
Federal Reserve System
Under FRB regulations, the Community Bank and the Commercial Bank are required to maintain non-
interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts). The
FRB regulations generally require that reserves be maintained against aggregate transaction accounts as follows: for
that portion of transaction accounts aggregating $43.9 million or less (subject to adjustment by the FRB), the reserve
requirement is 3%; for amounts greater than $43.9 million, the reserve requirement is 10% (subject to adjustment by
the FRB between 8% and 14%). The first $9.3 million of otherwise reservable balances (subject to adjustments by
the FRB) are exempted from the reserve requirements. The Community Bank and the Commercial Bank are in
compliance with the foregoing requirements. Because required reserves must be maintained in the form of vault
cash, in a non-interest-bearing account at a Federal Reserve Bank, or in a pass-through account as defined by the
FRB, this reserve requirement effectively reduces an institution’s interest-earning assets.
Federal Home Loan Bank System
The Community Bank and the Commercial Bank are members of the Federal Home Loan Bank (the “FHLB”)
system, which consists of 12 regional FHLBs. Each regional FHLB manages its customer relationships, while the 12
FHLBs use their combined size and strength to obtain the necessary funding at the lowest possible cost. As members
of the FHLB-NY, the Community Bank and the Commercial Bank are required to acquire and hold shares of capital
stock. Pursuant to this requirement, the Community Bank and the Commercial Bank held FHLB-NY stock of $411.5
million and $11.6 million, respectively, at December 31, 2007.
For the fiscal years ended December 31, 2007 and 2006, dividends from the FHLB-NY to the Community
Bank amounted to $31.5 million and $20.8 million, respectively. Dividends from the FHLB-NY to the Commercial
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Bank amounted to $871,000 and $602,000, respectively, in the corresponding years. A reduction in FHLB-NY
dividends received or an increase in the interest paid on future FHLB-NY advances would adversely impact the
Company’s net interest income.
Interstate Branching
Federal law allows the FDIC, and New York State Banking Law allows the Superintendent, to approve an
application by a state banking institution to acquire interstate branches by merger, unless, in the case of the FDIC,
the state of the target institution has opted out of interstate branching. New York State Banking Law authorizes
savings banks and commercial banks to open and occupy de novo branches outside the state of New York, and the
FDIC is authorized to approve a state bank’s establishment of a de novo interstate branch, if the intended host state
has opted into interstate de novo branching. The Community Bank currently maintains 53 branches in New Jersey in
addition to its 126 branches in New York State.
Holding Company Regulation
Federal Regulation. The Company is currently subject to examination, regulation, and periodic reporting
under the Bank Holding Company Act of 1956, as amended (the “BHCA”), as administered by the FRB.
The Company is required to obtain the prior approval of the FRB to acquire all, or substantially all, of the
assets of any bank or bank holding company. Prior FRB approval would be required for the Company to acquire
direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after giving
effect to such acquisition, it would, directly or indirectly, own or control more than 5% of any class of voting shares
of such bank or bank holding company. In addition to the approval of the FRB, before any bank acquisition can be
completed, prior approval thereof may also be required to be obtained from other agencies having supervisory
jurisdiction over the bank to be acquired, including the Banking Department.
A bank holding company is generally prohibited from engaging in, or acquiring, direct or indirect control of
more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal
exceptions to this prohibition is for activities found by the FRB to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Some of the principal activities that the FRB has determined by
regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data
processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment, or financial
advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily
to promote community welfare; and (vii) acquiring a savings and loan association.
The Gramm-Leach-Bliley Act of 1999 authorizes a bank holding company that meets specified conditions,
including being “well capitalized” and “well managed,” to opt to become a “financial holding company” and thereby
engage in a broader array of financial activities than previously permitted. Such activities can include insurance
underwriting and investment banking.
The FRB has adopted capital adequacy guidelines for bank holding companies (on a consolidated basis)
substantially similar to those of the FDIC for the Community Bank and the Commercial Bank. (Please see “Capital
Requirements” earlier in this report.) At December 31, 2007, the Company’s consolidated Total and Tier I capital
exceeded these requirements.
Bank holding companies are generally required to give the FRB prior written notice of any purchase or
redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions during the preceding twelve months,
is equal to 10% or more of the Company’s consolidated net worth. The FRB may disapprove such a purchase or
redemption if it determines that the proposal would constitute an unsafe or unsound practice, or would violate any
law, regulation, FRB order or directive, or any condition imposed by, or written agreement with, the FRB. The FRB
has adopted an exception to this approval requirement for well-capitalized bank holding companies that meet certain
other conditions.
The FRB has issued a policy statement regarding the payment of dividends by bank holding companies. In
general, the FRB’s policies provide that dividends should be paid only out of current earnings and only if the
prospective rate of earnings retention by the bank holding company appears consistent with the organization’s
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capital needs, asset quality, and overall financial condition. The FRB’s policies also require that a bank holding
company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources
to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining
the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks
where necessary. Under the prompt corrective action laws, the ability of a bank holding company to pay dividends
may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the ability of
the Company to pay dividends or otherwise engage in capital distributions.
Under the FDI Act, depository institutions are liable to the FDIC for losses suffered or anticipated by the
FDIC in connection with the default of a commonly controlled depository institution or any assistance provided by
the FDIC to such an institution in danger of default. The Community Bank and the Commercial Bank are commonly
controlled within the meaning of that law.
The status of the Company as a registered bank holding company under the BHCA does not exempt it from
certain federal and state laws and regulations applicable to corporations generally, including, without limitation,
certain provisions of the federal securities laws.
The Company, the Community Bank, and the Commercial Bank will be affected by the monetary and fiscal
policies of various agencies of the United States Government, including the Federal Reserve System. In view of
changing conditions in the national economy and in the money markets, it is impossible for management to
accurately predict future changes in monetary policy or the effect of such changes on the business or financial
condition of the Company, the Community Bank, or the Commercial Bank.
New York Holding Company Regulation. With the addition of the Commercial Bank, the Company became
subject to regulation as a “multi-bank holding company” under New York law since it controls two banking
institutions. Among other requirements, this means that the Company must receive the prior approval of the New
York State Banking Board prior to the acquisition of 10% or more of the voting stock of another banking institution
or to otherwise acquire a banking institution by merger or purchase.
Acquisition of the Holding Company
Federal Restrictions. Under the Federal Change in Bank Control Act (the “CIBCA”), a notice must be
submitted to the FRB if any person (including a company), or group acting in concert, seeks to acquire 10% or more
of the Company’s shares of outstanding common stock, unless the FRB has found that the acquisition will not result
in a change in control of the Company. Under the CIBCA, the FRB generally has 60 days within which to act on
such notices, taking into consideration certain factors, including the financial and managerial resources of the
acquirer, the convenience and needs of the communities served by the Company, the Community Bank, and the
Commercial Bank, and the anti-trust effects of the acquisition. Under the BHCA, any company would be required to
obtain prior approval from the FRB before it may obtain “control” of the Company within the meaning of the
BHCA. Control generally is defined to mean the ownership or power to vote 25% or more of any class of voting
securities of the Company or the ability to control in any manner the election of a majority of the Company’s
directors. An existing bank holding company would be required to obtain the FRB’s prior approval under the BHCA
before acquiring more than 5% of the Company’s voting stock. See “Holding Company Regulation” earlier in this
report.
New York Change in Control Restrictions. In addition to the CIBCA and the BHCA, New York State Banking
Law generally requires prior approval of the New York State Banking Board before any action is taken that causes
any company to acquire direct or indirect control of a banking institution which is organized in New York.
Federal Securities Law
The Company’s common stock is registered with the SEC under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). The Company is subject to the information and proxy solicitation requirements,
insider trading restrictions, and other requirements under the Exchange Act.
Registration of the shares of the common stock that were issued in the Community Bank’s conversion from
mutual to stock form under the Securities Act of 1933, as amended (the “Securities Act”), does not cover the resale
of such shares. Shares of the common stock purchased by persons who are not affiliates of the Company may be
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resold without registration. Shares purchased by an affiliate of the Company will be subject to the resale restrictions
of Rule 144 under the Securities Act. If the Company meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Company who complies with the other conditions of Rule 144
(including those that require the affiliate’s sale to be aggregated with those of certain other persons) would be able to
sell in the public market, without registration, a number of shares not to exceed in any three-month period the
greater of (i) 1% of the outstanding shares of the Company, or (ii) the average weekly volume of trading in such
shares during the preceding four calendar weeks. Provision may be made by the Company in the future to permit
affiliates to have their shares registered for sale under the Securities Act under certain circumstances.
ITEM 1A. RISK FACTORS
There are various risks and uncertainties that are inherent in our business. Following is a discussion of the
material risks and uncertainties that could have a material adverse impact on our financial condition and results of
operations, and that could cause the value of our common stock to decline significantly, were they to transpire.
Additional risks that are not currently known to us, or that we currently believe to be immaterial, may also have a
material effect on our financial condition and results of operations. This report is qualified in its entirety by these
risk factors.
We are subject to interest rate risk.
Our primary source of income is net interest income, which is the difference between the interest income
generated by our interest-earning assets (consisting primarily of loans and, to a lesser extent, securities) and the
interest expense generated by our interest-bearing liabilities (consisting primarily of deposits and wholesale
borrowings).
The level of net interest income is primarily a function of the average balance of our interest-earning assets,
the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of
such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our
interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition
for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board of
Governors (the “FOMC”), and market interest rates.
The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, the
level of which is driven by the FOMC. However, the yields generated by our loans and securities are typically
driven by intermediate-term (i.e., five-year) interest rates, which are set by the market and generally vary from day
to day. The level of net interest income is therefore influenced by movements in such interest rates, and the pace at
which such movements occur. If the interest rates on our interest-bearing liabilities increase at a faster pace than the
interest rates on our interest-earning assets, the result could be a reduction in net interest income and with it, a
reduction in the earnings of the Company. Our net interest income and earnings would be similarly impacted were
the interest rates on our interest-earning assets to decline more quickly than the interest rates on our interest-bearing
liabilities.
In addition, such changes in interest rates could affect our ability to originate loans and attract and retain
deposits; the fair values of our securities and other financial assets; the fair values of our liabilities; and the average
lives of our loan and securities portfolios.
Changes in interest rates could also have an effect on the level of loan refinancing activity which, in turn,
would impact the amount of prepayment penalty income we receive on our multi-family and commercial real estate
loans. As prepayment penalties are recorded as interest income, the extent to which they increase or decrease during
any given period could have a significant impact on the level of net interest income and net income generated by the
Company during that time.
In addition, changes in interest rates could have an effect on the slope of the yield curve. A flat to inverted
yield curve could cause our net interest income and net interest margin to contract, which could have a material
adverse effect on our net income and cash flows, and the value of our assets.
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Please see “Net Interest Income” and “Asset and Liability Management and the Impact of Interest Rate Risk”
in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for
information regarding the actions we have been taking to mitigate our exposure to interest rate risk.
We are subject to credit risk.
Risks stemming from our lending activities:
Our business strategy emphasizes the origination of multi-family loans and, to a lesser extent, commercial real
estate, construction, and commercial & industrial (“C&I”) loans, all of which are generally larger, and have higher
risk-adjusted returns and shorter maturities than one- to four-family mortgage loans. Our credit risk would ordinarily
be expected to increase with the growth of these loan portfolios.
While our record of asset quality has historically been solid, multi-family and commercial real estate
properties are generally believed to involve a greater degree of credit risk than one- to four-family loans. In addition,
payments on multi-family and commercial real estate loans generally depend on the income produced by the
underlying properties which, in turn, depends on their successful operation and management. Accordingly, the
ability of our borrowers to repay these loans may be impacted by adverse conditions in the local real estate market
and the local economy. While we seek to minimize these risks through our underwriting policies, which generally
require that such loans be qualified on the basis of the collateral property’s cash flows, appraised value, and debt
service coverage ratio, among other factors, there can be no assurance that our underwriting policies will protect us
from credit-related losses or delinquencies.
Construction financing typically involves a greater degree of credit risk than longer-term financing on
improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the
initial estimate of the property’s value at completion of construction or development, compared to the estimated
costs (including interest) of construction. If the estimate of value proves to be inaccurate, the loan may be under-
secured. While we seek to minimize these risks by maintaining consistent lending policies and rigorous underwriting
standards, an error in such estimates or a downturn in the local economy or real estate market could have a material
adverse effect on the quality of our construction loan portfolio, thereby resulting in material losses or delinquencies.
We seek to minimize the risks involved in C&I lending by underwriting such loans on the basis of the cash
flows produced by the business; by requiring that such loans be collateralized by various business assets, including
inventory, equipment, and accounts receivable, among others; and by requiring personal guarantees. However, the
capacity of a borrower to repay a C&I loan is substantially dependent on the degree to which his or her business is
successful. In addition, the collateral underlying such loans may depreciate over time, may not be conducive to
appraisal, or may fluctuate in value, based upon the business’ results.
While the quality of our assets has been consistently solid, we cannot guarantee that our historical record of
asset quality will be maintained in future periods. Although we are not involved in subprime or Alt-A lending, the
ramifications of the subprime lending crisis have been far-reaching, with many sectors of the country reporting
declining real estate values, rising unemployment, and a general reduction in consumer confidence. The ability of
our borrowers to repay their loans could be adversely impacted by the significant change in market conditions,
which could not only result in our experiencing an increase in charge-offs, but could also necessitate our setting
aside provisions for loan losses. Either of these events would have an adverse impact on our results of operations
were they to occur.
Please see “Loans” and “Asset Quality” in Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” for a discussion of the polices and procedures we follow in underwriting our
multi-family, commercial real estate, construction, and C&I loans.
Risks stemming from our focus on lending in the New York metropolitan region:
Our business depends significantly on general economic conditions in the New York metropolitan region,
where the majority of the buildings and properties securing our loans and the businesses of our customers are
located. Unlike larger national or superregional banks that serve a broader and more diverse geographic region, our
lending is primarily concentrated in New York City and the surrounding markets of Nassau, Suffolk, and
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Westchester counties in New York, and Essex, Hudson, Mercer, Middlesex, Monmouth, Ocean, and Union counties
in New Jersey.
Accordingly, the ability of our borrowers to repay their loans, and the value of the collateral securing such
loans, may be significantly affected by economic conditions in the region or changes in the local real estate market.
A significant decline in general economic conditions caused by inflation, recession, unemployment, acts of
terrorism, or other factors beyond our control could therefore have an adverse effect on our financial condition and
results of operations. In addition, because multi-family and commercial real estate loans represent the majority of
our loans outstanding, a decline in tenant occupancy due to such factors or for other reasons could adversely impact
the ability of property owners to repay their loans on a timely basis, which could have a negative impact on our
results of operations.
Please see “Loans” and “Asset Quality” in Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” for a discussion of the polices and procedures we follow in underwriting our
multi-family, commercial real estate, construction, and C&I loans.
We are subject to certain risks in connection with the level of our allowance for loan losses.
A variety of factors could cause our borrowers to default on their loan payments and the collateral securing
such loans to be insufficient to pay any remaining indebtedness. In such an event, we could experience significant
loan losses, which could have a material adverse effect on our financial condition and results of operations.
In the process of originating a loan, we make various assumptions and judgments about the ability of the
borrower to repay it, based on the cash flows produced by the building, property, or business; the value of the real
estate or other assets serving as collateral; and the creditworthiness of the borrower, among other factors.
We also establish an allowance for loan losses through an assessment of probable losses in each of our loan
portfolios. Several factors are considered in this process, including historical and projected default rates and loss
severities; internal risk ratings; loan size; economic, industry, and environmental factors; and loan impairment, as
defined by the Financial Accounting Standards Board. If our assumptions and judgments regarding such matters
prove to be incorrect, our allowance for loan losses might not be sufficient, and additional loan loss provisions might
need to be made. Depending on the amount of such loan loss provisions, the adverse impact on our earnings could
be material.
In addition, as we continue to grow our loan portfolio, it may be necessary to increase the allowance for loan
losses by making additional provisions, which would adversely impact our operating results. Furthermore, bank
regulators may require us to make a provision for loan losses or otherwise recognize further loan charge-offs
following their periodic review of our loan portfolio, our underwriting procedures, and our loan loss allowance. Any
increase in our allowance for loan losses or loan charge-offs as required by such regulatory authorities could have a
material adverse effect on our financial condition and results of operations.
Please see “Allowance for Loan Losses” under “Critical Accounting Policies” in Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” for a discussion of the procedures we
follow in establishing our loan loss allowance. Please see the discussion of risks stemming from our lending
activities on page 26.
We face significant competition for loans and deposits.
We face significant competition for loans and deposits from other banks and financial institutions, both within
and beyond our local marketplace. Within our region, we compete with commercial banks, savings banks, credit
unions, and investment banks for deposits, and with the same financial institutions and others (including mortgage
brokers, finance companies, mutual funds, insurance companies, and brokerage houses) for loans. We also compete
with companies that solicit loans and deposits over the Internet.
Many of our competitors (including money center, national, and superregional banks) have substantially
greater resources and higher lending limits than we do, and may offer certain products and services that we do not,
or cannot, provide. Because our profitability stems from our ability to attract deposits and originate loans, our
continued ability to compete for depositors and borrowers is critical to our success.
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Our success as a competitor depends on a number of factors, including our ability to develop, maintain, and
build upon long-term relationships with our customers by providing them with convenience, in the form of multiple
branch locations and extended hours of service; access, in the form of alternative delivery channels, such as online
banking, banking by phone, and ATMs; a broad and diverse selection of products and services; interest rates and
service fees that compare favorably with those of our competitors; and skilled and knowledgeable personnel to assist
our customers with their financial needs. External factors that may impact our ability to compete include changes in
local economic conditions and real estate values, changes in interest rates, and the consolidation of banks and thrifts
within our marketplace.
Please see “Loans” and “Funding Sources” in Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” for a discussion of the actions we have taken to attract and retain our
depositors and borrowers.
We are subject to certain risks with respect to liquidity.
“Liquidity” refers to our ability to generate sufficient cash flows to support our operations and to fulfill our
obligations, including commitments to originate loans, to repay our wholesale borrowings, and to satisfy the
withdrawal of deposits by our customers.
Our primary sources of liquidity are the cash flows generated through the repayment of loans and securities;
cash flows from the sale of loans and securities, typically in connection with the post-merger repositioning of our
balance sheet; the deposits we acquire in connection with our acquisitions and those we gather organically through
our branch network; and borrowed funds, primarily in the form of wholesale borrowings from the Federal Home
Loan Bank of New York (the “FHLB-NY”) and various Wall Street brokerage firms. In addition, and depending on
current market conditions, we have the ability to access the capital markets from time to time.
Deposit flows, calls of investment securities and wholesale borrowings, and prepayments of loans and
mortgage-related securities are strongly influenced by such external factors as the direction of interest rates, whether
actual or perceived; local and national economic conditions; and competition for deposits and loans in the markets
we serve. Furthermore, changes to the FHLB-NY’s underwriting guidelines for wholesale borrowings may limit or
restrict our ability to borrow, and could therefore have a significant adverse impact on our liquidity.
A decline in available funding could adversely impact our ability to originate loans, invest in securities, and
meet our expenses, or to fulfill such obligations as repaying our borrowings or meeting deposit withdrawal demands.
We are subject to certain risks in connection with our strategy of growing through mergers and acquisitions.
Mergers and acquisitions have contributed significantly to our growth in the past seven years, and continue to
be a key component of our business model. Accordingly, it is possible that we could acquire other financial
institutions, financial service providers, or branches of banks in the future. However, our ability to engage in future
mergers and acquisitions depends on our ability to identify suitable merger partners, our ability to finance and
complete such transactions on acceptable terms and at acceptable prices, and our ability to receive the necessary
regulatory approvals and, where required, shareholder approvals.
Furthermore, mergers and acquisitions involve a number of risks and challenges, including the diversion of
management’s attention; the need to integrate acquired operations, internal controls, and regulatory functions; the
potential loss of key employees and customers of the acquired companies; an increase in expenses and working
capital requirements; and limitations on our ability to successfully complete the post-merger repositioning of our
balance sheet.
Any of these factors, among others, could adversely affect our ability to achieve the anticipated benefits of the
acquisitions we undertake.
Please see Item 1, “Business,” earlier in this report and Note 3 to the Consolidated Financial Statements in
Item 8, “Financial Statements and Supplementary Data,” for information about our mergers and acquisitions.
28
We may not be able to attract and retain key personnel.
To a large degree, our success depends on our ability to attract and retain key personnel whose expertise,
knowledge of our markets, and years of industry experience would make them difficult to replace. Competition for
skilled leaders in our industry can be intense, and we may not be able to hire or retain the people we would like to
have working for us. The unexpected loss of services of one or more of our key personnel could have a material
adverse impact on our business, given the specialized knowledge of such personnel and the difficulty of finding
qualified replacements on a timely basis. To attract and retain personnel with the skills and knowledge to support
our business, we offer a variety of benefits which may negatively impact our earnings.
Please see Notes 11 and 12 to the Consolidated Financial Statements in Item 8, “Financial Statements and
Supplementary Data,” for a description of our employee and stock-related benefit plans.
We are subject to environmental liability risk associated with our lending activities.
A significant portion of our loan portfolio is secured by real property. During the ordinary course of business,
we may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or
toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for
remediation costs, as well as for personal injury and property damage. In addition, we own and operate certain
properties that may be subject to similar environmental liability risks.
Environmental laws may require us to incur substantial expenses and may materially reduce the affected
property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent
interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental
liability. Although we have policies and procedures requiring the performance of an environmental site assessment
before initiating any foreclosure action on real property, these assessments may not be sufficient to detect all
potential environmental hazards. The remediation costs and any other financial liabilities associated with an
environmental hazard could have a material adverse effect on our financial condition and results of operations.
Please see “Environmental Issues” in Item 1, “Business,” earlier in this report.
Our business may be adversely impacted by acts of war or terrorism.
Acts of war or terrorism could have a significant adverse impact on our ability to conduct our business. Such
events could affect the ability of our borrowers to repay their loans, could impair the value of the collateral securing
our loans, and could cause significant property damage, thus increasing our expenses and/or reducing our revenues.
In addition, such events could affect the ability of our depositors to maintain their deposits with the Banks. Although
we have established disaster recovery policies and procedures, the occurrence of any such event could have a
material adverse effect on our business which, in turn, could have a material adverse effect on our financial
condition and results of operations.
We are subject to extensive laws, regulations, and regulatory enforcement.
We are subject to regulation, supervision, and examination by the New York State Banking Department,
which is the chartering authority for both the Community Bank and the Commercial Bank; by the Federal Deposit
Insurance Corporation, as the insurer of the Banks’ deposits; and by the Board of Governors of the Federal Reserve
System.
Such regulation and supervision governs the activities in which a bank holding company and its banking
subsidiaries may engage, and is intended primarily for the protection of the Deposit Insurance Fund, the banking
system in general, and customers, and not for the benefit of a company’s shareholders. These regulatory authorities
have extensive discretion in connection with their supervisory and enforcement activities, including with respect to
the imposition of restrictions on the operation of a bank or a bank holding company, the imposition of significant
fines, the ability to delay or deny merger applications, the classification of assets by a bank, and the adequacy of a
bank’s allowance for loan losses, among other matters. Any failure to comply with, or any change in such regulation
and supervision, or change in regulation or enforcement by taxing authorities, whether in the form of policy,
regulations, legislation, rules, orders, enforcement actions, or decisions, could have a material impact on the
Company, our subsidiary banks, and our operations.
29
Our operations are also subject to extensive legislation enacted, and regulation implemented, by other federal,
state, and local governmental authorities, and to various laws and judicial and administrative decisions imposing
requirements and restrictions on part or all of our operations. While we believe that we are in compliance in all
material respects with applicable federal, state, and local laws, rules, and regulations, including those pertaining to
banking, lending, and taxes, among other matters, we may be subject to future changes in such laws, rules, and
regulations that could have a material impact on our results of operations.
The amount of income taxes that the Company is required to pay on its earnings is based on federal and state
legislation and regulations. The Company provides for current and deferred taxes in its financial statements, based
on its results of operations, business activity, legal structure, interpretation of tax statutes, assessment of risk of
adjustment upon audit, and application of financial accounting standards. The Company may take tax return filing
positions for which the final determination of tax is uncertain. The Company’s net income and earnings per share
may be reduced if a federal, state, or local authority assesses additional taxes that have not been provided for in its
consolidated financial statements. There can be no assurance that the Company will achieve its effective tax rate
either due to a change to tax law, a change in regulatory or judicial guidance, or an audit assessment which denies
previously recognized tax benefits.
Please see “Regulation and Supervision” in Item 1, “Business,” earlier in this report.
We are subject to litigation risk.
In the ordinary course of our business, the Company and the Banks may become involved in litigation, the
outcome of which may have a direct material impact on our financial position and daily operations. Please see
“Legal Proceedings” under Note 10 to the Consolidated Financial Statements, “Commitments and Contingencies,”
in Item 8, “Financial Statements and Supplementary Data,” for a discussion of the status of certain legal matters.
We are subject to certain risks in connection with our use of technology.
Risks associated with systems failures, interruptions, or breaches of security:
Communications and information systems are essential to the conduct of our business, as we use such systems
to manage our customer relationships, our general ledger, our deposits, and our loans. While we have established
policies and procedures to prevent or limit the impact of systems failures, interruptions, and security breaches, there
can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition,
any compromise of our security systems could deter customers from using our web site and our online banking
service, both of which involve the transmission of confidential information. Although we rely on commonly used
security and processing systems to provide the security and authentication necessary to effect the secure
transmission of data, these precautions may not protect our systems from compromises or breaches of security.
In addition, we outsource certain of our data processing to certain third-party providers. If our third-party
providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately
process and account for customer transactions could be affected, and our business operations could be adversely
impacted. Threats to information security also exist in the processing of customer information through various other
vendors and their personnel.
The occurrence of any systems failure, interruption, or breach of security could damage our reputation and
result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to
civil litigation and possible financial liability. Any of these occurrences could have a material adverse effect on our
financial condition and results of operations.
Risks associated with changes in technology:
The provision of financial products and services has become increasingly technology-driven. Our ability to
meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on our ability to keep
pace with technological advances and to invest in new technology as it becomes available. Many of our competitors
have greater resources to invest in technology than we do and may be better equipped to market new technology-
driven products and services. The ability to keep pace with technological change is important, and the failure to do
30
so on our part could have a material adverse impact on our business and therefore on our financial condition and
results of operations.
We rely on the dividends we receive from our subsidiaries.
The Parent Company is a separate and distinct legal entity from the Banks, and a substantial portion of the
revenues the Parent Company receives consists of dividends from the Banks. These dividends are the primary
funding source for the dividends we pay on our common stock and the interest and principal payments on our debt.
Various federal and state laws and regulations limit the amount of dividends that a bank may pay to its parent
company. In addition, our right to participate in a distribution of assets upon the liquidation or reorganization of a
subsidiary may be subject to the prior claims of the subsidiary’s creditors. If the Banks are unable to pay dividends
to the Parent Company, we may not be able to service our debt, pay our obligations, or pay dividends on our
common stock. The inability to receive dividends from the Banks could therefore have a material adverse effect on
our business, our financial condition, and our results of operations, as well as our ability to maintain or increase the
current level of cash dividends paid to our stockholders.
Please see “Supervision and Regulation” in Item 1, “Business,” and Note 14 to the Consolidated Financial
Statements, “Restrictions on Subsidiary Banks,” in Item 8, “Financial Statements and Supplementary Data,” for a
further discussion of the restrictions on our ability to pay dividends.
Various factors could make a takeover attempt of the Company more difficult to achieve.
Certain provisions of our certificate of incorporation and bylaws, in addition to certain federal banking laws
and regulations, could make it more difficult for a third party to acquire the Company without the consent of the
Board of Directors, even if doing so were perceived to be beneficial to the Company’s shareholders. These
provisions also make it more difficult to remove our current Board of Directors or management or to appoint new
directors, and also regulate the timing and content of stockholder proposals and nominations, and qualification for
service on the Board of Directors. In addition, the Company has entered into employment agreements with certain
executive officers and directors that would require payments to be made to them in the event that their employment
was terminated following a change in control of the Company or the Banks. These payments may have the effect of
increasing the costs of acquiring the Company. The combination of these provisions could effectively inhibit a non-
negotiated merger or other business combination, which could adversely impact the market price of our common
stock.
Various factors could impact the price and trading activity in our common stock.
The price of the Company’s common stock can fluctuate significantly in response to a variety of factors,
including, but not limited to: actual or anticipated variations in the Company’s quarterly results of operations;
earnings estimates and recommendations of securities analysts; the performance and stock price of other companies
that investors and analysts deem comparable to the Company; news reports regarding trends and issues in the
financial services industry; actual or anticipated changes in the economy, the real estate market, and interest rates;
speculation regarding the Company’s involvement in industry consolidation; the Company’s capital markets
activities; mergers and acquisitions involving the Company’s peers; delays in, or a failure to realize the anticipated
benefits of, an acquisition; speculation about, or an actual change in, dividend payments; changes in legislation or
regulation impacting the financial services industry in particular, or publicly traded companies in general; regulatory
enforcement or other actions against the Company or the Banks or their affiliates; threats of terrorism or military
conflicts; and general market fluctuations. Fluctuations in our stock price may make it more difficult for you to sell
your Company common stock at an attractive price.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
On December 15, 2000, the Company relocated its corporate headquarters to the former headquarters of
Haven Bancorp, Inc. (“Haven”), located at 615 Merrick Avenue in Westbury, New York. Haven’s primary
subsidiary, CFS Bank, had purchased the office building and land in December 1997 under a lease agreement and
31
Payment-in-Lieu-of-Tax (“PILOT”) agreement with the Town of Hempstead Industrial Development Agency (the
“IDA”). Under the IDA and PILOT agreements, the Company sold the building and land to the IDA and is leasing
them for $1.00 per year for a lease term that was initially scheduled to expire on December 31, 2007 and that has
been extended to December 31, 2008. The Company will repurchase the building and land for $1.00 upon expiration
of the extended lease term in exchange for IDA financial assistance in the event that the Company does not enter
into a new IDA or PILOT agreement.
In addition to owning certain branches and other bank business facilities, we also lease a majority of our
branch offices and facilities under various lease and license agreements that expire at various times. (Please see Note
10 to the Consolidated Financial Statements, “Commitments and Contingencies: Lease and License Commitments”
in Item 8, “Financial Statements and Supplementary Data.”) We believe that our facilities are adequate to meet our
present and immediately foreseeable needs.
ITEM 3.
LEGAL PROCEEDINGS
In the ordinary course of our business, we are defendants in or parties to a number of legal proceedings. We
believe we have meritorious defenses with respect to these cases and intend to defend them vigorously. Please see
Note 10 to the Consolidated Financial Statements, “Commitments and Contingencies: Legal Proceedings” in Item 8,
“Financial Statements and Supplementary Data,” for a discussion of the status of certain legal matters.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
32
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
The common stock of the Company is traded on the New York Stock Exchange (the “NYSE”) under the
symbol “NYB.”
At December 31, 2007, the number of outstanding shares was 323,812,639 and the number of registered
owners was approximately 14,300. The latter figure does not include those investors whose shares were held for
them by a bank or broker at that date.
Dividends Declared per Common Share and Market Price of Common Stock
The following table sets forth the dividends declared per common share, and the intra-day high/low price
range and closing prices for the Company’s common stock, as reported by the NYSE, in each of the four quarters of
2007 and 2006:
Dividends
Declared per
Common Share
$0.25
0.25
0.25
0.25
$0.25
0.25
0.25
0.25
Market Price
High
Low
Close
$17.62
17.95
19.87
19.50
$18.23
17.70
16.85
16.86
$16.08
16.77
15.80
16.60
$16.33
15.70
16.06
15.70
$17.59
17.02
19.05
17.58
$17.52
16.51
16.38
16.10
2007
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2006
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Please see the discussion of “Liquidity” in Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” for information regarding restrictions on the Company’s ability to pay
dividends.
On June 22, 2007, our Chairman, President, and Chief Executive Officer, Joseph R. Ficalora, submitted to the
NYSE his Annual CEO certification confirming our compliance with the NYSE’s corporate governance listing
standards, as required by Section 303A.12(a) of the NYSE Listed Company Manual.
Share Repurchase Program
From time to time, we repurchase shares of our common stock on the open market or through privately
negotiated transactions, and hold such shares in our Treasury account. Repurchased shares may be utilized for
various corporate purposes, including, but not limited to, the exercise of stock options and merger transactions.
33
During the three months ended December 31, 2007, we allocated $73,667 toward share repurchases, as
outlined in the following table:
(a)
Total Number
of Shares (or
Units)
Purchased(1)
(b)
Average Price
Paid per Share
(or Unit)
(c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs(2)
44
81
3,862
3,987
$19.09
$18.47
$18.47
$18.48
44
81
3,862
3,987
1,469,651
1,469,570
1,465,708
Period
Month #1:
October 1, 2007 through
October 31, 2007
Month #2:
November 1, 2007 through
November 30, 2007
Month #3:
December 1, 2007 through
December 31, 2007
Total
All shares were purchased in privately negotiated transactions.
(1)
(2) On February 26, 2004, the Board of Directors authorized the repurchase of five million shares. On April 20, 2004, with
44,816 shares remaining under such authorization, the Board authorized the repurchase of up to an additional five million
shares. At December 31, 2007, 1,465,708 shares were still available for repurchase under the April 20, 2004
authorization. Under said authorization, shares may be repurchased on the open market or in privately negotiated
transactions until completion or the Board’s earlier termination of the repurchase authorization.
Stock Performance Graph
Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings, including this
Form 10-K, in whole or in part, the following stock performance graph shall not be incorporated by reference into
any such filings.
The following graph provides a comparison of total shareholder returns on the Company’s Common Stock
since December 31, 2002 with the cumulative total returns of a broad market index and a peer group index. The
S&P Mid-Cap 400 index was chosen as the broad market index in connection with the Company’s trading activity
on the New York Stock Exchange, beginning on December 20, 2002. The peer group index chosen was the SNL
Bank and Thrift Index, which is comprised of bank and thrift institutions and includes the Company. The data for
the indices included in the graph were provided by SNL Financial, Inc.
34
Comparison of 5-Year Cumulative Total Return
Among New York Community Bancorp, Inc.,
S&P Mid-Cap 400 Index, and SNL Bank and Thrift Index
S
R
A
L
L
O
D
400
350
300
250
200
150
100
50
0
12/31/02
12/31/03
12/31/04
12/31/05
12/31/06
12/31/07
New York Community Bancorp, Inc.
S&P Mid-Cap 400 Index
SNL Bank and Thrift Index
ASSUMES $100 INVESTED ON DEC. 31, 2002
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2007
New York Community Bancorp, Inc.
S&P Mid-Cap 400 Index
SNL Bank and Thrift Index
12/31/2002 12/31/2003 12/31/2004 12/31/2005 12/31/2006 12/31/2007
$139.06
$211.80
$137.40
$120.12
$196.15
$180.17
$116.02
$177.80
$154.20
$136.49
$157.97
$151.82
$181.25
$135.62
$135.57
$100.00
$100.00
$100.00
35
ITEM 6.
SELECTED FINANCIAL DATA
(dollars in thousands, except share data)
EARNINGS SUMMARY:
Net interest income
Non-interest income (loss)
Non-interest expense:
Operating expenses
Prepayment of wholesale borrowings
Termination of interest rate swaps
Amortization of core deposit intangibles
Income tax expense
Net income(5)
Basic earnings per share(5)(6)
Diluted earnings per share(5)(6)
Dividends per share
SELECTED RATIOS:
Return on average assets(5)
Return on average stockholders’ equity(5)
Operating expenses to average assets
Average stockholders’ equity to average
assets
Efficiency ratio(5)
Interest rate spread
Net interest margin
Dividend payout ratio
BALANCE SHEET SUMMARY:
Total assets
Loans, net of allowance for loan losses
Allowance for loan losses
Securities held to maturity
Securities available for sale
Deposits
Borrowed funds
Stockholders’ equity
Common shares outstanding(6)
Book value per share(6)
Stockholders’ equity to total assets
ASSET QUALITY RATIOS:
Non-performing loans to total loans
Non-performing assets to total assets
Allowance for loan losses to
non-performing loans
Allowance for loan losses to total loans
2007(1)
$616,530
111,092
299,575
3,190
--
22,758
123,017
279,082
$0.90
0.90
1.00
0.94%
7.13
1.01
13.21
41.17
2.13
2.38
111.11
At or For the Years Ended December 31,
2005(3)
2006(2)
2004
2003(4)
$561,566
88,990
$595,367
97,701
$799,343
(62,303)
$532,671
136,291
256,362
26,477
1,132
17,871
116,129
232,585
$0.82
0.81
1.00
0.83%
6.57
0.91
12.60
39.41
2.04
2.27
123.46
236,621
--
--
11,733
152,629
292,085
$1.12
1.11
1.00
1.17%
9.15
0.95
12.83
34.14
2.61
2.74
90.09
193,632
--
--
11,440
176,882
355,086
$1.37
1.33
0.96
1.42%
11.24
0.78
12.65
26.27
3.63
3.70
72.18
169,373
--
--
6,907
169,311
323,371
$1.70
1.65
0.66
2.26%
20.74
1.18
10.90
25.32
4.04
4.15
39.89
$30,579,822
20,270,454
92,794
4,362,645
1,381,256
13,157,333
12,915,672
4,182,313
323,812,639
$12.95
$28,482,370
19,567,502
85,389
2,985,197
1,940,787
12,619,004
11,880,008
3,689,837
295,350,936
$12.56
$26,283,705
16,948,697
79,705
3,258,038
2,379,214
12,104,899
10,528,658
3,324,877
269,776,791
$12.43
$24,037,826
13,317,987
78,057
3,972,614
3,108,109
10,402,117
10,142,541
3,186,414
265,190,635
$12.23
$23,441,337
10,422,078
78,293
3,222,898
6,277,034
10,329,106
9,931,013
2,868,657
256,649,073
$11.40
13.68%
12.95%
12.65%
13.26%
12.24%
0.11%
0.07
418.14
0.46
0.11%
0.08
402.72
0.43
0.16%
0.11
289.17
0.47
0.21%
0.12
277.31
0.58
0.33%
0.15
228.01
0.75
(1)
(2)
(3)
(4)
(5)
The Company completed three business combinations in 2007: the acquisition of PennFed Financial Services, Inc. on
April 2, 2007; the acquisition of Doral Bank, FSB’s branch network in New York City and certain assets and liabilities on
July 26, 2007; and the acquisition of Synergy Financial Group, Inc. on October 1, 2007. Accordingly, the Company’s
2007 earnings reflect nine months, five months, and three months of combined operations with the respective institutions.
The Company acquired Atlantic Bank of New York on April 28, 2006. Accordingly, the Company’s 2006 earnings reflect
eight months of combined operations.
The Company acquired Long Island Financial Corp. on December 30, 2005, the last business day of the year.
Accordingly, its contribution to the Company’s earnings began on January 1, 2006.
The Company merged with Roslyn Bancorp, Inc. on October 31, 2003. Accordingly, the Company’s 2003 earnings reflect
two months of combined operations.
The 2007 amount includes the following pre-tax gains and charges which were recorded in non-interest income: a $64.9
million gain on the sale of bank-owned property; a $1.9 million net gain on the sale of securities; a $57.0 million
securities impairment loss; and a $1.8 million loss on debt redemption. In addition, the 2007 amount includes the
following pre-tax charges which were recorded in non-interest expense: a $3.2 million charge for the prepayment of
wholesale borrowings; a $1.0 million Visa litigation charge; and a $2.2 million merger-related charge. The 2007 amount
also includes a $2.6 million benefit for certain tax audit developments. The combined impact of these gains and charges
was an after-tax gain of $3.8 million, or $0.01 per diluted share. The 2006 amount includes the following pre-tax charges:
a $6.1 million loss on the mark-to-market of interest rate swaps and a $1.9 million loss on debt redemption, both of which
were recorded in non-interest income; a $26.5 million charge for the prepayment of wholesale borrowings and a $1.1
million charge for the termination of interest rate swaps, both of which were recorded in non-interest expense; and a
merger-related charge of $5.7 million and a $3.1 million charge for the retirement of a director and senior lending
consultant, both of which were recorded in operating expenses. The combined impact of these charges was an after-tax
charge of $31.0 million, or $0.11 per diluted share. The 2005 amount includes a pre-tax merger-related charge of $36.6
million, recorded in operating expenses, which resulted in an after-tax charge of $34.0 million, or $0.13 per diluted share.
The 2004 amount includes a $157.2 million pre-tax loss on the sale of securities in connection with the repositioning of the
36
balance sheet, and an $8.2 million pre-tax charge for the other-than-temporary impairment of certain perpetual preferred
FNMA securities, both of which were recorded in non-interest (loss) and resulted in a combined after-tax loss of $99.9
million, or $0.37 per diluted share. The 2003 amount includes a $37.6 million pre-tax gain on the sale of the Company’s
South Jersey Bank Division, recorded in non-interest income, and a pre-tax merger-related charge of $20.4 million,
recorded in operating expenses, which resulted in an after-tax gain of $3.7 million, or $0.02 per diluted share.
Excludes unallocated Employee Stock Ownership Plan (“ESOP”) shares from the number of shares outstanding. Please
see “book value per share” in the Glossary earlier in this report.
(6)
37
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the purpose of this discussion and analysis, the words “we,” “us,” “our,” and the “Company” are used
to refer to New York Community Bancorp, Inc. and our consolidated subsidiaries, including New York Community
Bank (the “Community Bank”) and New York Commercial Bank (the “Commercial Bank”) (collectively, the
“Banks”).
Executive Summary
Largely reflecting our growth through a series of eight business combinations since November 2000, we are
currently the fourth largest bank holding company headquartered in the New York metropolitan region, and rank
among the leading depositories in the markets we serve.
In our 14 years of public life, we have grown from a savings bank with assets of $1.0 billion and seven
branches in Queens and Nassau counties to a multi-bank holding company with assets of $30.6 billion, two bank
subsidiaries—one savings and one commercial—and 217 branches serving customers in all five boroughs of New
York City, Long Island, and Westchester County in New York, and Essex, Hudson, Mercer, Middlesex, Monmouth,
Ocean, and Union counties in New Jersey.
Our financial performance is driven by a business model with four primary components: (1) the origination of
multi-family loans, primarily on rent-regulated buildings in New York City; (2) the maintenance of conservative
underwriting standards; (3) the efficient operation of our Company; and (4) the growth of our franchise through
accretive merger transactions, and the strategic post-merger repositioning of our balance sheet.
Our 2007 performance reflected the merits of our business model and the increasing strength and quality of
our balance sheet:
1. The nature of our lending niche, and the consistency of our underwriting standards, enabled us to
extend our record of asset quality.
•
2007 was our 28th consecutive year without any losses in our multi-family niche.
• Non-performing assets represented 0.07% of total assets at December 31, 2007, an improvement
from 0.08% at December 31, 2006.
• Non-performing loans represented 0.11% of loans outstanding, consistent with the measure recorded
at the prior year-end.
• Charge-offs totaled $431,000 and represented 0.002% of average loans in 2007, comparable to the
$420,000 of charge-offs recorded in 2006. In both years, the charge-offs consisted of consumer and
unsecured credits that had been acquired in our various business combinations.
2. The unique structure of our multi-family loans contributed to the growth of our net interest income
and margin, as refinancing activity and property sales increased in the first nine months of the
year.
•
•
Prepayment penalty income rose $28.1 million, or 95.2%, year-over-year, to $57.6 million in 2007.
The increase in prepayment penalty income combined with the replenishment of our loan portfolio
with higher-yielding credits to generate a year-over-year increase in the average yield on our
interest-earning assets to 6.05% in 2007 from 5.69% in 2006.
3. With the completion of three acquisitions in 2007, we expanded our branch network, increased our
share of deposits, contained our funding costs, and boosted our revenues.
•
The acquisitions of PennFed Financial Services, Inc. (“PennFed”) and Synergy Financial Group, Inc.
(“Synergy”) on April 2 and October 1, 2007 added 45 branches to our Community Bank franchise in
New Jersey, increasing our presence in Essex, Hudson, and Union counties, and extending our
footprint into Mercer, Middlesex, Monmouth, and Ocean counties in the central part of the state.
38
• Our share of deposits rose from 1.0% to 6.8% in these counties, improving our rank among the
region’s thrifts from 18th to fifth.
•
The acquisition of 11 New York City-based branches from Doral Bank, FSB (“Doral”) on July 26,
2007 boosted our Commercial Bank franchise to 38 branches, including 24 in the boroughs of
Manhattan, Brooklyn, and Queens.
• Deposits rose $538.3 million to $13.2 billion over the course of 2007, as the deposits and excess
liquidity we derived from our three acquisitions enabled us to engage in a strategic run-off of certain
higher-cost funding, and to price our deposits conservatively as others raised their rates in order to
compete.
•
The acquisitions also contributed to an increase in fee and other income, which totaled $77.0 million
in 2007, a $6.4 million, or 9.1%, increase from the amount recorded in 2006.
4. Each of our acquisitions, and the balance sheet repositioning that followed the PennFed
transaction, contributed to a year-over-year increase in our net interest income and the year-over-
year expansion of our net interest margin.
•
•
•
In the second quarter of the year, we sold $1.4 billion of the loans acquired in the PennFed
transaction, either in whole or securitized form.
In the third quarter of the year, we sold $1.1 billion of lower-yielding mortgage-related securities.
The cash flows from loan and securities sales in the second and third quarters were primarily
deployed into higher-yielding interest-earning assets; a portion of the cash flows produced in the
second quarter were used to reduce our higher-cost wholesale funds.
• Our net interest income rose $55.0 million, or 9.8%, year-over-year to $616.5 million, while our net
interest margin expanded by 11 basis points to 2.38%.
•
In addition, the sale of our Atlantic Bank headquarters for $105.0 million early in the third quarter
generated an after-tax gain of $44.8 million, or $0.15 per diluted share. The Doral transaction
provided us with an alternative location in Manhattan to serve as the headquarters for the Atlantic
Bank division of the Commercial Bank.
5. Notwithstanding an acquisition-driven increase in operating expenses, we continued to rank among
the top 5% of all banks and thrifts in the nation on the basis of our efficiency.
•
In 2007, our efficiency ratio was 41.17%.
Earnings Growth and Capital Strength
While several factors contributed to our 2007 financial performance, the preceding achievements were the
primary drivers of the year’s results. Reflecting our actions during the year, our earnings rose 20.0% from $232.6
million in 2006 to $279.1 million in 2007. During this time, our diluted earnings per share rose 11.1% from $0.81 to
$0.90.
At December 31, 2007, our stockholders’ equity totaled $4.2 billion and represented 13.68% of total assets, as
compared to $3.7 billion, representing 12.95% of total assets, at December 31, 2006. During this time, our tangible
stockholders’ equity rose $198.4 million, or 13.8%, to $1.6 billion, and the ratio of tangible equity to tangible assets
rose 36 basis points to 5.83%. (Please see the reconciliations of our stockholders’ equity and tangible stockholders’
equity and the related measures on page 75 of this report.)
Reflecting the strength of our capital, and our financial performance, we distributed $310.2 million to our
shareholders in 2007, in the form of a $1.00 per share dividend ($0.25 per quarter, annualized).
39
Recent Events
Dividend Declaration
On January 28, 2008, the Board of Directors declared a quarterly cash dividend of $0.25 per share, payable on
February 15, 2008 to shareholders of record at the close of business on February 6, 2008.
Critical Accounting Policies
We have identified the accounting policies below as being critical to understanding our financial condition and
results of operations. Certain accounting policies are considered to be important to the portrayal of our financial
condition, since they require management to make complex or subjective judgments, some of which may relate to
matters that are inherently uncertain. The inherent sensitivity of our consolidated financial statements to these
critical accounting policies, and the judgments, estimates, and assumptions used therein, could have a material
impact on our financial condition or results of operations.
Allowance for Loan Losses
The allowance for loan losses is increased by the provisions for loan losses charged to operations and reduced
by net charge-offs or reversals. A separate loan loss allowance is established for the Community Bank and the
Commercial Bank and, except as otherwise noted below, the process for establishing the allowance for loan losses is
the same for each.
Management establishes the allowances for loan losses through an assessment of probable losses in each of
the respective loan portfolios. Several factors are considered in this process, including the level of defaulted loans at
the close of each quarter; recent trends in loan performance; historical levels of loan losses; the factors underlying
such loan defaults and loan losses; projected default rates and loss severities; internal risk ratings; loan size;
economic, industry, and environmental factors; and loan impairment, as defined under Statement of Financial
Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan,” as amended by
SFAS No. 118, “Accounting by Creditors for Impairment of a Loan/Income Recognition and Disclosures.”
Under SFAS Nos. 114 and 118, a loan is classified as “impaired” when, based on current information and
events, it is probable that we will be unable to collect both the principal and interest due under the contractual terms
of the loan agreement. We apply SFAS Nos. 114 and 118 as necessary to certain larger multi-family, commercial
real estate, construction, and commercial and industrial (“C&I”) loans, and exclude smaller balance homogenous
loans and loans carried at the lower of cost or fair value. The Company measures impairment of collateralized loans
based on the fair value of the collateral, less estimated costs to sell. For loans that are not collateral-dependent,
impairment is measured by using the present value of expected cash flows, discounted at the loan’s effective interest
rate.
A valuation allowance is established when the fair value or the present value of the expected cash flows is less
than the recorded investment in the loan. We had no impaired loans at December 31, 2007.
In addition, the process of determining the appropriate level for the Banks’ loan loss allowances includes, but
is not limited to:
1. Periodic inspections of the loan collateral by qualified in-house property appraisers/inspectors, as
applicable;
2. Regular meetings of executive management with the pertinent Board committee, during which observable
trends in the local economy and/or the real estate market are discussed;
3. Full assessment by the pertinent Board of Directors of the aforementioned factors when making a
business judgment regarding the impact of anticipated changes of the future level of the allowance for
loan losses; and
4. Analysis of the portfolio in the aggregate, as well as on an individual loan basis, taking into consideration
payment history, underwriting analyses, and internal risk ratings.
40
In establishing the loan loss allowances, management also considers the Banks’ current business strategies and
credit processes, including compliance with conservative guidelines established by the respective Boards of
Directors with regard to credit limitations, loan approvals, underwriting criteria, and loan workout procedures.
In accordance with the pertinent policies, the loan loss allowances are segmented to correspond to the various
types of loans in the loan portfolios. These loan categories are assessed with specific emphasis on the internal risk
ratings, underlying collateral, credit underwriting, and loan type. These factors correspond to the respective levels of
quantified and inherent risk.
The assessments take into consideration loans that have been adversely rated, primarily through the valuation
of the collateral supporting each loan. “Adversely rated” loans are loans that are either non-performing or that
exhibit certain weaknesses that could jeopardize payment in accordance with the original terms. Larger loans are
assigned risk ratings based upon a routine review of the credit files, while smaller loans exceeding 90 days in arrears
are assigned risk ratings based upon an aging schedule. Quantified risk factors are assigned for each risk-rating
category to provide an allocation to the overall loan loss allowance.
The remainder of each loan portfolio is then assessed, by loan type, with similar risk factors being considered,
including the borrower’s ability to pay and our past loan loss experience with each type of loan. These loans are also
assigned quantified risk factors, which result in allocations to the allowances for loan losses for each particular loan
or loan type in the portfolio.
In order to determine their overall adequacy, each of the respective loan loss allowances is reviewed quarterly
by management and by the Mortgage and Real Estate Committee of the Community Bank’s Board of Directors or
the Credit Committee of the Board of Directors of the Commercial Bank, as applicable.
While management uses available information to recognize losses on loans, future additions to the respective
loan loss allowances may be necessary, based on changes in economic and local market conditions beyond
management’s control. In addition, the Community Bank and/or the Commercial Bank may be required to take
certain charge-offs and/or recognize additions to their loan loss allowances, based on the judgment of regulatory
agencies with regard to information provided to them during their examinations.
The Company recognizes interest income on loans using the interest method over the life of the loan. The
Company defers certain loan origination and commitment fees, and certain loan origination costs, and amortizes the
net fee or cost as an adjustment to the loan yield over the term of the related loan, using the interest method. When a
loan is sold or repays, the remaining net unamortized fee or cost is recognized in interest income.
A loan generally is classified as a “non-accrual” loan when it is 90 days past due. When a loan is placed on
non-accrual status, the Company ceases the accrual of interest owed, and previously accrued interest is charged
against interest income. A loan is generally returned to accrual status when the loan is less than 90 days past due
and/or the Company has reasonable assurance that the loan will be fully collectible. Interest income on non-accrual
loans is recorded when received in cash.
Investment Securities
The securities portfolio consists of mortgage-related securities, and debt and equity (“other”) securities.
Securities that are classified as “available for sale” are carried at estimated fair value, with any unrealized gains and
losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity. Securities
that we have the positive intent and ability to hold to maturity are classified as “held to maturity” and are carried at
amortized cost.
The market values of our securities, particularly our fixed-rate securities, are affected by changes in market
interest rates. In general, as interest rates rise, the market value of fixed-rate securities will decline; as interest rates
fall, the market value of fixed-rate securities will increase. We conduct a periodic review and evaluation of the
securities portfolio to determine if the decline in the fair value of any security below its carrying value is other than
temporary. Estimated fair values for securities are based on published or securities dealers’ market values. If we
deem any decline in value to be other than temporary, the security is written down to a new cost basis and the
resulting loss is charged against earnings.
41
Goodwill Impairment
Goodwill is presumed to have an indefinite useful life and is tested for impairment, rather than amortized, at
the reporting unit level, at least once a year. Impairment exists when the carrying amount of goodwill exceeds its
implied fair value. If the fair value of a reporting unit exceeds its carrying amount at the time of testing, the goodwill
of the reporting unit is not considered impaired. According to SFAS No. 142, “Goodwill and Other Intangible
Assets,” quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for
measurement, when available. Other acceptable valuation methods include present-value measurements based on
multiples of earnings or revenues, or similar performance measures. Differences in the identification of reporting
units and in valuation techniques could result in materially different evaluations of impairment.
For the purpose of goodwill impairment testing, we have identified one reporting unit. We performed our
annual goodwill impairment test as of January 1, 2007, and determined that the fair value of the reporting unit was
in excess of its carrying value, using the quoted market price of our common stock on the impairment testing date as
the basis for determining fair value. As of the annual impairment test date, there was no indication of goodwill
impairment. In addition, we found no indication of goodwill impairment when we performed our annual goodwill
impairment test as of January 1, 2008.
Income Taxes
We estimate income taxes payable based on the amount we expect to owe the various taxing authorities (i.e.,
federal, state, and local). Income taxes represent the net estimated amount due to, or to be received from, such taxing
authorities. In estimating income taxes, management assesses the relative merits and risks of the appropriate tax
treatment of transactions, taking into account statutory, judicial, and regulatory guidance in the context of our tax
position. In this process, management also relies on tax opinions, recent audits, and historical experience. Although
we use available information to record income taxes, underlying estimates and assumptions can change over time as
a result of unanticipated events or circumstances such as changes in tax laws and judicial guidance influencing our
overall tax position.
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and
the carryforward of certain tax attributes such as net operating losses. A valuation allowance is maintained for
deferred tax assets that we estimate are more likely than not to be unrealizable based on available evidence at the
time the estimate is made. In assessing the need for a valuation allowance, we estimate future taxable income,
considering the feasibility of tax planning strategies and the realizability of tax loss carryforwards. Valuation
allowances related to deferred tax assets can be affected by changes to tax laws, statutory tax rates, and future
taxable income levels. In the event that we were to determine that we would not be able to realize all or a portion of
our net deferred tax assets in the future, we would reduce such amounts through a charge to income in the period in
which that determination was made. Conversely, if we were to determine that we would be able to realize our
deferred tax assets in the future in excess of the net carrying amounts, we would decrease the recorded valuation
allowance through an increase to income in the period in which that determination was made. Subsequently
recognized tax benefits associated with valuation allowances recorded in a business combination would be recorded
as an adjustment to goodwill.
Balance Sheet Summary
Largely reflecting the benefit of our three acquisitions and organic loan production, total assets grew to $30.6
billion at December 31, 2007 from $28.5 billion at December 31, 2006. The 7.4% increase largely reflects a $710.4
million rise in total loans to $20.4 billion, together with an $817.9 million rise in total securities to $5.7 billion.
Liabilities rose $1.6 billion year-over-year, to $26.4 billion, largely reflecting a $538.3 million increase in
deposits to $13.2 billion, and a $1.0 billion increase in borrowed funds to $12.9 billion.
Stockholders’ equity rose $492.5 million, or 13.3%, year-over-year, to $4.2 billion and represented 13.7% of
total assets, while our tangible stockholders’ equity rose to $1.6 billion, an increase of $198.4 million, or 13.8%. At
December 31, 2007, tangible stockholders’ equity represented 5.83% of tangible assets, a 36-basis point increase
from the measure at year-end 2006. (Please see the reconciliations of stockholders’ equity and tangible stockholders’
equity and the related measures on page 75 of this report.)
42
Loans
Loans are, and have historically been, our principal asset, and represented $20.4 billion, or 66.6%, of total
assets at December 31, 2007. At December 31, 2006, loans totaled $19.7 billion, and represented 69.0% of total
assets at that date.
Our primary lending niche is New York City’s multi-family real estate market. We are a leading producer of
multi-family loans in the City, with an emphasis on loans secured by buildings that are rent-controlled or rent-
stabilized. According to the 2007 Housing Supply Report published by the NYC Rent Guidelines Board, rent-
regulated units comprise approximately 52% of the city’s rental housing market.
Multi-family loans represented $14.1 billion, or 69.0%, of total loans at December 31, 2007, while
commercial real estate loans represented $3.8 billion, or 18.8%. Construction loans accounted for $1.1 billion, or
5.6%, of total loans at the end of December, while other loans accounted for $965.2 million, representing 4.7%. Of
the latter amount, $705.8 million, or 73.1%, consisted of commercial and industrial (“C&I”) loans.
While we also originate one- to four-family loans, we do so on a pass-through basis only, selling such loans to
a third-party conduit shortly after the loans are closed. As a result, one- to four-family loans represented a modest
$380.8 million, or 1.9%, of total loans at December 31, 2007, and primarily consisted of loans acquired through our
various business combinations.
The modest level of loan growth we recorded in 2007 was attributable to a variety of factors, most notably
including the competitive nature of our multi-family niche. During the year, as in 2006, many of our competitors
were offering loans at terms that were inconsistent with our underwriting standards. As a result, we chose to limit
our lending rather than compromise our standards in order to compete.
Another factor that contributed to the limited level of loan growth was the post-merger repositioning of our
balance sheet. While we added loans in all three of our 2007 business combinations, the increase was largely offset
by the sale of certain whole and securitized loans acquired in the transaction with PennFed. In addition to acquired
loans and the purchase of loans totaling $180.5 million, the growth of our loan portfolio at December 31, 2007
reflects twelve-month originations of $4.9 billion, a $118.2 million reduction from the volume produced in the prior
year. Multi-family loans accounted for $2.5 billion, or 50.8%, of loans produced in 2007, and commercial real estate
loans accounted for $695.3 million, or 14.3%. In 2006, multi-family loans represented 56.4% of loans originated,
with commercial real estate loans accounting for 8.3% of total loans produced.
Construction loans represented $548.4 million, or 11.3%, of total loans produced in 2007, a significant
reduction from $984.8 million, representing 19.8% of total loans produced, in the prior year. By comparison, C&I
loans represented $1.0 billion, or 21.6%, of 2007 loan production, as compared to $675.9 million, representing
13.6% of the total, in 2006.
The level of loan growth we achieved during the year was largely tempered by repayments of $5.4 billion,
most of which were received in the first three quarters of 2007, as many property owners took advantage of
favorable market conditions to either sell or refinance their properties. As a result, we recorded prepayment penalty
income of $57.6 million in 2007, exceeding the year-earlier level by $28.1 million, or 95.2%. The favorable impact
of prepayment penalty income on our net interest income and net income is further discussed in the 2007 earnings
summary later in this report. Loan growth was also tempered by sales of $1.5 billion, primarily in connection with
the post-merger repositioning of the balance sheet following the acquisition of PennFed.
43
The following table summarizes our loan production for the years ended December 31, 2007 and 2006:
Loan Origination Analysis
(dollars in thousands)
Mortgage Loan Originations:
Multi-family
Commercial real estate
Construction
1-4 family
Total mortgage loan originations
Other loan originations(1)
Total loan originations
For the Years Ended December 31,
2006
2007
Amount
$2,465,492
695,252
548,352
66,321
3,775,417
1,077,096
$4,852,513
Percent
of Total
50.81%
14.33
11.29
1.37
77.80
22.20
100.00%
Amount
$2,801,991
413,710
984,838
60,152
4,260,691
710,005
$4,970,696
Percent
of Total
56.37%
8.32
19.81
1.21
85.71
14.29
100.00%
(1)
Includes C&I loan originations of $1.0 billion and $675.9 million in the twelve months ended December 31, 2007 and
2006, respectively.
44
The following table summarizes the composition of our loan portfolio at each year-end for the five years ended December 31, 2007:
Loan Portfolio Analysis
(dollars in thousands)
Mortgage Loans:
Multi-family
Commercial real estate
Construction
1-4 family
Total mortgage loans
Other loans(1)
Total mortgage and other loans
Net deferred loan origination
(fees) costs
Allowance for loan losses
Loans, net
(1) Includes C&I loans.
2007
2006
At December 31,
2005
2004
2003
Amount
Percent
of Total
Amount
Percent
of Total
Amount
Percent
of Total
Amount
Percent
of Total
$14,052,298
3,828,334
1,138,851
380,824
19,400,307
965,205
69.00%
18.80
5.59
1.87
95.26
4.74
$14,529,097
3,114,440
1,102,732
230,508
18,976,777
676,793
73.93%
15.85
5.61
1.17
96.56
3.44
$12,854,188
2,888,294
856,651
254,510
16,853,643
175,493
75.49%
16.96
5.03
1.49
98.97
1.03
$ 9,839,263
2,140,770
807,107
506,116
13,293,256
102,455
73.45%
15.98
6.03
3.78
99.24
0.76
20,365,512 100.00%
19,653,570 100.00%
17,029,136 100.00%
13,395,711 100.00%
Amount
$ 7,368,155
1,445,048
643,548
730,963
10,187,714
311,634
10,499,348
Percent
of Total
70.18%
13.76
6.13
6.96
97.03
2.97
100.00%
(2,264)
(92,794)
$20,270,454
(679)
(85,389)
$19,567,502
(734)
(79,705)
$16,948,697
333
(78,057)
$13,317,987
1,023
(78,293)
$10,422,078
45
The following table presents a geographic analysis of the Company’s multi-family, commercial real estate,
and construction loan portfolios at December 31, 2007:
Geographic Analysis of the Loan Portfolio
Multi-Family
At December 31, 2007
Commercial
Real Estate
Construction
Amount
$ 4,237,734
2,567,207
1,693,926
1,603,354
103,374
382,525
442,788
1,473,735
688,247
859,408
$14,052,298
Percent
of Total
Amount
Percent
of Total
Amount
30.16%
18.27
12.05
11.41
0.74
2.72
3.15
10.49
4.90
6.11
100.00%
$1,246,389
307,717
153,995
406,115
33,990
594,560
127,772
642,912
197,726
117,158
$3,828,334
32.56%
8.04
4.02
10.61
0.89
15.53
3.34
16.79
5.16
3.06
100.00%
$ 298,137
180,298
178,120
122,212
47,413
200,166
3,564
71,313
--
37,628
$1,138,851
Percent
of Total
26.18%
15.83
15.64
10.73
4.16
17.58
0.32
6.26
--
3.30
100.00%
(dollars in thousands)
Manhattan
Brooklyn
Bronx
Queens
Staten Island
Long Island
Other New York State
New Jersey
Pennsylvania
All other states
Total
Multi-family Loans
Notwithstanding a linked-quarter rise in total loans in the fourth quarter, multi-family loans declined to $14.1
billion at December 31, 2007 from $14.5 billion at December 31, 2006. The modest decline reflects our decision to
refrain from lending at our more typical volumes during a year when many of our competitors were offering terms
that were incompatible with our underwriting standards.
While the transactions with PennFed, Doral, and Synergy contributed to our balance of multi-family loans at
December 31, 2007, the majority of loans added during the year were organically produced. Multi-family loans
accounted for $2.5 billion, or 50.8%, of the year’s originations, as compared to $2.8 billion, or 56.4%, in the prior
year.
At December 31, 2007, $13.0 billion, or 92.7%, of our multi-family loans were secured by rental apartment
buildings, with the remainder of the portfolio being secured by underlying mortgages on cooperative apartment
buildings. In addition, 72.6% of our multi-family loans were secured by buildings in New York City, with
Manhattan accounting for the largest share. Another 21.3% of multi-family loans were secured by buildings on Long
Island, other parts of New York State, New Jersey, and Pennsylvania, with the remaining 6.1% secured by buildings
outside our primary market, many of which are owned by borrowers we have made loans to successfully within our
local marketplace.
We primarily underwrite our multi-family loans based on the current cash flows produced by the building,
utilizing the income method of appraising the properties, rather than the sales approach, which is subject to
fluctuations in real estate market conditions and the general economy. We also consider a variety of other factors,
including the physical condition of the underlying property; the net operating income of the mortgaged premises
prior to debt service and depreciation; the debt service coverage ratio, which is the ratio of the property’s net
operating income to its debt service; and the ratio of the loan amount to the appraised value of the property. The
amount of a multi-family loan generally represents no more than 80% of the lower of the appraised value or the
sales price of the underlying property, with an amortization period of up to 30 years. In addition to requiring a
minimum debt service coverage ratio of 120% on multi-family buildings, we require a security interest in the
personal property at the premises, and an assignment of rents and leases. At December 31, 2007, the average multi-
family loan had a balance of $3.4 million and the portfolio had an average loan-to-value ratio of 64.5%.
In addition to qualifying a multi-family loan on the basis of the building’s income and condition, we consider
the borrower’s credit history, profitability, and building management expertise. Borrowers are required to present
evidence of their ability to repay the loan from the building’s rent rolls, and we also generally review their financial
statements and related documents. Because of our longevity in the multi-family market and the tendency of
46
borrowers to refinance, we also are able, in many cases, to consider our own prior experience with the owner of the
property.
Multi-family loans are typically made to long-term property owners who utilize the funds they borrow to
make improvements to the building and the apartments therein. Our multi-family loans generally feature a term of
ten years, with a fixed rate of interest for the first five years of the loan, and an alternative rate of interest in years six
through ten. The rate charged in the first five years is generally based on the five-year Constant Maturity Treasury
rate (the “five-year CMT”) plus a spread. During years six through ten, the borrower has the option of selecting an
annually adjustable rate that is tied to the prime rate of interest, as reported in The New York Times, plus a spread, or
a fixed rate that is tied to the five-year CMT plus a spread. The latter option also requires the payment of an amount
equal to one percentage point of the then-outstanding loan amount. The minimum rate at repricing is equivalent to
the rate in the initial five-year term.
While the spread above the five-year CMT in the first five years had long been 150 basis points, spreads
began to move toward more historical levels in the fourth quarter of 2007, as adverse conditions in the capital
markets and liquidity pressures forced many lenders from the market, and the credit cycle began its downward turn.
Reflecting our ability to capitalize on this significant change in market conditions, the multi-family loans we
produced in the fourth quarter of 2007 featured an average spread of 228 basis points above the average five-year
CMT.
As improvements are made to the collateral property, the property owner is permitted, in accordance with rent
regulations, to increase the amount of rent to be paid by the tenant, thus creating more cash flows to borrow against.
As the rent roll increases, the property owner typically opts to refinance the loan, even in a rising interest rate
environment. This cycle has repeated itself over the course of many decades, with property values increasing, and
borrowers typically refinancing before the loan reaches its sixth year. Accordingly, the expected weighted average
life of the multi-family loan portfolio was 3.6 years at December 31, 2007.
Multi-family loans that refinance within the first five years are typically subject to an established prepayment
penalty schedule. Depending on the remaining term of the loan at the time of prepayment, the penalties normally
range from five percentage points to one percentage point of the then-current loan balance.
Our emphasis on multi-family loans is driven by several factors, including their structure, which reduces our
exposure to interest rate volatility to some degree. Another factor driving our focus on multi-family loans is the
consistent quality of these assets: We have not had a loss of principal on a multi-family loan in our niche for 28
years. Although multi-family loans are generally considered to involve a greater degree of credit risk as compared to
other types of credits, we believe that the multi-family loans we produce involve a more modest degree of risk. The
multi-family loans we produce are typically collateralized by rent-regulated buildings which tend to be stable and
fully occupied. Because the buildings securing the loans are generally well maintained, and the rents are typically
below market, occupancy levels remain more or less constant, even during times of economic adversity. Thus, while
losses on loans may increase for many lenders in the current credit cycle, we believe that the nature of our multi-
family lending niche, together with our underwriting standards, should serve to reduce our exposure to credit risk.
The approval process for multi-family loans is also highly efficient, typically taking a period of four to six
weeks. Our success in this lending niche also reflects the solid relationships we have developed with the market’s
leading mortgage brokers, who are familiar with our lending practices, our underwriting standards, and our long-
standing practice of lending based on the cash flows produced by the buildings collateralizing these loans. Because
the multi-family market is largely broker-driven, the process of producing such loans is significantly expedited and
the related expenses substantially reduced.
Commercial Real Estate Loans
Commercial real estate loans totaled $3.8 billion at December 31, 2007, an increase of $713.9 million, or
22.9%, from the balance recorded at December 31, 2006. In addition to loans that were added in our three
acquisitions, the increase reflects $875.7 million of originated and purchased loans. At December 31, 2007, 56.1%
of our commercial real estate loans were secured by properties in New York City, with properties in New Jersey and
on Long Island accounting for 16.8% and 15.5%, respectively. The commercial real estate loans we produce are
secured by income-producing properties such as office buildings, retail centers, and multi-tenanted light industrial
buildings.
47
The pricing of our commercial real estate loans is structured along the same lines as our multi-family credits,
i.e., with a fixed rate of interest for the first five years of the loan that is generally tied to the five-year CMT, plus a
spread. For years six through ten, the borrower generally has the option of selecting an annually adjustable rate that
is based on the prime rate of interest, or a fixed rate that is based on the five-year CMT, each plus a spread. The
latter option also requires the payment of one percentage point of the then-outstanding loan amount. The minimum
rate at repricing is equivalent to the rate featured in the initial five-year term.
Prepayment penalties also apply, with five percentage points of the then-current balance generally being
charged on loans that refinance in the first year, scaling down to one percentage point of the then-current balance on
loans that refinance in year five. Our commercial real estate loans also tend to refinance within five years of
origination, and the expected weighted average life of the portfolio was 3.3 years at December 31, 2007.
The repayment of loans secured by commercial real estate is often dependent on the successful operation and
management of the underlying properties. To minimize our credit risk, we originate commercial real estate loans in
adherence with conservative underwriting standards, and require that such loans qualify on the basis of the
property’s income stream and debt service coverage ratio. The approval of a loan also depends on the borrower’s
credit history, profitability, and expertise in property management, and generally requires a debt service coverage
ratio of at least 130%, and a loan-to-value ratio that typically does not exceed 75%. In addition, the origination of
commercial real estate loans generally requires a security interest in the personal property and/or an assignment of
the rents and/or leases.
At December 31, 2007, the average commercial real estate loan had a principal balance of $2.0 million and the
portfolio had an average loan-to-value ratio of 56.9%.
Construction Loans
Construction loans totaled $1.1 billion at December 31, 2007, $36.1 million higher than the balance recorded
at year-end 2006. The decision to limit the portfolio’s growth was strategic in nature. As the housing market began
to decline in the second half of 2007, we chose to reduce our production of construction loans. As a result,
originations totaled $984.8 million in 2006 and $548.4 million in 2007, representing 19.8% and 11.3%, respectively,
of total loans produced.
At December 31, 2007, 72.5% of the loans in the portfolio were for construction in New York City, with
Manhattan accounting for more than a third of the City’s share. Long Island accounted for 17.6% of our construction
loans, with other parts of New York State and New Jersey accounting for 6.6%, combined. Little construction
lending is done outside our immediate market and, even then, to borrowers we have lent to successfully within our
marketplace.
The construction loans we produce are primarily for land acquisition, development, and construction of multi-
family and residential tract projects, and, to a lesser extent, for the construction of owner-occupied one-to four-
family homes and commercial properties. Such loans are typically originated for terms of 18 to 24 months, and
feature a floating rate of interest tied to prime, and a floor. They also generate origination fees that are recorded as
interest income and amortized over the life of the loan. Our construction loans have had a strong credit history, with
no losses recorded for more than ten years.
Because construction loans are generally considered to have a higher degree of credit risk, borrowers are
required to provide a personal guarantee of repayment and completion during construction. The risk of loss on a
construction loan is largely dependent upon the accuracy of the initial estimate of the property’s value upon
completion of construction, as compared to the estimated cost of construction, including interest, and upon the
estimated time to sell or lease such properties. If the estimate of value proves to be inaccurate, or the length of time
to sell or lease it is greater than anticipated, the property could have a value upon completion that is insufficient to
assure full repayment of the loan.
When applicable, it is our practice to require that residential properties be pre-sold or that borrowers secure
permanent financing commitments from a recognized lender for an amount equal to, or greater than, the amount of
our loan. In some cases, we ourselves may provide permanent financing. We typically require pre-leasing for loans
on commercial properties.
48
One- to four-family Loans
One- to four-family loans represented $380.8 million, or 1.9%, of total loans outstanding at December 31,
2007, as compared to $230.5 million, representing 1.2%, at December 31, 2006. The increase was largely driven by
our acquisitions, as it is our practice to originate one- to four-family loans through a third-party conduit and to sell
the loans to the conduit or its affiliates, shortly after they close, without recourse and servicing-released.
In connection with this practice, which was adopted on December 1, 2000, we participate in a private-label
program for the origination of one- to four-family loans with a nationally recognized third-party mortgage originator
(the “conduit”), based on defined underwriting criteria. The loans are marketed through our branch network and our
web site, and are intended to serve our existing customers and attract new ones, as well. In addition, dedicated loan
representatives are available through the conduit program to meet with our customers and assist them with the
application process. We fund the loans directly and have the option of retaining the loans for portfolio or delivering
the loans to the conduit. Each loan we originate through the conduit program generates income that is recorded as
“other non-interest income” in our Consolidated Statements of Income and Comprehensive Income. In 2007, we
originated one- to four-family and home equity loans totaling $66.2 million, as compared to $60.2 million in the
prior year.
We have no subprime or Alt-A loans in our loan portfolio.
In addition to ensuring that our customers are provided with an extensive range of one- to four-family
products, the conduit arrangement supports two of our primary objectives: managing our exposure to interest rate
risk and maintaining our efficiency.
Other Loans
Other loans represented 4.7% of total loans at December 31, 2007, as compared to 3.4% at December 31,
2006. Reflecting loans added in our three acquisitions and twelve-month originations of $1.1 billion, other loans
rose to $965.2 million at December 31, 2007 from $676.8 million at the year-earlier date. C&I loans represented
$705.8 million and $643.1 million of the respective year-end totals, and accounted for $1.0 billion and $675.9
million of loans originated in the respective years.
C&I loans are tailored to meet the specific needs of our borrowers, and include term loans, demand loans,
revolving lines of credit, letters of credit, and loans that are partly guaranteed by the Small Business Administration.
A broad range of commercial loans, both collateralized and unsecured, are made available to businesses for working
capital (including inventory and accounts receivable), business expansion, the purchase of machinery and
equipment, and other general corporate needs. The purpose of the loan is considered in determining its tenor and
structure, and pricing is tied to the prime rate of interest or other market indices plus an applicable spread. In
addition, we seek to establish full-scale banking relationships with our C&I customers. As a result, many of our
borrowers have provided us with deposits, and many are taking advantage of our cash management, investment, and
trade finance services.
The remainder of the portfolio of other loans consists primarily of home equity loans and lines of credit, as
well as a variety of consumer loans, most of which were originated by our merger partners prior to their joining the
Company.
Lending Authority
The loans we originate are subject to federal and state laws and regulations, and are underwritten in
accordance with loan underwriting policies and procedures approved by the Mortgage and Real Estate Committee of
the Board of Directors of the Community Bank (the “Mortgage Committee”), the Credit Committee of the Board of
Directors of the Commercial Bank (the “Credit Committee”), and the respective Boards of Directors as a whole.
In addition to the loans that we ourselves have originated, the portfolio includes loans that have been acquired
in our various business combinations that we have opted to retain.
In accordance with the Banks’ policies, all loans of $10.0 million or more must be reported to the respective
Boards of Directors. In 2007, 64 of such loans were originated by the Banks, with an aggregate loan balance of $2.1
49
billion at origination. In the prior year, 67 of such loans were originated by the Banks with an aggregate loan
balance of $1.5 billion at origination.
In addition, we place a limit on the amount of loans that may be made to one borrower. At December 31,
2007, the largest concentration of loans to one borrower consisted of a $467.0 million financing package provided
by the Community Bank to Riverbay Corporation – Co-op City, a residential community with 15,372 units in the
Bronx, New York, which was created under New York State’s Mitchell-Lama Housing Program in the late 1960s to
provide affordable housing for middle-income residents of the State. The financing package was originated on
September 30, 2004 and, at December 31, 2007, consisted of a multi-family loan of $300.0 million and construction
advances of $167.0 million. An additional $13.0 million of construction funds were unadvanced at year-end.
Loan Maturity and Repricing
The following table sets forth the maturity or period to repricing of our loan portfolio at December 31, 2007.
Loans that have adjustable rates are shown as being due in the period during which the interest rates are next subject
to change.
Loan Portfolio Analysis
Mortgage and Other Loans at
December 31, 2007
(in thousands)
Amount due:
Within one year
After one year:
One to five years
Over five years
Total due or repricing
Multi-
Family
Commercial
Real Estate
Construction
One- to Four-
Family
Other
Total
Loans
$ 2,112,587
$ 522,993
$ 897,669
$ 63,033
$773,685 $ 4,369,967
10,399,661
1,540,050
2,476,001
829,340
241,182
--
59,886
257,905
124,436
67,084
13,301,166
2,694,379
after one year
11,939,711
3,305,341
241,182
317,791
191,520
15,995,545
Total amounts due or
repricing, gross
$14,052,298
$3,828,334
$1,138,851
$380,824
$965,205 $20,365,512
The following table sets forth, as of December 31, 2007, the dollar amount of all loans due after December 31,
2008, and indicates whether such loans have fixed or adjustable rates of interest.
(in thousands)
Mortgage Loans:
Multi-family
Commercial real estate
Construction
1-4 family
Total mortgage loans
Other loans
Total loans
Outstanding Loan Commitments
Due after December 31, 2008
Adjustable
Total
Fixed
$1,729,789
1,059,773
241,182
237,764
3,268,508
142,212
$3,410,720
$10,209,922
2,245,568
--
80,027
12,535,517
49,308
$12,584,825
$11,939,711
3,305,341
241,182
317,791
15,804,025
191,520
$15,995,545
At December 31, 2007, we had outstanding loan commitments of $1.2 billion, including commitments to
originate $360.3 million of multi-family loans; $52.3 million of commercial real estate loans; $360.1 million of
construction loans; and $449.9 million of other loans, including $421.2 million of unadvanced lines of credit. The
Company had no commitments to originate one- to four-family loans at December 31, 2007.
In addition to our commitments to originate loans, we had commitments to issue financial stand-by,
performance, and commercial letters of credit of $28.3 million, $14.6 million, and $30.9 million, respectively, at
December 31, 2007. The commitments featured terms ranging from one to three years. Financial stand-by letters of
credit obligate us to guarantee payment of a specific financial obligation on behalf of certain borrowers, while
performance stand-by letters of credit obligate us to make payments in the event that a specified third party fails to
50
perform under certain non-financial contractual obligations. Commercial letters of credit act as a means of ensuring
payment to a seller upon shipment of goods to a buyer. Although commercial letters of credit are used to effect
payment for domestic transactions, the majority are used to settle payments in international trade. Typically, such
letters of credit require presentation of documents which describe the commercial transaction, and provide evidence
of shipment and the transfer of title.
The fees we collect in connection with the issuance of letters of credit are included in “fee income” in the
Consolidated Statements of Income and Comprehensive Income. Please see “Contractual Obligations and Off-
balance-sheet Commitments” later in this report for a further discussion of financial stand-by, performance, and
commercial letters of credit.
Asset Quality
In 2007, our performance continued to be distinguished by the quality of our assets, with non-performing
assets representing 0.07% of total assets at December 31, 2007, an improvement from 0.08% of total assets at
December 31, 2006. Non-performing assets rose modestly during the year, from $22.5 million to $22.9 million, as a
$989,000 increase in non-performing loans was tempered by a $683,000 reduction in other real estate owned.
Non-performing loans rose from $21.2 million at year-end 2006 to $22.2 million at year-end 2007, primarily
reflecting $2.0 million of Synergy loans that were non-performing at the current year-end. Each of the respective
balances was equivalent to 0.11% of total loans. Included in non-performing loans at December 31, 2007 were non-
accrual mortgage loans of $14.9 million and non-accrual other loans of $7.3 million, as compared to $18.1 million
and $3.1 million, respectively, at December 31, 2006. A loan generally is classified as a “non-accrual” loan when it
is 90 days past due. When a loan is placed on “non-accrual” status, we cease the accrual of interest owed, and
previously accrued interest is reversed and charged against interest income. A loan is generally returned to accrual
status when the loan is less than 90 days past due and we have reasonable assurance that the loan will be fully
collectible.
Non-performing loans are reviewed regularly by management and reported on a monthly basis to the
Mortgage Committee, the Credit Committee, and the Boards of Directors of the Banks. When necessary, non-
performing loans are written down to their current appraised values, less certain transaction costs. Outside counsel
with experience in foreclosure proceedings are retained to institute such action with regard to borrowers who are
delinquent in paying their loans.
Properties that are acquired through foreclosure are classified as “other real estate owned,” and recorded at the
lower of the unpaid principal balance or fair value at the date of acquisition, less the estimated cost of selling the
property at that time. At December 31, 2007, other real estate owned consisted of five properties totaling $658,000,
as compared to five properties totaling $1.3 million at December 31, 2006. A portion of other real estate owned is
titled in the name of a wholly-owned bank subsidiary.
It is our policy to require an appraisal of such properties shortly before foreclosure and to re-appraise the
properties on an as-needed basis until they are sold. We dispose of such properties as quickly and prudently as
possible, given current market conditions and the condition of the property. We are currently in the process of
marketing the properties acquired by foreclosure at prices that exceed their respective carrying values, and therefore
do not expect to incur a loss when such properties are sold.
Charge-offs rose from $420,000 in 2006 to $431,000 in 2007, and each represented 0.002% of average loans
in the respective years. Consistent with our experience in the preceding nine quarters, the loans we charged off in
2007 consisted of consumer and unsecured credits that had been added in our business combinations. While the
quality of the loan portfolio is partly due to the absence of significant weakness in our local economy and real estate
market in 2007, it also is indicative of our underwriting standards, and the consistency with which we have adhered
to these standards while growing our loan portfolio.
In the case of multi-family and commercial real estate loans, we look first at the consistency of the cash flows
being generated to determine the property’s economic value, and then at the market value of the property that
collateralizes the loan. The amount of the loan is then based on the lower of the two values, with the economic value
being the value more typically used.
51
The condition of the collateral property is another critical factor. Multi-family buildings and commercial real
estate properties are inspected from rooftop to basement as a prerequisite to approval by executive management and
the Mortgage or Credit Committee, as applicable. In addition, a member of the Mortgage or Credit Committee
participates in inspections on multi-family loans originated in excess of $4.0 million. Similarly, a member of the
Mortgage or Credit Committee participates in inspections on commercial real estate loans in excess of $2.5 million.
Furthermore, independent appraisers, whose appraisals are carefully reviewed by our experienced in-house appraisal
officers, perform appraisals on collateral properties.
In addition, we work with a select group of mortgage brokers who are familiar with our credit standards and
whose track record with our lending officers typically exceeds ten years.
To further manage our credit risk, our lending policies limit the amount of credit granted to any one borrower
and typically require a minimum debt service coverage ratio of 120%, except for commercial real estate loans,
which generally require a minimum ratio of 130%. Although we typically will lend up to 80% of the appraised value
on multi-family buildings and up to 75% on commercial properties, the average loan-to-value ratio of such credits at
December 31, 2007 was considerably lower, amounting to 64.5% and 56.9%, respectively. Exceptions to these loan-
to-value limitations may be made on a case-by-case basis, and require the approval of the Mortgage or Credit
Committee, as applicable.
The Boards of Directors also take part in the construction lending process, as all construction loans require the
approval of the Mortgage or Credit Committee, as applicable. In addition, a member of the pertinent committee
participates in inspections when the loan amount exceeds $2.5 million. We believe that the construction loans in our
portfolio have been prudently underwritten. In addition, they are primarily made to well-established builders who
have worked with us or our merger partners in the past. We typically will lend up to 75% of the estimated market
value of multi-family and residential tract projects; however, in the case of home construction loans to individuals,
the limit is 80%. With respect to commercial construction loans, which are not our primary focus, we typically will
lend up to 65% of the estimated market value of the property.
Credit risk is also managed through the loan disbursement process. Loan proceeds are disbursed periodically
in increments as construction progresses, and as warranted by inspection reports provided to us by our own lending
officers and/or consulting engineers.
C&I loans are typically underwritten on the basis of the cash flows produced by the borrower’s business, and
are generally collateralized by various business assets, including, but not limited to, inventory, equipment, and
accounts receivable. As a result, the capacity of the borrower to repay is substantially dependent on the degree to
which the business is successful. Furthermore, the collateral underlying the loans may depreciate over time, may not
be conducive to appraisal, and may fluctuate in value, based upon the business’ results. Accordingly, personal
guarantees are also a normal requirement for C&I loans.
Our loan portfolio has been deliberately structured to manage our exposure to both credit and interest rate risk.
The vast majority of the loans in our portfolio are intermediate-term credits, with multi-family and commercial real
estate loans typically repaying or refinancing within three to five years of origination, and the duration of
construction loans ranging up to 36 months, with 18 to 24 months more the norm. All three types of mortgage loans
have had a solid performance record, with no losses on principal recorded for 28 years in the case of our multi-
family credits and more than ten years in the case of commercial real estate and construction loans. Furthermore, our
multi-family loans are largely secured by rent-regulated buildings which, historically, have tended to maintain a high
level of occupancy, even in a declining economy.
The procedures we follow with respect to delinquent loans are generally consistent across all categories, with
late charges assessed, and notices mailed to the borrower, at specified dates. We attempt to reach the borrower by
telephone to ascertain the reasons for delinquency and the prospects for repayment. When contact is made with a
borrower at any time prior to foreclosure or recovery against collateral property, we attempt to obtain full payment,
and will consider a repayment schedule to avoid taking such action.
While we strive to originate loans that will perform fully, the absence of delinquencies or losses cannot be
guaranteed. In addition to a change in personal circumstances, the ability of a borrower to fulfill his or her
obligations may be impacted by a downturn in the credit cycle. Although the quality of our loan portfolio continued
52
to be strong in the late 1980s and early 1990s, when the last major cycle turn resulted in significant industry losses,
we cannot guarantee that our portfolio will remain unaffected by the current credit cycle turn.
At December 31, 2007, our loan loss allowance totaled $92.8 million, and was equivalent to 418.14% of non-
performing loans and 0.46% of total loans at that date. At the prior year-end, the allowance for loan losses totaled
$85.4 million, and was equivalent to 402.72% and 0.43% of non-performing loans and total loans, respectively. The
year-over-year increase was attributable to our acquisitions which added $7.8 million to the loan loss allowance
during the year. While the allowance for loan losses may be increased through a provision for loan losses that is
charged to operations, no provisions were made in 2007 or 2006.
The manner in which the allowance for loan losses is established, and the assumptions made in that process,
are considered critical to our financial condition and results. Such assumptions are based on judgments that are
difficult, complex, and subjective regarding various matters of inherent uncertainty. Accordingly, the policies that
govern our assessment of the allowance for loan losses are considered “Critical Accounting Policies” and are
discussed under that heading earlier in this report.
Based upon all relevant and presently available information, management believes that the current allowance
for loan losses is adequate.
The following table presents information regarding our consolidated allowance for loan losses and non-
performing assets at each year-end in the five years ended December 31, 2007:
Asset Quality Analysis
(dollars in thousands)
Allowance for Loan Losses:
Balance at beginning of year
Allowance acquired in merger transactions
Charge-offs
Balance at end of year
Non-performing Assets:
Non-accrual mortgage loans
Other non-accrual loans
Loans 90 days or more delinquent
and still accruing interest
Total non-performing loans
Other real estate owned
Total non-performing assets
Ratios:
Non-performing loans to total loans
Non-performing assets to total assets
Allowance for loan losses to
non-performing loans
Allowance for loan losses to total loans
2007
2006
At December 31,
2005
2004
2003
$85,389
7,836
(431)
$79,705
6,104
(420)
$78,057
1,669
(21)
$78,293
--
(236)
$92,794
$85,389
$79,705
$78,057
$40,500
37,793
--
$78,293
$14,891
7,301
$18,072
3,131
$15,551
1,338
$23,567
4,581
$32,344
1,994
--
22,192
658
$22,850
--
21,203
1,341
$22,544
10,674
27,563
1,294
$28,857
--
28,148
566
$28,714
--
34,338
92
$34,430
0.11%
0.07
0.11%
0.08
0.16%
0.11
0.21%
0.12
0.33%
0.15
418.14
0.46
402.72
0.43
289.17
0.47
277.31
0.58
228.01
0.75
We had no “troubled debt restructurings,” as defined in SFAS No. 15, “Accounting by Debtors and Creditors
for Troubled Debt Restructurings,” at any of the dates presented in the preceding table.
53
The following table sets forth the allocation of the consolidated allowance for loan losses at each year-end in the five years ended December 31, 2007:
Summary of the Allowance for Loan Losses
2007
2006
2005
2004
2003
(dollars in thousands)
Mortgage Loans:
Multi-family
Commercial real estate
Construction
1-4 family
Other loans
Total loans
Amount
$43,066
29,461
10,243
1,884
8,140
$92,794
Percent of
Loans in
Each
Category
to Total
Loans
Amount
Percent of
Loans in
Each
Category
to Total
Loans
Amount
Percent of
Loans in
Each
Category
to Total
Loans
Amount
Percent of
Loans in
Each
Category
to Total
Loans
Amount
Percent of
Loans in
Each
Category
to Total
Loans
69.00%
18.80
5.59
1.87
4.74
100.00%
$46,525
23,313
9,089
1,048
5,414
$85,389
73.93%
15.85
5.61
1.17
3.44
100.00%
$44,336
23,379
8,281
1,304
2,405
$79,705
75.49%
16.96
5.03
1.49
1.03
100.00%
$41,717
20,434
9,770
2,954
3,182
$78,057
73.45%
15.98
6.03
3.78
0.76
100.00%
$32,130
18,859
11,903
5,462
9,939
$78,293
70.18%
13.76
6.13
6.96
2.97
100.00%
The preceding allocation is based upon an estimate of various factors, as discussed in “Critical Accounting Policies” earlier in this report, and a different
allocation methodology may be deemed to be more appropriate in the future. In addition, it should be noted that the portion of the loan loss allowance allocated
to each loan category does not represent the total amount available to absorb losses that may occur within that category, since the total loan loss allowance is
available for the entire loan portfolio.
54
Securities
Securities represented $5.7 billion, or 18.8%, of total assets at December 31, 2007, as compared to $4.9
billion, or 17.3%, of total assets, at December 31, 2006. While the current year-end balance was increased by our
three business combinations and by purchases totaling $2.5 billion, the growth of the portfolio was largely offset by
securities sales of $2.1 billion and repayments of $933.9 million over the course of the year. The cash flows
generated through the sale of securities were primarily used to purchase higher-yielding government-sponsored
enterprise (“GSE”) obligations (defined as GSE certificates, GSE collateralized mortgage obligations, and GSE
debentures), and also were used to reduce our higher-cost funds. There are no subprime- or Alt-A- backed issues in
our securities portfolio.
The investment policies of the Company and the Banks are established by the respective Boards of Directors
and implemented by their respective Investment Committees, in concert with the respective Asset and Liability
Management Committees. The Investment Committees generally meet quarterly or on an as-needed basis to review
the portfolios and specific capital market transactions. In addition, the securities portfolios are reviewed monthly by
the Boards of Directors as a whole. Furthermore, the policies guiding the Company’s and the Banks’ investments are
reviewed at least annually by the respective Investment Committees, as well as by the respective Boards. While the
policies permit investment in various types of liquid assets, neither the Company nor the Banks currently maintain a
trading portfolio.
The investment policies of the Company and the Banks permit investments in “mortgage-related securities,”
i.e., securities issued and backed by such GSEs as Fannie Mae (“FNMA”) and Freddie Mac (“FHLMC”), and
collateralized mortgage obligations (“CMOs”); and “other securities,” consisting of GSE debentures, municipal
bonds, corporate debt obligations, capital trust notes, and corporate equities.
Depending on management’s intent at the time of purchase, securities are classified as “available for sale” or
as “held to maturity.” While available-for-sale securities are intended to generate earnings, they also represent a
significant source of cash flows and liquidity for future loan production, the reduction of higher-cost funding, and
general operating activities. Held-to-maturity securities also generate cash flows and serve as a source of earnings.
Our investment portfolio is primarily concentrated in GSE CMOs and GSE debentures. To a much lesser
extent, our portfolio is also comprised of triple A-rated private label CMOs, corporate bonds, trust preferred
securities, corporate equities, and municipal obligations. Our general investment strategy is to purchase liquid
investments with various maturities to ensure that our overall interest rate risk position stays within policy
requirements.
Substantially all of our securities have readily determinable market prices that are derived from third-party
pricing services. In determining if and when a decline in market value below amortized cost is other than temporary,
we consider the duration and severity of the unrealized loss, the financial condition and near-term prospects of the
issuers, and our intent and ability to hold the investments to allow for a recovery in market value in a reasonable
period of time. When such a decline in value is deemed to be other than temporary, an impairment loss is recognized
in current-period operating results to the extent of the decline. Based upon our analysis of the investment portfolio at
December 31, 2007, we determined that there was no decline in market value deemed to be other than temporary.
Securities expected to be held for an indefinite period of time are classified as available for sale. Decisions to
purchase or sell these securities are based on economic conditions, including changes in interest rates, liquidity, and
our asset and liability management strategy. Available-for-sale securities represented $1.4 billion, or 24.0%, of total
securities at December 31, 2007, and were down $559.5 million from the balance recorded at December 31, 2006.
Included in the respective year-end amounts were mortgage-related securities of $973.3 million and $1.7 billion, and
other securities of $407.9 million and $276.5 million, respectively.
In the third quarter of 2007, the Company sold $1.1 billion of available-for-sale securities at a pre-tax loss of
$7.3 million. The securities had been written down in the second quarter of 2007, generating an other-than-
temporary impairment loss on securities of $57.0 million that was recorded in non-interest income. Reflecting the
sale of these securities, the after-tax net unrealized loss on securities available for sale equaled $7.6 million at
December 31, 2007, a significant reduction from $42.8 million at December 31, 2006. The respective after-tax
losses were recorded as a component of stockholders’ equity in the Consolidated Statements of Condition at
December 31, 2007 and 2006. The sale of these securities also resulted in an increase in the estimated weighted
55
average life of the available-for-sale securities portfolio, to 7.5 years at December 31, 2007 from 4.7 years at
December 31, 2006.
Held-to-maturity securities represented $4.4 billion, or 76.0%, of total securities at December 31, 2007,
signifying a year-over-year increase of $1.4 billion, or 46.1%. Mortgage-related securities accounted for $2.5 billion
and $1.4 billion, respectively, of the year-end 2007 and 2006 totals, with other securities representing the remaining
$1.9 billion and $1.6 billion, respectively. Included in the respective year-end amounts were GSE obligations of $1.5
billion and $1.2 billion; capital trust notes of $186.8 million and $273.7 million; and corporate bonds of $166.0
million and $156.2 million. The estimated weighted average lives of the held-to-maturity securities portfolio were
5.9 years and 6.0 years at the corresponding dates.
Bank-owned Life Insurance (“BOLI”)
At December 31, 2007, the Company had a $664.4 million investment in BOLI, as compared to $585.0
million at December 31, 2006. In addition to an increase in the cash surrender value of the underlying policies, the
$79.4 million increase reflects $32.1 million of BOLI that was acquired in the PennFed transaction and $22.5
million of BOLI that was acquired in the transaction with Synergy.
BOLI is reported at the total cash surrender value of the policies in the Consolidated Statements of Condition,
and the income generated by the increase in the cash surrender value of the policies is recorded in “non-interest
income” in the Consolidated Statements of Income and Comprehensive Income. Please see the discussion of
Emerging Issues Task Force (“EITF”) Issue Nos. 06-4 and 06-5 under “Impact of Recent Accounting
Pronouncements” in Note 2, “Summary of Significant Accounting Policies,” in Item 8, “Financial Statements and
Supplementary Data.”
Goodwill and Core Deposit Intangibles (“CDI”)
At December 31, 2007, we recorded goodwill of $2.4 billion, representing a $289.3 million increase from the
balance recorded at December 31, 2006. The year-end 2007 amount includes the goodwill recorded in the PennFed,
Doral, and Synergy transactions, which amounted to $189.5 million, $11.8 million, and $89.7 million, respectively.
The PennFed, Doral, and Synergy transactions also generated respective CDI of $20.9 million, $2.1 million,
and $4.5 million, which are being amortized on an accelerated basis over a period of ten years, beginning in the
quarters when the respective acquisitions occurred. CDI totaled $111.1 million at December 31, 2007, an increase of
$4.7 million from the year-earlier balance, reflecting the CDI stemming from the transactions, net of twelve month’s
amortization expense.
Sources of Funds
On a stand-alone basis, the Company has four primary funding sources for the payment of dividends, share
repurchases, and other corporate uses: dividends paid to the Company by the Banks; funding raised through the
issuance of debt instruments; capital raised through the issuance of stock; and repayments of, and income from,
investment securities.
On a consolidated basis, the Company’s funding primarily stems from the cash flows generated through the
repayment of loans and securities; the cash flows generated through the sale of loans and securities, typically in
connection with our post-merger balance sheet repositioning; the deposits we acquire in our business combinations
or gather through our branch network; and the use of borrowed funds, primarily in the form of wholesale
borrowings.
In 2007, loan repayments totaled $6.9 billion, as compared to $3.5 billion in 2006. Included in the 2007
amount were loan sales of $1.5 billion, largely reflecting the sale of loans acquired in the PennFed transaction.
Securities also generated significant cash flows in 2007. Primarily reflecting the sale of mortgage-related
securities in the third quarter, cash flows from securities sales totaled $2.1 billion in 2007, as compared to $1.2
billion in the prior year. Repayments of securities generated another $933.9 million in 2007, as compared to $795.6
million in 2006.
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Deposits
As previously indicated, we are a leading depository in the New York metropolitan region, and have a
significant share of deposits in Staten Island, Queens, and Nassau County, which have a total of 103 branches and
117 ATM locations, combined. In Essex County, our franchise grew from two to 15 branches as a result of our
PennFed transaction and in Union County, the PennFed and Synergy transactions boosted our franchise from two
branches to 14.
Largely reflecting the benefit of our PennFed, Doral, and Synergy transactions, deposits rose $538.3 million,
or 4.3%, to $13.2 billion at December 31, 2007. Although the deposits acquired in these transactions far exceeded
the amount of the year-over-year increase, deposit growth was tempered by a strategic run-off of higher-cost NOW
and money market accounts and certificates of deposit (“CDs”), all of which included brokered deposits. In addition,
the limited growth of deposits reflects the availability of more attractive wholesale funding sources at a time when
several of our competitors were offering aggressive rates of interest on deposits, and when the significant liquidity
resulting from the post-merger sale of assets enabled us to price our deposits more conservatively.
CDs represented $6.9 billion, or 52.5%, of total deposits at December 31, 2007, and were up $968.5 million,
or 16.3%, from the year-earlier amount. The increase was primarily the result of our PennFed and Synergy
transactions, which contributed $1.0 billion and $306.4 million of CDs at the respective acquisition dates. CDs in
excess of $100,000 are accepted by both the Community Bank and the Commercial Bank, and typically feature
preferential rates of interest. In addition, brokered deposits are utilized by both the Community and Commercial
Banks.
Core deposits represented the remaining $6.2 billion, or 47.5%, of total deposits at December 31, 2007, a year-
over-year reduction of $430.1 million. While NOW and money market accounts fell $700.2 million over the course
of the year to $2.5 billion, the reduction was partly offset by a $120.0 million increase in savings accounts to $2.5
billion and a $150.1 million increase in non-interest-bearing deposits to $1.3 billion.
During the year, the cash flows from the sale of acquired assets were partly deployed into the reduction of
higher-cost funding, including brokered deposits which we utilize from time to time to fund our loan production or
to fulfill certain other liquidity needs. In view of the liquidity provided by our acquisitions, the cash flows produced
through the post-merger sale of assets, and the attractiveness of alternative wholesale funding sources, we reduced
our balance of brokered deposits by $353.3 million in 2007 to $590.5 million at December 31st. Included in the
year-end 2007 balance of CDs were $587.5 million of brokered deposits, representing a year-over-year increase of
$308.4 million. However, the year-end balance of NOW and money market accounts included $2.9 million of
brokered deposits, signifying a $661.8 million reduction from the balance recorded at December 31, 2006.
Our ability to attract and retain deposits depends on various factors, including competition, industry
consolidation, and the level of short-term interest rates. We vie for deposits and customers by placing an emphasis
on convenience and service, with 179 Community Bank locations, 38 Commercial Bank locations, and 234 ATM
locations, including 204 that operate 24 hours a day. Our customers also have 24-hour access to their accounts
through our bank-by-phone service, and online through our three web sites, www.myNYCB.com,
www.NewYorkCommercialBank.com, and www.NYCBfamily.com.
In addition to 125 traditional branches, three customer service centers, and five “campus” locations, our
Community Bank currently has 46 in-store branch offices. Our in-store branch network ranks among the largest
supermarket banking franchises in the New York metropolitan region, and one of the largest in the Northeast.
Because of their proximity to our traditional Community Bank branches, our in-store branches enable us to offer 70
to 80 hours of service a week in many of the communities we serve. This service model is a key component of our
efforts to attract and maintain deposits in a highly competitive marketplace.
We also compete by complementing our broad selection of traditional banking products with an extensive
menu of alternative financial services, including insurance, annuities, and mutual funds of various third-party service
providers. In addition, our practice of originating loans through a third-party mortgage originator enables us to offer
our customers a multitude of one- to four-family mortgage loans.
As a result of these factors, as well as the benefit of our significant community involvement, the Community
Bank is currently the second largest thrift depository in Nassau County, and the second largest in the New York City
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boroughs of Staten Island and Queens, with market shares of 40.0%, 39.3%, and 23.6%, respectively. As a result of
our recent transactions in New Jersey, the Community Bank also enjoys a 25.3% share of thrift deposits in densely
populated Essex County, and an 18.7% share of thrift deposits in Union County. (Market share information was
provided by SNL Financial and is based on deposits held at June 30, 2007.)
In addition to checking and savings accounts, Individual Retirement Accounts, and CDs for both businesses
and consumers, the Commercial Bank offers a variety of cash management products to address the needs of small
and mid-size businesses, professional associations, and government institutions throughout our marketplace.
Borrowed Funds
In 2007, the pricing of deposits was driven upward by several competing institutions, making it desirable for
us to seek alternative, lower-cost sources of funds. Rather than raise the rates on our NOW and money market
accounts and CDs in order to maintain or attract such deposits, we opted to engage in a strategic reduction of such
higher-cost retail funding, and, at the same time, to increase our use of wholesale borrowings at a time when they
featured more attractive rates.
Accordingly, the balance of wholesale borrowings rose to $12.2 billion at December 31, 2007 from $11.1
billion at December 31, 2006. Although the increase in wholesale borrowings also reflected funds acquired in our
three business combinations, the increase was partly tempered by the prepayment of higher-cost wholesale
borrowings totaling $330.3 million with some of the cash flows produced through the sale of PennFed’s one- to
four-family and home equity loans in the second quarter of the year.
FHLB-NY advances represented $7.8 billion of wholesale borrowings at December 31, 2007, and were up
$541.7 million from the balance recorded at December 31, 2006. The Community Bank and the Commercial Bank
are both members of, and have lines of credit with, the FHLB-NY. Pursuant to a blanket collateral agreement, our
FHLB-NY advances and overnight line-of-credit borrowings are secured by a pledge of certain eligible collateral,
including loans, securities, and equity shares in certain of our subsidiaries.
Also included in wholesale borrowings at the end of last year were repurchase agreements of $4.4 billion,
representing a $643.6 million increase from the balance at December 31, 2006. Repurchase agreements are contracts
for the sale of securities owned or borrowed by the Banks with an agreement to repurchase those securities at an
agreed-upon price and date. Our repurchase agreements are primarily collateralized by GSE obligations, and may be
entered into with the FHLB-NY or with certain brokerage firms. The brokerage firms we utilize are subject to an
ongoing financial review, which is performed internally, to ensure that we borrow funds only from those dealers
whose financial strength will minimize the risk of loss due to default. In addition, a master repurchase agreement
must be executed and on file for the brokerage firms we use.
A significant portion of our wholesale borrowings at year-end 2007 consisted of callable advances and
callable repurchase agreements that primarily featured a ten-year maturity and had various non-call provisions. At
December 31, 2007, $8.1 billion of our wholesale borrowings were callable in 2008; $2.9 billion and $500.0 million
were callable in 2009 and 2010, respectively.
We also had borrowed funds in the form of junior subordinated debentures at December 31, 2007. Reflecting
certain trust preferred securities that were acquired in the PennFed transaction, the balance of such debentures rose
$29.2 million year-over-year to $484.8 million at that date. Also included in the year-end 2007 amount were certain
floating rate junior subordinated debentures that were issued on April 16, 2007 and that featured a floating annual
interest rate equal to the three-month London Interbank Offered Rate (“LIBOR”) plus 1.65%. The new issue was
used to fund the early redemption of certain trust preferred securities that had been issued by our wholly-owned
subsidiaries, Haven Capital Trust I and Roslyn Preferred Trust I, respectively. The Haven Capital Trust I securities
had featured a fixed annual interest rate of 10.46%, while the Roslyn Preferred Trust I securities had featured a
floating annual interest rate equal to the six-month LIBOR plus 3.60%. Please see Note 8 to the Consolidated
Financial Statements, “Borrowed Funds,” in Item 8, “Financial Statements and Supplementary Data,” for a further
discussion of these borrowed funds.
The growth of wholesale borrowings and junior subordinated debentures in 2007 was tempered by a $116.8
million reduction in other borrowings to $237.2 million, primarily reflecting the maturity of senior debt acquired in
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our 2003 merger with Roslyn Bancorp, Inc. that totaled $115.0 million. Included in the balance of other borrowings
at year-end 2007 were senior debt of $75.2 million and preferred stock in bank subsidiaries of $162.0 million.
Liquidity, Contractual Obligations and Off-balance-sheet Commitments, and Capital Position
Liquidity
We manage our liquidity to ensure that cash flows are sufficient to support our operations, and to compensate
for any temporary mismatches between sources and uses of funds caused by erratic loan and deposit demand.
As discussed under “Sources of Funds,” the loans we produce are funded through four primary sources:
(1) cash flows from the repayment of loans and securities; (2) cash flows from the sale of loans and securities,
typically in connection with the post-merger repositioning of our balance sheet; (3) the deposits we acquire in
connection with our acquisitions and those we gather organically through our branch network; and (4) borrowed
funds, primarily in the form of wholesale borrowings.
While borrowed funds and the scheduled amortization of securities and loans are generally more predictable
funding sources, deposit flows and loan and securities repayments are less predictable in nature, as they are subject
to external factors beyond our control. Among these are changes in the economy and local real estate values,
competition from other financial institutions and non-traditional financial services companies; and changes in short-
and intermediate-term interest rates. Depending on the volume and cost of deposits acquired in our business
combinations, we may opt not to compete aggressively for deposits, and may also allow our higher-cost deposits to
run off.
Our principal investing activity is multi-family lending, which is supplemented by the production of
commercial real estate and, to a lesser extent, construction and C&I loans. In 2007, loan originations totaled $4.9
billion, including multi-family loans and commercial real estate loans of $2.5 billion and $695.3 million,
respectively. As previously mentioned, the growth of our loan portfolio in the last year was funded with the cash
flows from loan sales and repayments, and by the sale and repayment of securities. As a result, the net cash provided
by investing activities in 2007 totaled $2.0 billion.
In 2007, the net cash used in financing activities totaled $2.2 billion, primarily reflecting a $2.0 billion net
decrease in cash flows from deposits and the use of $310.2 million for the payment of cash dividends. Our investing
and financing activities were supported by the net cash provided by our operating activities, which totaled $296.2
million in 2007.
We monitor our liquidity on a daily basis to ensure that sufficient funds are available to meet our financial
obligations. Our most liquid assets are cash and cash equivalents, which totaled $335.7 million at December 31,
2007, exceeding the year-earlier amount by $105.0 million, or 45.5%. Additional liquidity stems from our portfolio
of available-for-sale securities, which totaled $1.4 billion at the end of December, and from the Banks’ approved
lines of credit with the FHLB-NY.
CDs due to mature in one year or less from December 31, 2007 totaled $6.0 billion, representing 86.7% of
total CDs at that date. Our ability to retain these CDs and to attract new deposits depends on numerous factors,
including customer satisfaction, the rates of interest we pay on our deposits, the types of products we offer, and the
attractiveness of their terms. As previously mentioned, there are times that we may choose not to compete for
deposits, depending on the availability of lower-cost funding sources, the competitiveness of the market and its
impact on pricing, and our need for such deposits to fund loan demand.
In 2007, the primary sources of funds for the Company on an unconsolidated basis (i.e., the “Parent
Company”) included dividend payments from the Banks and sales and repayments of investment securities. The
ability of the Community Bank and the Commercial Bank to pay dividends and other capital distributions to the
Parent Company is generally limited by New York State banking law and regulations, and by certain regulations of
the FDIC. In addition, the New York State Superintendent of Banks (the “Superintendent”), the FDIC, and the
Federal Reserve Bank, for reasons of safety and soundness, may prohibit the payment of dividends that are
otherwise permissible by regulation.
59
Under New York State Banking Law, a New York State-chartered stock-form savings bank or commercial
bank may declare and pay dividends out of its net profits, unless there is an impairment of capital. However, the
approval of the Superintendent is required if the total of all dividends declared in a calendar year would exceed the
total of a bank’s net profits for that year, combined with its retained net profits for the preceding two years. In 2007,
the Banks paid dividends totaling $200.0 million to the Parent Company, leaving $133.0 million that they could
dividend to the Parent Company without regulatory approval at December 31st. In addition, the Company had
$104.4 million in cash and cash equivalents at year-end 2007, together with $46.8 million of available-for-sale
securities. Were either of the Banks to apply to the Superintendent for approval to make a dividend or capital
distribution in excess of the dividend amounts permitted under the regulations, no assurances could be made that
such an application would be approved by the regulatory authorities.
Contractual Obligations and Off-balance-sheet Commitments
In the normal course of business, we enter into a variety of contractual obligations in order to manage our
assets and liabilities, fund loan growth, operate our branch network, and address our capital needs.
To fund the growth of our loan portfolio, we offer CDs to our customers under contract, and borrow funds
under contract from the FHLB-NY and various brokerage firms. These contractual obligations are reflected in the
Consolidated Statements of Financial Condition under “deposits” and “borrowed funds,” respectively. At
December 31, 2007, we recorded CDs of $6.9 billion and long-term debt (defined as borrowed funds with an
original maturity in excess of one year) of $12.9 billion.
We also are obligated under certain non-cancelable operating leases on the buildings and land we use in
operating our branch network and performing our back-office responsibilities. These obligations are not included in
the Consolidated Statements of Condition and totaled $154.2 million at December 31, 2007.
The following table sets forth the maturity profile of the aforementioned contractual obligations:
Contractual Obligations
(in thousands)
Under one year
One to three years
Three to five years
More than five years
Total
Certificates of
Deposit
$5,992,111
665,440
168,935
86,550
$6,913,036
Long-term Debt(1)
$ 253,064
660,476
1,078,306
10,923,826
$12,915,672
Operating
Leases
$ 21,739
40,016
33,609
58,800
$154,164
Total
$ 6,266,914
1,365,932
1,280,850
11,069,176
$19,982,872
(1)
Includes FHLB-NY advances, repurchase agreements, junior subordinated debentures, preferred stock of subsidiaries,
and senior debt.
We had no contractual obligations to purchase loans or securities at December 31, 2007.
At December 31, 2007, we had significant commitments to extend credit in the form of mortgage and other
loan originations. These off-balance-sheet commitments consist of agreements to extend credit, as long as there is no
violation of any condition established in the contract under which the loan is made. Commitments generally have
fixed expiration dates or other termination clauses and may require payment of a fee.
Commitments to originate mortgage loans amounted to $772.7 million at December 31, 2007, with
commitments to originate other loans amounting to $449.9 million, including unadvanced lines of credit. The
majority of our loan commitments were expected to be funded within 90 days of that date.
In addition, we had off-balance-sheet commitments to issue commercial, performance, and financial stand-by
letters of credit of $28.3 million, $14.6 million, and $30.9 million, respectively, at December 31, 2007.
Commercial letters of credit act as a means of ensuring payment to a seller upon shipment of goods to a buyer.
Although commercial letters of credit are used to effect payment for domestic transactions, the majority of the
transactions we execute are used to settle payments in international trade. Typically, such letters of credit require
60
presentation of documents which describe the commercial transaction, and provide evidence of shipment, and the
transfer of title.
Performance letters of credit are primarily issued for the benefit of local municipalities on behalf of certain of
our borrowers. These borrowers are mainly developers of residential subdivisions with whom we currently have a
lending relationship. Performance letters of credit obligate us to make payments in the event that a specified third
party fails to perform under non-financial contractual obligations.
Financial stand-by letters of credit primarily are issued for the benefit of other financial institutions or
municipalities, on behalf of certain of our current borrowers, and obligate us to guarantee payment of a specified
financial obligation.
The following table sets forth our off-balance-sheet commitments relating to outstanding loan commitments
and letters of credit at December 31, 2007:
(in thousands)
Mortgage Loan Commitments:
Multi-family loans
Commercial real estate loans
Construction loans
Total mortgage loan commitments
Other loan commitments
Total loan commitments
Commercial, performance, and financial stand-by letters of credit
Total commitments
$ 360,288
52,320
360,110
772,718
449,917
$1,222,635
73,800
$1,296,435
Based upon the current strength of our liquidity position, we expect that our funding will be sufficient to fulfill
these obligations and commitments when they are due.
Capital Position
We manage our capital to enhance shareholder value and to enable management to act opportunistically in a
changing marketplace. In 2007, we fulfilled the first of these objectives by distributing $310.2 million of cash
dividends to our shareholders, reflecting the declaration of four quarterly cash dividends of $0.25 per share. We also
capitalized on the opportunity to grow our franchise, and our value, with the acquisitions of PennFed, Doral, and
Synergy. While the acquisition of Doral’s branch network in New York City was an all-cash transaction, PennFed
and Synergy were acquired with shares of Company stock. In connection with these transactions, we issued a total
of 24,654,781 shares in 2007.
Stockholders’ equity totaled $4.2 billion at December 31, 2007, signifying a 13.3% increase from $3.7 billion
at December 31, 2006. The respective year-end amounts were equivalent to 13.68% and 12.95% of total assets, and
book values of $12.95 and $12.56 per common share based on 322,834,839 and 293,890,372 shares, respectively.
We calculate book value per share by subtracting the number of unallocated ESOP shares at the end of a
period from the number of shares outstanding at the same date, and then divide our total stockholders’ equity by the
resultant number of shares. Primarily reflecting the issuance of shares to effect the transactions with PennFed and
Synergy, the number of shares outstanding rose to 323,812,639 at December 31, 2007 from 295,350,936 at
December 31, 2006. Included in the respective year-end amounts were unallocated ESOP shares of 977,800 and
1,460,564. (Please see the definition of book value per share that appears in the Glossary on page 3 of this report.)
The balance of stockholders’ equity was also impacted by our recognition of the funded status of our pension
and other post-retirement benefit plans, which represented $6.5 million of our accumulated other comprehensive
loss at December 31, 2007, a $9.4 million reduction from the year-earlier amount. In addition, the balance of
stockholders’ equity was reduced by share repurchases totaling $168,000 in 2007, as compared to $2.4 million in
2006.
As discussed in greater detail on page 75 of this report, we calculate our tangible stockholders’ equity by
subtracting the goodwill and CDI stemming from our various business combinations at the end of December from
the balance of stockholders’ equity at the same date. At December 31, 2007, we recorded goodwill of $2.4 billion
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and CDI of $111.1 million; the respective amounts were $2.1 billion and $106.4 million at year-end 2006.
Accordingly, our tangible stockholders’ equity equaled $1.6 billion at December 31, 2007, signifying a $198.4
million increase from the year-earlier amount. The increase in tangible stockholders’ equity was largely attributable
to the year-over-year increase in earnings and to the acquisition-driven increase in the number of shares outstanding,
which more than offset the funds expended for the cash dividend.
Tangible stockholders’ equity represented 5.83% of tangible assets at December 31, 2007, reflecting a 36-
basis point increase from the measure recorded at December 31, 2006. Excluding net unrealized losses on securities
of $14.8 million and $52.1 million from the respective totals, the ratio of adjusted tangible stockholders’ equity to
adjusted tangible assets equaled 5.88% and 5.66% at the respective year-ends. (Please see the reconciliations of
stockholders’ equity and tangible stockholders’ equity and the related measures on page 75.)
Consistent with our focus on capital strength and preservation, the level of stockholders’ equity at
December 31, 2007 continued to exceed the minimum federal requirements for a bank holding company. The
following tables set forth our total risk-based, Tier 1 risk-based, and leverage capital amounts and ratios at
December 31, 2007 and 2006, and the respective minimum regulatory requirements on a consolidated basis:
Regulatory Capital Analysis
At December 31, 2007
(dollars in thousands)
Total risk-based capital
Tier 1 risk-based capital
Leverage capital
At December 31, 2006
(dollars in thousands)
Total risk-based capital
Tier 1 risk-based capital
Leverage capital
Actual
Amount
$2,414,558
2,321,764
2,321,764
Ratio
12.58%
12.10
8.32
Actual
Amount
$2,247,054
2,146,665
2,146,665
Ratio
12.31%
11.76
8.14
Minimum
Required
Ratio
8.00%
4.00
4.00
Minimum
Required
Ratio
8.00%
4.00
4.00
On March 1, 2005, the Federal Reserve Board adopted a final rule allowing bank holding companies to
continue, on a limited basis, the inclusion of trust preferred securities in Tier 1 capital. Under this rule, trust
preferred securities and other elements of restricted core capital are subject to stricter quantitative limits. It is
currently management’s expectation that our regulatory capital ratios will continue to exceed the minimum levels
required, despite the stricter quantitative limits applied under the final rule, which will become effective on
March 31, 2009.
The capital strength of the Company is paralleled by the solid capital position of the Banks. At December 31,
2007, the capital ratios for the Community Bank and the Commercial Bank continued to exceed the minimum levels
required for classification as a “well capitalized” institution under the Federal Deposit Insurance Corporation
Improvement Act of 1991, as further discussed in Note 16 to the Consolidated Financial Statements, “Regulatory
Matters,” in Item 8, “Financial Statements and Supplementary Data.”
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RESULTS OF OPERATIONS: 2007 and 2006 COMPARISON
Earnings Summary
In 2007, we recorded earnings of $279.1 million, signifying a $46.5 million, or 20.0%, increase from the year-
earlier level and a $0.09, or 11.1%, increase in diluted earnings per share to $0.90. Our basic earnings per share also
equaled $0.90 in 2007, signifying a year-over-year increase of $0.08, or 9.8%.
Several factors contributed to the year-over-year increase in our 2007 net income. Net interest income rose
$55.0 million, or 9.8%, to $616.5 million, partly reflecting a $28.1 million, or 95.2%, increase in prepayment
penalty income primarily derived from multi-family and commercial real estate loans. The latter increase
contributed to a 36-basis point rise in the average yield on our interest-earning assets, which grew $1.2 billion year-
over-year to $25.9 billion, and an 11-basis point increase in our net interest margin to 2.38%. We also realized an
$8.9 million, or 9.5%, increase in revenues from fee income, BOLI income, and other income to $103.1 million,
which combined with the increase in net interest income to offset a $23.7 million increase in non-interest expense to
$325.5 million. Largely reflecting our acquisition-driven expansion, operating expenses rose $43.2 million to $299.6
million, and CDI amortization rose $4.9 million to $22.8 million. The growth of our earnings was also tempered by
a $6.9 million increase in income tax expense to $123.0 million, the net effect of a $53.4 million rise in pre-tax
income and a reduction in the effective tax rate to 30.6%.
Also reflected in our 2007 earnings were the following after-tax gains and charges:
• A $44.8 million gain on the sale of our Atlantic Bank headquarters in Manhattan;
• A $2.6 million benefit from certain tax audit developments;
• A $1.2 million net gain on the sale of securities;
• A $38.7 million loss on the other-than-temporary impairment of securities in connection with the post-
PennFed repositioning of our balance sheet;
• A $2.2 million charge for the prepayment of wholesale borrowings in connection with the repositioning of
our balance sheet following the acquisition of PennFed;
• A $2.1 million charge for the merger-related allocation of ESOP shares in connection with our PennFed
and Synergy transactions;
• A $1.2 million loss on debt redemption, in connection with the early redemption of certain trust preferred
securities; and
• A $650,000 charge relating to our membership interest in Visa U.S.A.
The net effect of these gains and charges was a $3.8 million contribution to our 2007 net income, and a $0.01
per share contribution to our 2007 basic and diluted earnings per share.
Our 2007 earnings also reflect the nine-month benefit of the PennFed transaction, the five-month benefit of
the Doral transaction, and the three-month benefit of the transaction with Synergy.
While our 2006 earnings reflect the eight-month benefit of our acquisition of Atlantic Bank of New York
(“Atlantic Bank”) on April 2nd, the following after-tax charges reduced our earnings by $31.0 million, and our basic
and diluted earnings per share by $0.11:
• Charges of $18.0 million for the prepayment of wholesale borrowings and $769,000 for the termination of
our interest rate swap agreements, which were recorded in connection with the repositioning of our balance
sheet following the acquisition of Atlantic Bank;
• A $5.4 million charge for the merger-related allocation of ESOP shares in connection with our acquisition
of Atlantic Bank;
• A $3.6 million loss on the mark-to-market of certain interest rate swaps;
• A $2.0 million charge recorded in connection with the retirements of our chairman and senior lending
consultant; and
63
• A $1.2 million loss on debt redemption, in connection with the early redemption of certain trust preferred
securities.
Net Interest Income
The level of net interest income is a function of the average balance of our interest-earning assets, the average
balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such
liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-
bearing liabilities which, in turn, are impacted by various external factors, including the local economy, competition
for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board of
Governors (the “FOMC”), and market interest rates.
The cost of our deposits and borrowed funds is largely based on short-term rates of interest, the level of which
is partially impacted by the actions of the FOMC. The FOMC reduces, maintains, or increases the target federal
funds rate (the rate at which banks borrow from one another), as it deems necessary. In the first six months of 2006,
the FOMC raised the federal funds rate to 5.25%, where it remained until September 18, 2007. From that date
through the end of the year, the FOMC reduced the federal funds rate to 4.25%. In January 2008, the FOMC reduced
the federal funds rate to its current level of 3.00%.
While our cost of funds is influenced by the FOMC’s actions, the yields generated by our loans and other
interest-earning assets are typically driven by intermediate-term interest rates, which are set by the market and
generally vary from day to day. In 2006, the increase in intermediate-term rates failed to keep pace with the increase
in short-term rates of interest. Reflecting the disparity between the movements in short- and intermediate-term
interest rates over the twelve-month period, the yield curve continued to invert during 2006. In 2007, the yield curve
moved from inverted to flat midway through the year and then began to grow steeper as short-term rates began to
decline at a faster pace than long-term interest rates.
In 2007, the level of net interest income we recorded benefited significantly from the level of prepayment
penalty income we received, especially in the first nine months of the year. Reflecting an increase in property sales
and refinancing activity during that time, prepayment penalty income rose $28.1 million, or 95.2%, to $57.6 million
in the twelve months ended December 31, 2007 from the level recorded in the twelve months ended December 31,
2006. Because prepayment penalty income is recorded as interest income, the increase contributed to a rise in the
average yields on our loans and interest-earning assets and, ultimately, to the expansion of our net interest income
and net interest margin.
Our net interest income also reflects the benefit of our three business combinations, which contributed to the
growth of our interest-earning assets and, in the case of the PennFed acquisition, provided us with an opportunity to
reposition our balance sheet. The cash flows produced through the sale of PennFed’s loans in the second quarter
were deployed into higher-yielding assets over the course of the year. On the liability side of the balance sheet, the
transactions provided us with an infusion of deposits, enabling us to run off some of our higher-cost funding, which
further contributed to the growth of our net interest income and net interest margin.
Another step taken during the year to enhance our net interest income and margin was the redemption of
certain trust preferred securities bearing higher rates of interest, and the funding of these redemptions through the
issuance of trust preferred securities featuring lower interest rates.
Reflecting these factors, we recorded net interest income of $616.5 million in 2007, representing a $55.0
million, or 9.8%, increase from the level recorded in 2006. Although interest expense rose $103.1 million year-over-
year to $950.2 million, the increase was exceeded by a $158.0 million rise in interest income to $1.6 billion during
the same time.
Interest Income
The 11.2% increase in interest income was driven by a $1.2 billion rise in the average balance of interest-
earning assets to $25.9 billion and a 36-basis point increase in the average yield to 6.05%. Loans generated $1.2
billion of the interest income recorded during the year, a $98.9 million increase from the level recorded in the twelve
months ended December 31, 2006. The latter increase was the result of a $542.8 million rise in the average balance
of loans to $19.4 billion and a 35-basis point rise in the average yield to 6.27%. In addition to the aforementioned
64
increase in prepayment penalty income, the higher average yield reflects the replenishment of the loan portfolio with
higher-yielding credits over the course of the year.
Securities accounted for $319.6 million of the interest income recorded in 2007, the result of a $42.6 million
increase in the average balance to $5.9 billion and a 48-basis point increase in the average yield, to 5.44%. During
the year, the Company sold securities totaling $2.1 billion and utilized a portion of the cash flows generated to invest
in GSE obligations that featured higher yields than the securities they replaced.
To a lesser extent, the rise in interest income stemmed from a $28.6 million increase in the interest income
produced by money market investments, the result of a $566.8 million increase in the average balance of such assets,
to $594.5 million, and a 50-basis point increase in the average yield to 5.02%. During the year, our liquidity was
enhanced by the cash flows from the sale of acquired assets, a portion of which was placed in money market
investments pending reinvestment into higher-yielding securities and loans.
Interest Expense
The 12.2% increase in interest expense was the result of a $1.1 billion increase in the average balance of
interest-bearing liabilities to $24.3 billion and a 27-basis point increase in the average cost of funds to 3.92%.
Interest-bearing deposits produced interest expense of $425.8 million in 2007, reflecting a year-over-year increase of
$42.5 million, as the average balance rose to $12.3 billion and the average cost rose 30 basis points to 3.47%. CDs
accounted for the bulk of the rise in deposit-driven interest expense, generating 2007 interest expense of $307.8
million, a year-over-year increase of $58.5 million. The latter increase was the result of a $743.3 million rise in the
average balance of CDs to $6.7 billion, and a 41-basis point rise in the average cost of such funds to 4.61%.
The interest expense produced by savings accounts also rose in 2007, to $27.6 million, from $17.9 million in
2006. The increase stemmed from a $36.6 million rise in the average balance of such funds to $2.5 billion and a 37-
basis point rise in the average cost to 1.09%. The increase in interest expense was partly offset by a $25.7 million
reduction in the interest expense produced by NOW and money market accounts to $90.3 million, as the average
balance of such funds declined by $593.8 million and the average cost declined 21 basis points to 3.09%. The higher
average balances of CDs and savings accounts were largely attributable to our three acquisitions, while the reduction
in NOW and money market accounts reflects our efforts to reduce our higher-cost funds over the course of the year.
Non-interest-bearing deposits averaged $1.2 billion in 2007, and were up $82.2 million from the average
balance in 2006.
Interest Rate Spread and Net Interest Margin
The same factors that contributed to the growth of our net interest income in 2007 contributed to the
expansion of our interest rate spread and net interest margin over the course of the year. At 2.13%, our spread was
nine basis points higher than the year-earlier measure; at 2.38%, our margin was up 11 basis points year-over-year.
It should be noted that the level of prepayment penalty income in any given period depends on the volume of
loans that refinance or prepay during that time. Such activity is largely dependent on current market conditions,
including real estate values, the perceived or actual direction of market interest rates, and the contractual repricing
and maturity dates of our multi-family and commercial real estate loans. Accordingly, the level of prepayment
penalty income is unpredictable in nature. While the amount of prepayment penalty income received in 2007
significantly exceeded the amount received in 2006, the level received in 2008 may or may not differ significantly
from the levels received in either of these years.
65
Net Interest Income Analysis
The following table sets forth certain information regarding our average balance sheet for the years indicated, including the average yields on our interest-
earning assets and the average costs of our interest-bearing liabilities. Average yields are calculated by dividing the interest income produced by the average
balance of interest-earning assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities.
The average balances for the year are derived from average balances that are calculated daily. The average yields and costs include fees and premiums and
discounts (including mark-to-market adjustments from acquisitions) that are considered adjustments to such average yields and costs.
(dollars in thousands)
ASSETS:
Interest-earning assets:
Mortgage and other loans, net (1)
Securities(2)(3)
Money market investments
Total interest-earning assets
Non-interest-earning assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Interest-bearing liabilities:
NOW and money market accounts
Savings accounts
Certificates of deposit
Mortgagors’ escrow
Total interest-bearing deposits
Borrowed funds
Total interest-bearing liabilities
Non-interest-bearing deposits
Other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
Net interest income/interest rate spread
Net interest-earning assets/net interest margin
Ratio of interest-earning assets to
interest-bearing liabilities
2007
For the Years Ended December 31,
2006
2005
Average
Balance
Interest
Average
Yield/
Cost
Average
Balance
Interest
Average
Yield/
Cost
Average
Balance
Interest
Average
Yield/
Cost
$19,425,469
5,873,649
594,533
25,893,651
3,754,921
$29,648,572
$ 2,925,648
2,530,191
6,683,162
130,035
12,269,036
11,991,559
24,260,595
1,192,683
279,352
25,732,630
3,915,942
$29,648,572
$1,633,056
$1,217,348
319,566
29,831
1,566,745
6.27% $18,882,661
5,831,048
5.44
27,740
5.02
24,741,449
6.05
3,371,195
$28,112,644
$1,118,467
288,979
1,254
1,408,700
5.92% $15,183,973 $ 857,537
320,777
6,487,566
4.96
704
25,620
4.52
1,179,018
21,697,159
5.69
3,200,970
$24,898,129
$ 90,346
27,588
307,764
126
425,824
524,391
950,215
3.09% $ 3,519,471 $ 116,055
17,856
2,493,592
1.09
249,286
5,939,897
4.61
176
128,591
0.10
383,373
12,081,551
3.47
463,761
11,126,640
4.37
23,208,191
847,134
3.92
1,110,486
251,596
24,570,273
3,542,371
$28,112,644
3.30% $ 3,376,893 $ 73,052
13,349
2,637,639
0.72
116,173
4,250,386
4.20
249
108,971
0.14
202,823
10,373,889
3.17
380,828
10,292,641
4.17
20,666,530
583,651
3.65
738,075
300,130
21,704,735
3,193,394
$24,898,129
$ 616,530
2.13%
2.38%
1.07x
$ 561,566
$1,533,258
$ 595,367
$1,030,629
2.04%
2.27%
1.07x
5.65%
4.94
2.75
5.43
2.16%
0.51
2.73
0.23
1.96
3.70
2.82
2.61%
2.74%
1.05x
(1)
(2)
(3)
Amounts are net of net deferred loan origination costs / (fees) and the allowance for loan losses and include loans held for sale and non-performing loans.
Amounts are at amortized cost.
Includes FHLB-NY stock.
66
Rate/Volume Analysis
The following table presents the extent to which changes in interest rates and changes in the volume of
interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during
the periods indicated. Information is provided in each category with respect to (i) the changes attributable to changes
in volume (changes in volume multiplied by prior rate), (ii) the changes attributable to changes in rate (changes in
rate multiplied by prior volume), and (iii) the net change. The changes attributable to the combined impact of
volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Year Ended
December 31, 2007
Compared to Year Ended
December 31, 2006
Increase/(Decrease)
Due to
Year Ended
December 31, 2006
Compared to Year Ended
December 31, 2005
Increase/(Decrease)
Due to
Volume
Rate
Net
Volume
Rate
Net
$ 32,770
2,126
28,424
63,320
$66,111
28,461
153
94,725
$ 98,881
30,587
28,577
158,045
$217,707
$ 43,223
(32,840)
63
184,930
1,042
487
44,752
$260,930
(31,798)
550
229,682
(18,678)
266
32,901
37,136
2
51,627
$ 11,693
(7,031)
9,466
25,577
23,494
(52)
51,454
$43,271
(25,709)
9,732
58,478
60,630
(50)
103,081
$ 54,964
3,192
(704)
56,603
32,382
58
91,531
$ 93,399
39,811
5,211
76,510
50,551
(131)
171,952
43,003
4,507
133,113
82,933
(73)
263,483
$(127,200 ) $ (33,801)
(in thousands)
INTEREST-EARNING ASSETS:
Mortgage and other loans, net
Securities
Money market investments
Total
INTEREST-BEARING LIABILITIES:
NOW and money market accounts
Savings accounts
Certificates of deposit
Borrowed funds
Mortgagors’ escrow
Total
Change in net interest income
Provision for Loan Losses
The provision for loan losses is based on management’s assessment of the adequacy of the loan loss
allowance. This assessment is made periodically and considers several factors, including the current and historic
performance of the loan portfolio and its inherent risk characteristics; the level of non-performing loans and charge-
offs; local economic conditions; the direction of real estate values; and current trends in regulatory supervision.
The quality of our loan portfolio was consistently solid over the course of 2007. Non-performing loans
represented 0.11% of total loans at December 31, 2007, the same as the year-earlier measure, and non-performing
assets represented 0.07% of total assets, reflecting a year-over-year improvement of one basis point. In addition, the
allowance for loan losses rose $7.4 million to $92.8 million at December 31, 2007, as the transaction-related
additions to our loan loss allowance exceeded the modest level of loans we charged off. In 2007 and 2006, charge-
offs totaled $431,000 and $420,000, each representing 0.002% of average loans.
In view of these facts, and others considered in management’s assessment, no provision for loan losses was
recorded during the twelve months ended December 31, 2007; similarly, no provision for loan losses was recorded
in 2006.
Please see “Critical Accounting Policies” and “Asset Quality” earlier in this report for a detailed discussion of
the factors considered by management in determining the allowance for loan losses, and the quality of our loan
portfolio.
Non-interest Income
The non-interest income we produce stems from several sources, including “fee income” in the form of retail
deposit fees and charges on loans; income from our investment in BOLI; and “other income” derived from such
varied sources as the sale of third-party investment products; the sale of one- to four-family loans on a conduit basis;
and revenues from our wholly-owned subsidiary, Peter B. Cannell & Co., Inc. (“PBC”).
67
In 2007, these ongoing sources of non-interest income reflected an improvement from the levels recorded in
2006. Fee income rose $3.5 million, or 9.1%, to $42.2 million, largely reflecting the acquisition-driven increase in
depository accounts. We also realized a $2.5 million, or 10.6%, increase in BOLI income, the result of an increase in
the underlying cash value of our investment, and the addition of $54.6 million in BOLI through the acquisitions of
PennFed and Synergy. Other income rose 9.1% during this time, to $34.8 million, as an expected decline in joint
venture income was exceeded by increased revenues from the sale of third-party investment products and revenues
produced by PBC.
While these ongoing revenue sources contributed to an increase in non-interest income in 2007, certain other
factors had a more significant impact. Most notably, the sale of our Atlantic Bank headquarters in Manhattan
generated a pre-tax gain of $64.9 million; we also recorded net gains on the sale of securities of $1.9 million during
the year. These contributing factors were largely offset by a $57.0 million pre-tax loss on the other-than-temporary
impairment of securities, recorded in the second quarter, in anticipation of selling those securities in the third quarter
of the year, as previously discussed. The level of non-interest income also reflects a $1.8 million pre-tax loss on debt
redemption, in connection with the early redemption of certain trust preferred securities.
In 2006, the level of non-interest income was reduced by a $313,000 loss on the other-than-temporary
impairment of securities; a $1.9 million loss on debt redemption; and a $6.1 million loss on the mark-to-market of
interest rate swaps. These negative factors were only partly offset by net gains on the sale of securities of $3.0
million.
Reflecting the year-over-year increase in fee income, BOLI income, and other income, and the impact of the
additional factors cited above, we recorded non-interest income of $111.1 million in 2007, signifying a 24.8%
increase from $89.0 million in 2006.
The following table summarizes our sources of non-interest income in 2007, 2006, and 2005, and the year-
over-year changes in 2007 and 2006:
Non-interest Income Analysis
For the Year
For the Year
Ended Dec. 31, % Change Ended Dec. 31, % Change
2007
$ 42,170
26,142
1,888
(1,848)
2006 to 2007
9.07 %
10.64
(37.75)
0.59
2006
$38,662
23,627
3,033
(1,859)
2005 to 2006
18.54 %
4.84
1.13
--
For the Year
Ended Dec. 31,
2005
$32,614
22,536
2,999
--
--
100.00
(6,071)
(56,958)
N/A
(313)
--
--
--
--
64,879
--
--
(100.00)
6,040
14,905
9,539
9.75
32.49
13,581
7,200
22.41
(10.07)
705
2
9,668
34,819
$111,092
1.73
(99.94)
39.49
9.11
24.84 %
693
3,506
6,931
31,911
$88,990
(80.40)
(1.13)
(5.43)
(4.78)
(8.92)%
11,095
8,006
3,536
3,546
7,329
33,512
$97,701
(dollars in thousands)
Fee income
BOLI
Net gain on sale of securities
Loss on debt redemption
Loss on mark-to-market of interest
rate swaps
Loss on other-than-temporary
impairment of securities
Gain on sale of bank-owned
properties
Other income:
Peter B. Cannell
Third-party product sales
Gain on sale of 1-4 family
and other loans
Joint venture income
Other
Total other income
Total non-interest income
Non-interest Expense
Non-interest expense has two primary components: operating expenses, which include compensation and
benefits, occupancy and equipment, and general and administrative (“G&A”) expenses; and the amortization of the
CDI stemming from our business combinations.
68
Largely reflecting our acquisition-driven expansion, operating expenses rose $43.2 million year-over-year to
$299.6 million, the result of a $20.5 million increase in compensation and benefits expense to $159.2 million; an
$11.8 million increase in occupancy and equipment expense to $68.5 million; and a $10.9 million increase in G&A
expense to $71.8 million.
In addition to the acquisition-driven growth of our branch and back-office staff, the rise in compensation and
benefits expense reflects normal salary increases and expenses recorded in connection with certain stock incentive
awards. The increase in 2007 compensation and benefits expense was partly offset by a year-over-year reduction in
the merger-related charge stemming from the allocation of ESOP shares in connection with our bank acquisitions, to
$2.2 million from $5.7 million in 2006.
The increase in occupancy and equipment expense stemmed from the addition of 56 locations to our branch
network, which was only nominally offset by the sale of two in-store branches in Westchester County and the
closure of two traditional branches on Long Island during the year. The increase in G&A expense stemmed from a
variety of sources, including acquisition-related professional fees and marketing costs.
Also included in 2007 G&A expense was a $1.0 million Visa litigation charge relating to our membership
interest in Visa U.S.A., a Visa, Inc. subsidiary. In October 2007, Visa completed a reorganization in contemplation
of its initial public offering, which is expected to occur in 2008. As part of that reorganization, the Community Bank
and the former Synergy Bank, along with many other banks across the nation, received shares of common stock of
Visa, Inc. In accordance with U.S. generally accepted accounting principles (“GAAP”), we have not yet recognized
any value for our common stock ownership interest in Visa, Inc.
Visa claims that all of the Visa U.S.A. member banks are obligated to share with it in losses stemming from
certain litigation against it and certain other named member banks (the “Covered Litigation”). Visa is expected to set
aside a portion of the proceeds from its initial public offering in an escrow account to fund any judgments or
settlements that may arise from the Covered Litigation, and plans to reduce the amount of shares to be allocated to
the Visa U.S.A. member banks by amounts necessary to cover such liability. Nevertheless, Visa member banks were
required to record a liability for the fair value of their related contingent obligation to Visa, based on the percentage
of their membership interest. The Visa litigation charge was established based on our best estimate of the combined
membership interests of the Community Bank and the former Synergy Bank with regard to both settled and pending
litigation in which Visa is involved.
Reflecting the CDI acquired in connection with our PennFed, Doral, and Synergy transactions, the
amortization of CDI rose to $22.8 million in 2007 from $17.9 million in 2006. As previously discussed, the CDI
stemming from each of these transactions is being amortized on an accelerated basis over a period of ten years.
In addition to these ongoing expense items, the level of non-interest expense recorded in 2007 was increased
by a $3.2 million charge for the prepayment of wholesale borrowings. In 2006, the prepayment of wholesale
borrowings generated a charge of $26.5 million; in addition, we recorded a $1.1 million charge for the termination
of certain interest rate swaps in non-interest expense during that year.
As a result of these charges, and the year-over-year increases in operating expenses and CDI amortization,
non-interest expense rose 7.8% year-over-year to $325.5 million in 2007 from $301.8 million in 2006.
69
The following table summarizes the components of non-interest expense in 2007, 2006, and 2005, and the
year-over-year changes in 2007 and 2006:
Non-interest Expense Analysis
For the Year
Ended Dec. 31, % Change
2005 to 2006
For the Year
Ended Dec. 31,
2005
For the Year
Ended Dec. 31,
2007
% Change
2006 to 2007
$159,217
68,543
71,815
299,575
14.79 %
20.81
17.88
16.86
3,190
(87.95)
--
(100.00)
2006
$138,705
56,735
60,922
256,362
26,477
1,132
0.43%
27.84
12.55
8.34
$138,114
44,380
54,127
236,621
--
--
--
--
22,758
$325,523
27.35
7.84 %
17,871
$301,842
52.31
21.54%
11,733
$248,354
(dollars in thousands)
Operating Expenses:
Compensation and benefits
Occupancy and equipment
General and administrative
Total operating expenses
Prepayment of wholesale
borrowings
Termination of interest rate
swaps
Amortization of core deposit
intangibles
Total non-interest expense
Income Tax Expense
Income tax expense includes federal, New York State, and New York City income taxes, as well as non-
material income taxes from other jurisdictions. Income tax expense totaled $123.0 million in 2007, $6.9 million
higher than the year-earlier amount. Although pre-tax income rose $53.4 million year-over-year, to $402.1 million,
the increase was partly tempered by a reduction in the effective tax rate to 30.6% from 33.3% during this time.
The higher effective tax rate in 2006 was, in part, attributable to the non-deductibility of the merger-related
charge that was recorded for the allocation of ESOP shares in connection with the acquisition of Atlantic Bank in
April of that year. While a merger-related charge was also incurred in connection with our PennFed and Synergy
acquisitions in 2007, the amount of the pre-tax charge in 2006 exceeded the 2007 amount by $3.5 million, as
previously discussed under “non-interest expense.” In addition, our 2006 income tax expense included the
establishment of certain deferred tax valuation allowances.
As a result of developments and settlements of IRS and New York tax audits, the Company adjusted its
reserve for unrecognized tax benefits and related interest accrual in 2007. These tax adjustments had an immaterial
impact on the Company’s income tax expense for the year.
In January 2008, the Governor of the State of New York released a budget proposal that included a proposal to
subject to current tax the income earned by a REIT subsidiary controlled directly or indirectly by a banking
corporation, even in situations where the REIT subsidiary is not otherwise doing business in New York or where the
dividends are distributed by the REIT subsidiary to an affiliate that is not doing business in New York. This new law
would replace the 2007 laws enacted to modify the tax treatment of income earned by a New York banking
corporation from its ownership of a controlled REIT subsidiary. If this proposal is enacted as presented, it is
expected to have an immaterial impact on our 2008 income tax expense. However, since the budget proposal
contains a phase-out of certain tax benefits, there could be a greater impact on our income tax expense in future
years (assuming no other changes to our tax attributes or structure). We will continue to evaluate the impact of the
budget proposal and to monitor any changes to the proposed language.
Please see Note 9 to the Consolidated Financial Statements, “Federal, State, and Local Taxes,” within Item 8,
“Financial Statements and Supplementary Data,” for a further discussion of the Company’s income tax expense.
70
RESULTS OF OPERATIONS: 2006 AND 2005 COMPARISON
Earnings Summary
In 2006, we recorded earnings of $232.6 million, or $0.81 per diluted share, as compared to $292.1 million, or
$1.11 per diluted share, in 2005. While the year-over-year reduction was partly attributable to the adverse impact of
the inverted yield curve on the level of net interest income, it also reflected the after-tax charges that were recorded
in non-interest income and non-interest expense, as previously described on page 63 of this report. Collectively,
these after-tax charges reduced our 2006 earnings by $31.0 million, or $0.11 per diluted share.
By comparison, our 2005 earnings were reduced by an after-tax charge of $34.0 million, or $0.13 per diluted
share, recorded in the fourth quarter, for the merger-related allocation of ESOP shares in connection with the
acquisition of Long Island Financial Corp. (“Long Island Financial”).
Our 2006 earnings also reflect the twelve-month benefit of the Long Island Financial acquisition and the
eight-month benefit of the acquisition of Atlantic Bank.
Net Interest Income
In the first six months of 2006, the FOMC raised the federal funds rate four times in 25-basis point increments
to 5.25% and maintained the rate at that level for the remainder of the year. By comparison, the federal funds rate
rose eight times in 2005, in 25-basis point increments, from 2.25% to 4.25%. Furthermore, in 2006, the increase in
intermediate-term rates failed to keep pace with the increase in short-term rates of interest. As a result of the
disparity between the movements in short- and intermediate-term interest rates over the twelve-month period, the
yield curve continued to invert during 2006.
As a result of the inversion, our net interest income declined $33.8 million in 2006 to $561.6 million, the net
effect of a $229.7 million rise in interest income and a $263.5 million rise in interest expense. The decline in 2006
net interest income also reflected a $3.5 million decline in prepayment penalties to $29.5 million and the mark-to-
market adjustments on the interest-earning assets and interest-bearing liabilities acquired in our various business
combinations.
The negative impact of the inverted yield curve in 2006 was partly offset by the twelve-month benefit of the
Long Island Financial transaction and the eight-month benefit of the acquisition of Atlantic Bank. As a result of
these transactions, we increased the concentration of lower-cost and non-interest-bearing deposits within our mix of
funding sources, and utilized the cash flows from the sale of acquired assets to reduce our balance of higher-cost
wholesale funds. While the transactions also contributed to the growth of interest-earning assets, the increase was
primarily fueled by organic loan production, with $5.0 billion of loans produced over the course of 2006.
Interest Income
Interest income rose 19.5% in 2006, to $1.4 billion, driven by a $3.0 billion, or 14.0%, increase in the average
balance of interest-earning assets to $24.7 billion and a 26-basis point increase in the average yield on such assets to
5.69%. The growth of the loan portfolio accounted for most of the increase in the average balance, while the higher
yield was largely due to the replenishment of the loan portfolio with higher-yielding credits, reflecting a rise in
intermediate-term interest rates.
Average loans rose $3.7 billion, or 24.4%, year-over-year to $18.9 billion, accompanied by a 27-basis point
rise in the average yield to 5.92%. As a result, the interest income produced by loans rose $260.9 million in 2006, to
$1.1 billion, offsetting a $31.8 million reduction in the interest income produced by securities. In 2006, securities
generated interest income of $289.0 million, the net effect of a $656.5 million, or 10.1%, reduction in the average
balance to $5.8 billion, and a two-basis point rise in the average yield to 4.96%. The decline in average securities
was consistent with management’s emphasis on lending and the strategic use of cash flows from securities sales and
repayments to fund the growth of the loan portfolio.
71
Interest Expense
Interest expense rose 45.1% in 2006, to $847.1 million, reflecting a $2.5 billion, or 12.3%, rise in the average
balance of interest-bearing liabilities to $23.2 billion and an 83-basis point rise in the average cost of funds to
3.65%. The higher balance was primarily due to our increased use of borrowed funds over the twelve-month period,
the growing popularity of CDs as short-term interest rates increased, and the deposits acquired in the acquisition of
Atlantic Bank. The higher cost reflected the increase in short-term rates of interest, which was triggered by the 100-
basis point rise in the federal funds rate in the first six months of the year.
Borrowed funds generated 2006 interest expense of $463.8 million, an $82.9 million increase from the year-
earlier amount. The increase was the result of an $834.0 million, or 8.1%, rise in the average balance to $11.1 billion
and a 47-basis point rise in the average cost of such funds to 4.17%.
CDs produced 2006 interest expense of $249.3 million, an increase of $133.1 million, as the average balance
rose $1.7 billion to $5.9 billion and the average cost rose 147 basis points to 4.20%. CDs thus accounted for the bulk
of the interest expense produced by interest-bearing deposits, which rose $180.6 million to $383.4 million in 2006.
The latter increase was attributable to a $1.7 billion, or 16.5%, rise in the average balance of interest-bearing
deposits to $12.1 billion, together with a 121-basis point rise in the average cost of such funds to 3.17%.
Core deposits generated 2006 interest expense of $133.9 million, signifying a year-over-year increase of $47.5
million, or 55.0%. The increase was the result of a $370.9 million rise in the average balance to $7.1 billion and a
165-basis point rise in the average cost of such funds to 2.93%. While the average balance of savings accounts fell
$144.0 million to $2.5 billion, the reduction was largely tempered by a $142.6 million rise in the average balance of
NOW and money market accounts to $3.5 billion. Largely reflecting the benefit of our commercial bank
acquisitions, the average balance of non-interest-bearing deposits rose $372.4 million, or 50.5%, to $1.1 billion in
the twelve months ended December 31, 2006.
Interest Rate Spread and Net Interest Margin
The same factors that contributed to the year-over-year decline in our 2006 net interest income contributed to
a reduction in our interest rate spread and net interest margin. At 2.04%, our interest rate spread was 57 basis points
narrower than the 2005 measure, and at 2.27%, our net interest margin was down 47 basis points year-over-year.
Provision for Loan Losses
Reflecting management’s assessment of the adequacy of the loan loss allowance, no provision for loan losses
was recorded during the twelve months ended December 31, 2006 or 2005. The ratio of non-performing loans to
total loans improved from 0.16% to 0.11% over the twelve-month period, as the balance of non-performing loans
declined $6.4 million to $21.2 million at December 31, 2006. While the level of charge-offs rose from $21,000 to
$420,000 during this time, all of the charge-offs recorded consisted of consumer loans and other unsecured credits
that were acquired in our various business combinations.
Notwithstanding the absence of any provisions, the allowance for loan losses rose $5.7 million year-over-year
to $85.4 million, the net effect of the aforementioned charge-offs and the $6.1 million loan loss allowance acquired
in the transaction with Atlantic Bank. At December 31, 2006 and 2005, the allowance for loan losses represented
0.43% and 0.47% of total loans and 402.72% and 289.17% of non-performing loans, respectively.
Non-interest Income
In 2006, we recorded non-interest income of $89.0 million, as compared to $97.7 million in 2005. The 2006
amount was reduced by the $1.9 million loss on debt redemption, the $6.1 million loss on the mark-to-market of
interest rate swaps, and the $313,000 loss on the other-than-temporary impairment of securities that were previously
discussed. These reductions were partly offset by a $6.0 million rise in fee income to $38.7 million and a $1.1
million rise in BOLI income to $23.6 million, which also tempered the impact of a $1.6 million decline in other
income to $31.9 million. While revenues from PBC rose $2.5 million year-over-year, to $13.6 million, the increase
was offset by reductions in income from the sale of third-party investment products and one- to four-family loans.
Included in other income in each of 2005 and 2006 was $3.5 million produced by our real estate joint venture, which
was completed in the fourth quarter of 2006.
72
Non-interest Expense
Non-interest expense totaled $301.8 million in 2006 and $248.4 million in 2005. Included in the 2006 amount
were operating expenses of $256.4 million, including the $3.1 million charge recorded in connection with the
retirements of our chairman and senior lending consultant and the $5.7 million charge recorded for the allocation of
ESOP shares pursuant to the acquisition of Atlantic Bank, both of which were included in fourth quarter 2006
compensation and benefits expense. Included in 2005 non-interest expense were operating expenses of $236.6
million, including a $36.6 million pre-tax charge recorded for the allocation of ESOP shares pursuant to the
acquisition of Long Island Financial, which was reflected in our fourth quarter 2005 compensation and benefits
expense.
The level of non-interest expense recorded in 2006 was boosted by the $26.5 million charge for the
prepayment of wholesale borrowings and the $1.1 million charge for the termination of our interest rate swap
agreements in connection with the repositioning of our balance sheet following the acquisition of Atlantic Bank. In
addition, the year-over-year increase in non-interest expense was due to the twelve-month impact of the Long Island
Financial transaction and the eight-month impact of the acquisition of Atlantic Bank. The related increases in staff
and the addition of 29 branch locations accounted for a significant portion of the increase in operating expenses,
while the CDI acquired in the two transactions resulted in a $6.1 million increase in CDI amortization to $17.9
million.
Income Tax Expense
In 2006, we recorded income tax expense of $116.1 million, signifying a $36.5 million reduction from the
amount recorded in 2005. The year-over-year reduction was attributable to a $96.0 million decline in pre-tax income
to $348.7 million and a decline in the effective tax rate from 34.32% to 33.30%. The higher effective tax rate in
2005 was largely attributable to the non-deductibility of the merger-related charge recorded for the allocation of
ESOP shares in connection with the acquisition of Long Island Financial, which exceeded the merger-related ESOP
charge recorded in connection with the acquisition of Atlantic Bank by $30.8 million.
QUARTERLY FINANCIAL DATA
The following table sets forth selected unaudited quarterly financial data for the years ended December 31,
2007 and 2006:
(in thousands, except per share data)
Net interest income
Provision for loan losses
Non-interest income (loss)
Non-interest expense
Income before income taxes
Income tax expense
Net income
Basic earnings per share
Diluted earnings per share
4th
$154,408
--
26,498
87,913
92,993
25,613
$ 67,380
$0.21
$0.21
2007
3rd(1)
$154,852
--
84,442
78,655
160,639
49,730
$110,909
$0.36
$0.35
2nd(2)
$161,082
--
(23,929)
84,608
52,545
16,571
$ 35,974
$0.12
$0.12
1st
$146,188
--
24,081
74,347
95,922
31,103
$ 64,819
$0.22
$0.22
2006
2nd(3)
$144,016
--
23,659
93,192
74,483
23,871
4th
$140,805
--
22,688
78,548
84,945
31,824
3rd
$139,847
--
23,467
71,477
91,837
29,360
1st
$136,898
--
19,176
58,625
97,449
31,074
$ 53,121 $ 62,477 $ 50,612 $ 66,375
$0.25
$0.25
$0.18
$0.18
$0.21
$0.21
$0.18
$0.18
(1)
(2)
(3)
Includes a pre-tax gain of $64.9 million on the sale of bank-owned property that was recorded in non-interest income and was equivalent
to $44.8 million, or $0.14 per diluted share, after-tax.
Includes a pre-tax loss of $57.0 million on the other-than-temporary impairment of securities and a $1.8 million loss on debt redemption,
which were recorded in non-interest income, and a charge of $3.2 million for the prepayment of wholesale borrowings, which was
recorded in non-interest expense. The collective charges were equivalent to $42.1 million, or $0.13 per diluted share, after-tax.
Includes a pre-tax charge of $26.5 million for the prepayment of wholesale borrowings and a pre-tax charge of $1.1 million for the
termination of interest rate swaps, both recorded in non-interest expense, which collectively were equivalent to $18.8 million, or $0.07
per diluted share, after-tax.
73
IMPACT OF INFLATION
The Consolidated Financial Statements and notes thereto presented in this report have been prepared in
accordance with GAAP, which require that we measure our financial condition and operating results in terms of
historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, nearly all of
a bank’s assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our
performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same
direction, or to the same extent, as the prices of goods and services.
IMPACT OF ACCOUNTING PRONOUNCEMENTS
Please refer to Note 2 to the Consolidated Financial Statements, “Summary of Significant Accounting
Policies,” in Item 8, “Financial Statements and Supplementary Data,” for a discussion of the impact of recent
accounting pronouncements on our financial condition and results of operations.
74
RECONCILIATION OF STOCKHOLDERS’ EQUITY AND TANGIBLE STOCKHOLDERS’ EQUITY,
TOTAL ASSETS AND TANGIBLE ASSETS, AND THE RELATED MEASURES
Although tangible stockholders’ equity, adjusted tangible stockholders’ equity, tangible assets, and adjusted
tangible assets are not measures that are calculated in accordance with GAAP, our management uses these non-
GAAP measures in its analysis of our performance. We believe that these non-GAAP measures are important
indications of our ability to grow both organically and through business combinations and, with respect to tangible
stockholders’ equity and adjusted tangible stockholders’ equity, our ability to pay dividends and to engage in various
capital management strategies.
We calculate tangible stockholders’ equity by subtracting from stockholders’ equity the sum of our goodwill
and CDI, and calculate tangible assets by subtracting the same sum from our total assets. To calculate our ratio of
tangible stockholders’ equity to tangible assets, we divide our tangible stockholders’ equity by our tangible assets,
both of which include after-tax net unrealized losses on securities. We also calculate our ratio of tangible
stockholders’ equity to tangible assets excluding our after-tax net unrealized losses on securities, as such losses are
impacted by changes in market interest rates and therefore tend to change from day to day. This ratio is referred to
below and earlier in this report as the ratio of “adjusted tangible stockholders’ equity to adjusted tangible assets.”
Neither tangible stockholders’ equity, adjusted tangible stockholders’ equity, tangible assets, adjusted tangible
assets, nor the related tangible capital measures should be considered in isolation or as a substitute for stockholders’
equity or any other capital measure prepared in accordance with GAAP. Moreover, the manner in which we
calculate these non-GAAP capital measures may differ from that of other companies reporting measures of capital
with similar names.
Reconciliations of our stockholders’ equity, tangible stockholders’ equity, and adjusted tangible stockholders’
equity; our total assets, tangible assets, and adjusted tangible assets; and the related measures at December 31, 2007
and 2006 follow:
(dollars in thousands)
Total stockholders’ equity
Less: Goodwill
Core deposit intangibles
Tangible stockholders’ equity
Total assets
Less: Goodwill
Core deposit intangibles
Tangible assets
December 31,
2007
$ 4,182,313
(2,437,404)
(111,123)
$ 1,633,786
$30,579,822
(2,437,404)
(111,123)
$28,031,295
2006
$ 3,689,837
(2,148,108)
(106,381)
$ 1,435,348
$28,482,370
(2,148,108)
(106,381)
$26,227,881
Stockholders’ equity to total assets
13.68%
12.95%
Tangible stockholders’ equity to tangible assets
5.83%
5.47%
Tangible stockholders’ equity
Add back: After-tax net unrealized losses on securities
Adjusted tangible stockholders’ equity
Tangible assets
Add back: After-tax net unrealized losses on securities
Adjusted tangible assets
Adjusted tangible stockholders’ equity to adjusted
tangible assets
$1,633,786
14,836
$1,648,622
$28,031,295
14,836
$28,046,131
$1,435,348
52,125
$1,487,473
$26,227,881
52,125
$26,280,006
5.88%
5.66%
75
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We manage our assets and liabilities to reduce our exposure to changes in market interest rates. The asset and
liability management process has three primary objectives: to evaluate the interest rate risk inherent in certain
balance sheet accounts; to determine the appropriate level of risk, given our business strategy, operating
environment, capital and liquidity requirements, and performance objectives; and to manage that risk in a manner
consistent with guidelines approved by the Boards of Directors of the Company, the Community Bank, and the
Commercial Bank.
Market Risk
As a financial institution, we are focused on reducing our exposure to interest rate volatility, which represents
our primary market risk. Changes in market interest rates represent the greatest challenge to our financial
performance, as such changes can have a significant impact on the level of income and expense recorded on a large
portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning
assets, other than those possessing a short term to maturity. To reduce our exposure to changing rates, the Board of
Directors and management monitor interest rate sensitivity on a regular or as needed basis so that adjustments in the
asset and liability mix can be made when deemed appropriate.
The actual duration of mortgage loans and mortgage-related securities can be significantly impacted by
changes in prepayment levels and market interest rates. The level of prepayments may be impacted by a variety of
factors, including the economy in the region where the underlying mortgages were originated; seasonal factors;
demographic variables; and the assumability of the underlying mortgages. However, the largest determinants of
prepayments are market interest rates and the availability of refinancing opportunities.
To manage our interest rate risk in 2007, we continued to pursue the core components of our business model:
(1) We continued to place an emphasis on the origination and retention of intermediate-term assets, primarily in the
form of multi-family and commercial real estate loans; (2) We continued to utilize the cash flows from securities
sales and repayments to fund the production of, or investment in, higher-yielding assets and also used such funds to
reduce our higher-cost liabilities; (3) We utilized wholesale borrowings when they presented an attractive alternative
to retail funding, and repositioned or prepaid our higher-cost wholesale borrowings to reduce the interest rate; and
(4) We completed three acquisitions during the year and used the proceeds from the sale of certain acquired assets to
reduce our higher-cost funding, while benefiting from the infusion of deposits.
Interest Rate Sensitivity Analysis
The matching of assets and liabilities may be analyzed by examining the extent to which such assets and
liabilities are “interest rate sensitive” and by monitoring a bank’s interest rate sensitivity “gap.” An asset or liability
is said to be interest rate sensitive within a specific time frame if it will mature or reprice within that period of time.
The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time frame and the amount of interest-bearing liabilities maturing or repricing within
that same period of time. In a rising interest rate environment, an institution with a negative gap would generally be
expected, absent the effects of other factors, to experience a greater increase in the cost of its interest-bearing
liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest income.
Conversely, in a declining rate environment, an institution with a negative gap would generally be expected to
experience a lesser reduction in the yield on its interest-earning assets than it would in the cost of its interest-bearing
liabilities, thus producing an increase in its net interest income.
In a rising interest rate environment, an institution with a positive gap would generally be expected to
experience a greater increase in the yield on its interest-earning assets than it would in the cost of its interest-bearing
liabilities, thus producing an increase in its net interest income. Conversely, in a declining rate environment, an
institution with a positive gap would generally be expected to experience a lesser reduction in the cost of its interest-
bearing liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest
income.
At December 31, 2007, our one-year gap was a positive 3.37%, as compared to a negative 11.66% at
December 31, 2006. The movement of our one-year gap was largely attributable to the extension of our wholesale
borrowings to terms greater than one year. At December 31, 2007, 20.3% of our borrowed funds were expected to
76
mature or be called within one year, as compared to 49.9% at December 31, 2006. To a lesser extent, the movement
in our one-year gap reflects the shortened maturity of our portfolio of other securities, as market interest rates
declined over the course of the year.
The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding
at December 31, 2007 which, based on certain assumptions stemming from our historical experience, are expected to
reprice or mature in each of the future time periods shown. Except as stated below, the amounts of assets and
liabilities shown as repricing or maturing during a particular time period were determined in accordance with the
earlier of (1) the term to repricing, or (2) the contractual terms of the asset or liability. The table provides an
approximation of the projected repricing of assets and liabilities at December 31, 2007 on the basis of contractual
maturities, anticipated prepayments (including anticipated calls on wholesale borrowings), and scheduled rate
adjustments within a three-month period and subsequent selected time intervals. For loans and mortgage-related
securities, prepayment rates were assumed to range up to 18% annually. Savings accounts, Super NOW accounts,
and NOW accounts were assumed to decay at an annual rate of 5% for the first five years and 15% for the years
thereafter. With the exception of those accounts having specified repricing dates, money market accounts were
assumed to decay at an annual rate of 20% for the first five years and 50% in the years thereafter.
Prepayment and deposit decay rates can have a significant impact on our estimated gap. While we believe our
assumptions to be reasonable, there can be no assurance that the assumed prepayment and decay rates noted above
will approximate actual future loan prepayments and deposit withdrawal activity.
77
Interest Rate Sensitivity Analysis
(dollars in thousands)
INTEREST-EARNING ASSETS:
Mortgage and other loans(1)
Mortgage-related securities(2)(3)
Other securities(2)
Money market investments
Total interest-earning assets
INTEREST-BEARING LIABILITIES:
Savings accounts
NOW and Super NOW accounts
Money market accounts
Certificates of deposit
Borrowed funds
Total interest-bearing liabilities
Interest rate sensitivity gap per period(4)
Cumulative interest sensitivity gap
Cumulative interest sensitivity gap
as a percentage of total assets
Cumulative net interest-earning assets as a
percentage of net interest-bearing
liabilities
Three
Months
or Less
Four to
Twelve
Months
More Than More Than
Three Years
One Year to
to Five Years
Three Years
More Than
Five Years
to 10 Years
More
Than
10 Years
Total
At December 31, 2007
$3,577,641
220,407
1,832,898
52,122
5,683,068
$3,887,083
370,671
223,550
--
4,481,304
$7,593,204
683,032
143,625
--
8,419,861
31,427
8,401
89,234
2,765,217
1,808,569
4,702,848
$ 980,220
$980,220
94,282
25,203
267,703
3,226,894
816,517
4,430,599
$ 50,705
$1,030,925
232,877
62,251
513,989
665,440
775,083
2,249,640
$6,170,221
$7,201,146
$4,389,658
555,947
143,000
--
5,088,605
210,171
56,181
328,953
168,935
1,064,230
1,828,470
$3,260,135
$10,461,281
$ 781,967
1,040,136
265,318
--
2,087,421
$ 111,503
582,614
105,772
--
799,889
$20,341,056
3,452,807
2,714,163
52,122
26,560,148
1,082,233
289,293
566,530
86,550
7,963,529
9,988,135
2,514,189
863,199
672,072
230,743
1,784,684
18,275
6,913,036
--
12,915,672
487,744
24,799,653
1,599,961
$(7,900,714) $ (800,072) $ 1,760,495
$1,760,495
$2,560,567
3.21%
3.37%
23.55%
34.21%
8.37%
5.76%
120.84
111.29
163.26
179.18
111.04
107.10
(1)
For the purpose of the gap analysis, non-performing loans and the allowance for loan losses have been excluded.
(2) Mortgage-related and other securities, including FHLB-NY stock, are shown at their respective carrying values.
(3)
(4)
Expected amount based, in part, on historical experience.
The interest rate sensitivity gap per period represents the difference between interest-earning assets and interest-bearing liabilities.
78
Certain shortcomings are inherent in the method of analysis presented in the preceding Interest Rate
Sensitivity Analysis. For example, although certain assets and liabilities may have similar maturities or periods to
repricing, they may react in varying degrees to changes in market interest rates. The interest rates on certain types of
assets and liabilities may fluctuate in advance of the market, while interest rates on other types may lag behind
changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict
changes in interest rates both on a short-term basis and over the life of the asset. Furthermore, in the event of a
change in interest rates, prepayment and early withdrawal levels would likely deviate from those assumed in
calculating the table. Finally, the ability of some borrowers to repay their adjustable-rate loans may be adversely
impacted by an increase in market interest rates.
Net Portfolio Value
Interest rate sensitivity is also monitored through the use of a model that generates estimates of the change in
our net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is defined as the net present value of
expected cash flows from assets, liabilities, and off-balance-sheet contracts. The NPV ratio, under any interest rate
scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The
model assumes estimated loan prepayment rates, reinvestment rates, and deposit decay rates similar to those utilized
in formulating the preceding Interest Rate Sensitivity Analysis.
The following table sets forth our NPV as of December 31, 2007:
(dollars in thousands)
Change in
Interest Rates
(in basis points)
-200
-100
--
+100
+200
Market Value
of Assets
$32,057,150
31,732,162
31,313,844
30,800,704
30,229,257
Market Value
of Liabilities
$28,522,731
27,706,860
27,061,616
26,568,028
26,216,381
Net Portfolio
Value
$3,534,419
4,025,302
4,252,228
4,232,676
4,012,876
Net Change
$(717,809)
(226,926)
--
(19,552)
(239,352)
Portfolio Market
Value Projected
% Change
to Base
(16.88)%
(5.34)
--
(0.46)
(5.63)
The net changes in NPV presented in the preceding table are within the parameters approved by the Boards of
Directors of the Company and the Banks.
As with the Interest Rate Sensitivity Analysis, certain shortcomings are inherent in the methodology used in
the preceding interest rate risk measurements. Modeling changes in NPV requires that certain assumptions be made
which may or may not reflect the manner in which actual yields and costs respond to changes in market interest
rates. In this regard, the NPV Analysis presented above assumes that the composition of our interest rate sensitive
assets and liabilities existing at the beginning of a period remains constant over the period being measured, and also
assumes that a particular change in interest rates is reflected uniformly across the yield curve, regardless of the
duration to maturity or repricing of specific assets and liabilities. Furthermore, the model does not take into account
the benefit of any strategic actions we may take to further reduce our exposure to interest rate risk. Accordingly,
while the NPV Analysis provides an indication of our interest rate risk exposure at a particular point in time, such
measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest
rates on our net interest income, and may very well differ from actual results.
Net Interest Income Simulation
In addition to the analyses of gap and NPV, we utilize an internal net interest income simulation to manage
our sensitivity to interest rate risk. The simulation incorporates various market-based assumptions regarding the
impact of changing interest rates on our future levels of financial assets and liabilities. The assumptions used in this
simulation are inherently uncertain. Actual results may differ significantly from those presented in the table that
follows, due to several factors, including the frequency, timing, and magnitude of changes in interest rates; changes
in spreads between maturity and repricing categories; and prepayments, coupled with any actions taken to counter
the effects of any such changes.
79
Based on the information and assumptions in effect at December 31, 2007, the following table sets forth the
estimated percentage change in future net interest income for the next twelve months, assuming a gradual increase
or decrease in interest rates during such time:
Change in Interest Rates
(in basis points)(1)
+200 over one year
+100 over one year
-100 over one year
-200 over one year
Estimated Percentage Change in
Future Net Interest Income
(1.33)%
0.82
(1.13)
(3.51)
(1)
In general, short- and long-term rates are assumed to increase or decrease in parallel fashion across all four quarters and
then remain unchanged.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and notes thereto and other supplementary data begin on page 81.
80
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
New York Community Bancorp, Inc:
We have audited the accompanying consolidated statements of condition of New York Community Bancorp, Inc.
and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of
income and comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the
three-year period ended December 31, 2007. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of New York Community Bancorp, Inc. and subsidiaries as of December 31, 2007 and 2006, and
the results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2007, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of December 31, 2007, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated February 29, 2008 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
New York, New York
February 29, 2008
81
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
New York Community Bancorp, Inc.:
We have audited the internal control over financial reporting of New York Community Bancorp, Inc. and
subsidiaries (the “Company”) as of December 31, 2007, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated statements of condition of the Company as of December 31, 2007 and 2006, and the related
consolidated statements of income and comprehensive income, changes in stockholders’ equity and cash flows for
each of the years in the three-year period ended December 31, 2007, and our report dated February 29, 2008
expressed an unqualified opinion on those consolidated financial statements.
New York, New York
February 29, 2008
82
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except share data)
ASSETS:
Cash and cash equivalents
Securities available for sale:
December 31,
2007
2006
$ 335,743
$ 230,759
Mortgage-related securities ($944,225 and $1,592,064 pledged, respectively)
Other securities ($140,032 and $102,067 pledged, respectively)
973,324
407,932
1,664,337
276,450
Securities held to maturity:
Mortgage-related securities ($2,414,157 and $1,374,806 pledged, respectively)
(fair value of $2,432,987 and $1,272,546, respectively)
Other securities ($1,477,966 and $1,155,070 pledged, respectively)
(fair value of $1,891,207 and $1,593,023, respectively)
Total securities
Loans, net of deferred loan fees and costs
Less: Allowance for loan losses
Loans, net
Federal Home Loan Bank of New York stock, at cost
Premises and equipment, net
Goodwill
Core deposit intangibles, net
Bank-owned life insurance (“BOLI”)
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Deposits:
NOW and money market accounts
Savings accounts
Certificates of deposit
Non-interest-bearing accounts
Total deposits
Official checks outstanding
Borrowed funds:
Federal Home Loan Bank of New York advances
Repurchase agreements
Federal funds purchased
Junior subordinated debentures
Other borrowings
Total borrowed funds
Mortgagors’ escrow
Other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock at par $0.01 (5,000,000 shares authorized; none issued)
Common stock at par $0.01 (600,000,000 shares authorized; 323,812,639 and
295,350,936 shares issued and outstanding)
Paid-in capital in excess of par
Retained earnings (partially restricted)
Less: Unallocated common stock held by Employee Stock Ownership Plan (“ESOP”)
Common stock held by Supplemental Executive Retirement Plan (“SERP”)
Accumulated other comprehensive loss, net of tax
Total stockholders’ equity
Commitments and contingencies
Total liabilities and stockholders’ equity
See accompanying notes to the consolidated financial statements.
83
2,479,483
1,387,817
1,883,162
5,743,901
20,363,248
(92,794)
20,270,454
423,069
214,906
2,437,404
111,123
664,431
378,791
$30,579,822
1,597,380
4,925,984
19,652,891
(85,389)
19,567,502
404,311
196,084
2,148,108
106,381
585,013
318,228
$28,482,370
$ 2,456,756
2,514,189
6,913,036
1,273,352
13,157,333
18,749
$ 3,156,988
2,394,145
5,944,585
1,123,286
12,619,004
20,158
7,782,390
4,411,220
--
484,843
237,219
12,915,672
78,468
227,287
26,397,509
7,240,684
3,767,649
62,000
455,659
354,016
11,880,008
74,736
198,627
24,792,533
--
--
3,238
3,815,831
390,757
(3,085)
(3,113)
(21,315)
4,182,313
2,954
3,341,340
421,313
(4,604)
(3,113)
(68,053)
3,689,837
$30,579,822
$28,482,370
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years Ended December 31,
2006
2007
2005
$1,217,348
319,566
29,831
1,566,745
$1,118,467
288,979
1,254
1,408,700
$ 857,537
320,777
704
1,179,018
90,346
27,588
307,764
524,391
126
950,215
616,530
--
616,530
42,170
26,142
1,888
64,879
(1,848)
(56,958)
--
34,819
111,092
116,055
17,856
249,286
463,761
176
847,134
561,566
--
561,566
38,662
23,627
3,033
--
(1,859)
(313)
(6,071)
31,911
88,990
73,052
13,349
116,173
380,828
249
583,651
595,367
--
595,367
32,614
22,536
2,999
6,040
--
--
--
33,512
97,701
159,217
68,543
71,815
299,575
3,190
--
22,758
325,523
402,099
123,017
$ 279,082
138,705
56,735
60,922
256,362
26,477
1,132
17,871
301,842
348,714
116,129
$ 232,585
138,114
44,380
54,127
236,621
--
--
11,733
248,354
444,714
152,629
$ 292,085
37,289
9,449
$ 325,820
3,732
--
$ 236,317
(15,160)
--
$ 276,925
$0.90
$0.90
$0.82
$0.81
$1.12
$1.11
(in thousands, except per share data)
INTEREST INCOME:
Mortgage and other loans
Securities
Money market investments
Total interest income
INTEREST EXPENSE:
NOW and money market accounts
Savings accounts
Certificates of deposit
Borrowed funds
Mortgagors’ escrow
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
NON-INTEREST INCOME:
Fee income
Bank-owned life insurance
Net gain on sale of securities
Gain on sale of bank-owned properties
Loss on debt redemption
Loss on other-than-temporary impairment of securities
Loss on mark-to-market of interest rate swaps
Other
Total non-interest income
NON-INTEREST EXPENSE:
Operating expenses:
Compensation and benefits
Occupancy and equipment
General and administrative
Total operating expenses
Prepayment of wholesale borrowings
Termination of interest rate swaps
Amortization of core deposit intangibles
Total non-interest expense
Income before income taxes
Income tax expense
Net income
Other comprehensive income (loss), net of tax:
Change in net unrealized losses on securities
Change in pension and post-retirement obligations
Total comprehensive income, net of tax
Basic earnings per share
Diluted earnings per share
See accompanying notes to the consolidated financial statements.
84
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
COMMON STOCK (Par Value: $0.01):
Balance at beginning of year
Shares issued (28,461,703; 21,954,484; and 0, respectively)
Balance at end of year
PAID-IN CAPITAL IN EXCESS OF PAR:
Balance at beginning of year
Allocation of ESOP stock
Restricted stock activity
Exercise of stock options
Tax effect of stock plans
Issuance of common stock for business combinations
Issuance of common stock in secondary offering
Shares issued
Cash-in-lieu of fractional shares
Balance at end of year
RETAINED EARNINGS (partially restricted):
Balance at beginning of year
Net income
Dividends paid on common stock ($1.00 per share each year)
Effect of adoption of Financial Accounting Standards Board
Interpretation No. 48 (“FIN 48”)
Exercise of stock options
Balance at end of year
TREASURY STOCK:
Years Ended December 31,
2006
2005
2007
$ 2,954
284
3,238
$ 2,734 $ 2,734
--
2,734
220
2,954
3,341,340
7,082
3,644
62,837
(2,139)
403,074
--
--
(7)
3,815,831
3,012,655
9,739
43
4,705
105
--
314,093
--
--
3,341,340
3,013,241
35,872
--
--
2,044
--
--
(38,502)
--
3,012,655
421,313
279,082
(310,205)
475,501
232,585
(286,773)
567
--
390,757
--
--
421,313
452,134
292,085
(261,063)
--
(7,655)
475,501
(223,230)
(1,158)
--
104,599
19,620
--
(100,169)
Balance at beginning of year
Purchase of common stock (9,424; 143,592; and 63,203 shares, respectively)
Shares issued in secondary offering (2,786,498 shares)
Shares issued to effect business combination (3,600,752 shares)
Exercise of stock options (9,424; 976,755; and 1,048,607 shares, respectively)
Cash-in-lieu of fractional shares
Balance at end of year
--
(168)
--
--
168
--
--
(100,169)
(2,415)
85,806
--
16,780
(2)
--
UNALLOCATED COMMON STOCK HELD BY ESOP:
Balance at beginning of year
Earned portion of ESOP
Balance at end of year
COMMON STOCK HELD BY SERP:
Balance at beginning and end of year
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX:
Balance at beginning of year
Pension and post-retirement obligations, net of tax of $10,697, from the
adoption of SFAS No. 158
Other comprehensive income (loss), net of tax:
(4,604)
1,519
(3,085)
(6,874)
2,270
(4,604)
(14,655)
7,781
(6,874)
(3,113)
(3,113)
(3,113)
(68,053)
(55,857)
(40,697)
--
(15,928)
--
Change in net unrealized loss on securities available for sale, net of tax of
$(1,164); $(1,609); and $14,035, respectively
1,786
2,430
(21,115)
Amortization of net unrealized loss on securities transferred from
available for sale to held to maturity, net of tax of $(1,403); $(2,070);
and $(5,095), respectively
Change in pension and post-retirement obligations, net of tax of $(6,148)
Less: Reclassification adjustment for net gain on sale of securities and
2,160
9,449
3,127
--
7,756
--
loss on other-than-temporary impairment of securities, net of tax of
$(21,727); $1,208; and $1,198, respectively
Other comprehensive income (loss), net of tax
Balance at end of year
Total stockholders’ equity
33,343
46,738
(21,315)
(1,825)
3,732
(68,053)
$4,182,313 $3,689,837
(1,801)
(15,160)
(55,857)
$3,324,877
See accompanying notes to the consolidated financial statements.
85
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Years Ended December 31,
2006
2007
2005
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$ 279,082 $ 232,585 $ 292,085
Depreciation and amortization
Accretion of discounts, net of premium amortization
Net change in net deferred loan origination costs and fees
Amortization of core deposit intangibles
Net gain on sale of securities
Net gain on sale of loans
Gain on sale of bank-owned properties
Tax effect of stock plans
Stock plan-related compensation
Loss on other-than-temporary impairment of securities
Changes in assets and liabilities:
Decrease in deferred income taxes, net
(Increase) decrease in other assets
(Decrease) increase in official checks outstanding
(Decrease) in other liabilities
Originations of loans held for sale
Proceeds from sales of loans originated for sale
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayments of securities held to maturity
Proceeds from repayments of securities available for sale
Proceeds from sale of securities available for sale
Purchase of securities held to maturity
Purchase of securities available for sale
Net redemption (purchase) of Federal Home Loan Bank of New York stock
Adjustments to intangible assets, net
Net decrease (increase) in loans, net
Purchase of loans
Proceeds from sale of loans
Net proceeds from sale of bank-owned properties
Purchase of premises and equipment, net
Net cash acquired in (used for) business acquisitions
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits
Net increase in borrowed funds
Net (decrease) increase in mortgagors’ escrow
Tax effect of stock plans
Cash dividends paid on common stock
Treasury stock purchases
Net cash received from stock option exercises
Proceeds from common shares issued in secondary offering, net
Proceeds from issuance of treasury shares
Cash-in-lieu of fractional shares
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental information:
Cash paid for interest
Cash paid for (received from) income taxes
Non-cash investing activities:
18,989
(3,477)
1,585
22,758
(1,888)
(705)
(64,879)
--
12,252
56,958
32,904
(38,698)
(1,409)
(13,863)
(66,181)
62,792
296,220
15,463
(2,929)
(55)
17,871
(3,033)
(693)
--
--
12,052
313
53,278
40,781
(33,037)
(41,468)
(60,152)
59,701
290,677
13,374
(15,910)
(38)
11,733
(2,999)
(3,536)
(6,040)
2,044
43,653
--
69,266
63,192
19,187
(31,812)
(96,219)
93,984
451,964
637,596
296,345
2,115,530
(2,010,035)
(517,954)
18,692
--
582,909
(180,465)
823,065
99,608
(8,803)
159,172
2,015,660
278,974
516,601
1,245,014
--
(195,577)
(61,487)
(553)
(1,414,958)
--
--
--
(11,524)
(325,765)
30,725
742,201
417,584
518,264
--
(6,373)
(94,413)
13,112
(3,545,332)
--
173,463
7,937
(2,376)
23,742
(1,752,191)
(2,020,041)
92,499
(10,899)
(2,139)
(310,205)
(168)
44,064
--
--
(7)
(2,206,896)
104,984
230,759
1,278,299
306,641
8,496
--
(261,063)
(1,158)
11,965
--
--
--
1,343,180
42,953
188,850
$ 335,743 $ 230,759 $ 231,803
(1,282,572)
834,639
270
105
(286,773)
(2,415)
14,183
314,313
85,806
(2)
(322,446)
(1,044)
231,803
$984,340
98,100
$878,048
14,018
$670,601
(23,476)
Mortgage loans securitized and transferred to mortgage-related securities available
for sale
Transfers to other real estate owned from loans
$593,816
706
$ --
47
$ --
1,019
Note: The fair values of non-cash assets acquired, excluding goodwill and core deposit intangibles, and of liabilities assumed in the acquisition of PennFed Financial Services, Inc. on April 2,
2007 were $2.2 billion and $2.2 billion, respectively. The fair values of non-cash assets acquired, excluding goodwill and core deposit intangibles, and of liabilities assumed in the acquisition of
Synergy Financial Group, Inc. on October 1, 2007, were $868.2 million and $821.0 million, respectively. The fair values of non-cash assets acquired, excluding goodwill and core deposit
intangibles, and of liabilities assumed in the Doral Bank, FSB transaction on July 26, 2007 were $375.3 million and $504.4 million, respectively. The fair values of non-cash assets acquired,
excluding goodwill and core deposit intangibles, and of liabilities assumed in the acquisition of Atlantic Bank of New York on April 28, 2006 were $2.5 billion and $2.4 billion, respectively. The
fair values of non-cash assets acquired, excluding goodwill and core deposit intangibles, and of liabilities assumed in the acquisition of Long Island Financial Corp. on December 30, 2005 were
$513.3 million and $524.0 million, respectively.
See accompanying notes to the consolidated financial statements.
86
NOTE 1: ORGANIZATION
Formerly known as Queens County Bancorp, Inc., New York Community Bancorp, Inc. (on a stand-alone
basis, the “Parent Company” or, collectively with its subsidiaries, the “Company”) was organized under Delaware
law on July 20, 1993 and is the holding company for New York Community Bank and New York Commercial Bank
(hereinafter referred to as the “Community Bank” and the “Commercial Bank,” respectively, and collectively as the
“Banks”). In addition, for the purpose of these Consolidated Financial Statements, the “Community Bank” and the
“Commercial Bank” refer not only to the respective banks but also to their respective subsidiaries.
The Community Bank is the primary banking subsidiary of the Company. Founded in 1859 and formerly
known as Queens County Savings Bank, the Community Bank converted from a state-chartered mutual savings
bank to the capital stock form of ownership on November 23, 1993, at which date the Company issued its initial
offering of common stock (par value: $0.01 per share) at a price of $25.00 per share. The Commercial Bank was
established on December 30, 2005.
Reflecting nine stock splits, the Company’s initial offering price adjusts to $0.93 per share. All share and per
share data presented in this report have been adjusted to reflect the impact of the stock splits.
The Company changed its name to New York Community Bancorp, Inc. in November 2000 in anticipation of
completing the first of eight business combinations that have expanded its footprint well beyond Queens County to
encompass all five boroughs of New York City, Long Island, and Westchester County in New York, and Essex,
Hudson, Mercer, Middlesex, Monmouth, Ocean, and Union counties in New Jersey.
Reflecting this strategy of growing through acquisitions, the Community Bank currently operates 179
branches through ten local divisions: Queens County Savings Bank, Roslyn Savings Bank, Richmond County
Savings Bank, Roosevelt Savings Bank, CFS Bank, First Savings Bank of New Jersey, Ironbound Bank, Penn
Federal Savings Bank, Synergy Bank, and Garden State Community Bank. In March 2008, the First Savings Bank
of New Jersey, Ironbound Bank, and Penn Federal Savings Bank divisions will be consolidated into the Garden
State Community Bank division. In addition, the three branches of the CFS Bank division will commence operations
under the name New York Community Bank.
The Commercial Bank operates 38 branches, including 19 that operate under the name “Atlantic Bank.”
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The following is a description of the significant accounting and reporting policies that the Company and its
wholly-owned subsidiaries follow in preparing and presenting their consolidated financial statements, which
conform to U.S. generally accepted accounting principles (“GAAP”) and to general practices within the banking
industry. The preparation of financial statements in conformity with GAAP requires the Company to make estimates
and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts of the Company and its wholly-
owned subsidiaries. All inter-company accounts and transactions are eliminated in consolidation. The Company
currently has unconsolidated subsidiaries in the form of nine wholly-owned statutory business trusts, which were
formed to issue guaranteed capital debentures (“capital securities”). Please see Note 8, “Borrowed Funds,” for
additional information regarding these trusts.
Cash and Cash Equivalents
For cash flow reporting purposes, cash and cash equivalents include cash on hand, amounts due from banks,
and money market investments, which include federal funds sold with original maturities of less than 90 days. In
accordance with the monetary policy of the Board of Governors of the Federal Reserve System, the Company was
required to maintain reserves of $53.6 million and $56.0 million in the form of vault cash and deposits with the
Federal Reserve Bank of New York at December 31, 2007 and 2006, respectively. The Company was in compliance
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with this requirement at both dates. In addition, at December 31, 2007 and 2006, the Company had $20.4 million
and $13.3 million, respectively, of interest-bearing deposits in other financial institutions, as well as federal funds
sold of $38.8 million at December 31, 2007.
Securities Held to Maturity and Available for Sale
The Company’s securities portfolio consists of mortgage-backed securities and collateralized mortgage
obligations (together, “mortgage-related securities”) and debt and equity securities (together, “other securities”).
Securities that are classified as “available for sale” are carried at estimated fair value, with any unrealized gains and
losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity. Securities
that the Company has the positive intent and ability to hold to maturity are classified as “held to maturity” and are
carried at amortized cost.
The market values of the Company’s securities, particularly fixed-rate mortgage-related securities, are
affected by changes in market interest rates. In general, as interest rates rise, the market value of fixed-rate securities
will decline; as interest rates fall, the market value of fixed-rate securities will increase. The Company conducts a
periodic review and evaluation of the securities portfolio to determine if the decline in the fair value of any security
below its carrying value is other than temporary. Estimated fair values for securities are based on published or
securities dealers’ market values. If the Company deems any decline in value to be other than temporary, the
security is written down to a new cost basis and the resulting loss is charged against earnings.
Premiums and discounts on securities are amortized to expense and accreted to income using a method which
approximates the interest method over the remaining period to contractual maturity, adjusted for anticipated
prepayments. Dividend and interest income are recognized when earned. The cost of securities sold is based on the
specific identification method.
Loans
Loans, net, are carried at unpaid principal balances, including unearned discounts, purchase accounting (i.e.,
mark-to-market) adjustments, net deferred loan origination costs or fees, and the allowance for loan losses. Loans
held for sale are carried at the lower of aggregate cost or aggregate estimated fair value. One- to four-family and
home equity loans held for sale are originated on a pass-through basis in order to minimize the Company’s exposure
to credit and interest rate risk. Applications are taken and processed by a third-party conduit and sold to the conduit
or its affiliates, servicing-released, shortly after the loans are closed.
The allowance for loan losses is increased by the provisions for loan losses charged to operations and reduced
by net charge-offs or reversals. A separate loan loss allowance is established for the Community Bank and the
Commercial Bank and, except as otherwise noted below, the process for establishing the allowance for loan losses is
the same for each.
Management establishes the allowances for loan losses through an assessment of probable losses in each of
the respective loan portfolios. Several factors are considered in this process, including the level of defaulted loans at
the close of each quarter; recent trends in loan performance; historical levels of loan losses; the factors underlying
such loan losses and loan defaults; projected default rates and loss severities; internal risk ratings; loan size;
economic, industry, and environmental factors; and loan impairment, as defined under Statement of Financial
Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan,” as amended by
SFAS No. 118, “Accounting by Creditors for Impairment of a Loan/Income Recognition and Disclosures.”
Under SFAS Nos. 114 and 118, a loan is classified as “impaired” when, based on current information and
events, it is probable that we will be unable to collect both the principal and interest due under the contractual terms
of the loan agreement. We apply SFAS Nos. 114 and 118 as necessary to certain larger multi-family, commercial
real estate, construction, and commercial and industrial (“C&I”) loans, and exclude smaller balance homogenous
loans and loans carried at the lower of cost or fair value. The Company measures impairment of collateralized loans
based on the fair value of the collateral, less estimated costs to sell. For loans that are not collateral-dependent,
impairment is measured by using the present value of expected cash flows, discounted at the loan’s effective interest
rate.
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A valuation allowance is established when the fair value or the present value of the expected cash flows is less
than the recorded investment in the loan. We had no impaired loans at December 31, 2007.
In addition, the process of determining the appropriate level for the Banks’ loan loss allowances includes, but
is not limited to:
1. Periodic inspections of the loan collateral by qualified in-house property appraisers/inspectors, as
applicable;
2. Regular meetings of executive management with the pertinent Board committee, during which observable
trends in the local economy and/or the real estate market are discussed;
3. Full assessment by the pertinent Board of Directors of the aforementioned factors when making a
business judgment regarding the impact of anticipated changes of the future level of the allowance for
loan losses; and
4. Analysis of the portfolio in the aggregate, as well as on an individual loan basis, taking into consideration
payment history, underwriting analyses, and internal risk ratings.
In establishing the loan loss allowances, management also considers the Banks’ current business strategies and
credit processes, including compliance with conservative guidelines established by the respective Boards of
Directors with regard to credit limitations, loan approvals, underwriting criteria, and loan workout procedures.
In accordance with the pertinent policies, the loan loss allowances are segmented to correspond to the various
types of loans in the loan portfolios. These loan categories are assessed with specific emphasis on the internal risk
ratings, underlying collateral, credit underwriting, and loan type. These factors correspond to the respective levels of
quantified and inherent risk.
The assessments take into consideration loans that have been adversely rated, primarily through the valuation
of the collateral supporting each loan. “Adversely rated” loans are loans that are either non-performing or that
exhibit certain weaknesses that could jeopardize payment in accordance with the original terms. Larger loans are
assigned risk ratings based upon a routine review of the credit files, while smaller loans exceeding 90 days in arrears
are assigned risk ratings based upon an aging schedule. Quantified risk factors are assigned for each risk-rating
category to provide an allocation to the overall loan loss allowance.
The remainder of each loan portfolio is then assessed, by loan type, with similar risk factors being considered,
including the borrower’s ability to pay and our past loan loss experience with each type of loan. These loans are also
assigned quantified risk factors, which result in allocations to the allowances for loan losses for each particular loan
or loan type in the portfolio.
In order to determine their overall adequacy, each of the respective loan loss allowances is reviewed quarterly
by management and by the Mortgage and Real Estate Committee of the Community Bank’s Board of Directors or
the Credit Committee of the Board of Directors of the Commercial Bank, as applicable.
While management uses available information to recognize losses on loans, future additions to the respective
loan loss allowances may be necessary, based on changes in economic and local market conditions beyond
management’s control. In addition, the Community Bank and/or the Commercial Bank may be required to take
certain charge-offs and/or recognize additions to their loan loss allowances, based on the judgment of regulatory
agencies with regard to information provided to them during their examinations.
The Company recognizes interest income on loans using the interest method over the life of the loan. The
Company defers certain loan origination and commitment fees, and certain loan origination costs, and amortizes the
net fee or cost as an adjustment to the loan yield over the term of the related loan, using the interest method. When a
loan is sold or repays, the remaining net unamortized fee or cost is recognized in interest income.
A loan generally is classified as a “non-accrual” loan when it is 90 days past due. When a loan is placed on
non-accrual status, the Company ceases the accrual of interest owed, and previously accrued interest is charged
against interest income. A loan is generally returned to accrual status when the loan is less than 90 days past due
and/or the Company has reasonable assurance that the loan will be fully collectible. Interest income on non-accrual
loans is recorded when received in cash.
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Goodwill
Goodwill is presumed to have an indefinite useful life and is tested for impairment, rather than amortized, at
the reporting unit level at least once a year. Impairment exists when the carrying amount of goodwill exceeds its
implied fair value. If the fair value of a reporting unit exceeds its carrying amount at the time of testing, the goodwill
of the reporting unit is not considered impaired. According to SFAS No. 142, “Goodwill and Other Intangible
Assets,” quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for
measurement, when available. Other acceptable valuation methods include present-value measurements based on
multiples of earnings or revenues, or similar performance measures. Differences in the identification of reporting
units and in valuation techniques could result in materially different evaluations of impairment.
For the purpose of goodwill impairment testing, the Company has identified one reporting unit. The Company
performed its annual goodwill impairment test as of January 1, 2007, and determined that the fair value of the
reporting unit was in excess of its carrying amount, using the quoted market price of the Company’s common stock
on the impairment testing date as the basis for determining fair value. As of the annual impairment test date, there
was no indication of goodwill impairment. In addition, no impairment was found to exist when the Company
performed its annual goodwill impairment test as of January 1, 2008.
The changes in the carrying amount of goodwill for the years ended December 31, 2007 and 2006 are as
follows:
(in thousands)
Balance at beginning of year
Goodwill recorded in acquisitions
FIN 48 adjustments
Purchase accounting adjustments
Balance at end of year
Core Deposit Intangibles
December 31,
2007
$2,148,108
291,070
(3,466)
1,692
$2,437,404
2006
$1,980,689
166,253
--
1,166
$2,148,108
Core deposit intangibles (“CDI”) are a measure of the value of checking and savings deposits acquired in
business combinations. The fair value of the CDI stemming from any given business combination is based on the
present value of the expected cost savings attributable to the core deposit funding, relative to an alternative source of
funding. CDI are amortized over the estimated useful lives of the existing deposit relationships acquired, but do not
exceed 10 years. The Company evaluates such identifiable intangibles for impairment when an indication of
impairment exists. No impairment charges were required to be recorded in 2007, 2006, or 2005. If an impairment
loss is determined to exist in the future, the loss will be reflected as an expense in the Consolidated Statement of
Income and Comprehensive Income for the period in which such impairment was identified.
Premises and Equipment, Net
Premises, furniture, fixtures, and equipment are carried at cost less the accumulated depreciation computed on
a straight-line basis over the estimated useful lives of the respective assets (generally 20 years for premises and three
to ten years for furniture, fixtures, and equipment). Leasehold improvements are carried at cost less the accumulated
amortization computed on a straight-line basis over the shorter of the related lease term or the estimated useful life
of the improvement.
Depreciation and amortization are included in “occupancy and equipment expense” in the Consolidated
Statements of Income and Comprehensive Income, and amounted to $19.0 million, $15.5 million, and $13.4 million
for the years ended December 31, 2007, 2006, and 2005, respectively.
Other Real Estate Owned
Real estate properties acquired through, or in lieu of, foreclosure are to be sold or rented, and are reported at
the lower of cost or fair value at the date of acquisition. “Cost” represents the unpaid balance of the loan at the
acquisition date, plus the expenses incurred to bring the property to a saleable condition, when appropriate. After
foreclosure, management periodically performs a valuation of the property and the real estate is carried at the lower
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of carrying amount or fair value, less the estimated selling costs. Revenues and expenses from operations and
changes in the valuation allowance, if any, are included in “other operating expenses.” The Company had other real
estate owned totaling $658,000 and $1.3 million at December 31, 2007 and 2006, respectively; these amounts are
included in “other assets” in the accompanying Consolidated Statements of Condition. There were no valuation
allowances for other real estate owned at December 31, 2007, 2006 or 2005, and no provisions for the years ended at
those dates.
Income Taxes
Income tax expense consists of income taxes that are currently payable and deferred income taxes. Deferred
income tax expense (benefit) is determined by recognizing deferred tax assets and liabilities for future tax
consequences, attributable to temporary differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates that are expected to apply to taxable income in years in which those temporary differences are expected to be
recovered or settled. The Company assesses the deferred tax assets and establishes a valuation allowance when
realization of a deferred asset is not considered to be “more likely than not.” The Company generally uses the
expectation of future taxable income in evaluating the need for a valuation allowance.
The Company estimates income taxes payable based on the amount it expects to owe the various tax
authorities (i.e., federal, state, and local). Income taxes represent the net estimated amount due to, or to be received
from, such taxing authorities. In estimating income taxes, management assesses the relative merits and risks of the
appropriate tax treatment of transactions, taking into account statutory, judicial, and regulatory guidance in the
context of the Company’s tax position. In this process, management also relies on tax opinions, recent audits, and
historical experience. Although the Company uses available information to record income taxes, underlying
estimates and assumptions can change over time as a result of unanticipated events or circumstances such as changes
in tax laws and judicial guidance influencing its overall tax position.
In July 2006, the Financial Accounting Standards Board (the “FASB”) issued Interpretation No. 48 (“FIN
48”), “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109.” FIN 48
prescribes a recognition threshold and measurement attribute for use in connection with the obligation of a company
to recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has
taken or expects to take on a tax return. Only tax positions that meet a “more likely than not” threshold may be
recognized. The Company adopted FIN 48 effective January 1, 2007. For a more detailed discussion of the impact of
adopting FIN 48, please see the discussion in Note 9, “Federal, State, and Local Taxes.”
Stock Options and Incentives
On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS
No. 123R”), using the modified prospective approach. Accordingly, the Company recognizes compensation costs
related to share-based payments at fair value on the date of grant and recognizes such costs in the financial
statements over the vesting period during which the employee provides service in exchange for the award. The
Company did not grant any stock options during the years ended December 31, 2007 or 2006; accordingly, there
were no unvested stock options outstanding at any time during those years, and no compensation and benefits
expense relating to stock options was recorded during those years. The adoption of SFAS No. 123R had no impact
on the Company’s basic or diluted earnings per share for the years ended December 31, 2007 or 2006.
On December 30, 2005, the Board of Directors of the Company accelerated the vesting of, and vested, all
unvested options to acquire the Company’s common stock that were outstanding at that date (the “Acceleration”)
under its eleven stock option plans (the “Stock Option Plans”). A total of 1.4 million stock options were impacted by
the Acceleration. All other terms and conditions of the accelerated stock options remained unchanged.
Prior to the adoption of SFAS No. 123R on January 1, 2006, the Company applied Accounting Principles
Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in
accounting for the Stock Option Plans. As each granted stock option entitled the holder to purchase shares of the
Company’s common stock at an exercise price equal to 100% of the fair market value of the stock on the date of
grant, no compensation cost for such options was recognized. Had compensation cost for the Stock Option Plans
been determined, using a Black-Scholes option-pricing model, based on the fair value at the date of grant for awards
made under those plans, consistent with the method set forth in SFAS No. 123, “Accounting for Stock-Based
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Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and
Disclosure,” the Company’s pro forma net income for the year ended December 31, 2005 would have amounted to
$286.0 million and been equivalent to basic and diluted earnings per share of $1.10 and $1.09, respectively. The
weighted average assumptions used for the valuation of options granted during the year ended December 31, 2005
were as follows: a dividend yield of 3.9%; expected volatility of 29.5%; a risk-free interest rate of 4.3%; and an
expected life of ten years.
In addition, under the New York Community Bancorp, Inc. 2006 Stock Incentive Plan (the “2006 Stock
Incentive Plan”), which was approved by the Company’s shareholders at its Annual Meeting on June 7, 2006, shares
are available for grant as stock options, restricted stock, or other forms of related rights. At December 31, 2007, the
Company had 8,226,509 shares available for grant under the 2006 Stock Incentive Plan. Compensation cost related
to restricted stock grants is recognized on a straight-line basis over the vesting period.
Retirement Plans
The Company’s pension benefit and post-retirement health and welfare benefit obligations, and the related
costs, are calculated using actuarial concepts, within the framework of SFAS No. 87, “Employers’ Accounting for
Pensions” and SFAS No. 106, “Employers’ Accounting for Post-retirement Benefits Other than Pensions,”
respectively. The measurement of such obligations and expenses requires that certain assumptions be made
regarding several factors, most notably including the discount rate and the expected return on plan assets. The
Company evaluates these critical assumptions on an annual basis. Other factors considered by the Company in its
evaluation include retirement patterns, mortality, turnover, and the rate of compensation increase.
Under SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans
– an amendment of FASB Statement Nos. 87, 88, 106, and 132R,” actuarial gains and losses, prior service costs or
credits, and any remaining transition assets or obligations that have not been recognized under previous accounting
standards must be recognized in “accumulated other comprehensive income or loss,” net of tax effects, until they are
amortized as a component of net periodic benefit cost. In addition, under SFAS No. 158, the measurement date (i.e.,
the date at which plan assets and the benefit obligation are measured for financial reporting purposes) is required to
be the company’s fiscal year-end. The Company presently uses a September 30 measurement date for its pension
and post-retirement benefit plans, as permitted by SFAS Nos. 87 and 106. In accordance with SFAS No. 158, the
Company will adopt a year-end measurement date on December 31, 2008.
Earnings per Share (Basic and Diluted)
SFAS No. 128, “Earnings per Share,” requires all entities with complex capital structures to provide a dual
presentation of basic and diluted earnings per share (“EPS”) on the face of their income statements, and to provide a
reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to holders of common stock by the
weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that would then share in the earnings of the entity.
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The following table presents the Company’s computation of basic and diluted EPS for the years ended
December 31, 2007, 2006, and 2005:
(in thousands, except share and per share amounts)
Net income
Weighted average common shares outstanding
Basic earnings per common share
Weighted average common shares outstanding
Additional dilutive shares using average value for the
period when utilizing the treasury stock method(1)
Total weighted average shares for diluted earnings
per share
Diluted earnings per common share and
common share equivalents
Years Ended December 31,
2006
$232,585
284,877,310
$0.82
284,877,310
2007
$279,082
309,535,954
$0.90
309,535,954
2005
$292,085
260,412,409
$1.12
260,412,409
1,567,038
1,384,182
2,085,434
311,102,992
286,261,492
262,497,843
$0.90
$0.81
$1.11
(1) Options to purchase 3,069,474 shares, 3,536,071 shares, and 3,531,694 shares of the Company’s common stock at a
weighted average price of $19.16, $19.07, and $19.07, respectively, were outstanding as of December 31, 2007, 2006, and
2005, but were excluded from the computation of diluted earnings per share for the respective years because the exercise
prices of the stock options exceeded the average market prices of the Company’s common shares during these years.
On April 20, 2004, with 44,816 shares remaining under its prior authorization, the Board of Directors
authorized the repurchase of up to five million additional shares of the Company’s common stock. At December 31,
2007, the Company had 1,465,708 shares still available for repurchase under the April 20, 2004 authorization.
Segment Reporting
In accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,”
the Company has determined that all of its activities constitute one reportable operating segment.
Bank-owned Life Insurance
The Company has purchased life insurance policies on certain employees. These Bank-owned Life Insurance
(“BOLI”) policies are recorded in the Consolidated Statements of Condition at their cash surrender value. Income
from these policies and changes in the cash surrender value are recorded in “non-interest income” in the
Consolidated Statements of Income and Comprehensive Income. The Company’s investment in BOLI generated
income of $26.1 million, $23.6 million, and $22.5 million, respectively, during the years ended December 31, 2007,
2006, and 2005. At December 31, 2007 and 2006, the Company’s investment in BOLI totaled $664.4 million and
$585.0 million, respectively. The December 31, 2007 amount includes $32.1 million and $22.5 million of BOLI that
was added in the acquisitions of PennFed Financial Services, Inc. (“PennFed”) and Synergy Financial Group, Inc.
(“Synergy”), respectively, on April 2, 2007 and October 1, 2007. The December 31, 2006 amount includes $50.0
million of BOLI that was added in the acquisition of Atlantic Bank of New York (“Atlantic Bank”) on April 28,
2006.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations (revised 2007).” SFAS
No. 141R improves reporting by creating greater consistency in the accounting and financial reporting of business
combinations, resulting in more complete, comparable, and relevant information for investors and other users of
financial statements. To achieve this goal, the new standard requires the acquiring entity in a business combination
to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-
date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer
to disclose to investors and other users all of the information they need to evaluate and understand the nature and
financial effect of the business combination. SFAS No. 141R applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first fiscal year that commences after December 15,
2008.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements.” SFAS No. 160 improves the relevance, comparability, and transparency of financial information
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provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same
way—as equity in the consolidated financial statements. In addition, SFAS No.160 eliminates the diversity that
currently exists in accounting for transactions between an entity and noncontrolling interests by requiring that they
be treated as equity transactions. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008 and
is not expected to have a material impact on the Company’s financial condition or results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities—including an amendment of FASB Statement No. 115.” SFAS No. 159 provides companies with the
option of electing fair value as an alternative measurement for most financial assets and liabilities. It also establishes
presentation and disclosure requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities. SFAS No. 159 requires companies to
provide additional information that will help investors and other users of financial statements to more easily
understand the effect of a company’s choice to use fair value on its earnings. It also requires entities to display the
fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance
sheet. Under SFAS No. 159, fair value is used for both the initial and subsequent measurement of the designated
assets and/or liabilities, with the changes in value recognized in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. The Company did not elect early adoption of SFAS No. 159, which was
permitted as of the beginning of its 2007 fiscal year.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which, among other things,
defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each
major asset and liability category measured at fair value on either a recurring or nonrecurring basis. SFAS No. 157
clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in pricing an asset
or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-level fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:
• Level 1. Observable inputs such as quoted prices in active markets;
• Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or
indirectly; and
• Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to
develop its own assumptions.
Assets and liabilities measured at fair value are based on one or more of three valuation techniques noted in
SFAS No. 157. The three valuation techniques are identified below. Where more than one technique is noted,
individual assets or liabilities are valued using one or more of the noted techniques. The valuation techniques are as
follows:
(a) Market approach. Prices and other relevant information generated by market transactions involving
identical or comparable assets or liabilities.
(b) Cost approach. The amount that would be required to replace the service capacity of an asset
(replacement cost).
(c) Income approach. Techniques to convert future amounts to a single present amount based on market
expectations (including present-value techniques, option pricing, and excess earnings models).
SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and for interim periods within
those fiscal years. The provisions of SFAS No. 157 are to be applied prospectively as of the beginning of the fiscal
year in which it is initially applied, except in limited circumstances. The Company does not anticipate that the
adoption of SFAS No. 157 on January 1, 2008 will have a material impact on its financial condition or results of
operations, although additional fair value disclosures will be provided. The portion of the Company’s assets and
liabilities with fair values based on unobservable inputs is not significant.
In 2006, the Emerging Issues Task Force (“EITF”) of the FASB reached final consensus on accounting for life
insurance in Issue No. 06-4, “Accounting for Deferred Compensation and Post-retirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements” (“EITF Issue No. 06-4”) and, “Accounting for Purchases of
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Life Insurance – Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin
(“FTB”) No. 85-4, ‘Accounting for Purchases of Life Insurance’ ” (“EITF Issue No. 06-5”). EITF Issue No. 06-4
concluded that an employer, entering into an endorsement split-dollar life insurance arrangement that provides an
employee with a post-retirement benefit, has not effectively settled the obligation by purchasing the life insurance.
Therefore, a liability for the future benefits should be recognized in accordance with SFAS No. 106, “Employers’
Accounting for Post-retirement Benefits Other than Pensions,” or Accounting Principles Board (“APB”) Opinion
No. 12, “Omnibus Opinion – 1967.” The consensus on EITF Issue No. 06-4 is effective for fiscal years beginning
after December 15, 2007 and may be recognized as a change in accounting principle through a cumulative-effect
adjustment to retained earnings as of the beginning of the year of adoption, or by a change in accounting principle
through retrospective application to all prior periods. The Company currently estimates that the adoption of EITF
Issue No. 06-4 on January 1, 2008 will reduce its stockholders’ equity by approximately $15 million.
EITF Issue No. 06-5 concluded that a policyholder should consider other amounts included in the contractual
terms of an insurance policy, in addition to cash surrender value, when determining the asset value that could be
realized under the terms of the insurance contract in accordance with FTB No. 85-4. These other amounts include
non-discretionary amounts (those items that are not contingent as of the balance sheet date) and time-based amounts
(i.e., Deferred Acquisition Costs Tax) which would be accounted for on a present-value basis. Items that are subject
to the insurance company’s intent to pay would not be included in the asset value. In addition, the amount that could
be realized should be determined on an individual policy or certificate level. The consensus on EITF Issue No. 06-5
is effective for fiscal years beginning after December 15, 2006 and may be recognized through a cumulative-effect
adjustment to retained earnings as of the beginning of the year of adoption for all life insurance contracts currently
held, or by a change in accounting principle through retrospective application to all prior periods. The Company’s
adoption of EITF Issue No. 06-5 on January 1, 2007 did not have an impact on its financial condition or results of
operations.
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NOTE 3: BUSINESS COMBINATIONS, CORE DEPOSIT AND OTHER INTANGIBLES
PennFed Financial Services, Inc.
On April 2, 2007, the Company acquired PennFed Financial Services, Inc. (“PennFed”) for an aggregate
purchase price of $271.8 million. Pursuant to the Agreement and Plan of Merger announced on November 2, 2006,
PennFed merged with and into the Company, and its primary subsidiary, Penn Federal Savings Bank, merged with
and into the Community Bank. Under the terms of the agreement, PennFed shareholders received 1.222 shares of
Company common stock for each share of PennFed stock held at the effective date of the merger. The Company
issued 15,977,941 shares of common stock to satisfy the tax-free exchange, the value of which was determined
based on the average closing price of the Company’s common stock for the two days prior to, and the two days
following, the announcement of the acquisition.
The purchase price was allocated to the acquired assets and liabilities of PennFed based on their fair value as
of April 2, 2007. As the Company is still in the process of finalizing these values, the allocation of the purchase
price presented in the following table is subject to revision.
(in thousands)
Assets:
Cash and cash equivalents
Securities
Loans, net
Premises and equipment
Goodwill
Core deposit intangible
Other assets
Total assets
Liabilities:
Deposits
Borrowed funds
Other liabilities
Total liabilities
$ 22,714
466,211
1,650,310
33,792
189,539
20,900
98,919
$2,482,385
$1,614,935
568,719
26,886
$2,210,540
Included in the purchase price were accrued acquisition-related costs of approximately $24.2 million. At
December 31, 2007, accrued acquisition-related costs of $4.2 million remained in “other liabilities” in the
Consolidated Statement of Condition and consisted primarily of employment benefits.
As operating results for PennFed were not significant to the consolidated operating results of the Company,
pro forma operating results are not presented herein. The Company’s Consolidated Statement of Income and
Comprehensive Income for the twelve months ended December 31, 2007 includes nine months of combined
operations with PennFed.
In connection with the PennFed transaction, the Company recorded goodwill of $189.5 million, none of which
is estimated to be deductible for income tax purposes. In addition, CDI of $20.9 million was recognized in
connection with the PennFed acquisition and is being amortized on an accelerated basis over an estimated useful life
of ten years. The Company retained the services of an independent valuation firm to determine the CDI amount.
The purpose of the PennFed acquisition was to expand the Company’s footprint and deposit market share in
New Jersey, and to provide additional cash flows for investment into higher-yielding loans and securities. The
acquisition added 24 branches to the Community Bank franchise, increasing its deposit market share in Essex,
Hudson, and Union counties, where it previously had eight branches, and expanding its footprint into the central
New Jersey counties of Middlesex, Monmouth, and Ocean.
Synergy Financial Group, Inc.
On October 1, 2007, the Company acquired Synergy Financial Group, Inc. (“Synergy”), the holding company
for Synergy Bank, for an aggregate purchase price of $166.6 million. Pursuant to the Agreement and Plan of Merger
96
announced on May 13, 2007, Synergy merged with and into the Company, and Synergy Bank merged with and into
the Community Bank.
Under the terms of the agreement, Synergy shareholders received 0.80 of a share of Company common stock
for each share of Synergy common stock held at the effective date of the merger. The Company issued 8,676,840
shares of common stock to satisfy the tax-free exchange, the value of which was determined based on the average
closing price of the Company’s common stock for the two days prior to, and the two days following, the
announcement of the acquisition.
The purchase price was allocated to the acquired assets and liabilities of Synergy based on their fair value as
of October 1, 2007. As the Company is still in the process of finalizing these values, the allocation of the purchase
price presented in the following table is subject to revision.
(in thousands)
Assets:
Cash and cash equivalents
Securities
Loans, net
Premises and equipment
Goodwill
Core deposit intangible
Other assets
Total assets
Liabilities:
Deposits
Borrowed funds
Other liabilities
Total liabilities
$ 25,124
119,526
665,190
21,013
89,703
4,500
62,464
$987,520
$564,500
250,206
6,261
$820,967
Included in the purchase price were accrued acquisition-related costs of approximately $17.1 million. At
December 31, 2007, accrued acquisition-related costs of $10.9 million remained in “other liabilities” in the
Consolidated Statement of Condition and consisted primarily of employment benefits and costs associated with the
cancellation of certain data processing contracts.
As operating results for Synergy were not significant to the consolidated operating results of the Company,
pro forma operating results are not presented herein. The Company’s Consolidated Statement of Income and
Comprehensive Income for the twelve months ended December 31, 2007 includes three months of combined
operations with Synergy.
In connection with the transaction, the Company recorded goodwill of $89.7 million, none of which is
expected to be deductible for income tax purposes. In addition, CDI of $4.5 million was recognized in connection
with the Synergy acquisition, and is being amortized on an accelerated basis over an estimated useful life of ten
years. The Company retained the services of an independent valuation firm to determine the CDI amount.
The purpose of the Synergy acquisition was to further expand the Company’s footprint and deposit market
share in central New Jersey and to provide additional cash flows for investment into higher-yielding loans and
securities. The transaction added 21 branches to the Community Bank’s franchise, including one in Mercer County,
five in Middlesex County, four in Monmouth County, and 11 in Union County.
Doral Bank, FSB Branch Network
On March 15, 2007, the Company announced that the Commercial Bank and Doral Bank, FSB (“Doral”), the
New York City-based subsidiary of Doral Financial Corporation, had signed a definitive purchase and assumption
agreement, pursuant to which the Commercial Bank would acquire Doral’s branch network in New York City, as
well as certain of its assets and liabilities. The transaction was completed on July 26, 2007, adding two branches in
Manhattan, six in Queens, and three in Brooklyn to the Commercial Bank franchise and boosting the number of
Commercial Bank branches from 27 to 38. In addition, the transaction provided the Company with assets of $494.4
97
million, including loans of $206.1 million and securities of $155.3 million; wholesale borrowings of $124.2 million;
and deposits of $377.5 million, for which the Company paid a premium of 2.6%.
In accordance with SFAS No. 141, “Business Combinations,” the Company recorded goodwill of $11.8
million and CDI of $2.1 million in connection with the Doral transaction. The CDI is being amortized on an
accelerated basis over an estimated useful life of ten years.
The primary purpose of the transaction was to expand the Commercial Bank’s footprint and deposit market
share in New York City.
Atlantic Bank of New York
On April 28, 2006, the Company acquired Atlantic Bank, a commercial bank headquartered in Manhattan,
New York, for $400.0 million. To fund the all-cash transaction, the Company issued 24.5 million shares of its
common stock in a secondary offering on April 18, 2006. At the acquisition date, Atlantic Bank had total assets of
$2.8 billion (including loans of $1.2 billion and securities of $1.1 billion); total deposits of $1.8 billion; and
borrowed funds of $516.7 million. The Company’s Consolidated Statement of Income and Comprehensive Income
for the year ended December 31, 2006 include eight months of combined operations with Atlantic Bank.
In connection with the acquisition, the Company recorded goodwill of $171.0 million. CDI of $38.3 million
was also recognized in connection with the Atlantic Bank acquisition; this amount is being amortized on an
accelerated basis over a period of ten years.
At December 31, 2007, accrued acquisition-related costs of $3.1 million remained in “other liabilities” in the
Consolidated Statement of Condition, and consisted primarily of employment benefits.
The primary purpose of the acquisition was to grow the Commercial Bank. In addition to adding 17 locations
to the Commercial Bank’s branch network, including five in Manhattan, the acquisition diversified the Company’s
asset mix and increased its lower-cost core and non-interest-bearing deposits.
CDI and Other Intangible Assets
As noted in the preceding discussion, the Company has CDI stemming from its various business combinations
with other banks and thrifts.
The Company also had mortgage servicing rights (“MSRs”) of $5.4 million at December 31, 2007. MSRs are
included, together with other identifiable intangible assets, in “other assets” in the Consolidated Statements of
Condition at December 31, 2007 and 2006. MSRs are carried at the lower of the initial carrying value, adjusted for
amortization, or fair value, and are amortized in proportion to, and over the period of, estimated net servicing
income. MSRs are periodically evaluated for impairment based on the difference between the carrying amount and
current fair value. If it is determined that impairment exists, the resulting loss is charged against earnings.
98
The following table sets forth the changes in MSRs for the year ended December 31, 2007:
(in thousands)
Balance, beginning of year
Acquired in acquisitions
Addition recorded in loan securitization
Fair value adjustment
Amortization
Balance, end of year
$ 970
581
5,413
(98)
(1,428)
$ 5,438
The Company recorded $5.4 million of MSRs in connection with the securitization of certain one- to four-
family loans that were acquired in the acquisition of PennFed.
The following table summarizes the gross carrying and accumulated amortization amounts of the Company’s
intangible assets as of December 31, 2007:
(in thousands)
Core deposit intangibles
Mortgage servicing rights
Other identifiable intangible assets
Total
Amount
$190,332
11,139
1,325
$202,796
Gross Carrying Accumulated
Amortization
Net Carrying
Amount
$111,123
5,438
214
$116,775
$(79,209)
(5,701)
(1,111)
$(86,021)
Amortization expenses related to CDI and other identifiable intangibles for the year ended December 31, 2007
were $22.8 million and $88,000, respectively. The Company assessed the useful lives of its intangible assets at
December 31, 2007 and deemed them to be appropriate.
The following table summarizes the estimated future expense stemming from the amortization of the
Company’s CDI, MSRs, and other identifiable intangible assets:
(in thousands)
2008
2009
2010
2011
2012
2013 and thereafter
Total remaining intangible assets
Core Deposit
Intangibles
$ 23,342
21,962
20,582
16,723
11,873
16,641
$111,123
Mortgage
Servicing Rights
$1,858
1,193
969
644
451
323
$5,438
Other
Identifiable
Intangible Assets
$ 88
88
38
--
--
--
$214
Total
$ 25,288
23,243
21,589
17,367
12,324
16,964
$116,775
99
NOTE 4: SECURITIES
The following tables summarize the Company’s portfolio of securities held to maturity at December 31, 2007
and 2006:
(in thousands)
Mortgage-related Securities:
GSE(1) certificates
GSE CMOs(2)
Other mortgage-related securities
Total mortgage-related securities
Other Securities:
GSE debentures
Corporate bonds
Capital trust notes
Total other securities
Total securities held to maturity
(1) Government-sponsored enterprises.
(2) Collateralized mortgage obligations.
(in thousands)
Mortgage-related Securities:
GSE certificates
GSE CMOs
Other mortgage-related securities
Total mortgage-related securities
Other Securities:
GSE debentures
Corporate bonds
Capital trust notes
Total other securities
Total securities held to maturity
Amortized
Cost
$ 250,510
2,222,355
6,618
$2,479,483
$1,530,414
165,992
186,756
$1,883,162
$4,362,645
Amortized
Cost
$ 5,483
1,376,062
6,272
$1,387,817
$1,167,570
156,156
273,654
$1,597,380
$2,985,197
December 31, 2007
Gross
Unrealized
Gain
Gross
Unrealized
Loss
$ 7,734
16,467
--
$24,201
$ 7,413
6,327
1,629
$15,369
$39,570
$ --
70,697
--
$70,697
$ --
1,644
5,680
$ 7,324
$78,021
December 31, 2006
Gross
Unrealized
Gain
Gross
Unrealized
Loss
$ 102
--
--
$ 102
$ --
9,226
11,449
$20,675
$20,777
$ --
115,373
--
$115,373
$ 23,632
1,246
154
$ 25,032
$140,405
Fair Market
Value
$ 258,244
2,168,125
6,618
$2,432,987
$1,537,827
170,675
182,705
$1,891,207
$4,324,194
Fair Market
Value
$ 5,585
1,260,689
6,272
$1,272,546
$1,143,938
164,136
284,949
$1,593,023
$2,865,569
The Company had $423.1 million and $404.3 million of Federal Home Loan Bank of New York (“FHLB-
NY”) stock, at cost, at December 31, 2007 and 2006, respectively. The Company is required to maintain this
investment in order to have access to funding resources provided by the FHLB-NY.
100
The following tables summarize the Company’s portfolio of securities available for sale at December 31, 2007
and 2006:
(in thousands)
Mortgage-related Securities:
GSE certificates
GSE CMOs
Private label CMOs
Total mortgage-related securities
Other Securities:
GSE debentures
U.S. Treasury obligations
Corporate bonds
State, county, and municipal
Capital trust notes
Preferred stock
Common stock
Total other securities
Total securities available for sale
(in thousands)
Mortgage-related Securities:
GSE certificates
GSE CMOs
Private label CMOs
Other mortgage-related securities
Total mortgage-related securities
Other Securities:
GSE debentures
U.S. Treasury obligations
Corporate bonds
State, county, and municipal
Foreign government bonds
Capital trust notes
Preferred stock
Common stock
Total other securities
Total securities available for sale
Amortized
Cost
$ 217,855
599,936
155,213
$ 973,004
$ 178,389
1,098
55,818
6,526
71,149
59,900
48,537
$ 421,417
$1,394,421
Amortized
Cost
$ 835,965
345,558
547,635
1,209
$1,730,367
$ 100,607
1,096
39,673
6,644
1,002
20,750
65,930
45,904
$ 281,606
$2,011,973
December 31, 2007
Gross
Unrealized
Gain
Gross
Unrealized
Loss
$ 3,984
6,848
--
$10,832
$ 9,535
14
38
3
1,786
--
211
$11,587
$22,419
$ 4
7,762
2,746
$10,512
$ --
--
6,930
78
5,975
8,812
3,277
$25,072
$35,584
December 31, 2006
Gross
Unrealized
Gain
Gross
Unrealized
Loss
$ 218
--
--
--
$ 218
$1,091
3
--
1
--
--
255
429
$1,779
$1,997
$36,693
13,920
15,635
--
$66,248
$ 48
--
2,548
91
--
3,453
400
395
$ 6,935
$73,183
Fair Market
Value
$ 221,835
599,022
152,467
$ 973,324
$ 187,924
1,112
48,926
6,451
66,960
51,088
45,471
$ 407,932
$1,381,256
Fair Market
Value
$ 799,490
331,638
532,000
1,209
$1,664,337
$ 101,650
1,099
37,125
6,554
1,002
17,297
65,785
45,938
$ 276,450
$1,940,787
The following table summarizes the gross proceeds, gross realized gains, and gross realized losses from the
sale of available-for-sale securities during the years ended December 31, 2007, 2006, and 2005:
(in thousands)
Gross proceeds
Gross realized gains
Gross realized losses
2007
$2,115,530
9,195
7,307
December 31,
2006
$1,245,014
3,263
230
2005
$518,264
3,555
556
In connection with the repositioning of the balance sheet following the PennFed acquisition, the Company
securitized $593.8 million of the one- to four-family loans that had been acquired in the transaction in the second
quarter of 2007, in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.” The resultant securities were recorded in the available-for-sale securities portfolio at
an initial cost basis of $588.4 million, and were subsequently sold in the third quarter of the year.
101
The following table summarizes the amortized cost and estimated market value of held-to-maturity and available-for-sale debt securities at December 31,
2007 by contractual maturity. The amortized cost and estimated market value of mortgage-related securities held to maturity and available for sale, all of which
have prepayment provisions, are distributed to a maturity category based on the end of the estimated average life of said securities, as indicated below. Principal
and amortization prepayments are not shown in maturity categories as they occur, but are considered in the determination of estimated average life.
(dollars in thousands)
Held-to-maturity Securities:
Due within one year
Due from one to five years
Due from five to ten years
Due after ten years
Total debt securities held to
maturity
Available-for-sale Securities:(2)
Due within one year
Due from one to five years
Due from five to ten years
Due after ten years
Total debt securities available
Mortgage
-related
Securities
$ --
--
--
2,479,483
Amortized Cost
Average
Yield
U.S. Treasury
and GSE
Obligations
Average
Yield
State,
County, and
Municipal
Average
Yield(1)
Other Debt
Securities
Average
Yield
Fair Market
Value
--%
--
--
4.96
$ --
150,000
629,966
750,448
--%
4.16
5.69
5.14
$ --
--
--
--
--%
--
--
--
$ --
46,882
--
305,866
--% $ --
198,024
636,294
3,489,876
7.27
--
7.08
$2,479,483
4.96%
$1,530,414
5.27%
$ --
--%
$352,748
7.11% $4,324,194
$ --
641
21,301
951,062
--%
5.33
6.59
5.28
$ 1,098
84,825
8,969
84,595
4.96%
5.21
4.81
6.30
$ --
373
632
5,521
--%
5.38
6.27
6.61
$ --
1,113
14,705
111,149
--% $ 1,112
89,236
45,213
1,149,136
5.60
7.48
7.07
for sale
$ 973,004
5.30%
$ 179,487
5.70%
$6,526
6.51%
$126,967
7.11% $1,284,697
(1) Not presented on a tax-equivalent basis.
(2)
As equity securities have no contractual maturity, they have been excluded from this table.
The Company had no commitments to purchase securities at December 31, 2007.
102
The following tables present held-to-maturity and available-for-sale securities having a continuous unrealized loss position for less than twelve months or
for twelve months or longer as of December 31, 2007 and 2006:
At December 31, 2007
(in thousands)
Temporarily Impaired Held-to-maturity
Debt Securities:
GSE CMOs
Corporate bonds
Capital trust notes
Total temporarily impaired held-to-
maturity debt securities
Temporarily Impaired Available-for-sale
Securities:
Debt Securities:
GSE debentures
GSE CMOs
Private label CMOs
Corporate bonds
State, county, and municipal
Capital trust notes
Total temporarily impaired available-for-
sale debt securities
Equity securities
Total temporarily impaired available-for-
Less than Twelve Months
Twelve Months or Longer
Total
Fair Value
Unrealized Loss
Fair Value
Unrealized Loss
Fair Value
Unrealized Loss
$ --
44,685
116,203
$ --
1,339
5,499
$1,107,216
24,729
15,586
$70,697
305
181
$1,107,216
69,414
131,789
$70,697
1,644
5,680
$160,888
$ 6,838
$1,147,531
$71,183
$1,308,419
$78,021
$ --
--
--
17,774
537
39,143
$ 57,454
77,679
$ --
--
--
1,930
1
4,239
$ 6,170
12,089
$ 898
276,648
152,468
20,000
5,416
2,975
$ 458,405
--
$ 4
7,762
2,746
5,000
77
1,736
$17,325
--
$ 898
276,648
152,468
37,774
5,953
42,118
$ 515,859
77,679
$ 4
7,762
2,746
6,930
78
5,975
$23,495
12,089
sale securities
$135,133
$18,259
$ 458,405
$17,325
$ 593,538
$35,584
103
At December 31, 2006
(in thousands)
Temporarily Impaired Held-to-maturity
Debt Securities:
GSE debentures
GSE CMOs
Corporate bonds
Capital trust notes
Total temporarily impaired held-to-
maturity debt securities
Temporarily Impaired Available-for-sale
Securities:
Debt Securities:
GSE debentures
GSE certificates
GSE CMOs
Private label CMOs
Corporate bonds
State, county, and municipal
Capital trust notes
Total temporarily impaired available-for-
sale debt securities
Equity securities
Total temporarily impaired available-for-
sale securities
Less than Twelve Months
Twelve Months or Longer
Total
Fair Value
Unrealized Loss
Fair Value
Unrealized Loss
Fair Value
Unrealized Loss
$ --
--
--
10,421
$ --
--
--
96
$1,143,938
1,260,689
24,872
5,210
$ 23,632
115,373
1,246
58
$1,143,938
1,260,689
24,872
15,631
$ 23,632
115,373
1,246
154
$10,421
$ 96
$2,434,709
$140,309
$2,445,130
$140,405
$ 4,813
17,156
--
--
4,625
406
13,028
$40,028
49,256
$89,284
$ 48
197
--
--
48
2
2,004
$2,299
795
$3,094
$ --
747,649
331,638
532,000
22,500
5,647
4,269
$1,643,703
--
$ --
36,496
13,920
15,635
2,500
89
1,449
$ 70,089
--
$ 4,813
764,805
331,638
532,000
27,125
6,053
17,297
$1,683,731
49,256
$ 48
36,693
13,920
15,635
2,548
91
3,453
$ 72,388
795
$1,643,703
$ 70,089
$1,732,987
$ 73,183
104
At December 31, 2007 and 2006, approximately 71% and 85%, respectively, of the unrealized losses on the
securities portfolio stemmed from GSE certificates, GSE CMOs, and private label CMOs (defined as CMOs issued
by entities other than GSEs). By virtue of the underlying collateral or structure, which is more often than not
sequential, the Company’s private label CMOs are AAA-rated. The Company believes that price movements in all
three types of securities are dependent upon movements in market interest rates, rather than on credit risk, since the
credit risk inherent in these securities is negligible. The remaining unrealized losses on the securities portfolio were
on corporate bonds, capital trust notes, state and municipal obligations, and equity securities.
The evaluation of impairment considers numerous factors, and their relative significance varies from case to
case. Among the factors considered are the length of time and extent to which the market value has been less than
the cost of the security; the financial condition and near-term prospects of the issuer; and the intent and ability to
retain the security in order to allow for an anticipated recovery in market value. If, based on such analysis, it is
determined that the impairment is other than temporary, the security is written down to fair value, and a loss is
recognized through earnings.
In the second quarter of 2007, the Company recorded a $57.0 million loss in its Consolidated Statement of
Income and Comprehensive Income on the other-than-temporary impairment of certain available-for-sale mortgage-
related securities. The impairment was recorded in connection with the repositioning of the balance sheet that
followed the acquisition of PennFed in the second quarter. In July 2007, the Company sold the impaired securities at
a pre-tax loss of $7.3 million which was recognized in non-interest income in the three months ended September 30,
2007. In 2006, the Company recorded a $313,000 loss on the other-than-temporary impairment of certain equity
securities. The Company determined that there was no other-than-temporary impairment of its securities in 2005.
The investment securities designated as having a continuous loss position for twelve months or more at
December 31, 2007 consisted of 28 mortgage-related securities, five municipal bonds, four corporate debt
obligations, and three capital trust notes. At December 31, 2006, the investment securities designated as having a
continuous loss position for twelve months or more consisted of 49 mortgage-related securities, seven municipal
bonds, four corporate debt obligations, two capital trust notes, and 10 GSE obligations. The market value of these
securities represented unrealized losses of $88.5 million and $210.4 million, respectively, at December 31, 2007 and
2006. At December 31, 2007, the fair value of securities having a continuous loss position for twelve months or
more was 5.2% below their collective amortized cost of $1.7 billion. At December 31, 2006, the fair value of such
securities was 4.9% below their collective amortized cost of $4.3 billion.
Management expects that the unrealized losses on securities at December 31, 2007 will be recovered within a
reasonable time through a typical interest rate cycle; that the Company has the ability and intent to retain these
securities until recovery of market value; and that the debt securities will be repaid in accordance with their terms.
Accordingly, management has concluded that none of the Company’s securities were other-than-temporarily
impaired at December 31, 2007.
105
NOTE 5: LOANS
The following table sets forth the composition of the loan portfolio at December 31, 2007 and 2006:
(in thousands)
Mortgage Loans:
Multi-family
Commercial real estate
Construction
1-4 family
Total mortgage loans
Net deferred loan origination (fees) costs
Mortgage loans, net
Other Loans:
Commercial and industrial
Consumer
Auto leases, net
Total other loans
Net deferred loan origination fees
Total other loans, net
Less: Allowance for loan losses
Loans, net
December 31,
2007
2006
$14,052,298
3,828,334
1,138,851
380,824
19,400,307
(1,512)
$19,398,795
$ 705,810
255,055
4,340
$ 965,205
(752)
964,453
92,794
$20,270,454
$14,529,097
3,114,440
1,102,732
230,508
18,976,777
651
$18,977,428
$ 643,116
26,598
7,079
$ 676,793
(1,330)
675,463
85,389
$19,567,502
The Company is primarily a multi-family mortgage lender, with a significant portion of its loan portfolio
secured by buildings in New York City that are largely rent-controlled or rent-stabilized. At December 31, 2007,
approximately 72% of the loan portfolio was secured by properties in New York City, with Manhattan accounting
for approximately 42% of the City’s share.
To diversify its asset mix, the Company also originates commercial real estate loans, primarily in New York
City, New Jersey, and Long Island, and, to a lesser extent, construction loans and commercial and industrial (“C&I”)
loans. Construction loans are primarily originated for land acquisition, development, and construction of multi-
family and residential tract projects in New York City and Long Island, while C&I loans are made to small and mid-
size businesses on both a secured and unsecured basis, for working capital, business expansion, and the purchase of
machinery and equipment.
As the majority of the buildings and properties securing the Company’s loans, and a majority of its customers’
businesses, are located in the Metro New York/New Jersey region, the ability of its borrowers to repay their loans,
and the value of the collateral securing such loans, may be significantly affected by local economic conditions and
changes in the local real estate market. Although the performance of the Company’s loan portfolio has been
consistently solid, the recent downturn in the credit cycle and the related decline in real estate values could have an
adverse impact of the Company’s operating results. In addition to a decline in net interest income, the Company
could experience an increase in charge-offs and/or determine that provisions for loan losses need to be made.
The Company originates one- to four-family mortgage loans on a pass-through basis, and sells such loans
shortly after closing to a third-party conduit, servicing-released. Under the conduit program, the Company sold one-
to four-family loans totaling $62.1 million, $59.0 million, and $93.2 million in 2007, 2006, and 2005, respectively,
and recorded aggregate net gains of $705,000, $693,000, and $846,000, respectively, on such sales. Loans originated
and held for sale through the conduit program are included in “consumer loans” in the preceding table. At
December 31, 2007, the Company had no such loans outstanding; at December 31, 2006, the Company had $1.5
million of one- to four-family loans held for sale.
The Company services mortgage loans for various third parties, including, but not limited to, Savings Bank
Life Insurance (“SBLI”), FNMA, FHLMC, and the State of New York Mortgage Agency (“SONYMA”). At
December 31, 2007, the unpaid principal balance of serviced loans amounted to $933.7 million; at December 31,
2006, the unpaid principal balance was $310.4 million. The custodial escrow balances maintained in connection
with such loans amounted to $5.5 million and $5.2 million, respectively, at the corresponding dates.
106
NOTE 6: ALLOWANCE FOR LOAN LOSSES
The following table summarizes activity in the allowance for loan losses for the years ended December 31,
2007, 2006, and 2005:
(in thousands)
Balance, beginning of year
Charge-offs
Allowance acquired in merger transactions
Balance, end of year
2007
$85,389
(431)
7,836
$92,794
December 31,
2006
$79,705
(420)
6,104
$85,389
2005
$78,057
(21)
1,669
$79,705
The Company made no provisions for loan losses in 2007, 2006, or 2005. Non-accrual loans amounted to
$22.2 million, $21.2 million, and $16.9 million, respectively, at December 31, 2007, 2006, and 2005. There were no
loans 90 days or more delinquent and still accruing interest at December 31, 2007 or 2006, and a single loan totaling
$10.7 million that was 90 days or more delinquent and still accruing interest at December 31, 2005.
The interest income that would have been recorded under the original terms of non-accrual loans at December
31, 2007 and the interest income actually recorded in the years ended December 31, 2007, 2006, and 2005, are
summarized below:
(in thousands)
Interest income that would have been recorded
Interest income actually recorded
Interest income foregone
2007
$1,832
(844)
$ 988
December 31,
2006
$2,214
(399)
$1,815
2005
$3,109
(319)
$2,790
The Company had no impaired loans at December 31, 2007 and $12.7 million of impaired loans at December
31, 2006. No valuation allowance was deemed to be needed at the latter date. The average balances of impaired
loans in 2007, 2006, and 2005 were $8.0 million, $19.0 million, and $17.0 million, respectively, and the interest
income recorded on these loans, which was not materially different from cash-basis interest income, amounted to
$2.0 million, $3.0 million, and $1.6 million, respectively.
In conjunction with the Synergy and Atlantic Bank transactions, the Company acquired certain loans for
which there was, at the time of acquisition, evidence of deteriorating credit quality and for which it was probable
that not all contractually required payments would be collected. Those loans are segregated from the remaining
acquired portfolios and are being accounted for under Statement of Position 03-3, “Accounting for Certain Loans or
Debt Securities Acquired in a Transfer” (“SOP 03-3”). The Company also considered if there was evidence of
deteriorating credit quality for the loans acquired in the PennFed acquisition and determined that none of these loans
were required to be accounted for in accordance with SOP 03-3.
The carrying amounts of loans accounted for under SOP 03-3 are included in “Loans, net” in the Consolidated
Statements of Condition. The contractual amounts outstanding and the carrying amounts at December 31, 2007 and
2006 of such loans are summarized as follows:
(in thousands)
Commercial and industrial loans
Construction and commercial real estate loans
Other loans
Auto leases
Total outstanding
Total carrying amount
2007
$3,146
1,480
552
122
$5,300
$3,466
2006
$3,268
189
--
2,177
$5,634
$1,933
The Company did not record any accretable yield relating to these loans.
107
The following table summarizes loans that were acquired in 2007 and 2006 for which it was probable at the
time of acquisition that not all contractually required payments would be collected:
(in thousands)
Contractually required payments receivable at acquisition:
Commercial real estate and construction loans
Other loans
Commercial and industrial loans
Total
Nonaccretable difference (expected losses and foregone interest) at acquisition
Cash flows expected to be collected at acquisition
Accretable yield (interest component of expected cash flows)
Basis in acquired loans at acquisition
2007
2006
$1,480
552
--
$2,032
504
$1,528
$ --
$1,528
$189
--
709
$898
275
$623
$ --
$623
There were no loans acquired that were not accounted for using the income recognition model of SOP 03-3. In
addition, the Company was able to reasonably estimate the cash flows expected to be collected in connection with
these loans.
NOTE 7: DEPOSITS
The following table sets forth a summary of the weighted average interest rates for each type of deposit at
December 31, 2007 and 2006:
December 31,
Amount
(dollars in thousands)
NOW and money market accounts $ 2,456,756
2,514,189
Savings accounts
6,913,036
Certificates of deposit
Non-interest-bearing accounts
1,273,352
$13,157,333
Total deposits
2007
Percent of
Total
18.67%
19.11
52.54
9.68
100.00%
(1) Excludes the effect of purchase accounting adjustments.
Weighted
Average
Rate(1)
2.84%
1.10
4.53
--
3.12%
Amount
$ 3,156,988
2,394,145
5,944,585
1,123,286
$12,619,004
2006
Weighted
Average
Percent of
Rate(1)
Total
25.02% 3.24%
18.97
47.11
8.90
0.93
4.62
--
100.00% 3.16%
At December 31, 2007 and 2006, the aggregate amounts of deposits that had been reclassified as loan balances
(i.e., overdrafts) were $6.3 million and $3.5 million, respectively.
The scheduled maturities of certificates of deposit (“CDs”) at December 31, 2007 are as follows:
(in thousands)
1 year or less
More than 1 year through 2 years
More than 2 years through 3 years
More than 3 years through 4 years
More than 4 years through 5 years
Over 5 years
Total certificates of deposit
$5,992,111
581,956
83,484
63,209
105,726
86,550
$6,913,036
The following table presents a summary of CDs in amounts of $100,000 or more, by remaining term to
maturity, at December 31, 2007:
(in thousands)
Total
0 – 3
Months
$477,308
CDs of $100,000 or More Maturing Within
6 – 12
Months
$387,418
Over 12
Months
$1,489,978
3 – 6
Months
$305,675
Total
$2,660,379
108
At December 31, 2007 and 2006, the aggregate amounts of CDs of $100,000 or more were $2.7 billion and
$2.1 billion, respectively.
Included in total deposits at December 31, 2007 and 2006 were brokered deposits totaling $590.5 million and
$943.8 million, respectively.
NOTE 8: BORROWED FUNDS
The following table summarizes the Company’s borrowed funds at December 31, 2007 and 2006:
(in thousands)
FHLB-NY advances
Repurchase agreements
Federal funds purchased
Junior subordinated debentures
Senior debt
Preferred stock of subsidiaries
Total borrowed funds
December 31,
2007
$ 7,782,390
4,411,220
--
484,843
75,219
162,000
$12,915,672
2006
$ 7,240,684
3,767,649
62,000
455,659
192,016
162,000
$11,880,008
Accrued interest on borrowed funds is included in “other liabilities” in the Consolidated Statements of
Condition, and amounted to $60.3 million and $62.2 million, respectively, at December 31, 2007 and 2006.
In 2007 and 2006, respectively, the Company recorded, in non-interest income, losses of $1.8 million and $1.9
million in connection with the write-off of unamortized issuance costs stemming from the redemption of certain
trust preferred securities. During these years, the Company also recorded respective charges of $3.2 million and
$26.5 million for the prepayment of wholesale borrowings in connection with the repositioning of the balance sheet
following the acquisitions of PennFed and Atlantic Bank.
Federal Home Loan Bank of New York Advances
FHLB-NY advances totaled $7.8 billion and $7.2 billion, respectively, at December 31, 2007 and 2006. The
contractual maturities and the next call dates of the outstanding FHLB-NY advances at December 31, 2007 were as
follows:
(dollars in thousands)
Contractual Maturity
2008
2009
2010
2011
2012
2013
2015
2016
2017
2025
Contractual Maturity
Earlier of Contractual Maturity
or Next Call Date
Weighted
Average
Interest Rate(1)
5.57%
3.86
5.63
4.77
3.93
2.64
3.79
4.44
4.23
7.82
4.39%
Amount
$ 52,368
434
449,908
414,197
200,000
9,880
400,000
2,615,000
3,640,312
291
$7,782,390
Amount
$4,366,758
2,465,433
549,908
400,000
--
--
--
--
--
291
$7,782,390
Weighted
Average
Interest Rate(1)
4.43 %
4.40
3.75
4.76
--
--
--
--
--
7.82
4.39 %
(1) Excludes the effect of purchase accounting adjustments.
FHLB-NY advances include both straight fixed-rate advances and advances under the FHLB-NY convertible
advance program, which gives the FHLB-NY the option of either calling the advance after an initial lock-out period
of up to five years and quarterly thereafter until maturity, or a one-time call at the initial call date.
109
The following table sets forth certain information regarding FHLB-NY advances at or for the years ended
December 31, 2007, 2006, and 2005:
(dollars in millions)
Average balance during the year
Maximum balance at any month-end during the year
Balance outstanding at end of year
Weighted average interest rate during the year(1)
Weighted average interest rate at end of year(1)
(1) Excludes the effect of purchase accounting adjustments.
At or For the Years Ended December 31,
2005
2007
2006
$4,609
$6,360
$7,119
5,409
7,241
7,782
5,409
7,241
7,782
4.31%
4.28%
4.46%
4.31
4.21
4.39
At December 31, 2007, the Banks had a combined overnight line of credit of $300.0 million with the FHLB-
NY. There were no borrowings under this line of credit at December 31, 2007. At December 31, 2006, borrowings
under this line of credit amounted to $196.2 million. At December 31, 2007, the Company also had access to funds
through a $200.0 million one-month facility with the FHLB-NY. There were no borrowings outstanding under this
facility at December 31, 2007 or 2006. FHLB-NY advances and overnight line-of-credit borrowings are secured by
a pledge of certain eligible collateral, which may consist of eligible loans, mortgage-related securities, and/or equity
shares in certain subsidiaries. At December 31, 2007, the Company’s FHLB-NY borrowings were collateralized by
FHLB-NY stock, a blanket assignment of qualifying mortgage loans, and securities of $28.9 million.
The interest expense on FHLB-NY advances was $304.4 million, $247.6 million, and $162.5 million,
respectively, for the years ended December 31, 2007, 2006, and 2005.
Repurchase Agreements
Repurchase agreements totaled $4.4 billion and $3.8 billion, respectively, at December 31, 2007 and 2006.
The following table provides the contractual maturities and weighted average interest rates of repurchase
agreements, and the amortized cost and fair value, including accrued interest, of the securities collateralizing the
repurchase agreements, at December 31, 2007:
(dollars in thousands)
Contractual Maturity
Over 90 days(2)
Amount
$4,411,220
Weighted
Average
Interest Rate(1)
4.27%
Amortized
Cost
$3,269,965
Fair Value
$3,226,852
Amortized
Cost
$1,533,870
Fair Value
$1,546,649
Mortgage-related
Securities
GSE Debentures and
U.S. Treasury Obligations
(1) Excludes the effect of purchase accounting adjustments.
(2) Contractual maturities range from three to 15 years.
At December 31, 2007 and 2006, the accrued interest on repurchase agreements amounted to $19.9 million
and $16.3 million, respectively. The interest expense on repurchase agreements was $153.7 million, $147.1 million,
and $159.7 million, respectively, for the years ended December 31, 2007, 2006, and 2005. At December 31, 2007,
$3.7 billion of the Company’s repurchase agreements were callable in 2008, with a weighted average interest rate of
4.24%. In 2009, $393.0 million are callable with a weighted average interest rate of 4.03%.
110
The following table sets forth certain information regarding short-term repurchase agreements (i.e., repurchase
agreements with contractual maturities of less than one year) at or for the years ended December 31, 2007, 2006,
and 2005:
(dollars in millions)
Average balance during the year
Maximum balance at any month-end during the year
Balance outstanding at end of year
Weighted average interest rate during the year(1)
Weighted average interest rate at end of year(1)
(1) Excludes the effect of purchase accounting adjustments.
Federal Funds Purchased
At or For the Years Ended December 31,
2006
$111.6
299.3
--
4.74%
--
2007
$2.9
--
--
5.34%
--
2005
$104.1
372.0
102.4
3.05%
4.31
The Company had no federal funds purchased at December 31, 2007 and $62.0 million at December 31, 2006.
The interest expense on federal funds purchased was $687,000, $1.7 million, and $101,000, respectively, for the
years ended December 31, 2007, 2006, and 2005.
In 2007, the average balance of federal funds purchased amounted to $20.8 million and had a weighted
average interest rate of 3.30%. In 2006, the average balance of federal funds purchased amounted to $38.6 million
and had a weighted average interest rate of 4.31%. All of the federal funds purchased during 2007 had contractual
maturities of less than 90 days.
111
Junior Subordinated Debentures
Junior subordinated debentures totaled $484.8 million and $455.7 million, respectively, at December 31, 2007 and 2006. The following junior subordinated
debentures were outstanding at December 31, 2007:
(dollars in thousands)
Issuer
Haven Capital Trust II
Queens Capital Trust I
Queens County Statutory Trust I
New York Community Capital
Trust V
New York Community Capital
Trust X
LIF Statutory Trust I
PennFed Capital Trust II
PennFed Capital Trust III
New York Community Capital
Trust XI
Total junior subordinated
debentures
Interest Rate
of
Capital
Securities and
Debentures(1)
10.250 %
11.045
10.600
Junior
Subordinated
Debentures
Amount
Outstanding
$ 23,333
10,309
15,464
6.000
6.591
10.600
10.180
8.241
6.480
191,722
123,712
8,122
14,031
31,139
67,011
Capital Securities
Amount
Outstanding
$ 22,550
10,000
15,000
Date of
Original Issue
May 26, 1999
July 26, 2000
Stated Maturity
June 30, 2029
July 19, 2030
First Optional
Redemption Date
June 30, 2009
July 19, 2010
September 7, 2000 September 7, 2030 September 7, 2010
183,217
November 4, 2002 November 1, 2051 November 4, 2007
120,000
7,890
13,659
30,211
December 14, 2006 December 15, 2036 December 15, 2011
September 7, 2000 September 7, 2030 September 7, 2010
March 28, 2001
June 2, 2003
June 8, 2031
June 15, 2033
June 8, 2011
June 15, 2008
65,000
April 16, 2007
June 30, 2037
June 30, 2012
$484,843
$467,527
(1) Excludes the effect of purchase accounting adjustments.
112
On November 4, 2002, the Company completed a public offering of 5,500,000 BONUSES Units, including
700,000 that were sold pursuant to the exercise of the underwriters’ over-allotment option, at a public offering price
of $50.00 per share. The Company realized net proceeds from the offering of approximately $267.3 million. Each
BONUSES Unit consists of a capital security issued by New York Community Capital Trust V, a trust formed by
the Company, and a warrant to purchase 2.4953 shares of the common stock of the Company (for a total of
approximately 13.7 million common shares) at an effective exercise price of $20.04 per share. Each capital security
has a maturity of 49 years, with a coupon, or distribution rate, of 6.00% on the $50.00 per share liquidation amount.
The warrants and capital securities were non-callable for five years from the date of issuance and were not called by
the Company when the five-year period passed on November 4, 2007.
The gross proceeds of the BONUSES Units totaled $275.0 million and were allocated between the capital
security and the warrant comprising such units in proportion to their relative values at the time of issuance. The
value assigned to the warrants was $92.4 million, and was recorded as a component of additional “paid-in capital” in
the Company’s consolidated financial statements. The value assigned to the capital security component was $182.6
million. The $92.4 million difference between the assigned value and the stated liquidation amount of the capital
securities is treated as an original issue discount and amortized to “interest expense” over the 49-year life of the
capital securities on a level-yield basis. Issuance costs related to the BONUSES Units totaled $7.7 million, with $5.1
million allocated to the capital security, and were reflected in “other assets” in the Consolidated Statements of
Condition; as of December 31, 2007, all such costs have been fully amortized. The portion of issuance costs
allocated to the warrants totaled $2.6 million and was treated as a reduction in paid-in capital.
In addition to the trust established in connection with the issuance of the BONUSES Units, the Company has
eight business trusts of which it owns all of the common securities: Haven Capital Trust II, Queens County Capital
Trust I, Queens Statutory Trust I, New York Community Capital Trust X, LIF Statutory Trust I, PennFed Capital
Trust II, PennFed Capital Trust III, and New York Community Capital Trust XI (the “Trusts”). New York
Community Capital Trust X was established on December 5, 2006, in connection with the redemptions of NYCB
Capital Trust I and New York Community Statutory Trusts I and II. New York Community Capital Trust XI was
formed on April 15, 2007 in connection with the redemptions of Haven Capital Trust I and Roslyn Preferred Trust I.
PennFed Capital Trust II and PennFed Capital Trust III were assumed by the Company in the PennFed acquisition.
The Trusts were formed for the purpose of issuing Company Obligated Mandatorily Redeemable Capital Securities
of Subsidiary Trusts Holding Solely Junior Subordinated Debentures (collectively, the “Capital Securities”), and are
described in the preceding table. Dividends on the Capital Securities are payable either quarterly or semi-annually
and are deferrable, at the Company’s option, for up to five years. As of December 31, 2007, all dividends were
current. As each of the Capital Securities was issued, the Trusts used the offering proceeds to purchase a like amount
of Junior Subordinated Deferrable Interest Debentures (the “Debentures”) of the Company. The Debentures bear the
same terms and interest rates as the related Capital Securities. The Company has fully and unconditionally
guaranteed all of the obligations of the Trusts. Under current applicable regulatory guidelines, a portion of the
Capital Securities qualifies as Tier I capital, and the remainder qualifies as Tier II capital.
The interest expense on junior subordinated debentures was $40.3 million, $42.7 million, and $37.6 million,
respectively, for the years ended December 31, 2007, 2006, and 2005.
In the second quarter of 2003, the Company entered into four interest rate swap agreements. The agreements
effectively converted four of the Company’s capital securities from fixed-rate to variable-rate instruments. Under
these agreements, which were designated and accounted for as “fair value hedges” aggregating a notional value of
$65.0 million, the Company received a fixed interest rate of 10.51% which was equal to the interest due to the
holders of the four capital securities, and paid a floating interest rate that was tied to the three-month London
Interbank Offered Rate (“LIBOR”). In accordance with SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities,” the Company concluded in the first quarter of 2006 that its interest rate swap transactions did
not qualify for the short-cut accounting method. Accordingly, during said quarter, the Company re-designated three
of the swaps associated with these transactions as fair value hedges under the long-haul accounting method, in order
to qualify them for fair value hedge accounting under SFAS No. 133, effective March 31, 2006. In connection with
this action, a pre-tax mark-to-market loss on interest rate swaps of $6.1 million was recorded in “non-interest
income” in the Consolidated Statement of Income and Comprehensive Income for the year ended December 31,
2006. In the second quarter of 2006, in connection with the repositioning of its liabilities following the Atlantic
Bank acquisition, the Company terminated its interest rate swap agreements. The termination resulted in a pre-tax
charge of $1.1 million which is recorded in “non-interest expense” in the Consolidated Statement of Income and
Comprehensive Income for the year ended December 31, 2006.
113
Senior Debt
On November 13, 2002, Roslyn Bancorp, Inc. (“Roslyn”), which merged with and into the Company on
October 31, 2003, issued $115.0 million of 5.75% unsecured senior notes at a price of 99.785%. These notes
matured on November 15, 2007. On November 21, 2001, Roslyn issued $75.0 million of 7.50% unsecured senior
notes at par, with a maturity date of December 1, 2008. Interest on such notes is paid semi-annually on June 1 and
December 1 of each year.
The interest expense on senior debt amounted to $10.1 million, $9.8 million, and $8.4 million in the years
ended December 31, 2007, 2006, and 2005, respectively.
Preferred Stock of Subsidiaries
On April 7, 2003, the Company, through its then second-tier subsidiary, CFS Investments New Jersey, Inc.,
completed the sale of $60.0 million of capital securities of Richmond County Capital Corporation in a private
placement transaction. The private placement was made to “Qualified Institutional Buyers,” as defined in Rule 144A
of the Rules and Regulations promulgated under the Securities Act of 1933, as amended (the “33 Act”). The capital
securities consisted of $10.0 million, or 100 shares, of Richmond County Capital Corporation Series B Non-
Cumulative Exchangeable Fixed-Rate Preferred Stock, stated value of $100,000 per share (the “Series B Preferred
Stock”) and $50.0 million, or 500 shares, of Richmond County Capital Corporation Series C Non-Cumulative
Exchangeable Floating-Rate Preferred Stock, stated value of $100,000 per share (the “Series C Preferred Stock”).
Dividends on the Series B Preferred Stock are payable quarterly at an annual rate of 8.25% of its stated value. The
Series B Preferred Stock may be redeemed by the Company on or after July 15, 2024. Dividends on the Series C
Preferred Stock are payable quarterly at an annual rate equal to LIBOR plus 3.25% of its stated value. The Series C
Preferred Stock may be redeemed by the Company on or after July 15, 2008. The dividend rate on the Series C
Preferred Stock resets quarterly.
On October 27, 2003, Roslyn Real Estate Asset Corp. (“RREA”), a second-tier subsidiary that was acquired
by the Company in the Roslyn merger, completed the sale of $102.0 million of capital securities in a private
placement transaction. The private placement was made to “Qualified Institutional Buyers,” as defined in Rule 144A
of the Rules and Regulations promulgated under the 33 Act. The capital securities consisted of $12.5 million, or 125
shares, of RREA Series C Non-Cumulative Exchangeable Fixed-Rate Preferred Stock, liquidation preference of
$100,000 per share (the “RREA Series C Preferred Stock”) and $89.5 million, or 895 shares, of RREA Series D
Non-Cumulative Exchangeable Floating-Rate Preferred Stock, liquidation preference of $100,000 per share (the
“RREA Series D Preferred Stock”). Dividends on the RREA Series C Preferred Stock are payable quarterly at an
annual rate of 8.95% of its stated value. The RREA Series C Preferred Stock may be redeemed by the Company on
or after September 30, 2023. Dividends on the RREA Series D Preferred Stock were payable quarterly at an annual
rate equal to 4.79% for the period from September 30, 2003 to, but excluding, December 31, 2003, and payable
thereafter at an annual rate equal to LIBOR plus 3.65% of its stated value. The RREA Series D Preferred Stock may
be redeemed by the Company on or after September 30, 2008. The dividend rate on the RREA Series D Preferred
Stock resets quarterly.
Dividends on preferred stock of subsidiaries are reported as interest expense and amounted to $15.1 million,
$14.9 million, and $12.5 million, respectively, for the years ended December 31, 2007, 2006, and 2005.
$1.0 Billion Shelf Registration Statement
On October 31, 2005, the Company filed a shelf registration statement which allows the Company to
periodically offer and sell, individually or in any combination, debt securities, trust preferred securities, warrants to
purchase other securities, depository shares, stock purchase contracts, and stock purchase units (a combination of
one or more stock purchase contracts and certain beneficial interests), preferred stock, common stock, and units
(which include a combination of any of the preceding securities), up to a total of $1.0 billion. The shelf registration
statement, which also served to de-register approximately $195 million of securities that were unissued under a
previous shelf registration statement dated May 16, 2003, was declared effective on December 21, 2005. The
Company’s ability to issue debt or equity under the shelf registration is subject to market conditions and its capital
needs. Under the shelf registration, the Company issued 24,500,000 shares of its common stock on April 18, 2006,
at an offering price of $16.35 per share, generating gross proceeds of $400.6 million.
114
NOTE 9: FEDERAL, STATE, AND LOCAL TAXES
The following table summarizes the components of the Company’s net deferred tax asset at December 31,
2007 and 2006:
(in thousands)
Deferred Tax Assets:
Allowance for loan losses
Purchase accounting adjustments on borrowed funds
Merger-related costs
Purchase accounting adjustments on loans
Compensation and related benefit obligations
Purchase accounting adjustments and net unrealized losses on securities
Other
Gross deferred tax assets
Valuation allowance
Deferred tax asset after valuation allowance
Deferred Tax Liabilities:
Prepaid pension cost
Amortizable intangibles
Premises and equipment
Undistributed earnings of subsidiaries
Other
Gross deferred tax liabilities
Net deferred tax asset
December 31,
2007
2006
$ 34,428
8,450
3,267
23,139
29,713
15,504
12,284
126,785
(3,874)
122,911
(11,153)
(32,473)
(11,852)
--
(6,233)
(61,711)
$ 61,200
$ 34,465
14,708
4,141
3,429
34,712
40,656
23,962
156,073
(10,647)
145,426
(3,460)
(30,509)
(20,213)
(25,097)
(7,654)
(86,933)
$ 58,493
The net deferred tax asset, which is included in “other assets” in the Consolidated Statements of Condition at
December 31, 2007 and 2006, represents the anticipated federal, state, and local tax benefits that are expected to be
realized in future years upon the utilization of the underlying tax attributes comprising this balance.
A valuation allowance of $3.9 million was established as an offset to the New York State (“NYS”) deferred
tax assets to reflect the likely utilization of NYS net operating loss carryforwards in a manner which would not
reduce the NYS tax liability. A valuation allowance of $2.3 million at December 31, 2006, recognized due to the
expected reversal of temporary differences in a manner which would not reduce the New York State and City (“New
York”) tax liability for 2007, was no longer necessary at December 31, 2007. The Company has determined that it is
more likely than not that all remaining temporary differences at December 31, 2007 will provide a benefit in
reducing future New York and federal tax liabilities. The gross deferred tax assets include the tax effects of net
operating loss carryforwards of $1.4 million for use in the consolidated federal tax return and $102.6 million for the
Banks’ combined NYS tax return, none of which will expire until the year 2019. There is no capital loss
carryforward to 2008. The entire carryforward from 2006 was utilized to offset capital gains realized during 2007.
The following table summarizes the Company’s income tax expense for the years ended December 31, 2007,
2006, and 2005:
(in thousands)
Federal – current
State and local – current
Total current
Federal – deferred
State and local – deferred
Total deferred
Total income tax expense
2007
$ 94,784
9,985
104,769
26,757
(8,509)
18,248
$123,017
December 31,
2006
$ 57,321
2,332
59,653
42,878
13,598
56,476
$116,129
2005
$ 67,681
3,535
71,216
78,528
2,885
81,413
$152,629
115
The following table presents a reconciliation of statutory federal income tax expense to combined effective
income tax expense for the years ended December 31, 2007, 2006, and 2005:
(in thousands)
Statutory federal income tax expense at 35%
State and local income taxes, net of federal income tax benefit
Effect of tax deductibility of ESOP
Non-taxable income on BOLI
Federal tax credits
Other, net
Total income tax expense
2007
$140,735
959
(3,778)
(9,150)
(5,766)
17
$123,017
December 31,
2006
$122,050
10,355
(2,650)
(8,269)
(6,061)
704
$116,129
2005
$155,650
4,173
6,941
(7,885)
(5,614)
(636)
$152,629
FIN 48 prescribes a recognition threshold and measurement attribute for use in connection with the obligation
of a company to recognize, measure, present, and disclose in its financial statements uncertain tax positions that the
company has taken or expects to take on a tax return. Upon adoption of FIN 48, only tax positions that meet a “more
likely than not” threshold at the effective date may be recognized or may continue to be recognized. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The Company’s adoption of FIN 48 on January 1,
2007 decreased its income tax liability for unrecognized tax benefits by $4.1 million through a $3.5 million
reduction in the opening balance of goodwill and a $567,000 increase in the opening balance of retained earnings.
After its adoption of FIN 48, the Company had $26.8 million of unrecognized gross tax benefits on January 1, 2007.
As of December 31, 2007, the Company had $24.7 million of unrecognized gross tax benefits.
As a result of developments and settlements of tax audits conducted by the IRS and New York, the Company
adjusted its liability for unrecognized tax benefits and related interest accrual during 2007. These adjustments had an
immaterial impact on the Company’s tax expense for 2007 and on its goodwill balances.
The total amount of net unrecognized tax benefits that would affect the effective tax rate, if recognized, would
be $8.3 million, with the balance of such net unrecognized tax benefits relating to potential adjustments to goodwill
or paid-in capital.
Interest and penalties (if any) related to the underpayment of income taxes are classified as a component of
income tax expense in the Consolidated Statements of Income and Comprehensive Income. Accrued interest on tax
liabilities was $2.0 million at December 31, 2007 and $1.9 million at January 1, 2007.
The following table summarizes changes in the liability for unrecognized gross tax benefits for 2007:
(in thousands)
Uncertain tax positions at beginning of year
Additions for tax positions relating to current year operations
Additions for tax positions relating to prior tax years
Subtractions for tax positions relating to prior tax years
Reductions in balance due to settlements
Uncertain tax positions at December 31, 2007
For the Year Ended
December 31, 2007
$ 26,753
--
8,254
(38)
(10,265)
$ 24,704
The Company and its acquired companies have filed tax returns in many states. The following are the more
significant tax filings which are open for examination:
• Federal tax filings of the Company and acquired companies for the tax years 2002 through the present;
• New York City tax filings of the Company for the tax years 2005 through the present;
• New York City tax filings of acquired companies for varying tax periods, including 2001 through the
present; and
• New Jersey tax filings of the Company and acquired companies for varying periods, including 2003
through the present.
116
In addition, there are tax receivables of $36.8 million from various carryback claims and amended returns
which are also subject to examination and can be disallowed based on findings relating to the determination of tax in
the carryback or amended tax years.
It is reasonably possible that there will be developments within the next twelve months, including audit
resolutions, which will necessitate an adjustment to the balance of unrecognized tax benefits. The Company believes
that the range of possible adjustments for each tax position is not significant when compared to the aggregate
balance and that such adjustments would not materially impact its results of operations during this time frame.
As a savings institution, the Community Bank is subject to special provisions in the federal and New York tax
laws regarding its tax bad debt reserves and, for New York purposes, its allowable tax bad debt deduction. At each
of December 31, 2007 and 2006, the Community Bank’s federal, New York State, and New York City tax bad debt
base-year reserves were $45.1 million, $109.7 million, and $121.2 million, respectively. Related net deferred tax
liabilities of $15.8 million, $5.3 million, and $2.1 million, respectively, have not been recognized since the
Community Bank does not expect that these reserves will become taxable in the foreseeable future. Under the tax
laws, events that would result in taxation of certain of these reserves include (1) redemptions of the Community
Bank’s stock or certain excess distributions by the Community Bank to the Company; and (2) failure of the
Community Bank to maintain a specified qualifying assets ratio or meet other thrift definition tests for New York
tax purposes.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Pledged Assets
At December 31, 2007 and 2006, the Company had pledged mortgage-related securities held to maturity with
carrying values of $2.4 billion and $1.4 billion at the respective dates. The Company also had pledged other
securities held to maturity with carrying values of $1.5 billion and $1.2 billion at the corresponding dates. In
addition, the Company had pledged available-for-sale mortgage-related securities and other securities with
respective carrying values of $944.2 million and $140.0 million at December 31, 2007, and $1.6 billion and $102.1
million at December 31, 2006. The pledged securities primarily serve as collateral for the Company’s repurchase
agreements.
Loan Commitments
At December 31, 2007 and 2006, the Company had commitments to originate loans, including unadvanced
lines of credit, of approximately $1.2 billion and $1.2 billion, respectively. The majority of the outstanding loan
commitments at December 31, 2007 had an adjustable rate of interest, and were expected to close within 90 days.
The Company had no commitments to originate loans held for sale at December 31, 2007.
Lease and License Commitments
At December 31, 2007, the Company was obligated under various non-cancelable operating lease and license
agreements with renewal options on properties used primarily for branch operations. The Company currently
expects to renew such agreements upon their expiration in the normal course of business. The agreements contain
periodic escalation clauses that provide for increases in the annual rent, commencing at various times during the
lives of the agreements, which are primarily based on increases in real estate taxes and cost-of-living indices.
The projected minimum annual rental commitments under these agreements, exclusive of taxes and other
charges, are summarized as follows:
(in thousands)
2008
2009
2010
2011
2012
2013 and thereafter
Total minimum future rentals
$ 21,739
20,766
19,250
17,636
15,973
58,800
$154,164
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The rental expense under these leases is included in “occupancy and equipment expense” in the Consolidated
Statements of Income and Comprehensive Income, and amounted to approximately $22.9 million, $20.8 million,
and $16.1 million in the years ended December 31, 2007, 2006, and 2005, respectively. Rental income on bank-
owned properties, netted in occupancy and equipment expense, was approximately $2.7 million, $1.8 million, and
$1.8 million in the corresponding periods. Minimum future rental income under non-cancelable sublease agreements
aggregated $3.5 million at December 31, 2007.
On December 15, 2000, the Company relocated its corporate headquarters to the former headquarters of
Haven Bancorp, Inc. (“Haven”) in Westbury, New York. Haven’s primary subsidiary, CFS Bank, had purchased the
office building and land in December 1997 under a lease agreement and Payment-in-Lieu-of-Tax (“PILOT”)
agreement with the Town of Hempstead Industrial Development Agency (the “IDA”). Under the IDA and PILOT
agreements, the Company sold the building and land to the IDA and is leasing them for $1.00 per year for a lease
term that was initially scheduled to expire on December 31, 2007 and that has been extended to December 31, 2008.
The Company will repurchase the building and land for $1.00 upon expiration of the extended lease term in
exchange for IDA financial assistance in the event that the Company does not enter into a new IDA or PILOT
agreement.
Financial Guarantees
The Company provides guarantees and indemnifications to its customers to enable them to complete a wide
variety of business transactions and to enhance their credit standing. In accordance with FASB Interpretation No. 45,
“Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others,” such guarantees are recorded at their respective fair values in “other liabilities” in the
Consolidated Statements of Condition, and amounted to $372,000 at December 31, 2007. The Company deems the
fair value of the guarantees to equal the consideration received.
The following table summarizes the Company’s guarantees and indemnifications at December 31, 2007:
(in thousands)
Financial stand-by letters of credit
Performance stand-by letters of credit
Commercial letters of credit
Loans with recourse/indemnification
Expires Within
One Year
$27,358
9,622
30,860
--
$67,840
Expires After
One Year
$ 950
5,010
--
191
$6,151
Total
Outstanding
Amount
$28,308
14,632
30,860
191
$73,991
Maximum
Potential Amount
of Future
Payments
$28,308
14,632
30,860
191
$73,991
The maximum potential amount of future payments represents the notional amounts that could be funded and
lost under the guarantees and indemnifications if there were a total default by the guaranteed parties or
indemnification provisions were triggered as applicable, without consideration of possible recoveries under recourse
provisions or from collateral held or pledged.
The Company collects a fee upon the issuance of letters of credit. These fees are initially recorded by the
Company as a liability and are recognized as income at the expiration date of the respective guarantees. In addition,
the Company requires adequate collateral, typically in the form of real property or personal guarantees, upon its
issuance of performance, financial stand-by, and commercial letters of credit. In the event that a borrower defaults,
loans with recourse or indemnification obligate the Company to purchase loans that the Company has sold or
otherwise transferred to a third party. Also outstanding at December 31, 2007, were $262,000 of bankers
acceptances.
In 2007, the Company recorded in non-interest income a $1.0 million Visa litigation charge relating to its
membership interest in Visa U.S.A., a Visa, Inc. subsidiary. In October 2007, Visa completed a reorganization in
contemplation of its initial public offering, which is expected to occur in 2008. As part of that reorganization, the
Community Bank and the former Synergy Bank, along with many other banks across the nation, received shares of
common stock of Visa, Inc. In accordance with GAAP, the Company has not yet recognized any value for its
common stock ownership interest in Visa, Inc.
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Visa claims that all of the Visa U.S.A. member banks are obligated to share with it in losses stemming from
certain litigation against it and certain other named member banks (the “Covered Litigation”). Visa is expected to set
aside a portion of the proceeds from its initial public offering in an escrow account to fund any judgments or
settlements that may arise out of the Covered Litigation, and plans to reduce the amount of shares to be allocated to
the Visa U.S.A. member banks by amounts necessary to cover such liability. Nevertheless, Visa member banks were
required to record a liability for the fair value of their related contingent obligation to Visa, based on the percentage
of their membership interest. The Visa litigation charge was established based on the Company’s best estimate of
the combined membership interests of the Community Bank and the former Synergy Bank with regard to both
settled and pending litigation in which Visa is involved.
Legal Proceedings
In the ordinary course of business, the Company and its subsidiaries are defendants in or parties to a number
of legal proceedings. We believe we have meritorious defenses with respect to these cases and intend to defend them
vigorously. At the present time, management is not in a position to determine whether resolution of these cases will
have a material adverse effect on the Company.
In February 1983, the contents of various safe deposit boxes were burglarized at a branch office of CFS Bank,
now the Queens County Savings Bank division of the Community Bank. The Community Bank is a defendant in a
lawsuit, brought in Supreme Court, Queens County, New York whereby the plaintiffs have alleged CFS Bank was
negligent in safeguarding the safe deposit box contents and are seeking recovery of approximately $12.3 million in
damages. This amount does not include statutory prejudgment interest of 9% per annum from the date of loss that
could be awarded on a judgment amount. Plaintiffs also named Wells Fargo Alarm Services, a division of Baker
Protection Services, Inc. (“Wells Fargo”), the alarm company, as a defendant. CFS Bank filed a cross claim against
Wells Fargo alleging that its gross negligence caused or contributed to the loss. The Court entered summary
judgment dismissing plaintiffs’ claims against Wells Fargo, but denied Wells Fargo’s motion to dismiss CFS Bank’s
cross claim for gross negligence against Wells Fargo. That ruling was affirmed on appeal. Discovery is complete
and the plaintiffs have requested a jury trial, which trial has not been scheduled. The ultimate liability, if any, from
the disposition of the pending claims cannot presently be determined.
In 2004, the Company and various executive officers and directors were named in certain putative securities
laws class action lawsuits brought in the United States District Court, Eastern District of New York, and one class
action lawsuit brought in the Supreme Court of the State of New York, Kings County that was later removed by the
defendants to federal court. On August 9, 2005, the Court consolidated the actions and appointed a Lead Plaintiff.
On October 6, 2005, the Lead Plaintiff filed a consolidated amended complaint on behalf of a putative class of
persons and entities, other than defendants, who purchased or otherwise acquired the Company’s securities from
June 27, 2003 to July 1, 2004, alleging claims under Sections 11 and 12 of the Securities Act of 1933, Sections 10
and 14 of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated pursuant to Section 10 of the
Securities Exchange Act of 1934. Plaintiffs allege, among other things, that the Registration Statement issued in
connection with the Company’s merger with Roslyn Bancorp, Inc. and other documents and statements made by
executive management were inaccurate and misleading, contained untrue statements of material facts, omitted other
facts necessary to make the statements made not misleading, and concealed and failed to adequately disclose
material facts, pertaining to, among other things, the Company’s business plans and its exposure to interest rate risk.
On September 18, 2006, the Court entered an order dismissing the action in its entirety on the ground that the
complaint failed to plead any actionable misstatement or omission. The Lead Plaintiff filed a notice of appeal from
that dismissal. Also, the plaintiff in the action removed from state court filed a notice of appeal from the Court’s
decision insofar as it declined to remand that action to state court. Each of these appeals subsequently was
withdrawn. No further appeal remains pending and the matter has been terminated.
Based upon the same facts and allegations described in the prior paragraph, on November 9, 2004, an
additional suit was filed in the Eastern District of New York alleging that the Company and various of its officers
violated the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The suit was brought on
behalf of a putative class of participants in the New York Community Bank Employee Savings Plan. The defendants
moved to dismiss the ERISA action. On February 6, 2006, the Court granted in part and denied in part the motion to
dismiss. The Court ruled that one of the two putative class representatives did not have standing under ERISA, but
found that there were issues of fact concerning the standing of the other putative class representative. After the
parties engaged in limited discovery concerning the plaintiff’s standing under ERISA, defendants renewed their
motion to dismiss. On October 25, 2006, the Court entered an order dismissing the remaining claims in this action
119
on the ground that the plaintiffs lack standing to pursue the claims. On November 20, 2006, plaintiffs filed a notice
of appeal, and on December 20, 2007, the Second Circuit issued its order affirming the district court’s dismissal of
the plaintiffs’ claims.
On May 6, 2005, sixteen of the Company’s current or former officers and directors were named as defendants
in a putative derivative action filed by an alleged shareholder on behalf of the Company in the United States District
Court for the Eastern District of New York. The same shareholder previously had sent the Company’s Board of
Directors a letter reciting many of the allegations made in the putative class actions, and demanding that the Board
take a variety of actions allegedly required to address those allegations. The Board appointed a committee of
independent directors to evaluate what response, if any, to make to this letter. Nevertheless, the putative derivative
plaintiff filed this action repeating the same allegations, and purporting to seek on behalf of the Company money
damages, restitution, and equitable relief against the defendants for various alleged breaches of duty and alleged
corporate waste. On August 15, 2005, the plaintiff filed an amended complaint, repeating the same substantive
allegations of fact. On September 30, 2005, the defendants filed motions to dismiss this action, which motions
remain pending.
Management believes that the defendants have meritorious defenses against each of the continuing actions and
will vigorously defend both the substantive and procedural aspects of these litigations.
NOTE 11: EMPLOYEE BENEFITS
Retirement Plans
On April 1, 2002, three separate pension plans for employees of the former Queens County Savings Bank, the
former CFS Bank, and the former Richmond County Savings Bank were merged together and renamed the “New
York Community Bancorp Retirement Plan” (the “New York Community Plan”). The pension plan for employees
of the former Roslyn Savings Bank was merged into the New York Community Plan on September 30, 2004. The
New York Community Plan covers substantially all employees who had attained minimum age, service, and
employment status requirements prior to the date when the individual plans were frozen by the banks of origin. Once
frozen, the plans ceased to accrue additional benefits, service, and compensation factors, and became closed to
employees who would otherwise have met eligibility requirements after the “freeze” date. In connection with the
acquisition of Atlantic Bank, the Company froze the Atlantic Bank Retirement Plan (the “Atlantic Plan”) on
April 28, 2006. The New York Community Plan and the former Atlantic Plan (collectively, the “Plans”) are
presented on a consolidated basis in the disclosures that follow, except where otherwise noted. The Plans are subject
to the provisions of ERISA.
The following tables set forth certain information regarding the Plans, based on an October 1st measurement
date:
(in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year
Interest cost
Actuarial gain
Annuity payments
Settlements
Acquisition of Atlantic Plan
Benefit obligation at end of year
Change in Plan Assets:
Fair value of assets at beginning of year
Actual return on plan assets
Annuity payments
Settlements
Administrative expenses
Acquisition of Atlantic Plan
Fair value of assets at end of year
Funded status (included in other assets)
2007
2006
$111,129
6,340
(4,435)
(5,588)
(1,446)
--
$106,000
$124,784
16,995
(5,588)
(1,446)
(306)
--
$134,439
$28,439
$ 88,605
5,386
(4,448)
(4,537)
(459)
26,582
$111,129
$ 92,285
6,877
(4,537)
(459)
--
30,618
$124,784
$13,655
120
Changes recognized in other comprehensive income for the year:
Amortization of prior service cost
Amortization of actuarial gain
Net actuarial gain arising during the year
Total recognized in other comprehensive income for the year
(pre-tax)
$ (202)
(1,011)
(10,801)
$(12,014)
Accumulated other comprehensive loss (pre-tax) not yet recognized
in net periodic benefit cost:
Prior service cost
Actuarial loss, net
Total accumulated other comprehensive loss (pre-tax)
$ 650
10,055
$10,705
$ 852
21,867
$22,719
The estimated net actuarial loss and prior service cost for the defined benefit pension plan that will be
amortized from accumulated other comprehensive loss into net periodic benefit cost in 2008 are $196,000 and
$202,000, respectively.
The following table indicates the discount rate used to determine the benefit obligation at:
Discount rate
December 31,
2007
6.3%
2006
5.9%
The discount rate reflects rates at which the benefit obligation could be effectively settled. In determining this
rate, the Company considers rates of return on high-quality fixed-income investments currently available and
expected to be available during the period to payment of the pension benefits. The expected future payments are
discounted based on a portfolio of high-quality rated bonds (AA or better) for which the Company relies on the
Citigroup Pension Liability Index, which is developed from the Citigroup Pension Discount Curve published as of
the measurement date.
The components of net periodic pension credit were as follows for the years indicated:
(in thousands)
Components of Net Periodic Pension Credit:
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of unrecognized actuarial loss
Net periodic pension credit
Years Ended December 31,
2006
2007
2005
$ 6,340
(10,323)
202
1,011
$ (2,770)
$ 5,386
(8,940)
202
1,524
$(1,828)
$ 4,922
(7,679)
202
1,047
$(1,508)
The following table indicates the assumptions used in determining the net periodic benefit cost for the years
indicated:
Years Ended December 31,
2006
2007
2005
Weighted Average Assumptions:
Discount rate
Expected rate of return on plan assets
5.9%
8.6
5.7%
8.6
6.0%
9.0
New York Community Plan assets are invested in six diversified investment funds of the RSI Retirement
Trust (the “Trust”), a no-load series open-ended mutual fund, and in the Company’s common stock. At
December 31, 2007 and 2006, the amounts of New York Community Plan assets invested in the Company’s
common stock were $10.6 million and $9.6 million, respectively. The investment funds include four equity mutual
funds and two bond mutual funds, each with its own investment objectives, strategies, and risks, as detailed in the
Trust’s prospectus. The Trust has been given partial discretion by the Plan Sponsor to determine the appropriate
121
strategic asset allocation versus plan liabilities, as governed by the Trust’s Statement of Investment Objectives and
Guidelines (the “Guidelines”).
The long-term investment objective is to be invested 65% in equity securities (equity mutual funds) and 35%
in debt securities (bond mutual funds). If the New York Community Plan is underfunded under the Guidelines, the
bond fund portion will be temporarily increased to 50% in order to lessen asset value volatility. When the New York
Community Plan is no longer underfunded, the bond fund portion will be returned to 35%. The New York
Community Plan is not currently underfunded under the Guidelines. Asset rebalancing is scheduled when the
investment mix varies more than 10% from the target (i.e., within a 20% target range).
The investment goal of the New York Community Plan is to achieve investment results that will contribute to
the proper funding of the pension plan by exceeding the rate of inflation over the long term. In addition, investment
managers for the Trust are expected to provide above average performance when compared to their peers.
Performance volatility is monitored, and risk and volatility are further managed by the distinct investment objectives
of each of the Trust funds and by the diversification within each fund.
Atlantic Plan assets are invested in seven diversified investment funds managed by SEI Investment
Management Co., a series of no-load open-ended mutual funds, and in the Company’s common stock. At
December 31, 2007, the amount of Atlantic Plan assets invested in the Company’s common stock was $3.7 million.
The investment funds include four equity mutual funds and three bond mutual funds, each with its own investment
objectives, investment strategies, and risks, as detailed in the funds’ prospectuses.
The current investment objective of the Atlantic Plan is to be invested 60% in equity securities (i.e., equity
mutual funds) and 40% in debt securities (i.e., bond mutual funds). The portfolio is reviewed for rebalancing
monthly, with interim adjustments made when the investment mix varies more than 2% from the target (i.e., within a
4% target range).
The investment goal is to achieve investment results that will contribute to the proper funding of the Atlantic
Plan by exceeding the rate of inflation over the long term. In addition, investment managers are expected to provide
above-average performance when compared to their peers. Performance volatility is monitored, and risk and
volatility are further managed by the distinct investment objectives of each fund and by the diversification within
each fund.
Current Asset Allocation
At October 1, 2007 and 2006, the weighted average asset allocations for the New York Community Plan and
the Atlantic Plan were as follows:
Asset Category:
Equity securities
Debt securities
Total
New York Community
Atlantic
Plan Assets at
October 1, 2007
Plan Assets at
October 1, 2006
Plan Assets at
October 1, 2007
Plan Assets at
October 1, 2006
71%
29
100%
69%
31
100%
60%
40
100%
62%
38
100%
Determination of Long-term Rate of Return
The long-term rate-of-return-on-assets assumption was set based on historical returns earned by equities and
fixed income securities, and adjusted to reflect expectations of future returns as applied to the New York
Community Plan’s target allocation of asset classes. Equities and fixed income securities were assumed to earn real
rates of return in the ranges of 5-9% and 2-6%, respectively. The long-term inflation rate was estimated to be 3%.
When these overall return expectations are applied to the New York Community Plan’s target allocation, the result
is an expected rate of return of 7% to 11%.
In determining the long-term rate of return for the Atlantic Plan assets, the Company considered the current
level of expected returns on risk-free investments (primarily government bonds), the historical level of risk
premiums associated with other asset classes, and the expectations of future returns over a 20-year time horizon on
122
each asset class, based on the views of leading financial advisors and economists. The expected return for each asset
class was then weighted based on the Atlantic Plan’s target asset allocation.
Expected Contributions
The Company expects to contribute $39.2 million to the Plans in 2008.
Expected Future Annuity Payments
The following annuity payments, which reflect expected future service, as appropriate, are expected to be paid
by the Plans during the years indicated:
(in thousands)
2008
2009
2010
2011
2012
2013-2017
Total
Qualified Savings Plans
$ 7,037
6,482
6,612
6,837
7,551
36,147
$70,666
The Company maintains a defined contribution qualified savings plan (the “New York Community Bank
Employee Savings Plan”) in which all full-time employees are able to participate after one year of service and
having attained age 21. No matching contributions have been made by the Company to this plan since 1993.
In connection with the Atlantic Bank acquisition, all matching contributions to the former Atlantic Bank
401(k) Savings Plan were suspended, effective June 30, 2006. As a result, Company contributions for the year ended
December 31, 2006 consisted of $116,000 for the months of May and June.
Deferred Compensation Plan
The Company maintains an unfunded deferred compensation plan for former directors of the Company. The
unfunded balances are reflected in “other liabilities” in the Company’s Consolidated Statements of Condition and
amounted to $203,000 and $374,000 at December 31, 2007 and 2006, respectively.
Post-retirement Health and Welfare Benefits
The Company offers certain post-retirement benefits, including medical, dental, and life insurance, to retired
employees, depending on age and years of service at the time of retirement (the “Health & Welfare Plan”). The costs
of such benefits are accrued during the years that an employee renders the necessary service.
123
The following tables set forth certain information regarding the Health & Welfare Plan based on an
October 1st measurement date:
(in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial loss
Premiums/claims paid
Plan amendments
Acquisition of Atlantic Plan
Benefit obligation at end of year
Change in Plan Assets:
Fair value of assets at beginning of year
Employer contribution
Premiums/claims paid
Fair value of assets at end of year
Funded status (included in other liabilities)
Changes recognized in other comprehensive income for the year:
Prior service cost arising during the year
Amortization of prior service cost
Amortization of actuarial gain
Net loss arising during the year
Total recognized in other comprehensive income for the year (pre-tax)
Accumulated other comprehensive loss (pre-tax) not yet recognized in net
periodic benefit cost:
Prior service cost
Actuarial loss (net)
Total accumulated other comprehensive loss (pre-tax)
2007
2006
$20,243
9
1,139
5
(1,622)
(3,623)
--
$16,151
$ --
1,622
(1,622)
$ --
$(16,151)
$(3,623)
(42)
(117)
5
$(3,777)
$(3,588)
3,595
$ 7
$18,234
8
1,050
909
(2,071)
--
2,113
$20,243
$ --
2,071
(2,071)
$ --
$(20,243)
$ 77
3,707
$3,784
The estimated net actuarial loss and prior service liability that will be amortized from accumulated other
comprehensive loss into net periodic benefit cost over the next fiscal year amount to $138,000 and $249,000,
respectively.
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The following table indicates the components of net periodic benefit cost for the years indicated:
(in thousands)
Components of Net Periodic Benefit Cost:
Service cost
Interest cost
Amortization of prior service cost
Amortization of unrecognized actuarial loss
Net periodic benefit cost
Years Ended December 31,
2006
2005
2007
$ 9
1,139
42
117
$1,307
$ 8
1,050
43
69
$1,170
$ 9
946
43
--
$998
The following table indicates the assumptions used in determining the net periodic benefit cost for the years
indicated:
Years Ended December 31,
2006
2005
2007
Weighted Average Assumptions:
Discount rate
Current medical trend rate
5.9%
9.0
5.5%
9.5
6.0%
10.0
At December 31, 2007 and 2006, the discount rates were 6.1% and 5.9%, respectively.
Had the assumed medical trend rate increased by 1% in each future year, the accumulated post-retirement
benefit obligation at December 31, 2007 would have increased by $295,000; the aggregate of the benefits earned and
the interest components of 2007 net post-retirement benefit cost would have increased by $33,000. Had the assumed
medical trend rate decreased by 1% in each future year, the accumulated post-retirement benefit obligation at
December 31, 2007 would have declined by $492,000; the aggregate of the benefits earned and the interest
components of 2007 net post-retirement benefit cost would have declined by $32,000.
The impact of applying FASB Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to
The Medicare Prescription Drug, Improvement and Modernization Act of 2003,” to the Company’s accumulated
post-retirement benefit obligation as of December 31, 2007 was a $766,000 reduction in said obligation and a
$310,000 reduction in the net periodic benefit cost for 2007.
Investment Policies and Strategies
The Health & Welfare Plan is an unfunded non-qualified pension plan and is not expected to hold assets for
investment at any time. Any contributions made to the Health & Welfare Plan will be used to immediately pay plan
premiums and claims as they come due.
Expected Contributions
The Company expects to contribute $1.8 million to the Health & Welfare Plan to pay premiums and claims for
the fiscal year ending December 31, 2008.
Expected Future Payments for Premiums and Claims
The following amounts are expected to be paid for premiums and claims during the years indicated under the
Health & Welfare Plan:
(in thousands)
2008
2009
2010
2011
2012
2013-2017
Total
$ 1,774
1,726
1,686
1,604
1,406
6,386
$14,582
125
NOTE 12: STOCK-RELATED BENEFIT PLANS
New York Community Bank Employee Stock Ownership Plan
At the time of the Community Bank’s conversion to stock form, the Company loaned $19.4 million to the
New York Community Bank Employee Stock Ownership Plan (the “ESOP”) to purchase 18,583,440 shares of the
Company’s common stock. In the second quarter of 2002, the Company loaned an additional $14.8 million to the
ESOP for the purchase of 906,667 shares of the common stock that were sold in a secondary offering on May 14,
2002. In 2002, the two loans were consolidated into a single loan which is being repaid at a fixed interest rate of
4.75% over a period of time not to exceed 30 years.
The Community Bank is obligated to repay the loan by making periodic contributions. The obligation to make
such contributions is reduced to the extent of any investment earnings realized on such contributions and any
dividends paid on shares held in the unallocated ESOP share account. At December 31, 2007 and 2006, the loan had
outstanding balances of $2.8 million and $4.1 million, respectively.
As the loan is repaid, shares are released from a suspense account and allocated among participants on the
basis of compensation, as described in the ESOP, in the year of allocation. The Community Bank made no
contributions to the ESOP during 2007, 2006, or 2005. The investment income and dividends on ESOP shares that
were used for debt service in 2007, 2006, and 2005 amounted to approximately $1.5 million, $2.3 million, and $8.1
million, respectively.
All full-time employees who have attained 21 years of age and who have completed twelve consecutive
months of credited service are eligible to participate in the ESOP, with benefits vesting on a seven-year basis,
starting with 20% in the third year of employment and continuing in 20% increments in each successive year.
Benefits are payable upon death, retirement, disability, or separation from service, and may be paid in stock.
However, in the event of a change in control, as defined in the ESOP, any unvested portion of benefits shall vest
immediately.
In 2007 and 2006, the Company allocated 482,764 and 721,834 shares, respectively, to participants in the
ESOP. At December 31, 2007, there were 14,776,066 shares allocated and 977,800 shares remaining for future
allocation, with a market value of $17.2 million. The Community Bank recognizes compensation expense for the
ESOP based on the average market price of the Company’s common stock during the year at the date of allocation.
For the years ended December 31, 2007, 2006, and 2005, the Company recorded ESOP-related compensation
expense of $8.6 million, $12.0 million, and $43.7 million, respectively. Included in the respective amounts were
special merger-related ESOP allocation expenses of $2.2 million, $5.7 million, and $36.6 million, respectively.
Supplemental Executive Retirement Plan
In 1993, the Community Bank also established a Supplemental Executive Retirement Plan (“SERP”), which
provided additional unfunded, non-qualified benefits to certain participants in the ESOP in the form of Company
common stock. The SERP was frozen in 1999. At both December 31, 2007 and 2006, the SERP maintained $3.1
million of trust-held assets, based upon the cost of said assets. Trust-held assets, consisting entirely of Company
common stock, amounted to 959,917 and 906,731 shares at December 31, 2007 and 2006, respectively. The cost of
these shares is reflected as contra-equity and additional paid-in capital in the Consolidated Statements of Condition.
The Company recorded no SERP-related compensation expense in 2007, 2006, or 2005.
Stock Incentive and Stock Option Plans
At December 31, 2007, the Company had 8,226,509 shares available for grant as options, restricted stock, or
other forms of related rights under the New York Community Bancorp, Inc. 2006 Stock Incentive Plan (the “2006
Stock Incentive Plan”), which was approved by the Company’s shareholders at its Annual Meeting on June 7, 2006.
During 2007, 732,991 shares of restricted stock were granted under the 2006 Stock Incentive Plan, with an average
fair value of $17.69 per share on the grant date; 206,900 shares, 485,091 shares, 12,000 shares, and 29,000 shares of
such restricted stock vests periodically over a span of two, three, four, and five years, respectively. Compensation
cost related to the restricted stock grants is recognized on a straight-line basis over the vesting period, and totaled
$3.7 million and $43,000 for the years ended December 31, 2007 and 2006, respectively.
126
A summary of activity with regard to restricted stock awards in the year ended December 31, 2007 is
presented in the following table:
Unvested at beginning of year
Granted
Vested
Cancelled
Unvested at end of year
For the Year Ended
December 31, 2007
Number of Shares
47,000
732,991
(14,500)
(7,500)
757,991
Weighted Average
Grant Date
Fair Value
$16.53
17.69
16.54
17.80
17.64
As of December 31, 2007, unrecognized compensation cost relating to unvested restricted stock totaled $9.9
million and will be recognized over a remaining weighted average period of 2.1 years.
In addition, the Company had eleven stock option plans at December 31, 2007: the 1993 and 1997 New York
Community Bancorp, Inc. Stock Option Plans; the 1993 and 1996 Haven Bancorp, Inc. Stock Option Plans; the
1998 Richmond County Financial Corp. Stock Compensation Plan; the T R Financial Corp. 1993 Incentive Stock
Option Plan; the Roslyn Bancorp, Inc. 1997 and 2001 Stock-based Incentive Plans; the 1998 Long Island Financial
Corp. Stock Option Plan; and the 2003 and 2004 Synergy Financial Group Stock Option Plans (all eleven plans
collectively referred to as the “Stock Option Plans”). All stock options granted under the Stock Option Plans expire
ten years from the date of grant.
At the time of grant, all options were to have vested in whole or in part over two to five years from the date of
issuance, with all options becoming 100% exercisable in the event that employment were terminated due to death,
disability, normal retirement, or in the event of a change in control of the Community Bank or the Company. On
December 30, 2005, the Board of Directors of the Company accelerated the vesting of, and vested, all unvested
stock options that were outstanding at that date. A total of 1.4 million options held by 179 individuals were impacted
by the Acceleration. All other terms and conditions of the accelerated options remain unchanged. As a result of the
Acceleration, the Company was able to avoid recognizing compensation expense that it otherwise would have had to
recognize in 2006 and 2007 under SFAS No. 123R.
In connection with its adoption of SFAS No. 123R on January 1, 2006, using the modified prospective
approach, the Company recognizes compensation costs related to share-based payments at fair value on the date of
grant and recognizes such costs in the financial statements over the vesting period during which the employee
provides service in exchange for the award. However, as there were no unvested options at January 1, 2006, or at
any time during 2006 or 2007, the Company did not record any compensation and benefits expense relating to stock
options during those years.
Currently, the Company issues new shares of common stock at market value to satisfy the exercise of options.
The Company may also use common stock held in Treasury to satisfy the exercise of options. In such event, the
difference between the average cost of Treasury shares and the exercise price is recorded as an adjustment to
retained earnings or paid-in capital on the date of exercise. At December 31, 2007, 2006, and 2005, respectively,
there were 15,763,696; 19,019,717; and 20,313,114 stock options outstanding. The number of shares available for
future issuance under the Stock Option Plans was 144,757 at December 31, 2007.
127
The status of the Stock Option Plans at December 31, 2007 and changes that occurred during the year ended at
that date are summarized below:
Stock options outstanding, beginning of year
Assumed in merger transaction
Exercised
Forfeited
Stock options outstanding, end of year
Options exercisable at year-end
For the Year Ended
December 31, 2007
Number of Stock
Options
19,019,717
424,503
(3,097,775)
(582,749)
15,763,696
15,763,696
Weighted Average
Exercise Price
$15.12
10.12
14.57
16.25
15.05
15.05
The intrinsic value of stock options outstanding and exercisable at December 31, 2007 was $43.9 million. The
intrinsic values of options exercised during the years ended December 31, 2007 and 2006 were $9.1 million and $5.8
million, respectively.
NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” requires the disclosure of fair value
information about the Company’s on- and off-balance-sheet financial instruments. Quoted market prices, when
available, are used as the measure of fair value. In cases where quoted market prices are not available, fair values are
based on present-value estimates or other valuation techniques. Such fair values are significantly affected by the
assumptions used, the timing of future cash flows, and the discount rate.
Because assumptions are inherently subjective in nature, estimated fair values cannot be substantiated by
comparison to independent market quotes. Furthermore, in many cases, the estimated fair values provided would not
necessarily be realized in an immediate sale or settlement of the instrument.
The following table summarizes the carrying values and estimated fair values of the Company’s on-balance-
sheet financial instruments at December 31, 2007 and 2006:
(in thousands)
Financial Assets:
Cash and cash equivalents
Securities held to maturity
Securities available for sale
FHLB-NY stock
Loans, net
Financial Liabilities:
Deposits
Borrowed funds
Mortgagors’ escrow
December 31,
2007
2006
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
$ 335,743
4,362,645
1,381,256
423,069
20,270,454
$13,157,333
12,915,672
78,468
$ 335,743
4,324,194
1,381,256
423,069
20,660,655
$13,182,409
13,554,895
78,468
$ 230,759
2,985,197
1,940,787
404,311
19,567,502
$12,619,004
11,880,008
74,736
$ 230,759
2,865,569
1,940,787
404,311
19,275,924
$12,616,941
11,858,795
74,736
The methods and significant assumptions used to estimate fair values for the Company’s financial instruments
are as follows:
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks and federal funds sold. The estimated fair values
of cash and cash equivalents are assumed to equal their carrying values, as these financial instruments are either due
on demand or have short-term maturities.
128
Securities Held to Maturity and Available for Sale
The fair values of mortgage-related and other securities are estimated based on bid quotations received from
securities dealers or on prices obtained from firms specializing in providing securities pricing services.
Federal Home Loan Bank of New York Stock
The fair value of FHLB-NY stock approximates the carrying amount, which is at cost.
Loans
The loan portfolio is segregated into various components for valuation purposes in order to group loans based
on their significant financial characteristics, such as loan type (mortgages or other) and payment status (performing
or non-performing). The estimated fair values of mortgage and other loans are computed by discounting the
anticipated cash flows from the respective portfolios. The discount rates reflect current market rates for loans with
similar terms to borrowers of similar credit quality. The estimated fair values of non-performing mortgage and other
loans are based on recent collateral appraisals.
The methods used to estimate fair value are extremely sensitive to the assumptions and estimates used. While
management has attempted to use assumptions and estimates that best reflect the Company’s loan portfolio and
current market conditions, a greater degree of subjectivity is inherent in these values than in those determined in
active markets. Accordingly, readers are cautioned in using this information for purposes of evaluating the financial
condition and/or value of the Company in and of itself or in comparison with any other company.
Deposits
The fair values of deposit liabilities with no stated maturity (i.e., NOW and money market accounts, savings
accounts, and non-interest-bearing accounts) are equal to the carrying amounts payable on demand. The fair values
of certificates of deposit represent contractual cash flows, discounted using interest rates currently offered on
deposits with similar characteristics and remaining maturities. These estimated fair values do not include the
intangible value of core deposit relationships, which comprise a significant portion of the Company’s deposit base.
Borrowed Funds
The estimated fair value of borrowed funds is based on either bid quotations received from securities dealers
or on the discounted value of contractual cash flows with interest rates currently in effect for borrowed funds with
similar maturities and structure.
Off-balance-sheet Financial Instruments
The fair values of commitments to extend credit and unadvanced lines of credit are estimated based on an
analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining
terms of the commitments and the creditworthiness of the potential borrowers. The estimated fair values of such off-
balance-sheet financial instruments were insignificant at December 31, 2007 and 2006.
NOTE 14: RESTRICTIONS ON SUBSIDIARY BANKS
Various legal restrictions limit the extent to which the Company’s subsidiary banks can supply funds to the
Parent Company and its non-bank subsidiaries. The Company’s subsidiary banks would require the approval of the
Superintendent of the New York State Banking Department if the dividends they declared in any calendar year were
to exceed the total of their respective net profits for that year combined with their respective retained net profits for
the preceding two calendar years, less any required transfer to paid-in capital. The term “net profits” is defined as
the remainder of all earnings from current operations plus actual recoveries on loans and investments and other
assets, after deducting from the total thereof all current operating expenses, actual losses, if any, and all federal and
local taxes. In 2007, the Banks together paid dividends of $200.0 million to the Parent Company; at December 31,
2007, the Banks had combined dividends of $133.0 million that they could pay to the Parent Company without
regulatory approval.
129
NOTE 15: PARENT COMPANY ONLY FINANCIAL INFORMATION
Following are the condensed financial statements for New York Community Bancorp, Inc. (Parent Company
December 31,
2007
2006
$ 104,416
10,000
46,773
4,562,190
2,735
25,867
$4,751,981
$ 75,219
484,843
9,606
569,668
4,182,313
$4,751,981
$ 312,829
10,000
17,686
3,996,775
4,572
31,253
$4,373,115
$ 192,016
455,659
35,603
683,278
3,689,837
$4,373,115
Years Ended December 31,
2006
$ 8,145
560,000
495
(1,859)
(6,071)
1,288
561,998
63,575
2007
$ 6,911
200,000
1,220
(1,848)
--
1,415
207,698
60,633
2005
$ 8,866
279,594
2,869
--
--
1,160
292,489
50,896
147,065
(22,373)
498,423
(20,754)
241,593
(15,865)
169,438
109,644
$279,082
519,177
(286,592)
$ 232,585
257,458
34,627
$292,085
only):
Condensed Statements of Condition
(in thousands)
ASSETS:
Cash and cash equivalents
Securities held to maturity
Securities available for sale
Investments in subsidiaries
Receivable from subsidiaries
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Senior debt
Junior subordinated debentures
Other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
Condensed Statements of Income
(in thousands)
Interest income
Dividends received from subsidiaries
Gain on sales of securities
Loss on debt redemption
Loss on mark-to-market of interest rate swaps
Other income
Gross income
Operating expenses
Income before income tax benefit and equity in undistributed
(overdistributed) earnings of subsidiaries
Income tax benefit
Income before equity in undistributed (overdistributed) earnings
of subsidiaries
Equity in undistributed (overdistributed) earnings of subsidiaries
Net income
130
Condensed Statements of Cash Flows
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Change in other assets
Change in other liabilities
Net gain on sale of securities
Other, net
Equity in (undistributed) overdistributed earnings of subsidiaries
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available for sale
Proceeds from sales and repayments of securities
Payments from (investments in) subsidiaries
Net cash acquired in business combinations
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common shares issued in secondary offering, net
Treasury stock purchases
Cash dividends paid on common stock
Net cash received from exercise of stock options
Redemption of junior subordinated debentures
Issuance of junior subordinated debentures
Repayment of senior debt
Cash-in-lieu of fractional shares
Net cash (used in) provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
NOTE 16: REGULATORY MATTERS
Years Ended December 31,
2006
2007
2005
$ 279,082
20,423
(47,087)
(1,220)
1,350
(109,644)
142,904
(29,158)
12,556
44,551
2,698
30,647
--
(168)
(310,205)
44,064
(83,123)
82,475
(115,000)
(7)
(381,964)
(208,413)
312,829
$ 104,416
$ 232,585
11,681
25,420
(495)
(677)
286,592
555,106
--
8,427
(396,480)
--
(388,053)
400,119
(2,415)
(286,773)
14,183
(125,034)
123,712
--
(2)
123,790
290,843
21,986
$ 312,829
$ 292,085
19,617
(4,410)
(2,869)
3,678
(34,627)
273,474
--
10,636
(44,795)
--
(34,159)
--
(1,158)
(261,063)
11,965
--
--
--
--
(250,256)
(10,941)
32,927
$ 21,986
The Company is subject to examination, regulation, and periodic reporting under the Bank Holding Company
Act of 1956, as amended, which is administered by the Federal Reserve Board (the “FRB”). The FRB has adopted
capital adequacy guidelines for bank holding companies (on a consolidated basis) that are substantially similar to
those of the FDIC.
The following tables present the regulatory capital ratios for the Company at December 31, 2007 and 2006, in
comparison with the minimum amounts and ratios required by the FRB for capital adequacy purposes:
At December 31, 2007
(dollars in thousands)
Total regulatory capital
Minimum for capital
adequacy purposes
Excess
At December 31, 2006
(dollars in thousands)
Total regulatory capital
Minimum for capital
adequacy purposes
Excess
Leverage Capital
Ratio
8.32%
Amount
$2,321,764
Risk-based Capital
Tier 1
Total
Amount
$2,321,764
Ratio
12.10%
Amount
$2,414,558
Ratio
12.58%
1,116,168
$1,205,596
4.00
4.32%
767,443
$1,554,321
4.00
8.10%
1,534,886
$ 879,672
8.00
4.58%
Leverage Capital
Ratio
8.14%
Amount
$2,146,665
Risk-based Capital
Tier 1
Total
Amount
$2,146,665
Ratio
11.76%
Amount
$2,247,054
Ratio
12.31%
1,055,425
$1,091,240
4.00
4.14%
730,319
$1,416,346
4.00
7.76%
1,460,639
$ 786,415
8.00
4.31%
131
The Banks are subject to regulation, examination, and supervision by the New York State Banking
Department and the Federal Deposit Insurance Corporation (the “Regulators”). The Banks are also governed by
numerous federal and state laws and regulations, including the FDIC Improvement Act of 1991 (“FDICIA”), which
established five categories of capital adequacy ranging from well capitalized to critically undercapitalized. Such
classifications are used by the FDIC to determine various matters, including prompt corrective action and each
institution’s semi-annual FDIC deposit insurance premium assessments. Capital amounts and classification are also
subject to the Regulators’ qualitative judgments about components of capital and risk weightings, among other
factors.
The quantitative measures established to ensure capital adequacy require that banks maintain minimum
amounts and ratios of leverage capital to average assets, and of total and Tier 1 capital to risk-weighted assets (as
such measures are defined in the regulations). At December 31, 2007, the Banks exceeded all of the capital
adequacy requirements to which they were subject.
As of December 31, 2007, the most recent notification from the FDIC categorized the Community Bank and
the Commercial Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, a bank must maintain a minimum leverage capital ratio of 5.00%; a minimum Tier 1
risk-based capital ratio of 6.00%; and a minimum total risk-based capital ratio of 10.00%. In the opinion of
management, no conditions or events have transpired since said notification to change these capital adequacy
classifications.
The following tables present the actual capital amounts and ratios for the Community Bank at December 31,
2007 and 2006 in comparison to the minimum amounts and ratios required for capital adequacy purposes:
At December 31, 2007
(dollars in thousands)
Total regulatory capital
Minimum for capital
adequacy purposes
Excess
At December 31, 2006
(dollars in thousands)
Total regulatory capital
Minimum for capital
adequacy purposes
Excess
Leverage Capital
Ratio
7.69%
Amount
$1,982,073
Risk-based Capital
Tier 1
Total
Amount
$1,982,073
Ratio
11.29%
Amount
$2,067,725
Ratio
11.78%
1,031,119
$ 950,954
4.00
3.69%
701,929
$1,280,144
4.00
7.29%
1,403,859
$ 663,866
8.00
3.78%
Leverage Capital
Ratio
7.10%
Amount
$1,735,140
Risk-based Capital
Tier 1
Total
Amount
$1,735,140
Ratio
10.48%
Amount
$1,813,032
Ratio
10.95%
977,566
$ 757,574
4.00
3.10%
662,527
$1,072,613
4.00
6.48%
1,325,054
$ 487,978
8.00
2.95%
The following tables present the actual capital amounts and ratios for the Commercial Bank at December 31,
2007 and 2006 in comparison to the minimum amounts and ratios required for capital adequacy purposes:
At December 31, 2007
(dollars in thousands)
Total regulatory capital
Minimum for capital
adequacy purposes
Excess
At December 31, 2006
(dollars in thousands)
Total regulatory capital
Minimum for capital
adequacy purposes
Excess
Leverage Capital
Ratio
9.10%
Amount
$257,089
Risk-based Capital
Tier 1
Total
Amount
$257,089
Ratio
11.91%
Amount
$264,259
Ratio
12.24%
113,043
$144,046
4.00
5.10%
86,347
$170,742
4.00
7.91%
172,695
$ 91,564
8.00
4.24%
Leverage Capital
Ratio
10.01%
Amount
$277,026
Risk-based Capital
Tier 1
Total
Amount
$277,026
Ratio
11.18%
Amount
$284,539
Ratio
11.49%
110,732
$166,294
4.00
6.01%
99,081
$177,945
4.00
7.18%
198,162
$ 86,377
8.00
3.49%
132
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision, and with the participation, of our Chief Executive Officer and Chief Financial Officer,
our management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and
procedures pursuant to Rule 13a-15(b), as adopted by the Securities and Exchange Commission (the “SEC”) under
the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of
the end of the period covered by this annual report.
Disclosure controls and procedures are the controls and other procedures that are designed to ensure that
information required to be disclosed in the reports that the Company files or submits under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or submits under the Exchange Act is
accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure.
(b) Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over
financial reporting. Our system of internal control is designed under the supervision of management, including our
Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of the Company’s financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles (“GAAP”).
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide
reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures are made only in accordance with the authorization of
management and the Boards of Directors of the Parent Company and the subsidiary banks; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls
may become inadequate because of changes in conditions or that the degree of compliance with policies and
procedures may deteriorate.
As of December 31, 2007, management assessed the effectiveness of the Company’s internal control over
financial reporting based upon the framework established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon its assessment,
management believes that the Company’s internal control over financial reporting as of December 31, 2007 is
effective using these criteria.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2007 has been audited by KPMG LLP, an independent registered public accounting firm that audited
the Company’s consolidated financial statements as of and for the year ended December 31, 2007, as stated in their
report, included in Item 8 on page 82, which expresses an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2007.
133
(c) Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
134
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Information regarding our directors, executive officers, and corporate governance appears in our Proxy
Statement for the Annual Meeting of Shareholders to be held on June 11, 2008 (hereafter referred to as our “2008
Proxy Statement”), under the captions “Information with Respect to Nominees, Continuing Directors, and Executive
Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Meetings and Committees of the Board of
Directors,” and “Corporate Governance,” and is incorporated herein by this reference.
A copy of our Code of Business Conduct and Ethics, which applies to our Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, and Chief Accounting Officer, as officers of the Company, and all other
senior financial officers of the Company designated by the Chief Executive Officer from time to time, is available at
our web sites, www.myNYCB.com, www.NewYorkCommercialBank.com, and www.NYCBfamily.com, and will
be provided, without charge, upon written request to the Corporate Secretary at 615 Merrick Avenue, Westbury, NY
11590.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation appears in our 2008 Proxy Statement, under the captions
“Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,”
“Compensation Discussion and Analysis,” “Executive Compensation,” and “Director Compensation,” and is
incorporated herein by this reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table provides information regarding the Company’s equity compensation plans at
December 31, 2007:
Plan category
Number of securities to be
issued upon exercise of
outstanding options,
warrants, and rights
Weighted-average exercise
price of outstanding
options, warrants, and
rights
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(a)
(b)
(c)
Equity compensation plans
approved by security holders
Equity compensation plans
not approved by security
holders
Total
15,763,696
--
15,763,696
$15.05
--
$15.05
8,371,266
--
8,371,266
Information regarding security ownership of certain beneficial owners appears in our 2008 Proxy Statement,
under the captions “Security Ownership of Certain Beneficial Owners” and “Information with Respect to Nominees,
Continuing Directors, and Executive Officers,” and is incorporated herein by this reference.
Information regarding security ownership of certain beneficial owners and management appears in our 2008
Proxy Statement, under the caption “Information with Respect to the Nominees, Continuing Directors, and
Executive Officers,” and is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information regarding certain relationships and related transactions appears in our 2008 Proxy Statement,
under the captions “Transactions with Certain Related Persons” and “Corporate Governance,” and is incorporated
herein by this reference.
135
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information regarding principal accounting fees and services appears in our 2008 Proxy Statement, under the
caption “Audit and Non-audit Fees,” and is incorporated herein by this reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) Documents Filed as Part of this Report
1. Financial Statements
The following are incorporated by reference from Item 8 hereof:
• Reports of Independent Registered Public Accounting Firm;
• Consolidated Statements of Condition at December 31, 2007 and 2006;
• Consolidated Statements of Income and Comprehensive Income for each of the years in the three-year
period ended December 31, 2007;
• Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three-year period
ended December 31, 2007;
• Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31,
2007; and
• Notes to the Consolidated Financial Statements.
The following are incorporated by reference from Item 9A hereof:
• Management’s Report on Internal Control over Financial Reporting; and
• Changes in Internal Control over Financial Reporting.
2. Financial Statement Schedules
Financial statement schedules have been omitted because they are not applicable or because the required
information is provided in the Consolidated Financial Statements or Notes thereto.
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
The following exhibits are filed as part of this Form 10-K and this list includes the Exhibit Index.
Exhibit No.
2.1
2.2
3.1
3.2
3.3
4.1
4.2
10.1
Stock Purchase Agreement between New York Community Bancorp, Inc. and NBG International
Holdings B.V., dated as of October 10, 2005(1)
Unconditional Guaranty Agreement between New York Community Bancorp, Inc. and the National
Bank of Greece, dated as of October 10, 2005(1)
Amended and Restated Certificate of Incorporation(2)
Certificates of Amendment of Amended and Restated Certificate of Incorporation(3)
Amended and Restated Bylaws(4)
Specimen Stock Certificate(5)
Registrant will furnish, upon request, copies of all instruments defining the rights of holders of long-
term debt instruments of the registrant and its consolidated subsidiaries.
Form of Employment Agreement between New York Community Bancorp, Inc. and Joseph R.
Ficalora, Robert Wann, Thomas R. Cangemi, James J. Carpenter, and John J. Pinto(6)
136
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
11.0
12.0
21.0
23.0
31.1
31.2
32.0
Retirement Agreement between New York Community Bancorp, Inc. and Michael F. Manzulli(7)
Retirement Agreement between New York Community Bancorp, Inc. and James J. O’Donovan(7)
Synergy Financial Group, Inc. 2003 Stock Option Plan (as assumed by New York Community
Bancorp, Inc. effective October 1, 2007)(8)
Synergy Financial Group, Inc. 2004 Stock Option Plan (as assumed by New York Community
Bancorp, Inc. effective October 1, 2007)(8)
Form of Change in Control Agreements among the Company, the Bank, and Certain Officers(9)
Form of Queens County Bancorp, Inc. 1993 Incentive Stock Option Plan(10)
Form of Queens County Bancorp, Inc. 1993 Incentive Stock Option Plan for Outside Directors(10)
Form of Queens County Savings Bank Employee Severance Compensation Plan(9)
Form of Queens County Savings Bank Outside Directors’ Consultation and Retirement Plan(9)
Form of Queens County Bancorp, Inc. Employee Stock Ownership Plan and Trust(9)
Incentive Savings Plan of Queens County Savings Bank(11)
Retirement Plan of Queens County Savings Bank(9)
Supplemental Benefit Plan of Queens County Savings Bank(12)
Excess Retirement Benefits Plan of Queens County Savings Bank(9)
Queens County Savings Bank Directors’ Deferred Fee Stock Unit Plan(9)
New York Community Bancorp, Inc. 1997 Stock Option Plan(13)
Richmond County Financial Corp. 1998 Stock-Based Incentive Plan(14)
Amended and Restated Roslyn Bancorp, Inc. 1997 Stock-Based Incentive Plan(15)
Roslyn Bancorp, Inc. 2001 Stock-Based Incentive Plan(15)
Long Island Financial Corp. 1998 Stock Option Plan, as amended(16)
TR Financial Corp. 1993 Incentive Stock Option Plan, as amended and restated(15)
Haven Bancorp, Inc. Incentive Stock Option Plan, as amended and restated(17)
Haven Bancorp, Inc. 1996 Stock Option Plan, as amended and restated(17)
Haven Bancorp, Inc. Stock Option Plan for Outside Directors, as amended and restated(17)
Amended and Restated Bayonne Bancshares 1995 Stock Option Plan (as assumed by Richmond
County Financial Corp.)(14)
Richmond County Financial Corp. Stock Compensation Plan(14)
New York Community Bancorp, Inc. Management Incentive Compensation Plan(18)
New York Community Bancorp, Inc. 2006 Stock Incentive Plan(18)
Statement Re: Computation of Per Share Earnings (See Note 2 to the Consolidated Financial
Statements.)
Statement Re: Ratio of Earnings to Fixed Charges (attached hereto)
Subsidiaries information incorporated herein by reference to Part I, “Subsidiaries”
Consent of KPMG LLP, dated February 29, 2008 (attached hereto)
Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section
302 of the Sarbanes-Oxley Act of 2002 (attached hereto)
Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section
302 of the Sarbanes-Oxley Act of 2002 (attached hereto)
Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer of the
Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto)
137
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Incorporated herein by reference into this document from the Exhibits to Form 8-K filed with the Securities
and Exchange Commission on October 14, 2005
Incorporated by reference to Exhibits filed with the Company’s Form 10-Q for the quarterly period ended
March 31, 2001 (File No. 0-22278)
Incorporated by reference to Exhibits filed with the Company’s Form 10-K for the year ended December 31,
2003 (File No. 1-31565)
Incorporated herein by reference into this document from the Exhibits to Form 8-K filed with the Securities
and Exchange Commission on June 20, 2007
Incorporated by reference to Exhibits filed with the Company’s Registration Statement on Form S-1,
Registration No. 33-66852
Incorporated by reference to Exhibits filed with the Company’s Form 8-K filed with the Securities and
Exchange Commission on March 9, 2006
Incorporated by reference to Exhibits filed with the Company’s Form 10-Q for the quarterly period ended
March 31, 2007 (File No. 001-31565)
Incorporated herein by reference into this document from the Exhibits to Form S-8, Registration Statement
filed on June 23, 2007, Registration No. 333-135279
Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1, Registration No. 33-
66852
(10) Incorporated herein by reference into this document from the Exhibits to Form S-8, Registration Statement
filed on October 27, 1994, Registration No. 33-85684
(11) Incorporated herein by reference into this document from the Exhibits to Form S-8, Registration Statement
filed on October 27, 1994, Registration No. 33-85682
(12) Incorporated herein by reference into this document from the Exhibits filed with the 1995 Proxy Statement for
the Annual Meeting of Shareholders held on April 19, 1995
(13) Incorporated by reference to Exhibits filed with the 1997 Proxy Statement for the Annual Meeting of
Shareholders held on April 16, 1997, as amended as reflected in the Company’s Proxy Statement for the
Annual Meeting of Shareholders held on May 15, 2002
(14) Incorporated herein by reference into this document from the Exhibits to Form S-8, Registration Statement
filed on July 31, 2001, Registration No. 333-66366
(15) Incorporated by reference into this document from the Exhibits to Form S-8, Registration Statement filed on
November 10, 2003, Registration No. 333-110361
(16) Incorporated by reference into this document from the Exhibits to Form S-8, Registration Statement filed on
January 9, 2006, Registration No. 333-130908
(17) Incorporated by reference into this document from the Exhibits to Form S-8, Registration Statement filed on
December 15, 2000, Registration No. 333-51998
(18) Incorporated by reference into this document from the Exhibits filed with the 2006 Proxy Statement for the
Annual Meeting of Shareholders held on June 7, 2006
138
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
February 29, 2008
New York Community Bancorp, Inc.
(Registrant)
/s/ Joseph R. Ficalora
Joseph R. Ficalora
Chairman, President, and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Joseph R. Ficalora
Joseph R. Ficalora
Chairman, President, and
Chief Executive Officer
(Principal Executive Officer)
/s/ Donald M. Blake
Donald M. Blake
Director
/s/ Dominick Ciampa
Dominick Ciampa
Director
/s/ Hanif “Wally” Dahya
Hanif “Wally” Dahya
Director
/s/ William C. Frederick, M.D.
William C. Frederick, M.D.
Director
/s/ Michael J. Levine
Michael J. Levine
Director
/s/ James J. O’Donovan
James J. O’Donovan
Director
/s/ John M. Tsimbinos
John M. Tsimbinos
Director
/s/ Robert Wann
Robert Wann
Director
2/29/08
2/29/08
/s/ Thomas R. Cangemi
Thomas R. Cangemi
Senior Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
2/29/08
/s/ John J. Pinto
John J. Pinto
Executive Vice President and Chief Accounting
Officer
(Principal Accounting Officer)
2/29/08
2/29/08
/s/ Maureen E. Clancy
2/29/08
2/29/08
2/29/08
2/29/08
2/29/08
2/29/08
Maureen E. Clancy
Director
2/29/08
/s/ Robert S. Farrell
Robert S. Farrell
Director
2/29/08
/s/ Max L. Kupferberg
Max L. Kupferberg
Director
/s/ Hon. Guy V. Molinari
Hon. Guy V. Molinari
Director
/s/ John A. Pileski
John A. Pileski
Director
/s/ Spiros J. Voutsinas
Spiros J. Voutsinas
Director
2/29/08
2/29/08
2/29/08
2/29/08
139
STATEMENT RE: RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.0
(dollars in thousands)
Including Interest Paid on Deposits:
Earnings before income taxes
Combined fixed charges:
Interest expense on deposits
Interest expense on borrowed funds
Appropriate portion (1/3) of rent expenses
Total fixed charges
Earnings before income taxes and fixed charges
Ratio of earnings to fixed charges
Excluding Interest Paid on Deposits:
Earnings before income taxes
Combined fixed charges:
Interest expense on borrowed funds
Appropriate portion (1/3) of rent expenses
Total fixed charges
Earnings before income taxes and fixed charges
Ratio of earnings to fixed charges
Years Ended December 31,
2006
2005
2007
$ 402,099
$ 348,714
$ 444,714
425,824
524,391
8,315
$ 958,530
$1,360,629
383,373
463,761
6,940
$ 854,074
$1,202,788
202,823
380,828
5,370
$ 589,021
$1,033,735
1.42x
1.41x
1.76x
$402,099
$348,714
$444,714
524,391
8,315
$532,706
$934,805
1.75x
463,761
6,940
$470,701
$819,415
380,828
5,370
$386,198
$830,912
1.74x
2.15x
140
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.0
The Board of Directors
New York Community Bancorp, Inc.:
We consent to the incorporation by reference in the registration statements (No. 333-146512, 333-135279, 333-
130908, 333-110361, 333-105901, 333-89826, 333-666366, 333-32881, 333-51998, 333-32881, and 333-129338)
on Form S-8, and the Registration Statements (Nos. 333-129338, 333-105350, 333-100767, and 333-86682) on
Form S-3, and the Registration Statement (No. 333-143910) on Form S-4 of New York Community Bancorp, Inc.
(the “Company”) of our reports dated February 29, 2008 relating to (i) the consolidated statements of condition of
New York Community Bancorp, Inc. and subsidiaries as of December 31, 2007 and 2006, and the related
consolidated statements of income and comprehensive income, changes in stockholders’ equity and cash flows for
each of the years in the three-year period ended December 31, 2007, and (ii) the effectiveness of internal control
over financial reporting as of December 31, 2007, which reports appear in the December 31, 2007 annual report on
Form 10-K of New York Community Bancorp, Inc.
New York, New York
February 29, 2008
141
NEW YORK COMMUNITY BANCORP, INC.
CERTIFICATIONS
EXHIBIT 31.1
I, Joseph R. Ficalora, certify that:
1. I have reviewed this annual report on Form 10-K of New York Community Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 29, 2008
BY: /s/ Joseph R. Ficalora
Joseph R. Ficalora
Chairman, President, and Chief Executive Officer
(Duly Authorized Officer)
142
NEW YORK COMMUNITY BANCORP, INC.
CERTIFICATIONS
EXHIBIT 31.2
I, Thomas R. Cangemi, certify that:
1. I have reviewed this annual report on Form 10-K of New York Community Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 29, 2008
BY: /s/ Thomas R. Cangemi
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
143
NEW YORK COMMUNITY BANCORP, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.0
In connection with the Annual Report of New York Community Bancorp, Inc. (the “Company”) on Form 10-K for
the fiscal year ended December 31, 2007 as filed with the Securities and Exchange Commission (the “Report”), the
undersigned certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of
2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company as of and for the period covered by the Report.
DATE: February 29, 2008
BY: /s/ Joseph R. Ficalora
Joseph R. Ficalora
Chairman, President, and Chief Executive Officer
(Duly Authorized Officer)
BY: /s/ Thomas R. Cangemi
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
144
Deepdale Deer Park Ditmars Dongan Hills Dyker Heights East Islip East Meadow East Newark East Northport East Rockaway East
Windsor Elizabeth Eltingville Essex Fairfield Farmingdale Flushing Forest Hills Franklin Square Freehold Freeport Fresh Meadows
Garden City Gowanus Grasmere Gravesend Great Kills Greenvale Harrison Hauppauge Hewlett Hicksville Holbrook Homecrest
Howard Beach Howell Hudson Huntington Station Iselin Islandia Islip Jackson Heights Jericho Kenilworth Kew Gardens Hills Lake
Success Lawrence Linden Little Neck Livingston Long Island City Manhattan Marine Park Marlboro Massapequa Massapequa Park
Matawan Medford Melville Mercer Merrick Middlesex Mineola Monmouth Monroe Montclair Morganville Murray Hill Nassau
New Dorp New Hyde Park New Springville New York City Newark North Babylon North Brunswick North Yonkers Ocean Oceanside
Old Bridge Ozone Park Park Slope Patchogue Plainview Port Jefferson Port Richmond Port Washington Prospect Heights Queens
Rego Park Richmond Ridgewood Rockaway Park Ronkonkoma Roseland Roslyn Rossville Sayreville Seaford Shirley Smithtown
South Richmond Hill Spotswood Springfield Gardens St. James Starrett City Staten Island Steinway Suffolk Summit Sunnyside
Syosset Toms River Tottenville Union Upper Montclair Valley Stream Verona Washington Heights West Babylon West Brighton West
Caldwell West Hempstead West Orange Westbury Westchester Westerleigh Whitestone Woodbury Woodhaven Woodside Yonkers
Aberdeen Amboy Amityville Annadale Astoria Auburndale Babylon Baldwin Bay Ridge Bay Shore Bay Terrace Bayonne Bayside
Bayville Bedford-Stuyvesant Bellerose Bellmore Bensonhurst Bethpage Boro Park Brentwood Brick Bronx Brooklyn Bulls Head
Caldwell Castleton Corners Centereach Clark College Point Commack Co-op City Corona Corona Heights Cranford Deepdale Deer
Park Ditmars Dongan Hills Dyker Heights East Islip East Meadow East Newark East Northport East Rockaway East Windsor Elizabeth
Eltingville Essex Fairfield Farmingdale Flushing Forest Hills Franklin Square Freehold Freeport Fresh Meadows Garden City Gowanus
Grasmere Gravesend Great Kills Greenvale Harrison Hauppauge Hewlett Hicksville Holbrook Homecrest Howard Beach Howell
Hudson Huntington Station Iselin Islandia Islip Jackson Heights Jericho Kenilworth Kew Gardens Hills Lake Success Lawrence
Linden Little Neck Livingston Long Island City Manhattan Marine Park Marlboro Massapequa Massapequa Park Matawan Medford
Melville Mercer Merrick Middlesex Mineola Monmouth Monroe Montclair Morganville Murray Hill Nassau New Dorp New Hyde
Park New Springville New York City Newark North Babylon North Brunswick North Yonkers Ocean Oceanside Old Bridge Ozone Park
Park Slope Patchogue Plainview Port Jefferson Port Richmond Port Washington Prospect Heights Queens Rego Park Richmond
Ridgewood Rockaway Park Ronkonkoma Roseland Roslyn Rossville Sayreville Seaford Shirley Smithtown South Richmond Hill
Spotswood Springfield Gardens St. James Starrett City Staten Island Steinway Suffolk Summit Sunnyside Syosset Toms River
Tottenville Union Upper Montclair Valley Stream Verona Washington Heights West Babylon West Brighton West Caldwell West
Hempstead West Orange Westbury Westchester Westerleigh Whitestone Woodbury Woodhaven Woodside Yonkers Aberdeen
Amboy Amityville Annadale Astoria Auburndale Babylon Baldwin Bay Ridge Bay Shore Bay Terrace Bayonne Bayside Bayville
Bedford-Stuyvesant Bellerose Bellmore Bensonhurst Bethpage Boro Park Brentwood Brick Bronx Brooklyn Bulls Head Caldwell
Castleton Corners Centereach Clark College Point Commack Co-op City Corona Corona Heights Deepdale Deer Park Ditmars Dongan
Hills Dyker Heights East Islip East Meadow East Newark East Northport East Rockaway East Windsor Elizabeth Eltingville Essex
Fairfield Farmingdale Flushing Forest Hills Franklin Square Freehold Freeport Fresh Meadows Garden City Gowanus Grasmere
615 Merrick Avenue, Westbury, New York 11590
(516) 683- 4100 w w w.myNYCB.com
Gravesend Great Kills Greenvale Harrison Hauppauge Hewlett Hicksville Holbrook Homecrest Howard Beach Howell Hudson
Huntington Station Iselin Islandia Islip Jackson Heights Jericho Kenilworth Kew Gardens Hills Lake Success Lawrence Linden Little
Neck Livingston Long Island City Manhattan Marine Park Marlboro Massapequa Massapequa Park Matawan Medford Melville
Mercer Merrick Middlesex Mineola Monmouth Monroe Montclair Morganville Murray Hill Nassau New Dorp New Hyde Park New
Springville New York City Newark North Babylon North Brunswick North Yonkers Ocean Oceanside Old Bridge Ozone Park Park
Slope Patchogue Plainview Port Jefferson Port Richmond Port Washington Prospect Heights Queens Rego Park Richmond Ridgewood
Rockaway Park Ronkonkoma Roseland Roslyn Rossville Sayreville Seaford Shirley Smithtown South Richmond Hill Spotswood