neW YoRK CoMMunItY
BAnCoRp, InC.
The Value of Consistency in a Time of Change
2 011 A n n u A l R e p o R t
new york community bancorp, inc.
is the holding company for new york
community bank, a thrift, with more
than 240 branches in Metro new
york, new Jersey, ohio, Florida, and
Arizona—and new york commercial
bank, with more than 30 branches,
all in Metro new york.
With assets of $42.0 billion at December 31, 2011,
we are the 21st largest financial institution in the
nation, and with deposits of $22.3 billion, its 23rd
largest depository.
We also are the leading producer of multi-family
loans on rent-regulated apartment buildings in
new york city—a market we’ve been lending
in for more than 40 years. in 2011, multi-family
loans represented $5.8 billion of the $9.0 billion
of loans we originated for investment. We also
produced $7.1 billion of one-to-four family loans
for sale over the course of the year.
Another distinguishing feature is our financial
performance. We continue to rank among the top
performers in our industry. in 2011, our earnings
of $480 million provided a 1.28% return on aver-
age tangible assets and a 16.52% return on average
tangible stockholders’ equity.
2011 Annual Report
New York Community Bank
and its divisions:
Queens County Savings Bank
Richmond County Savings Bank
Roslyn Savings Bank
Roosevelt Savings Bank
Garden State Community Bank
Ohio Savings Bank
AmTrust Bank
New York Commercial Bank
and its division:
Atlantic Bank
Yet another Company hallmark is the quality
of our assets, which have outperformed those
of our industry throughout our public life.
Excluding loans covered by FDIC loss sharing
agreements, non-performing loans represented
1.28% of total loans at December 31, 2011, in con-
trast to an industry average of 2.60%.
We also are distinguished by the strength of
our capital measures—as well as our commitment
to paying a strong cash dividend. Our ratio of
tangible stockholders’ equity to tangible assets
was a solid 7.78% at December 31, 2011, and we
paid our 31st consecutive quarterly cash divi-
dend of $0.25 per share in the fourth quarter of
the year.
To learn more about our performance and
strategies, and our commitment to our investors,
we invite you to continue reading our 2011
Annual Report.
Contents
p. 3
Letter to Shareholders
p. 9
The NYCB Family of Banks:
The Value of Giving
p. 10 Financial Highlights
p. 12 Reconciliations of GAAP and
Non-GAAP Capital Measures
p. 13 Reconciliations of GAAP and
Non-GAAP Earnings
p. 14 Corporate Directory
p. 16 Shareholder Reference
1
NEW YORK COMMUNITY BANCORP…ONE OF THE TOP 25 BANK
HOLDING COMPANIES IN THE UNITED STATES
A s s e t s
$42.0 billion
With assets of $42.0 billion at December 31, 2011, we are the nation’s 21st largest bank holding company.
D e p o s i t s
$22.3 billion
With deposits of $22.3 billion—and 275 branches in Metro New York, New Jersey, Ohio, Florida,
and Arizona—we ranked 23rd among the nation’s largest depositories at December 31, 2011.
M u l t i - F A M i l y l o A n s
$17.4 billion
With $17.4 billion of multi-family loans at December 31, 2011, we are the leading producer of multi-
family loans for portfolio in New York City, where buildings that feature below-market rents
comprise our primary lending niche.
o n e - t o - F o u R F A M i l y l o A n s
$7.1 billion
With $7.1 billion of one-to-four family mortgage loans funded and sold in 2011, we are the 14th
largest aggregator of residential mortgage loans for sale in the United States.
M A R K e t C A p
$5.4 billion
With a market cap of $5.4 billion at December 31, 2011, we ranked 16th among the nation’s
publicly traded banks and thrifts. At March 31, 2012, our market cap was $6.1 billion, representing
a linked-quarter increase of 12.8%.
t o t A l R e t u R n o n i n V e s t M e n t 2,670%
From November 23, 1993 through December 31, 2011, we provided our investors with a total return on
investment of 2,670%. Through March 31, 2012, our total return on investment was 3,076%.
p e R F o R M A n C e R A n K i n G
#1
Our performance ranked first among publicly traded thrifts with assets in excess of $2.0 billion, as
reported by SNL Financial in July 2011.
2
2011 Annual Report
F E L L O W S H A R E H O L D E R S :
This is the 19th annual report we’ve prepared as a publicly traded institution
and, as always, we welcome the opportunity it presents. At a time when change
appears to be the only constant, it’s a chance to share our thoughts about the
Company’s strategies and performance, and the opportunities and challenges
we currently face.
Much has changed in the 18+ years since
the Company went public, and in many ways,
those changes have been for the good. In our
first 18 years of public life, our assets rose from
$1.1 billion to $42.0 billion, and our franchise
expanded from seven branches to 275. In the
same way that our franchise grew, so too did
our deposits—and the market we serve now
extends beyond Queens to include cities and
towns in five states. Our loan portfolio also
grew in our first 18 years, from $789.3 million
to $30.3 billion. During this time, our market
cap rose to $5.4 billion, and our total return
on investment to 2,670%.
Nonetheless, there is much to be said for
the value of being consistent—a word that
describes both our mission and the strategies
we employ. For 18+ years, it has been our goal
to enhance the value of your investment by
delivering a strong financial performance,
employing a business model designed to pro-
duce solid earnings, maintain a strong capital
position, and, at the same time, mitigate risk.
conservative loan-to-value ratios. We also con-
tinue to base our loans on the properties’ current
cash flows, and most of our loans still refinance
within a span of three to four years. The bor-
rowers to whom we lend are responsible prop-
erty owners who reinvest in their buildings;
the improvements they make enable them to
increase the cash flows those buildings produce.
Further more, most of the buildings securing
our loans tend to hold onto their tenants, even
in adverse credit cycles, which contributes in a
meaningful way to our asset quality.
Multi-family loans represented $5.8 billion,
or 64.1%, of the loans we originated for invest-
ment in 2011, exceeding the year-earlier volume
by $3.2 billion, or 127.1%. At the end of the year,
multi-family loans totaled $17.4 billion, and had
an expected weighted average life of 3.3 years.
While the volume of loans we produce is much
larger today than it was when we, ourselves,
were much smaller, our approach to making
multi-family loans is otherwise very much
the same.
Accordingly, we’d like to devote the remain-
As a result, we’ve also upheld the quality
der of this letter to discussing the value of our
business model in general and, more specifically,
the results we produced by pursuing that model
last year.
The Merits of Multi-Family
Lending and Maintaining
Conservative Credit Standards
Multi-family mortgage loans are our prin cipal
asset, and have been for more than four decades
—much as New York City still is home to most
of the loans we produce. Buildings that feature
below-market rents remain our primary focus,
and we continue to underwrite our loans at
of our assets—as we expected would be the
case when the credit cycle took a significant
downward turn in 2008. Reflecting the nature
of our loans and our underwriting standards,
net charge-offs averaged 0.19% of average loans
from that year through 2011, as compared to an
industry average during that time of 2.29%. Our
high expectations were largely due to our expe-
rience in the preceding cycle downturn, when
our ratio of net charge-offs to average loans
averaged 0.04% over a four-year period, in
contrast to an industry average of 1.22%. In
addition, our ratio of net charge-offs to average
loans was 0.35% in 2011—again, in significant
contrast to the industry average of 1.77%.
3
Yet another measure that aptly reflects
our portfolio’s resilience is our ratio of non-
performing loans to total loans at December
31st. Excluding loans that are covered by FDIC
loss sharing agreements, our ratio of non-
performing loans to total loans improved to
1.28% at the end of 2011 from 2.60% at the end
of 2010. The respective industry averages, also
excluding loans that are covered, were 2.60%
and 3.56%, by comparison.
The Importance of Operating
Efficiently
Another enduring component of our busi-
ness model has been our efficient operation.
In 2011, as in the past, we ranked among the
nation’s 10 most efficient financial institutions,
with an efficiency ratio of 40.03%. The industry
average was 65.80%, by comparison. As with
asset quality, the lower measure is better—in
this case, indicating that we retain more of our
earnings and use less to cover our overhead. We
attribute our consistent rank among the indus-
try’s most efficient institutions to our capacity
for revenue generation, as well as to our pro-
pensity for containing costs.
In 2011, our earnings generated a
1.28% return on average tangible
assets and a 16.52% return on aver-
age tangible stockholders’ equity.*
The Merits of Having Multiple
Revenue Sources
Our ability to produce solid earnings is
enhanced by having multiple revenue sources.
In addition to the net interest income that stems
from our loans and other interest-earning assets,
we also generate non-interest income in various
forms. Primary among these is the mortgage
banking income that stems from the origination,
sale, and servicing of one-to-four family loans.
In 2011, net interest income amounted to
$1.2 billion, consistent with the prior year’s
level, despite the pressure placed on our asset
yields by the decline in market interest rates.
Among the factors contributing to the consis-
tency of our net interest income, as well as our
margin, were a record level of prepayment pen-
alty income, as property sales and refinancing
activity increased; an increase in average inter-
est-earning assets, reflecting the volume of
loans we originated; and our continued ability
to reduce our funding costs.
4
2011 Annual Report
In the meantime, non-interest income
totaled $253.3 million in 2011, with mortgage
banking income accounting for more than one
third of this amount. The origination of one-
to-four family loans for sale is the one strategy
we employ today that is somewhat new to our
business model—yet since assuming this busi-
ness two years ago through our AmTrust Bank
acquisition, it has enhanced our earnings poten-
tial to a meaningful degree. Furthermore, the
origination and sale of one-to-four family loans
enables us to meet the needs of homeowners
throughout the nation, and to do so without
compromising our asset quality. The capacity
of this business to contribute revenues, and the
quality of our proprietary mortgage banking
platform, have extinguished any doubts we may
have had early on about their place in our over-
all corporate strategy.
Including one-to-four family loans held for
sale and loans held for investment, we originated
a record $16.1 billion of loans in 2011—exceed-
ing the prior-year volume by $946.2 million, or
6.2%. Of the $30.3 billion of loans we held at
the end of December, $25.5 billion were loans
held for investment and $1.0 billion were loans
held for sale. The remaining balance consisted
of loans acquired in our AmTrust and Desert
Hills Bank acquisitions, all of which are covered
by loss sharing agreements with the FDIC.
Reflecting the nature of our loans
and our underwriting standards, net
charge-offs averaged 0.19% of average
loans from 2008 through 2011, as
compared to an industry average
during that time of 2.29%.
The Benefits of Growing through
Earnings-Accretive Acquisitions
Yet another long-term component of our
business model has been growing through
acquisitions that are accretive to both our earn-
ings and our tangible book value per share.
Much of the growth we’ve enjoyed in the past
has stemmed from such transactions, and we
would expect to continue to grow in this way
over the years ahead.
In 2011, the number of bank and thrift
acquisitions declined substantially from the
prior year’s number, and the reasons for the
reduction were diverse. Among them was
the decline in the number of failed institutions,
as economic conditions began to improve in most
parts of the country and the volume of delin-
quent loans and foreclosures began to contract.
Another was the uncertainty created by the
onslaught of new regulations designed to thwart
5
We originated a record $16.1 billion
of loans in 2011, including $9.0 billion
of loans held for investment and $7.1
billion of loans held for sale.
the likelihood of another Wall Street collapse.
With boards of directors and management
teams focused on the new rules, and the need
for enhanced risk mitigation, the environment
was not conducive to acquisition-driven growth.
Nonetheless, we expect to see opportunities
for growth to increase in the years before us, as
the regulatory demands on banks become too
challenging for some to comply with, and as the
technological and financial demands become
too costly for some to meet.
The Value of Maintaining a Consistent
Business Model
In sum, the business model we pursue
today is much the same as the one described
in our first letter to shareholders. It’s also the
same model that prompted our decision to
convert to stock form in 1993. That decision was
based, in large part, on our expectation that
our business model would do more than just
sustain us in an adverse credit cycle—it would
enable us to outperform much of our industry.
As our performance in the years since the Great
Recession has demonstrated, this has proved to
be the case. In 2011 alone, we generated earn-
ings of $480.0 million, providing a 1.28% return
on average tangible assets and a 16.52% return
on average tangible stockholders’ equity.* In
contrast, the return on average tangible assets
was 0.52% for the SNL U.S. Bank & Thrift Index,
and its return on average tangible stockholders’
equity was 5.65%.
We also distributed dividends of $0.25 per
share per quarter in 2011, and recorded a strong
ratio of tangible stockholders’ equity to tangible
assets at December 31st, 7.78%.*
The Benefits of Flexibility
While consistency is clearly a quality we
value, we also recognize the benefits of flexi-
bility. Changes in the economy, competition,
and regulation are just some of the many changes
to which banks today are subject—and in some
cases, they can present an attractive opportu-
nity. Last year, for example, we increased our
commercial real estate lend ing when given the
chance to originate certain large loans at highly
conservative loan-to-value ratios. We also
opted to sell our insurance premium financing
business—at a profit—and to originate jumbo
loans, under contract, through our mortgage
6
2011 Annual Report
banking platform for sale to other banks.
Flexibility is, in its own way, a key component
of our business model, as it indicates our open-
ness to earnings-accretive opportunities.
The Importance of Maintaining a
Strong Capital Position
The strategies we describe above have also
been essential to fulfilling our objective of
maintaining our position of capital strength.
Capital gives us the wherewithal to acquire
banks and engage in other value-enhancing
corporate actions, and also supports the pay-
ment of our very strong cash dividend.
Today, the capital strength of banks is being
scrutinized to a greater extent than at any time
since the Savings & Loan crisis led to the
enactment of the FDIC Improvement Act of
1991. FDICIA established the risk-based capital
guidelines and regulatory framework for
“prompt corrective action” to which all banks
are subject, and that classifies banks based on
their measures of leverage, Tier 1 risk-based,
and total risk-based capital. At December 31,
2011, as in the past, both New York Community
Bank and New York Commercial Bank substan-
tially exceeded the requirements for classification
as “well capitalized” institutions. In addition, we
continued to exceed the federal capital require-
ments for a bank holding company.
We firmly believe that our capacity
to earn—which has been tested over
time and in varying circumstances—
and our inherent risk aversion—will
enable us to maintain a strong capi-
tal position, and to overcome the
challenges that face our industry.
Much as the S&L crisis prompted the enact-
ment of FDICIA, the more recent economic cri-
sis prompted the enactment of the Dodd-Frank
Wall Street Reform and Consumer Protection
Act in July 2010. Now, as then, our industry is
engaged in a period of transition, as we strive
to get our arms around the resultant new regu-
lations, and determine how best to ensure our
compliance as the details are rolled out.
In addition to conforming to new regula-
tions, our industry has been tasked with find-
ing ways to better mitigate risk. While the
foundation on which our business model is based
is, in fact, risk aversion, we too are devoting more
resources to this charge. Furthermore, although
unemployment rates have begun to improve,
and real estate values have stabilized—albeit
well below pre-crisis levels—the spread between
short-term interest rates and market interest
rates has narrowed, pressuring bank margins
7
and profitability. Coupled with the demands of
Dodd-Frank, these economic factors have created
a new set of challenges for banks and thrifts.
While past performance cannot guarantee
our performance in the future, we firmly
believe that our capacity to earn—which has
been tested over time and in varying circum-
stances—together with our inherent risk aver-
sion—will enable us to maintain a strong capital
position, and to overcome the challenges that
currently face our industry. Again, at a time
when change itself appears to be the only con-
stant, we will continue to rely on our proven
business model—and on the people who have
made that model work.
In Appreciation
On behalf of the Board of Directors, we
would like to thank our officers and employees
for their efforts and dedication, which have con-
tributed to our record of performance over time.
We also would like to thank our Directors for
sharing their expertise, wisdom, and knowledge.
The work they do and the insight they give are
to the benefit of us all.
Among those who deserve our thanks
is Robert S. Farrell, who joined our Board in
connection with our merger with Richmond
County Financial Corp. and who, regrettably,
retired on January 12th. Those of us who served
with Bob valued not only his business acumen,
but also his knowledge of Staten Island, his
quintessential good humor, and his quiet
strength.
We also would like to convey our thanks,
and that of the entire Board of Directors, for your
interest and your investment in the Company.
We will continue to do our utmost to maintain
your confidence and trust.
With sincere good wishes,
Dominick Ciampa
Chairman
Joseph R. Ficalora
President and Chief Executive Officer
April 9, 2012
Dominick Ciampa
Chairman of the Board
Joseph R. Ficalora
President, Chief Executive
Officer, and Director
Robert Wann
Senior Executive
Vice President,
Chief Operating Officer,
and Director
Thomas R. Cangemi
Senior Executive
Vice President and
Chief Financial Officer
James J. Carpenter
Senior Executive
Vice President and
Chief Lending Officer
8
the nyCB FAMily oF BAnKs:
The Value of Giving
2011 Annual Report
While investors typically value companies on the basis of their performance, returns,
and prospects, there is another measure of value that has increased in popularity.
Today, investors are also taking into consideration a company’s commitment to,
and involvement in, the communities where its customers live and work.
Although the extent of our
commitment may appear less
important than, say, our capital
or our earnings, we do believe it
speaks volumes about our charac-
ter, our compassion, and our sense
of community. Giving back is so
much more than something we
believe in. It’s something we’ve
done, and continue to do—in
an increasingly meaningful way.
In 2011, for example, our
foundations contributed more
than $5.5 million to local non-
profits, bringing the total they’ve
awarded since inception to $70+
million. Last year, for example,
we funded a work-study pro-
gram that enables young people
with disabilities to develop
essential job skills while working
at a horse farm on Long Island.
Another local program—one
we’ve been funding for a while—
provides eight weeks of home
maintenance training to adults
on a limited budget, enabling
them to save money by making
home repairs themselves.
Yet another good example—
this time on Staten Island—is our
support of an organization that
aids families in crisis, either due
to a lack of housing or the illness
of a child. Among the projects
we fund in Queens is a four-year
professional development pro-
gram created by the New York
Hall of Science for teachers of
science, technology, engineering,
and math. We also fund free
outdoor summer concerts at
the New Jersey Performing Arts
Center in Newark, in addition
to supporting the Center’s youth
art gallery.
The good we do by no
means ends at the borders of
New York and New Jersey. In
fact, our efforts to the west and
south are as beneficial and
diverse. For example, in Ohio, we
and our employees support the
United Way of Cleveland, in
addition to collecting tons (yes,
tons!) of food for distribution to
homeless shelters and food banks.
In Arizona, where temperatures
often soar past 100˚ during the
summer, we collected and dis-
tributed 1,933 gallons of bottled
water to low-income families.
And in Florida, which leads the
nation in deaths due to drown-
ing, we are active supporters of
the Pembroke Pines YMCA.
In addition to awarding
grants and making donations,
we also give time and talent. In
fact, we most enjoy it when our
involvement is hands-on. Last
year, for example, ten members
of our back-office staff prepared
and served dinner to 80 residents
at the Ronald McDonald House
of Long Island. We also raised
more funds than any other corpo-
rate participant in the annual
Light the Night Walk to benefit
the Leukemia and Lymphoma
Society. In Florida, our employees
raised thousands of dollars for
Autism Speaks, again by walking,
and in Manhattan, our team
raised thousands of dollars more
by walking for the March of
Dimes. In Ohio, our employees
relied not on their feet but, rather,
on their muscles, to support
another worthy cause—Habitat
for Humanity. And in New Jersey,
our officers used their heads
and professional training to
counsel participants at a confer-
ence we sponsored on women’s
empowerment.
Among the most meaning-
ful ways that we give back to
our neighbors is by educating
people who are underbanked
and underserved. Our campaign
for financial literacy reaches both
children and adults in each of
the states comprising our market,
and helps them develop financial
habits that will serve them well
in life. In addition to teaching
them how to save, to apply for a
loan, and to manage their money
safely, our workshops enable the
hundreds of participants in this
program to make informed finan-
cial decisions when selecting
products and services to best suit
their needs.
The examples of giving we’ve
cited here are just that: examples.
All told, our foundations, our
banks, our employees, our execu-
tives, and our directors, have
provided more than $120 million
to the scores of organizations
whose programs and services do
so much to enhance the quality
of life in our communities.
However you value our
commitment and community
involvement, we hope you see it
as we do—as a responsibility, a
privilege, and a tremendous
source of pride.
9
F i na nc i a l H igH l igH t s (unaudited)
(dollars in thousands, except per share data)
12/31/2011
12/31/2010
12/31/2009
BALANCE SHEET SUMMARY:
Total assets
Non-covered loans held for investment:
Multi-family
Commercial real estate
Acquisition, development, and construction
Commercial and industrial
All other (1)
Total non-covered loans held for investment
Loans held for sale
Covered loans
Total loans
Allowance for losses on non-covered loans
Allowance for losses on covered loans
Securities
Deposits
Wholesale borrowings
Stockholders’ equity
Tangible stockholders’ equity (2)
CAPITAL MEASURES:
Book value per share
Tangible book value per share (2)
Stockholders’ equity to total assets
Tangible stockholders’ equity to tangible assets (2)
Adjusted tangible stockholders’ equity to adjusted tangible assets (2)
OTHER BALANCE SHEET MEASURES:
Non-covered loans held for investment to total loans
Total loans to total assets
Securities to total assets
Deposits to total assets
Wholesale borrowings to total assets
ASSET QUALITY MEASURES:
Non-performing non-covered loans to total non-covered loans
Non-performing non-covered assets to total non-covered assets
Allowance for losses on non-covered loans to non-performing
non-covered loans
Net charge-offs to average loans
$ 42,024,302
$ 41,190,689
$ 42,153,869
$ 17,432,665
6,855,888
445,387
601,610
197,268
$ 25,532,818
1,036,918
3,753,031
$ 16,801,868
5,438,270
569,193
642,213
255,950
$ 23,707,494
1,207,077
4,297,869
$16,735,684
4,987,410
665,912
653,071
334,522
$ 23,376,599
—
5,016,100
$ 30,322,767
$ 29,212,440
$ 28,392,699
$
137,290
33,323
4,540,516
22,274,130
13,439,193
5,565,704
3,077,905
$
158,942
11,903
4,788,891
21,809,051
12,500,659
5,526,220
3,012,327
$
127,491
—
5,742,243
22,316,411
13,080,769
5,366,902
2,824,737
$12.73
7.04
13.24%
7.78
7.95
84.2%
72.2
10.8
53.0
32.0
$12.69
6.91
13.42%
7.79
7.90
81.2%
70.9
11.6
52.9
30.3
$12.40
6.53
12.73%
7.13
7.25
82.3%
67.4
13.6
52.9
31.0
At or for the
Twelve Months Ended
12/31/2011
12/31/2010
12/31/2009
1.28%
1.07
42.14
0.35
2.63%
1.77
25.45
0.21
2.47%
1.41
22.05
0.13
(1) Includes one-to-four family and other loans (excluding commercial and industrial loans) held for investment.
(2) Please see the discussion and reconciliations of our GAAP and non-GAAP capital measures on page 12.
10
Fina ncial HigHligH ts (unaudited)
(dollars in thousands, except per share data)
GAAP EARNINGS SUMMARY:
Net interest income
Non-interest income (3)
Provision for losses on non-covered loans
Provision for losses on covered loans
Non-interest expense
Income tax expense
Net income
Basic earnings per share
Diluted earnings per share
Dividends paid per common share
GAAP PROFITABILITY MEASURES:
Return on average assets
Return on average tangible assets (4)
Return on average stockholders’ equity
Return on average tangible stockholders’ equity (4)
Efficiency ratio
Interest rate spread
Net interest margin
OPERATING EARNINGS SUMMARY: (5)
Operating earnings
Basic operating earnings per share
Diluted operating earnings per share
OPERATING PROFITABILITY MEASURES: (5)
Return on average assets
Return on average tangible assets (4)
Return on average stockholders’ equity
Return on average tangible stockholders’ equity (4)
Efficiency ratio
2011 Annual Report
2011
2010 (1)
2009 (2)
$ 1,200,421
235,325
79,000
21,420
600,749
254,540
$ 1,179,963
337,923
91,000
11,903
577,512
296,454
$ 905,325
157,639
63,000
—
406,815
194,503
$ 480,037
$ 541,017
$ 398,646
$1.09
1.09
1.00
1.17%
1.28
8.73
16.52
40.03
3.37
3.46
$1.24
1.24
1.00
1.29%
1.42
10.03
19.57
35.99
3.45
3.45
$1.13
1.13
1.00
1.20%
1.34
9.29
23.27
36.13
2.98
3.12
$464,432
$1.06
1.06
$530,370
$1.22
1.21
$364,650
$1.03
1.03
1.13%
1.24
8.44
16.00
40.67
1.27%
1.40
9.84
19.20
35.88
1.10%
1.23
8.50
21.35
36.16
(1) We acquired certain assets and assumed certain liabilities of Desert Hills Bank on March 26, 2010. Accordingly, our earnings reflect combined
operations from that date forward.
(2) We acquired certain assets and assumed certain liabilities of AmTrust Bank on December 4, 2009. Accordingly, our earnings reflect combined
operations from that date forward.
(3) Includes mortgage banking income of $80.7 million, $183.9 million, and $12.1 million, respectively, in 2011, 2010, and 2009.
(4) Please see the discussion and reconciliations of our GAAP and non-GAAP capital measures on page 12.
(5) Operating earnings and the related profitability measures are non-GAAP financial measures. Please see the discussion and reconciliations
of our GAAP and non-GAAP earnings on page 13.
11
REcOn ciliat iOns OF ga aP a nd nOn- ga aP caPital MEasU REs (unaudited)
Although tangible stockholders’ equity, adjusted tangible stockholders’ equity, tangible assets, and adjusted tangible
assets are not measures that are calculated in accordance with GAAP, we use these non-GAAP capital measures in our
analysis of our performance. We believe that these non-GAAP capital measures are an important indication 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.
Neither tangible stockholders’ equity, adjusted tangible stockholders’ equity, tangible assets, adjusted tangible assets,
nor the related measures should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any
other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP
measures may differ from that of other companies reporting non-GAAP measures with similar names.
Reconciliations of our stockholders’ equity, tangible stockholders’ equity, and adjusted tangible stockholders’ equity;
total assets, tangible assets, and adjusted tangible assets; and the related measures at or for the twelve months ended
December 31, 2011, 2010, and 2009 follow:
(dollars in thousands)
total stockholders’ Equity
Less: Goodwill
Core deposit intangibles
tangible stockholders’ equity
total assets
Less: Goodwill
Core deposit intangibles
tangible assets
tangible stockholders’ Equity
Add back: Accumulated other comprehensive loss, net of tax
adjusted tangible stockholders’ equity
tangible assets
Add back: Accumulated other comprehensive loss, net of tax
adjusted tangible assets
average stockholders’ Equity
Less: Average goodwill and core deposit intangibles
average tangible stockholders’ equity
average assets
Less: Average goodwill and core deposit intangibles
average tangible assets
net income
Add back: Amortization of core deposit intangibles, net of tax
adjusted net income
Return on average assets
Return on average tangible assets
Return on average stockholders’ equity
Return on average tangible stockholders’ equity
At or for the Twelve Months
Ended December 31,
2011
2010
2009
$ 5,565,704
(2,436,131)
(51,668)
$ 3,077,905
$42,024,302
(2,436,131)
(51,668)
$39,536,503
$ 3,077,905
71,910
$ 3,149,815
$39,536,503
71,910
$39,608,413
$ 5,501,639
(2,500,864)
$ 3,000,775
$41,131,010
(2,500,864)
$38,630,146
$
$
480,037
15,640
495,677
$ 5,526,220
(2,436,159)
(77,734)
$ 3,012,327
$41,190,689
(2,436,159)
(77,734)
$38,676,796
$ 3,012,327
45,695
$ 3,058,022
$ 38,676,796
45,695
$38,722,491
$ 5,392,305
(2,529,993)
$ 2,862,312
$41,843,613
(2,529,993)
$39,313,620
$
$
541,017
19,073
560,090
$ 5,366,902
(2,436,401)
(105,764)
$ 2,824,737
$42,153,869
(2,436,401)
(105,764)
$39,611,704
$ 2,824,737
49,903
$ 2,874,640
$39,611,704
49,903
$39,661,607
$ 4,290,025
(2,516,993)
$ 1,773,032
$33,284,289
(2,516,993)
$30,767,296
$
$
398,646
13,915
412,561
1.17%
1.28
8.73
16.52
1.29%
1.42
10.03
19.57
1.20%
1.34
9.29
23.27
12
REcOn ciliat iOns OF ga aP a nd nOn- ga aP EaR nings (unaudited)
2011 Annual Report
Although operating earnings are not a measure of performance calculated in accordance with U.S. generally accepted
accounting principles (“GAAP”), we believe that our operating earnings are an important indication of our ability to
generate earnings through our fundamental business. Since they exclude the effects of certain items that are unusual
and/or difficult to predict, we believe that our operating earnings, although non-GAAP, provide useful supplemental
information to both management and investors in evaluating our financial results.
Operating earnings should not be considered in isolation or as a substitute for net income, cash flows from operating
activities, or other income or cash flow statement data calculated in accordance with GAAP. Moreover, the manner
in which we calculate our operating earnings may differ from that of other companies reporting non-GAAP measures
with similar names.
Reconciliations of our GAAP and operating earnings for the twelve months ended December 31, 2011, 2010, and
2009 follow:
(in thousands, except per share data)
GAAP EARNINGS
Adjustments to GAAP earnings:
Gain on sales of securities
Severance charges
Gain on business disposition
Loss on other-than-temporary impairment of securities
Gain on business acquisitions
Gain on debt repurchases/exchange
Acquisition-related costs
FDIC special assessment
Gain on termination of servicing hedge
Resolution of tax audits
Income tax effect
Operating earnings
DILUTED GAAP EARNINGS PER SHARE
Adjustments to diluted GAAP earnings per share:
Gain on sales of securities
Severance charges
Gain on business disposition
Loss on other-than-temporary impairment of securities
Gain on business acquisitions
Gain on debt repurchases/exchange
Acquisition-related costs
FDIC special assessment
Gain on termination of servicing hedge
Resolution of tax audits
For the Twelve Months
Ended December 31,
2011
2010
2009
$ 480,037
$ 541,017
$ 398,646
(36,608)
2,300
(9,823)
18,124
—
—
—
—
—
—
10,402
(22,438)
—
—
—
(2,883)
(2,441)
11,545
—
—
—
5,570
—
—
—
96,533
(139,607)
(10,054)
7,530
14,753
(3,078)
(14,337)
14,264
$464,432
$530,370
$ 364,650
$ 1.09
$ 1.24
$ 1.13
(0.05)
0.01
(0.01)
0.02
—
—
—
—
—
—
(0.03)
—
—
—
(0.01)
(0.01)
0.02
—
—
—
—
—
—
0.16
(0.24)
(0.02)
0.01
0.03
—
(0.04)
diluted operating earnings per share
$ 1.06
$ 1.21
$ 1.03
13
C O R P O R A T E D I R E C T O R Y
NEW YORK COMMUNITY
BANCORP, INC.
BOaRd OF diREctORs (1)
cHaiRMan OF tHE BOaRd
dominick ciampa
Principal and Partner
Ciampa Organization
MEMBERs
Maureen E. clancy (2)
Chief Financial Officer and Owner
Clancy & Clancy Brokerage Ltd.
Hanif “Wally” dahya
Chief Executive Officer
The Y Company LLC
Joseph R. Ficalora (3)
President and Chief Executive Officer
New York Community Bancorp, Inc.
William c. Frederick, M.d. (4)
Surgeon (retired)
St. Vincent’s Hospital
Max l. Kupferberg
Chairman of the Board of Directors
Kepco, Inc.
Michael J. levine (5)
Principal, Norse Realty Group, Inc. & Affiliates;
Partner, Levine & Schmutter, CPAs
Hon. guy V. Molinari (4)
Richmond County Borough President (retired);
Former U.S. Congressman
and New York State Assemblyman;
Managing Partner, The Molinari Group;
Of Counsel, Russo Scamardella & D’Amato
James J. O’donovan
Senior Executive Vice President
and Chief Lending Officer (retired)
New York Community Bank
Ronald a. Rosenfeld
Chairman (retired)
Federal Housing Finance Board
John M. tsimbinos, Jr. (6)
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
New York Community Bancorp, Inc.
diREctOR EMERitUs
donald M. Blake
President and Chief Executive Officer (retired)
Joseph J. Blake & Associates, Inc.
ExEcUtiVE OFFicERs
Joseph R. Ficalora
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
ExEcUtiVE VicE PREsidEnts
ilene a. angarola
Director, Investor Relations and
Corporate Communications
Robert d. Brown
Chief Information Officer
William P. disalvatore
Deputy Chief Operating Officer
Frank Esposito
Director, Loan Administration
cynthia s. Flynn
Chief Administrative Officer
Robert P. gillespie
Director, Employee Development and Training
andrew Kaplan
Director, Retail Products and Services;
President, CFS Investments, Inc.
lloyd levy
Chief Auditor
anthony M. lewis
Director, Regulatory Oversight and
Asset Review Group
John J. Pinto
Chief Accounting Officer
R. Patrick Quinn, Esq.
Chief Corporate Governance Officer and
Corporate Secretary
Bernard a. terlizzi
Director, Human Resources
Robert J. tolomer
Director, Enterprise Risk Management
Proctor n. Wong
President, Real Estate and Capital Markets Division
(1) Directors of New York Community Bancorp, Inc.
also serve as directors of New York Community Bank
and New York Commercial Bank.
(2) Mrs. Clancy chairs the Compensation Committee
of the Board.
(3) Mr. Ficalora serves as a director on each of the
Divisional Boards.
(4) Dr. Frederick and Mr. Molinari also serve as
directors on the Richmond County Savings Bank
Divisional Board.
(5) Mr. Levine chairs both the Audit Committee and the
Nominating and Corporate Governance Committee
of the Board.
(6) Mr. Tsimbinos also serves as a director on the
Atlantic Bank Divisional Board.
14
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
NEW YORK COMMUNITY BANK
nYcB MORtgagE cOMPanY, llc
Jon K. Baymiller
President and Chief Executive Officer
Paul E. Harris
Executive Vice President and Director,
Residential Loan Administration
PEtER B. cannEll & cO., inc.
Joseph B. Werner
Chairman, President, and Chief Executive Officer
diVisiOnal BanK diREctORs
QUEEns cOUntY saVings BanK
Joseph R. Ficalora
President
Hon. claire shulman
Queens Borough President (retired);
President & Chief Executive Officer
Flushing Willets Point Corona LDC
Michael R. stoler
Managing Director
Madison Realty Capital
RicHMOnd cOUntY saVings BanK
Michael F. Manzulli
Chairman;
Former Chairman and Chief Executive Officer
Richmond County Bancorp, Inc. and
Richmond County Savings Bank
godfrey H. carstens, Jr.
President
Carstens Electrical Supply
Peter J. Esposito
Senior Mortgage Lending Officer (retired)
New York Community Bank
Robert s. Farrell
President (retired)
H.S. Farrell, Inc.
James l. Kelley, Esq.
Partner
Lahr, Dillon, Manzulli, Kelley & Penett, P.C.
tHE ROslYn saVings BanK
John R. Bransfield, Jr.
President;
Former Vice Chairman
Roslyn Bancorp, Inc. and
The Roslyn Savings Bank
thomas J. calabrese, Jr.
Vice President, Operations
Daniel Gale Agency
atlantic BanK
spiros J. Voutsinas
President
nicolas Bornozis
President
Capital Link, Inc.
John catsimatidis
Chairman and Chief Executive Officer
Red Apple Group
andre gregory
President
Sete Consultants & Services, Inc.
andrew J. Jacovides
Former Ambassador, Cyprus
savas Konstantinides
President and Chief Executive Officer
Omega Brokerage
spiros Milonas
President
Ionian Management Inc.
Mitchell Rutter
President
Essex Capital Partners
OHiO saVings BanK
Ronald a. Rosenfeld
Chairman
leslie d. dunn
Independent Director
Federal Home Loan Bank of Cincinnati
Robert P. duvin
Partner
Littler Mendelson, PC
Keith V. Mabee
Vice Chairman
Dix & Eaton
Rev. Robert l. niehoff, s.J.
President
John Carroll University
2011 Annual Report
15
S H A R E H O L D E R R E F E R E N C E
CORPORATE HEADQUARTERS
615 Merrick Avenue
Westbury, NY 11590-6607
Phone:
Fax:
Online: www.myNYCB.com
(516) 683-4100
(516) 683-8385
INVESTOR RELATIONS
Shareholders, analysts, and others seeking information about New York Community
Bancorp, Inc. are invited to contact our Department of Investor Relations and Corporate
Communications at:
Phone:
Fax:
E-mail:
Online:
(516) 683-4420
(516) 683-4424
ir@myNYCB.com
ir.myNYCB.com
Copies of our earnings releases and other financial publications, including our Annual
Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”), are
available without charge upon request.
Information about our financial performance may also be found at ir.myNYCB.com, the
Investor Relations portion of our web site, under “Strategies & Results.” 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 addi-
tion, shareholders wishing to receive e-mail notification each time a press release, SEC filing,
or other corporate event is posted to our web site may do so by clicking on “Register for
E-mail Alerts,” and following the prompts.
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 ir.myNYCB.com, click on “Request Online
Delivery of Proxy Materials,” and 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 disbursement agent, Computershare (formerly BNY Mellon
Shareowner Services), directly.
Computershare is available to assist you 24 hours a day, seven days a week, through its
toll-free Interactive Voice Response system or through its online service, EquityAccess®. 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 New York Stock Exchange holidays.
You may contact Computershare in any of the following ways:
Online:
Visit www.computershare.com and click on “EquityAccess & More.”
• To access your account online, click on “Investor Service Direct®” and follow the prompts.
• To access Computershare’s “Online Contact Us Form,” select the “Click here to contact us”
link, and then choose “All other companies or general questions.”
By phone:
In the U.S. & Canada: (866) 293-6077
International: (201) 680-6578
By U.S. mail:
P.O. Box 358015
Pittsburgh, PA 15252-8015
TDD lines for hearing-impaired investors:
In the U.S. & Canada: (866) 231-5469
International: (201) 680-6610
By overnight mail:
480 Washington Blvd.
Jersey City, NJ 07310-1900
In all correspondence with Computershare, 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.
1616
NEW YORK COMMUNITY BANCORP, INC.
2011 ANNUAL REPORT ON FORM 10-K
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, 2011
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 (cid:95) No (cid:133)(cid:3)
(cid:3)
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 (cid:95)(cid:3)
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 (cid:95) No (cid:133)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§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)(cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (cid:95) No (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 (cid:95) 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 (cid:95)(cid:3)
As of June 30, 2011, the aggregate market value of the shares of common stock outstanding of the registrant was $6.3 billion,
excluding 15,193,655 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, 2011, $14.99, as reported by the New York Stock Exchange.
The number of shares of the registrant’s common stock outstanding as of February 22, 2012 was 438,671,990 shares.
Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 7, 2012 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.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases
of Equity Securities
Selected Financial Data
Item 6.
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.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
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 Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
Certifications
Page
1
3
7
27
37
37
37
37
38
41
42
87
91
156
156
157
157
157
157
157
157
158
161
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:
(cid:120) general economic conditions, either nationally or in some or all of the areas in which we and our customers
conduct our respective businesses;
(cid:120) conditions in the securities markets and real estate markets or the banking industry;
(cid:120) changes in real estate values, which could impact the quality of the assets securing the loans in our
portfolio;
(cid:120) changes in interest rates, which may affect our net income, prepayment penalty income, mortgage banking
income, and other future cash flows, or the market value of our assets, including our investment securities;
(cid:120) changes in the quality or composition of our loan or securities portfolios;
(cid:120) changes in our capital management policies, including those regarding business combinations, dividends,
and share repurchases, among others;
(cid:120) our use of derivatives to mitigate our interest rate exposure;
(cid:120) changes in competitive pressures among financial institutions or from non-financial institutions;
(cid:120) changes in deposit flows and wholesale borrowing facilities;
(cid:120) changes in the demand for deposit, loan, and investment products and other financial services in the
markets we serve;
(cid:120) 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;
(cid:120) changes in our customer base or in the financial or operating performances of our customers’ businesses;
(cid:120) any interruption in customer service due to circumstances beyond our control;
(cid:120) our ability to retain key members of management;
(cid:120) potential exposure to unknown or contingent liabilities of companies we have acquired or may acquire in
the future;
(cid:120) the outcome of pending or threatened litigation, or of other matters before regulatory agencies, whether
currently existing or commencing in the future;
(cid:120) environmental conditions that exist or may exist on properties owned by, leased by, or mortgaged to the
Company;
(cid:120) any interruption or breach of security resulting in failures or disruptions in customer account management,
general ledger, deposit, loan, or other systems;
(cid:120) 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;
(cid:120) the ability to keep pace with, and implement on a timely basis, technological changes;
1
(cid:120) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental,
or legislative action, including, but not limited to, the impact of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, and other changes pertaining to banking, securities, taxation, rent regulation and
housing, financial accounting and reporting, environmental protection, and insurance, and the ability to
comply with such changes in a timely manner;
(cid:120) changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S.
Department of the Treasury and the Board of Governors of the Federal Reserve System;
(cid:120) changes in accounting principles, policies, practices, or guidelines;
(cid:120) additional FDIC special assessments or required assessment prepayments;
(cid:120) any breach in performance by the Community Bank under our loss sharing agreements with the FDIC;
(cid:120) changes in our estimates of future reserves based upon the periodic review thereof under relevant
regulatory and accounting requirements;
(cid:120) changes in regulatory expectations relating to predictive models we use in connection with stress testing
and other forecasting or in the assumptions on which such modeling and forecasting is predicated;
(cid:120) the ability to successfully integrate any assets, liabilities, customers, systems, and management personnel of
any banks we may acquire into our operations, and our ability to realize related revenue synergies and cost
savings within expected time frames;
(cid:120) changes in our credit ratings or in our ability to access the capital markets;
(cid:120) war or terrorist activities; and
(cid:120) other economic, competitive, governmental, regulatory, technological, and geopolitical factors affecting our
operations, pricing, and services.
It should be noted that we routinely evaluate opportunities to expand through acquisitions 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 or our debt or equity securities
may occur.
In addition, 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
BARGAIN PURCHASE GAIN
A bargain purchase gain exists when the fair value of the assets acquired in a business combination exceeds
the fair value of the assumed liabilities. Assets acquired in an FDIC-assisted transaction may include cash payments
received from the FDIC.
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%.
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 any 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 were subtracted at December 31, 2011, 2010, 2009, 2008, and 2007. As there were no unallocated
ESOP shares remaining at December 31, 2011 or 2010, both numbers were the same at those dates.
Shares outstanding
Less: Unallocated ESOP shares
Shares used for book value per
2011
437,344,796
--
2010
435,646,845
--
2009
433,197,332
(299,248)
2008
344,985,111
(631,303)
2007
323,812,639
(977,800)
share computation
437,344,796
435,646,845
432,898,084
344,353,808
322,834,839
BROKERED DEPOSITS
Refers to funds obtained, directly or indirectly, by or through deposit brokers that are then deposited into one
or more deposit accounts at a bank.
CHARGE-OFF
Refers to the amount of a loan balance that has been written off against the allowance for losses on non-
covered loans.
COMMERCIAL REAL ESTATE (“CRE”) LOAN
A mortgage loan secured by either an income-producing property owned by an investor and leased primarily
for commercial purposes or, to a lesser extent, an owner-occupied building used for business purposes. The CRE
loans in our portfolio are typically secured by office buildings, retail shopping centers, light industrial centers with
multiple tenants, or mixed-use properties.
CORE DEPOSIT INTANGIBLE (“CDI”)
Refers to the intangible asset related to the value of core deposit accounts acquired in a business combination.
CORE DEPOSITS
All deposits other than certificates of deposit (i.e., NOW and money market accounts, savings accounts, and
non-interest-bearing deposits) 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.
COVERED LOANS AND OTHER REAL ESTATE OWNED (“OREO”)
Refers to the loans and OREO we acquired in our AmTrust Bank (“AmTrust”) and Desert Hills Bank (“Desert
Hills”) acquisitions, which are “covered” by loss sharing agreements with the FDIC. Please see the definition of
“Loss Sharing Agreements” that appears on the following page.
3
DIVIDEND PAYOUT RATIO
The percentage of our earnings that is paid out to shareholders in the form of dividends. It is 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.
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 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.
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 Federal Home Loan Banks (the “FHLBs”).
GSE OBLIGATIONS
Refers to GSE mortgage-related securities (both certificates and collateralized mortgage obligations) and GSE
debentures.
INTEREST RATE LOCK COMMITMENTS (“IRLCs”)
Refers to commitments we have made to originate new one-to-four family loans at specific (i.e., locked-in)
interest rates. The volume of IRLCs at the end of a period is a leading indicator of loans to be originated in the near
future.
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 (“LTV”) RATIO
Measures the balance of a loan as a percentage of the appraised value of the underlying property.
LOSS SHARING AGREEMENTS
Refers to the agreements we entered into with the FDIC in connection with the loans and OREO we acquired
in our AmTrust and Desert Hills acquisitions. The agreements call for the FDIC to reimburse us for 80% of any
losses (and share in 80% of any recoveries) up to specified thresholds and to reimburse us for 95% of any losses
(and share in 95% of any recoveries) beyond those thresholds with respect to the acquired assets, for specified
periods of time. All of the loans and OREO acquired in the AmTrust and Desert Hills acquisitions are subject to
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these agreements and are referred to in this report either as “covered loans,” “covered OREO,” or, when discussed
together, “covered assets.”
MORTGAGE BANKING INCOME
Refers to the income generated by our mortgage banking operation, which is recorded in non-interest income.
Mortgage banking income has two components: income generated from the origination of one-to-four family loans
for sale (“income from originations”) and income generated by servicing such loans (“servicing income”).
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 over 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-COVERED LOANS AND OTHER REAL ESTATE OWNED
Refers to all of the loans and OREO in our portfolio that are not covered by our loss sharing agreements with
the FDIC.
NON-PERFORMING LOANS AND ASSETS
Non-performing loans consist of non-accrual loans and loans over 90 days past due and still accruing interest.
Non-performing assets consist of non-performing loans and OREO.
RENT-CONTROL/RENT-STABILIZATION
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 on the apartments in certain buildings is restricted under certain “rent-
control” or “rent-stabilization” laws. Rent-control laws apply to apartments in buildings that were 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. Rent-controlled and -stabilized apartments tend to be more
affordable to live in because of the applicable regulations, and buildings with a preponderance of such rent-regulated
apartments 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 FHLBs or various brokerage firms.
RETURN ON AVERAGE ASSETS
A measure of profitability determined by dividing net income by average assets for a given period.
5
RETURN ON AVERAGE STOCKHOLDERS’ EQUITY
A measure of profitability determined by dividing net income by average stockholders’ equity for a given
period.
TOTAL DELINQUENCIES
Refers to the sum of non-performing loans and loans 30 to 89 days past due.
WHOLESALE BORROWINGS
Refers to advances drawn by the Banks against their respective lines of credit with the FHLBs, their
repurchase agreements with the FHLBs 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.
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ITEM 1.
BUSINESS
General
PART I
With total assets of $42.0 billion at December 31, 2011, we are the 21st largest publicly traded bank holding
company in the nation, and operate the nation’s second largest public thrift. Reflecting our growth through ten
business combinations between November 30, 2001 and March 26, 2010, we currently have 275 branch offices,
combined, in five states.
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”).
New York Community Bank
Established in 1859, the Community Bank is a New York State-chartered savings bank with 241 branches that
currently operate through seven divisional banks.
In New York, we serve our Community Bank customers through Roslyn Savings Bank, with 55 branches on
Long Island, a suburban market east of New York City comprised of Nassau and Suffolk counties; Queens County
Savings Bank, with 34 branches in the New York City borough of Queens; Richmond County Savings Bank, with
22 branches in the borough of Staten Island; and Roosevelt Savings Bank, with eight branches in the borough of
Brooklyn. In the Bronx and neighboring Westchester County, we currently have four branches that operate directly
under the name “New York Community Bank.”
In New Jersey, we serve our Community Bank customers through 51 branches that operate under the name
Garden State Community Bank.
In Florida and Arizona, where we have 25 and 14 branches, respectively, we serve our customers through the
AmTrust Bank division of the Community Bank.
In Ohio, we serve our Community Bank customers through 28 branches of Ohio Savings Bank.
We compete for depositors in these diverse markets by emphasizing service and convenience, and by offering
a comprehensive menu of traditional and non-traditional products and services. Of our 241 Community Bank
branches, 223 feature weekend hours, including 59 that are open seven days a week. Of these, 42 are in-store
branches in New York and New Jersey that are primarily located in supermarkets. The Community Bank also offers
24-hour banking online and by phone.
We also are a leading producer of multi-family loans in New York City, with an emphasis on non-luxury
apartment buildings that feature below-market rents. In addition to multi-family loans, which are our principal asset,
we originate commercial real estate loans (primarily in New York City, as well as Long Island and New Jersey) and,
to a much lesser extent, acquisition, development, and construction loans, and commercial and industrial loans.
We also originate one-to-four family loans, primarily through our mortgage banking operation, which was
acquired in connection with our acquisition of certain assets, and assumption of certain liabilities, of AmTrust Bank
(“AmTrust”) on December 4, 2009. In 2011, the vast majority of the one-to-four family loans we originated were
agency-conforming loans sold to government-sponsored enterprises (“GSEs”), servicing retained. The remainder
were jumbo one-to-four family loans that were sold under contract to other financial institutions.
Although the vast majority of the loans we produce for investment (i.e., for our portfolio) are secured by
properties or businesses in New York City, and to a lesser extent, Long Island and New Jersey, the one-to-four
family loans we originate through our mortgage banking operation are for the purchase or refinancing of homes in
all 50 states.
New York Commercial Bank
Established through an acquisition on December 30, 2005, the Commercial Bank is a New York State-
chartered commercial bank with 34 branches in Manhattan, Queens, Brooklyn, Westchester County, and Long
Island, including 17 that operate under the name “Atlantic Bank.”
7
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, the Commercial Bank offers 24-hour banking online and by phone.
Customers of the Commercial Bank may transact their business at any of the 174 Community Bank branches
in New York and New Jersey, and Community Bank customers in New York and New Jersey may transact their
business at any of the 34 Commercial Bank branch in New York. In addition, customers of both Banks have 24-hour
access to their accounts through 261 of our 285 ATM locations in the five states we serve.
Our Websites
We also serve our customers through three connected 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 websites provide extensive information about the Company for the investment community. Earnings
releases, dividend announcements, and other press releases are posted upon issuance to the Investor Relations
portion of our websites. 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, typically within minutes of being filed. The websites also
provide information regarding our Board of Directors and management team and the number of Company shares
held by these insiders, as well as certain Board Committee charters and our corporate governance policies. The
content of our websites shall not be deemed to be incorporated by reference into this Annual Report.
Overview
Lending
Loans represented $30.3 billion, or 72.1%, of total assets at December 31, 2011. Our loan portfolio has three
components:
1. Covered Loans – Covered loans refers to the loans we acquired in our FDIC-assisted acquisitions of
AmTrust and Desert Hills Bank (“Desert Hills”), and are covered by loss sharing agreements with the FDIC. At
December 31, 2011, the balance of covered loans was $3.8 billion; of this amount, $3.4 billion were one-to-four
family loans. To distinguish these “covered loans” from the loans in our portfolio that are not subject to these
agreements (and that, for the most part, we ourselves originated), all other loans in our portfolio are referred to as
“non-covered loans.”
2. Non-Covered Loans Held for Sale – Non-covered loans held for sale refers to the one-to-four family loans
that we originate and aggregate for sale, primarily to GSEs. At December 31, 2011, the held-for-sale loan portfolio
totaled $1.0 billion. In the twelve months ended at that date, we originated $7.2 billion of one-to-four family loans
for sale.
3. Non-Covered Loans Held for Investment – Referring to the loans we originate for our own portfolio, non-
covered loans held for investment totaled $25.5 billion at December 31, 2011. The year-end balance consisted
primarily of loans secured by multi-family buildings in New York City, most of which are subject to rent regulation
and therefore feature below-market rents. In addition to multi-family loans, loans held for investment include
commercial real estate loans and, to a much lesser extent, acquisition, development, and construction loans;
commercial and industrial loans; and one-to-four family loans.
Multi-Family Loans
Multi-family loans represented $17.4 billion, or 68.3%, of total loans held for investment at December 31,
2011, and represented $5.8 billion, or 64.1%, of the total loans we originated for investment over the course of the
year.
The multi-family loans we originate are typically secured by non-luxury apartment buildings in New York
City that are subject to rent regulation and therefore feature below-market rents. Such loans are typically made to
long-term property owners with a history of growing their cash flows over time by making improvements to certain
apartments which, in turn, enables them to increase the rents their tenants pay. We also make multi-family loans to
property owners who are seeking to expand their real estate holdings by purchasing additional properties.
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Our typical loan has a term of ten years, with a fixed rate of interest in years one through five and a rate that
either adjusts annually or is fixed for the five years that follow. 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. If a loan is still outstanding in the sixth year and the borrower selects
the fixed rate option, the prepayment penalties typically reset to a range of five points to one point over years six
through ten. Reflecting the structure of our multi-family credits, and the tendency of our borrowers to refinance their
loans as their cash flows increase, our average multi-family loan had an expected weighted average life of 3.3 years
at December 31, 2011.
Commercial Real Estate (“CRE”) Loans
CRE loans represented $6.9 billion, or 26.9%, of total loans held for investment at December 31, 2011, and
$2.4 billion, or 26.3%, of loans produced for investment over the course of the year. Our CRE loans are similar in
structure to our multi-family credits, and had a weighted average life of 3.4 years at December 31, 2011.
The CRE loans we originate are secured by income-producing properties such as office buildings, retail
centers, multi-tenanted light industrial properties, and mixed-use buildings, most of which are located in New York
City and, to a lesser extent, on Long Island and in New Jersey.
Acquisition, Development, and Construction (“ADC”) Loans
Our ADC loan portfolio largely consists of loans that were originated 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.
ADC loans represented $445.7 million, or 1.7%, of total loans held for investment at the end of December,
reflecting our decision to limit such lending in the current housing market, and the increased deployment of our cash
flows into multi-family and CRE loans.
Commercial and Industrial (“C&I”) Loans
Included in “other loans” in our Consolidated Statements of Condition, C&I loans represented $600.0 million,
or 2.4%, of total loans held for investment at December 31, 2011. We offer a broad range of loans to small and mid-
size businesses for working capital (including inventory and receivables), business expansion, and the purchase of
equipment and machinery.
One-to-Four Family Loans
Non-covered one-to-four family loans totaled $127.4 million at the end of this December, and consisted
primarily of loans acquired in our business combinations prior to 2009.
Asset Quality
The quality of our assets improved in 2011, as an improvement in market conditions combined with the efforts
of our Loan Recovery Unit to reduce the balance of non-performing loans. Non-performing non-covered loans
declined $298.6 million year-over-year to $325.8 million at December 31, 2011, representing 1.28% of total non-
covered loans. Reflecting the decline in non-performing loans, and a $56.5 million rise in other real estate owned
(“OREO”) to $84.6 million, non-performing assets fell $242.1 million year-over-year to $410.4 million,
representing 1.07% of total non-covered assets at December 31, 2011.
At December 31, 2011, the allowance for losses on non-covered loans totaled $137.3 million, representing
42.14% of total non-covered loans at that date. The provision for losses on non-covered loans totaled $79.0 million
in the twelve months ended December 31, 2011, while net charge-offs totaled $100.7 million, representing 0.35% of
average loans.
Notwithstanding the year-over-year improvement in the economy and local market conditions, it should be
noted that economic weakness resulting from a further contraction of real estate values and/or an increase in office
vacancies, bankruptcies, and unemployment, could result in our experiencing a further increase in charge-offs and/or
an increase in our loan loss provision, either of which could have an adverse impact on our earnings in the future.
9
Funding Sources
We have four primary funding sources: the deposits we gather through our branch network or add through
acquisitions, and brokered deposits; wholesale borrowings, primarily in the form of Federal Home Loan Bank
(“FHLB”) advances and repurchase agreements with the FHLB and various brokerage firms; cash flows produced
by the repayment and sale of loans; and cash flows produced by securities repayments and sales.
Deposits totaled $22.3 billion at December 31, 2011, and included certificates of deposit (“CDs”) of $7.4
billion; NOW and money market accounts of $8.8 billion; savings accounts of $4.0 billion; and non-interest-bearing
accounts of $2.2 billion.
Borrowed funds totaled $14.0 billion at the end of the year, with wholesale borrowings representing $13.4
billion, or 96.3%, of that balance and 32.0% of total assets at December 31, 2011.
Loan repayments and sales generated cash flows of $15.0 billion in 2011, while securities repayments and
sales generated cash flows of $4.2 billion.
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 produced 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),
net; and some of which are not (e.g., the level of short-term interest rates and market rates of interest, the degree of
competition we face for deposits and loans, and the level of prepayment penalty income we receive). In 2011, net
interest income rose $20.5 million to $1.2 billion, as a $47.1 million decline in interest income was exceeded by a
$67.6 million decline in interest expense. Prepayment penalty income added $86.6 million to interest income in
2011, as a decline in market interest rates combined with the improvement in local market conditions to trigger an
increase in multi-family and CRE loan demand.
While net interest income is our primary source of income, it is supplemented by the non-interest income we
produce. In 2011, our largest source of non-interest income was the income generated by our mortgage banking
operation through the origination of loans for sale to GSEs. Mortgage banking income accounted for $80.7 million
of total non-interest income, with income from originations accounting for $80.2 million and servicing income
accounting for the rest. In addition, fee income from deposits and loans accounted for $44.9 million of 2011 non-
interest income, while BOLI income and other income accounted for $28.4 million and $35.5 million, respectively.
Included in other income are the revenues from the sale of third-party investment products in our branches, and
revenues from our investment advisory firm, Peter B. Cannell & Co., Inc., which had $1.6 billion of assets under
management at December 31, 2011.
Efficiency
The efficiency of our operation has long been a distinguishing characteristic, stemming from our focus on
multi-family lending, which is broker-driven, and from the expansion of our franchise through acquisitions rather
than de novo growth. For the twelve months ended December 31, 2011, our efficiency ratio was 40.03%.
Our Market
Our current market for deposits consists of the 26 counties in the five states that are served by our branch
network, including all five boroughs of New York City, Nassau and Suffolk Counties on Long Island, and
Westchester County in New York; Essex, Hudson, Mercer, Middlesex, Monmouth, Ocean, and Union Counties in
New Jersey; Maricopa and Yavapai Counties in Arizona; Cuyahoga, Lake, and Summit Counties in Ohio; and
Broward, Collier, Lee, Miami-Dade, Palm Beach, and St. Lucie Counties in Florida.
The market for the loans we produce varies, depending on the type of loan. For example, the vast majority of
our multi-family loans are collateralized by rental apartment buildings in New York City, which is also home to the
majority of the properties collateralizing our CRE loans. In contrast, our mortgage banking operation originates one-
to-four family loans in all 50 states.
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Competition for Deposits
The combined population of the 26 counties where our branches are located is approximately 29.6 million,
and the number of banks and thrifts we compete with currently exceeds 360. With total deposits of $22.3 billion at
December 31, 2011, we ranked ninth among all bank and thrift depositories serving these 26 counties, and ranked
first or second among all thrift depositories in the following counties: Queens, Richmond, and Nassau Counties in
New York; Essex County in New Jersey; and Palm Beach County in Florida. (Market share information was
provided by SNL Financial.)
We also compete for deposits with other financial institutions, including credit unions, Internet banks, and
brokerage firms. Although we currently rank 21st among the top 25 bank holding companies in the nation, based on
total assets, many of the institutions we compete with have greater financial resources than we do and serve a far
broader market, which enables them to promote their products more extensively than we can.
Our ability to attract and retain deposits is not only a function of short-term interest rates and industry
consolidation, but also the competitiveness of the rates being offered by other financial institutions within our
marketplace.
Competition for deposits is also influenced by several internal factors, including the opportunity to acquire
deposits through business combinations; the cash flows produced through loan and securities repayments and sales;
and the availability of attractively priced wholesale funds. In addition, the degree to which we compete for deposits
is influenced by the liquidity needed to fund our loan production and other outstanding commitments.
We vie for deposits and customers by placing an emphasis on convenience and service. In addition to our 241
Community Bank branches and 34 Commercial Bank branches, we have 285 ATM locations, including 261 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 websites, www.myNYCB.com, www.NewYorkCommercialBank.com, and
www.NYCBfamily.com.
In addition to 192 traditional branches in New York, New Jersey, Florida, Ohio, and Arizona, our Community
Bank currently has 42 “in-store” branches in New York and New Jersey—41 in supermarkets and one in a drug
store. Because of the proximity of these branches to our traditional locations, our customers have the option of doing
their banking seven days a week in many of the communities we serve. This service model is an important
component of our efforts to attract and maintain deposits in a highly competitive marketplace. Of the remaining
Community Bank branches, four are located on corporate campuses in New Jersey and three are customer service
centers in New York.
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. Furthermore, customers who come to us seeking a residential mortgage can begin the application process
by phone or in any branch.
In addition to checking and savings accounts, Individual Retirement Accounts, and CDs for both businesses
and consumers, the Commercial Bank offers a suite of cash management products to address the needs of small and
mid-size businesses, municipal and county governments, school districts, and professional associations.
Another competitive advantage is our strong community presence, with April 14, 2011 having marked the
152nd year of service of our forebear, Queens County Savings Bank. We have found that our longevity, as well as
our strong capital position, are especially appealing to customers seeking a strong, stable, and service-oriented bank.
Competition for Loans
Our success as a producer of multi-family, CRE, ADC, and C&I loans is substantially tied to the economic
health of the markets where we lend. 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.
The competition we face for loans also varies with the type of loan we are originating. In New York City,
where the majority of the buildings collateralizing our multi-family loans are located, we compete for such loans on
the basis of timely service and the expertise that stems from being a specialist in our field.
11
Following the financial crisis in 2008, most of our competitors were either acquired or chose to step away
from the multi-family lending space. As the multi-family housing market began to reflect improvement in 2011, we
began to see new entrants to this market, as well as the return of certain competitors who had opted to step away
during the downward cycle turn. Nonetheless, Fannie Mae and Freddie Mac continued to be our primary
competition for multi-family loans in 2011, as they were in 2010 and 2009.
While we anticipate that competition for multi-family loans will continue in the future, we believe that the
significant volume of multi-family loans we produced in 2011 is indicative of our ability to compete for such
business as conditions in our market continue to improve. That said, no assurances can be made that we will be able
to sustain or increase our level of multi-family loan production, given the extent to which it is influenced not only by
competition, but also by such factors as the level of market interest rates, the availability and cost of funding, real
estate values, market conditions, and the state of the economy.
Although multi-family lending remains our primary focus, we also originate CRE loans for our portfolio. Our
ability to originate CRE loans was also enhanced by the exit of certain financial and non-financial institutions from
our market, a factor that contributed to the growth of our portfolio in 2011 as it did in the prior two years. Our ability
to compete for CRE loans on a go-forward basis depends on the same factors that impact our ability to compete for
multi-family credits, and on the degree to which other CRE lenders choose to step up their loan production as the
local market continues to improve.
Since the second half of 2007, we have been largely limiting our ADC lending; in addition, we have generally
been limiting our production of C&I loans.
Our mortgage banking operation competes with a significant number of financial and non-financial
institutions throughout the nation that also originate and aggregate one-to-four family loans for sale to GSEs. In
2011, we originated $7.2 billion of one-to-four family loans for sale.
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, lenders may become liable for the costs of cleaning up hazardous materials found on such properties. We
attempt to mitigate such environmental risks by requiring either that a borrower purchase environmental insurance
or that an appropriate environmental site assessment be completed as part of our underwriting review on the initial
granting of CRE and ADC loans, regardless of location, and of any out-of-state multi-family loans we may produce.
In addition, we order an updated environmental analysis prior to foreclosing on such properties, and typically
maintain ownership of the real estate we acquire through foreclosure in 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 typically
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 (which may contain 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.
12
Subsidiary Activities
The Community Bank has formed, or acquired through merger transactions, 34 active subsidiary corporations.
Of these, 22 are direct subsidiaries of the Community Bank and 12 are subsidiaries of Community Bank-owned
entities.
The 22 direct subsidiaries of the Community Bank are:
Name
DHB Real Estate, LLC
Mt. Sinai Ventures, LLC
Jurisdiction of
Organization
Arizona
Delaware
NYCB Community Development Corp. Delaware
NYCB Mortgage Company, LLC
Delaware
Realty Funding Company, LLC
Eagle Rock Investment Corp.
Pacific Urban Renewal, Inc.
Somerset Manor Holding Corp.
Delaware
New Jersey
New Jersey
New Jersey
Synergy Capital Investments, Inc.
New Jersey
1400 Corp.
BSR 1400 Corp.
Bellingham Corp.
Blizzard Realty Corp.
CFS Investments, Inc.
Main Omni Realty Corp.
NYB Realty Holding Company, LLC
O.B. Ventures, LLC
RCBK Mortgage Corp.
RCSB Corporation
New York
New York
New York
New York
New York
New York
New York
New York
New York
New York
New York
RSB Agency, Inc.
Richmond Enterprises, Inc.
New York
Roslyn National Mortgage Corporation New York
Purpose
Organized to own interests in real estate
A joint venture partner in the development,
construction, and sale of a 177-unit golf course
community in Mt. Sinai, NY, all the units of which
were sold by December 31, 2006
Formed to invest in community development
activities
Originates and aggregates one-to-four family loans
for sale, primarily servicing retained
Holding company for loan company subsidiaries
Formed to hold and manage investment portfolios for
the Company
Owns a branch building
Holding company for four subsidiaries that owned
and operated two assisted-living facilities in New
Jersey in 2005
Formed to hold and manage investment portfolios for
the Company
Manages properties acquired by foreclosure while
they are being marketed for sale
Organized to own interests in real estate
Organized to own interests in real estate
Organized to own interests in real estate
Sells non-deposit investment products
Organized to own interests in real estate
Holding company for subsidiaries owning interests in
real estate
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
Organized to own interests in certain multi-family
loans
Owns a branch building, Ferry Development Holding
Company, and Woodhaven Investments, Inc.
Sells non-deposit investment products
Holding company for Peter B. Cannell & Co., Inc.
Formerly operated as a mortgage loan originator and
servicer and currently holds an interest in its former
office space
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The 12 subsidiaries of Community Bank-owned entities are:
Jurisdiction of
Organization
Name
Bronx Realty Funding Company, LLC
Delaware
Columbia Preferred Capital Corporation Delaware
Ferry Development Holding Company
Delaware
Peter B. Cannell & Co., Inc.
Delaware
Roslyn Real Estate Asset Corp.
Delaware
Walnut Realty Funding Company, LLC Delaware
Delaware
Woodhaven Investments, Inc.
Your New REO, LLC
Delaware
Ironbound Investment Company, Inc.
New Jersey
The Hamlet at Olde Oyster Bay, LLC
New York
The Hamlet at Willow Creek, LLC
New York
Richmond County Capital Corporation
New York
Purpose
A non-performing loan holding company
A real estate investment trust (“REIT”) organized for
the purpose of investing in mortgage-related assets
Formed to hold and manage investment portfolios for
the Company
Advises high net worth individuals and institutions on
the management of their assets
A REIT organized for the purpose of investing in
mortgage-related assets
Established to own Bank-owned properties
Holding company for Roslyn Real Estate Asset Corp.
and Ironbound Investment Company, Inc.
Owns a website that lists bank-owned properties for
sale
A REIT organized for the purpose of investing in
mortgage-related assets that also is the principal
shareholder of Richmond County 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
A REIT organized for the purpose of investing in
mortgage-related assets that also is the principal
shareholder of Columbia Preferred Capital Corp.
There are 66 additional entities that are subsidiaries of a Community Bank-owned entity organized to own
interests in real estate.
The Commercial Bank has six active subsidiary corporations, two of which are subsidiaries of Commercial
Bank-owned entities.
The two direct subsidiaries of the Commercial Bank are:
Name
Beta Investments, Inc.
Jurisdiction of
Organization
Delaware
Gramercy Leasing Services, Inc.
New York
Purpose
Holding company for Omega Commercial Mortgage
Corp. and Long Island Commercial Capital Corp.
Provides equipment lease financing
The two subsidiaries of Commercial Bank-owned entities are:
Name
Omega Commercial Mortgage Corp.
Jurisdiction of
Organization
Delaware
Long Island Commercial Capital Corp.
New York
Purpose
A REIT organized for the purpose of investing in
mortgage-related assets
A REIT organized for the purpose of investing in
mortgage-related assets
There are two additional entities that are subsidiaries of the Commercial Bank that are organized to own
interests in real estate.
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.
Please see Note 7, “Borrowed Funds,” in Item 8, “Financial Statements and Supplementary Data,” for a further
discussion of the Company’s special business trusts.
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The Company also has one non-banking subsidiary that was established in connection with the acquisition of
Atlantic Bank of New York.
Personnel
At December 31, 2011, the number of full-time equivalent employees was 3,348. 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
The Company is subject to federal, state, and local income taxes. Please see the discussion of “Income Taxes”
in “Critical Accounting Policies” in Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” later in this report.
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 Department of Financial Services (the “NYDFS”) (formerly, the New York State Banking Department),
as their chartering agency, by the Federal Deposit Insurance Corporation (the “FDIC”), as their insurer of deposits,
and by the Consumer Financial Protection Bureau (the “CFPB”), which was created under the Dodd-Frank Wall
Street Reform and Consumer Protection Act (the “Dodd Frank Act”) in 2011 to implement and enforce consumer
protection laws applying to banks. The Banks must file reports with the NYDFS, the FDIC, and the CFPB
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 NYDFS 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 NYDFS, the FDIC, or through legislation,
could have a material adverse impact on the Company, the Banks, 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 of Governors (the “FRB”), the FDIC, the NYDFS, 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.
The Dodd-Frank Act
The Dodd-Frank Act has significantly changed the current bank regulatory structure and will continue to
affect, into the immediate future, the lending and investment activities and general operations of depository
institutions and their holding companies.
In addition to creating the CFPB, the Dodd-Frank Act requires the FRB to establish minimum consolidated
capital requirements for bank holding companies that are as stringent as those required for insured depository
institutions; the components of Tier 1 capital will be restricted to capital instruments that are currently considered to
be Tier 1 capital for insured depository institutions. In addition, the proceeds of trust preferred securities will be
excluded from Tier 1 capital unless (i) such securities are issued by bank holding companies with assets of less than
$500 million, or (ii) such securities were issued prior to May 19, 2010 by bank or savings and loan holding
companies with assets of less than $15 billion. The exclusion of such proceeds will be phased in over a three-year
period beginning in 2013.
The Dodd-Frank Act created a new supervisory structure for oversight of the U.S. financial system, including
the establishment of a new council of regulators, the Financial Stability Oversight Council, to monitor and address
15
systemic risks to the financial system. Non-bank financial companies that are deemed to be significant to the
stability of the U.S. financial system and all bank holding companies with $50 billion or more in total consolidated
assets will be subject to heightened supervision and regulation. The FRB will implement prudential requirements
and prompt corrective action procedures for such companies.
The Dodd-Frank Act made many additional changes in banking regulation, including: authorizing depository
institutions, for the first time, to pay interest on business checking accounts; requiring originators of securitized
loans to retain a percentage of the risk for transferred loans; establishing regulatory rate-setting for certain debit card
interchange fees; and establishing a number of reforms for mortgage lending and consumer protection.
The Dodd-Frank Act also broadened the base for FDIC insurance assessments. The FDIC was required to
promulgate rules revising its assessment system so that it is based not on deposits, but on the average consolidated
total assets less the tangible equity capital of an insured institution. That rule took effect April 1, 2011. The Dodd-
Frank Act also permanently increased the maximum amount of deposit insurance for banks, savings institutions, and
credit unions to $250,000 per depositor, retroactive to January 1, 2008, and provided non-interest-bearing
transaction accounts with unlimited deposit insurance through December 31, 2012.
Many of the provisions of the Dodd-Frank Act are not yet effective. The Dodd-Frank Act requires various
federal agencies to promulgate numerous and extensive implementing regulations over the next several years.
Although it is therefore difficult to predict at this time what impact the Dodd-Frank Act and the implementing
regulations will have on the Company and the Banks, they may have a material impact on operations through,
among other things, heightened regulatory supervision and increased compliance costs.
Basel III
During the third quarter of 2010, the Basel Committee on Banking Supervision revised the Capital Accord
(“Basel III”), which narrows the definition of capital and increases capital requirements for specific exposures. The
new capital requirements will be phased in over six years, beginning in 2013. If these revisions were adopted
currently, we estimate they would have a minimal impact on our regulatory capital ratios, based on our current
understanding of the revisions to capital qualification. We await clarification from our banking regulators as to their
interpretation of Basel III and any additional requirements to the stated thresholds.
In addition, the FDIC has approved issuance of an interagency proposed rulemaking to implement certain
provisions of Section 171 of the Dodd-Frank Act (“Section 171”). Section 171 provides that the capital requirements
generally applicable to insured banks shall serve as a floor for other capital requirements the agencies establish. The
FDIC has noted that the advanced approaches of Basel III allow for reductions in risk-based capital requirements
below those generally applicable to insured banks and, accordingly, need to be modified to be consistent with
Section 171.
New York State 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 NYDFS, 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
State-chartered 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.
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 provisions 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.
16
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, New York State-chartered stock-form savings banks and commercial
banks may declare and pay dividends out of their net profits, unless there is an impairment of capital, but approval
of the NYDFS Superintendent (the “Superintendent”) is required if the total of all dividends declared by the bank 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 NYDFS 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 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 1”) 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 2”)
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 at least 8%, of which at least 4% must be Tier 1 capital.
In addition, the FDIC has established regulations prescribing a minimum Tier 1 leverage capital ratio (the ratio
of Tier 1 capital to adjusted average assets as specified in the regulations). These regulations provide for a minimum
Tier 1 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 1 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, 2011, 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 1 leverage capital ratio of 5%, a minimum Tier 1 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, 2011 appears in Note 17, “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 such 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
17
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 provide it with 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.
Stress Testing
On January 17, 2012, the FDIC approved a notice of proposed rulemaking that would require certain large
insured depository institutions to conduct annual capital-adequacy stress tests. The proposal, to implement section
165(i)(2) of the Dodd-Frank Act, would apply to FDIC-insured state non-member banks with total consolidated
assets of more than $10 billion (a “covered bank”). The proposed rule defines a stress test as a process to assess the
potential impact of economic and financial conditions on the consolidated earnings, losses, and capital of the
covered bank over a set planning horizon, taking into account the current condition of the covered bank and its risks,
exposures, strategies, and activities.
Under the proposed rule, each covered bank would be required to conduct annual stress tests using the bank’s
financial data as of September 30 of that year to assess the potential impact of different scenarios on the
consolidated earnings and capital of that bank and certain related items over a nine-quarter forward-looking planning
horizon, taking into account all relevant exposures and activities. On or before January 5th of each year, each
covered bank, including the Community Bank, would be required to report to the FDIC, in the manner and form
prescribed in the proposed rule, the results of the stress tests conducted by the covered bank during the immediately
preceding year. Based on the information provided by a covered bank in the required report to the FDIC, as well as
other relevant information, the FDIC would conduct an analysis of the quality of the covered bank’s stress test
processes and related results. The FDIC envisions that feedback concerning such analysis would be provided to a
covered bank through the supervisory process.
Consistent with the requirements of the Dodd-Frank Act, the proposed rule would require each covered bank
to publish a summary of the results of its annual stress tests within 90 days of the required date for submitting its
stress test report to the FDIC.
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 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.
In 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
18
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 State law as previously discussed under “New York State 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 1 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 such 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 measures 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 1 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 1 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 1 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
of less than 6%, a Tier 1 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% 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
19
directors or officers; and restrictions on interest rates paid on deposits, compensation of executive officers, and
capital distributions by the parent holding company.
Beginning 60 days after becoming “critically undercapitalized,” critically undercapitalized institutions also
may not 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
within 270 days after it obtains such status.
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%. Please 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. The DIF is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were
merged in 2006.
Under the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk
categories based upon supervisory evaluations, regulatory capital level, and certain other factors, with less risky
institutions paying lower assessments. An institution’s assessment rate depends upon the category to which it is
assigned and certain other factors. Historically, assessment rates ranged from seven to 77.5 basis points of each
institution’s deposit assessment base. On February 7, 2011, as required by the Dodd-Frank Act, the FDIC published
a final rule to revise the deposit insurance assessment system. The rule, which took effect April 1, 2011, changed the
assessment base used for calculating deposit insurance assessments from deposits to total assets less tangible (Tier
1) capital. Since the new base is larger than the previous base, the FDIC also lowered assessment rates so that the
rule would not significantly alter the total amount of revenue collected from the industry. The range of adjusted
assessment rates is now 2.5 to 45 basis points of the new assessment base; the Community Bank’s assessment
ranged within the low to middle part of that range in 2011. On September 30, 2009, the FDIC collected, from all
insured institutions, a special emergency assessment of five basis points of total assets minus Tier 1 capital (capped
at ten basis points of an institution’s deposit assessment base as of June 30, 2009), in order to cover losses to the
DIF. The FDIC considered the need for similar special assessments during the final two quarters of 2009. However,
in lieu of further special assessments, the FDIC required insured institutions to prepay estimated quarterly risk-based
assessments for the fourth quarter of 2009 through the fourth quarter of 2012. The estimated assessments, which
include an assumed annual assessment base increase of 5%, were recorded as a prepaid expense asset as of
December 31, 2009. As of December 31, 2009, and each quarter thereafter, a charge to earnings is recorded for each
regular assessment with an offsetting credit to the prepaid asset.
Due to the decline in economic conditions, the deposit insurance provided by the FDIC per account owner was
raised to $250,000 for all types of accounts. That change, initially intended to be temporary, was made permanent by
the Dodd-Frank Act. In addition, the FDIC adopted an optional Temporary Liquidity Guarantee Program (“TLGP”)
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under which, for a fee, non-interest-bearing transaction accounts would receive unlimited insurance coverage until
December 31, 2009 (later extended to December 31, 2010), and certain senior unsecured debt issued by institutions
and their holding companies between October 13, 2008 and June 30, 2009 (later extended to October 31, 2009)
would be guaranteed by the FDIC through June 30, 2012 or, in certain cases, until December 31, 2012. The Banks
both participated in the unlimited non-interest-bearing transaction account coverage and, together with the
Company, participated in the unsecured debt guarantee program. In December 2008, the Company issued $90.0
million of fixed rate senior notes with a maturity date of June 22, 2012. In addition, the Community Bank issued
$512.0 million of fixed rate senior notes with a maturity date of December 16, 2011, which was repaid on that date.
The Dodd-Frank Act has provided for continued unlimited coverage for certain non-interest-bearing transaction
accounts until December 31, 2012.
The Dodd-Frank Act increased the minimum target DIF ratio from 1.15% of estimated insured deposits to
1.35% of estimated insured deposits. The FDIC must seek to achieve the 1.35% ratio by September 30, 2020.
Insured institutions with assets of $10 billion or more are supposed to fund the increase. The Dodd-Frank Act
eliminated the 1.5% maximum fund ratio, leaving it, instead, to the discretion of the FDIC. The FDIC has recently
exercised that discretion by establishing a long range fund ratio of 2%, which could result in our paying higher
deposit insurance premiums in the future.
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 is based on assessable deposits for the first three quarters and on assessable
assets for the fourth quarter of the year. In the calendar year ending December 31, 2011, the payment averaged 1.007
basis points of assessable deposits and 0.680 basis points of assessable assets, during the respective periods.
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 would lead to termination of the deposit insurance of either of the Banks.
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 at least as
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
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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
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.
Community Reinvestment Act
Federal Regulation
Under the Community Reinvestment Act (“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.
While our latest rating in Florida and Ohio, two of the markets we entered in December 2009 in connection with our
FDIC-assisted AmTrust acquisition, was “needs improvement,” the latest overall CRA rating for the Community
Bank was “Satisfactory,” as was the latest CRA rating for the Commercial Bank.
New York State Regulation
The Community Bank and the Commercial Bank are also subject to provisions of the New York State
Banking Law that impose continuing and affirmative obligations upon a banking institution organized in New York
State 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 NYDFS 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 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 $71.0 million or less (subject to adjustment by the FRB), the reserve requirement is 3%; for
amounts greater than $71.0 million, the reserve requirement is 10% (subject to adjustment by the FRB between 8%
and 14%). The first $11.5 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.
Federal Home Loan Bank System
The Community Bank and the Commercial Bank are members of the FHLB of New York (the “FHLB-NY”),
one of 12 regional FHLBs comprising the FHLB system. Each regional FHLB manages its customer relationships,
while the 12 FHLBs use their combined size and strength to obtain their 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 FHLB-NY capital stock. Including $25.2 million of FHLB-Cincinnati stock acquired in the AmTrust
acquisition and $2.7 million of FHLB-San Francisco stock acquired in the Desert Hills acquisition, the Community
Bank held total FHLB stock of $482.5 million at December 31, 2011. In addition, the Commercial Bank held
FHLB-NY stock of $7.8 million at that date. FHLB stock continued to be valued at par, with no impairment loss
required, at that date.
For the fiscal years ended December 31, 2011 and 2010, dividends from the FHLBs to the Community Bank
amounted to $19.5 million and $23.3 million, respectively. Dividends from the FHLB-NY to the Commercial Bank
amounted to $374,000 and $446,000, respectively, in the corresponding years.
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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. Pursuant
to the Dodd-Frank Act, the FDIC is authorized to approve a state bank’s establishment of a de novo interstate branch
if the intended host state allows de novo branching by banks chartered by that state. The Community Bank currently
maintains 51 branches in New Jersey, 25 branches in Florida, 28 branches in Ohio, and 14 branches in Arizona, in
addition to its 123 branches in New York State.
In April 2008, the Banking Regulators in New Jersey, New York, and Pennsylvania entered into a
Memorandum of Understanding (the “Interstate MOU”) to clarify their respective roles, as home and host state
regulators, regarding interstate branching activity on a regional basis pursuant to the Riegle-Neal Amendments Act
of 1997. The Interstate MOU establishes the regulatory responsibilities of the respective state banking regulators
regarding bank regulatory examinations and is intended to reduce the regulatory burden on state-chartered banks
branching within the region by eliminating duplicative host state compliance exams.
Under the Interstate MOU, the activities of branches established by the Community Bank or the Commercial
Bank in New Jersey or Pennsylvania would be governed by New York State law to the same extent that federal law
governs the activities of the branch of an out-of-state national bank in such host states. For the Community Bank and
the Commercial Bank, issues regarding whether a particular host state law is preempted are to be determined in the
first instance by the NYDFS. In the event that the NYDFS and the applicable host state regulator disagree regarding
whether a particular host state law is pre-empted, the NYDFS and the applicable host state regulator would use their
reasonable best efforts to consider all points of view and to resolve the disagreement.
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 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 NYDFS.
FRB regulations generally prohibit a bank holding company 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 FRB has adopted capital adequacy guidelines for bank holding companies (on a consolidated basis)
substantially similar to, but somewhat less stringent than, those of the FDIC for the Community Bank and the
Commercial Bank. (Please see “Capital Requirements” earlier in this report.) At December 31, 2011, the Company’s
consolidated Total and Tier 1 capital exceeded these requirements. The Dodd-Frank Act required the FRB to issue
consolidated regulatory capital requirements for bank holding companies that are at least as stringent as those
applicable to insured depository institutions. Such regulations eliminated the use of certain instruments, such as
cumulative preferred stock and trust preferred securities, as Tier 1 holding company capital. However, instruments
issued before May 19, 2010 by bank holding companies with more than $15 billion of consolidated assets are
subject to a three-year phase-out from inclusion as Tier 1 capital, beginning January 1, 2013. Based on the balance
of cumulative preferred stock and trust preferred securities we held at December 31, 2011, and absent any reduction
in that balance over the three years ending January 1, 2016, the elimination of such instruments would be expected
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to reduce our capital by $412.0 million, or 11.5%, at the end of the three-year phase-in, and reduce our Tier 1
leverage ratio by 105 basis points.
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
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. The Dodd-Frank Act codifies the source of financial strength policy and requires regulations to
facilitate its application. 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, a depository institution may be liable to the FDIC for losses caused the DIF if a
commonly controlled depository institution were to fail. 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, the Commercial Bank, and their respective affiliates 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 difficult 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 State 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 State law since it controls two banking institutions. Among other requirements,
this means that the Company must receive the 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 (“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 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, under the BHCA, be required to obtain the FRB’s approval before acquiring more than 5% of the Company’s
voting stock. Please see “Holding Company Regulation” earlier in this report.
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New York State 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 and certain other securities listed on the cover page of this report are 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
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.
Consumer Financial Protection Bureau
Created under the Dodd-Frank Act, and given extensive implementation and enforcement powers, the CFPB
has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks, including,
among other things, the authority to prohibit “unfair, deceptive, or abusive” acts and practices. Abusive acts or
practices are defined as those that (1) materially interfere with a consumer’s ability to understand a term or condition
of a consumer financial product or service, or (2) take unreasonable advantage of a consumer’s (a) lack of financial
savvy, (b) inability to protect himself in the selection or use of consumer financial products or services, or
(c) reasonable reliance on a covered entity to act in the consumer’s interests. The CFPB has the authority to
investigate possible violations of federal consumer financial law, hold hearings and commence civil litigation. The
CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial laws. The
CFPB may also institute a civil action against an entity in violation of federal consumer financial law in order to
impose a civil penalty or an injunction. The CFPB has examination and enforcement authority over all banks with
more than $10 billion in assets, as well as their affiliates.
Mortgage Banking and Related Consumer Protection Regulations
The retail activities of banks, including our mortgage banking operation, are subject to a variety of statutes and
regulations designed to protect consumers. Interest and other charges collected or contracted for by banks are subject
to state usury laws and federal laws concerning interest rates. Loan operations are also subject to federal laws
applicable to credit transactions, such as:
(cid:120) The federal Truth-In-Lending Act and Regulation Z issued by the FRB, governing disclosures of credit
terms to consumer borrowers;
(cid:120) The Home Mortgage Disclosure Act and Regulation C issued by the FRB, requiring financial institutions to
provide information to enable the public and public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the community it serves;
(cid:120) The Equal Credit Opportunity Act and Regulation B issued by the FRB, prohibiting discrimination on the
basis of race, creed or other prohibited factors in extending credit;
(cid:120) The Fair Credit Reporting Act and Regulation V issued by the FRB, governing the use and provision of
information to consumer reporting agencies;
(cid:120) The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by
collection agencies; and
(cid:120) The guidance of the various federal agencies charged with the responsibility of implementing such federal
laws.
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Deposit operations also are subject to:
(cid:120) The Truth in Savings Act and Regulation DD issued by the FRB, which requires disclosure of deposit
terms to consumers;
(cid:120) Regulation CC issued by the FRB, which relates to the availability of deposit funds to consumers;
(cid:120) The Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer
financial records and prescribes procedures for complying with administrative subpoenas of financial
records; and
(cid:120) The Electronic Funds Transfer Act and Regulation E issued by the FRB, which governs automatic deposits
to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
In addition, the Banks’ and their subsidiaries may also be subject to certain state laws and regulations
designed to protect consumers.
Many of the foregoing laws and regulations are subject to change resulting from the provisions in the Dodd-
Frank Act, which in many cases calls for revisions to implementing regulations. In addition, oversight
responsibilities of these and other consumer protection laws and regulations will, in large measure, transfer from the
Banks’ primary regulators to the CFPB. We cannot predict the effect that being regulated by a new, additional
regulatory authority focused on consumer financial protection, or any new implementing regulations or revisions to
existing regulations that may result from the establishment of this new authority, will have on our businesses.
Enterprise Risk Management
The Company identifies, measures, and attempts to mitigate risks that affect, or have the potential to affect,
our business. Proper risk management does not achieve the elimination of all risk but, rather, keeps risks within
acceptable levels, and ensures that efforts are made to prioritize identified risks. The Company uses the COSO
Enterprise Risk Management—Integrated Framework to manage risk. The framework applies at all levels, from the
development of the Enterprise Risk Management (“ERM”) Program to the tactical operations of the front-line
business team. The framework has eight key elements:
1. Internal Environment – The internal environment sets the basis for how risk and control are viewed and
addressed by the Company. Our employees, their individual attributes, including integrity, ethical values, and
competence, along with the environment in which they operate, are all critical to setting a proper internal
environment.
2. Objective Setting – Management sets the Company’s key objectives before proceeding to the challenge of
identifying the potential events, risks, and other factors that could affect the achievement of those objectives. The
ERM Program ensures that management has in place a process to set objectives and that such objectives support and
align with the Company’s mission.
3. Risk Identification – The ERM Program focuses on recognizing and identifying existing risks to the core
objectives of the Company, as well as risks that may arise from time to time from new business initiatives or from
changes to the Company’s size, businesses, structure, personnel, or strategic interests.
4. Risk Measurement – Accurate and timely measurement of risks is a critical component of effective risk
management. The sophistication of the risk measurement tools the Company uses reflects the complexity and levels
of risk it has assumed. The Company periodically verifies the integrity of the measurement tools it uses. Risk
measurement takes into account inherent risks (risks before controls are applied), residual risks (the level of risks
remaining after controls are applied), and mitigating factors (e.g., insurance).
5. Risk Control – The Company establishes and communicates limits through policies, standards, and/or
procedures that define responsibility and authority. These control limits are meaningful management tools that can
be adjusted if conditions or risk tolerances change. The Company has a process to authorize exceptions or changes
to risk limits when they are warranted.
6. Risk Monitoring – The Company monitors risk levels to ensure timely review of risk positions and
exceptions. Monitoring reports compare actual performance metrics against benchmarks, and where applicable,
against Board-established limits. Reports are produced with such frequency as management deems to be appropriate
26
and a major effort is made to ensure that these reports are timely, accurate, and informative. These reports are
distributed to appropriate individuals to ensure action, when needed.
7. Risk Response – Management addresses cases where actual risk levels are approaching or exceeding
established limits, and considers alternative risk response options (taking into account appropriate cost/benefit
analyses) in order to reduce residual risk to desired risk tolerances.
8. Information and Communication – Relevant information is communicated in a form and time frame that
enable our employees to carry out their responsibilities. Effective communication occurs in a broader sense, flowing
down, across, and up the Company, including Executive Management and, if appropriate, the applicable Board of
Directors, and other relevant parties across the Company.
Risk Management Roles and Responsibilities
The proper management of risk starts at, and is driven by, the highest level within a company. The following
groups play an integral role in the successful achievement of the Company’s ERM Program.
Board of Directors
The Company’s Board of Directors (the “Board”) is responsible for oversight of the Company’s overall ERM
function, including, but not limited to, the approval and oversight of the execution of the ERM Program; reviewing
the Company’s risk profile; and reviewing risk indicators against established risk limits, including those identified in
the reports presented by the Director of ERM.
Risk Assessment Committee
The Risk Assessment Committee of the Board is responsible for assisting the Board in its oversight of the
Company’s risk management framework, including the policies and procedures used to manage the following risks:
credit; interest rate; liquidity; market; operational; legal/compliance; loss share compliance; reputational; and
strategic.
Senior Management
Senior Management is responsible for ensuring that a risk management process with adequate resources is
effectively implemented; ensuring that the corporate structure supports risk management goals; and ensuring that a
risk management process is integrated into the corporate culture.
Director of Enterprise Risk Management
The Director of ERM is responsible for maintaining the Company’s overall ERM Policy; overseeing and
implementing the ERM Program; reviewing each Business Process Owner’s self-risk assessment, and making
recommendations regarding their risk scores; aggregating and categorizing risks; and reporting the Company’s risk
profile and risk indicators to Senior Management, the Risk Assessment Committee, and the Board.
Business Process Owners
Each Business Process Owner is responsible for ensuring that proper controls are in place to prudently
mitigate risk; performing periodic self-assessments of risks and controls which are reviewed by the Director of
ERM; identifying changes in rules, laws, and regulations that could impact the business unit; and maintaining
communication with the appropriate member(s) of senior management and the Director of ERM on emerging risk.
Internal Audit
Internal Audit is responsible for validating controls identified by Business Process Owners when performing
internal audits and communicating its audit findings to the Director of ERM, who revisits the self-assessment
performed by each Business Process Owner.
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. 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.
27
We are subject to certain risks with respect to changes in interest rates:
Changes in interest rates may adversely impact our financial condition and results of operations.
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 produced by our interest-bearing liabilities (consisting primarily of deposits and wholesale
borrowings).
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 Federal Open Market Committee of the Federal Reserve Board of Governors.
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 our earnings. 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 loan refinancing activity which, in turn, would impact
the amount of prepayment penalty income we receive on our multi-family and CRE loans. Because 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 we generate during that time.
In addition, changes in interest rates could have an effect on the slope of the yield curve. If the yield curve
were to invert or become flat, our net interest income and net interest margin could contract, adversely affecting our
net income and cash flows and the value of our assets.
Our use of derivative financial instruments to mitigate our interest rate exposure may not be effective and may
expose us to counterparty risk.
Our mortgage banking operation is actively engaged in the origination of one-to-four family loans for sale. In
accordance with our operating policies, we may use various types of derivative financial instruments, including
forward rate agreements, options, and other derivative transactions, to mitigate or reduce our exposure to losses from
adverse changes in interest rates in connection with this business. These activities will vary in scope based on the
types of assets held, the level and volatility of interest rates, and other changing market conditions. However, no
strategy can completely insulate us from the interest rate risks to which we are exposed, and there is no guarantee
that any strategy we implement will have the desired impact. Furthermore, although derivatives are intended to limit
losses, they may actually have an adverse impact on our earnings, which could reduce our capital and the cash
available to us for distribution to our shareholders in the form of dividends. Our derivative financial instruments also
expose us to counterparty risk, which is the risk that other parties to the instruments will not fulfill their contractual
obligations.
We are subject to certain risks with respect to our ability to fulfill our regulatory capital requirements.
We are subject to the comprehensive, consolidated supervision and regulation set forth by the Federal Reserve
Board of Governors (the “FRB”). Such regulation includes, among other matters, the level of leverage and risk-
based capital ratios we are required to maintain. Our capital ratios can change, depending on general economic
conditions, our financial condition, our risk profile, and our plans for growth. Compliance with the FRB’s capital
requirements may limit our ability to engage in operations that require the intensive use of capital and therefore
could adversely affect our ability to maintain our current level of business or to expand.
Furthermore, it is possible that future regulatory changes could result in more stringent capital requirements
including, among other things, an increase in the levels of regulatory capital we are required to maintain, changes in
the way regulatory capital is calculated, and increases in liquidity requirements, any and all of which could
adversely affect our business and our ability to expand. For example, the implementation of certain proposed
regulatory changes under the Dodd-Frank Act is expected to result in the disqualification of previously issued and
outstanding trust preferred securities as Tier 1 capital. Any additional requirements to increase our capital ratios or
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liquidity could have a material adverse effect on our financial condition, as this might necessitate our liquidating
certain assets, perhaps on terms that are unfavorable to us or that are contrary to our business plans. Such a
requirement could also compel us to issue additional securities, thus diluting the value of our common stock.
In addition, failure to meet the established capital requirements could result in the FRB placing limitations or
conditions on our activities and further restricting the commencement of new activities. The failure to meet
applicable capital guidelines could subject us to a variety of enforcement remedies available to the federal regulatory
authorities, including limiting our ability to pay dividends; issuing a directive to increase our capital; and
terminating our FDIC deposit insurance.
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 other liabilities, and
to satisfy the withdrawal of deposits by our customers.
Our primary sources of liquidity are deposits, including those we gather organically through our branch
network, those we acquire in connection with acquisitions, and the brokered deposits we accept; borrowed funds,
primarily in the form of wholesale borrowings from the FHLB and various Wall Street brokerage firms; the cash
flows generated through the repayment and sale of loans; and the cash flows generated through the repayment and
sale of securities. 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 the prepayment 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’s underwriting guidelines for wholesale borrowings or lending policies
may limit or restrict our ability to borrow, and could therefore have a significant adverse impact on our liquidity. In
addition, replacing funds in the event of large-scale withdrawals of brokered deposits could require us to pay
significantly higher interest rates on retail deposits or other wholesale funding sources, which would have an adverse
impact on our net interest income and net income. 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 credit risk.
Credit risk stemming from our held-for-investment lending activities:
The loans we originate for investment are primarily multi-family loans and, to a lesser extent, CRE loans.
Such loans 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.
Payments on multi-family and CRE 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.
We also originate ADC and C&I loans for investment, although to a far lesser degree than we originate multi-
family and CRE loans. ADC financing typically involves a greater degree of credit risk than longer-term financing
on multi-family and CRE properties. Risk of loss on an ADC loan largely depends 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, among other factors, could have a material adverse effect on the quality of our
ADC 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
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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 results of operation of the business.
Although our losses have been comparatively limited, despite the economic weakness in our markets, we
cannot guarantee that this record will be maintained in future periods. The ability of our borrowers to repay their
loans could be adversely impacted by a further decline in real estate values and/or a further increase in
unemployment, which not only could result in our experiencing an increase in charge-offs, but also could necessitate
our further increasing our provision for losses on non-covered loans. Either of these events would have an adverse
impact on our net income.
Credit risk stemming from our covered loan portfolio:
The credit risk associated with the loans and OREO we acquired in our AmTrust and Desert Hills acquisitions
is largely mitigated by our loss sharing agreements with the FDIC. Nonetheless, these assets are not without risk.
Although the loans and OREO we acquired were initially accounted for at fair value, there is no assurance that they
will not become impaired, which could result in their being charged off. Fluctuations in national, regional, and local
economic conditions may increase the level of charge-offs on the loans we acquired in these transactions, and would
therefore have an adverse impact on our net income. Such fluctuations are not predictable, cannot be controlled, and
may have a material adverse impact on our operations and financial condition even if other favorable events occur.
In addition, although our loss sharing agreements call for the FDIC to bear a significant portion of any losses
related to the acquired loan portfolios, we are not protected from all losses resulting from charge-offs with respect to
the acquired loans. Also, the loss sharing agreements have limited terms. Charge-offs we experience on covered
loans after the terms of the loss sharing agreements end may not be fully recoverable and this, too, could have an
adverse impact on our net income.
Furthermore, the FDIC has the right to refuse or delay payment for losses on our covered loans if the loss
sharing agreements are not managed in accordance with their terms.
Credit risk stemming from the geographic concentration of our held-for-investment loan portfolio:
Unlike larger national or superregional banks that serve a broader and more diverse geographic region, our
business depends significantly on general economic conditions in the New York metropolitan region, where the
majority of the buildings and properties securing the loans we originate for investment, and the businesses of the
customers to whom we make C&I loans, are located.
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 this region or by 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 CRE loans represent the majority of the loans in our
portfolio, a decline in tenant occupancy or rents due to such factors, or for other reasons, could adversely impact the
ability of our borrowers to repay their loans on a timely basis, which could have a negative impact on our net
income.
Risks with respect to our allowance for losses on non-covered loans:
In addition to mitigating credit risk through our underwriting process, we attempt to mitigate such risk through
the establishment of an allowance for losses on non-covered loans. The process of determining whether or not this
allowance is sufficient to cover potential non-covered loan losses is based on our evaluation of inherent losses in the
held-for-investment loan portfolio, which requires that management make certain assumptions, estimates, and
judgments regarding several factors, including the current and historical performance of the portfolio; its inherent
risk characteristics; the level of non-performing non-covered loans and charge-offs; delinquency levels and trends;
local economic and market conditions; declines in real estate values; and the levels of unemployment and vacancy
rates.
If our assumptions, estimates, and judgments regarding such matters prove to be incorrect, our allowance for
losses on such loans might not be sufficient, and additional non-covered 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.
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In addition, as we continue to grow our held-for-investment loan portfolio, it may be necessary to increase the
allowance for losses on such loans by making additional provisions, which also could adversely impact our
operating results. Furthermore, bank regulators may require us to make a provision for non-covered loan losses or
otherwise recognize further loan charge-offs following their periodic review of our held-for-investment loan
portfolio, our underwriting procedures, and our allowance for losses on such loans. Any increase in the non-covered
loan loss allowance or loan charge-offs as required by such regulatory authorities could have a material adverse
effect on our financial condition and results of operations.
For more information regarding our allowance for losses on non-covered loans in recent periods, please see
“Allowance for Losses on Non-Covered Loans” in the discussion of “Critical Accounting Policies” and the
discussion of “Asset Quality” that appear in Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” later in this report.
We are subject to certain risks with respect to our dividend policy:
We may not pay dividends on our common stock.
Holders of our common stock are only entitled to receive such dividends as our Board of Directors may
declare out of funds available for such payments under applicable law and regulatory guidance. Furthermore,
regulatory agencies may impose further restrictions on the payment of dividends in the future. In addition, although
we have historically declared cash dividends on our common stock, we are not required to do so. Any reduction of,
or the elimination of, our common stock dividend in the future could adversely affect the market price of our
common stock.
We rely on the dividends we receive from our subsidiaries.
The Parent Company (i.e., the company on an unconsolidated basis) 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 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 shareholders.
If we defer payments on our trust preferred capital debt securities or are in default under the related indentures, we
will be prohibited from paying dividends or distributions on our common stock.
The terms of our outstanding trust preferred capital debt securities prohibit us from (1) declaring or paying any
dividends or distributions on our capital stock, including our common stock; or (2) purchasing, acquiring, or making
a liquidation payment on such stock, under the following circumstances: (a) if an event of default has occurred and
is continuing under the applicable indenture; (b) if we are in default with respect to a guarantee payment under the
guarantee of the related trust preferred securities; or (c) if we have given notice of our election to defer interest
payments but the related deferral period has not yet commenced, or a deferral period is continuing. In addition,
without notice to, or consent from, the holders of our common stock, we may issue additional series of trust
preferred capital debt securities with similar terms, or enter into other financing agreements that limit our ability to
pay dividends on our common stock.
The extensive laws, regulations, and regulatory enforcements to which we are subject pose certain risks:
We are subject to certain risks with respect to our ability to comply with certain laws and regulations.
We are subject to regulation, supervision, and examination by the following entities: (1) the NYDFS, the
chartering authority for both the Community Bank and the Commercial Bank; (2) the FDIC, as the insurer of the
Banks’ deposits; (3) the Federal Reserve Bank of New York, in accordance with objectives and standards of the U.S.
Federal Reserve System; and (4) the CFPB, which was established in 2011 under Dodd-Frank and given broad
authority to regulate financial service providers and financial products.
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 DIF, the banking system in general, and
customers, and not for the benefit of a company’s stockholders. These regulatory authorities have extensive
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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 or other regulatory 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 such 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 other affiliates, and our operations.
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 taxation, 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 broader regulatory regime established under the Dodd-Frank Act may adversely affect our business and our
results of operations.
The enactment of the Dodd-Frank Act in July 2010 significantly changed the regulation of the financial
services industry. In addition to creating the CFPB, the Act established new standards relating to regulatory
oversight of systemically important financial institutions, derivatives transactions, asset-backed securitization, and
mortgage underwriting, and limited the revenues banks can derive from debit card interchange fees. Extensive
regulatory guidance is needed to implement and clarify many of the provisions of the Dodd-Frank Act and, although
certain U.S. agencies have begun to initiate the required administrative processes, it is still too early in those
processes to fully assess the impact of this legislation on our business, the rest of the banking industry, and the
broader financial services industry.
Additional legislative and regulatory proposals may adversely affect our business and results of operations.
In addition to the numerous regulatory actions expected in connection with the implementation of the Dodd-
Frank Act, additional legislative and regulatory proposals are being considered by the U.S. Congress and various
federal regulators that also may significantly impact the financial services industry and our business. For example,
the Federal Reserve Bank has proposed guidance on incentive compensation at the banking organizations it
regulates, and the U.S. Department of the Treasury and the federal banking regulators have issued statements calling
for higher capital and liquidity requirements for banks. Complying with any new legislative or regulatory
requirements, and any programs established thereunder by federal and state governments to address the continuing
economic weakness, could have an adverse impact on our results of operations, our ability to fill positions with the
most qualified candidates available, and our ability to maintain our dividend.
Furthermore, the current Administration has announced plans to dramatically transform the role of
government in the U.S. housing market, including by winding down Fannie Mae and Freddie Mac, and by reducing
other government support to such markets. Congressional leaders have voiced similar plans for future legislation. It
is too early to determine the nature and scope of any legislation that may develop along these lines, or what roles
Fannie Mae and Freddie Mac or the private sector will play in future housing markets. However, it is possible that
legislation will be proposed over the near term that would result in the nature of GSE guarantees being considerably
limited relative to historical measurements, which could have broad adverse implications for the market and
significant implications for our business.
Our enterprise risk management framework may not be effective in mitigating the risks we are subject to or in
reducing the potential for losses in connection with such risks.
As a financial institution, we are subject to a number of risks, including credit, interest rate, liquidity, market,
operational, legal/compliance, loss sharing compliance, reputational, and strategic. Our enterprise risk management
framework is designed to minimize the risks to which we are subject, as well as any losses stemming from such
risks. Although we seek to identify, measure, monitor, report, and control our exposure to such risks, and employ a
broad and diversified set of risk monitoring and mitigation techniques in the process, those techniques are inherently
limited because they cannot anticipate the existence or development of risks that are currently unknown and
unanticipated.
For example, recent economic conditions, heightened legislative and regulatory scrutiny of the financial
services industry, and increases in the overall complexity of our operations, among other developments, have
resulted in the creation of a variety of risks that were previously unknown and unanticipated, highlighting the
32
intrinsic limitations of our risk monitoring and mitigation techniques. As a result, the further development of
previously unknown or unanticipated risks may result in our incurring losses in the future that could adversely
impact our financial condition and results of operations.
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, and remain a 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, either through negotiated transactions or FDIC-assisted acquisitions.
However, our ability to engage in future mergers and acquisitions depends on various factors, including:
(1) our ability to identify suitable merger partners and acquisition opportunities; (2) our ability to finance and
complete negotiated transactions on acceptable terms and at acceptable prices; (3) our ability to bid competitively
for FDIC-assisted transactions; (4) our ability to receive the necessary regulatory approvals; and (5) when, required,
our ability to receive the necessary shareholder approvals.
Our inability to engage in an acquisition or merger for any of these reasons could have an adverse impact on
our financial condition and results of operations. As acquisitions have been a significant source of deposits, the
inability to complete a business combination could require that we increase the interest rates we pay on deposits in
order to attract such funding through our current branch network, or that we increase our use of wholesale funds.
Increasing our cost of funds could adversely impact our net interest income, and therefore our results of operations.
Furthermore, the funding we obtain in acquisitions is generally used to fund our loan production or to reduce our
higher funding costs. The absence of an acquisition could therefore impact our ability to meet our loan demand.
Furthermore, mergers and acquisitions involve a number of risks and challenges, including:
(cid:120) Our ability to integrate the branches and operations we acquire, and the internal controls and regulatory
functions into our current operations;
(cid:120) Our ability to limit the outflow of deposits held by our new customers in the acquired branches and to
successfully retain and manage the loans we acquire;
(cid:120) Our ability to attract new deposits, and to generate new interest-earning assets, in geographic areas we have
not previously served;
(cid:120) Our success in deploying any cash received in a transaction into assets bearing sufficiently high yields
without incurring unacceptable credit or interest rate risk;
(cid:120) Our ability to control the incremental non-interest expense from the acquired branches in a manner that
enables us to maintain a favorable overall efficiency ratio;
(cid:120) Our ability to retain and attract the appropriate personnel to staff the acquired branches and conduct any
acquired operations;
(cid:120) Our ability to earn acceptable levels of interest and non-interest income, including fee income, from the
acquired branches;
(cid:120) The diversion of management’s attention from existing operations;
(cid:120) Our ability to address an increase in working capital requirements; and
(cid:120) Limitations on our ability to successfully reposition the post-merger balance sheet, when deemed
appropriate.
Additionally, no assurance can be given that the operation of acquired branches would not adversely affect our
existing profitability; that we would be able to achieve results in the future similar to those achieved by our existing
banking business; that we would be able to compete effectively in the market areas served by acquired branches; or
that we would be able to manage any growth resulting from a transaction effectively. In particular, our ability to
compete effectively in new markets is dependent on our ability to understand those markets and their competitive
dynamics, and our ability to retain certain key employees from the acquired institution who know those markets
better than we do.
Any of these factors, among others, could adversely affect our ability to achieve the anticipated benefits of any
acquisitions we undertake and could adversely affect our financial condition and results of operations, perhaps
materially.
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Furthermore, the acquisition of assets and liabilities of financial institutions in FDIC-sponsored or assisted
transactions involves risks similar to those faced when acquiring existing financial institutions, even though the
FDIC might provide assistance to mitigate certain risks, e.g., by entering into loss sharing arrangements. However,
because such acquisitions are structured in a manner that does not allow the time normally associated with
evaluating and preparing for the integration of an acquired institution, we face the additional risk that the anticipated
benefits of such an acquisition may not be realized fully or at all, or within the time period expected.
Economic conditions could adversely affect our financial condition and results of operations.
Financial institutions continue to be affected by economic weakness in the form of high unemployment and
soft real estate values. Although we have taken, and continue to take, steps to reduce our exposure to the risks that
stem from such conditions, we nonetheless could be impacted by them to the degree that they affect the loans we
originate, the securities we invest in, and our portfolios of covered and non-covered loans.
Declines in the value of our investment securities could result in our recording losses on the other-than-
temporary impairment of securities, which would reduce our earnings and, therefore, our capital. Declines in real
estate values and home sales, and an increase in the financial stress on borrowers stemming from high
unemployment, among other economic conditions, could have an adverse effect on our borrowers or their
customers, which could adversely impact the repayment of the loans we have made. Further deterioration in
economic conditions also could subject us and our industry to increased regulatory scrutiny and could result in an
increase in loan delinquencies, an increase in problem assets and foreclosures, and a decline in the value of the
collateral for our loans, which could reduce our customers’ borrowing power. Deterioration in local economic
conditions could drive the level of loan losses beyond the level we have provided for in our loan loss allowances;
this, in turn, could necessitate an increase in our provisions for loan losses, which would reduce our earnings and
capital. Additionally, continued economic weakness could reduce the demand for our products and services, which
would adversely impact our liquidity and the revenues we produce.
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 markets. 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 cannot.
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.
Our success as a competitor depends on a number of factors, including our ability to develop, maintain, and
build 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.
In addition, our mortgage banking operation originates one-to-four family loans for sale throughout the nation,
and therefore competes nationally with other major banks and mortgage brokers for this business.
The level of revenues we produce is unpredictable.
The net interest income we produce includes prepayment penalty income, which depends on the volume of
loans that refinance or prepay. Such activity is largely dependent on current market conditions, the perceived or
actual direction of market interest rates, and the contractual repricing and maturity dates of our multi-family and
CRE loans. As a result, the level of prepayment penalty income we record will vary from period to period, and is
difficult to predict.
Similarly, the revenues we generate in the form of net interest income are complemented by the non-interest
income we produce. Our primary source of non-interest income is the mortgage banking income we generate
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through our origination of one-to-four-family loans for sale, which includes income from originations and servicing
income. The level of mortgage banking income we produce depends on various factors, including the level of
residential market interest rates, the level of refinancing activity and new home sales, conditions in the U.S. housing
market, and competition with other banks and mortgage banking firms. As a result, the mortgage banking income
we produce is unpredictable in nature and also may vary from one period to the next.
We are subject to certain risks in connection with our use of technology:
Our security measures may not be sufficient to mitigate the risk of a cyber attack.
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. Our operations rely on the
secure processing, storage, and transmission of confidential and other information in our computer systems and
networks. Although we take protective measures and endeavor to modify them as circumstances warrant, the
security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access,
misuse, computer viruses, or other malicious code and cyber attacks that could have a security impact.
In addition, breaches of security may occur through intentional or unintentional acts by those having
authorized or unauthorized access to our confidential or other information or the confidential or other information of
our customers, clients, or counterparties. If one or more of such events were to occur, the confidential and other
information processed and stored in, and transmitted through, our computer systems and networks could potentially
be jeopardized, or could otherwise cause interruptions or malfunctions in our operations or the operations of our
customers, clients, or counterparties. This could cause us significant reputational damage or result in our
experiencing significant losses.
Furthermore, we may be required to expend significant additional resources to modify our protective measures
or to investigate and remediate vulnerabilities or other exposures arising from operational and security risks. Also,
we may be subject to litigation and financial losses that are either not insured against or not fully covered through
any insurance we maintain.
In addition, we routinely transmit and receive personal, confidential, and proprietary information by e-mail
and other electronic means. We have discussed and worked with our customers, clients, and counterparties to
develop secure transmission capabilities, but we do not have, and may be unable to put in place, secure capabilities
with all of these constituents, and we may not be able to ensure that these third parties have appropriate controls in
place to protect the confidentiality of such information. Any interception, misuse, or mishandling of personal,
confidential, or proprietary information being sent to or received from a customer, client, or counterparty could
result in legal liability, regulatory action, and reputational harm, and could have a significant adverse effect on our
competitive position, financial condition, and results of operations.
Our security measures may not protect us from systems failures or interruptions.
While we have established policies and procedures to prevent or limit the impact of systems failures and
interruptions, there can be no assurance that such events will not occur or that they will be adequately addressed if
they do. In addition, we outsource certain aspects 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 or interruption 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.
We may not be able to keep pace with changes in bank technology.
Financial products and services have become increasingly technology-driven. To some degree, 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
35
so on our part could have a material adverse impact on our business and therefore on our financial condition and
results of operations.
Our goodwill may become impaired.
We test goodwill for impairment on an annual basis, or more frequently, if necessary. Quoted market prices in
active markets are the best evidence of fair value and are to be used as the basis for measuring impairment, when
available. Other acceptable valuation methods include present-value measurements based on multiples of earnings
or revenues, or similar performance measures. If we were to determine that the carrying amount of our goodwill
exceeded its implied fair value, we would be required to write down the value of the goodwill on our balance sheet.
This, in turn, would result in a charge against earnings and, thus, a reduction in our stockholders’ equity.
The results of our most recent internal stress test might not accurately predict the impact of a decline in economic
conditions on our financial condition.
We regularly perform an internal analysis of our capital position. In doing so, we apply many of the same
methodologies that the U.S. Treasury applies in estimating our loan losses, the resources available to us to absorb
such losses, and any necessary additions to capital that could be required, in periods of economic stress. The
assumptions we utilize for our stress tests may not be the same as those used by our regulators or others, and may
include less severe loss assumptions than those under “more adverse” stress test scenarios. Accordingly, results of
our stress tests may not be comparable to the results of stress tests performed by others (including those performed
by our regulators), and our estimates for loan losses or other losses based on such testing may be lower than those
derived by using other assumptions.
The results of our internal stress tests involve many assumptions about the economy, future loan losses, and
default rates, and may not accurately reflect the impact on our financial condition if the economy does not improve
or deteriorates. Deterioration of the economy could result in our recording significantly higher credit losses than
those predicted by our internal stress tests, and could have a corresponding impact on our financial condition and
capital.
We are subject to risks associated with taxation.
The amount of income taxes we are required to pay on our earnings is based on federal and state legislation
and regulations. We provide for current and deferred taxes in our financial statements, based on our results of
operations, business activity, legal structure, interpretation of tax statutes, assessment of risk of adjustment upon
audit, and application of financial accounting standards. We may take tax return filing positions for which the final
determination of tax is uncertain. Our 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 our consolidated financial statements. There
can be no assurance that we will achieve our anticipated effective tax rate either due to a change in tax law, a change
in regulatory or judicial guidance, or an audit assessment that denies previously recognized tax benefits.
We may be required to pay significantly higher FDIC premiums, special assessments, or taxes that could
adversely affect our earnings.
Market developments have significantly depleted the insurance fund of the FDIC and reduced the ratio of
reserves to insured deposits in recent years. As a result, we may be required to pay significantly higher premiums or
additional special assessments or taxes that could adversely affect our earnings. We are generally unable to control
the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial
institution failures, we may be required to pay even higher FDIC premiums than the higher levels imposed in 2011.
These increases and any future increases or required prepayments in FDIC insurance premiums or taxes may have a
material adverse affect on our results of operations.
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 that may reduce our earnings.
36
Damage to our reputation could significantly harm the businesses we engage in, as well as our competitive
position and prospects for growth.
Our ability to attract and retain investors, customers, clients, and employees could be adversely affected if our
reputation were damaged. Significant harm to our reputation could arise from many sources, including employee
misconduct, litigation or regulatory outcomes, failure to deliver minimum standards of service and quality,
compliance failures, unethical behavior, unintended disclosure of confidential information, and the activities of our
clients, customers, and/or counterparties. Actions by the financial services industry in general, or by certain entities
or individuals within it, also could have a significantly adverse impact on our reputation.
Our actual or perceived failure to address various issues also could give rise to reputational risk that could
significantly harm us and our business prospects, including failure to properly address operational risks. These
issues include legal and regulatory requirements; privacy; properly maintaining customer and associated personal
information; record keeping; protecting against money-laundering; sales and trading practices; ethical issues; and the
proper identification of the legal, reputational, credit, liquidity, and market risks inherent in our products and
services.
We are subject to certain risks with respect to the value of our common stock.
The market price of our common stock could be subject to significant fluctuations due to changes in sentiment
in the market regarding our operations or business prospects. Among other factors, these risks may be affected by:
(cid:120) Operating results that vary from the expectations of our management or of securities analysts and investors;
(cid:120) Developments in our business or in the financial services sector generally;
(cid:120) Regulatory or legislative changes affecting our industry generally or our business and operations;
(cid:120) Operating and securities price performance of companies that investors consider to be comparable to us;
(cid:120) Changes in estimates or recommendations by securities analysts or rating agencies;
(cid:120) Announcements of strategic developments, acquisitions, dispositions, financings, and other material events
by us or our competitors;
(cid:120) Changes or volatility in global financial markets and economies, general market conditions, interest or
foreign exchange rates, stock, commodity, credit, or asset valuations; and
(cid:120) Significant fluctuations in the capital markets.
Although the economy showed some signs of improvement in 2011, renewed economic or market turmoil
could occur in the near or long term, which could negatively affect our business, our financial condition, and our
results of operations, as well as volatility in the price and trading volume of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
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
9, “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.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
37
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, 2011, the number of outstanding shares was 437,344,796 and the number of registered
owners was approximately 13,500. 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
2011 and 2010:
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
$19.23
17.55
15.67
13.65
$17.44
18.19
17.81
19.32
$17.10
14.66
11.45
11.13
$14.24
14.40
14.93
16.09
$17.26
14.99
11.90
12.37
$16.54
15.27
16.25
18.85
2011
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2010
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 July 1, 2011, our 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.
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, 2006 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 NYSE. The peer group index chosen was the SNL U.S. Bank and Thrift Index, which currently is comprised
of 472 bank and thrift institutions, including the Company. The data for the indices included in the graph were
provided by SNL Financial.
38
Comparison of 5-Year Cumulative Total Return
Among New York Community Bancorp, Inc.,
S&P Mid-Cap 400 Index, and SNL U.S. Bank and Thrift Index
ASSUMES $100 INVESTED ON DEC. 31, 2006
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2011
12/31/2006
12/31/2007
12/31/2008
12/31/2009
12/31/2010
12/31/2011
New York Community Bancorp, Inc.
$100.00
S&P Mid-Cap 400 Index
SNL U.S. Bank and Thrift Index
$100.00
$100.00
$115.77
$107.97
$76.26
$83.67
$68.84
$43.85
$110.88
$94.57
$43.27
$152.98
$119.77
$48.30
$107.35
$117.70
$37.56
39
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, merger transactions and the exercise of stock options.
During the three months ended December 31, 2011, we allocated $927,000 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)
15,926
$12.73
15,926
818,176
1,600
11.57
1,600
816,576
58,683
76,209
12.02
$12.16
58,683
76,209
757,893
Period
Month #1:
October 1, 2011 through
October 31, 2011
Month #2:
November 1, 2011 through
November 30, 2011
Month #3:
December 1, 2011 through
December 31, 2011
Total
(1) All shares were purchased in privately negotiated transactions.
(2) On April 20, 2004, the Board authorized the repurchase of up to five million shares. Of this amount, 757,893 shares were
still available for repurchase at December 31, 2011. 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.
40
ITEM 6.
SELECTED FINANCIAL DATA
(dollars in thousands, except share data)
EARNINGS SUMMARY:
Net interest income (4)
Provision for losses on non-covered loans
Provision for losses on covered loans (5)
Non-interest income
Non-interest expense:
Operating expenses
Debt repositioning charges
Amortization of core deposit intangibles
Income tax expense (benefit)
Net income
Basic earnings per share
Diluted earnings per share
Dividends paid per common share
SELECTED RATIOS:
Return on average assets
Return on average stockholders’ equity
Operating expenses to average assets
Average stockholders’ equity to average assets
Efficiency ratio (4)
Interest rate spread (4)
Net interest margin (4)
Dividend payout ratio
BALANCE SHEET SUMMARY:
Total assets
Loans, net of allowances for loan losses
Allowance for losses on non-covered loans
Allowance for losses on covered loans (5)
Securities
Deposits
Borrowed funds
Stockholders’ equity
Common shares outstanding
Book value per share (6)
Stockholders’ equity to total assets
ASSET QUALITY RATIOS (excluding covered
assets):
Non-performing non-covered loans to total
non-covered loans
Non-performing non-covered assets to total
non-covered assets
Allowance for losses on non-covered loans to
non-performing non-covered loans
Allowance for losses on non-covered loans to
total non-covered loans
Net charge-offs to average loans
ASSET QUALITY RATIOS (including covered
assets): (5)
Total non-performing loans to total loans
Total non-performing assets to total assets
Allowances for loan losses to total non-
performing loans
Allowances for loan losses to total loans
2011
$1,200,421
79,000
21,420
235,325
574,683
--
26,066
254,540
480,037
$1.09
1.09
1.00
1.17 %
8.73
1.40
13.38
40.03
3.37
3.46
91.74
At or For the Years Ended December 31,
2009 (2)
2010 (1)
2008
$1,179,963
91,000
11,903
337,923
$905,325
63,000
--
157,639
$675,495
7,700
--
15,529
546,246
--
31,266
296,454
541,017
$1.24
1.24
1.00
1.29%
10.03
1.31
12.89
35.99
3.45
3.45
80.65
384,003
--
22,812
194,503
398,646
$1.13
1.13
1.00
1.20%
9.29
1.15
12.89
36.13
2.98
3.12
88.50
320,818
285,369
23,343
(24,090)
77,884
$0.23
0.23
1.00
0.25%
1.86
1.03
13.41
46.43
2.25
2.48
434.78
2007 (3)
$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
2.11
2.38
111.11
$42,024,302
30,152,154
137,290
33,323
4,540,516
22,274,130
13,960,413
5,565,704
437,344,796
$12.73
$41,190,689
29,041,595
158,942
11,903
4,788,891
21,809,051
13,536,116
5,526,220
435,646,845
$12.69
$42,153,869
28,265,208
127,491
--
5,742,243
22,316,411
14,164,686
5,366,902
433,197,332
$12.40
$32,466,906
22,097,844
94,368
--
5,901,493
14,375,648
13,496,710
4,219,246
344,985,111
$12.25
$30,579,822
20,270,454
92,794
--
5,743,901
13,235,801
12,915,672
4,182,313
323,812,639
$12.95
13.24%
13.42%
12.73%
13.00%
13.68%
1.28%
2.63%
2.47%
0.51%
1.07
42.14
0.54
0.35
2.30
1.97
25.34
0.58
1.77
25.45
0.67
0.21
3.52
2.61
17.34
0.61
1.41
22.05
0.55
0.13
2.23
1.54
20.10
0.45
0.35
83.00
0.43
0.03
--
--
--
--
0.11%
0.07
418.14
0.46
0.00
--
--
--
--
(1) The Company acquired certain assets and assumed certain liabilities of Desert Hills Bank on March 26, 2010. Accordingly, the Company’s
2010 earnings reflect combined operations from that date.
(2) The Company acquired certain assets and assumed certain liabilities of AmTrust Bank (“AmTrust”) on December 4, 2009. Accordingly, the
Company’s 2009 earnings reflect combined operations from that date.
(3) The Company completed three business combinations in 2007: the acquisition of PennFed Financial Services, Inc. on April 2nd; the
acquisition of Doral Bank, FSB’s branch network in New York City and certain assets and liabilities on July 26th; and the acquisition of
Synergy Financial Group, Inc. on October 1st. Accordingly, the Company’s 2007 earnings reflect nine months, five months, and three
months of combined operations with the respective institutions.
(4) The 2008 amount/measure reflects the impact of a $39.6 million debt repositioning charge that was recorded in interest expense.
(5) Prior to the AmTrust acquisition on December 4, 2009, the Company had no covered assets.
(6) Excludes unallocated Employee Stock Ownership Plan (“ESOP”) shares from the number of shares outstanding at December 31, 2009,
2008, and 2007. (Please see the definition of “book value per share” in the Glossary earlier in this report.)
41
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
The U.S. economy showed certain signs of improvement in 2011, as the unemployment rate declined to 8.5%
at the end of December from 9.4% at December 31, 2010. Although unemployment rates declined in Florida,
Arizona, and Ohio—three of the five states served by our branch network—the unemployment rates held steady in
New York and New Jersey, the other two. In New York City, where most of our branches and the properties
securing our multi-family and commercial real estate loans are located, unemployment rose two basis points, to
8.8%.
Nonetheless, the year-over-year rise in unemployment in New York City occurred in tandem with
improvements in certain other local economic indices. For example, personal bankruptcy filings throughout Metro
New York fell 9.2% over the course of 2011, while business bankruptcy filings declined 25.2%. Furthermore, in
Manhattan, which is home to 34.4% and 52.6%, respectively, of our multi-family and commercial real estate credits,
the office vacancy rate improved to 10.4% at December 31, 2011 from 11.9% at December 31, 2010.
While our market for multi-family and commercial real estate loans strengthened in 2011, the much broader
market for the one-to-four family loans we produce for sale generally did not. Average home prices fell 4.0% year-
over-year throughout the U.S. in 2011, according to the S&P/Case-Shiller Home Price Indices, and the volume of
new home sales declined to a 48-year low, according to a U.S. Commerce Department report. In addition,
refinancing activity declined in the first half of the year, as residential market interest rates increased, but picked up
again in the second half as such interest rates declined.
Against this backdrop, and by adhering to our long-held business model, we generated solid earnings for the
year. Among the factors contributing to the strength of our 2011 performance were:
A significant increase in the volume of multi-family and commercial real estate loans originated for
investment, as the decline in market interest rates triggered an increase in refinancing activity, as well as an
increase in property purchases and sales;
A significant increase in prepayment penalty income, as refinancing activity rose year-over-year in New
York City, where most of the properties securing our multi-family and commercial real estate loans are
located;
A continued, albeit modest, decline in our cost of funds, as the federal funds rate was maintained in the
range of zero to 0.25% throughout 2011, and as the liquidity provided by the repayment and sale of loans
and securities enabled us to refrain from pricing our deposits higher to compete for such funds with our
peers;
The stability of our net interest margin at a time when margins were being pressured;
An improvement in the quality of our non-covered assets, as market conditions improved in our primary
lending market; and
A reduction in staff in the fourth quarter of 2011, which tempered the impact of a year-over-year increase
in non-interest expense.
These contributing factors were only partly offset by the factors that follow:
The replenishment of the loan portfolio at lower yields as market interest rates declined and refinancing
activity increased;
A reduction in the volume of one-to-four family loans originated for sale as residential mortgage interest
rates rose in the first six months of 2011, and as the purchase of new homes and refinancing activity were
discouraged by continued economic weakness and high unemployment throughout the U.S.;
A reduction in mortgage banking income, reflecting the aforementioned decline in one-to-four family loan
production and the expiration of our subservicing arrangement with the FDIC in the fourth quarter of 2010;
and
42
(cid:120) An increase in operating expenses, partly reflecting an increase in our FDIC deposit insurance premiums as
well as the legal and other costs associated with the acquisition and management of foreclosed real estate.
As a result of these factors, and others described later in this report, we generated earnings of $480.0 million,
or $1.09 per diluted share, in 2011 and, at the end of the year, recorded assets of $42.0 billion, including loans and
securities of $30.3 billion and $4.5 billion; deposits of $22.3 billion; and stockholders’ equity of $5.6 billion. In
addition, our tangible stockholders’ equity totaled $3.1 billion, representing 7.78% of tangible assets, after
distributing cash dividends of $436.9 million over the course of the year. (Please see the discussion and
reconciliations of stockholders’ equity and tangible stockholders’ equity, total assets and tangible assets, and the
related measures that appear later in this report.)
Recent Events
Dividend Declaration
On January 24, 2012, the Board of Directors declared a quarterly cash dividend of $0.25 per share, payable on
February 17, 2012 to shareholders of record at the close of business on February 7, 2012.
Critical Accounting Policies
We consider certain accounting policies to be critically important to the portrayal of our financial condition
and results of operations, 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.
We have identified the following to be critical accounting policies: the determination of the allowances for
loan losses; the valuation of loans held for sale; the determination of whether an impairment of securities is other
than temporary; the determination of the amount, if any, of goodwill impairment; and the determination of the
valuation allowance for deferred tax assets.
The judgments used by management in applying these critical accounting policies may be influenced by a
further and prolonged deterioration in the economic environment, which may result in changes to future financial
results. In addition, the current economic environment has increased the degree of uncertainty inherent in our
judgments, estimates, and assumptions.
Allowances for Loan Losses
Allowance for Losses on Non-Covered Loans
The allowance for losses on non-covered loans is increased by provisions for non-covered loan losses that are
charged against earnings, and is reduced by net charge-offs and/or reversals, if any, that are credited to earnings.
Although non-covered loans are held by either the Community Bank or the Commercial Bank, and a separate loan
loss allowance is established for each, the total of the two allowances is available to cover all losses incurred. In
addition, except as otherwise noted below, the process for establishing the allowance for losses on non-covered
loans is the same for each of the Community Bank and the Commercial Bank. In determining the respective
allowances for loan losses, management considers the Community Bank’s and the Commercial Bank’s current
business strategies and credit processes, including compliance with guidelines approved by the respective Boards of
Directors with regard to credit limitations, loan approvals, underwriting criteria, and loan workout procedures.
The allowance for losses on non-covered loans is established based on our evaluation of the probable inherent
losses in our portfolio in accordance with GAAP, and are comprised of both specific valuation allowances and
general valuation allowances.
Specific valuation allowances are established based on management’s analyses of individual loans that are
considered impaired. If a non-covered loan is deemed to be impaired, management measures the extent of the
impairment and establishes a specific valuation allowance for that amount. A non-covered 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 this classification as
necessary to non-covered loans individually evaluated for impairment in our portfolios of multi-family; commercial
real estate; acquisition, development, and construction; and commercial and industrial loans. Smaller balance
43
homogenous loans and loans carried at the lower of cost or fair value are evaluated for impairment on a collective,
rather than individual, basis.
We generally measure impairment on an individual loan and determine the extent to which a specific
valuation allowance is necessary by comparing the loan’s outstanding balance to either the fair value of the
collateral, less the estimated cost to sell, or the present value of expected cash flows, discounted at the loan’s
effective interest rate. A specific valuation allowance is established when the fair value of the collateral, net of the
estimated costs to sell, or the present value of the expected cash flows, is less than the recorded investment in the
loan.
We also follow a process to assign general valuation allowances to non-covered loan categories. General
valuation allowances are established by applying our loan loss provisioning methodology, and reflect the inherent
risk in outstanding held-for-investment loans. This loan loss provisioning methodology considers various factors in
determining the appropriate quantified risk factors to use to determine the general valuation allowances. The factors
assessed begin with the historical loan loss experience for each of the major loan categories we maintain. Our
historical loan loss experience is then adjusted by considering qualitative or environmental factors that are likely to
cause estimated credit losses associated with the existing portfolio to differ from historical loss experience,
including, but not limited to:
(cid:120) Changes in lending policies and procedures, including changes in underwriting standards and collection,
charge-off, and recovery practices;
(cid:120) Changes in international, national, regional, and local economic and business conditions and developments
that affect the collectability of the portfolio, including the condition of various market segments;
(cid:120) Changes in the nature and volume of the portfolio and in the terms of loans;
(cid:120) Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and
severity of adversely classified or graded loans;
(cid:120) Changes in the quality of our loan review system;
(cid:120) Changes in the value of the underlying collateral for collateral-dependent loans;
(cid:120) The existence and effect of any concentrations of credit, and changes in the level of such concentrations;
(cid:120) Changes in the experience, ability, and depth of lending management and other relevant staff; and
(cid:120) The effect of other external factors, such as competition and legal and regulatory requirements, on the level
of estimated credit losses in the existing portfolio.
By considering the factors discussed above, we determine quantified risk factors that are applied to each non-
impaired loan or loan type in the loan portfolio to determine the general valuation allowances.
In recognition of prevailing macroeconomic and real estate market conditions, the time periods considered for
historical loss experience continue to be the last three years and the current period. We also evaluate the sufficiency
of the overall allocations used for the allowance for losses on non-covered loans by considering the loss experience
in the current and prior calendar year.
The process of establishing the allowance for losses on non-covered loans also involves:
(cid:120) Periodic inspections of the loan collateral by qualified in-house and external property appraisers/inspectors,
as applicable;
(cid:120) 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;
(cid:120) Assessment of the aforementioned factors by the pertinent members of the Boards of Directors and
executive management when making a business judgment regarding the impact of anticipated changes on
the future level of loan losses; and
(cid:120) 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 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 (the
44
“Mortgage Committee”) or the Credit Committee of the Board of Directors of the Commercial Bank (the “Credit
Committee”), as applicable.
We charge off loans, or portions of loans, in the period that such loans, or portions thereof, are deemed
uncollectible. The collectability of individual loans is determined through an assessment of the financial condition
and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral.
Generally, the time period in which this assessment is made is within the same quarter that the loan is considered
impaired and quarterly thereafter. For non-real estate-related consumer credits, the following past-due time periods
determine when charge-offs are typically recorded: (1) closed-end credits are charged off in the quarter that the loan
becomes 120 days past due; (2) open-end credits are charged off in the quarter that the loan becomes 180 days past
due; and (3) both closed-end and open-end credits are typically charged off in the quarter that the credit is 60 days
past the date we received notification that the borrower has filed for bankruptcy.
The level of future additions to the respective non-covered loan loss allowances is based on many factors,
including certain factors that are beyond management’s control such as changes in economic and local market
conditions, including declines in real estate values, and increases in vacancy rates and unemployment. Management
uses the best available information to recognize losses on loans or to make additions to the loan loss allowances;
however, the Community Bank and/or the Commercial Bank may be required to take certain charge-offs and/or
recognize further additions to their loan loss allowances, based on the judgment of regulatory agencies with regard
to information provided to them during their examinations of the Banks.
Allowance for Losses on Covered Loans
We have elected to account for the loans acquired in the AmTrust and Desert Hills acquisitions (i.e., our
covered loans) based on expected cash flows. This election is in accordance with Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 310-30, “Loans and Debt Securities Acquired
with Deteriorated Credit Quality” (“ASC 310-30”). In accordance with ASC 310-30, we will maintain the integrity
of a pool of multiple loans accounted for as a single asset and with a single composite interest rate and an aggregate
expectation of cash flows.
Under our loss sharing agreements with the FDIC, covered loans are reported exclusive of the FDIC loss share
receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions are, and will continue to be,
reviewed for collectability based on the expectations of cash flows from these loans. Covered loans have been
aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered
loans, we periodically perform an analysis to estimate the expected cash flows for each of the loan pools. We record
a provision for losses on covered loans to the extent that the expected cash flows from a loan pool have decreased
for credit-related items since the acquisition date. Accordingly, if there is a decrease in expected cash flows due to
an increase in estimated credit losses compared to the estimates made at the respective acquisition dates, the
decrease in the present value of expected cash flows will be recorded as a provision for covered loan losses charged
to earnings, and the allowance for covered loan losses will be increased. A related credit to non-interest income and
an increase in the FDIC loss share receivable will be recognized at the same time, and will be measured based on the
loss sharing agreement percentages.
Please see Note 4, “Loans” in Item 8, “Financial Statements and Supplementary Data,” for a further discussion
of our allowance for losses on covered loans as well as additional information about our allowance for losses on
non-covered loans.
Loans Held for Sale
We carry at fair value the one-to-four family mortgage loans we originate for sale to investors. The fair value
of such loans is primarily based on quoted market prices for securities backed by similar types of loans. Changes in
fair value, which are recorded as a component of mortgage banking income, are largely driven by changes in interest
rates subsequent to loan funding, and changes in the fair value of servicing associated with mortgage loans held for
sale. In addition, we use various derivative instruments to mitigate the economic effect of changes in the fair value
of the underlying loans.
Investment Securities
The securities portfolio primarily consists of mortgage-related securities and, to a lesser extent, debt and
equity (together, “other”) securities. Securities that are classified as “available for sale” are carried at their estimated
fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or
loss in stockholders’ equity. Securities that we have the intent and ability to hold to maturity are classified as “held
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to maturity” and carried at amortized cost, less the non-credit portion of other-than-temporary impairment (“OTTI”)
recorded in accumulated other comprehensive loss, net of tax (“AOCL”).
The fair values of our securities—and particularly our fixed-rate securities—are affected by changes in market
interest rates and credit spreads. In general, as interest rates rise and/or credit spreads widen, the fair value of fixed-
rate securities will decline; as interest rates fall and/or credit spreads tighten, the fair value of fixed-rate securities
will rise. We regularly conduct a review and evaluation of our securities portfolio to determine if the decline in the
fair value of any security below its carrying amount is other than temporary. If we deem any decline in value to be
other than temporary, the security is written down to its current fair value, creating a new cost basis, and the
resultant loss (other than the OTTI on debt securities attributable to non-credit factors) is charged against earnings
and recorded in non-interest income. Our assessment of a decline in fair value includes judgment as to the financial
position and future prospects of the entity that issued the investment security, as well as a review of the security’s
underlying collateral. Broad changes in the overall market or interest rate environment generally will not lead to a
write-down.
In accordance with OTTI accounting guidance, unless we have the intent to sell, or it is more likely than not
that we may be required to sell a security before recovery, OTTI is recognized as a realized loss on the income
statement to the extent that the decline in fair value is credit-related. If there is a decline in fair value of a security
below its carrying amount and we have the intent to sell it, or it is more likely than not that we may be required to
sell the security before recovery, the entire amount of the decline in fair value is charged to earnings.
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. In addition to being tested annually, goodwill would be tested if there
were a “triggering event.” Currently, the goodwill impairment analysis is a two-step test. (Please see “Significant
Accounting Policies” under Note 2, “Impact of Recent Accounting Pronouncements,” in Item 8, “Financial
Statements and Supplementary Data” regarding changes in accounting guidance relating to goodwill impairment
testing.) The first step (“Step 1”) is used to identify potential impairment, and involves comparing each reporting
segment’s estimated fair value to its carrying amount, including goodwill. If the estimated fair value of a reporting
segment exceeds its carrying amount, goodwill is considered not to be impaired. If the carrying amount exceeds the
estimated fair value, there is an indication of potential impairment and the second step (“Step 2”) is performed to
measure the amount.
Step 2 involves calculating an implied fair value of goodwill for each reporting segment for which impairment
was indicated in Step 1. The implied fair value of goodwill is determined in a manner similar to the amount of
goodwill calculated in a business combination, i.e., by measuring the excess of the estimated fair value of the
reporting segment, as determined in Step 1, over the aggregate estimated fair values of the individual assets,
liabilities, and identifiable intangibles, as if the reporting segment were being acquired in a business combination at
the impairment test date. If the implied fair value of goodwill exceeds the carrying amount of goodwill assigned to
the reporting segment, there is no impairment. If the carrying amount of goodwill assigned to a reporting segment
exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss
cannot exceed the carrying amount of goodwill assigned to a reporting segment, and the loss establishes a new basis
in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted.
Quoted market prices in active markets are the best evidence of fair value and are 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, management has determined that the Company has two
reporting segments: Banking Operations and Residential Mortgage Banking. All of our recorded goodwill has
resulted from prior acquisitions and, accordingly, is attributed to Banking Operations. There is no goodwill
associated with Residential Mortgage Banking, as this operation was acquired in our FDIC-assisted AmTrust Bank
(“AmTrust”) acquisition, which resulted in a bargain purchase gain. In order to perform our annual goodwill
impairment test, we determined the carrying value of the Banking Operations segment to be the carrying value of the
Company and compared it to the fair value of the Banking Operations segment as the fair value of the Company.
We performed our annual goodwill impairment test as of December 31, 2011 and found no indication of
goodwill impairment at that date.
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Income Taxes
In estimating income taxes, management assesses the relative merits and risks of the 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 the best
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 or
transaction-specific 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 prudence and 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 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 tax expense
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 a decrease in income tax expense 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.
In July 2009, new tax laws were enacted that were effective for the determination of our New York City
income tax liability beginning in calendar year 2009. In general, these laws conformed the New York City tax rules
to those of New York State. These tax laws include a provision that requires the inclusion of income earned by a
subsidiary taxed as a real estate investment trust (“REIT”) for federal tax purposes, regardless of the location in
which the REIT subsidiary conducts its business or the timing of its distribution of earnings. The law provided for
25% of such income to be excluded from tax in 2009 and 2010; beginning in 2011, the income earned by a
subsidiary taxed as a REIT was fully taxable. As a result of certain earlier business combinations, we have six REIT
subsidiaries that have been subject to this tax provision since 2009.
In August 2010, new tax laws were enacted by the State and City of New York that repealed the preferential
deduction for bad debts that had been permitted in the determination of our New York State and City income tax
liabilities. These laws have been applied to the determination of our tax liability since calendar year 2010.
FINANCIAL CONDITION
Balance Sheet Summary
At December 31, 2011, our assets totaled $42.0 billion, reflecting an $833.6 million increase from the balance
at December 31, 2010. Loans rose $1.1 billion year-over-year, to $30.3 billion, more than offsetting the impact of a
$248.4 million decline in the balance of securities to $4.5 billion.
Borrowed funds rose $424.3 million year-over-year, to $14.0 billion, the net effect of a $938.5 million
increase in wholesale borrowings to $13.4 billion and a $514.2 million decline in other borrowings. Total deposits
also rose, to $22.3 billion, as a $461.9 million decline in certificates of deposit (“CDs”) to $7.4 billion was exceeded
by a $927.0 million increase in core deposits to $14.9 billion. Core deposits consist of NOW and money market
accounts, savings accounts, and non-interest-bearing deposits, i.e., all deposits other than CDs.
Stockholders’ equity rose $39.5 million year-over-year, to $5.6 billion, representing 13.24% of total assets and
a book value per share of $12.73. Tangible stockholders’ equity rose $65.6 million year-over-year, to $3.1 billion,
representing 7.78% of tangible assets and a tangible book value per share of $7.04. (Please see the discussion and
reconciliations of stockholders’ equity and tangible stockholders’ equity, total assets and tangible assets, and the
related measures that appear later in this report.)
Loans
Loans represented $30.3 billion, or 72.1%, of total assets at December 31, 2011, an increase from $29.2
billion, or 70.9%, of total assets at December 31, 2010. Included in the balance at December 31, 2011 were covered
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loans of $3.8 billion and non-covered loans of $26.5 billion. Included in non-covered loans were $25.5 billion of
loans held for investment and $1.0 billion of loans held for sale.
Covered Loans
“Covered loans” refers to the loans we acquired in our FDIC-assisted AmTrust and Desert Hills Bank (“Desert
Hills”) acquisitions, and are referred to as such because they are covered by loss sharing agreements with the FDIC.
At $3.8 billion, covered loans represented 12.4% of total loans at December 31, 2011, and were down $544.8
million from the balance at December 31, 2010.
One-to-four family loans represented $3.4 billion of total covered loans at the end of this December, with all
other types of covered loans representing $386.6 million, combined. Covered one-to-four family loans include both
fixed and adjustable rate loans. Covered other loans consist of commercial real estate (“CRE”) loans; acquisition,
development, and construction (“ADC”) loans; multi-family loans; commercial and industrial (“C&I”) loans; home
equity lines of credit (“HELOCs”); and consumer loans.
The AmTrust and Desert Hills loss sharing agreements each require the FDIC to reimburse us for 80% of
losses up to a specified threshold, and for 95% of losses beyond that threshold with respect to covered loans and
covered other real estate owned (“OREO”).
In 2011, we recorded a provision for losses on covered loans of $21.4 million, as compared to $11.9 million in
2010. The increase was largely attributable to credit deterioration in the portfolio of C&I loans acquired in the
Desert Hills acquisition and in the portfolios of HELOCs acquired in the acquisitions of both AmTrust and Desert
Hills. The respective provisions were largely offset by FDIC indemnification income of $17.6 million and $11.3
million, recorded in non-interest income in the corresponding years.
Geographical Analysis of the Covered Loan Portfolio
The following table presents a geographical analysis of our covered loan portfolio at December 31, 2011:
(in thousands)
California
Florida
Arizona
Ohio
Massachusetts
Michigan
Illinois
New York
Nevada
Texas
Maryland
New Jersey
Washington
Colorado
All other states
Total covered loans
$ 657,909
630,284
362,793
235,298
168,153
165,310
129,286
113,745
97,109
96,046
88,700
83,432
82,370
82,062
760,534
$3,753,031
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Loan Maturity and Repricing: Covered Loans
The following table sets forth the maturity or period to repricing of our covered loan portfolio at December 31,
2011. Loans that have adjustable rates are shown as being due in the period during which the interest rates are next
subject to change.
(in thousands)
Amount due:
Within one year
After one year:
One to five years
Over five years
Total due or repricing after one year
Total amounts due or repricing, gross
Covered Loans at December 31, 2011
One-to-Four
Family
All Other
Loans
Total
Loans
$1,918,717
$336,956
$2,255,673
172,306
1,275,433
1,447,739
$3,366,456
37,312
12,307
49,619
$386,575
209,618
1,287,740
1,497,358
$3,753,031
The following table sets forth, as of December 31, 2011, the dollar amount of all covered loans due after
December 31, 2012, and indicates whether such loans have fixed or adjustable rates of interest.
(in thousands)
One-to-four family
All other loans
Total loans
Due after December 31, 2012
Fixed
$1,058,258
18,038
$1,076,296
Adjustable
$389,481
31,581
$421,062
Total
$1,447,739
49,619
$1,497,358
Non-Covered Loans Held for Investment
Non-covered loans held for investment totaled $25.5 billion at December 31, 2011, representing 84.2% of
total loans and 60.7% of total assets, and a $1.8 billion, or 7.6%, increase from the balance recorded at December
31, 2010. In addition to multi-family loans and CRE loans, the held-for-investment portfolio includes substantially
smaller balances of ADC loans, one-to-four family loans, and other loans. C&I loans comprise the bulk of our
“other” loan portfolio. The vast majority of our non-covered loans held for investment consist of loans that we
ourselves originated or, in some cases, were acquired in our business combinations prior to 2009.
Originations of held-for-investment loans rose to $9.0 billion in 2011 from $4.3 billion in 2010. The increase
reflects the continued improvement in the Metro New York market where the vast majority of our held-for-
investment loans are originated, as well as a year-over-year decline in market interest rates. As market interest rates
declined, property transactions and refinancing activity increased, particularly in the markets for our multi-family
and CRE loans. While portfolio growth was limited by an increase in repayments, we benefited from the related rise
in prepayment penalty income, as further discussed under “Net Interest Income” later in this report.
Multi-Family Loans
Multi-family loans are our principal asset, and non-luxury residential apartment buildings with below-market
rents in New York City constitute our primary lending niche. Consistent with our emphasis on multi-family lending,
multi-family loan originations represented $5.8 billion, or 64.1%, of the loans we produced for investment in 2011, a
$3.2 billion, or 127.1%, increase from the volume produced in 2010. At December 31st, the balance of multi-family
loans represented $17.4 billion, or 68.3%, of total non-covered loans held for investment, reflecting a year-over-year
increase of $622.7 million. The average multi-family loan at that date had a principal balance of $4.0 million and the
portfolio had an average loan-to-value (“LTV”) ratio of 51.5%, based on appraisals that primarily were received at
the time of origination.
The vast majority of our multi-family loans are made to long-term owners of buildings with apartments that
are subject to rent regulation, and therefore feature below-market rents. Our borrowers typically use the funds we
provide to make improvements to certain apartments, as a result of which they are able to increase the rents their
tenants pay. In doing so, the borrower creates more cash flows to borrow against in future years. We also make loans
to building owners seeking to expand their real estate holdings with the purchase of additional properties.
In addition to underwriting multi-family loans on the basis of the buildings’ income and condition, we
consider the borrowers’ credit history, profitability, and building management expertise. Borrowers are required to
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present evidence of their ability to repay the loan from the buildings’ current rent rolls, their financial statements,
and related documents.
Our multi-family loans typically 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 intermediate-term interest rates plus a spread. During years six through ten, the loan resets to an
annually adjustable rate that is tied to the prime rate of interest, as reported in The New York Times, plus a spread.
Alternatively, the borrower may opt for a fixed rate that is tied to the five-year fixed advance rate of the Federal
Home Loan Bank (“FHLB”) of New York (the “FHLB-NY”), plus a spread. The fixed-rate option also requires the
payment of an amount equal to one percentage point of the then-outstanding loan balance. In either case, the
minimum rate at repricing is equivalent to the rate in the initial five-year term.
As the rent roll increases, the typical property owner seeks to refinance the mortgage, and generally does so
before the loan reprices in year six. Notably, the expected weighted average life of the multi-family loan portfolio
was 3.3 years at December 31, 2011, as compared to 4.1 years at December 31, 2010. While refinancing activity had
been constrained by uncertainty in the real estate market in the wake of the economic crisis, the increase in such
activity in 2011 resulted in the year-over-year reduction in the expected weighted average life of our multi-family
loan portfolio.
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. If a loan extends past the
fifth year and the borrower selects the fixed rate option, the prepayment penalties typically reset to a range of five
points to one point over years six through ten.
Prepayment penalties are recorded as interest income and are therefore reflected in the average yields on our
loans and assets, our interest rate spread and net interest margin, and the level of net interest income we record. No
assumptions are involved in the recognition of prepayment penalty income, as such income is only recorded when
cash is received.
Our success as a multi-family lender partly 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 basing our loans on the cash flows produced by the properties. Because the multi-family
market is largely broker-driven, the process of producing such loans is expedited, with loans generally taking four to
six weeks to process, and the related expenses being substantially reduced.
At December 31, 2011, the vast majority of our multi-family loans were secured by rental apartment
buildings. In addition, 79.2% of our multi-family loans were secured by buildings in New York City, with
Manhattan accounting for the largest share. Of the loans secured by buildings outside New York City, the State of
New York was home to 6.0%, with New Jersey and Pennsylvania accounting for 7.9% and 2.9%, respectively. The
remaining 3.9% of multi-family loans were secured by buildings outside these markets.
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 lending has been
the comparative quality of the loans we produce. Reflecting the nature of the buildings securing our loans, our
underwriting standards, and the generally conservative LTV ratios our multi-family loans feature at origination, a
relatively small percentage of the multi-family loans that have transitioned to non-performing status have actually
resulted in losses during the most recent downturn in the credit cycle, as well as historically.
We primarily underwrite our multi-family loans based on the current cash flows produced by the collateral
property, with a reliance on the “income” approach to appraising the properties, rather than the “sales” approach.
The sales approach is subject to fluctuations in the real estate market, as well as general economic conditions, and is
therefore likely to be more risky in the event of a downward credit cycle turn. 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
multi-family loans we are originating today generally represent no more than 75% of the lower of the appraised
value or the sales price of the underlying property, and typically feature 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 obtain a security
interest in the personal property located on the premises, and an assignment of rents and leases.
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Accordingly, while our multi-family lending niche has not been immune to the downturn of the credit cycle,
we continue to believe that the multi-family loans we produce involve less credit risk than certain other types of
loans. In general, buildings that are subject to rent regulation have tended to be stable, with occupancy levels
remaining more or less constant over time. Because the rents are typically below market and the buildings securing
our loans are generally maintained in good condition, we believe that they are reasonably likely to retain their
tenants in adverse economic times. In addition, we underwrite our multi-family loans on the basis of the current cash
flows generated by the underlying properties, and exclude any partial property tax exemptions and abatement
benefits the property owners receive.
Commercial Real Estate Loans
In 2011, CRE loans represented $2.4 billion, or 26.3%, of loans originated for investment, a $1.4 billion, or
149.4%, increase from the volume produced in the prior year. Although the growth of the portfolio was somewhat
tempered by the level of repayments, the balance of CRE loans rose $1.4 billion, or 26.0%, year-over-year to $6.9
billion at December 31, 2011, representing 26.9% of the total held-for-investment portfolio at that date. At
December 31st, the average CRE loan had a principal balance of $3.9 million, and the portfolio had an average LTV
ratio at origination of 50.9%. The increase in CRE loan production was primarily due to the decline in market
interest rates and the improvement in market conditions, as well as the origination of certain larger CRE loans.
The CRE loans we produce are secured by income-producing properties such as office buildings, retail
centers, mixed-use buildings, and multi-tenanted light industrial properties. At December 31, 2011, 71.6% of our
CRE loans were secured by properties in New York City, primarily in Manhattan, while properties on Long Island
and in New Jersey accounted for 12.8% and 7.4%, respectively.
The pricing of our CRE loans is similar to the pricing of our multi-family credits, i.e., with a fixed rate of
interest for the first five years of the loan that is generally based on intermediate-term interest rates plus a spread.
During years six through ten, the loan resets to an annually adjustable rate that is tied to the prime rate of interest, as
reported in The New York Times, plus a spread. Alternately, the borrower may opt for a fixed rate that is tied to the
five-year fixed advance rate of the FHLB-NY plus a spread. The fixed-rate option also requires the payment of an
amount equal to one percentage point of the then-outstanding loan balance. In either case, the minimum rate at
repricing is equivalent to the rate 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 CRE loans tend to refinance within five years of origination. Reflecting the
same factors that contributed to the reduction in the expected weighted average life of our multi-family loan
portfolio, the expected weighted average life of the CRE portfolio declined to 3.4 years at December 31, 2011 from
4.0 years at December 31, 2010. If a loan remains outstanding in the sixth year, and the borrower selects the fixed-
rate option, a schedule of prepayment penalties ranging from five points to one point begins again in year six.
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 CRE loans in adherence with
conservative underwriting standards, and require that such loans qualify on the basis of the property’s current
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 minimum debt service coverage ratio
of 130% and a maximum LTV ratio of 65%. In addition, the origination of CRE loans typically requires a security
interest in the furniture, fixtures, equipment, and other personal property of the borrower and/or an assignment of the
rents and/or leases.
Acquisition, Development, and Construction Loans
In the interest of reducing our exposure to credit risk in a declining real estate market, we have limited our
production of ADC loans to loans that have limited market risk and low LTV ratios and are made to reputable
borrowers who have significant collateral. As a result, ADC loans represented $150.4 million, or 1.7%, of the loans
we produced for investment in 2011, and the portfolio of ADC loans declined $123.9 million to $445.7 million year-
over-year. ADC loans thus represented 1.7% of total loans held for investment at December 31, 2011, down from
2.2% at December 31, 2010.
At December 31, 2011, 48.5% of the loans in our ADC portfolio were for land acquisition and development;
the remaining 51.5% consisted of loans that were provided for the construction of owner-occupied homes and
commercial properties. Such loans are typically originated for terms of 18 to 24 months, and feature a floating rate
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of interest tied to prime, with a floor. They also generate origination fees that are recorded as interest income and
amortized over the lives of the loans.
In addition, 69.6% of the loans in the ADC portfolio were for properties in New York City, with Manhattan
accounting for more than half of New York City’s share. Long Island accounted for 16.3% of our ADC loans, with
other parts of New York State and New Jersey accounting for 11.1%, combined. Reflecting the limited extent to
which ADC loans have been originated beyond our immediate market, 3.0% of our ADC loans are secured by
properties beyond these two states.
Because ADC loans are generally considered to have a higher degree of credit risk, especially during a
downturn in the credit cycle, borrowers are required to provide a personal guarantee of repayment and completion.
In the twelve months ended December 31, 2011, we recovered losses against personal guarantees of $120,000; no
losses were recovered from personal guarantees in the prior year. The risk of loss on an ADC loan is largely
dependent upon the accuracy of the initial appraisal of the property’s value upon completion of construction; the
estimated cost of construction, including interest; and the estimated time to complete and/or sell or lease such
property. If the appraised value proves to be inaccurate, the cost of completion is greater than expected, or the length
of time to complete and/or sell or lease the collateral property is greater than anticipated, the property could have a
value upon completion that is insufficient to assure full repayment of the loan. Reflecting the disposition of certain
non-performing assets, 6.7% of the loans in our ADC loan portfolio were non-performing at the end of this
December, as compared to 16.1% at December 31, 2010.
When applicable, as a condition to closing an ADC loan, 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 ADC loans on commercial properties.
One-to-Four Family Loans
The majority of the one-to-four family loans in our portfolio of loans held for investment are loans that were
acquired in our business combinations prior to 2009. Reflecting repayments, and our general practice of originating
one-to-four family loans for sale, the balance of one-to-four family loans held for investment declined $43.0 million
year-over-year to $127.4 million, representing one-half of 1% of our total held-for-investment loan portfolio at
December 31, 2011.
To meet the needs of our customers, we originate agency-conforming one-to-four family loans through several
selected clients of our mortgage banking operation, and aggregate those loans with others produced by our mortgage
banking clients throughout the United States. These loans are generally sold, servicing retained, to government-
sponsored enterprises (“GSEs”). (For more detailed information about our production of one-to-four family loans for
sale, please see “Non-Covered Loans Held for Sale” later in this section.)
Other Loans
Primarily reflecting the sale of our insurance premium financing business in the second quarter, other loans
declined $57.3 million year-over-year to $669.9 million, representing 2.6% of total loans at December 31, 2011.
C&I loans accounted for $600.0 million of the year-end 2011 total, reflecting a $41.7 million reduction from the
prior year-end amount. Of the $715.2 million of other loans originated for investment in 2011, C&I loans
represented $705.8 million, or 98.7%.
The vast majority of our C&I loans are made to small and mid-size businesses in New York City and Long
Island, and are tailored to meet the specific needs of our borrowers. The loans we produce include term loans,
demand loans, revolving lines of credit, letters of credit, and, to a lesser extent, loans that are partly guaranteed by
the Small Business Administration. A broad range of C&I 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. In determining the term and structure of a
C&I loan, several factors are considered, including its purpose, the collateral, and the anticipated sources of
repayment. C&I loans are typically secured by business assets and personal guarantees of the borrower, and include
financial covenants to monitor the borrower’s financial stability.
The interest rates on C&I loans can be fixed or floating, with floating rate loans being tied to prime or some
other market index, plus an applicable spread. Our floating rate loans may or may not feature a floor rate of interest.
52
The decision to require a floor on C&I loans depends on the level of competition we face for such loans from other
institutions, the direction of market interest rates, and the profitability of our relationship with the borrower.
A benefit of C&I lending is the opportunity to establish full-scale banking relationships with our C&I
customers. As a result, many of our borrowers provide us with deposits, and many take advantage of our fee-based
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 pre-2009 merger partners prior to their
joining the Company. We currently do not offer home equity loans or lines of credit.
Lending Authority
The loans we originate for investment are subject to federal and state laws and regulations, and are
underwritten in accordance with loan underwriting policies and procedures approved by the Mortgage Committee,
the Credit Committee, and the respective Boards of Directors.
In accordance with the Banks’ policies, all loans are presented to the Mortgage Committee or the Credit
Committee, as applicable, for approval, and all loans of $10.0 million or more are reported to the respective Boards
of Directors. In 2011, 145 loans of $10.0 million or more were originated by the Banks, with an aggregate loan
balance of $5.0 billion at origination. In 2010, 66 of such loans were originated by the Banks, with an aggregate loan
balance at origination of $1.6 billion.
We also place a limit on the amount of loans that may be made to one borrower. At December 31, 2011, the
largest concentration of loans to one borrower consisted of a $546.2 million multi-family loan 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 loan was originally made on September 30, 2004
and, as of December 31, 2011, has been current since origination. The interest rate on the loan was 5.75% at
December 31st.
Geographical Analysis of the Portfolio of Non-Covered Loans Held for Investment (1)
The following table presents a geographical analysis of the multi-family, CRE, and ADC loans in our held-
for-investment portfolio at December 31, 2011:
Multi-Family Loans
At December 31, 2011
Commercial
Real Estate Loans
(dollars in thousands)
New York City:
Manhattan
Brooklyn
Bronx
Queens
Staten Island
Total New York City
Long Island
Other New York State
New Jersey
Pennsylvania
All other states
Total
Amount
$ 5,996,851
3,214,501
2,653,367
1,816,636
122,259
$13,803,614
546,203
506,350
1,382,604
512,904
678,953
$17,430,628
Percent
of Total
34.40%
18.44
15.22
10.42
0.70
79.18%
3.14
2.91
7.93
2.94
3.90
100.00%
Amount
$3,607,711
395,981
209,394
625,180
71,522
$4,909,788
879,334
146,570
505,327
268,429
145,796
$6,855,244
Percent
of Total
52.63%
5.78
3.05
9.12
1.04
71.62%
12.83
2.14
7.37
3.91
2.13
100.00%
Acquisition, Development,
and Construction Loans
Percent
of Total
Amount
$152,692
42,287
38,564
65,596
11,291
$310,430
72,424
7,458
42,159
--
13,200
$445,671
34.26%
9.49
8.65
14.72
2.53
69.65%
16.25
1.68
9.46
--
2.96
100.00%
(1) The vast majority of other loans held for investment are secured by properties and/or businesses in the Metro New York
region.
53
Loan Maturity and Repricing Analysis of the Portfolio of Non-Covered Loans Held for Investment
The following table sets forth the maturity or period to repricing of our portfolio of non-covered loans held for
investment at December 31, 2011. Loans that have adjustable rates are shown as being due in the period during
which the interest rates are next subject to change.
Non-Covered Loans Held for Investment
at December 31, 2011
Acquisition,
Development, One-to-Four
and Construction
Family
Other
Multi-
Family
Commercial
Real Estate
Total
Loans
$ 943,392
$ 565,073
$412,246
$ 33,916
$388,257 $ 2,342,884
8,401,067
8,086,169
2,954,859
3,335,312
16,487,236
6,290,171
31,394
2,031
33,425
30,187
63,258
144,922
136,714
11,562,429
11,623,484
93,445
281,636
23,185,913
$17,430,628
$6,855,244
$445,671
$127,361
$669,893 $25,528,797
(in thousands)
Amount due:
Within one year
After one year:
One to five years
Over five years
Total due or repricing
after one year
Total amounts due or
repricing, gross
The following table sets forth, as of December 31, 2011, the dollar amount of all non-covered loans held for
investment that are due after December 31, 2012, and indicates whether such loans have fixed or adjustable rates of
interest:
(in thousands)
Mortgage Loans:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Total mortgage loans
Other loans
Total loans
Non-Covered Loans Held for Sale
Due after December 31, 2012
Adjustable
Total
Fixed
$5,709,951
2,473,350
33,425
82,769
8,299,495
276,340
$8,575,835
$10,777,285
3,816,821
--
10,676
14,604,782
5,296
$14,610,078
$16,487,236
6,290,171
33,425
93,445
22,904,277
281,636
$23,185,913
Although we generally do not originate one-to-four family loans for investment, we are actively engaged in
the origination of one-to-four family loans for sale. Our mortgage banking operation serves approximately 1,000
clients—community banks, credit unions, mortgage companies, and mortgage brokers—who utilize our proprietary
web-accessible mortgage banking platform to originate full-documentation, prime credit one-to-four family loans in
all 50 states.
In 2011, we originated one-to-four family loans for sale of $7.2 billion, reflecting a $3.7 billion reduction from
the year-earlier amount. The reduction was attributable to the continued weakness in the U.S. housing market, as an
increase in residential mortgage interest rates in the first half of the year combined with the high level of
unemployment to further discourage the purchase and refinancing of one-to-four family homes. The vast majority of
the held-for-sale loans we produced were agency-conforming loans sold to GSEs. To a much lesser extent, we
utilized our mortgage banking platform to originate jumbo loans under contract for sale to other financial
institutions, a practice we initiated in the first quarter of 2011.
At December 31, 2011 and 2010, the respective balances of one-to-four family loans held for sale were $1.0
billion and $1.2 billion, representing 3.4% and 4.1%, respectively, of total loans at the corresponding dates.
To mitigate the risks inherent in originating and reselling residential mortgage loans, we utilize processes,
proprietary technologies, and third-party software application tools that seek to ensure that the loans meet investors’
program eligibility, underwriting, and collateral requirements. In addition, compliance verification and fraud
detection tools are utilized throughout the processing, underwriting, and loan closing stages to assist in the
determination that the loans we originate and acquire are in compliance with applicable local, state, and federal laws
54
and regulations. Controlling, auditing, and validating the data upon which the credit decision is made (and the loan
documents created) substantially mitigates the risk of our originating or acquiring a loan that subsequently is
deemed to be in breach of loan sale representations and warranties made by us to loan investors.
We require the use of our proprietary processes, origination systems, and technologies for all loans we close.
Collectively, these tools and processes are known internally as our proprietary “Gemstone” system. By mandating
usage of Gemstone for all table-funded loan originations, we are able to tightly control key risk aspects across the
spectrum of loan origination activities. Our clients access Gemstone via secure Internet protocols, and initiate the
process by submitting required loan application data and other required income, asset, debt, and credit documents to
us electronically. Key data is then verified by a combination of trusted third-party validations and internal reviews
conducted by our loan underwriters and quality control specialists. Once key data is independently verified, it is
“locked down” within the Gemstone system to further ensure the integrity of the transaction.
In addition, all “trusted source” third-party vendors are directly connected to the Gemstone system via secure
electronic data interfaces. Within the Gemstone system, these trusted sources provide key risk and control services
throughout the origination process, including ordering and receipt of credit report information, independent
collateral appraisals, and private mortgage insurance, automated underwriting and program eligibility
determinations, flood insurance determination, fraud detection, local/state/federal regulatory compliance, predatory
or “high cost” loan reviews, and legal document preparation services. Our employees augment the automated system
controls by performing audits during the process, which include the final underwriting of the loan file (the credit
decision), and various other pre-funding and post-funding quality control reviews.
The agency-conforming one-to-four family loans we originate for sale to GSEs require that we make certain
representations and warranties with regard to the underwriting, documentation, and legal/regulatory compliance, and
we may be required to repurchase a loan or loans from the GSEs if it is found that a breach of the representations
and warranties has occurred. In such case, we would be exposed to any subsequent credit loss on the mortgage loans
that might or might not be realized in the future.
As governed by our agreements with the GSEs, the representations and warranties we make relate to several
factors, including, but not limited to, the ownership of the loan; the validity of the lien securing the loan; the absence
of delinquent taxes or liens against the property securing the loan as of its closing date; the process used to select the
loan for inclusion in a transaction; and the loan’s compliance with any applicable criteria, including underwriting
standards, loan program guidelines, and compliance with applicable federal, state, and local laws.
We record a liability for estimated losses relating to these representations and warranties, which is included in
“other liabilities” in the accompanying Consolidated Statements of Condition. The related expense is recorded in
“mortgage banking income” in the accompanying Consolidated Statements of Income and Comprehensive
Income. At December 31, 2011 and December 31, 2010, the respective liabilities for estimated possible future losses
relating to these representations and warranties were $5.3 million and $3.5 million. The methodology used to
estimate the liability for representations and warranties is a function of the representations and warranties given and
considers a variety of factors, including, but not limited to, actual default experience, estimated future defaults,
historical loan repurchase rates and the frequency and potential severity of defaults, probability that a repurchase
request will be received, and the probability that a loan will be required to be repurchased.
The following table sets forth the activity in our representation and warranty reserve during the periods
indicated:
Representation and Warranty Reserve
(in thousands)(cid:3)
Balance, beginning of period
Provision for repurchase losses:
Loan sales
Change in estimates
Balance, end of period
For the Years Ended
December 31,
2011
$3,537
1,783
--
$5,320
2010
$ --
3,537
--
$3,537
Because the level of mortgage loan repurchase losses is dependent on economic factors, investor demand
strategies, and other external conditions that may change over the lives of the underlying loans, the level of the
55
liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management
judgment. However, we believe the amount and range of reasonably possible losses in excess of our reserve is not
material to our operations or to our financial condition or results of operations.
The following table sets forth our GSE repurchase requests in the twelve months ended December 31, 2011:
Repurchase Request Activity
(cid:3)
(dollars in thousands)
Balance, beginning of period
New repurchase requests (2)
Successful rebuttal/rescission
Indemnifications (3)
Loan repurchases (3)
Balance, end of period (4)
For the Year Ended
December 31, 2011
Number
of Loans
1
95
(82)
(5)
(1)
8
Amount (1)
155
$
21,913
(18,928)
(1,392)
(165)
$ 1,583
(1) Represents the loan balance at origination.
(2) All requests are from GSEs and relate to one-to-four family loans originated for sale since December 2009. No repurchase
requests were received during the year ended December 31, 2010.
(3) The Company protects a GSE against a loss on a loan under an indemnification agreement. All five loans that were
indemnified in 2011, along with the one loan repurchased by us, were fully performing as of December 31, 2011.
(4) Of the eight period-end requests, five were from Fannie Mae and three were from Freddie Mac. Fannie Mae allows 90 days
to respond, whereas Freddie Mac allows 30 days. Failure to respond to a request in a timely manner could result in the
Company having an obligation to repurchase the loan.
Please see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” for a discussion of the
strategies we employ to mitigate the interest rate risk associated with our production of one-to-four family loans for
sale.
Loan Origination Analysis
The following table summarizes our production of loans held for investment and loans held for sale in the
years ended December 31, 2011 and 2010:
(dollars in thousands)
Mortgage Loan Originations for Investment:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Total mortgage loan originations for investment
Other Loan Originations for Investment:
Commercial and industrial
Other
Total other loan originations for investment
Total loan originations for investment
One-to-four family loan originations for sale
Total loan originations
For the Years Ended December 31,
2010
2011
Amount
$ 5,761,004
2,361,541
150,363
147
8,273,055
705,794
9,416
715,210
$ 8,988,265
7,151,083
Percent
of Total
35.69%
14.63
0.93
0.01
51.26
4.37
0.06
4.43
55.69%
44.31
$16,139,348 100.00%
Amount
$ 2,537,145
946,982
127,154
6,711
3,617,992
Percent
of Total
16.70%
6.23
0.84
0.04
23.81
703,716
7,271
710,987
$ 4,328,979
10,864,188
$15,193,167 100.00%
4.63
0.05
4.68
28.49%
71.51
56
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Outstanding Loan Commitments
At December 31, 2011, we had outstanding loan commitments of $2.7 billion, a $1.0 billion increase from the
level at December 31, 2010. Included in the current year-end amount were commitments to originate loans for
investment of $1.6 billion and commitments to originate loans for sale of $1.1 billion, exceeding the year-earlier
levels by $622.3 million and $420.0 million, respectively. Multi-family and CRE loans represented $1.1 billion of
held-for-investment loan commitments at December 31, 2011, while ADC loans and other loans represented $93.0
million and $423.9 million, respectively.
In addition to loan commitments, we had commitments to issue financial stand-by, performance, and
commercial letters of credit totaling $172.9 million at December 31, 2011, as compared to $133.6 million at
December 31, 2010.
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.
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.
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 the presentation of documents that
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.
Asset Quality
Non-Covered Loans Held for Investment and Non-Covered Other Real Estate Owned
The quality of our assets improved over the course of 2011 as conditions improved in the markets where we
do most of our held-for-investment lending, enabling some of our borrowers to bring their loans current and
facilitating the disposition and sale of certain foreclosed loans and properties.
Specifically, non-performing non-covered loans declined $298.6 million, or 47.8%, year-over-year to $325.8
million at December 31, 2011, representing 1.28% of total non-covered loans at that date. At December 31, 2010,
non-performing non-covered loans totaled $624.4 million and represented 2.63% of total non-covered loans.
Non-performing multi-family and CRE loans accounted for the bulk of these improvements, having declined
$122.8 million and $94.4 million, respectively, year-over-year. Non-performing ADC loans declined $62.0 million
in the twelve months ended December 31, 2011, while non-performing one-to-four family and other loans declined
more modestly.
The following table sets forth the changes in non-performing loans for the twelve months ended December 31,
2011:
(in thousands)
Balance at December 31, 2010
New non-accrual in the period
Charge-offs
Transferred to other real estate owned
Loan payoffs including dispositions and principal amortization
Restored to performing status
Balance at December 31, 2011
$ 624,431
213,995
(67,645)
(58,844)
(338,170)
(47,952)
$ 325,815
All of our non-performing loans at December 31, 2011 and 2010 were non-accrual loans.
58
Non-accrual mortgage loans accounted for $314.9 million of non-performing non-covered loans at
December 31, 2011 in contrast to $600.0 million at December 31, 2010. Other non-accrual loans also declined
during this time, to $10.9 million from $24.5 million. A loan generally is classified as a “non-accrual” loan when it
is over 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.
We monitor non-accrual loans both within and beyond our primary lending area in the same manner.
Monitoring loans generally involves inspecting and re-appraising the collateral properties; holding discussions with
the principals and managing agents of the borrowing entities and/or retained legal counsel, as applicable; requesting
financial, operating, and rent roll information; confirming that hazard insurance is in place or force-placing such
insurance; monitoring tax payment status and advancing funds as needed; and appointing a receiver, whenever
possible, to collect rents, manage the operations, provide information, and maintain the collateral properties.
It is our policy to order updated appraisals for all non-performing loans, irrespective of loan type, that are
collateralized by multi-family buildings, CRE properties, or land, in the event that such a loan is more than 90 days
past due, and if the most recent appraisal on file for the property is more than one year old. Appraisals are ordered
annually until such time as the loan becomes performing and is returned to accrual status. It is not our policy to
obtain updated appraisals for performing loans. However, appraisals may be ordered for performing loans when a
borrower requests an increase in the loan amount, or when a borrower requests an extension of a maturing loan. We
do not analyze current LTV ratios on a portfolio-wide basis. We believe that disclosing the average LTV ratios at
origination for our multi-family and CRE loan portfolios provides insight into the quality of these portfolios, as well
as our stringent underwriting standards.
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. In accordance with our
charge-off policy, non-performing loans are written down to their current appraised values, less certain transaction
costs. Workout specialists from our Loan Recovery Unit actively pursue borrowers who are delinquent in repaying
their loans in an effort to collect payment. In addition, outside counsel with experience in foreclosure proceedings
are retained to institute such action with regard to such borrowers.
Properties that are acquired through foreclosure are classified as OREO, and are 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. It is
our policy to require an appraisal and environmental assessment of properties classified as OREO 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 property’s condition.
Although OREO rose $56.5 million year-over-year, to $84.6 million, the increase was exceeded by the
reduction in non-performing loans. As a result, the balance of non-performing assets improved to $410.4 million at
December 31, 2011, reflecting a $242.1 million, or 37.1%, reduction from the balance at December 31, 2010. Non-
performing non-covered assets represented 1.07% of total non-covered assets at December 31, 2011, in contrast to
1.77% at December 31, 2010.
The improvement in asset quality also was reflected in the balance of loans 30 to 89 days past due, which
declined $39.4 million from the year-earlier balance to $111.7 million at December 31, 2011. The reduction was
primarily due to a $74.5 million decline in multi-family loans 30 to 89 days past due to $46.7 million, as certain
loans migrated to non-accrual status and other loans were brought current by the borrowers. In addition, the balances
of one-to-four family loans and other loans 30 to 89 days past due declined $3.0 million and $8.8 million,
respectively, to $2.7 million and $1.9 million year-over-year. These improvements were somewhat offset by a $45.6
million increase in 30-to-89 day past due CRE loans, to $53.8 million, and by a far more modest increase in the
balance of 30-to-89 day past due ADC loans. The increase in CRE loans 30 to 89 days past due includes a $26.2
million loan collateralized by a 12-story office building located in Manhattan.
Reflecting the improvements in non-performing loans and loans 30 to 89 days past due, total delinquencies
declined $281.5 million, or 35.0%, year-over-year to $522.0 million at December 31, 2011.
To mitigate the potential for credit losses, we underwrite our loans in accordance with credit standards that we
consider prudent. In the case of multi-family and CRE loans, we look first at the consistency of the cash flows being
59
generated by the property to determine its 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
more typically used.
The condition of the collateral property is another critical factor. Multi-family buildings and CRE properties
are inspected from rooftop to basement as a prerequisite to approval by management and the Mortgage or Credit
Committee, as applicable. A member of the Mortgage or Credit Committee participates in inspections on multi-
family loans to be originated in excess of $4.0 million. Similarly, a member of the Mortgage or Credit Committee
participates in inspections on CRE loans to be originated 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 is typically greater than ten years. Furthermore, in New York City,
where the majority of the buildings securing our multi-family loans are located, the rents that tenants may be
charged on certain apartments are typically restricted under certain rent-control or rent-stabilization laws. As a
result, the rents that tenants pay for such apartments are generally lower than current market rents. Buildings with a
preponderance of such rent-regulated apartments are less likely to experience vacancies in times of economic
adversity.
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% for multi-family loans and 130% for CRE
loans. Although we typically will lend up to 75% of the appraised value on multi-family buildings and up to 65% on
commercial properties, the average LTV ratios of such credits at origination, as previously noted, were below those
amounts at December 31, 2011. Exceptions to these LTV limitations are reviewed on a case-by-case basis, requiring
the approval of the Mortgage or Credit Committee, as applicable.
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 CRE loans in adherence with
conservative underwriting standards, and require that such loans qualify on the basis of the property’s current
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.
Although the reasons for a loan to default will vary from credit to credit, our multi-family and CRE loans, in
particular, typically have not resulted in significant losses. Such loans are generally originated at conservative LTV
ratios, as previously stated. Furthermore, in the case of multi-family loans, the cash flows generated by the
properties generally have significant value.
The Boards of Directors also take part in the ADC lending process, with all ADC loans requiring 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. ADC loans primarily have been made to well-established
builders who have borrowed from us in the past. We typically lend up to 75% of the estimated as-completed 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 lend
up to 65% of the estimated as-completed 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.
Our loan portfolio has been 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 CRE loans typically
repaying or refinancing within three to five years of origination, and the duration of ADC loans ranging up to 36
months, with 18 to 24 months more the norm. Furthermore, our multi-family loans are largely secured by buildings
with rent-regulated apartments that tend to maintain a high level of occupancy, regardless of economic conditions in
our marketplace.
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 loan may depreciate over time, may not
60
be conducive to appraisal, and may fluctuate in value, based upon the operating results of the business. Accordingly,
personal guarantees are also a normal requirement for C&I loans.
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. Delinquencies are addressed by our Loan
Recovery Unit and every effort is made to collect rather than initiate foreclosure proceedings.
Fair values for all multi-family buildings, CRE properties, and land are determined based on the appraised
value. If an appraisal is more than one year old and the loan is classified as either non-performing or as an accruing
troubled debt restructuring (“TDR”), then an updated appraisal is required to determine fair value. Estimated
disposition costs are deducted from the fair value of the property to determine estimated net realizable value. In the
instance of an outdated appraisal on an impaired loan, we adjust the original appraisal by using a third-party index
value to determine the extent of impairment until an updated appraisal is received.
While we strive to originate loans that will perform fully, the severity of the credit cycle resulted in a greater
number of loans transitioning to non-accrual status and a greater volume of net charge-offs than we incurred before
the downward cycle turn. Although the level of non-performing non-covered loans and assets reflected steady
improvement over the twelve months ended December 31, 2011, net charge-offs rose $41.1 million to $100.7
million during this time. Reflecting this increase, our ratio of net charge-offs to average loans was 0.35% in 2011, as
compared to 0.21% in 2010.
Multi-family and CRE loans represented $70.5 million and $10.6 million, respectively, of net charge-offs in
2011, while ADC, one-to-four family, and other loans accounted for $8.6 million, $1.2 million, and $9.8 million,
respectively.
Reflecting the $79.0 million provision for losses on non-covered loans recorded in 2011 and the year’s net
charge-offs, our allowance for losses on non-covered loans declined to $137.3 million at December 31, 2011 from
$158.9 million at December 31, 2010. The current year-end amount was equivalent to 42.14% of non-performing
non-covered loans at the end of this December, while the year-earlier amount was equivalent to 25.45% of non-
performing non-covered loans at the prior year-end.
Although our asset quality showed signs of improvement in 2011, the allowance for losses on non-covered
loans was not reduced to the same degree as the level of non-performing assets because we maintain the allowance
at a level to cover potential losses inherent in the loan portfolio. Based upon all relevant and available information at
December 31, 2011, management believes that the allowance for losses on non-covered loans was appropriate at that
date.
Historically, our level of charge-offs has been relatively low in adverse credit cycles, even when the volume of
non-performing loans has increased. This distinction has largely been due to the nature of our primary lending niche
(multi-family loans collateralized by non-luxury apartment buildings in New York City that feature below-market
rents), and to our conservative underwriting practices that require, among other things, low LTV ratios.
Reflecting the strength of the underlying collateral for these loans and the collateral structure, a relatively
small percentage of our non-performing multi-family loans have resulted in losses over time. Low LTV ratios
provide a greater likelihood of full recovery and reduce the possibility of incurring a severe loss on a credit.
Furthermore, in many cases, low LTV ratios result in our having fewer loans with a potential for the borrower to
“walk away” from the property. Although borrowers may default on loan payments, they have a greater incentive to
protect their equity in the collateral property and to return their loans to performing status.
Given that our CRE loans are underwritten in accordance with underwriting standards that are similar to those
that apply to our multi-family credits, an increase in non-performing CRE loans historically has not resulted in a
corresponding increase in losses on such loans.
To further mitigate our credit risk, we continue to de-emphasize the production of ADC and other loans, as
well as one-to-four family loans, for portfolio. At December 31, 2011, ADC loans, one-to-four family loans, and
other loans represented 1.74%, 0.50%, and 2.63%, respectively, of total non-covered loans held for investment, as
61
compared to 2.40%, 0.72%, and 3.06%, respectively, at December 31, 2010. At the current year-end 6.71%, 19.35%,
and 1.63% of ADC loans, one-to-four family loans, and other loans, respectively, were non-performing loans.
Although our asset quality showed signs of improvement in 2011, the allowance for losses on non-covered
was not reduced to the same degree as the level of non-performing assets because we maintain the allowance at a
level to cover potential losses inherent in the loan portfolio.
In view of these factors, we do not believe that the level of our non-performing non-covered loans will result
in a comparable level of loan losses and will not necessarily require a significant increase in our loan loss provision
or allowance for non-covered loans in any given period. As indicated, non-performing non-covered loans
represented 1.28% of total non-covered loans at December 31, 2011; the ratio of net charge-offs to average loans for
the twelve months ended at that date was 0.35%.
The following tables present the number and amount of non-performing multi-family and CRE loans by
originating bank at December 31, 2011 and 2010:
December 31, 2011
(dollars in thousands)
New York Community Bank
New York Commercial Bank
Total
December 31, 2010
(dollars in thousands)
New York Community Bank
New York Commercial Bank
Total
Non-Performing
Multi-Family
Loans
Number
85
2
87
Amount
$204,116
948
$205,064
Non-Performing
Multi-Family
Loans
Number
128
3
131
Amount
$323,751
4,141
$327,892
Number
Non-Performing
Commercial
Real Estate Loans
Amount
$58,437
9,595
$68,032
49
6
55
Number
Non-Performing
Commercial
Real Estate Loans
Amount
$130,132
32,268
$162,400
53
12
65
The following table presents information about our five largest non-performing loans at December 31, 2011,
all of which are non-covered loans:
Type of Loan
Origination Date
Origination Balance
Full Commitment Balance
Balance at December 31, 2011
Associated Allowance
Non-Accrual Date
Origination LTV Ratio
Current LTV Ratio
Last Appraisal
Loan No. 1
Multi-family
6/29/2005
$41,116,000
$45,531,750
$45,340,123
None
February 2009
76%
82%
November 2011
Loan No. 2
Multi-family
4/17/2008
$17,500,000
$17,500,000
$16,255,108
None
June 2011
73%
91%
April 2011
Loan No. 3
Construction
9/12/2007
$4,292,189
$27,155,875
$15,886,260
None
July 2011
77%
90%
March 2011
Loan No. 4
Multi-family
3/10/2005
$11,400,000
$11,400,000
$10,903,319
None
May 2010
81%
89%
March 2011
Loan No. 5
Multi-family
5/23/2011
$8,806,889
$8,498,165
$8,498,165
None
August 2011
97%
97%
February 2011
The following is a description of the five loans identified in the preceding table. It should be noted that none
of these loans required that an allocation be made to the allowance for losses on non-covered loans, as determined
by using the fair value of collateral method defined in ASC 310-10 and -40.
No. 1 - The borrower is based in New Jersey and is an owner of real estate throughout the U.S. This loan is
collateralized by a complex of four multi-family buildings with 672 residential units and four
commercial units in Washington, D.C.
No. 2 - The borrower is based in Connecticut and is an owner of real estate throughout the Metro New York
region. The loan is collateralized by a multi-family building with 144 residential units in the Bronx,
New York.
62
No. 3 - The borrower is based in New York and is an owner of real estate throughout the Metro New York
region. This loan is collateralized by a property in Astoria, Queens that is being developed into a
seven-story condominium building with 33 residential units and 9,498 square feet of retail or
professional space. Construction on this project was 99% completed at December 31, 2011.
No. 4 - The borrower is based in New York and is an owner of real estate throughout the Metro New York
region. The loan is collateralized by a multi-family building with 167 residential units in the Bronx,
New York.
No. 5 - The borrower is based in Connecticut and is an owner of real estate throughout the Metro New York
region. The loan is collateralized by a multi-family building with 130 condominium units in
Hartford, Connecticut. The origination date is the date on which the loan was modified as a TDR.
The LTV ratio is based on the most recent re-appraisal of the collateral property. The initial
origination date was December 21, 2007.
Troubled Debt Restructurings
In accordance with GAAP, we are required to account for certain loan modifications or restructurings as
TDRs. In general, a modification or restructuring of a loan constitutes a TDR if we grant a concession to a borrower
experiencing financial difficulty. Loans modified as TDRs are placed on non-accrual status until we determine that
future collection of principal and interest is reasonably assured, which generally requires that the borrower
demonstrate performance according to the restructured terms for at least six consecutive months.
In April 2011, the FASB issued guidance regarding the determination of whether a restructuring is a TDR. In
anticipation of this action, we began applying these stricter, more conservative metrics at the beginning of that year.
Accordingly, we did not record any additional TDRs as a result of adopting the FASB’s new guidance when it
became effective.
Loans modified as TDRs totaled $287.1 million at December 31, 2011, including accruing loans of $63.8
million and non-accrual loans of $223.3 million.
Analysis of Troubled Debt Restructurings
The following table presents information regarding our TDRs as of December 31, 2011 and 2010:
(in thousands)
Loan Category:
Multi-family
Commercial real estate
Acquisition, development, and construction
Commercial and industrial
One-to-four family
Total
December 31, 2011
December 31, 2010
Accruing Non-Accrual
Total
Accruing Non-Accrual
Total
$60,454
$166,248
3,389
--
--
--
39,054
15,886
667
1,411
$63,843
$223,266
$226,702
42,443
15,886
667
1,411
$287,109
$148,738
3,917
--
--
--
$152,655
$123,435 $272,173
60,731
17,666
5,381
1,520
$357,471
56,814
17,666
5,381
1,520
$204,816
In an effort to proactively manage delinquent loans, we have selectively extended to certain borrowers
concessions such as rate reductions and extension of maturity dates, as well as forbearance agreements. As of
December 31, 2011, loans on which concessions were made with respect to rate reductions and/or extension of
maturity dates amounted to $246.7 million; loans in connection with which forbearance agreements were reached
amounted to $40.4 million.
The eligibility of a borrower for work-out concessions of any nature depends upon the facts and circumstances
of each transaction, which may change from period to period, and involve judgment regarding the likelihood that the
concession will result in the maximum recovery for the Company.
Except for the non-accrual loans, loans over 90 days past due and still accruing interest, and TDRs disclosed
in this filing, we did not have any potential problem loans at December 31, 2011 that would have caused
management to have serious doubts as to the ability of a borrower to comply with present loan repayment terms and
that would have resulted in such disclosure if that were the case.
63
Asset Quality Analysis (Excluding Covered Loans, Covered OREO, and Non-Covered Loans Held for Sale)
The following table presents information regarding our allowance for losses on non-covered loans, our non-
performing non-covered assets, and our non-covered loans 30 to 89 days past due at each year-end in the five years
ended December 31, 2011. Covered loans are considered to be performing due to the application of the yield
accretion method, as discussed later in this section. Therefore, covered loans are not reflected in the amounts or
measures provided in this table.
(dollars in thousands)
Allowance for Losses on Non-Covered Loans:
Balance at beginning of year
Provision for losses on non-covered loans
Charge-offs:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Other loans
Total charge-offs
Recoveries
Allowance acquired in merger transactions
Balance at end of year
Non-Performing Non-Covered Assets:
Non-accrual non-covered mortgage loans:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Total non-accrual non-covered mortgage loans
Other non-accrual non-covered loans
Loans 90 days or more past due and still
accruing interest
Total non-performing non-covered loans (1)
Other real estate owned (2)
Total non-performing non-covered assets
Asset Quality Measures:
Non-performing non-covered loans to total non-
2011
2010
2009
2008
2007
At December 31,
$ 158,942
79,000
$127,491
91,000
$ 94,368
63,000
$92,794
7,700
$85,389
--
(71,187)
(11,900)
(9,153)
(1,208)
(12,462)
(105,910)
5,258
--
$ 137,290
(27,042)
(3,359)
(9,884)
(931)
(19,569)
(60,785)
1,236
--
$158,942
(15,261)
(530)
(5,990)
(322)
(7,828)
(29,931)
(175)
(16)
(2,517)
--
(3,460)
(6,168)
42
--
$94,368
--
--
--
--
(431)
(431)
--
7,836
$92,794
54
--
$127,491
$205,064
68,032
29,886
11,907
314,889
10,926
$327,892
162,400
91,850
17,813
599,955
24,476
$393,113
70,618
79,228
14,171
557,130
20,938
$ 53,153
12,785
24,839
11,155
101,932
11,765
$ 3,061
3,293
2,939
5,598
14,891
7,301
--
$325,815
84,567
$410,382
--
$624,431
28,066
$652,497
--
$578,068
15,205
$593,273
--
$113,697
1,107
$114,804
--
$22,192
658
$22,850
covered loans
1.28%
2.63%
2.47%
0.51%
0.11%
Non-performing non-covered assets to total non-
covered assets
Allowance for losses on non-covered loans to
non-performing non-covered loans
Allowance for losses on non-covered loans to
total non-covered loans
Net charge-offs during the period to average
loans outstanding during the period
Loans 30-89 Days Past Due:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Other loans
Total loans 30-89 days past due (3)
1.07
1.77
1.41
0.35
0.07
42.14
25.45
22.05
83.00
418.14
0.54
0.35
0.67
0.21
0.55
0.13
0.43
0.03
0.46
0.00
$ 46,702
53,798
6,520
2,712
1,925
$111,657
$121,188
8,207
5,194
5,723
10,728
$151,040
$155,790
42,324
48,838
5,019
21,036
$273,007
$ 37,266
29,090
21,380
4,885
10,170
$102,791
$15,461
1,762
2,870
4,875
9,333
$34,301
(1) The December 31, 2011, 2010, and 2009 amounts exclude loans 90 days or more past due of $347.4 million, $360.8 million,
and $56.2 million, respectively, that are covered by FDIC loss sharing agreements.
(2) The December 31, 2011 and 2010 amounts exclude OREO totaling $71.4 million and $62.4 million, respectively, that are
covered by FDIC loss sharing agreements.
(3) The December 31, 2011, 2010, and 2009 amounts exclude loans 30 to 89 days past due of $112.0 million, $130.5 million,
and $110.1 million, respectively, that are covered by FDIC loss sharing agreements.
64
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6
Covered Loans and Covered Other Real Estate Owned
The credit risk associated with the assets acquired in our AmTrust and Desert Hills transactions has been
substantially mitigated by our loss sharing agreements with the FDIC. Under the terms of the loss sharing
agreements, the FDIC will reimburse us for 80% of losses (and share in 80% of any recoveries) up to a specified
threshold with respect to the loans and OREO acquired in the transactions. In each case, the FDIC will reimburse us
for 95% of any losses (and share in 95% of any recoveries) with respect to the acquired assets beyond the initial
amounts. The loss sharing (and reimbursement) agreements applicable to one-to-four family mortgage loans and
HELOCs are effective for a ten-year period. Under the loss sharing agreements applicable to other loans and OREO,
the FDIC will reimburse us for losses for a five-year period; the period for sharing in recoveries on other loans and
OREO extends for a period of eight years.
We consider our covered loans to be performing due to the application of the yield accretion method under
ASC 310-30, which allows us to aggregate credit-impaired loans acquired in the same fiscal quarter into one or more
pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a
single composite interest rate and an aggregate expectation of cash flows. Accordingly, loans that may have been
classified as non-performing loans by AmTrust or Desert Hills were no longer classified as non-performing at the
dates of acquisition because we believed at that time that we would fully collect the new carrying value of those
loans. The new carrying value represents the contractual balance, reduced by the portion expected to be
uncollectible (referred to as the “non-accretable difference”) and by an accretable yield (discount) that is recognized
as interest income. It is important to note that management’s judgment is required in reclassifying loans subject to
ASC 310-30 as performing loans, and is dependent on having a reasonable expectation about the timing and amount
of the cash flows to be collected, even if a loan is contractually past due.
In connection with the AmTrust and Desert Hills loss sharing agreements, we established FDIC loss share
receivables of $740.0 million and $69.6 million, which were the acquisition date fair values of the respective loss
sharing agreements (i.e., the expected reimbursements from the FDIC over the terms of the agreements). The loss
share receivables may increase if the losses increase, and may decrease if the losses fall short of the expected
amounts. Increases in estimated reimbursements will be recognized in income in the same period that they are
identified and that the allowance for losses on the related covered loans is recognized. In 2011, indemnification
income of $17.6 million was recorded in “non-interest income” as a result of an increase in expected
reimbursements from the FDIC under our loss sharing agreements. This benefit partially offset a provision for losses
on covered loans of $21.4 million.
Decreases in estimated reimbursements from the FDIC, if any, will be recognized in income prospectively
over the life of the related covered loans (or, if shorter, over the remaining term of the loss sharing agreement).
Related additions to the accretable yield on the covered loans will be recognized in income prospectively over the
lives of the loans. Gains and recoveries on covered assets will offset losses, or be paid to the FDIC at the applicable
loss share percentage at the time of recovery.
The loss share receivables may also increase due to accretion, which was $24.0 million in 2011 and $44.4
million in 2010. Accretion of the FDIC loss share receivable relates to the difference between the discounted, versus
the undiscounted, expected cash flows of covered loans subject to the FDIC loss sharing agreements. These cash
flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursements from
the FDIC. In the twelve months ended December 31, 2011, we received FDIC reimbursements of $160.5 million.
66
Asset Quality Analysis (Including Covered Loans and Covered OREO)
The following table presents information regarding our non-performing assets and loans past due at
December 31, 2011 and 2010, including covered loans and covered OREO (collectively, “covered assets”):
December 31,
2011
2010
$
161
8,599
5,082
314,821
18,779
347,442
71,400
$418,842
$205,225
76,631
34,968
326,728
29,705
673,257
155,967
$829,224
$ 410
12,060
12,664
310,929
24,764
360,827
62,412
$423,239
$ 328,302
174,460
104,514
328,742
49,240
985,258
90,478
$1,075,736
2.30%
1.97
25.34
0.58
3.52%
2.61
17.34
0.61
$ --
1,054
272
103,495
7,168
$111,989
$ 46,702
54,852
6,792
106,207
9,093
$223,646
$ 402
9,095
1,172
108,691
11,182
$130,542
$121,590
17,302
6,366
114,414
21,910
$281,582
(dollars in thousands)
Covered Loans 90 Days or More Past Due:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Other
Total covered loans 90 days or more past due
Covered other real estate owned
Total covered non-performing assets
Total Non-Performing Assets (including covered assets):
Non-performing loans:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Other non-performing loans
Total non-performing loans
Other real estate owned
Total non-performing assets (including covered assets)
Asset Quality Ratios (including covered loans and the allowance
for losses on covered loans):
Total non-performing loans to total loans
Total non-performing assets to total assets
Allowances for loan losses to total non-performing loans
Allowances for loan losses to total loans
Covered Loans 30-89 Days Past Due:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Other loans
Total covered loans 30-89 days past due
Total Loans 30-89 Days Past Due (including covered loans):
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Other loans
Total loans 30-89 days past due (including covered loans)
67
Geographical Analysis of Non-Performing Loans (Covered and Non-Covered)
The following table presents a geographical analysis of our non-performing loans at December 31, 2011:
(in thousands)
New York
Florida
New Jersey
Arizona
Washington, D.C.
California
Connecticut
Ohio
Nevada
Massachusetts
All other states
Total non-performing loans
Securities
$206,872
98,434
83,503
51,034
45,591
40,462
23,548
17,361
15,172
12,467
78,813
$673,257
Securities represented $4.5 billion, or 10.8%, of total assets at December 31, 2011, reflecting a $248.4 million
decrease from the balance at December 31, 2010. In addition to the decline in market interest rates, which triggered
a rise in repayments, the decline in securities reflects the deployment of our cash flows into loan originations, which
totaled $16.0 billion over the course of the year.
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.
Our general investment strategy is to purchase liquid investments with various maturities to ensure that our
overall interest rate risk position stays within the required limits of our investment policies. We generally limit our
investments to GSE obligations (defined as GSE certificates; GSE collateralized mortgage obligations (“CMOs”);
and GSE debentures). At December 31, 2011, 93.7% of our securities portfolio consisted of GSE obligations, as
compared to 90.5% at December 31, 2010. The remainder of the portfolio was comprised of private label CMOs,
corporate bonds, trust preferred securities, corporate equities, and municipal obligations. We have no investment
securities that are backed by subprime or Alt-A loans.
Depending on management’s intent at the time of purchase, securities are classified as either “available for
sale” or “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. These cash flows stem from the repayment of principal and interest, in addition to the
sale of such securities. Held-to-maturity securities also generate cash flows from repayments and serve as a source
of earnings.
Securities expected to be held for an indefinite period of time are classified as available for sale. A decision to
purchase or sell these securities is based on economic conditions, including changes in interest rates, liquidity, and
our asset and liability management strategy. Available-for-sale securities represented $724.7 million, or 16.0%, of
total securities at December 31, 2011, up from $653.0 million, or 13.6%, of total securities at December 31, 2010.
Included in the respective year-end amounts were mortgage-related securities of $192.0 million and $485.2 million,
and other securities of $532.7 million and $167.8 million. The shift in the composition of the available-for-sale
portfolio reflects the deployment of cash flows from GSE mortgage-backed securities into GSE debentures.
Primarily reflecting the decline in market interest rates, the estimated weighted average life of the available-for-sale
securities portfolio was 3.0 years at December 31, 2011 as compared to 3.8 years at December 31, 2010.
Held-to-maturity securities, which are securities that management has the positive intent to hold to maturity,
represented $3.8 billion, or 84.0%, of total securities at December 31, 2011, as compared to $4.1 billion, or 86.4%,
68
of total securities at December 31, 2010. At the current year-end, the fair value of securities held to maturity
represented 103.94% of their carrying value, as compared to 100.52% at the prior year-end. Mortgage-related
securities accounted for $3.0 billion of securities held to maturity at the end of December 2011 and 2010, while
other securities represented $819.6 million and $1.2 billion at the respective year-ends. Included in the latter year-
end amounts were GSE obligations of $3.6 billion and $3.9 billion; capital trust notes of $131.6 million and $145.5
million; and corporate bonds of $54.8 million and $86.5 million, respectively. The estimated weighted average lives
of the held-to-maturity securities portfolio were 4.7 years and 4.8 years at the corresponding dates.
Federal Home Loan Bank Stock
The Community Bank and the Commercial Bank are members of the FHLB-NY, one of 12 regional FHLBs
comprising the FHLB system. Each regional FHLB manages its customer relationships, while the 12 FHLBs use
their combined size and strength to obtain their 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 its capital stock. In addition, the Community Bank acquired shares of the capital stock of the FHLB-
Cincinnati and the FHLB-San Francisco in connection with the AmTrust and Desert Hills acquisitions, respectively.
At December 31, 2011, the value of our stock in the FHLB-Cincinnati and the FHLB-San Francisco was $25.2
million and $2.7 million, respectively.
Including FHLB-NY stock of $462.4 million, the Community Bank and the Commercial Bank held total
FHLB stock of $482.5 million and $7.8 million, respectively, at December 31, 2011. FHLB stock continued to be
valued at par, with no impairment required.
For the fiscal year ended December 31, 2011, dividends from the FHLB to the Community Bank and the
Commercial Bank respectively totaled $19.5 million and $374,000. In 2010, such dividends amounted to $23.3
million and $446,000, respectively.
Bank-Owned Life Insurance
At December 31, 2011, our investment in bank-owned life insurance (“BOLI”) was $769.0 million, as
compared to $742.5 million at December 31, 2010. The increase in our investment reflects the rise in the cash
surrender value of the underlying policies over the course of the year.
BOLI is recorded as 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.
FDIC Loss Share Receivable
In connection with our loss sharing agreements with the FDIC with respect to the loans and OREO acquired in
the AmTrust and Desert Hills acquisitions, we recorded FDIC loss share receivables of $695.2 million and $814.1
million, respectively, at December 31, 2011 and 2010. The loss share receivables represent the present values of the
reimbursements we expected to receive under the combined loss sharing agreements at those dates.
Goodwill and Core Deposit Intangibles
We record goodwill and core deposit intangibles (“CDI”) in our Consolidated Statements of Condition in
connection with our various business combinations.
At December 31, 2011 and 2010, goodwill totaled $2.4 billion. Reflecting amortization, CDI declined $26.1
million year-over-year, to $51.7 million.
Sources of Funds
The Parent Company (i.e., the Company on an unconsolidated basis) has four primary funding sources for the
payment of dividends, share repurchases, and other corporate uses: dividends paid to the Company by the Banks;
capital raised through the issuance of stock; funding raised through the issuance of debt instruments; and repayments
of, and income from, investment securities.
On a consolidated basis, our funding primarily stems from a combination of the following sources: the
deposits we gather through our branch network or acquire in business combinations, as well as brokered deposits;
69
borrowed funds, primarily in the form of wholesale borrowings; the cash flows generated through the repayment and
sale of loans; and the cash flows generated through the repayment and sale of securities.
In 2011, loan repayments and sales totaled $15.0 billion, as compared to $14.6 billion in the prior year.
Repayments and sales accounted for $7.7 billion and $7.3 billion, respectively, of the 2011 total, and for $4.6 billion
and $10.0 billion, respectively, of the total in 2010. The decline in cash flows from sales is indicative of the
aforementioned reduction in the production of one-to-four family loans for sale during the year.
Cash flows from the repayment and sale of securities totaled $3.0 billion and $1.1 billion, respectively, in
2011, while purchases of securities totaled $3.9 billion over the course of the year. In 2010, the cash flows from the
repayment and sale of securities totaled $5.0 billion and $23.1 million, respectively, and were partially offset by
purchases of securities totaling $4.0 billion.
Consistent with our business model, the cash flows from loans and securities were primarily deployed into
loan production and, to a much lesser extent, GSE obligations.
Deposits
Our ability to retain and attract deposits depends on numerous factors, including customer satisfaction, the
rates of interest we pay, the types of products we offer, and the attractiveness of their terms. There are times we may
choose not to compete for deposits, depending on our access to deposits through acquisitions, 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 our loan demand.
While the vast majority of our deposits have been acquired through business combinations or gathered
through our branch network, our mix of deposits has also included brokered deposits. Depending on the availability
and pricing of such wholesale funding sources, we typically refrain from pricing our retail deposits at the higher end
of the market, in order to contain or reduce our funding costs.
Deposits totaled $22.3 billion at December 31, 2011, representing a $465.1 million increase from the balance
recorded at December 31, 2010. Although CDs declined $461.9 million year-over-year to $7.4 billion, NOW and
money market accounts, savings accounts, and non-interest-bearing accounts together rose $927.0 million to $14.9
billion during the same time.
Specifically, NOW and money market accounts rose $521.4 million year-over-year, to $8.8 billion, reflecting
an $887.0 million increase in brokered NOW and money market accounts to $3.8 billion. Savings accounts rose
$68.1 million during this time, to $4.0 billion, while non-interest-bearing accounts rose $337.5 million to $2.2
billion. The increase in non-interest-bearing accounts was partly due to a $25.8 million increase in brokered non-
interest-bearing accounts to $61.6 million and to an increase in fiduciary accounts.
Although we prefer to compete for deposits on the basis of service, convenience, and our extensive range of
products, we have the ability to compete on the basis of pricing should the need arise. While this has not yet been
the case, given our success in acquiring deposits through business combinations, we believe that the size and scope
of our franchise would facilitate our efforts to mount a deposit campaign.
Borrowed Funds
Borrowed funds consist primarily of wholesale borrowings (i.e., FHLB advances, repurchase agreements, and
federal funds purchased); junior subordinated debentures; and other borrowed funds (consisting of preferred stock of
subsidiaries and senior notes). At December 31, 2011, borrowed funds totaled $14.0 billion, reflecting a $424.3
million increase from the year-earlier amount.
Wholesale Borrowings
Wholesale borrowings rose $938.5 million year-over-year, to $13.4 billion, and represented 32.0% of total
assets at December 31, 2011. FHLB advances accounted for $9.3 billion of the current year-end total, signifying a
$938.5 million increase from the balance at December 31, 2010. Included in the year-end 2011 amount were $661.6
million of FHLB-Cincinnati advances that were acquired in the AmTrust acquisition. The remaining advances were
from the FHLB-NY.
70
The increase in wholesale borrowings was largely due to the maturity and repayment of certain fixed rate
senior notes that had been issued under the Temporary Liquidity Guarantee Program (“TLGP”), as further discussed
below.
The Community Bank and the Commercial Bank are both members of, and have lines of credit with, the
FHLB-NY. Pursuant to blanket collateral agreements with the Banks, our FHLB advances and overnight advances
are secured by pledges of certain eligible collateral in the form of loans and securities.
Also included in wholesale borrowings at the end of the year were repurchase agreements of $4.1 billion,
consistent with the balance at December 31, 2010. Repurchase agreements are contracts for the sale of securities
owned or borrowed by the Banks with an agreement to repurchase those securities at agreed-upon prices and dates.
Our repurchase agreements are primarily collateralized by GSE obligations, and may be entered into with the
FHLB-NY or certain brokerage firms. The brokerage firms we utilize are subject to an ongoing internal financial
review 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 each of the
brokerage firms we use.
A significant portion of our wholesale borrowings at year-end 2011 consisted of callable advances and
callable repurchase agreements. As of December 31st, $11.3 billion of our wholesale borrowings are callable in
2012. Given the current interest rate environment, we do not expect these borrowings to be called.
Junior Subordinated Debentures
Junior subordinated debentures totaled $426.9 million at December 31, 2011, comparable to the balance
recorded at December 31, 2010.
Other Borrowings
Other borrowings totaled $94.3 million at December 31, 2011, as compared to $608.5 million at December 31,
2010. Included in the latter amount were $602.0 million of fixed rate senior notes that had been issued in 2008 under
the TLGP. The reduction in other borrowings reflects the maturity of $512.0 million of such notes on December 16,
2011; the remaining $90.0 million will mature on June 22, 2012.
Please see Note 7, “Borrowed Funds,” in Item 8, “Financial Statements and Supplementary Data” for a further
discussion of our wholesale borrowings, junior subordinated debentures, and other borrowings.
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 variable loan and deposit demand.
We monitor our liquidity daily to ensure that sufficient funds are available to meet our financial obligations.
Our most liquid assets are cash and cash equivalents, which totaled $2.0 billion and $1.9 billion, respectively, at
December 31, 2011 and 2010. In 2011, as in 2010, our portfolios of loans and securities were meaningful sources of
liquidity, with cash flows from the repayment and sale of loans totaling $15.0 billion and cash flows from the
repayment and sale of securities totaling $4.2 billion.
Additional liquidity stems from the deposits we gather through our branches or acquire in business
combinations, and from our use of wholesale funding sources, including brokered deposits and wholesale
borrowings. We also have access to the Banks’ approved lines of credit with various counterparties, including the
FHLB-NY. The availability of these wholesale funding sources is generally based on the amount of mortgage loan
collateral available under a blanket lien we have pledged to the FHLB-NY and, to a lesser extent, the amount of
available securities that may be pledged to collateralize our borrowings. At December 31, 2011, our available
borrowing capacity with the FHLB-NY was $3.7 billion. In addition, the Community Bank and the Commercial
Bank had $720.8 million in available-for-sale securities, combined.
Our primary investing activity is loan production and in 2011, the volume of loans originated exceeded the
volume of loan repayments received. During this time, the net cash used in investing activities totaled $1.2 billion.
Our financing activities provided net cash of $455.0 million and our operating activities provided net cash of $830.2
million.
71
CDs due to mature in one year or less from December 31, 2011 totaled $5.5 billion, representing 74.2% 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. However, there are times when we may choose not to compete for deposits, depending
on the availability of lower-cost funding, the competitiveness of the market and its impact on pricing, and our need
for such deposits to fund loan demand.
On a stand-alone basis, the Company (the “Parent Company”) is a separate legal entity from each of the Banks
and must provide for its own liquidity. In addition to operating expenses and any share repurchases, the Company is
responsible for paying any dividends declared to our shareholders. As a Delaware corporation, the Company is able
to pay dividends either from surplus or, in case there is no surplus, from net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. In addition, the Company is not required to obtain prior
Federal Reserve approval to pay a dividend unless the declaration and payment of a dividend could raise supervisory
concerns about the safe and sound operation of the Company and the Banks, where the dividend declared for a
period is not supported by earnings for that period, or where the Company plans to declare a material increase in its
dividend.
The Company’s ability to pay dividends may depend, in part, upon dividends it receives from the Banks. 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 Superintendent of the New York State Department of Financial Services (the
“Superintendent”), the FDIC, and the Federal Reserve, for reasons of safety and soundness, may prohibit the
payment of dividends that are otherwise permissible by regulations.
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 2011,
the Banks paid dividends totaling $555.0 million to the Parent Company, leaving $296.5 million that they could
dividend to the Parent Company without regulatory approval at year-end. Additional sources of liquidity available to
the Parent Company at December 31, 2011 included $241.3 million in cash and cash equivalents and $3.8 million of
available-for-sale securities. If either of the Banks were to apply to the Superintendent for approval to make a
dividend or capital distribution in excess of the dividend amounts permitted under the regulations, there can be no
assurance that such 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.
For example, we offer CDs to our customers under contract, and borrow funds under contract from the FHLB
and various brokerage firms. These contractual obligations are reflected in the Consolidated Statements of Condition
under “deposits” and “borrowed funds,” respectively. At December 31, 2011, we recorded CDs of $7.4 billion and
long-term debt (defined as borrowed funds with an original maturity in excess of one year) of $12.4 billion.
We also are obligated under certain non-cancelable operating leases on the buildings and land we use in
operating our branch network and in performing our back-office responsibilities. These obligations are not included
in the Consolidated Statements of Condition and totaled $150.2 million at December 31, 2011.
72
Contractual Obligations
The following table sets forth the maturity profile of the aforementioned contractual obligations:
(in thousands)
One year or less
One to three years
Three to five years
More than five years
Total
Certificates of
Deposit
$5,471,551
1,484,293
408,921
8,498
$7,373,263
Long-Term Debt (1)
$ 142,337
891,548
3,160,807
8,203,722
$12,398,414
Operating
Leases
$ 26,525
43,895
26,527
53,296
$150,243
Total
$ 5,640,413
2,419,736
3,596,255
8,265,516
$19,921,920
(1) Includes FHLB advances, repurchase agreements, junior subordinated debentures, preferred stock of subsidiaries, and
senior notes with an original maturity exceeding twelve months.
At December 31, 2011, we had contractual obligations to purchase $45.5 million of GSE securities. We also
had 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.
At December 31, 2011, commitments to originate mortgage loans totaled $2.3 billion, including $1.1 billion of
one-to-four family loans committed for sale. Commitments to originate other loans totaled $423.9 million, including
unadvanced lines of credit. The majority of our loan commitments were expected to be funded within 90 days of
year-end. We also had off-balance-sheet commitments to issue commercial, performance, and financial stand-by
letters of credit of $111.7 million, $13.2 million, and $48.0 million, respectively.
The following table sets forth our off-balance-sheet commitments relating to outstanding loan commitments
and letters of credit at December 31, 2011:
(in thousands)
Commitments to Originate Mortgage Loans for Investment:
Multi-family and commercial real estate loans
Acquisition, development, and construction loans
Total commitments to originate mortgage loans for investment
Commitments to originate other loans for investment
Commitments to originate one-to-four family loans for sale
Total loan commitments
Commercial, performance, and financial stand-by letters of credit
Total commitments
$1,089,614
92,974
$1,182,588
423,924
1,136,230
$2,742,742
172,888
$2,915,630
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.
Derivative Financial Instruments
We use various financial instruments, including derivatives, in connection with our strategies to reduce market
risk resulting from changes in interest rates. Our derivative financial instruments consist of financial forward and
futures contracts, IRLCs, swaps, and options. These derivatives relate to mortgage banking operations, MSRs, and
other risk management activities, and seek to mitigate or reduce our exposure to losses from adverse changes in
interest rates. These activities will vary in scope based on the level and volatility of interest rates, the types of assets
held, and other changing market conditions. At December 31, 2011, we held derivative financial instruments with a
notional value of $5.1 billion. (Please see Note 14, “Derivative Financial Instruments,” in Item 8, “Financial
Statements and Supplementary Data” for a further discussion of our use of such financial instruments.)
Capital Position
In 2011, we maintained the strength of our capital position, as our levels of stockholders’ equity and tangible
stockholders’ equity rose $39.5 million and $65.6 million, respectively, to $5.6 billion and $3.1 billion at December
31st. (Please see the discussion and reconciliations of stockholders’ equity and tangible stockholders’ equity, total
assets and tangible assets, and the related measures that appear later in this report.)
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At December 31, 2011 and 2010, stockholders’ equity represented 13.24% and 13.42%, respectively, of total
assets and respective book values per share of $12.73 and $12.69. Our calculation of book value per share was based
on the number of shares outstanding at the end of each December: 437,344,796 shares at December 31, 2011 and
435,646,845 shares at December 31, 2010. (Please see the definition of book value per share that appears in the
Glossary earlier in this report.)
We calculate tangible stockholders’ equity by subtracting the amount of goodwill and CDI recorded at the end
of a period from the amount of stockholders’ equity recorded at the same date. At December 31, 2011, we recorded
goodwill of $2.4 billion, which was consistent with the year-earlier balance, and CDI of $51.7 million, which was
$26.1 million less than the prior year-end amount.
At December 31, 2011, our tangible capital measures were comparable to, or reflected improvement from, the
year-earlier measures, another indication of our continued capital strength. Tangible stockholders’ equity
represented 7.78% of tangible assets at December 31, 2011, one basis point below the measure at December 31,
2010. Excluding AOCL from the calculation, the ratio of adjusted tangible stockholders’ equity to adjusted tangible
assets was 7.95% at December 31, 2011, reflecting a year-over-year improvement of five basis points. The year-
over-year increase in tangible stockholders’ equity was tempered by the distribution of cash dividends totaling
$436.9 million in the form of four quarterly cash dividends of $0.25 per share, or $1.00 per share, annualized.
In addition, AOCL rose $26.2 million year-over-year, to $71.9 million, primarily reflecting the impact of a
$21.9 million increase in our pension and post-retirement obligations and an $11.3 million reduction in the net
unrealized gain on our portfolio of available-for-sale securities. The increase in AOCL was partly offset by a $6.9
million decline in the net unrealized loss on the non-credit portion of OTTI losses from the level recorded at
December 31, 2010.
Consistent with our focus on capital strength and preservation, the level of stockholders’ equity at December
31, 2011 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 on a consolidated basis at
December 31, 2011 and 2010, and the respective minimum regulatory capital requirements:
Regulatory Capital Analysis
At December 31, 2011
(dollars in thousands)
Total risk-based capital
Tier 1 risk-based capital
Leverage capital
At December 31, 2010
(dollars in thousands)
Total risk-based capital
Tier 1 risk-based capital
Leverage capital
Actual
Minimum Required
Amount
$3,750,915
3,580,302
3,580,302
Ratio
14.23%
13.59
9.09
Ratio
8.00%
4.00
4.00
Actual
Minimum Required
Amount
$3,674,679
3,503,672
3,503,672
Ratio
14.36%
13.69
9.07
Ratio
8.00%
4.00
4.00
The capital strength of the Company is paralleled by the solid capital position of the Banks. At December 31,
2011, the capital ratios for the Community Bank and the Commercial Bank continued to exceed the minimum levels
required for classification as “well capitalized” institutions under the Federal Deposit Insurance Corporation
Improvement Act of 1991, as further discussed in Note 17, “Regulatory Matters,” in Item 8, “Financial Statements
and Supplementary Data.”
74
RESULTS OF OPERATIONS: 2011 and 2010
Earnings Summary
In the twelve months ended December 31, 2011, we generated earnings of $480.0 million, or $1.09 per diluted
share, as compared to $541.0 million, or $1.24 per diluted share, in the twelve months ended December 31, 2010.
Although our 2011 performance benefited from a modest increase in net interest income and a decline in our
non-covered loan loss provision, these benefits were exceeded by the impact of a substantial decline in non-interest
income and a more modest increase in non-interest expense.
Net interest income rose $20.5 million year-over-year to $1.2 billion, as a $47.1 million decline in interest
income was exceeded by a $67.6 million reduction in interest expense. Among the factors contributing to the rise in
net interest income were an increase in the average balance of interest-earning assets and a significant rise in
prepayment penalty income, as a decline in market interest rates triggered an increase in property transactions and
refinancing activity in our multi-family space. The rise in net interest income was also fueled by a decline in the
average balance and cost of our interest-bearing deposits, together with a decline in the average balance of borrowed
funds. In view of our liquidity, which was fueled by an increase in cash flows from loans and securities, we were
able to reduce certain higher-cost funding sources and to refrain from competing for deposits by paying higher
interest rates.
The year-over-year decline in the non-covered loan loss provision was attributable to the significant
improvement in the quality of our assets, as discussed earlier in this report. Specifically, in 2011, the provision for
losses on non-covered loans totaled $79.0 million, reflecting a $12.0 million reduction from the year-earlier amount.
In contrast to the modest increase in net interest income, non-interest income declined to $235.3 million in
2011 from $337.9 million in 2010. The reduction was primarily due to a $103.2 million decrease in mortgage
banking income to $80.7 million, as the volume of one-to-four family loans produced for sale declined from the
prior year’s level, the result of continued weakness in the U.S. housing market and an increase in residential
mortgage interest rates in the first six months of the year. Servicing income also declined in 2011, reflecting the
expiration of our mortgage servicing arrangement with the FDIC in the fourth quarter of 2010.
While non-interest income was also reduced by a $9.7 million decline in fee income and an OTTI loss of
$18.1 million, these declines were somewhat offset by a $14.2 million increase in net securities gains to $36.6
million and a $9.8 million gain on the disposition of our insurance premium financing subsidiary during the year. On
an after-tax basis, the respective gains were equivalent to $21.8 million and $5.9 million, or $0.05 and $0.01 per
diluted share, respectively. By comparison, the OTTI loss was equivalent to $10.8 million, or $0.02 per diluted
share, after-tax. In 2010, net securities gains added $22.4 million to non-interest income, while a gain on the Desert
Hills acquisition added $2.9 million. On an after-tax basis, the respective gains were $13.5 million and $1.8 million,
equivalent to $0.03 and $0.01 per diluted share, respectively.
Non-interest expense rose $23.2 million year-over-year, to $600.7 million, as a $28.4 million increase in
operating expenses to $574.7 million exceeded a $5.2 million reduction in the amortization of CDI to $26.1 million.
Compensation and benefits expense accounted for $18.5 million of the year-over-year increase in operating
expenses, while general and administrative (“G&A”) expense accounted for $11.1 million of this increase. In
addition to reflecting normal salary increases and incentive stock award grants, the rise in 2011 compensation and
benefits expense reflected severance charges of $2.3 million (or $1.4 million after-tax) in connection with a
reduction in staff in the fourth quarter of the year.
The year-over-year increase in G&A expense for the twelve months ended December 31, 2011 was primarily
due to legal and other expenses stemming from the acquisition and management of foreclosed real estate. Although
such expenses were also incurred in 2010, the level of G&A expense during that year was increased by acquisition-
related costs of $11.5 million stemming from the FDIC-assisted acquisitions of AmTrust and Desert Hills. On an
after-tax basis, these costs were equivalent to $7.0 million, or $0.02 per diluted share.
Reflecting the resultant decline in pre-tax income, income tax expense fell to $254.5 million in 2011 from
$296.5 million in 2010.
Net Interest Income
Net interest income is our primary source of income. Its level 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
75
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.
In 2011, we recorded net interest income of $1.2 billion, reflecting a year-over-year increase of $20.5 million.
Although interest income declined $47.1 million year-over-year to $1.9 billion, the decline was exceeded by a $67.6
million reduction in interest expense to $666.2 million.
A description of the factors contributing to the modest growth of our net interest income follows:
Interest Income
Notwithstanding a $515.2 million rise in the average balance of interest-earning assets to $34.7 billion,
interest income declined $47.1 million in 2011 to $1.9 billion, as the average yield on interest-earning assets fell 22
basis points to 5.38%.
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. Reflecting a decline in market interest
rates from the year-earlier level, the average yield on loans fell 17 basis points to 5.64% in 2011 and the average
yield on securities and money market investments fell 42 basis points to 4.07%. The impact of the respective
declines was tempered by a $344.3 million increase in the average balance of loans to $29.1 billion, and a $170.9
million increase in the average balance of securities and money market investments to $5.6 billion.
The increase in the average balance of loans was driven by multi-family and CRE loan production, as the
decline in market interest rates triggered an increase in property transactions, together with a significant increase in
refinancing activity. As a result, prepayment penalty income rose $63.9 million, or 282.4%, in 2011 from the year-
earlier level, adding $86.6 million to the interest income generated by loans and 30 basis points to their average
yield. In contrast, prepayment penalty income added $22.6 million to the interest income generated by loans in 2010,
and eight basis points to the average yield on loans.
Although the purchase of GSE securities contributed to the increase in the average balance of securities and
money market investments, the benefit was largely tempered by calls and repayments as the level of market interest
rates declined over the course of the year.
Interest Expense
The year-over-year decline in interest expense was the result of a $1.1 billion decrease in the average balance
of interest-bearing liabilities to $33.1 billion and a 14-basis point decrease in the average cost of such funds to
2.01%.
The average balance of interest-bearing deposits fell $660.4 million year-over-year to $20.0 billion, as a $1.2
billion reduction in the average balance of CDs, to $7.4 billion, exceeded more modest increases in the average
balances of NOW and money market accounts and savings accounts. In addition, the average balance of borrowed
funds fell $399.7 million year-over-year to $13.1 billion. Both declines were consistent with our efforts to reduce
our higher-cost funding sources while, at the same time, increasing the balances of lower-cost deposits and non-
interest-bearing accounts.
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 to promote the health of the U.S.
economy. Although economic conditions reflected modest improvement in certain markets, the pace of economic
recovery continued to be slow. Real estate values remained well below pre-2007 levels, and unemployment rates
ranged from a high of 9.1% in January and the entire third quarter to a low of 8.5% in December 2011. As a result,
the FOMC maintained the target federal funds rate at the same historically low level it initially established in the
fourth quarter of 2008, zero to 0.25%.
Although the degree to which we reduced our funding costs was greater in 2010 than in 2011, the average cost
of our CDs fell 24 basis points year-over-year to 1.38%, while the average costs of our NOW and money market
accounts and savings accounts fell 24 and 15 basis points, respectively, to 0.45% and 0.39%. The benefit of these
declines was partly tempered by a six-basis point rise in the average cost of borrowed funds to 3.88%.
76
In addition to the low level of short-term interest rates, the decline in the average cost of our interest-bearing
deposits reflects our ability to refrain from paying higher rates for deposits. In 2011, that ability was reinforced by
the liquidity provided by our other funding sources, including the cash flows from the repayment and sale of loans
and the repayment and sale of securities.
Interest Rate Spread and Net Interest Margin
The same factors that contributed to the modest increase in net interest income in 2011 contributed to a
modest increase in our net interest margin. At 3.46%, our margin was one basis point higher than the year-earlier
measure, even as our interest rate spread fell eight basis points to 3.37%.
While our margin and spread typically move in the same direction, the increase in our margin, albeit modest,
reflects the benefits of having grown our average interest-earning assets while, at the same time, having reduced our
average interest-bearing liabilities.
Prepayment penalty income contributed 25 basis points each to our margin and spread in 2011; in 2010,
prepayment penalty income added six basis points to our margin and seven basis points to our spread.
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 CRE loans. As a result, the level of prepayment penalty income we
record will vary from quarter to quarter, and is difficult to predict.
77
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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, 2011
Compared to Year Ended
December 31, 2010
Increase/(Decrease)
Due to
Year Ended
December 31, 2010
Compared to Year Ended
December 31, 2009
Increase/(Decrease)
Due to
Volume
Rate
Net
Volume
Rate
Net
$ 20,405 $ (51,625) $ (31,220)
(15,910)
(23,938)
(47,130)
(75,563)
8,028
28,433
$ 333,388 $ 10,882
(29,379)
304,009
(35,709)
(24,827)
$344,270
(65,088)
279,182
$ 3,176
347
(17,369)
(15,686)
(29,532)
$ 57,965
$ (20,882) $ (17,706)
(5,345)
(36,316)
(8,221)
(67,588)
$ (37,507) $ 20,458
(5,692)
(18,947)
7,465
(38,056)
$ 25,648 $
5,622
639,171
(9,525)
660,916
(2,445) $ 23,203
4,974
(24,452)
819
4,544
$(356,907) $ 631,545 $274,638
(648)
(663,623)
10,344
(656,372)
(in thousands)
INTEREST-EARNING ASSETS:
Mortgage and other loans, net
Securities and money market investments
Total
INTEREST-BEARING LIABILITIES:
NOW and money market accounts
Savings accounts
Certificates of deposit
Borrowed funds
Total
Change in net interest income
Provisions for Loan Losses
Provision for Losses on Non-Covered Loans
The provision for losses on non-covered loans is based on management’s periodic assessment of the adequacy
of the allowance for losses on such loans which, in turn, is based on its evaluation of inherent losses in the held-for-
investment loan portfolio in accordance with GAAP. This evaluation considers several factors, including the current
and historical performance of the portfolio; its inherent risk characteristics; the level of non-performing non-covered
loans and charge-offs; delinquency levels and trends; local economic and market conditions; declines in real estate
values; and the levels of unemployment and vacancy rates.
As a result of management’s assessment of these factors, including the year-over-year decline in non-
performing non-covered loans and assets, we reduced our provision for losses on non-covered loans to $79.0 million
in 2011 from $91.0 million in 2010. The allowance for losses on non-covered loans declined to $137.3 million as a
result of this reduction and the $41.1 million increase in net charge-offs during the year. We believe that the
coverage provided by this allowance was adequate at December 31, 2011.
Provision for Losses on Covered Loans
A provision for losses on covered loans is recorded when the cash flows from certain loan portfolios acquired
in our FDIC-assisted acquisitions are expected to be less than the cash flows we expected at the time of acquisition,
as a result of a deterioration in credit quality. Accordingly, the provision for losses on covered loans grew to $21.4
million in 2011 from $11.9 million in the prior year. Reflecting the $9.5 million increase in this provision, the
allowance for losses on covered loans rose to $33.3 million at December 31, 2011 from $11.9 million at December
31, 2010.
If we had reason to believe that the cash flows from acquired loans would exceed our original expectations,
we would reverse the previously established covered loan loss allowance and increase our interest income as a
prospective yield adjustment over the remaining life of the loan or pool of loans.
For additional information about the provisions for loan losses, please see the discussion of the respective loan
loss allowances under “Critical Accounting Policies” and the discussion of “Asset Quality” that appear earlier in this
report.
79
Non-Interest Income
The non-interest income we produce stems from several sources, some of which are ongoing and some of
which are not. Among our ongoing sources of non-interest income are mortgage banking income, which includes
income from the origination of one-to-four family loans for sale as well as servicing income; fee income in the form
of retail deposit fees and charges on loans; income from our investment in BOLI; and other income, which is
derived from various sources, including the sale of third-party investment products in our branches, and the revenues
from our wholly-owned subsidiary, Peter B. Cannell & Co., Inc., an investment advisory firm.
In 2011, as in 2010, the income generated by our mortgage banking operation was our largest source of non-
interest income, totaling $80.7 million in the current twelve-month period and $183.9 million in the year-earlier
twelve months. Income from originations accounted for $80.2 million and $136.5 million of the respective totals,
while servicing income accounted for $517,000 and $47.4 million, respectively.
The decline in income from originations was attributable to ongoing weakness in the U.S. housing market as
the nation continued to be faced with high levels of unemployment and the inventory of one-to-four family homes
continued to exceed demand. In addition, residential mortgage interest rates were higher in the first half of 2011 than
they were in the prior period, discouraging both the purchase and the refinancing of one-to-four family homes.
The decline in servicing income was largely due to the expiration of a loan servicing arrangement with the
FDIC in the fourth quarter of 2010.
Fee income declined $9.7 million year-over-year, to $44.9 million, primarily reflecting a reduction in lending
fee income in connection with accounts serviced for the FDIC.
The reductions in mortgage banking income and fee income were nominally tempered by modest increases in
BOLI income and other income over the course of the year.
In 2011, the non-interest income generated by these four ongoing sources was complemented by net securities
gains of $36.6 million, exceeding the year-earlier level by $14.2 million. In addition, FDIC indemnification income
contributed $17.6 million to non-interest income in 2011, exceeding the year-earlier level by $6.3 million. While
non-interest income was also increased by a $9.8 million gain on the disposition of our insurance premium financing
business in the second quarter, the benefit was exceeded by an OTTI loss of $18.1 million, as compared to an OTTI
loss of $2.0 million in 2010.
Reflecting these factors, non-interest income totaled $235.3 million in the twelve months ended December 31,
2011, as compared to $337.9 million in the twelve months ended December 31, 2010.
Non-Interest Income Analysis
The following table summarizes our sources of non-interest income in 2011, 2010, and 2009:
(in thousands)
Fee income
BOLI
Net gain on sales of securities
Gain on business disposition
OTTI loss on securities
Mortgage banking income
FDIC indemnification income
Gain on business acquisitions
Gain on debt repurchases/exchange
Other income:
For the Years Ended December 31,
2010
$ 54,584
28,015
22,430
--
(1,971)
183,883
11,308
2,883
3,008
2009
$ 40,074
27,406
338
--
(96,533)
12,129
--
139,607
10,054
2011
$ 44,874
28,384
36,608
9,823
(18,124)
80,674
17,633
--
--
Peter B. Cannell & Co., Inc.
Third-party investment product sales
Other
Total other income
Total non-interest income
14,022
13,387
8,044
35,453
$235,325
12,711
10,486
10,586
33,783
$337,923
10,610
9,936
4,018
24,564
$157,639
80
It should be noted that the level of mortgage banking income we record in any period depends in large part on
the volume of loans originated during that time. The volume of loan originations depends, in turn, on such diverse
factors as changes in market interest rates and economic conditions, competition, refinancing activity, and loan
demand. As a result, the level of mortgage banking income we record will vary, and is difficult to predict.
Non-Interest Expense
Non-interest expense has two primary components: operating expenses, which include compensation and
benefits, occupancy and equipment, and G&A expenses; and the amortization of the CDI stemming from our
various business combinations.
In 2011, non-interest expense totaled $600.7 million, reflecting a year-over-year increase of $23.2 million, or
4.0%. While operating expenses rose $28.4 million to $574.7 million, representing 1.40% of average assets, the
impact was somewhat tempered by a $5.2 million decline in the amortization of CDI to $26.1 million.
Although occupancy and equipment expense declined $1.2 million year-over-year, to $86.9 million, the
decline was far exceeded by an $18.5 million increase in compensation and benefits expense to $293.3 million and
an $11.1 million increase in G&A expense to $194.4 million. Included in 2010’s G&A expense were acquisition-
related costs of $11.5 million stemming from the AmTrust and Desert Hills transactions in December 2009 and
March 2010, respectively.
In addition to normal salary increases, the year-over-year increase in compensation and benefits expense
reflects stock awards that were granted to employees in accordance with our shareholder-approved stock incentive
plan. Also included in 2011 compensation and benefits expense were severance charges of $2.3 million in
connection with a reduction in staff that was primarily necessitated by changes in the way our customers do their
banking as a result of advances in technology.
While several factors contributed to the rise in G&A expense—including a $5.6 million increase in FDIC
deposit insurance premiums to $54.3 million—primary among them was an increase in legal and other expenses
incurred in the acquisition and management of foreclosed property.
Reflecting the levels of net interest income, non-interest income, and operating expenses recorded in 2011, our
efficiency ratio was 40.03%.
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 where we have branch operations or operate certain subsidiaries.
Income tax expense declined $41.9 million year-over-year to $254.5 million in the twelve months ended
December 31, 2011. In addition to reflecting a $102.9 million reduction in pre-tax income to $734.6 million, the
level of income tax expense recorded in 2011 reflects a decline in the effective tax rate to 34.7% from 35.4%.
In August 2010, new tax laws were enacted that repealed the preferential deduction for bad debts that had
been previously permitted in the determination of the Company’s New York State and City income tax liability. The
laws applied retroactively to the determination of tax liability for calendar year 2010, in addition to applying to
subsequent years. In 2011 and 2010, the application of these new laws added $500,000 and $2.1 million,
respectively, to our income tax expense. The 2010 amount was offset by our recognition of a one-time, $2.2 million
reduction in deferred income tax expense to reflect the higher value of the balance of New York net deferred tax
assets.
In July 2009, new tax laws were enacted that conformed the New York City tax rules to those of New York
State. Among these was a provision that required the inclusion of income earned by a subsidiary taxed as a REIT for
federal tax purposes, regardless of the location in which the REIT subsidiary conducts its business or the timing of
its distribution of earnings. Although the new law provided transition relief in tax years 2009 and 2010, all taxable
income of our REIT subsidiaries were subject to New York tax in 2011. The New York City tax law added $2.6
million to our income tax expense in 2011, as compared to $1.5 million in 2010.
81
RESULTS OF OPERATIONS: 2010 and 2009
Earnings Summary
In the twelve months ended December 31, 2010, our earnings rose $142.4 million, or 35.7%, to $541.0
million, equivalent to an $0.11, or 9.7%, increase in diluted earnings per share to $1.24. The growth of our earnings
in 2010 reflected the benefits of our acquisition-driven expansion, together with our continuing focus on multi-
family lending, asset quality, and efficiency.
Total revenues increased by $454.9 million year-over-year, to $1.5 billion, as net interest income rose $274.6
million to $1.2 billion and non-interest income rose $180.3 million to $337.9 million. While both increases
conveyed the full-year benefit of the AmTrust acquisition, the increase in net interest income also reflected a
strategic reduction in our funding costs and an increase in interest income from loans. The growth of our net interest
income was paralleled by the expansion of our net interest margin, which grew 33 basis points over the course of the
year to 3.45%.
The increase in non-interest income primarily stemmed from the origination of one-to-four family loans for
sale to GSEs by our mortgage banking operation. Including income from servicing as well as originations, mortgage
banking income accounted for $183.9 million of our 2010 non-interest income, in contrast to $12.1 million in 2009.
Non-interest income was also increased by a net gain on the sale of securities of $22.4 million and a $2.9
million bargain purchase gain on the Desert Hills acquisition. On an after-tax basis, the respective gains were
equivalent to $13.5 million and $1.8 million, and collectively added $0.04 to our 2010 diluted earnings per share.
In 2009, non-interest income was increased by a $139.6 million bargain purchase gain on the AmTrust
acquisition and by a $10.1 million gain on the repurchase and exchange of certain REIT- and trust preferred
securities. On an after-tax basis, the respective gains were equivalent to $84.2 million and $6.5 million, and added
$0.24 and $0.02, respectively, to our 2009 diluted earnings per share. These contributions to non-interest income
were largely offset by pre-tax OTTI losses on securities totaling $96.5 million, equivalent to $58.5 million, or $0.17
per diluted share, after-tax.
In 2010, the year-over-year increase in total revenues was tempered by a $28.0 million increase in the
provision for losses on non-covered loans to $91.0 million, and by a $170.7 million increase in non-interest expense
to $577.5 million. Operating expenses accounted for $162.2 million of the increase in non-interest expense and
totaled $546.2 million, primarily reflecting the full-year impact of the AmTrust acquisition and the costs of
operating a significantly larger franchise in five states. Included in operating expenses in 2010 and 2009 were
acquisition-related costs of $11.5 million and $5.2 million, respectively. Notwithstanding the increase in operating
expenses, our efficiency ratio improved to 35.99% in 2010 from 36.13% in the prior year.
The impact of higher non-interest expense and the higher loan loss provision was exceeded by the significant
increase in total revenues. As a result, pre-tax income rose $244.3 million year-over-year, to $837.5 million, and
income tax expense rose $102.0 million to $296.5 million.
Net Interest Income
In 2010, our net interest income rose $274.6 million, or 30.3%, to $1.2 billion, representing 77.7% of total
revenues for the year. The increase was fueled by a $279.2 million, or 17.1%, rise in interest income to $1.9 billion,
which far exceeded the impact of a $4.5 million rise in interest expense to $733.8 million.
A description of the factors contributing to the growth of our net interest income in 2010 follows:
Interest Income
Reflecting the full-year and nine-month benefits of the AmTrust and Desert Hills acquisitions, as well as
organic loan production, the average balance of loans rose $5.7 billion, or 25.0%, year-over-year, to $28.7 billion,
offsetting the impact of a $608.4 million decline in the average balance of securities and money market investments
to $5.4 billion. The net effect was a $5.1 billion increase in the average balance of interest-earning assets to $34.2
billion, which occurred in tandem with a three-basis point decline in the average yield to 5.60%. Although the
average yield on loans rose five basis points year-over-year, that increase was exceeded by a 62-basis point drop in
the average yield on securities and money market investments to 4.49%.
82
Although intermediate-term interest rates were generally lower in the first nine months of 2010 than they were
in 2009, interest rates began to rise in the fourth quarter. The increase in intermediate-term rates triggered an
increase in refinancing activity which, in turn, prompted an increase in prepayment penalty income from multi-
family and CRE loans.
In 2010, prepayment penalty income rose $15.0 million to $22.6 million, with most of the increase occurring
in the fourth quarter of the year. Prepayment penalty income contributed eight basis points to our average yield on
loans in 2010, a five-basis point increase from the year-earlier contribution, and seven basis points to our average
yield on interest-earning assets, representing an increase of four basis points.
Interest Expense
Although the low level of short-term interest rates in 2010 contributed to a reduction in our funding costs, the
cash and retail funds we received in our FDIC-assisted transactions also played a meaningful part. A portion of the
cash we received from the FDIC was used to reduce our balance of wholesale borrowings from the year-earlier
level, and also enabled us to reduce our balance of higher-cost CDs. In view of our liquidity, and the acquisition-
driven growth of our deposits, we refrained from paying higher interest rates to retain or attract new deposits. We
also continued our practice of accepting brokered deposits when able to do so at attractive rates.
Although the average balance of interest-bearing liabilities rose $6.7 billion year-over-year, largely reflecting
the full-year effect of the AmTrust acquisition, the average cost of funds dropped 50 basis points to 2.15% during
this time. NOW and money market accounts were responsible for most of the growth in interest-bearing liabilities in
2010, as the average balance of such funds rose $3.7 billion year-over-year, to $8.2 billion; however, the average
cost of such funds dropped six basis points, to 0.69%. While the average balance of CDs rose $2.3 billion over the
year, to $8.6 billion, the impact was largely offset by a 97-basis point decline in the cost of such funds to 1.62%.
Although the average balance of borrowed funds fell $407.8 million year-over-year, to $13.5 billion, the average
cost of such funds rose 12 basis points to 3.82%.
Interest Rate Spread and Net Interest Margin
In 2010, our spread and margin benefited from the same combination of factors that contributed to the growth
of our net interest income over the course of the year. At 3.45%, our spread was 47 basis points higher than the year-
earlier measure; our margin also equaled 3.45%, and was up 33 basis points year-over-year. Prepayment penalty
income added seven basis points to our spread and six basis points to our margin in the twelve months ended
December 31, 2010, in contrast to three basis points each in the twelve months ended December 31, 2009.
Provisions for Loan Losses
In 2010, we recorded two loan loss provisions: a provision for losses on non-covered loans and a provision for
losses on covered loans.
Provision for Losses on Non-Covered Loans
In 2010, we increased our provision for losses on non-covered loans by $28.0 million, or 44.4%, from the
year-earlier level to $91.0 million. The 2010 provision exceeded the year’s net charge-offs by $31.5 million, and
thus increased the allowance for losses on non-covered loans to $158.9 million at December 31, 2010.
Provision for Losses on Covered Loans
In the fourth quarter of 2010, we recorded an $11.9 million provision for losses on covered loans to reflect a
decrease in the estimated present value of cash flows from the covered loan portfolio at December 31st. This
provision was partially offset by an $11.3 million increase in the FDIC indemnification asset which reflected the
increase in expected reimbursements under our loss sharing agreements with the FDIC. The increase in expected
reimbursements was recorded in non-interest income in the fourth quarter of 2010.
For additional information about the provisions for loan losses, please see the discussion of the loan loss
allowances under “Critical Accounting Policies” and the discussion of “Asset Quality” that appear earlier in this
report.
Non-Interest Income
In 2010, non-interest income totaled $337.9 million, signifying a $180.3 million increase from the year-earlier
amount. Reflecting the full-year benefit of the AmTrust acquisition, mortgage banking income accounted for $183.9
83
million of the 2010 total, representing a year-over-year increase of $171.8 million. Income from the origination of
loans represented $136.5 million of total mortgage banking income and servicing income represented the remaining
$47.4 million.
The full-year benefit of our expansion was also reflected in the level of fee income recorded in 2010. At $54.6
million, fee income was up $14.5 million, or 36.2%, year-over-year.
Also included in 2010 non-interest income was a $2.9 million gain on the Desert Hills acquisition and a $3.0
million gain on debt repurchases, which exceeded the impact of a $2.0 million OTTI loss on securities. In the prior
year, the amount of non-interest income recorded included a $139.6 million gain on the AmTrust acquisition and a
$10.1 million gain on debt repurchases and exchange, which more than offset the impact of a $96.5 million OTTI
loss on securities.
Non-Interest Expense
In 2010, non-interest expense totaled $577.5 million, representing a $170.7 million increase from the total
recorded in 2009. CDI amortization accounted for $31.3 million of the 2010 amount, having risen $8.5 million from
the year-earlier level, a reflection of the CDI acquired in the AmTrust and Desert Hills acquisitions.
Largely reflecting the full-year impact of the AmTrust acquisition, operating expenses rose $162.2 million
year-over-year to $546.2 million, representing 1.31% of average assets in the twelve months ended December 31,
2010. The increase stemmed from all three categories of operating expenses, including a $90.2 million increase in
compensation and benefits expense to $274.9 million, a $14.3 million increase in occupancy and equipment expense
to $88.1 million, and a $57.7 million increase in G&A expense to $183.3 million.
The year-over-year increase in compensation and benefits expense was largely driven by staff expansion,
consistent with the growth of our franchise and the Company as a whole. In addition, the increase reflected normal
salary increases and incentive stock awards that were granted to employees during 2010. The year-over-year
increase in occupancy and equipment expense was primarily due to the acquisition-driven expansion of our
franchise. In addition to the full-year impact of expanding our footprint and our franchise, the increase in G&A
expense reflected legal and other expenses associated with the acquisition and management of foreclosed property.
Furthermore, acquisition-related costs accounted for $11.5 million and $5.2 million of G&A expense in 2010 and
2009, respectively.
Notwithstanding the year-over-year increase in operating expenses, our efficiency ratio improved to 35.99% in
2010 from 36.13% in 2009.
Income Tax Expense
Pre-tax income rose $244.3 million, or 41.2%, year-over-year, to $837.5 million in the twelve months ended
December 31, 2010. Reflecting this increase, and the impact of certain changes in tax laws, income tax expense rose
$102.0 million, or 52.4%, year-over-year to $296.5 million, and the effective tax rate rose to 35.40% from 32.79%.
The increase in the effective tax rate was primarily attributable to the growth of our net income, which was subject
to a higher marginal tax rate. In addition, the level of income tax expense in 2009 was reduced by $14.3 million in
connection with the resolution of various tax audits during that year.
Included in income tax expense in 2010 was $2.1 million stemming from the application of new tax laws that
repealed the preferential deduction for bad debts that had been previously permitted in the determination of the
Company’s New York State and City income tax liability. The impact was offset by our recognition of a one-time
reduction in deferred income tax expense in the amount of $2.2 million to reflect the higher value of the balance of
New York net deferred tax assets.
Also included in 2010 income tax expense was $1.5 million stemming from the application of the new tax
laws that conformed the New York City tax rules to those of New York State. The new laws included a provision
requiring that income earned by a subsidiary taxed as a REIT for federal tax purposes be included, regardless of the
location in which the REIT subsidiary conducts its business or the timing of its distribution of earnings. In 2009, the
application of this provision added $1.6 million to our income tax expense.
84
QUARTERLY FINANCIAL DATA
The following table sets forth selected unaudited quarterly financial data for the years ended December 31,
2011 and 2010:
(in thousands, except per share data)
Net interest income
Provisions for loan losses
Non-interest income
Non-interest expense
Income before income taxes
Income tax expense
Net income
Basic earnings per share
Diluted earnings per share
IMPACT OF INFLATION
2011
4th
3rd
2nd
1st
32,712
59,758
146,387
180,917
63,265
18,000
58,069
152,616
182,420
62,670
$300,258 $294,967 $301,944 $303,252
26,000
58,610
146,702
189,160
65,984
$117,652 $119,750 $119,459 $123,176
$0.28
$0.28
23,708
58,888
155,044
182,080
62,621
$0.27
$0.27
$0.27
$0.27
$0.27
$0.27
4th
$304,990
28,903
103,260
148,305
231,042
81,210
$149,832
$0.34
$0.34
2010
1st
3rd
32,000
107,103
151,089
210,202
74,593
2nd
$286,188 $294,201 $294,584
20,000
55,044
136,747
192,881
68,732
$135,609 $131,427 $124,149
$0.29
$0.29
22,000
72,516
141,371
203,346
71,919
$0.30
$0.30
$0.31
$0.31
The consolidated financial statements and notes thereto presented in this report have been prepared in
accordance with GAAP, which requires 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, the impact of interest rates on our performance is
greater than the impact 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, “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.
85
RECONCILIATIONS 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, management uses these non-GAAP
measures in their 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 AOCL. AOCL consists of after-tax net unrealized losses on securities and pension and post-
retirement obligations, and is recorded in our Consolidated Statements of Condition. We also calculate our ratio of
tangible stockholders’ equity to tangible assets excluding AOCL, as its components are impacted by changes in
market conditions, including interest rates, which fluctuate. This ratio is referred to earlier in this report and below
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, 2011
and 2010 follow:
(dollars in thousands)
Total stockholders’ equity
Less: Goodwill
Core deposit intangibles
Tangible stockholders’ equity
Total assets
Less: Goodwill
Core deposit intangibles
Tangible assets
Stockholders’ equity to total assets
Tangible stockholders’ equity to tangible assets
Tangible stockholders’ equity
Add back: AOCL
Adjusted tangible stockholders’ equity
Tangible assets
Add back: AOCL
Adjusted tangible assets
December 31,
2011
$ 5,565,704
(2,436,131)
(51,668)
$ 3,077,905
2010
$ 5,526,220
(2,436,159)
(77,734)
$ 3,012,327
$42,024,302
(2,436,131)
(51,668)
$39,536,503
$41,190,689
(2,436,159)
(77,734)
$38,676,796
13.24%
13.42%
7.78%
7.79%
$3,077,905
71,910
$3,149,815
$3,012,327
45,695
$3,058,022
$39,536,503
71,910
$39,608,413
$38,676,796
45,695
$38,722,491
Adjusted tangible stockholders’ equity to adjusted tangible assets
7.95%
7.90%
86
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 Boards of
Directors and management monitor interest rate sensitivity on a regular or as needed basis so that adjustments to the
asset and liability mix can be made when deemed appropriate.
The actual duration of held-for-investment 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.
In 2011, we continued to pursue the core components of our business model in order to reduce our interest rate
risk: (1) We continued to emphasize the origination and retention of intermediate-term assets, primarily in the form
of multi-family and CRE loans; (2) We continued to deploy the cash flows from loan and securities repayments and
sales to fund our loan production, as well as our more limited investments in GSE securities; and (3) We continued
to capitalize on the historically low level of the target federal funds rate to reduce our retail funding costs.
In connection with the activities of our mortgage banking operation, we enter into contingent commitments to
fund residential mortgage loans by a specified future date at a stated interest rate and corresponding price. Such
commitments, which are generally known as interest rate lock commitments (“IRLCs”), are considered to be
financial derivatives and, as such, are carried at fair value.
To mitigate the interest rate risk associated with our IRLCs, we enter into forward commitments to sell
mortgage loans or mortgage-backed securities (“MBS”) by a specified future date and at a specified price. These
forward sale agreements are also carried at fair value. Such forward commitments to sell generally obligate us to
complete the transaction as agreed, and therefore pose a risk to us if we are not able to deliver the loans or MBS
pursuant to the terms of the applicable forward-sale agreement. For example, if we are unable to meet our
obligation, we may be required to pay a “make whole” fee to the counterparty.
When we retain the servicing on the loans we sell, we capitalize a mortgage servicing right (“MSR”) asset.
MSRs are recorded at fair value, with changes in fair value recorded as a component of non-interest income. We
estimate the fair value of the MSR asset based upon a number of factors, including the current and expected loan
prepayment rates, economic conditions, and market forecasts, as well as relevant characteristics of the associated
underlying loans. Generally, when market interest rates decline, loan prepayments increase as customers refinance
their existing mortgages to more favorable interest rate terms. When a mortgage prepays, or when loans are expected
to prepay earlier than originally expected, a portion of the anticipated cash flows associated with servicing these
loans is terminated or reduced, which can result in a reduction in the fair value of the capitalized MSRs and a
corresponding reduction in earnings.
To mitigate the prepayment risk inherent in MSRs, we could sell the servicing of the loans we originate, and
thus minimize the potential for earnings volatility.
We also invest in exchange-traded derivative financial instruments that are expected to experience opposite
and offsetting changes in fair value as related to the value of the MSRs.
87
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, 2011, our one-year gap was a negative 0.92%, as compared to a positive 1.72% at
December 31, 2010. The modest decrease in our one-year gap was attributable to an increase in short-term
borrowings and a decline in the balance of MBS, among other factors.
The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding
at December 31, 2011 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, 2011 on the basis of contractual
maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent
selected time intervals. Prepayment rates were assumed to range from 13% to 39% annually for mortgage-related
securities, and from 14% to 15% for multi-family and CRE loans. Borrowed funds were not assumed to prepay.
Savings, NOW, and money market accounts were assumed to decay based on a comprehensive statistical analysis
that incorporates our historical deposit experience. Based on the results of this analysis, savings accounts were
assumed to decay at 47% for the first five years, 17% for years five through ten, and 36% for the years thereafter.
NOW accounts were assumed to decay at 39% for the first five years, 22% for years five through ten, and 39% for
the years thereafter. Money market accounts, with the exception of those accounts having specified repricing dates,
were assumed to decay at 93% for the first five years and 7% for years five through ten.
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 and securities prepayments and deposit withdrawal activity.
To validate our prepayment assumptions for our multi-family and CRE loan portfolios, we perform a monthly
analysis, during which we review our historical prepayment rates and compare them to our projected prepayment
rates. We continually review the actual prepayment rates to ensure that our projections are as accurate as possible,
since prepayments on these types of loans are not as closely correlated to changes in interest rates as prepayments on
one-to-four family loans would be. In addition, we review the call provisions in our borrowings and investment
portfolios and, on a monthly basis, compare the actual calls to our projected calls to ensure that our projections are
reasonable.
As of December 31, 2011, the impact of a 100-basis point decline in market interest rates would have
increased our projected prepayment rates by a constant prepayment rate of nine. Conversely, the impact of a 100-
basis point increase in market interest rates would have reduced our projected prepayment rates by a constant
prepayment rate of three.
88
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9
8
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 different 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. Also, the ability of some borrowers to repay their adjustable-rate loans may be adversely
impacted by an increase in market interest rates.
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, 2011:
(dollars in thousands)
Change in
Interest Rates
(in basis points) (1)
--
+100
+200
Market Value
of Assets
$42,702,778
42,092,113
41,576,505
Market Value
of Liabilities
$37,956,779
37,449,388
37,028,773
Net Portfolio
Value
$4,745,999
4,642,725
4,547,732
Net Change
$ --
(103,274)
(198,267)
Portfolio Market
Value Projected
% Change
to Base
-- %
(2.18)
(4.18)
(1) The impact of 100- and 200-basis point reductions in interest rates is not presented in view of the current level of the federal
funds rate and other short-term interest rates.
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.
We also 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 future
levels of our financial assets and liabilities. The assumptions used in the net interest income simulation are
inherently uncertain. Actual results may differ significantly from those presented in the following table, due to the
frequency, timing, and magnitude of changes in interest rates; changes in spreads between maturity and repricing
categories; and prepayments, among other factors, coupled with any actions taken to counter the effects of any such
changes.
90
Based on the information and assumptions in effect at December 31, 2011, the following table reflects the
estimated percentage change in future net interest income for the next twelve months, assuming the changes in
interest rates noted:
Change in Interest Rates
(in basis points) (1)(2)
+200 over one year
+100 over one year
Estimated Percentage Change in
Future Net Interest Income
(0.73)%
(0.44)
(1) In general, short- and long-term rates are assumed to increase in parallel fashion across all four quarters and then remain
unchanged.
(2) The impact of 100- and 200-basis point reductions in interest rates is not presented in view of the current level of the federal
funds rate and other short-term interest rates.
Future changes in our mix of assets and liabilities may result in greater changes to our gap, NPV, and/or net
interest income simulation.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and notes thereto and other supplementary data begin on the following
page.
91
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except share data)
ASSETS:
Cash and cash equivalents
Securities:
Available-for-sale ($590,488 and $500,811 pledged, respectively)
Held-to-maturity ($3,610,172 and $3,881,139 pledged, respectively) (fair value of
$3,966,185 and $4,157,322, respectively)
Total securities
Non-covered loans held for sale
Non-covered loans held for investment, net of deferred loan fees and costs
Less: Allowance for losses on non-covered loans
Non-covered loans held for investment, net
Covered loans
Less: Allowance for losses on covered loans
Covered loans, net
Total loans, net
Federal Home Loan Bank stock, at cost
Premises and equipment, net
FDIC loss share receivable
Goodwill
Core deposit intangibles, net
Mortgage servicing rights
Bank-owned life insurance
Other real estate owned (includes $71,400 and $62,412, respectively, covered by loss
sharing agreements)
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
Borrowed funds:
Wholesale borrowings:
Federal Home Loan Bank advances
Repurchase agreements
Total wholesale borrowings
Junior subordinated debentures
Other borrowings
Total borrowed funds
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; 437,426,665 and 435,646,845
shares issued, and 437,344,796 and 435,646,845 shares outstanding, respectively)
Paid-in capital in excess of par
Retained earnings
Treasury stock, at cost (81,869 and 0 shares, respectively)
Accumulated other comprehensive loss, net of tax:
Net unrealized gain on securities available for sale, net of tax
Net unrealized loss on the non-credit portion of other-than-temporary impairment
(“OTTI”) losses on securities, net of tax
Net unrealized loss on pension and post-retirement obligations, net of tax
Total accumulated other comprehensive loss, net of tax
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to the consolidated financial statements.
92
December 31,
2011
2010
$ 2,001,737
$ 1,927,542
724,662
652,956
3,815,854
4,540,516
1,036,918
25,532,818
(137,290)
25,395,528
3,753,031
(33,323)
3,719,708
30,152,154
490,228
250,859
695,179
2,436,131
51,668
117,012
768,996
4,135,935
4,788,891
1,207,077
23,707,494
(158,942)
23,548,552
4,297,869
(11,903)
4,285,966
29,041,595
446,014
233,694
814,088
2,436,159
77,734
107,378
742,481
155,967
363,855
$42,024,302
90,478
484,635
$41,190,689
$ 8,757,198
3,953,859
7,373,263
2,189,810
22,274,130
$ 8,235,825
3,885,785
7,835,161
1,852,280
21,809,051
9,314,193
4,125,000
13,439,193
426,936
94,284
13,960,413
224,055
36,458,598
8,375,659
4,125,000
12,500,659
426,992
608,465
13,536,116
319,302
35,664,469
--
--
4,374
5,309,269
324,967
(996)
4,356
5,285,715
281,844
--
1,321
12,600
(13,627)
(59,604)
(71,910)
5,565,704
$42,024,302
(20,572)
(37,723)
(45,695)
5,526,220
$41,190,689
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)
INTEREST INCOME:
Mortgage and other loans
Securities and money market investments
Total interest income
INTEREST EXPENSE:
NOW and money market accounts
Savings accounts
Certificates of deposit
Borrowed funds
Total interest expense
Net interest income
Provision for losses on non-covered loans
Provision for losses on covered loans
Net interest income after provisions for loan losses
NON-INTEREST INCOME:
Total OTTI loss on securities
Less: Non-credit portion of OTTI recorded in other
comprehensive income (before taxes)
Net OTTI loss recognized in earnings
Fee income
Bank-owned life insurance
Mortgage banking income
Net gain on sales of securities
FDIC indemnification income
Gain on business disposition
Gain on business acquisitions
Gain on debt repurchases
Other
Total non-interest income
NON-INTEREST EXPENSE:
Operating expenses:
Compensation and benefits
Occupancy and equipment
General and administrative
Total operating expenses
Amortization of core deposit intangibles
Total non-interest expense
Income before income taxes
Income tax expense
Net income
Other comprehensive (loss) income , net of tax:
Net unrealized (loss) gain on securities and non-credit portion
of OTTI 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.
93
Years Ended December 31,
2010
2011
2009
$1,638,651
228,013
1,866,664
$1,669,871
243,923
1,913,794
$1,325,601
309,011
1,634,612
39,285
15,488
102,400
509,070
666,243
1,200,421
79,000
21,420
1,100,001
56,991
20,833
138,716
517,291
733,831
1,179,963
91,000
11,903
1,077,060
33,788
15,859
163,168
516,472
729,287
905,325
63,000
--
842,325
(18,124)
(26,456)
(106,248)
--
(18,124)
44,874
28,384
80,674
36,608
17,633
9,823
--
--
35,453
235,325
24,485
(1,971)
54,584
28,015
183,883
22,430
11,308
--
2,883
3,008
33,783
337,923
9,715
(96,533)
40,074
27,406
12,129
338
--
--
139,607
10,054
24,564
157,639
293,344
86,903
194,436
574,683
26,066
600,749
734,577
254,540
$ 480,037
274,864
88,070
183,312
546,246
31,266
577,512
837,471
296,454
$ 541,017
184,692
73,724
125,587
384,003
22,812
406,815
593,149
194,503
$ 398,646
(4,334)
(21,881)
$ 453,822
2,229
1,979
$ 545,225
27,601
10,405
$ 436,652
$1.09
$1.09
$1.24
$1.24
$1.13
$1.13
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 for exercise of stock options (168,001; 308,173; and 38,093, respectively)
Shares issued for restricted stock awards (1,611,819; 374,858; and 1,184,166,
respectively)
Shares issued in stock offerings (69,000,000)
Shares issued for debt exchange (4,756,444)
Shares issued in connection with the direct stock purchase feature of the Dividend
Reinvestment and Stock Purchase Plan (“DRP”) (1,766,482 in 2010 and 13,233,518
in 2009)
Balance at end of year
PAID-IN CAPITAL IN EXCESS OF PAR:
Balance at beginning of year
Shares issued for restricted stock awards, net of forfeitures
Compensation expense related to restricted stock awards
Stock options
Tax effect of stock plans
Allocation of Employee Stock Ownership Plan (“ESOP’) stock
Shares issued in connection with the direct stock purchase feature of the DRP
Shares issued for debt exchange
Shares issued in common stock offerings
Net effect of issuance and exercise of FDIC equity appreciation instrument, net of tax
effects
Balance at end of year
RETAINED EARNINGS:
Balance at beginning of year
Net income
Dividends paid on common stock ($1.00 per share in each year)
Adjustment for the cumulative effect of a change in accounting for OTTI, net of tax
Balance at end of year
TREASURY STOCK:
Balance at beginning of year
Purchase of common stock (229,712; 248,385; and 114,302 shares, respectively)
Exercise of stock options (135,162; 176,043; and 6,867 shares, respectively)
Shares issued for restricted stock awards (12,681; 72,342; and 107,435 shares,
respectively)
Balance at end of year
UNALLOCATED COMMON STOCK HELD BY ESOP:
Balance at beginning of year
Earned portion of ESOP
Balance at end of year
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX:
Balance at beginning of year
Other comprehensive (loss) income, net of tax:
Change in net unrealized gain (loss) on securities available for sale, net of tax
of $366; $17,134; and $16,648, respectively
Adjustment for the cumulative effect of a change in accounting for OTTI, net
of tax of $377
Change in the non-credit portion of OTTI losses recognized in other
comprehensive loss (income), net of tax of $4,857; $9,656; and $3,886,
respectively
Amortization of net unrealized loss on securities transferred from available for
sale to held to maturity, net of tax of $2,557 and $513, respectively
Change in pension and post-retirement obligations, net of tax of $14,993;
$1,334; and $6,981, respectively
Less: Reclassification adjustment for sales of securities and OTTI loss on
securities, net of tax of $7,439; $8,186; and $37,885, respectively
Other comprehensive (loss) income, net of tax
Balance at end of year
Total stockholders’ equity
See accompanying notes to the consolidated financial statements.
94
Years Ended December 31,
2010
2009
2011
$ 4,356 $ 4,332 $ 3,450
--
3
2
16
--
--
4
--
--
12
690
48
--
4,374
17
4,356
132
4,332
5,285,715 5,238,231 4,181,599
(1,245)
9,490
414
4,010
2,718
147,118
39,105
864,208
(1,145)
10,889
2,549
2,349
3,924
28,918
--
--
(216 )
16,735
4,356
2,679
--
--
--
--
--
(9,186)
5,309,269 5,285,715 5,238,231
--
281,844
480,037
(436,914 )
--
324,967
175,193
541,017
(434,366)
--
281,844
123,511
398,646
(347,554)
590
175,193
--
(3,696 )
2,500
200
(996 )
--
--
--
--
(4,054)
2,913
1,141
--
(951)
951
--
--
(1,311)
78
1,233
--
(1,995)
1,044
(951)
(45,695 )
(49,903)
(87,319)
(540 )
25,404
(25,659)
--
--
(590)
7,251
(14,829)
(5,829)
--
3,927
779
(21,881 )
1,979
10,405
(11,045 )
(26,215 )
(71,910 )
58,310
37,416
(49,903)
$5,565,704 $5,526,220 $5,366,902
(12,273)
4,208
(45,695)
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Years Ended December 31,
2010
2009
2011
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating
$ 480,037 $ 541,017 $ 398,646
activities:
Provision for loan losses
Depreciation and amortization
(Accretion of discounts) amortization of premiums, net
Amortization of core deposit intangibles
Net gain on sale of securities
Net gain on sale of loans
Gain on business disposition
Gain on business acquisitions
Stock plan-related compensation
OTTI loss on securities recognized in earnings
Changes in assets and liabilities:
Decrease (increase) in deferred tax asset, net
Decrease (increase) in other assets
(Decrease)increase in other liabilities
Origination of loans held for sale
Proceeds from sale of loans originated for sale
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayment of securities held to maturity
Proceeds from repayment of securities available for sale
Proceeds from sale of securities held to maturity
Proceeds from sale of securities available for sale
Purchase of securities held to maturity
Purchase of securities available for sale
Net (purchase) redemption of Federal Home Loan Bank stock
Net (increase) decrease in loans
Purchase of premises and equipment, net
Net cash acquired in business transactions
Net cash (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits
Net increase (decrease) in short-term borrowed funds
Net decrease in long-term borrowed funds
Tax effect of stock plans
Cash dividends paid on common stock
Treasury stock purchases
Net cash received from stock option exercises
Cash used for exercise of FDIC equity appreciation instrument
Proceeds from issuance of common stock, net
Net cash provided by (used in) 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 income taxes
Non-cash investing and financing activities:
Transfers to other real estate owned from loans
Exchange of debt for common stock
100,420
23,535
(1,337)
26,066
(36,608)
(80,304)
(9,823)
--
16,735
18,124
28,270
126,654
(126,812)
(7,151,083)
7,416,333
830,207
2,799,160
221,077
284,406
862,755
(2,753,777)
(1,151,639)
(44,214)
(1,488,025)
(40,746)
100,027
(1,210,976)
102,903
20,112
3,642
31,266
(22,430)
(137,361)
--
(2,883)
15,764
1,971
36,396
59,774
9,214
(10,864,188)
10,135,124
(69,679)
4,117,849
872,548
--
23,098
(4,034,384)
--
54,315
173,459
(48,641)
140,895
1,299,139
63,000
19,982
(4,109)
22,812
(338)
(10,470)
--
(139,607)
13,252
96,533
(14,916)
(97,805)
(89,146)
(888,527)
846,120
215,427
2,469,068
201,245
--
10,338
(1,808,546)
--
14,829
(1,161,484)
(7,385)
4,029,729
3,747,794
465,079
1,062,000
(637,703)
2,679
(436,914)
(3,696)
3,519
--
--
454,964
74,195
1,927,542
(266,380)
(1,012,900)
(860,783)
4,010
(347,554)
(1,311)
465
(23,275)
1,012,148
(1,495,580)
2,467,641
203,216
$ 2,001,737 $ 1,927,542 $ 2,670,857
(898,001)
500,000
(1,173,074)
2,349
(434,366)
(4,054)
5,436
--
28,935
(1,972,775)
(743,315)
2,670,857
$686,245
152,115
$790,233
307,850
$715,619
182,767
$230,677
--
$82,374
--
$14,372
39,153
Note: Excluding the core deposit intangible and FDIC loss share receivable, the fair values of non-cash assets
acquired, and of liabilities assumed, in the acquisition of Desert Hills Bank on March 26, 2010 were $230.5
million and $442.5 million, respectively. Excluding the core deposit intangible and FDIC loss share
receivable, the fair values of non-cash assets acquired, and of liabilities assumed, in the acquisition of
AmTrust Bank on December 4, 2009 were $6.2 billion and $10.9 billion, respectively.
See accompanying notes to the consolidated financial statements.
95
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
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 on April 14, 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. on November 21, 2000 in
anticipation of completing the first of eight business combinations that 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
seven counties in the northern and central parts of New Jersey. The Company expanded beyond this region to south
Florida, northeast Ohio, and central Arizona through its FDIC-assisted acquisition of certain assets and its
assumption of certain liabilities of AmTrust Bank (“AmTrust”) in December 2009, and extended its Arizona
franchise through its FDIC-assisted acquisition of certain assets and its assumption of certain liabilities of Desert
Hills Bank (“Desert Hills”) in March 2010.
Reflecting this strategy of growth through acquisitions, the Community Bank currently operates 241 branches,
four of which operate directly under the Community Bank name. The remaining 237 Community Bank branches
operate through seven divisional banks—Queens County Savings Bank, Roslyn Savings Bank, Richmond County
Savings Bank, and Roosevelt Savings Bank (in New York), Garden State Community Bank in New Jersey, AmTrust
Bank in Florida and Arizona, and Ohio Savings Bank in Ohio.
The Commercial Bank currently operates 34 branches in Manhattan, Queens, Brooklyn, Westchester County,
and Long Island (all in New York), including 17 branches that operate under the name “Atlantic Bank.”
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. Estimates that are particularly susceptible to change in the near term are used in
connection with the determination of the allowances for loan losses; the valuation of loans held for sale; the
evaluation of goodwill for impairment; the evaluation of other-than-temporary impairment (“OTTI”) on securities;
and the evaluation of the need for a valuation allowance on the Company’s deferred tax assets. The current
economic environment has increased the degree of uncertainty inherent in these material 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 7, “Borrowed Funds,” for
additional information regarding these trusts.
When necessary, certain reclassifications have been made to prior-year amounts to conform to the current-year
presentation.
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NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 and reverse repurchase agreements with original
maturities of less than 90 days. At December 31, 2011 and 2010, the Company’s cash and cash equivalents totaled
$2.0 billion and $1.9 billion, respectively. Included in cash and cash equivalents at both dates were $1.2 billion of
interest-bearing deposits in other financial institutions, primarily consisting of balances due from the Federal
Reserve Bank of New York. Also included in cash and cash equivalents at December 31, 2011 and 2010 were
federal funds sold of $5.8 million and $870,000, respectively. In addition, the Company had $646.5 million and
$550.0 million in reverse repurchase agreements outstanding at December 31, 2011 and 2010, respectively.
In accordance with the monetary policy of the Board of Governors of the Federal Reserve System, the
Company was required to maintain reserves with the Federal Reserve Bank of New York of $115.6 million and
$100.9 million, respectively, at December 31, 2011 and 2010, in the form of deposits and vault cash. The Company
was in compliance with this requirement at both dates.
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 fair values of the Company’s securities are affected by changes in interest rates, credit spreads, and
market illiquidity. In general, as interest rates rise, the fair value of fixed-rate securities will decline; as interest rates
fall, the fair 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.
Prior to April 1, 2009, when the decline in fair value below an investment’s carrying amount was deemed to
be other than temporary, the investment was written down to fair value and the full amount of the write-down was
charged to earnings. A decline in the fair value of an investment was deemed to be other than temporary if the
Company did not expect to recover the carrying amount of the investment or the Company did not have the intent
and ability to hold the investment to the anticipated recovery of its amortized cost. Effective April 1, 2009, under
revised OTTI accounting requirements issued by the Financial Accounting Standards Board (the “FASB”), unless
the Company has the intent to sell, or it is more likely than not that it will be required to sell a security before
recovery, an OTTI is recognized as a realized loss on the income statement to the extent that the decline in fair value
is credit-related. The decline in value attributable to factors other than credit is charged to accumulated other
comprehensive loss, net of tax (“AOCL”). If there is a decline in fair value of a security below its carrying amount
and the Company has the intent to sell it, or it is more likely than not that it will be required to sell the security
before recovery, the entire amount of the decline in fair value is charged to earnings.
Premiums and discounts on securities are amortized to expense and accreted to income over the remaining
period to contractual maturity, using a method that approximates the interest method, and are adjusted for
anticipated prepayments. Dividend and interest income are recognized when earned. The cost of securities sold is
based on the specific identification method.
Federal Home Loan Bank Stock
As a member of the Federal Home Loan Bank (“FHLB”) of New York (the “FHLB-NY”), the Company is
required to hold shares of FHLB stock, which is carried at cost. The Company’s holding requirement varies based
on certain factors, primarily including its outstanding borrowings from the FHLB-NY. In connection with the FDIC-
assisted acquisitions of AmTrust and Desert Hills, the Company acquired stock in the FHLBs of Cincinnati and San
Francisco, respectively. The Company conducts a periodic review and evaluation of its FHLB stock to determine if
any impairment exists. The factors considered in this process include, among other things, significant deterioration
in earnings performance, credit rating, or asset quality; significant adverse changes in the regulatory or economic
environment; and other factors that raise significant concerns about the creditworthiness and the ability of an FHLB
to continue as a going concern.
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Loans
Loans, net, are carried at unpaid principal balances, including unearned discounts, purchase accounting (i.e.,
acquisition-date fair value) adjustments, net deferred loan origination costs or fees, and the allowance for loan
losses.
One-to-four family loans held for sale are originated through the mortgage banking operation acquired in the
AmTrust acquisition and are sold primarily to government-sponsored enterprises (“GSEs”), with the servicing
typically retained. The loans originated by the mortgage banking operation are carried at fair value. The fair value of
held-for-sale loans is primarily based on quoted market prices for securities backed by similar types of loans. The
changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and
changes in the fair value of servicing associated with the mortgage loans held for sale.
The Company recognizes interest income on non-covered loans using the interest method over the life of the
loan. Using this method, 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. When a loan is sold or repaid, the remaining net unamortized fee or cost is recognized in interest income.
Prepayment penalty income is recorded in interest income and only when cash is received. Accordingly, there
are no assumptions involved in the recognition of prepayment penalty income.
Two factors are considered in determining the amount of prepayment penalty income: the prepayment penalty
percentage set forth in the loan documents and the balance of the loan at the time of prepayment. Prepayment
penalty income may increase during periods of rising rates (or periods when rates are expected to rise) because
borrowers may opt to lock in a lower rate at such times, rather than take the risk of refinancing in the future when
interest rates could be higher. In addition, prepayment penalty income may increase during periods of declining rates
(or in a low interest rate environment), as borrowers seek to lock in a low rate.
A loan generally is classified as a “non-accrual” loan when it is over 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 no longer 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.
Allowances for Loan Losses
Allowance for Losses on Non-Covered Loans
The allowance for losses on non-covered loans is increased by provisions for non-covered loan losses that are
charged against earnings, and is reduced by net charge-offs and/or reversals, if any, that are credited to earnings.
Although loans are held by either the Community Bank or the Commercial Bank, and a separate loan loss allowance
is established for each, the total of the two allowances is available to cover all losses incurred. In addition, except as
otherwise noted below, the process for establishing the allowance for losses on non-covered loans is the same for
each of the Community Bank and the Commercial Bank. In determining the respective allowances for loan losses,
management considers the Community Bank’s and the Commercial Bank’s current business strategies and credit
processes, including compliance with guidelines approved by the respective Boards of Directors with regard to
credit limitations, loan approvals, underwriting criteria, and loan workout procedures.
The allowances for losses on non-covered loans are established based on our evaluation of the probable
inherent losses in our portfolio in accordance with GAAP, and are comprised of both specific valuation allowances
and general valuation allowances.
Specific valuation allowances are established based on management’s analyses of individual loans that are
considered impaired. If a loan is deemed to be impaired, management measures the extent of the impairment and
establishes a specific valuation allowance for that amount. A loan is classified as “impaired” when, based on current
information and events, it is probable that the Company will be unable to collect both the principal and interest due
under the contractual terms of the loan agreement. The Company applies this classification as necessary to loans
individually evaluated for impairment in its portfolios of multi-family; commercial real estate; acquisition,
development, and construction; and commercial and industrial loans. Smaller balance homogenous loans and loans
carried at the lower of cost or fair value are evaluated for impairment on a collective, rather than individual, basis.
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The Company generally measures impairment on an individual loan and determines the extent to which a
specific valuation allowance is necessary by comparing the loan’s outstanding balance to either the fair value of the
collateral, less the estimated cost to sell, or the present value of expected cash flows, discounted at the loan’s
effective interest rate. A specific valuation allowance is established when the fair value of the collateral, net of the
estimated costs to sell, or the present value of the expected cash flows, is less than the recorded investment in the
loan.
The Company also follows a process to assign general valuation allowances to non-covered loan categories.
General valuation allowances are established by applying its loan loss provisioning methodology, and reflect the
inherent risk in outstanding held-for-investment loans. This loan loss provisioning methodology considers various
factors in determining the appropriate quantified risk factors to use to determine the general valuation allowances.
The factors assessed begin with the historical loan loss experience for each of the major loan categories the
Company maintains. The Company’s historical loan loss experience is then adjusted by considering qualitative or
environmental factors that are likely to cause estimated credit losses associated with the existing portfolio to differ
from historical loss experience, including, but not limited to:
(cid:120) Changes in lending policies and procedures, including changes in underwriting standards and collection,
charge-off, and recovery practices;
(cid:120) Changes in international, national, regional, and local economic and business conditions and developments
that affect the collectability of the portfolio, including the condition of various market segments;
(cid:120) Changes in the nature and volume of the portfolio and in the terms of loans;
(cid:120) Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and
severity of adversely classified or graded loans;
(cid:120) Changes in the quality of the Company’s loan review system;
(cid:120) Changes in the value of the underlying collateral for collateral-dependent loans;
(cid:120) The existence and effect of any concentrations of credit, and changes in the level of such concentrations;
(cid:120) Changes in the experience, ability, and depth of lending management and other relevant staff; and
(cid:120) The effect of other external factors, such as competition and legal and regulatory requirements, on the level
of estimated credit losses in the existing portfolio.
By considering the factors discussed above, the Company determines quantified risk factors that are applied to
each non-impaired loan or loan type in the loan portfolio to determine the general valuation allowances.
In recognition of prevailing macroeconomic and real estate market conditions, the time periods considered for
historical loss experience continue to be the last three years and the current period. The Company also evaluates the
sufficiency of the overall allocations used for the allowance for losses on non-covered loans by considering the loss
experience in the current and prior calendar year.
The process of establishing the allowances for losses on non-covered loans also involves:
(cid:120) Periodic inspections of the loan collateral by qualified in-house and external property appraisers/inspectors,
as applicable;
(cid:120) 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;
(cid:120) Assessment of the aforementioned factors by the pertinent members of the Boards of Directors and
executive management when making a business judgment regarding the impact of anticipated changes on
the future level of loan losses; and
(cid:120) 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 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 (the
“Mortgage Committee”) or the Credit Committee of the Board of Directors of the Commercial Bank (the “Credit
Committee”), as applicable.
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The Company charges off loans, or portions of loans, in the period that such loans, or portions thereof, are
deemed uncollectible. The collectability of individual loans is determined through an assessment of the financial
condition and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying
collateral. Generally, the time period in which this assessment is made is within the same quarter that the loan is
considered impaired and quarterly thereafter. For non-real estate-related consumer credits, the following past-due
time periods determine when charge-offs are typically recorded: (1) closed-end credits are charged off in the quarter
that the loan becomes 120 days past due; (2) open-end credits are charged off in the quarter that the loan becomes
180 days past due; and (3) both closed-end and open-end credits are typically charged off in the quarter that the
credit is 60 days past the date we received notification that the borrower has filed for bankruptcy.
The level of future additions to the respective non-covered loan loss allowances is based on many factors,
including certain factors that are beyond management’s control such as changes in economic and local market
conditions, including declines in real estate values, and increases in vacancy rates and unemployment. Management
uses the best available information to recognize losses on loans or to make additions to the loan loss allowances;
however, the Community Bank and/or the Commercial Bank may be required to take certain charge-offs and/or
recognize further additions to their loan loss allowances, based on the judgment of regulatory agencies with regard
to information provided to them during their examinations of the Banks.
Allowance for Losses on Covered Loans
The Company has elected to account for the loans acquired in the AmTrust and Desert Hills acquisitions (i.e.,
its covered loans) based on expected cash flows (Please see Note 4, “Loans,” for further information regarding these
acquisitions). This election is in accordance with FASB Accounting Standards Codification (“ASC”) Topic 310-30,
“Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”). In accordance with ASC
310-30, the Company will maintain the integrity of a pool of multiple loans accounted for as a single asset and with
a single composite interest rate and an aggregate expectation of cash flows.
Under the loss sharing agreements with the FDIC, covered loans are reported exclusive of the FDIC loss share
receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions are, and will continue to be,
reviewed for collectability based on the expectations of cash flows from these loans. Covered loans have been
aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered
loans, the Company periodically performs an analysis to estimate the expected cash flows for each of the loan pools.
The Company records a provision for losses on covered loans to the extent that the expected cash flows from a loan
pool have decreased since the acquisition date. Accordingly, if there is a decrease in expected cash flows due to an
increase in estimated credit losses compared to the estimates made at the respective acquisition dates, the decrease in
the present value of expected cash flows will be recorded as a provision for covered loan losses charged to earnings,
and the allowance for covered loan losses will be increased. A related credit to non-interest income and an increase
in the FDIC loss share receivable will be recognized at the same time, and will be measured based on the loss
sharing agreement percentages.
FDIC Loss Share Receivable
The FDIC loss share receivable is initially recorded at fair value and is measured separately from the covered
loans acquired in the AmTrust and Desert Hills acquisitions as it is not contractually embedded in any of the covered
loans. The loss share receivable related to estimated future loan losses is not transferable should the Company sell a
loan prior to foreclosure or maturity. The fair value of the loss share receivable represents the present value of the
estimated cash payments expected to be received from the FDIC for future losses on covered assets, based on the
credit adjustment estimated for each covered asset and the loss sharing percentages. These cash flows are then
discounted at a market-based rate to reflect the uncertainty of the timing and receipt of the loss sharing
reimbursements from the FDIC. The amount ultimately collected for this asset is dependent upon the performance of
the underlying covered assets, the passage of time, and claims submitted to the FDIC.
The FDIC loss share receivable will be reduced as losses are recognized on covered loans and loss sharing
payments are received from the FDIC. Realized losses in excess of acquisition-date estimates will result in an
increase in the FDIC loss share receivable. Conversely, if realized losses are less than acquisition-date estimates, the
FDIC loss share receivable will be reduced.
Decreases in estimated reimbursements from the FDIC, if any, will be recognized in income prospectively
over the life of the related covered loans (or, if shorter, over the remaining term of the related loss sharing
agreement); related additions to the accretable yield on the covered loans will be recognized in income prospectively
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over the lives of the loans. Increases in estimated reimbursements will be recognized in income in the same period
that they are identified and an allowance for loan losses for the related loans will be recorded.
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. In addition to being tested annually, goodwill would be tested if there
were a “triggering event.” Currently, the goodwill impairment analysis is a two-step test. The first step (“Step 1”) is
used to identify potential impairment, and involves comparing each reporting segment’s estimated fair value to its
carrying amount, including goodwill. If the estimated fair value of a reporting segment exceeds its carrying amount,
goodwill is considered not to be impaired. If the carrying amount exceeds the estimated fair value, there is an
indication of potential impairment and the second step (“Step 2”) is performed to measure the amount.
Step 2 involves calculating an implied fair value of goodwill for each reporting segment for which impairment
was indicated in Step 1. The implied fair value of goodwill is determined in a manner similar to the amount of
goodwill calculated in a business combination, i.e., by measuring the excess of the estimated fair value of the
reporting segment, as determined in Step 1, over the aggregate estimated fair values of the individual assets,
liabilities, and identifiable intangibles, as if the reporting segment were being acquired in a business combination at
the impairment test date. If the implied fair value of goodwill exceeds the carrying amount of goodwill assigned to
the reporting segment, there is no impairment. If the carrying amount of goodwill assigned to a reporting segment
exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss
cannot exceed the carrying amount of goodwill assigned to a reporting segment, and the loss establishes a new basis
in the goodwill. Subsequent reversal of a goodwill impairment loss is not permitted.
Quoted market prices in active markets are the best evidence of fair value and are 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, management has determined that the Company has two
reporting segments: Banking Operations and Residential Mortgage Banking. All of our recorded goodwill has
resulted from prior acquisitions and, accordingly, is attributed to Banking Operations. There is no goodwill
associated with Residential Mortgage Banking, as it was acquired in our FDIC-assisted acquisition of AmTrust,
which resulted in a bargain purchase gain. In order to perform our annual goodwill impairment test, the Company
determined the carrying value of the Banking Operations segment to be the carrying value of the Company and
compared it to the fair value of the Banking Operations segment as the fair value of the Company.
The Company performed its annual goodwill impairment test as of December 31, 2011 and found no
indication of goodwill impairment at that date.
Core Deposit Intangibles
Core deposit intangible (“CDI”) is a measure of the value of checking and savings deposits acquired in a
business combination. 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 is amortized over the estimated useful lives of the existing deposit relationships acquired, but does 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 2011, 2010, or 2009. 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 is 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 $23.5 million, $20.1 million, and $20.0 million,
respectively, in the years ended December 31, 2011, 2010, and 2009.
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Mortgage Servicing Rights
The Company recognizes the right to service mortgage loans for others as a separate asset referred to as
mortgage servicing rights (“MSRs”). The Company has two classes of MSRs for which it separately manages the
economic risk: residential and securitized. (Please see Note 10, “Intangible Assets,” for additional information
regarding residential and securitized MSRs.) MSRs are generally obtained through the sale of one-to-four family
mortgage loans with servicing retained. The Company initially records MSRs at fair value. Subsequently, residential
MSRs are carried at fair value, with changes in fair value recorded as a component of non-interest income.
Securitized MSRs are subsequently 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. Such MSRs
are periodically evaluated for impairment, based on the difference between the carrying amount and current fair
value of the MSR. If it is determined that impairment exists, the resultant loss is charged against earnings.
The Company bases the fair value of its MSRs on the present value of estimated future net servicing income
cash flows utilizing an internal valuation model. The Company estimates future net servicing income cash flows
with assumptions that market participants would use to estimate fair value, including estimates of prepayment
speeds, discount rates, default rates, refinance rates, servicing costs, escrow account earnings, contractual servicing
fee income, and ancillary income. The Company reassesses and periodically adjusts the underlying inputs and
assumptions in the model to reflect market conditions and assumptions that a market participant would consider in
valuing the MSR asset.
Changes in the fair value of MSRs occur primarily due to the collection/realization of expected cash flows, as
well as changes in valuation inputs and assumptions.
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. At December 31, 2011 and 2010, the Company’s
investment in BOLI was $769.0 million and $742.5 million, respectively. The Company’s investment in BOLI
generated income of $28.4 million, $28.0 million, and $27.4 million, respectively, during the years ended December
31, 2011, 2010, and 2009.
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, less the estimated selling costs, 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. Following foreclosure, management periodically performs a valuation of the property,
and the real estate is carried at the lower of the carrying amount or fair value, less the estimated selling costs.
Revenues and expenses from operations and changes in valuation, if any, are included in general and administrative
expense in the Consolidated Statements of Income and Comprehensive Income. At December 31, 2011 and 2010,
the Company had other real estate owned (“OREO”) of $156.0 million and $90.5 million, respectively. The
respective amounts include OREO of $71.4 million and $62.4 million that is covered under the Company’s FDIC
loss sharing agreements.
Income Taxes
Income tax expense (benefit) 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 considers its 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 tax 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
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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 the best 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.
Stock Options and Incentives
The Company did not grant any stock options during the years ended December 31, 2011, 2010, or 2009. As
all previously issued stock options had vested prior to 2008, there were no unvested stock options outstanding at any
time during those years, and, accordingly, no compensation and benefits expense relating to stock options was
recorded.
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 and reaffirmed at the
Annual Meeting on June 2, 2011, shares are available for grant as stock options, restricted stock, or other forms of
related rights. At December 31, 2011, the Company had 3,010,058 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. For a more detailed discussion of the Company’s stock-based compensation, please see Note 12,
“Stock-Related Benefit Plans.”
Retirement Plans
The Company’s pension benefit obligations and post-retirement health and welfare benefit obligations, and the
related costs, are calculated using actuarial concepts in accordance with GAAP. 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 GAAP, 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 AOCL, until
they are amortized as a component of net periodic benefit cost. In addition, 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, December 31st.
Earnings per Share (Basic and Diluted)
Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of
common shares outstanding during the period. Prior to 2011, weighted-average common shares were adjusted to
exclude unallocated Employee Stock Ownership Plan (“ESOP”) shares. Diluted EPS is computed using the same
method as basic EPS, however, the computation reflects the potential dilution that would occur if outstanding in-the-
money stock options were exercised and converted into common stock.
Unvested stock-based compensation awards containing non-forfeitable rights to dividends are considered
participating securities and therefore are included in the two-class method for calculating EPS. Under the two-class
method, all earnings (distributed and undistributed) are allocated to common shares and participating securities
based on their respective rights to receive dividends. The Company grants restricted stock to certain employees
under its stock-based compensation plans. Recipients receive cash dividends during the vesting periods of these
awards (i.e., including on the unvested portion of such awards). Since these dividends are non-forfeitable, the
unvested awards are considered participating securities and therefore have earnings allocated to them.
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The following table presents the Company’s computation of basic and diluted EPS for the years ended
December 31, 2011, 2010, and 2009:
(in thousands, except share and per share amounts)
Net income
Less: Dividends paid on and earnings allocated to
participating securities
Earnings applicable to common stock
Years Ended December 31,
2010
$541,017
2011
$480,037
2009
$398,646
(3,614)
$476,423
(3,116)
$537,901
(2,251)
$396,395
Weighted average common shares outstanding
Basic earnings per common share
436,018,938
$1.09
433,740,639
$1.24
351,869,427
$1.13
Earnings applicable to common stock
$476,423
$537,901
$396,395
Weighted average common shares outstanding
Potential dilutive common shares (1)
Total shares for diluted earnings per share computation
Diluted earnings per common share and common share
equivalents
436,018,938
124,196
436,143,134
433,740,639
445,860
434,186,499
351,869,427
69,626
351,939,053
$1.09
$1.24
$1.13
(1) Options to purchase 6,302,302 shares, 2,815,862 shares, and 12,742,326 shares, respectively, of the Company’s common
stock that were outstanding as of December 31, 2011, 2010, and 2009, at respective weighted average exercise prices of
$16.30, $19.19, and $15.76, were excluded from the respective computations of diluted EPS because their inclusion would
have had an antidilutive effect.
Impact of Recent Accounting Pronouncements
In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill
for Impairment.” Under ASU 2011-08, entities can first assess qualitative factors to determine whether it is
necessary to perform the two-step quantitative goodwill impairment test. Under this amendment, an entity would not
be required to calculate the fair value of a reporting unit unless the entity determined, based on a qualitative
assessment, that it was more likely than not that its fair value was less than its carrying amount. The amendment
includes a number of events and circumstances for an entity to consider in conducting the qualitative assessment.
ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning
after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests
performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or
interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The
adoption of ASU 2011-08 is not expected to have a material effect on the Company’s consolidated statement of
condition or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” Under ASU
2011-05, an entity has the option to present the total of comprehensive income, the components of net income, and
the components of other comprehensive income, either in a single continuous statement of comprehensive income or
in two separate but consecutive statements. For both choices, an entity is required to present each component of net
income along with total net income, each component of other comprehensive income along with a total for other
comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to
present the components of other comprehensive income as part of the statement of changes in stockholders’ equity
but does not change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. ASU 2011-05 is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2011 and should be applied retroactively. Early adoption is
permitted, because compliance with the amendments is already permitted. The amendments do not require any
transition disclosures. The application of this guidance will only affect the presentation of the Company’s
consolidated financial statements and will have no impact on its consolidated statement of condition or results of
operations. In December 2011, the FASB delayed certain aspects of ASU 2011-05 that pertain to how and where
reclassification adjustments are presented.
In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards
(“IFRS”).” The amendments in ASU 2011-04 generally represent clarifications of Topic 820 (Fair Value), but also
include some instances where a particular principle or requirement for measuring fair value or disclosing
104
information about fair value measurements has changed. ASU 2011-04 results in common principles and
requirements for measuring fair value and for disclosing information about fair value measurements in accordance
with U.S. GAAP and IFRS. The amendments in ASU 2011-04 are to be applied prospectively and are effective
during interim and annual periods beginning after December 15, 2011. Early application is not permitted. The
adoption of ASU 2011-04 is not expected to have a material effect on the Company’s consolidated statement of
condition or results of operations.
In April 2011, the FASB issued ASU No. 2011-02, “A Creditor’s Determination of Whether a Restructuring
Is a Troubled Debt Restructuring.” ASU 2011-02 clarifies which loan modifications constitute troubled debt
restructurings (“TDRs”) and is intended to assist creditors in determining whether a modification of the terms of a
receivable meets the criteria to be considered a TDR, both for purposes of recording an impairment loss and for
disclosure of TDRs. In addition, ASU 2011-02 requires the disclosure of certain information relating to TDRs as
required by ASU 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for
Credit Losses.” These disclosures were previously deferred by ASU No. 2011-01, “Deferral of the Effective Date of
Disclosures about Troubled Debt Restructurings in Update No. 2010-20.” The new guidance is effective for interim
and annual periods beginning on or after June 15, 2011, and applies retroactively to restructurings occurring on or
after the beginning of the fiscal year of adoption. The adoption of ASU 2011-02 did not have a material effect on the
Company’s consolidated statement of condition or results of operations.
In July 2010, the FASB issued ASU 2010-20 to improve the disclosures that an entity provides about the
credit quality of its financing receivables and the related allowance for loan losses. As a result of these amendments,
an entity is required to disaggregate, by portfolio segment or class, certain existing disclosures, and to provide
certain new disclosures about its financing receivables and related allowance for loan losses. The disclosures as of
the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15,
2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual
reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not
require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity
should provide comparative disclosures for those reporting periods ending after initial adoption. For further details
on the Company’s credit quality disclosures, please refer to Note 4, “Loans” and Note 5, “Allowance for Loan
Losses.”
NOTE 3: SECURITIES
The following table summarizes the Company’s portfolio of securities available for sale at December 31,
2011:
(in thousands)
Mortgage-Related Securities:
GSE certificates
GSE CMOs (1)
Private label CMOs
Total mortgage-related securities
Other Securities:
GSE debentures
State, county, and municipal
Capital trust notes
Preferred stock
Common stock
Total other securities
Total securities available for sale (2)
Amortized
Cost
$ 97,642
62,373
25,306
$ 185,321
$ 456,969
1,188
36,754
--
42,863
$ 537,774
$ 723,095
December 31, 2011
Gross
Gross
Unrealized
Unrealized
Gain
Loss
Fair Value
$ 5,013
2,903
--
$ 7,916
$ 1,797
97
141
195
1,604
$ 3,834
$11,750
$
10
--
1,265
$ 1,275
$
--
--
4,692
--
4,216
$ 8,908
$10,183
$ 102,645
65,276
24,041
$ 191,962
$ 458,766
1,285
32,203
195
40,251
$ 532,700
$ 724,662
(1) Collateralized mortgage obligations
(2) The non-credit portion of OTTI recorded in AOCL was $570,000 (before taxes).
As of December 31, 2011, the fair value of marketable equity securities included common stock of $40.3 million
and Freddie Mac preferred stock of $195,000. The common stock primarily consisted of an investment in a large cap
equity fund and certain other funds that are Community Reinvestment Act (“CRA”) eligible. The Freddie Mac
preferred stock was recognized by the Company as other-than-temporarily impaired in the fourth quarter of 2008.
105
The following table summarizes the Company’s portfolio of securities available for sale at December 31,
2010:
(in thousands)
Mortgage-Related Securities:
GSE certificates
GSE CMOs
Private label CMOs
Total mortgage-related securities
Other Securities:
U.S. Treasury obligations
GSE debentures
Corporate bonds
State, county, and municipal
Capital trust notes
Preferred stock
Common stock
Total other securities
Total securities available for sale (1)
Amortized
Cost
$ 203,480
213,839
51,657
$ 468,976
$ 57,859
620
4,814
1,304
38,843
30,574
42,044
$ 176,058
$ 645,034
December 31, 2010
Gross
Gross
Unrealized
Unrealized
Gain
Loss
Fair Value
$ 8,067
8,464
110
$16,641
$
694
--
--
41
8,550
2,129
3,786
$15,200
$31,841
$
$
32
--
405
437
$
--
--
564
11
5,389
11,964
5,554
$23,482
$23,919
$211,515
222,303
51,362
$485,180
$ 58,553
620
4,250
1,334
42,004
20,739
40,276
$167,776
$652,956
(1) The non-credit portion of OTTI recorded in AOCL was $12.5 million (before taxes).
The following tables summarize the Company’s portfolio of securities held to maturity at December 31, 2011
and 2010:
(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 (1)
Amortized
Cost
Carrying
Amount
$ 660,945
2,331,916
3,379
$2,996,240
$ 660,945
2,331,916
3,379
$ 2,996,240
$ 633,258
54,759
153,334
$ 841,351
$3,837,591
$ 633,258
54,759
131,597
$ 819,614
$ 3,815,854
December 31, 2011
Gross
Unrealized
Gain
Gross
Unrealized
Loss
$ 47,064
93,216
--
$140,280
$ 14,878
2,826
12,362
$ 30,066
$170,346
$
$
--
--
--
--
$
146
12
19,857
$ 20,015
$ 20,015
Fair Value
$ 708,009
2,425,132
3,379
$3,136,520
$ 647,990
57,573
124,102
$ 829,665
$3,966,185
(1) Held-to-maturity securities are reported at a carrying amount equal to amortized cost less the non-credit portion of OTTI
recorded in AOCL. The non-credit portion of OTTI recorded in AOCL was $21.7 million (before taxes).
106
(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 (1)
Amortized
Cost
Carrying
Amount
$ 208,993
2,763,545
6,777
$2,979,315
$ 208,993
2,763,545
6,777
$ 2,979,315
$ 924,663
86,483
167,355
$1,178,501
$4,157,816
$ 924,663
86,483
145,474
$ 1,156,620
$ 4,135,935
December 31, 2010
Gross
Unrealized
Gain
Gross
Unrealized
Loss
$ 12,206
47,352
--
$ 59,558
$ 4,524
8,647
11,410
$ 24,581
$ 84,139
$ 1,094
28,345
--
$ 29,439
$ 10,592
13
22,708
$ 33,313
$ 62,752
Fair Value
$ 220,105
2,782,552
6,777
$3,009,434
$ 918,595
95,117
134,176
$1,147,888
$4,157,322
(1) The non-credit portion of OTTI recorded in AOCL was $21.9 million (before taxes).
The Company had $490.2 million and $446.0 million of FHLB stock, at cost, at December 31, 2011 and 2010,
respectively. The Company is required to maintain this investment in order to have access to the funding resources
provided by the FHLB.
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, 2011, 2010, and 2009:
(in thousands)
Gross proceeds
Gross realized gains
Gross realized losses
2011
December 31,
2009
2010
$862,755 $23,098 $10,338
338
--
28,116
11
22,438
8
In addition, during the twelve months ended December 31, 2011, the Company sold held-to-maturity
securities with gross proceeds of $284.4 million and gross realized gains of $8.5 million. These sales occurred
because the Company had either collected a substantial portion (at least 85%) of the initial principal balance or
because there was evidence of significant deterioration in the issuer’s creditworthiness.
The $156.3 million market value of the capital trust note portfolio at December 31, 2011 included three pooled
trust preferred securities. The following table details the pooled trust preferred securities that had at least one credit
rating below investment grade as of December 31, 2011:
(dollars in thousands)
Book value
Fair value
Unrealized (loss) gain
Lowest credit rating assigned to security
Number of banks/insurance companies
currently performing
Actual deferrals and defaults as a percentage of
original collateral
Expected deferrals and defaults as a percentage
of remaining performing collateral
Expected recoveries as a percentage of
remaining performing collateral
Excess subordination as a percentage of
remaining performing collateral
INCAPS
Funding I
Class B-2 Notes
$14,964
14,887
(77)
CCC-
Alesco Preferred
Funding VII Ltd.
Class C-1 Notes
$ 553
266
(287)
C
24
11%
24
--
11
59
33%
25
--
--
Preferred Term
Securities II
Mezzanine Notes
$629
753
124
C
24
36%
19
2
--
After taking into account the Company’s best estimates of future deferrals, defaults, and recoveries, two of the
pooled trust preferred securities had no excess subordination in the classes owned by the Company and one had
107
excess subordination of 11%. Excess subordination is calculated after taking into account the deferrals, defaults, and
recoveries noted in the table above, and indicates whether there is sufficient additional collateral to cover the
outstanding principal balance of the class owned, after taking into account these projected deferrals, defaults, and
recoveries.
The following table presents a roll-forward, from December 31, 2010 through December 31, 2011, of the
credit loss component of OTTI on debt securities for which a non-credit component of OTTI was recognized in
AOCL. The beginning balance represents the credit loss component for debt securities for which OTTI occurred
prior to January 1, 2011. For credit-impaired debt securities, OTTI recognized in earnings after that date is presented
as an addition in two components, based upon whether the current period was the first time a debt security was
credit-impaired (initial credit impairment) or was not the first time a debt security was credit-impaired (subsequent
credit impairment).
(in thousands)
Beginning credit loss amount as of December 31, 2010
Add: Initial other-than-temporary credit losses
Subsequent other-than-temporary credit losses
Amount previously recognized in AOCL
Less: Realized losses for securities sold
Securities intended or required to be sold
Increases in expected cash flows on debt securities
Ending credit loss amount as of December 31, 2011
For the Twelve Months Ended
December 31, 2011
$201,854
--
6,160
11,964
--
--
--
$219,978
OTTI losses on securities (consisting entirely of preferred stock) totaled $18.1 million in the year ended
December 31, 2011. As this entire amount was related to credit, it was recognized in earnings. OTTI was determined
based on the Company’s expectation that it would no longer receive any cash flows from the impaired security.
In 2010, OTTI losses on securities totaled $26.5 million and consisted of $12.8 million relating to preferred
stock and $13.7 million relating to trust preferred securities. The OTTI losses that were related to credit were
recognized in earnings and totaled $2.0 million. In 2009, the total OTTI loss on securities consisted of $96.3 million
on trust preferred securities ($86.6 million of which was recognized in earnings) and $10.0 million related to
corporate debt (all of which was recognized in earnings).
108
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C
An OTTI loss on impaired securities must be fully recognized in earnings if an investor has the intent to sell
the debt security or if it is more likely than not that the investor will be required to sell the debt security before
recovery of its amortized cost. However, even if an investor does not expect to sell a debt security, it must evaluate
the expected cash flows to be received and determine if a credit loss has occurred. In the event that a credit loss
occurs, only the amount of impairment associated with the credit loss is recognized in earnings. Amounts relating to
factors other than credit losses are recorded in AOCL. FASB guidance also requires additional disclosures regarding
the calculation of credit losses, as well as factors considered by the investor in reaching a conclusion that an
investment is not other-than-temporarily impaired.
Available-for-sale securities in unrealized loss positions are analyzed as part of the Company’s ongoing
assessment of OTTI. When the Company intends to sell such available-for-sale securities, the Company recognizes
an impairment loss equal to the full difference between the amortized cost basis and the fair value of those
securities. When the Company does not intend to sell available-for-sale equity or debt securities in an unrealized
loss position, potential OTTI is considered based on a variety of factors, including the length of time and extent to
which the fair value has been less than the cost; adverse conditions specifically related to the industry, the
geographic area, or financial condition of the issuer, or the underlying collateral of a security; the payment structure
of the security; changes to the rating of the security by a rating agency; the volatility of the fair value changes; and
changes in fair value of the security after the balance sheet date. For debt securities, the Company estimates cash
flows over the remaining life of the underlying collateral to assess whether credit losses exist and, where applicable,
to determine if any adverse changes in cash flows have occurred. The Company’s cash flow estimates take into
account expectations of relevant market and economic data as of the end of the reporting period. As of December
31, 2011, the Company did not intend to sell the securities with an unrealized loss position in AOCL, and it was
more likely than not that the Company would not be required to sell these securities before recovery of their
amortized cost basis. The Company believes that the securities with an unrealized loss position in AOCL were not
other-than-temporarily impaired as of December 31, 2011.
Other factors considered in determining whether a loss is temporary include the length of time and the extent
to which fair value has been below cost; the severity of the impairment; the cause of the impairment; the financial
condition and near-term prospects of the issuer; activity in the market of the issuer that may indicate adverse credit
conditions; and the forecasted recovery period using current estimates of volatility in market interest rates (including
liquidity and risk premiums).
Management’s assertion regarding its intent not to sell, or that it is not more likely than not that the Company
will be required to sell the security before its anticipated recovery, is based on a number of factors, including a
quantitative estimate of the expected recovery period (which may extend to maturity) and management’s intended
strategy with respect to the identified security or portfolio. If management does have the intent to sell, or believes it
is more likely than not that the Company will be required to sell the security before its anticipated recovery, the
unrealized loss is charged directly to earnings in the Consolidated Statement of Income and Comprehensive Income.
The unrealized losses on the Company’s GSE debentures at December 31, 2011 were primarily caused by
movements in market interest rates and spread volatility, rather than credit risk. The Company purchased these
investments either at par or at a discount relative to their face amount, and the contractual cash flows of these
investments are guaranteed by the GSEs. Accordingly, it is expected that these securities will not be settled at a price
that is less than the amortized cost of the Company’s investment. Because the Company does not have the intent to
sell the investments and it is not more likely than not that the Company will be required to sell them before
anticipated recovery of fair value, which may be at maturity, the Company did not consider these investments to be
other-than-temporarily impaired at December 31, 2011.
The Company reviews quarterly financial information related to its investments in capital trust notes as well as
other information that is released by each financial institution to determine the continued creditworthiness of the
issuer of the securities. The contractual terms of these investments do not permit settling the securities at prices that
are less than the amortized costs of the investments; therefore, the Company expects that these investments will not
be settled at prices that are less than their amortized costs. The Company continues to monitor these investments and
currently estimates that the present value of expected cash flows is not less than the amortized cost of the securities.
Because the Company does not have the intent to sell the investments, and it is not more likely than not that the
Company will be required to sell them before the anticipated recovery of fair value, which may be at maturity, it did
not consider these investments to be other-than-temporarily impaired at December 31, 2011. It is possible that these
securities will perform worse than is currently expected, which could lead to adverse changes in cash flows from
these securities and potential OTTI losses in the future. Events that may occur in the future at the financial
institutions that issued these securities could trigger material unrecoverable declines in the fair values of the
112
Company’s investments and therefore could result in future potential OTTI losses. Such events include, but are not
limited to, government intervention, deteriorating asset quality and credit metrics, significantly higher levels of
default and loan loss provisions, losses in value on the underlying collateral, deteriorating credit enhancement, net
operating losses, and further illiquidity in the financial markets.
The unrealized losses on the Company’s private label CMOs were insignificant at December 31, 2011.
Current characteristics of each security owned, such as delinquency and foreclosure levels, credit enhancement, and
projected losses and coverage, are reviewed periodically by management. Accordingly, it is expected that these
securities will not be settled at a price less than the amortized cost of the Company’s investment. Because the
Company does not have the intent to sell these investments, and it is not more likely than not that the Company will
be required to sell them before anticipated recovery of fair value, which may be at maturity, the Company did not
consider these investments to be other-than-temporarily impaired at December 31, 2011. It is possible that the
underlying loan collateral of these securities will perform worse than is currently expected, which could lead to
adverse changes in cash flows from these securities and potential OTTI losses in the future. Events that could trigger
material unrecoverable declines in fair value, and therefore potential OTTI losses for these securities in the future,
include, but are not limited to, deterioration of credit metrics, significantly higher levels of default, loss in value on
the underlying collateral, deteriorating credit enhancement, and further illiquidity in the financial markets.
At December 31, 2011, the Company’s equity securities portfolio consisted of perpetual preferred and
common stock, and mutual funds. The Company considers a decline in the fair value of available-for-sale equity
securities to be other than temporary if the Company does not expect to recover the entire amortized cost basis of the
security. In analyzing its investments in perpetual preferred stock for OTTI, the Company uses an impairment model
that is applied to debt securities, consistent with guidance provided by the SEC, provided that there has been no
evidence of deterioration in the creditworthiness of the issuer. The unrealized losses on the Company’s equity
securities were primarily caused by market volatility. In addition, perpetual preferred stock was impacted by
widening interest rate spreads across market sectors related to the continued illiquidity and uncertainty in the
marketplace. The Company evaluated the near-term prospects of a recovery of fair value for each security in the
portfolio, together with the severity and duration of impairment to date. Based on this evaluation, and the
Company’s ability and intent to hold these investments for a period of time reasonably sufficient to realize a near-
term forecasted recovery of fair value, the Company did not consider these investments to be other-than-temporarily
impaired at December 31, 2011. Nonetheless, it is possible that these equity securities will perform worse than is
currently expected, which could lead to adverse changes in their fair values, or the failure of the securities to fully
recover in value as presently forecasted by management, causing the Company to potentially record OTTI losses in
future periods. Events that could trigger material declines in the fair values of these securities include, but are not
limited to, deterioration in the equity markets; a decline in the quality of the loan portfolios of the issuers in which
the Company has invested; and the recording of higher loan loss provisions and net operating losses by such issuers.
The investment securities designated as having a continuous loss position for twelve months or more at
December 31, 2011 consisted of one mortgage-related security, eleven capital trust notes, and six equity securities.
At December 31, 2010, the investment securities designated as having a continuous loss position for twelve months
or more consisted of two mortgage-related securities, one corporate debt obligation, eleven capital trust notes, and
seven equity securities. At December 31, 2011 and 2010, the combined market value of the respective securities
represented unrealized losses of $28.3 million and $46.5 million. At December 31, 2011, the fair value of securities
having a continuous loss position for twelve months or more was 21.2% below the collective amortized cost of
$133.4 million. At December 31, 2010, the fair value of such securities was 24.0% below the collective amortized
cost of $193.5 million.
113
NOTE 4: LOANS
The following table sets forth the composition of the loan portfolio at December 31, 2011 and 2010:
December 31, 2011
December 31, 2010
(dollars in thousands)
Non-Covered Loans Held for Investment:
Mortgage Loans:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Total mortgage loans held for investment
Other Loans:
Commercial and industrial
Other
Total other loans held for investment
Total non-covered loans held for investment
Net deferred loan origination costs/(fees)
Allowance for losses on non-covered loans
Non-covered loans held for investment, net
Covered loans
Allowance for losses on covered loans
Total covered loans, net
Loans held for sale
Total loans, net
Non-Covered Loans
Loans Held for Investment
Amount
$17,430,628
6,855,244
445,671
127,361
$24,858,904
599,986
69,907
669,893
$25,528,797
4,021
(137,290)
$25,395,528
3,753,031
(33,323)
$ 3,719,708
1,036,918
$30,152,154
Percent of
Non-Covered
Loans Held for
Investment
68.28%
26.85
1.75
0.50
97.38
2.35
0.27
2.62
100.00%
Percent of
Non-Covered
Loans Held for
Investment
70.88%
22.94
2.40
0.72
96.94
2.70
0.36
3.06
100.00%
Amount
$16,807,913
5,439,611
569,537
170,392
$22,987,453
641,663
85,559
727,222
$23,714,675
(7,181)
(158,942)
$23,548,552
4,297,869
(11,903)
$ 4,285,966
1,207,077
$29,041,595
The vast majority of the loans the Company originates for investment are multi-family loans, most of which
are collateralized by non-luxury apartment buildings in New York City that feature below-market rents. In addition,
the Company originates commercial real estate (“CRE”) loans, most of which are collateralized by properties
located in New York City and, to a lesser extent, on Long Island and in New Jersey.
To a lesser extent, the Company also originates acquisition, development, and construction (“ADC”) loans and
commercial and industrial (“C&I”) loans. ADC loans are primarily originated for multi-family and residential tract
projects in New York City and on Long Island, while C&I loans are made to small and mid-size businesses in New
York City, Long Island, New Jersey, and, to a lesser extent, Arizona, on both a secured and unsecured basis, for
working capital, business expansion, and the purchase of machinery and equipment.
Payments on multi-family and CRE 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 the
Company’s borrowers to repay these loans may be impacted by adverse conditions in the local real estate market
and the local economy. While the Company generally requires that such loans be qualified on the basis of the
collateral property’s current cash flows, appraised value, and debt service coverage ratio, among other factors, there
can be no assurance that its underwriting policies will protect the Company from credit-related losses or
delinquencies.
ADC loans typically involve a higher degree of credit risk than loans secured by improved or owner-occupied
real estate. The risk of loss on an ADC loan is largely dependent upon the accuracy of the initial appraisal of the
property’s value upon completion of construction or development; the estimated cost of construction, including
interest; and the estimated time to complete and/or sell or lease such property. The Company seeks to minimize
these risks by maintaining consistent lending policies and rigorous underwriting standards. However, if the estimate
of value proves to be inaccurate, the cost of completion is greater than expected, the length of time to complete
and/or sell or lease the collateral property is greater than anticipated, or if there is a downturn in the local economy
or real estate market, the property could have a value upon completion that is insufficient to assure full repayment of
114
the loan. This could have a material adverse effect on the quality of the ADC loan portfolio, and could result in
significant losses or delinquencies.
The Company seeks 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 results of operations of the business.
In the second quarter of 2011, the Company sold $92.1 million of C&I loans in connection with the
disposition of the assets and liabilities of its insurance premium financing subsidiary, Standard Funding Corp. As a
result, the Company recognized a gain on business disposition of $9.8 million ($5.9 million after-tax) during the
three-month period.
The ability of the Company’s borrowers to repay their loans, and the value of the collateral securing such
loans, could be adversely impacted by continued or more significant economic weakness in its local markets as a
result of increased unemployment, declining real estate values, or increased residential and office vacancies. This
not only could result in the Company experiencing a further increase in charge-offs and/or non-performing assets,
but also could necessitate an increase in the provision for loan losses. These events, if they were to occur, would
have an adverse impact on the Company’s results of operations and its capital.
Loans Held for Sale
The Community Bank’s mortgage banking subsidiary, NYCB Mortgage Company, LLC, is one of the largest
aggregators of one-to-four family loans for sale to GSEs in the nation. Community banks, credit unions, mortgage
companies, and mortgage brokers use the subsidiary’s proprietary web-accessible mortgage banking platform to
originate and close one-to-four family loans in all 50 states. The Company sells these loans, primarily servicing
retained.
Prior to December 2010, the Company would originate one-to-four family loans in its branches and on its
website on a pass-through, or conduit, basis, and would sell the loans to the third-party conduit shortly after they
closed. Since December 2010, the Company has been originating one-to-four family loans through several selected
clients of its mortgage banking operation, rather than through the single third-party conduit with which it previously
worked. The one-to-four family loans produced for the Company’s customers are aggregated with loans produced
by its mortgage banking clients throughout the nation, and then sold.
The Company also services mortgage loans for various third parties. At December 31, 2011, the unpaid
principal balance of serviced loans amounted to $13.1 billion. At December 31, 2010, the unpaid principal balance
of serviced loans amounted to $9.5 billion. In accordance with the Purchase and Assumption Agreement between
the Community Bank and the FDIC, effective December 4, 2009, the Community Bank serviced the loans that were
acquired by the FDIC in the AmTrust acquisition for a period of one year, which ended prior to December 31, 2010.
Asset Quality
The following table presents information regarding the quality of the Company’s non-covered loans at
December 31, 2011:
(in thousands)
Multi-family
Commercial real estate
Acquisition, development, and
construction
One-to-four family
Commercial and industrial
Other
Total
30-89 Days
Past Due
$ 46,702
53,798
6,520
2,712
1,223
702
$111,657
Non-
Accrual
$205,064
68,032
29,886
11,907
8,827
2,099
$325,815
90 Days or More
Delinquent and
Still Accruing
Interest
$--
--
--
--
--
--
$--
Total Past
Due
$251,766
121,830
Current
$17,178,862
6,733,414
Total Loans
Receivable
$17,430,628
6,855,244
36,406
14,619
10,050
2,801
$437,472
409,265
112,742
589,936
67,106
$25,091,325
445,671
127,361
599,986
69,907
$25,528,797
115
The following table presents information regarding the quality of the Company’s non-covered loans at
December 31, 2010:
(in thousands)
Multi-family
Commercial real estate
Acquisition, development, and
construction
One-to-four family
Commercial and industrial
Other
Total
30-89 Days
Past Due
$121,188
8,207
5,194
5,723
9,324
1,404
$151,040
Non-
Accrual
$327,892
162,400
91,850
17,813
22,804
1,672
$624,431
90 Days or More
Delinquent and
Still Accruing
Interest
$--
--
Total Past
Due
$449,080
170,607
Current
Total Loans
Receivable
$16,358,833 $16,807,913
5,439,611
5,269,004
--
--
--
--
$--
97,044
23,536
32,128
3,076
$775,471
472,493
146,856
609,535
82,483
569,537
170,392
641,663
85,559
$22,939,204 $23,714,675
The following table summarizes the Company’s non-covered loan portfolio by credit quality indicator at
December 31, 2011:
(in thousands)
Credit Quality Indicator:
Multi-Family
Commercial
Real Estate
Acquisition,
Development,
and Construction
One-to-Four
Family
Total
Mortgage
Segment
Commercial
and
Industrial
Other
Total Other
Loan Segment
Pass
Special mention
Substandard
Doubtful
Total
$17,135,461
58,134
237,033
--
$17,430,628
$6,704,824
64,802
85,618
--
$6,855,244
$399,811
6,489
39,371
--
$445,671
$118,293 $24,358,389
129,425
371,090
--
$127,361 $24,858,904
--
9,068
--
$570,442 $67,808
--
2,099
--
$599,986 $69,907
13,234
15,928
382
$638,250
13,234
18,027
382
$669,893
The following table summarizes the Company’s non-covered loan portfolio by credit quality indicator at
December 31, 2010:
(in thousands)
Credit Quality Indicator:
Multi-Family
Commercial
Real Estate
Acquisition,
Development,
and Construction
One-to-Four
Family
Total
Mortgage
Segment
Commercial
and
Industrial
Other
Total Other
Loan Segment
Pass
Special mention
Substandard
Doubtful
Total
$16,097,834
172,713
535,366
2,000
$16,807,913
$5,239,936
22,650
176,797
228
$5,439,611
$454,570
6,650
108,317
--
$569,537
$158,240 $21,950,580
202,013
832,632
2,228
$170,392 $22,987,453
--
12,152
--
$594,373 $83,887
--
1,672
--
$641,663 $85,559
21,224
23,564
2,502
$678,260
21,224
25,236
2,502
$727,222
The preceding classifications follow regulatory guidelines and can be generally described as follows: pass
loans are of satisfactory quality; special mention loans have a potential weakness or risk that may result in the
deterioration of future repayment; substandard loans are inadequately protected by the current net worth and paying
capacity of the borrower or of the collateral pledged (these loans have a well-defined weakness and there is a distinct
possibility that the Company will sustain some loss); and doubtful loans, based on existing circumstances, have
weaknesses that make collection or liquidation in full highly questionable and improbable. In addition, one-to-four
family residential loans are classified utilizing an inter-regulatory agency methodology that incorporates the extent
of delinquency and the loan-to-value ratios. These classifications are the most current available and have been
generally updated within the last twelve months.
The interest income that would have been recorded under the original terms of non-accrual loans at the
respective year-ends, and the interest income actually recorded on these loans in the respective years, is summarized
below:
(in thousands)
Interest income that would have been recorded
Interest income actually recorded
Interest income foregone
2011
$14,072
(6,484)
$ 7,588
December 31,
2010
$32,943
(7,055)
$25,888
2009
$ 35,805
(13,929)
$ 21,876
116
Troubled Debt Restructurings
In accordance with GAAP, the Company is required to account for certain loan modifications or restructurings
as TDRs. In general, a modification or restructuring of a loan constitutes a TDR if the Company grants a concession
to a borrower experiencing financial difficulty. Loans modified in TDRs are placed on non-accrual status until the
Company determines that future collection of principal and interest is reasonably assured, which generally requires
that the borrower demonstrate performance according to the restructured terms for a period of at least six months.
In April 2011, the FASB issued guidance regarding the determination of whether or not a restructuring is a
TDR. In anticipation of such guidance, the Company began applying these more conservative metrics at the
beginning of 2011 and, accordingly, the Company did not record any additional TDRs as a result of adopting the
FASB’s new guidance later in the year.
The following table presents information regarding the Company’s TDRs as of December 31, 2011 and
December 31, 2010:
(in thousands)
Loan Category:
Multi-family
Commercial real estate
Acquisition, development, and
construction
Commercial and industrial
One-to-four family
Total
December 31, 2011
Accruing Non-Accrual
Total
December 31, 2010
Non-Accrual
Accruing
Total
$60,454
3,389
$166,248
39,054
$226,702
42,443
$148,738
3,917
$123,435
56,814
$272,173
60,731
--
--
--
$63,843
15,886
667
1,411
$223,266
15,886
667
1,411
$287,109
--
--
--
$152,655
17,666
5,381
1,520
$204,816
17,666
5,381
1,520
$357,471
In an effort to proactively manage delinquent loans, the Company has selectively extended to certain
borrowers concessions such as rate reductions, extension of maturity dates, and forbearance agreements. As of
December 31, 2011, loans on which concessions were made with respect to rate reductions and/or extension of
maturity dates amounted to $246.7 million, and loans on which forbearance agreements were reached amounted to
$40.4 million.
The eligibility of a borrower for work-out concessions of any nature depends upon the facts and circumstances
of each transaction, which may change from period to period, and involve judgment by Company personnel
regarding the likelihood that the concession will result in the maximum recovery for the Company.
The financial effects of the Company’s TDRs for the twelve months ended December 31, 2011 are
summarized as follows:
For the Twelve Months Ended December 31, 2011
(dollars in thousands)
Loan Category:
Multi-family
Commercial real estate
Acquisition, development,
and construction
Other
Total
Weighted Average Interest Rate
Post-
Modification
Pre-
Modification
Number
of Loans
22
7
2
1
32
4.33%
6.88
7.50
6.75
4.85
3.62%
4.00
5.00
4.00
4.07
Charge-off
Amount
$ 9,853
--
--
326
$10,179
During the twelve months ended December 31, 2011, there were no payment defaults on any loans that had
been modified as TDRs during the preceding twelve months. A loan is considered to be in payment default once it is
30 days contractually past due under the modified terms.
117
Covered Loans
The following table presents the carrying balance of covered loans acquired in the AmTrust and Desert Hills
acquisitions as of December 31, 2011:
(dollars in thousands)
Loan Category:
One-to-four family
All other loans
Total covered loans
Amount
$3,366,456
386,575
$3,753,031
Percent of
Covered Loans
89.7%
10.3
100.0%
The Company refers to the loans acquired in the AmTrust and Desert Hills acquisitions as “covered loans”
because the Company is being reimbursed for a substantial portion of losses on these loans under the terms of the
FDIC loss sharing agreements. Covered loans are accounted for under ASC 310-30, and initially measured at fair
value, which includes estimated future credit losses expected to be incurred over the lives of the loans. Under ASC
310-30, purchasers are permitted to aggregate acquired loans into one or more pools, provided that the loans have
common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and
an aggregate expectation of cash flows.
At December 31, 2011 and 2010, the outstanding balance of covered loans (i.e. amounts owed to the
Company) totaled $4.5 billion and $5.2 billion, respectively. The carrying values of such loans were $3.8 billion and
$4.3 billion, respectively, at the corresponding dates.
At the respective acquisition dates, the Company estimated the fair values of the AmTrust and Desert Hills
loan portfolios, which represented the expected cash flows from the portfolios discounted at market-based rates. In
estimating such fair value, the Company (a) calculated the contractual amount and timing of undiscounted principal
and interest payments (the “undiscounted contractual cash flows”); and (b) estimated the expected amount and
timing of undiscounted principal and interest payments (the “undiscounted expected cash flows”). The amount by
which the undiscounted expected cash flows exceed the estimated fair value (the “accretable yield”) is accreted into
interest income over the lives of the loans. The difference between the undiscounted contractual cash flows and the
undiscounted expected cash flows is referred to as the “non-accretable difference.” The non-accretable difference
represents an estimate of the credit risk in the loan portfolios at the acquisition date.
The accretable yield is affected by changes in interest rate indices for variable rate loans, changes in
prepayment assumptions, and changes in expected principal and interest payments over the estimated lives of the
loans. Changes in interest rate indices for variable rate loans increase or decrease the amount of interest income
expected to be collected depending on the direction of interest rates. Prepayments affect the estimated lives of
covered loans and could change the amount of interest income and principal expected to be collected. Changes in
expected principal and interest payments over the estimated lives of covered loans are driven by the credit outlook
and actions that may be taken with borrowers.
The Company periodically evaluates the estimates of the cash flows it expects to collect. Expected future cash
flows from interest payments are based on the variable rates at the time of the periodic evaluation. Estimates of
expected cash flows that are impacted by changes in interest rate indices for variable rate loans and prepayment
assumptions are treated as prospective yield adjustments and included in interest income.
Changes in the accretable yield for covered loans were as follows for the twelve months ended December 31,
2011:
(in thousands)
Balance at beginning of period
Reclassification from non-accretable difference
Accretion
Balance at end of period
Accretable Yield
$1,356,844
206,580
(197,446)
$1,365,978
The line item in the preceding table titled “reclassification from non-accretable difference” includes changes
in cash flows the Company expects to collect due to changes in prepayment assumptions and changes in interest
rates on variable rate loans. As of the Company’s last periodic evaluation, prepayment assumptions declined and,
accordingly, future expected principal and interest cash flows increased. This resulted in an increase in the
118
accretable yield. In addition, the increase in the expected principal and interest payments was driven by better
expectations relating to credit. These increases were partially offset by a reduction in the expected cash flows from
interest payments, as interest rates continued to be very low. As a result, a large percentage of the Company’s
covered variable rate loans continue to reset at lower interest rates.
In connection with the AmTrust and Desert Hills transactions, the Company has acquired OREO, all of which
is covered under FDIC loss sharing agreements. Covered OREO is initially recorded at its estimated fair value on
the acquisition date, based on independent appraisals less the estimated selling costs. Any subsequent write-downs
due to declines in fair value are charged to non-interest expense, and partially offset by loss reimbursements under
the FDIC loss sharing agreements. Any recoveries of previous write-downs are credited to non-interest expense and
partially offset by the portion of the recovery that is due to the FDIC.
The FDIC loss share receivable represents the present value of the estimated losses on covered loans to be
reimbursed by the FDIC. The estimated losses were based on the same cash flow estimates used in determining the
fair value of the covered loans. The FDIC loss share receivable is reduced as losses on covered loans are recognized
and as loss sharing payments are received from the FDIC. Realized losses in excess of acquisition-date estimates
will result in an increase in the FDIC loss share receivable. Conversely, if realized losses are less than the
acquisition-date estimates, the FDIC loss share receivable will be reduced.
The following table presents information regarding the Company’s covered loans 90 days or more past due at
December 31, 2011 and 2010:
(in thousands)
Covered Loans 90 Days or More Past Due:
One-to-four family
Other loans
Total covered loans 90 days or more past due
December 31,
2011
2010
$314,821
32,621
$347,442
$310,929
49,898
$360,827
The following table presents information regarding the Company’s covered loans that were 30 to 89 days past
due at December 31, 2011 and 2010:
(in thousands)
Loans 30-89 Days Past Due:
One-to-four family
Other loans
Total loans 30-89 days past due
December 31,
2011
2010
$103,495
8,494
$111,989
$108,691
21,851
$130,542
At December 31, 2011, the Company had $112.0 million of covered loans that were 30 to 89 days past due,
and covered loans of $347.4 million that were 90 days or more past due but considered to be performing due to the
application of the yield accretion method under ASC 310-30. The remaining portion of the Company’s covered loan
portfolio totaled $3.3 billion at December 31, 2011 and is considered current as of that date. ASC 310-30 allows the
Company to aggregate credit-impaired loans acquired in the same fiscal quarter into one or more pools, provided
that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single
composite interest rate and an aggregate expectation of cash flows. Accordingly, loans that may have been classified
as non-performing loans by AmTrust or Desert Hills are no longer classified as non-performing because, at the
respective dates of acquisition, the Company believed that it would fully collect the new carrying value of these
loans. The new carrying value represents the contractual balance, reduced by the portion that is expected to be
uncollectible (referred to as the “non-accretable difference”) and by an accretable yield (discount) that is recognized
as interest income. It is important to note that management’s judgment is required in reclassifying loans subject to
ASC 310-30 as performing loans, and its judgment is dependent on having a reasonable expectation about the timing
and amount of the cash flows to be collected, even if the loan is contractually past due.
The primary credit quality indicator for covered loans is the expectation of underlying cash flows. At
December 31, 2011, the balance of pools with an adverse change in expected cash flows was $497.4 million. These
pools consisted of one-to-four family loans of $184.9 million and other loans of $312.5 million. At December 31,
2010, the balance of pools with an adverse change in expected cash flows was $3.3 billion. These pools consisted of
one-to-four family loans of $3.1 billion and other loans of $281.4 million.
119
The Company recorded a $21.4 million provision for losses on covered loans during the twelve months ended
December 31, 2011. This provision was largely due to credit deterioration in the portfolio of C&I loans acquired in
the Desert Hills acquisition and in the portfolios of home equity lines of credit (“HELOCs”) acquired in the
acquisitions of both AmTrust and Desert Hills. The provision for covered loans was largely offset by FDIC
indemnification income of $17.6 million that was recorded in non-interest income for the twelve months ended
December 31, 2011.
NOTE 5: ALLOWANCES FOR LOAN LOSSES
The following table provides additional information regarding the Company’s allowances for losses on non-
covered loans and covered loans, based upon the method of evaluating loan impairment:
(in thousands)
Allowance for Loan Losses at December 31, 2011:
Individually evaluated for impairment
Collectively evaluated for impairment
Acquired loans with deteriorated credit quality
Total
Mortgage
Other
Total
$ 490
121,505
14,227
$136,222
$ --
15,295
19,096
$34,391
$ 490
136,800
33,323
$170,613
(in thousands)
Allowance for Loan Losses at December 31, 2010:
Individually evaluated for impairment
Collectively evaluated for impairment
Acquired loans with deteriorated credit quality
Total
Mortgage
Other
Total
$ 15,877
124,957
4,873
$145,707
$ 130
17,978
7,030
$25,138
$ 16,007
142,935
11,903
$170,845
The following table provides additional information regarding the methods used to evaluate the Company’s
loan portfolio for impairment:
(in thousands)
Loans Receivable at December 31, 2011:
Individually evaluated for impairment
Collectively evaluated for impairment
Acquired loans with deteriorated credit quality
Total
Mortgage
Other
Total
$ 324,427 $ 5,995 $ 330,422
25,198,375
24,534,477
3,753,031
3,366,456
$28,225,360 $1,056,468 $29,281,828
663,898
386,575
(in thousands)
Loans Receivable at December 31, 2010:
Individually evaluated for impairment
Collectively evaluated for impairment
Acquired loans with deteriorated credit quality
Total
Non-Covered Loans
Mortgage
Other
Total
$ 747,869 $ 12,929 $ 760,798
22,953,877
22,239,584
4,297,869
3,874,449
$26,861,902 $1,150,642 $28,012,544
714,293
423,420
The following table summarizes activity in the allowance for losses on non-covered loans for the years ended
December 31, 2011, 2010, and 2009:
(in thousands)
Balance, beginning of year
Provision for loan losses
Charge-offs
Recoveries
Balance, end of year
December 31,
2010
2011
2009
$ 158,942 $127,491 $ 94,368
63,000
(29,931)
54
$ 137,290 $158,942 $127,491
79,000
(105,910)
5,258
91,000
(60,785)
1,236
Please see Note 2, “Summary of Significant Accounting Polices” for additional information regarding the
Company’s allowance for losses on non-covered loans.
120
The following table presents additional information regarding the Company’s impaired non-covered loans at
December 31, 2011:
(in thousands)
Impaired Loans with No Related Allowance:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Commercial and industrial
Total impaired loans with no related allowance
Recorded
Investment
$235,100
49,258
26,680
1,127
5,995
$318,160
Impaired Loans with An Allowance Recorded:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Commercial and industrial
$ 6,329
5,648
--
285
--
Unpaid
Principal
Balance
$244,684
52,152
27,143
1,520
10,240
$335,739
$ 6,899
5,857
--
373
--
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
$ --
--
--
--
--
$ --
$408
53
--
29
--
$321,994
63,032
42,600
2,649
6,442
$436,717
$ 10,893
10,297
14,495
71
1,837
$3,435
1,397
1,141
10
60
$6,043
$ 187
--
--
--
--
Total impaired loans with an allowance
recorded
Total Impaired Loans:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Commercial and industrial
Total impaired loans
$ 12,262
$ 13,129
$490
$ 37,593
$ 187
$241,429
54,906
26,680
1,412
5,995
$330,422
$251,583
58,009
27,143
1,893
10,240
$348,868
$408
53
--
29
--
$490
$332,887
73,329
57,095
2,720
8,279
$474,310
$3,622
1,397
1,141
10
60
$6,230
The following table presents additional information regarding the Company’s impaired non-covered loans at
December 31, 2010:
(in thousands)
Loans with No Related Allowance:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Commercial and industrial
Total impaired loans with no related allowance
Loans with An Allowance Recorded:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Commercial and industrial
Total impaired loans with an allowance recorded
Total Impaired Loans:
Multi-family
Commercial real estate
Acquisition, development, and construction
One-to-four family
Commercial and industrial
Total impaired loans
Unpaid
Principal
Balance
$464,011
122,486
71,541
3,707
15,197
$676,942
$ 52,209
25,894
37,634
373
2,010
$118,120
$516,220
148,380
109,175
4,080
17,207
$795,062
Related
Allowance
$
$
--
--
--
--
--
--
$ 6,756
1,555
7,553
13
130
$16,007
$ 6,756
1,555
7,553
13
130
$16,007
Recorded
Investment
$447,137
120,087
65,453
3,611
10,919
$647,207
$ 50,153
25,700
35,355
373
2,010
$113,591
$497,290
145,787
100,808
3,984
12,929
$760,798
121
The average balances of impaired loans in 2011, 2010, and 2009 were $474.3 million, $696.5 million, and
$469.5 million, respectively. The interest income recorded on these loans, which was not materially different from
cash-basis interest income, was $6.2 million, $14.9 million, and $18.3 million in the corresponding years.
Covered Loans
Under the loss sharing agreements with the FDIC, covered loans are reported exclusive of the FDIC loss share
receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions are, and will continue to be,
reviewed for collectability based on the expectations of cash flows from these loans. Covered loans have been
aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered
loans, the Company periodically performs an analysis to estimate the expected cash flows for each of the loan pools.
The Company records a provision for loan losses on covered loans to the extent that the expected cash flows from a
loan pool have decreased since the acquisition date. Accordingly, if there is a decrease in expected cash flows due to
an increase in estimated credit losses compared to the estimates made at the respective acquisition dates, the
decrease in the present value of expected cash flows is recorded as a provision for covered loan losses charged to
earnings, and an allowance for covered loan losses is established. A related credit to non-interest income and an
increase in the FDIC loss share receivable is recognized at the same time, and measured based on the loss sharing
agreement percentages.
The following table summarizes activity in the allowance for losses on covered loans for the years ended
December 31, 2011 and 2010:
(in thousands)
Balance, beginning of period
Provision for losses on covered loans
Balance, end of period
NOTE 6: DEPOSITS
December 31,
2011
$11,903
21,420
$33,323
2010
$
--
11,903
$11,903
The following table sets forth a summary of the weighted average interest rates for each type of deposit at
December 31, 2011 and 2010:
December 31,
Amount
(dollars in thousands)
NOW and money market accounts $ 8,757,198
3,953,859
Savings accounts
7,373,263
Certificates of deposit
2,189,810
Non-interest-bearing accounts
$22,274,130
Total deposits
2011
Percent of
Total
39.32%
17.75
33.10
9.83
100.00%
Weighted
Average
Rate (1)
0.39%
0.34
1.33
--
0.65%
Amount
$ 8,235,825
3,885,785
7,835,161
1,852,280
$21,809,051
2010
Weighted
Percent of
Average
Rate (1)
Total
37.76% 0.56%
17.82
35.93
8.49
0.43
1.58
--
100.00% 0.86%
(1) Excludes the effect of purchase accounting adjustments for certificates of deposits (“CDs”).
At December 31, 2011 and 2010, the aggregate amounts of deposits that had been reclassified as loan balances
(i.e., overdrafts) were $8.9 million and $5.6 million, respectively.
The scheduled maturities of CDs at December 31, 2011 were 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 CDs
$5,471,551
1,166,187
318,106
124,296
284,625
8,498
$7,373,263
122
The following table presents a summary of CDs in amounts of $100,000 or more, by remaining term to
maturity, at December 31, 2011:
(in thousands)
Total
0 – 3
Months
$906,291
CDs of $100,000 or More Maturing Within
Over 6 to
12 Months
$567,617
Over 3 to
6 Months
$691,391
Over 12
Months
$807,460
Total
$2,972,759
At December 31, 2011 and 2010, the aggregate amounts of CDs of $100,000 or more were $3.0 billion and
$3.1 billion, respectively.
Included in total deposits at December 31, 2011 and 2010 were brokered deposits of $3.9 billion and $3.0
billion, respectively. Brokered deposits had weighted average interest rates of 0.35% and 0.59% at the respective
year-ends. Brokered money market accounts represented $3.8 billion and $2.9 billion, respectively, of the year-end
2011 and 2010 totals. Brokered non-interest bearing accounts represented $61.6 million and $35.8 million,
respectively, of the year-end 2011 and 2010 totals. There were no brokered CDs at December 31, 2011 or 2010.
NOTE 7: BORROWED FUNDS
The following table summarizes the Company’s borrowed funds at December 31, 2011 and 2010:
(in thousands)
FHLB advances
Repurchase agreements
Junior subordinated debentures
Senior notes
Preferred stock of subsidiaries
Total borrowed funds
December 31,
2011
$ 9,314,193
4,125,000
426,936
89,984
4,300
$13,960,413
2010
$ 8,375,659
4,125,000
426,992
601,865
6,600
$13,536,116
FHLB advances at December 31, 2011 are reported net of acquisition accounting adjustments of $32.1
million.
Accrued interest on borrowed funds is included in “other liabilities” in the Consolidated Statements of
Condition, and amounted to $48.0 million and $49.7 million, respectively, at December 31, 2011 and 2010.
FHLB Advances
The contractual maturities and the next call dates of FHLB advances outstanding at December 31, 2011 were
as follows:
Contractual Maturity
Earlier of Contractual Maturity
or Next Call Date
(dollars in thousands)
Year of Maturity
2012
2013
2014
2015
2016
2017
2018
2025
Total FHLB advances
Amount
$1,614,353
85,991
105,557
600,807
2,115,000
3,856,146
936,085
254
$9,314,193
Weighted
Average
Interest Rate
0.34%
3.25
1.99
3.50
4.35
4.13
3.03
7.82
3.34%
Amount
$9,285,343
25,991
495
807
--
--
1,303
254
$9,314,193
Weighted
Average
Interest Rate
3.34%
3.40
0.66
0.69
--
--
3.09
7.82
3.34%
FHLB advances include both straight fixed-rate advances and advances under the FHLB convertible advance
program, which gives the FHLB 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.
123
At December 31, 2011, the Company had $1.6 billion in short-term FHLB advances with an interest rate of
0.31%. During 2011, the average balance of short-term FHLB advances was $164.8 million with an interest rate of
0.39%, generating interest expense of $650,000. At December 31, 2010, the Company had $400.0 million in short-
term FHLB advances with an interest rate of 0.36%. During 2010, the average balance of short-term FHLB
advances was $2.2 million with an interest rate of 0.36%, generating interest expense of $8,000.
At December 31, 2011 and 2010, the Banks had combined unused lines of available credit of up to $3.7 billion
and $3.3 billion, respectively, with the FHLB-NY; the respective amounts exclude repurchase agreements. There
were no overnight advances outstanding at December 31, 2011. At December 31, 2010, the Company had $100.0
million outstanding in overnight advances with the FHLB-NY. In 2010, and 2009, the average balances of overnight
advances amounted to $1.1 million and $111.9 million, respectively, and had weighted average interest rates of
0.62% and 0.47%, respectively. FHLB-NY advances and overnight advances are secured by pledges of certain
eligible collateral, which may consist of eligible loans or mortgage-related securities.
The interest expense on FHLB advances was $313.4 million, $318.8 million, and $309.0 million, respectively,
in the years ended December 31, 2011, 2010, and 2009.
Repurchase Agreements
The following table presents on analysis of the contractual maturities and the next call dates of the Company’s
outstanding repurchase agreements at December 31, 2011:
(dollars in thousands)
Year of Maturity
2012
2013
2015
2016
2017
2018
2020
Contractual Maturity
Earlier of Contractual Maturity
or Next Call Date
Amount
$ --
700,000
100,000
345,000
1,080,000
1,600,000
300,000
$4,125,000
Weighted
Average
Interest Rate
--%
3.04
2.50
4.09
4.08
3.48
2.93
3.54%
Amount
$3,643,000
200,000
100,000
182,000
--
--
--
$4,125,000
Weighted
Average
Interest Rate
3.61%
2.83
2.50
3.58
--
--
--
3.54%
The following table provides the contractual maturity and weighted average interest rate of repurchase
agreements, and the amortized cost and fair value (including accrued interest) of the securities collateralizing the
repurchase agreements, at December 31, 2011:
(dollars in thousands)
Contractual Maturity
Over 90 days
Amount
$4,125,000
Weighted Average
Interest Rate
3.54%
Amortized
Cost
$3,251,187
Fair Value
$3,398,156
Mortgage-Related and
Other Securities
GSE Debentures and
U.S. Treasury Obligations
Amortized
Cost
$930,826
Fair Value
$946,670
The Company had no short-term repurchase agreements outstanding at or during the years ended December
31, 2011, 2010, or 2009.
At December 31, 2011 and 2010, the accrued interest on repurchase agreements amounted to $13.8 million
and $13.9 million, respectively. The interest expense on repurchase agreements was $147.1 million, $148.4 million,
and $149.5 million, respectively, in the years ended December 31, 2011, 2010, and 2009.
Federal Funds Purchased
The Company had no federal funds purchased outstanding at December 31, 2011 or 2010.
In 2009, the average balance of federal funds purchased was $577.8 million and had a weighted average
interest rate of 0.37%. The interest expense produced by federal funds purchased was $2.1 million in the year ended
December 31, 2009.
124
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On November 4, 2002, the Company completed a public offering of 5,500,000 Bifurcated Option Note Unit
SecuritiESSM (“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 Statement of Condition. 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. At December 31, 2011, this discount totaled $67.9 million, reflecting the
exchange offer described below.
On July 29, 2009, the Company announced the commencement of an offer to exchange shares of its common
stock for any and all of the 5,498,544 outstanding BONUSES units (the “Offer to Exchange”). All holders of
BONUSES units were eligible to participate in the exchange offer. A total of 1,393,063 BONUSES units were
validly tendered, not withdrawn, and accepted in the exchange offer, representing 25.3% of the 5,498,544
BONUSES units outstanding at the exchange offer’s expiration date. As a result, trust preferred securities totaling
$48.6 million were extinguished in August 2009. In accordance with the terms of the Offer to Exchange, the
Company issued 3.4144 shares (the “Exchange Ratio”) of its common stock for each BONUSES unit that was
tendered, not withdrawn, and accepted. The Exchange Ratio was determined by adding (i) 2.4953 common shares to
(ii) 0.9191 common shares. The latter number was determined by dividing $10.00 by $10.88, the average of the
daily volume-weighted average price of the Company’s common stock during the five consecutive trading days
ending on August 21, 2009. The Company issued 4.8 million shares of its common stock as a result of the Offer to
Exchange. In addition, a $5.7 million gain on debt exchange was recorded in non-interest income in the third quarter
of 2009.
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”). 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 table on the preceding page. 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, 2011, 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. In the fourth quarter of
2009, the Company repurchased $7.5 million of New York Community Capital Trust XI, resulting in a $3.1 million
pre-tax gain that was recorded in non-interest income.
Interest expense on junior subordinated debentures was $24.4 million, $24.4 million, and $28.7 million,
respectively, for the years ended December 31, 2011, 2010, and 2009.
Senior Notes
On December 22, 2008, the Company (on a stand-alone basis) completed an offering of $90.0 million of
2.55% Fixed Rate Senior Notes, due June 22, 2012, at a price of 99.875%. Interest is payable semi-annually in
arrears on June 22nd and December 22nd of each year, commencing on June 22, 2009. These notes are guaranteed
by the FDIC (for an annual assessment rate of 100 basis points, which is included in interest expense over the life of
the debt) under the Temporary Liquidity Guarantee Program (the “TLGP”) and are backed by the full faith and
credit of the United States. These notes may not be redeemed prior to their stated maturity. The senior notes issued
126
by the Company are its direct, unconditional, unsecured, and general obligation, and rank equally with all other
senior unsecured indebtedness of the Company.
On December 17, 2008, the Community Bank completed an offering of $512.0 million of 3.00% Fixed Rate
Senior Notes due December 16, 2011, at a price of 99.949%. Interest was payable semi-annually in arrears on
June 16th and December 16th of each year, commencing on June 16, 2009. These notes were also FDIC-guaranteed
(for an annual assessment rate of 100 basis points) under the TLGP, and were backed by the full faith and credit of
the United States. On December 16, 2011, the Community Bank repaid these notes in entirety.
Interest expense on senior notes amounted to $23.8 million, $24.4 million, and $24.1 million in the years
ended December 31, 2011, 2010, and 2009, 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 (“RCCC”), a
wholly-owned real estate investment trust (“REIT”) of the Company, 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.
In 2010, RCCC repurchased 202 shares, or $20.2 million, of its previously issued Series C Preferred Stock, as
a result of which the Company recorded a pre-tax gain of $1.5 million in non-interest income. In 2009, RCCC
repurchased 30 shares, or $3.0 million, of its previously issued Series C Preferred Stock, as a result of which the
Company recorded a pre-tax gain of $300,000 in non-interest income.
In 2010, RCCC repurchased 20 shares, or $2.0 million, of its previously issued Series B Preferred Stock and,
as a result, the Company recorded a pre-tax loss of $22,000 in non-interest income.
On October 27, 2003, Roslyn Real Estate Asset Corp. (“RREA”), a wholly-owned REIT that was acquired by
the Company in its merger with Roslyn Bancorp, Inc. (“Roslyn”), 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.
In 2011, RREA repurchased 23 shares, or $2.3 million, of its previously issued RREA Series C Preferred
Stock, as a result of which the Company recorded a pre-tax gain of $46,000 in non-interest income.
In 2010, RREA repurchased 250 shares, or $25.0 million, of its previously issued RREA Series D Preferred
Stock, as a result of which the Company recorded a pre-tax gain of $1.6 million in non-interest income. RREA also
repurchased 100 shares, or $1.0 million, of its previously issued RREA Series C Preferred Stock in 2010, as a result
of which the Company recorded a pre-tax loss of $65,000 in non-interest income. During 2009, RREA repurchased
100 shares, or $10.0 million, of its previously issued RREA Series D Non-Cumulative Exchangeable Floating-Rate
Preferred Stock and, as a result, the Company recorded a pre-tax gain of $963,000 in non-interest income.
127
Dividends on preferred stock of subsidiaries are recorded as interest expense and amounted to $223,000; $1.3
million; and $2.9 million, respectively, for the years ended December 31, 2011, 2010, and 2009.
NOTE 8: FEDERAL, STATE, AND LOCAL TAXES
The following table summarizes the components of the Company’s net deferred tax asset at December 31,
2011 and 2010:
(in thousands)
Deferred Tax Assets:
Allowance for loan losses
Compensation and related benefit obligations
Acquisition accounting and fair value adjustments on securities
(including OTTI)
Acquisition accounting adjustments on borrowed funds
Non-accrual interest
Restructuring and retirement of borrowed funds
Acquisition-related costs
Other
Gross deferred tax assets
Valuation allowance
Deferred tax asset after valuation allowance
Deferred Tax Liabilities:
Amortizable intangibles
Acquisition accounting and fair value adjustments on loans
(including the FDIC loss share receivable)
Mortgage servicing rights
Premises and equipment
Prepaid pension cost
Other
Gross deferred tax liabilities
Net deferred tax asset
December 31,
2011
2010
$ 82,800 $ 76,169
22,093
24,208
48,396
12,979
24,176
7,976
975
15,868
217,378
--
56,347
18,545
18,529
29,604
1,308
14,568
237,163
--
$ 217,378 $ 237,163
(14,816)
(23,267 )
(29,530)
(40,543)
(29,333)
(6,670)
(14,646)
(135,538)
(42,019 )
(41,946 )
(22,225 )
(7,969 )
(6,501 )
(143,927 )
$ 81,840 $ 93,236
The net deferred tax asset, which is included in “other assets” in the Consolidated Statements of Condition at
December 31, 2011 and 2010, 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.
The Company has determined that at December 31, 2011, all deductible temporary differences are more likely
than not to provide a benefit in reducing future federal, state, and local tax liabilities, as applicable.
The following table summarizes the Company’s income tax expense (benefit) for the years ended December
31, 2011, 2010, and 2009:
(in thousands)
Federal – current
State and local – current
Total current
Federal – deferred
State and local – deferred
Total deferred
Total income tax expense
2011
$186,936
41,000
227,936
28,672
(2,068)
26,604
$254,540
December 31,
2010
$220,785
33,636
254,421
34,862
7,171
42,033
$296,454
2009
$193,108
16,028
209,136
(30,482)
15,849
(14,633)
$194,503
128
The following table presents a reconciliation of statutory federal income tax expense (benefit) to combined
actual income tax expense (benefit) for the years ended December 31, 2011, 2010, and 2009:
(in thousands)
Statutory federal income tax expense at 35%
State and local income taxes, net of federal income tax effect
Effect of tax deductibility of ESOP
Non-taxable income and expense of BOLI
Federal tax credits
Adjustments relating to prior tax years
Other, net
Total income tax expense
2011
$257,102
25,306
(6,739 )
(9,848)
(6,194)
(5,152)
65
$254,540
December 31,
2010
2009
$293,115 $207,602
20,719
(5,666)
(9,592)
(6,048)
(13,160)
648
$296,454 $194,503
26,525
(5,243)
(9,805)
(5,955)
(1,342)
(841)
FASB guidance 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.
As of December 31, 2011, the Company had $8.9 million of unrecognized gross tax benefits. Gross tax
benefits do not reflect the federal tax effect associated with state tax amounts.
The total amount of net unrecognized tax benefits at December 31, 2011 that would affect the effective tax
rate, if recognized, was $5.8 million.
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. During the years ended
December 31, 2011, 2010, and 2009, the Company recognized income tax benefit attributed to interest and penalties
of $2.5 million, $1.1 million, and $1.4 million, respectively. Accrued interest and penalties on tax liabilities were
$1.1 million at December 31, 2011 and $900,000 at December 31, 2010.
The following table summarizes changes in the liability for unrecognized gross tax benefits for the years
ended December 31, 2011, 2010, and 2009:
(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 end of year
2011
2009
December 31,
2010
$13,068 $ 9,327 $ 24,153
762
6,103
778
2,221
(13,509)
(2,677)
(2,857)
(1,906)
$ 8,922 $13,068 $ 9,327
457
--
(4,603)
--
The Company and its acquired companies have filed tax returns in many states. The following are the more
significant tax filings that are open for examination:
(cid:120) Federal tax filings of the Company for tax years 2009 through the present;
(cid:120) New York State tax filings of the Company for tax years 2007 through the present;
(cid:120) New York City tax filings of the Company for tax years 2009 through the present; and
(cid:120) New Jersey tax filings of the Company and certain acquired companies for tax years 2007 through the
present.
It is reasonably possible that there will be developments within the next twelve months that would necessitate
an adjustment to the balance of unrecognized tax benefits. The Company does not believe that the ranges of possible
adjustments for each federal, state, and local tax position would be material.
As a savings institution, the Community Bank is subject to a special federal tax provision regarding its frozen
tax bad debt reserve. At December 31, 2011, the Community Bank’s federal tax bad debt base-year reserve was
$61.5 million, with a related net deferred tax liability of $21.5 million, which has not been recognized since the
129
Community Bank does not expect that this reserve will become taxable in the foreseeable future. Events that would
result in taxation of this reserve include redemptions of the Community Bank’s stock or certain excess distributions
by the Community Bank to the Company.
NOTE 9: COMMITMENTS AND CONTINGENCIES
Pledged Assets
At December 31, 2011 and 2010, the Company had pledged mortgage-related securities held to maturity, each
with a carrying value of $3.0 billion. The Company also had pledged other securities held to maturity with carrying
values of $617.8 million and $923.5 million at the respective dates. In addition, the Company had pledged available-
for-sale mortgage-related securities and other securities with respective carrying values of $158.0 million and
$432.5 million at December 31, 2011, and of $437.5 million and $63.3 million at December 31, 2010. The pledged
securities primarily serve as collateral for the Company’s repurchase agreements.
Loan Commitments and Letters of Credit
At December 31, 2011 and 2010, the Company had commitments to originate loans, including unused lines of
credit, of $2.7 billion and $1.7 billion, respectively. The majority of the outstanding loan commitments at December
31, 2011 and 2010 had adjustable interest rates and were expected to close within 90 days of the respective dates.
The following table sets forth the Company’s off-balance-sheet commitments relating to outstanding loan
commitments and letters of credit at December 31, 2011:
(in thousands)
Mortgage Loan Commitments:
Multi-family and commercial real estate
Acquisition, development, and construction
One-to-four family held for sale
Total mortgage loan commitments
Other loan commitments
Total loan commitments
Commercial, performance, and financial stand-by letters of credit
Total commitments
$1,089,614
92,974
1,136,230
$2,318,818
423,924
$2,742,742
172,888
$2,915,630
Lease and License Commitments
At December 31, 2011, 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)
2012
2013
2014
2015
2016
2017 and thereafter
Total minimum future rentals
$ 26,525
23,408
20,487
14,215
12,312
53,296
$150,243
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 $28.1 million, $34.0 million,
and $26.3 million in the years ended December 31, 2011, 2010, and 2009, respectively. Rental income on bank-
owned properties, netted in occupancy and equipment expense, was approximately $3.8 million, $2.7 million, and
$2.6 million in the corresponding periods. Minimum future rental income under non-cancelable sublease agreements
aggregated $126,000 at December 31, 2011.
130
Financial Guarantees
The Company provides guarantees and indemnifications to its customers to enable them to complete a variety
of business transactions and to enhance their credit standings. These guarantees are recorded at their respective fair
values in “other liabilities” in the Consolidated Statements of Condition. 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, 2011:
(in thousands)
Financial stand-by letters of credit
Performance stand-by letters of credit
Commercial letters of credit
Loans with recourse
Expires
Within One
Year
$18,826
4,333
18,408
--
$41,567
Expires
After One
Year
$1,048
6,937
--
160
$8,145
Total
Outstanding
Amount
$19,874
11,270
18,408
160
$49,712
Maximum Potential
Amount of
Future Payments
$ 47,979
13,249
111,660
160
$173,048
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 it has sold or otherwise
transferred to a third party. Also outstanding at December 31, 2011 were $29,000 of bankers’ acceptances.
In October 2007, Visa U.S.A., a subsidiary of Visa Inc. (“Visa”) completed a reorganization in contemplation
of its initial public offering, which was subsequently completed in March 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. In accordance with GAAP, the Company did not recognize any value for this common stock
ownership interest.
Visa claims that all 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 continues to set aside
amounts in an escrow account to fund any judgments or settlements that may arise from the Covered Litigation, and
reduced the amount of shares allocated to the Visa U.S.A. member banks by amounts necessary to cover such
liability. Nevertheless, Visa U.S.A. member banks were required to record a liability for the fair value of their
related contingent obligation to Visa U.S.A., based on the percentage of their membership interest. The Company
has a $1.7 million liability based on its best estimate of the combined membership interest of the Community Bank
and the former Synergy Bank with regard to both settled and pending litigation in which Visa is involved.
Depending on the outcome of the Covered Litigation, the Company could incur an increase or a reduction in the
value of its membership interest in Visa, the amount of which is not expected to be material.
Derivative Financial Instruments
The Company uses various financial instruments, including derivatives, in connection with its strategies to
mitigate or reduce price risk resulting from changes in interest rates. The Company’s derivative financial
instruments consist of financial forward and futures contracts, interest rate lock commitments (“IRLCs”), swaps, and
options, and relate to mortgage banking operations, MSRs, and other risk management activities. These activities
vary in scope based on the level and volatility of interest rates, the type of assets held, and other changing market
conditions. Please see Note 14, “Derivative Financial Instruments.”
Legal Proceedings
The Company is involved in various legal actions arising in the ordinary course of its business. All such
actions, in the aggregate, involve amounts that are believed by management to be immaterial to the financial
condition and results of operations of the Company.
131
NOTE 10: INTANGIBLE ASSETS
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. The changes in the carrying amount of goodwill for the years ended
December 31, 2011 and 2010 are as follows:
(in thousands)
Balance at beginning of year
Accounting adjustments
Balance at end of year
Core Deposit Intangibles
December 31,
2011
2010
$2,436,159 $2,436,401
(242)
$2,436,131 $2,436,159
(28)
As previously noted, the Company has CDI stemming from its various business combinations with other
banks and thrifts. CDI is a measure of the value of checking and savings deposits acquired in a business
combination. 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
is amortized over the estimated useful lives of the existing deposit relationships acquired, but does 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 2011, 2010, or 2009. If an impairment loss is determined to
exist in the future, the loss will be recorded in non-interest expense in the Consolidated Statement of Income and
Comprehensive Income for the period in which such impairment is identified.
Mortgage Servicing Rights
The Company had MSRs of $117.0 million and $107.4 million, respectively, at December 31, 2011 and 2010.
The Company has two classes of MSRs for which it separately manages the economic risk: residential and
securitized.
Residential MSRs are carried at fair value, with changes in fair value recorded as a component of non-interest
income in each period. The Company uses various derivative instruments to mitigate the income statement-effect of
changes in fair value due to changes in valuation inputs and assumptions regarding its residential MSRs. MSRs do
not trade in an active open market with readily observable prices. Accordingly, the Company bases the fair value of
its MSRs on the present value of estimated future net servicing income cash flows utilizing an internal valuation
model. The Company estimates future net servicing income cash flows with assumptions that market participants
would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance
rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The
Company reassesses and periodically adjusts the underlying inputs and assumptions in the model to reflect market
conditions and assumptions that a market participant would consider in valuing the MSR asset.
The value of MSRs is significantly affected by mortgage interest rates then currently available in the
marketplace, which influence mortgage loan prepayment speeds. During periods of declining interest rates, the value
of MSRs generally declines due to increasing prepayments attributable to increased mortgage refinancing activity.
Conversely, during periods of rising interest rates, the value of MSRs generally increases as mortgage refinancing
activity declines.
Securitized 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. Such MSRs are
periodically evaluated for impairment, based on the difference between their carrying amount and their current fair
value. If it is determined that impairment exists, the resultant loss is charged against earnings.
132
The following table sets forth the changes in residential and securitized MSRs for the years ended December
31, 2011 and 2010:
(in thousands)
Carrying value, beginning of year
Additions
Decrease in fair value:
Due to changes in valuation assumptions
Due to other changes (1)
Amortization
Carrying value, end of period
(1) Includes net servicing cash flows and the passage of time.
For the Years Ended December 31,
2011
2010
Residential Securitized
$106,186
82,060
Residential
8,617
$
100,767
$1,192
--
Securitized
$1,965
--
(24,537)
(47,293)
--
$116,416
--
--
(596)
$ 596
--
(3,198)
--
$ 106,186
--
--
(773)
$1,192
The following table presents the key assumptions used in calculating the fair value of the Company’s
residential MSRs at the dates indicated:
Weighted average expected life
Constant prepayment speed
Discount rate
Primary mortgage rate to refinance
Cost to service (per loan per year):
Current
30-59 days delinquent
60-89 days delinquent
90-119 days delinquent
Over 120 days delinquent
December 31,
2011
2010
69 months
85 months
14.2%
10.0
4.1
$ 53
103
203
303
553
10.1%
10.0
5.0
$ 53
103
203
303
553
As of December 31, 2011, there were no changes in assumed future servicing costs since the prior year-end.
Analyses of CDI and MSRs
The following table summarizes the gross carrying and accumulated amortization amounts of the Company’s
CDI and MSRs as of December 31, 2011:
(in thousands)
Core deposit intangibles
Mortgage servicing rights
Total
Gross Carrying
Amount
$234,364
127,594
$361,958
Accumulated
Amortization
$(182,696)
(10,582)
$(193,278)
Net Carrying
Amount
$ 51,668
117,012
$168,680
For the year ended December 31, 2011, amortization expenses related to CDI totaled $26.1 million. The
Company assessed the useful lives of its intangible assets at December 31, 2011 and deemed them to be appropriate.
There were no impairment losses recorded for the years ended December 31, 2011, 2010, or 2009.
The following table summarizes the estimated future expense stemming from the amortization of the
Company’s CDI and MSRs:
(in thousands)
2012
2013
2014
2015
2016
2017 and thereafter
Total remaining intangible assets
Core Deposit
Intangibles
$19,644
15,784
8,298
5,344
2,390
208
$51,668
Mortgage
Servicing Rights Total
$20,047
15,945
8,330
5,344
2,390
208
$52,264
$403
161
32
--
--
--
$596
133
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
pension plan for employees of the former Atlantic Bank of New York was merged into the New York Community
Plan on March 31, 2008. 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. The New York Community Plan is subject to the provisions of ERISA.
The following tables set forth certain information regarding the New York Community Plan, based on the
measurement date indicated:
(in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year
Interest cost
Actuarial loss
Annuity payments
Settlements
Benefit obligation at end of year
Change in Plan Assets:
Fair value of assets at beginning of year
Actual (loss) return on plan assets
Contributions
Annuity payments
Settlements
Fair value of assets at end of year
Funded status (included in other assets)
Changes recognized in other comprehensive income for the year
ended December 31:
Amortization of prior service cost
Amortization of actuarial gain
Net actuarial loss arising during the year
Total recognized in other comprehensive loss for the year (pre-tax)
December 31,
2011
2010
$116,566
5,964
19,852
(5,931)
(2,292)
$134,159
$142,204
(7,310)
24,000
(5,931)
(2,292)
$150,671
$ 16,512
$108,699
6,057
8,902
(5,793)
(1,299)
$116,566
$130,913
18,383
--
(5,793)
(1,299)
$142,204
$ 25,638
$
--
(4,758)
39,693
$34,935
$ (196)
(5,145)
1,982
$ (3,359)
Accumulated other comprehensive loss (pre-tax) not yet recognized in
net periodic benefit cost at December 31:
Prior service cost
Actuarial loss, net
Total accumulated other comprehensive loss (pre-tax)
$
--
93,742
$ 93,742
$
--
58,807
$ 58,807
In 2012, an estimated $9.7 million of unrecognized net actuarial loss for the defined benefit pension plan will
be amortized from AOCL into net periodic benefit cost. The comparable amount recognized as net periodic benefit
cost in 2011 was $4.8 million. No prior service cost will be amortized in 2012 and none was amortized in 2011. The
discount rates used to determine the benefit obligation at December 31, 2011 and 2010 were 4.5% and 5.3%,
respectively.
The discount rate reflects rates at which the benefit obligation could be effectively settled. To determine this
rate, the Company considers rates of return on high-quality fixed-income investments that are currently available
and are expected to be available during the period until 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.
134
The components of net periodic pension (credit) expense were as follows for the years indicated:
(in thousands)
Components of Net Periodic Pension (Credit) Expense:
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of unrecognized actuarial loss
Net periodic pension (credit) expense
Years Ended December 31,
2010
2011
2009
$ 5,964
(12,531)
--
4,758
$ (1,809)
$ 6,057
(11,463)
196
5,145
(65)
$
$ 6,444
(10,303)
202
6,983
$ 3,326
The following table indicates the weighted average assumptions used in determining the net periodic benefit
cost for the years indicated:
Discount rate
Expected rate of return on plan assets
Years Ended December 31,
2009
2010
2011
6.1%
5.8%
5.3%
9.0
9.0
9.0
New York Community Plan assets are invested in diversified investment funds of the RSI Retirement Trust
(the “Trust”), a private placement fund, and in the Company’s common stock. At December 31, 2011 and 2010, the
amounts of New York Community Plan assets invested in the Company’s common stock were $15.5 million and
$22.2 million, respectively.
The Trust has been given discretion by the Plan Sponsor to determine the appropriate strategic asset allocation
versus plan liabilities, as governed by the Trust’s Statement of Investment Objectives and Guidelines (the
“Guidelines”). The investment funds include a series of equity and bond mutual funds or commingled trust funds,
each with its own investment objectives, strategies, and risks, as detailed in the Guidelines.
The long-term investment objectives are to maintain plan assets at a level that will sufficiently cover long-
term obligations and to generate a return on plan assets that will meet or exceed the rate at which long-term
obligations grow. A broadly diversified combination of equity and fixed income portfolios and various risk
management techniques are used to help achieve these objectives.
In addition, significant consideration is given to the Plan’s funding levels when determining the overall asset
allocation. If the New York Community Plan is considered to be well funded, approximately 63% of its assets are
allocated to equity securities (i.e., equity mutual funds) and approximately 37% to debt securities (i.e., bond mutual
funds); these were the allocations at December 31, 2011. If the New York Community Plan does not satisfy the
criteria for a well funded plan, approximately 50% of the Plan’s assets are allocated to equity securities and
approximately 50% to debt securities. Asset rebalancing is scheduled when the investment mix varies more than
10% in either direction from the target.
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.
135
The following table presents information about the investments held by the New York Community Plan as of
December 31, 2011:
(in thousands)
Mutual Funds – Equity:
Large-cap value (1)
Small-cap core (2)
Common/Collective Trusts – Equity:
Large-cap core (3)
Large-cap value (4)
Large-cap growth (5)
International core (6)
Common/Collective Trusts – Fixed Income:
Market duration fixed (7)
Equity Securities:
Company common stock
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$ 11,573
14,588
$11,573
14,588
$
--
--
13,310
6,735
18,246
15,475
55,202
--
--
--
--
--
15,542
$150,671
15,542
$41,703
13,310
6,735
18,246
15,475
55,202
--
$108,968
$--
--
--
--
--
--
--
--
$--
(1) This category consists of investments whose sector and industry exposures are maintained within a narrow band around the
Russell 1000 Index. The portfolio holds approximately 150 stocks.
(2) This category contains stocks whose sector weightings are maintained within a narrow band around those of the Russell
2000 Index. The portfolio typically holds more than 150 stocks.
(3) This fund tracks the performance of the S&P 500 Index by purchasing the securities represented in the Index in
approximately the same weightings as the Index.
(4) This category contains large-cap stocks with above-average yields. The portfolio typically holds between 60 and 70 stocks.
(5) This category consists of a portfolio of 45 to 65 stocks that typically overweight technology and health care.
(6) This category consists of a broadly diversified portfolio of non-U.S. domiciled stocks. The portfolio typically holds more
than 200 stocks, with 0% to 35% invested in emerging markets securities.
(7) This category consists of an index fund that tracks the Barclays Capital U.S. Aggregate Bond Index. The fund invests in
Treasury, agency, corporate, mortgage-backed, and asset-backed securities.
Current Asset Allocation
The weighted average asset allocations for the New York Community Plan as of December 31, 2011 and 2010
were as follows:
Equity securities
Debt securities
Total
At December 31,
2010
2011
68%
63%
32
37
100%
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. Equity securities and fixed income securities were assumed to
earn real rates of return in the ranges of 5% to 9% and 2% to 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%.
Expected Contributions
The Company does not expect to contribute to the New York Community Plan in 2012.
136
Expected Future Annuity Payments
The following annuity payments, which reflect expected future service, as appropriate, are expected to be paid
by the New York Community Plan during the years indicated:
(in thousands)
2012
2013
2014
2015
2016
2017 and thereafter
Total
Qualified Savings Plan
$ 6,748
6,810
6,910
6,986
7,025
37,016
$71,495
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.
Post-Retirement Health and Welfare Benefits
The Company offers certain post-retirement benefits, including medical, dental, and life insurance (the
“Health & Welfare Plan”) to retired employees, depending on age and years of service at the time of retirement. The
costs of such benefits are accrued during the years that an employee renders the necessary service.
The following tables set forth certain information regarding the Health & Welfare Plan based on the
measurement dates indicated:
(in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial loss
Premiums/claims paid
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
ended December 31:
Amortization of prior service cost
Amortization of actuarial gain
Net loss arising during the year
Total recognized in other comprehensive loss for the year (pre-tax)
December 31,
2011
2010
$ 15,998
5
720
1,291
(859)
$ 17,155
$
--
859
(859)
$
--
$(17,155)
$ 15,766
4
793
1,283
(1,848)
$ 15,998
$
--
1,848
(1,848)
$
--
$(15,998)
$ 249
(411)
1,292
$1,130
$ 249
(313)
1,283
$1,219
Accumulated other comprehensive loss (pre-tax) not yet recognized
in net periodic benefit cost at December 31:
Prior service cost
Actuarial loss, net
Total accumulated other comprehensive loss (pre-tax)
$(2,529)
7,477
$ 4,948
$ (2,778)
6,596
$ 3,818
At December 31, 2011 and 2010, the discount rates used in the preceding table were 3.9% and 4.7%,
respectively.
137
The estimated net actuarial loss and the prior service liability that will be amortized from AOCL into net
periodic benefit cost over the next fiscal year are $505,000 and $249,000, respectively.
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,
2009
2011
2010
$
5
720
(249)
411
$ 887
$ 4
793
(249)
313
$ 861
$
4
910
(249)
303
$ 968
The following table indicates the weighted average assumptions used in determining the net periodic benefit
cost for the years indicated:
Discount rate
Current medical trend rate
Ultimate trend rate
Year when ultimate trend rate will be reached
Years Ended December 31,
2009
2010
2011
5.9%
5.3%
4.7 %
9.0
9.0
9.0
5.0
5.0
5.0
2013
2014
2015
Had the assumed medical trend rate at December 31, 2011 increased by 1% in each future year, the
accumulated post-retirement benefit obligation at that date would have increased by $551,000, and the aggregate of
the benefits earned and the interest components of 2011 net post-retirement benefit cost would each have increased
by $2,000. Had the assumed medical trend rate decreased by 1% in each future year, the accumulated post-
retirement benefit obligation at December 31, 2011 would have declined by $456,000, and the aggregate of the
benefits earned and the interest components of 2011 net post-retirement benefit cost each would have declined by
$2,000.
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 $1.3 million to the Health & Welfare Plan to pay premiums and claims for
the fiscal year ending December 31, 2012.
Expected Future Payments for Premiums and Claims
The following amounts are currently expected to be paid for premiums and claims during the years indicated
under the Health & Welfare Plan:
(in thousands)
2012
2013
2014
2015
2016
2017 and thereafter
Total
$ 1,329
1,310
1,290
1,253
1,227
5,629
$12,038
138
NOTE 12: STOCK-RELATED BENEFIT PLANS
New York Community Bank Employee Stock Ownership Plan
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.
At the time of the Community Bank’s conversion to stock form, the Company loaned $19.4 million to 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 was
being repaid at a fixed interest rate of 4.75% over a period of time not to exceed 30 years. The dividends and
investment income on ESOP shares that were used for debt service in 2010 and 2009 amounted to approximately
$299,000 and $632,000, respectively. In 2010, the loan was fully repaid and all the remaining shares were released
from the suspense account and allocated to participants.
In 2011, 2010, and 2009, the Company allocated 526,800; 472,841; and 332,055 shares, respectively, to
participants in the ESOP. For the years ended December 31, 2011, 2010, and 2009, the Company recorded ESOP-
related compensation expense of $7.0 million, $9.1 million, and $3.8 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. Trust-held assets, consisting entirely of Company common stock,
amounted to 1,268,102 and 1,185,062 shares at December 31, 2011 and 2010, respectively. The cost of these shares
is reflected as a reduction of paid-in capital in excess of par in the Consolidated Statements of Condition. The
Company recorded no SERP-related compensation expense in 2011, 2010, or 2009.
Stock Incentive and Stock Option Plans
At December 31, 2011, the Company had 3,010,058 shares available for grant as options, restricted stock, or
other forms of related rights under the 2006 Stock Incentive Plan. During 2011, 2010, and 2009, 1,693,000;
463,000; and 1,352,000 shares of restricted stock were granted under the 2006 Stock Incentive Plan, with average
fair values of $18.30, $16.29, and $13.05 per share on the respective grant dates. The shares of restricted stock that
were granted in 2011 and 2010 vest over a period of five years. Compensation cost related to the restricted stock
grants is recognized on a straight-line basis over the vesting period, and totaled $16.7 million, $10.9 million, and
$9.5 million for the years ended December 31, 2011, 2010, and 2009, respectively.
The following table provides a summary of activity with regard to restricted stock awards in the year ended
December 31, 2011:
Unvested at beginning of year
Granted
Vested
Forfeited
Unvested at end of year
For the Year Ended
December 31, 2011
Number of Shares
2,636,700
1,693,000
(812,760)
(87,500)
3,429,440
Weighted Average
Grant Date
Fair Value
$14.17
18.30
14.33
16.68
16.11
As of December 31, 2011, unrecognized compensation cost relating to unvested restricted stock totaled $45.3
million. This amount will be recognized over a remaining weighted average period of 3.2 years.
In addition, the Company had eight stock option plans at December 31, 2008: the 1993 and 1997 New York
Community Bancorp, Inc. Stock Option Plans; the 1993 Haven Bancorp, Inc. Stock Option Plan; the 1998
139
Richmond County Financial Corp. Stock Compensation Plan; the 2001 Roslyn Bancorp Stock-based Incentive Plan;
the 1998 Long Island Financial Corp. Stock Option Plan; and the 2003 and 2004 Synergy Financial Group Stock
Option Plans (all eight 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.
The Company uses the modified prospective approach to recognize 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. As there were no unvested options at
any time during 2011, 2010, or 2009, the Company did not record any compensation and benefits expense relating to
stock options during these years.
Currently, the Company issues new shares of common stock 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, 2011, 2010, and 2009, respectively, there were 9,006,944;
12,443,676; and 13,037,564 stock options outstanding. The number of shares available for future issuance under the
Stock Option Plans was 10,400 at December 31, 2011.
The status of the Stock Option Plans at December 31, 2011 and changes that occurred during the year ended at
that date are summarized below:
Stock options outstanding, beginning of year
Exercised
Expired
Stock options outstanding, end of year
Options exercisable at year-end
For the Year Ended
December 31, 2011
Number of Stock
Options
12,443,676
(349,923)
(3,086,809)
9,006,944
9,006,944
Weighted Average
Exercise Price
$15.75
12.54
16.55
15.60
15.60
The intrinsic value of stock options outstanding and exercisable at December 31, 2011 was $62,000. The
intrinsic values of options exercised during the years ended December 31, 2011, 2010, and 2009 were $1.9 million,
$3.1 million, and $309,000, respectively.
NOTE 13: FAIR VALUE MEASUREMENTS
The FASB issued guidance that, among other things, defined fair value, established a consistent framework
for measuring fair value, and expanded disclosure for each major asset and liability category measured at fair value
on either a recurring or non-recurring basis. The guidance clarified that fair value is an “exit” price, representing the
amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction
between market participants. Fair value is thus 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, the FASB established a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair
value as follows:
(cid:120) Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or
liabilities in active markets.
(cid:120) Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in
active markets and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument.
(cid:120) Level 3 – Inputs to the valuation methodology are significant unobservable inputs that reflect a company’s
own assumptions about the assumptions that market participants use in pricing an asset or liability.
A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input
that is significant to the fair value measurement.
140
The following tables present assets and liabilities that were measured at fair value on a recurring basis as of
December 31, 2011 and 2010, and that were included in the Company’s Consolidated Statement of Condition at
those dates:
Fair Value Measurements at December 31, 2011 Using
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Netting
Adjustments
Total
Fair Value
$
$
--
--
--
--
$ 102,645
65,276
24,041
$ 191,962
$
$
--
--
--
--
$
--
--
--
--
--
--
37,026
$ 37,026
$ 37,026
$
--
--
9,004
$ 458,766
--
--
1,285
14,125
195
3,225
$ 477,596
$ 669,558
$1,036,918
--
762
$
--
--
--
--
18,078
--
--
$ 18,078
$ 18,078
$
--
116,416
15,633
$ --
--
--
$ --
$ --
--
--
--
--
--
--
$ --
$ --
$ 102,645
65,276
24,041
$ 191,962
$ 458,766
--
--
1,285
32,203
195
40,251
$ 532,700
$ 724,662
$ --
--
--
$1,036,918
116,416
25,399
(in thousands)
Mortgage-Related Securities
Available for Sale:
GSE certificates
GSE CMOs
Private label CMOs
Total mortgage-related securities
Other Securities Available for Sale:
GSE debentures
Corporate bonds
U. S. Treasury obligations
State, county, and municipal
Capital trust notes
Preferred stock
Common stock
Total other securities
Total securities available for sale
Other Assets:
Loans held for sale
Mortgage servicing rights
Derivative assets
Liabilities:
Derivative liabilities
$
(20)
$ (11,742)
$
--
$ --
$ (11,762)
141
Fair Value Measurements at December 31, 2010 Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Netting
Adjustments
Total
Fair Value
$
$
--
--
--
--
$
--
--
58,553
--
--
--
34,387
$ 92,940
$ 92,940
$
--
--
152
$ 211,515
222,303
51,362
$ 485,180
$
620
4,250
--
1,334
13,467
14,468
5,889
40,028
$
$ 525,208
$1,203,844
--
14,067
$
$
--
--
--
--
$
--
--
--
--
28,537
6,271
--
$ 34,808
$ 34,808
$
--
106,186
53
$--
--
--
$--
$--
--
--
--
--
--
--
$--
$--
$ 211,515
222,303
51,362
$ 485,180
$
620
4,250
58,553
1,334
42,004
20,739
40,276
$ 167,776
$ 652,956
$--
--
--
$1,203,844
106,186
14,272
(in thousands)
Mortgage-Related Securities
Available for Sale:
GSE certificates
GSE CMOs
Private label CMOs
Total mortgage-related securities
Other Securities Available for Sale:
GSE debentures
Corporate bonds
U. S. Treasury obligations
State, county, and municipal
Capital trust notes
Preferred stock
Common stock
Total other securities
Total securities available for sale
Other Assets:
Loans held for sale
Mortgage servicing rights
Derivative assets
Liabilities:
Derivative liabilities
$
(210)
$
(3,908)
$
--
$--
$
(4,118)
The Company reviews and updates the fair value hierarchy classifications for its assets on a quarterly basis.
Changes from one quarter to the next that are related to the observability of inputs to a fair value measurement may
result in a reclassification from one hierarchy level to another.
A description of the methods and significant assumptions utilized in estimating the fair value of available-for-
sale securities follows:
Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation
hierarchy. Level 1 securities include highly liquid government securities, exchange-traded securities, and
derivatives.
If quoted market prices are not available for the specific security, then fair values are estimated by using
pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing
models primarily use market-based or independently sourced market parameters as inputs, including, but not limited
to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market
information, models incorporate transaction details such as maturity and cash flow assumptions. Securities valued in
this manner would generally be classified within Level 2 of the valuation hierarchy and primarily include such
instruments as mortgage-related and corporate debt securities.
The Company reviews quoted market prices supplied by independent pricing services, as well as their
underlying pricing methodologies, for reasonableness. At various times, the Company will validate, on a sample
basis, quoted market prices supplied by independent pricing services compared to market prices obtained from third-
party sources or derived from internal models.
The Company carries loans held for sale originated by the Residential Mortgage Banking segment at fair
value, in accordance with ASC Topic 825 “Financial Instruments.” The fair value of held-for-sale loans is primarily
based on quoted market prices for securities backed by similar types of loans. The changes in fair value of these
assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of
142
servicing associated with the mortgage loans held for sale. Loans held for sale are classified within Level 2 of the
valuation hierarchy.
In certain cases where there is limited activity or less transparency around inputs to the valuation, securities
are classified within Level 3 of the valuation hierarchy. In valuing collateralized debt obligations (“CDOs”), which
include pooled trust preferred securities and income notes, and certain single-issue capital trust notes, each of which
are classified within Level 3, the determination of fair value may require benchmarking to similar instruments or
analyzing default and recovery rates. Therefore, CDOs and certain single-issue capital trust notes are valued using a
model based on the specific collateral composition and cash flow structure of the securities. Key inputs to the model
consist of market spread data for each credit rating, collateral type, and other relevant contractual features. In
instances where quoted price information is available, that price is considered when arriving at the security’s fair
value. Where there is limited activity or less transparency around the inputs to the valuation of preferred stock, the
valuation is based on a discounted cash flow model.
MSRs do not trade in an active open market with readily observable prices. The Company bases the fair value
of its MSRs on the present value of estimated future net servicing income cash flows utilizing an internal valuation
model. The Company estimates future net servicing income cash flows with assumptions that market participants
would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance
rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The
Company reassesses and periodically adjusts the underlying inputs and assumptions in the model to reflect market
conditions and assumptions that a market participant would consider in valuing the MSR asset. MSR fair value
measurements use significant unobservable inputs and, accordingly, are classified within Level 3.
Exchange-traded derivatives that are valued using quoted prices are classified within Level 1 of the valuation
hierarchy. The majority of the Company’s derivative positions are valued using internally developed models that use
readily observable market parameters as their basis. These are parameters that are actively quoted and can be
validated by external sources, including industry pricing services. Where the types of derivative products have been
in existence for some time, the Company uses models that are widely accepted in the financial services industry.
These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based
parameters such as interest rates, volatility, and the credit quality of the counterparty. Furthermore, many of these
models do not contain a high level of subjectivity, as the methodologies used in the models do not require significant
judgment, and inputs to the models are readily observable from actively quoted markets, as is the case for “plain
vanilla” interest rate swaps and option contracts. Such instruments are generally classified within Level 2 of the
valuation hierarchy. Derivatives that are valued based on models with significant unobservable market parameters,
and that are normally traded less actively, have trade activity that is one-way, and/or are traded in less-developed
markets, are classified within Level 3 of the valuation hierarchy.
The fair value of IRLCs for residential mortgage loans that the Company intends to sell is based on internally
developed models. The key model inputs primarily include the sum of the value of the forward commitment based
on the loans’ expected settlement dates and the projected values of the MSRs, loan level price adjustment factors,
and historical IRLC fall-out factors. Such derivatives are classified as Level 3.
While the Company believes its valuation methods are appropriate and consistent with those of other market
participants, the use of different methodologies or assumptions to determine the fair values of certain financial
instruments could result in different estimates of fair values at the reporting date.
143
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1
Assets Measured at Fair Value on a Non-Recurring Basis
Certain assets are measured at fair value on a non-recurring basis. Such instruments are subject to fair value
adjustments under certain circumstances (e.g., when there is evidence of impairment). The following tables present
assets and liabilities that were measured at fair value on a non-recurring basis as of December 31, 2011 and 2010,
and that were included in the Company’s Consolidated Statements of Condition at those dates:
(in thousands)
Certain impaired loans
Other assets (1)
Fair Value Measurements at December 31, 2011 Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
$--
--
$--
Significant Other
Observable Inputs
(Level 2)
--
$
26,810
$ 26,810
Significant
Unobservable Inputs
(Level 3)
$72,582
--
$72,582
Total Fair
Value
$72,582
26,810
$99,392
(1) Represents the fair value of OREO that was measured at fair value subsequent to its initial classification as OREO.
(in thousands)
Loans held for sale
Certain impaired loans
Fair Value Measurements at December 31, 2010 Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
$--
--
$--
Significant Other
Observable Inputs
(Level 2)
$3,233
--
$3,233
Significant
Unobservable Inputs
(Level 3)
--
$
237,975
$237,975
Total Fair
Value
$
3,233
237,975
$241,208
The fair values of collateral-dependent impaired loans are determined using various valuation techniques,
including consideration of appraised values and other pertinent real estate market data.
Other Fair Value Disclosures
Certain FASB guidance 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 such instruments.
The following table summarizes the carrying values and estimated fair values of the Company’s financial
instruments at December 31, 2011 and 2010:
(in thousands)
Financial Assets:
Cash and cash equivalents
Securities held to maturity
Securities available for sale
FHLB stock
Loans, net
Mortgage servicing rights
Derivatives
Financial Liabilities:
Deposits
Borrowed funds
Derivatives
December 31,
2011
2010
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
$ 2,001,737 $ 2,001,737
3,966,185
724,662
490,228
30,755,121
117,012
25,399
3,815,854
724,662
490,228
30,152,154
117,012
25,399
$ 1,927,542 $ 1,927,542
4,157,322
652,956
446,014
29,454,199
107,378
14,272
4,135,935
652,956
446,014
29,041,595
107,378
14,272
$22,274,130 $22,321,011
15,423,474
13,960,413
11,762
11,762
$21,809,051 $21,846,984
14,801,131
13,536,116
4,118
4,118
145
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.
Securities Held to Maturity and Available for Sale
If quoted market prices are not available for a specific security, then fair values are estimated by using pricing
models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models
primarily use market-based or independently sourced market parameters as inputs, including, but not limited to,
yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information,
pricing models also incorporate transaction details such as maturity and cash flow assumptions.
Federal Home Loan Bank Stock
The fair value of FHLB 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 the fair value of loans 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.
In addition, these methods of estimating fair value do not incorporate the exit-price concept of fair value
described in ASC Topic 820-10, “Fair Value Measurements and Disclosures.”
Loans Held for Sale
Fair value is based on independent quoted market prices, where available, and adjusted as necessary for such
items as servicing value, guaranty fee premiums, and credit spread adjustments.
Mortgage Servicing Rights
MSRs do not trade in an active market with readily observable prices. Accordingly, the Company utilizes a
valuation model that calculates the present value of estimated future cash flows. The model incorporates various
assumptions, including estimates of prepayment speeds, discount rates, refinance rates, servicing costs, and ancillary
income. The Company reassesses and periodically adjusts the underlying inputs and assumptions in the model to
reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset.
Derivative Financial Instruments
For exchange-traded futures and exchange-traded options, the fair value is based on observable quoted market
prices in an active market. For forward commitments to buy and sell loans and mortgage-backed securities, the fair
value is based on observable market prices for similar securities in an active market. The fair value of IRLCs for
one-to-four family mortgage loans that the Company intends to sell is based on internally developed models. The
key model inputs primarily include the sum of the value of the forward commitment based on the loans’ expected
settlement dates, the value of MSRs arrived at by an independent MSR broker, government agency price adjustment
factors, and historical IRLC fall-out factors.
146
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 CDs 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 either on bid quotations received from securities dealers
or the discounted value of contractual cash flows with interest rates currently in effect for borrowed funds with
similar maturities and structures.
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, 2011 and 2010.
NOTE 14: DERIVATIVE FINANCIAL INSTRUMENTS
The Company’s derivative financial instruments consist of financial forward and futures contracts, IRLCs,
swaps, and options. These derivatives relate to mortgage banking operations, MSRs, and other risk management
activities, and seek to mitigate or reduce the Company’s exposure to losses from adverse changes in interest
rates. These activities will vary in scope based on the level and volatility of interest rates, the type of assets held, and
other changing market conditions.
The Company held derivatives not designated as hedges with a notional amount of $5.1 billion at December
31, 2011. Changes in the fair value of these derivatives are reflected in current-period earnings.
The following table sets forth information regarding the Company’s derivative financial instruments at
December 31, 2011:
(in thousands)
Treasury options
Eurodollar futures
Forward commitments to sell loans/mortgage-backed securities
Forward commitments to buy loans/mortgage-backed securities
Interest rate lock commitments
Total derivatives
December 31, 2011
Notional
Amount
$ 800,000
600,000
1,849,921
705,000
1,130,284
$ 5,085,205
Unrealized (1)
Gain
$ 2,102
--
--
7,927
15,633
$ 25,662
Loss
$
--
20
18,908
--
--
$18,928
(1) Derivatives in a net gain position are recorded as “other assets” and derivatives in a net loss position are recorded as
“other liabilities” in the Consolidated Statements of Condition.
The Company uses various financial instruments, including derivatives, in connection with its strategies to
reduce price risk resulting from changes in interest rates. Derivative instruments may include IRLCs entered into
with borrowers or correspondents/brokers to acquire conforming fixed and adjustable rate residential mortgage loans
that will be held for sale. Other derivative instruments include Treasury options and Eurodollar futures. Gains or
losses due to changes in the fair value of derivatives are recognized in current-period earnings.
The Company enters into forward contracts to sell fixed rate mortgage-backed securities to protect against
changes in the prices of conforming fixed rate loans held for sale. Forward contracts are entered into with securities
dealers in an amount related to the portion of IRLCs that is expected to close. The value of these forward sales
contracts moves inversely with the value of the loans in response to changes in interest rates.
To manage the price risk associated with fixed rate non-conforming mortgage loans, the Company generally
enters into forward contracts on mortgage-backed securities or forward commitments to sell loans to approved
investors. Short positions in Eurodollar futures contracts are used to manage price risk on adjustable rate mortgage
loans held for sale.
147
The Company also purchases put and call options to manage the risk associated with variations in the amount
of IRLCs that ultimately close.
In addition, the Company mitigates a portion of the risk associated with changes in the value of MSRs. The
general strategy for mitigating this risk is to purchase derivative instruments, the value of which changes in the
opposite direction of interest rates, thus partially offsetting the changes in the value of our servicing assets, the value
of which tends to move in the same direction as interest rates. Accordingly, the Company purchases Eurodollar
futures and call options on Treasury securities and enters into forward contracts to purchase mortgage-backed
securities.
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income
and Comprehensive Income for the twelve months ended December 31, 2011 and 2010:
(in thousands)
Treasury options
Eurodollar futures
Forward commitments to buy/sell
loans/mortgage-backed securities
Total loss
Gain (Loss) Included in Mortgage Banking Income
For the Twelve Months Ended December 31,
2011
$ 19,063
(2,456)
(37,434)
$ (20,827)
$
2010
(753)
(1,847)
(28,065)
$ (30,665)
NOTE 15: DIVIDEND 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 Department of Financial Services (the “NYDFS”) 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,
investments, and other assets, after deducting from the total thereof all current operating expenses, actual losses, if
any, and all federal, state, and local taxes. In 2011, dividends of $555.0 million were paid by the Banks to the Parent
Company. At December 31, 2011, the Banks could have paid additional dividends of $296.5 million to the Parent
Company without regulatory approval.
148
NOTE 16: PARENT COMPANY-ONLY FINANCIAL INFORMATION
The following tables present the condensed financial statements for New York Community Bancorp, Inc.
December 31,
2011
2010
$ 241,268
3,815
5,839,263
6,171
28,463
$6,118,980
$ 82,081
6,023
5,915,608
8,041
52,414
$6,064,167
$ 89,984
426,936
36,356
553,276
5,565,704
$6,118,980
$ 89,951
426,992
21,004
537,947
5,526,220
$6,064,167
2009
2011
Years Ended December 31,
2010
$ 1,064 $ 969 $ 1,837
300,000
335,000
(13,200)
--
8,792
--
881
767
298,310
336,736
41,134
39,394
555,000
--
--
753
556,817
42,185
514,632
16,445
297,342
17,127
257,176
20,511
531,077
(51,040)
277,687
314,469
120,959
226,548
$480,037 $541,017 $398,646
(parent company only):
Condensed Statements of Condition
(in thousands)
ASSETS:
Cash and cash equivalents
Securities available for sale
Investments in subsidiaries
Receivables from subsidiaries
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Senior notes
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
OTTI loss on securities
Gain on debt repurchases
Other income
Gross income
Operating expenses
Income before income tax benefit and equity in (overdistributed)
undistributed earnings of subsidiaries
Income tax benefit
Income before equity in (overdistributed) undistributed earnings
of subsidiaries
Equity in (overdistributed) undistributed earnings of subsidiaries
Net income
149
Condensed Statements of Cash Flows
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Change in other assets
Change in other liabilities
Gain on debt repurchases
OTTI loss on securities
Other, net
Equity in overdistributed (undistributed) earnings of subsidiaries
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale and repayment of securities
Change in receivable from subsidiaries, net
Investments in subsidiaries
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net
Treasury stock purchases
Cash dividends paid on common stock
Net cash received from exercise of stock options
Repurchase of junior subordinated debentures
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
NOTE 17: REGULATORY MATTERS
Years Ended December 31,
2010
2009
2011
$ 480,037
23,990
15,352
--
--
21,530
51,040
591,949
2,459
1,870
--
4,329
--
(3,696)
(436,914)
3,519
--
(437,091)
159,187
82,081
$ 241,268
$ 541,017
3,004
(3,420)
--
--
8,038
(226,548)
322,091
$ 398,646
30,567
(2,038)
(8,792)
13,200
8,640
(120,959)
319,264
634
(4,423)
--
(3,789)
781
(771)
(937,000)
(936,990)
28,935
(4,054)
(434,366)
5,436
--
(404,049)
(85,747)
167,828
$ 82,081
1,012,148
(1,311)
(347,554)
465
(7,500)
656,248
38,522
129,306
$ 167,828
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 of Governors (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, 2011 and 2010, in
comparison with the minimum amounts and ratios required by the FRB for capital adequacy purposes:
At December 31, 2011
(dollars in thousands)
Total regulatory capital
Minimum for capital adequacy purposes
Excess
Leverage Capital
Amount
$3,580,302
1,575,464
$2,004,838
Ratio
9.09%
4.00
5.09%
Tier 1
Amount Ratio
$3,580,302 13.59 %
Total
Amount Ratio
$3,750,915 14.23%
1,054,144
$2,526,158
4.00
9.59 %
2,108,287
$1,642,628
8.00
6.23%
Risk-Based Capital
At December 31, 2010
(dollars in thousands)
Total regulatory capital
Minimum for capital adequacy purposes
Excess
Leverage Capital
Amount
$3,503,672
1,544,875
$1,958,797
Ratio
9.07%
4.00
5.07%
Tier 1
Amount Ratio
$3,503,672 13.69%
Total
Amount Ratio
$3,674,679 14.36%
1,023,848
$2,479,824
4.00
9.69%
2,047,696
$1,626,983
8.00
6.36%
Risk-Based Capital
In December 2009, the Company issued 69,000,000 shares of common stock in an offering that generated
gross proceeds of $897.0 million and net proceeds (i.e., after issuance costs) of $864.9 million. These shares were
issued in connection with the AmTrust acquisition on December 4, 2009 and the proceeds were used for general
corporate purposes.
The Banks are subject to regulation, examination, and supervision by the NYDFS and the FDIC (the
“Regulators”). The Banks are also governed by numerous federal and state laws and regulations, including the FDIC
150
Improvement Act of 1991, 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 FDIC deposit insurance premium assessments. Capital amounts and
classifications are also subject to the Regulators’ qualitative judgments about the 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 Tier 1 and total risk-based capital to risk-weighted
assets (as such measures are defined in the regulations). At December 31, 2011, the Banks exceeded all the capital
adequacy requirements to which they were subject.
As of December 31, 2011, the most recent notifications 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,
2011 and 2010 in comparison to the minimum amounts and ratios required for capital adequacy purposes:
At December 31, 2011
(dollars in thousands)
Total regulatory capital
Minimum for capital adequacy purposes
Excess
Leverage Capital
Amount
$3,125,359
1,478,304
$1,647,055
Ratio
8.46%
4.00
4.46%
Tier 1
Amount Ratio
$3,125,359 12.78%
Total
Amount Ratio
$3,283,502 13.42%
978,548
$2,146,811
4.00
8.78%
1,957,097
$1,326,405
8.00
5.42%
Risk-Based Capital
At December 31, 2010
(dollars in thousands)
Total regulatory capital
Minimum for capital adequacy purposes
Excess
Leverage Capital
Amount
$3,200,193
1,454,555
$1,745,638
Ratio
8.80%
4.00
4.80%
Tier 1
Amount Ratio
$3,200,193 13.30%
Total
Amount Ratio
$3,356,156 13.95%
962,360
$2,237,833
4.00
9.30%
1,924,720
$1,431,436
8.00
5.95%
Risk-Based Capital
The following tables present the actual capital amounts and ratios for the Commercial Bank at December 31,
2011 and 2010 in comparison to the minimum amounts and ratios required for capital adequacy purposes:
At December 31, 2011
(dollars in thousands)
Total regulatory capital
Minimum for capital adequacy purposes
Excess
Leverage Capital
Amount
Ratio
$322,611 13.01%
99,219
$223,392
4.00
9.01%
Tier 1
Amount Ratio
$322,611 17.01%
75,862
4.00
$246,749 13.01%
Total
Amount Ratio
$335,509 17.69%
151,724
$183,785
8.00
9.69%
Risk-Based Capital
At December 31, 2010
(dollars in thousands)
Total regulatory capital
Minimum for capital adequacy purposes
Excess
Leverage Capital
Amount
Ratio
$285,267 12.70%
89,815
$195,452
4.00
8.70%
Tier 1
Amount Ratio
$285,267 16.38%
69,650
4.00
$215,617 12.38%
Total
Amount Ratio
$301,683 17.33%
139,300
$162,383
8.00
9.33%
Risk-Based Capital
151
NOTE 18: SEGMENT REPORTING
The Company’s operations are divided into two reportable business segments: Banking Operations and
Residential Mortgage Banking. These operating segments have been identified based on the Company’s
organizational structure. The segments require unique technology and marketing strategies and offer different
products and services. While the Company is managed as an integrated organization, individual executive managers
are held accountable for the operations of these business segments.
The Company measures and presents information for internal reporting purposes in a variety of ways. The
internal reporting system presently used by management in the planning and measurement of operating activities,
and to which most managers are held accountable, is based on organizational structure.
The management accounting process uses various estimates and allocation methodologies to measure the
performance of the operating segments. To determine financial performance for each segment, the Company
allocates capital, funding charges and credits, certain non-interest expenses, and income tax provisions to each
segment, as applicable. Allocation methodologies are subject to periodic adjustment as the internal management
accounting system is revised. Furthermore, business or product lines within the segments may change. In addition,
because the development and application of these methodologies is a dynamic process, the financial results
presented may be periodically revised.
The Company’s overall objective is to maximize shareholder value by, among other things, optimizing return
on equity and managing risk. Capital is assigned to each segment, the total of which is equivalent to the Company’s
consolidated total, on an economic basis, using management’s assessment of the inherent risks associated with the
segment. Capital allocations are made to cover the following risk categories: credit risk, liquidity risk, interest rate
risk, option risk, basis risk, market risk, and operational risk.
The Company allocates expenses to the reportable segments based on various factors, including the volume
and amount of loans produced and the number of full-time equivalent employees. Income taxes are allocated to the
various segments based on taxable income and statutory rates applicable to the segment.
Banking Operations Segment
Banking Operations serves individual and business customers by offering and servicing a variety of loan and
deposit products and other financial services.
Residential Mortgage Banking Segment
The Residential Mortgage Banking segment originates, sells, aggregates, and services one-to-four family
mortgage loans. Mortgage loan products include conventional fixed- and adjustable-rate loans and jumbo loans for
the purpose of purchasing or refinancing one-to-four family residential properties. The Residential Mortgage
Banking segment earns interest on loans held in the warehouse and fee income from the origination and servicing of
loans, and recognizes gains or losses from the sale of such loans.
The following tables provide a summary of the Company’s segment results for the years ended December 31,
2011 and 2010.
(in thousands)
Non-interest income – third party (1)
Non-interest income – inter-segment
Total non-interest income
Net interest income
Total net revenues
Provision for loan losses
Non-interest expense (2)
Income before income tax expense
Income tax expense
Net income
Identifiable segment assets (period-end)
(1) Includes ancillary fee income.
(2) Includes both direct and indirect expenses.
Banking
Operations
153,307
$
(16,699)
136,608
1,176,137
1,312,745
100,420
531,264
681,061
233,963
$
447,098
$40,796,101
152
For the Twelve Months Ended December 31, 2011
Residential
Mortgage Banking
$
82,018
16,699
98,717
24,284
123,001
--
69,485
53,516
20,577
$
32,939
$1,228,201
$
Total
Company
235,325
--
235,325
1,200,421
1,435,746
100,420
600,749
734,577
254,540
$
480,037
$42,024,302
For the Twelve Months Ended December 31, 2010
Residential
Banking
Mortgage Banking
Operations
$ 136,494
201,429
$
(1,542)
1,542
134,952
202,971
18,370
1,161,593
153,322
1,364,564
--
102,903
55,229
522,283
98,093
739,378
39,854
256,600
58,239
$
482,778
$
$1,219,907
$39,970,782
Total
Company
337,923
$
--
337,923
1,179,963
1,517,886
102,903
577,512
837,471
296,454
541,017
$
$41,190,689
(in thousands)
Non-interest income – third party (1)
Non-interest income – inter-segment
Total non-interest income
Net interest income
Total net revenues
Provision for loan losses
Non-interest expense (2)
Income before income tax expense
Income tax expense
Net income
Identifiable segment assets (period-end)
(1) Includes ancillary fee income.
(2) Includes both direct and indirect expenses.
NOTE 19: SUBSEQUENT EVENTS
The Company evaluated whether any subsequent events that require recognition or disclosure in the
accompanying financial statements and notes thereto took place through the date these financial statements were
issued (February 29, 2012). The Company determined that no such subsequent events occurred during this time.
153
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, 2011 and 2010, 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, 2011. 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, 2011 and 2010, and
the results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2011, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of evaluating
other-than-temporary impairments of debt securities due to the adoption of new accounting requirements issued by
the Financial Accounting Standards Board, as of April 1, 2009.
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, 2011, 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, 2012 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
New York, New York
February 29, 2012
154
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
New York Community Bancorp, Inc.:
We have audited New York Community Bancorp, Inc. and subsidiaries’ (the “Company’s”) internal control over
financial reporting as of December 31, 2011, 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, 2011, 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, 2011 and 2010, 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, 2011, and our report dated February 29, 2012
expressed an unqualified opinion on those consolidated financial statements.
New York, New York
February 29, 2012
155
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 Company and the 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, 2011, 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 concluded that the Company’s internal control over financial reporting as of December 31, 2011 was
effective using these criteria.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2011 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, 2011, as stated in their
report, included in Item 8 on the preceding page, which expresses an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2011.
(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.
156
ITEM 9B. OTHER INFORMATION
None.
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 7, 2012 (hereafter referred to as our “2012
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 websites, 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 2012 Proxy Statement under the captions
“Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,”
“Compensation Discussion and Analysis,” “Executive Compensation and Related Information,” 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, 2011:
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)
9,006,944
--
9,006,944
$15.60
--
$15.60
3,020,458
--
3,020,458
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Information relating to the security ownership of certain beneficial owners and management appears in our
2012 Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners” and “Information with
Respect to Nominees, Continuing Directors, and Executive Officers.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information regarding certain relationships and related transactions appears in our 2012 Proxy Statement
under the captions “Transactions with Certain Related Persons” and “Corporate Governance,” and is incorporated
herein by this reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding principal accountant fees and services appears in our 2012 Proxy Statement under the
caption “Audit and Non-Audit Fees,” and is incorporated herein by this reference.
157
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents Filed As Part of This Report
1. Financial Statements
The following are incorporated by reference from Item 8 hereof:
(cid:120) Reports of Independent Registered Public Accounting Firm;
(cid:120) Consolidated Statements of Condition at December 31, 2011 and 2010;
(cid:120) Consolidated Statements of Income and Comprehensive Income for each of the years in the three-year
period ended December 31, 2011;
(cid:120) Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three-year period
ended December 31, 2011;
(cid:120) Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31,
2011; and
(cid:120) Notes to the Consolidated Financial Statements.
The following are incorporated by reference from Item 9A hereof:
(cid:120) Management’s Report on Internal Control over Financial Reporting; and
(cid:120) 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
Purchase and Assumption Agreement - Whole Bank; All Deposits, among the Federal Deposit
Insurance Corporation, receiver of Desert Hills Bank, Phoenix, Arizona, the Federal Deposit Insurance
Corporation, and New York Community Bank, dated as of March 26, 2010 (1)
3.1
Amended and Restated Certificate of Incorporation (2)
3.2
3.3
4.1
4.2
10.1
10.2
10.3
10.4
10.5
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)
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)
10.6
Form of Change in Control Agreements among the Company, the Bank, and Certain Officers (9)
158
10.7
10.8
10.9
Form of Queens County Bancorp, Inc. 1993 Incentive Stock Option Plan (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)
10.10
Form of Queens County Bancorp, Inc. Employee Stock Ownership Plan and Trust (9)
10.11
Incentive Savings Plan of Queens County Savings Bank (11)
10.12
Retirement Plan of Queens County Savings Bank (9)
10.13
Supplemental Benefit Plan of Queens County Savings Bank (12)
10.14
Excess Retirement Benefits Plan of Queens County Savings Bank (9)
10.15 Queens County Savings Bank Directors’ Deferred Fee Stock Unit Plan (9)
10.16 New York Community Bancorp, Inc. 1997 Stock Option Plan (13)
10.17
Richmond County Financial Corp. 1998 Stock-Based Incentive Plan (14)
10.18 Amended and Restated Roslyn Bancorp, Inc. 1997 Stock-Based Incentive Plan (15)
10.19
Roslyn Bancorp, Inc. 2001 Stock-Based Incentive Plan (15)
10.20
Long Island Financial Corp. 1998 Stock Option Plan, as amended (16)
10.21
TR Financial Corp. 1993 Incentive Stock Option Plan, as amended and restated(15)
10.22 Haven Bancorp, Inc. Incentive Stock Option Plan, as amended and restated(17)
10.23 Haven Bancorp, Inc. Stock Option Plan for Outside Directors, as amended and restated (17)
10.24 Amended and Restated Bayonne Bancshares 1995 Stock Option Plan (as assumed by Richmond County
Financial Corp.) (14)
10.25 New York Community Bancorp, Inc. Management Incentive Compensation Plan (18)
10.26 New York Community Bancorp, Inc. 2006 Stock Incentive Plan (18)
11.0
12.0
21.0
23.0
31.1
31.2
32.0
101
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, 2012 (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)
The following materials from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the
Consolidated Statements of Condition, (ii) the Consolidated Statements of Income and Comprehensive
Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated
Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements.
__________
(1)
(2)
(3)
Incorporated by reference to Exhibits filed with the Company’s Form 8-K filed with the Securities and
Exchange Commission on March 31, 2010
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)
159
(4)
(5)
(6)
(7)
(8)
(9)
Incorporated by reference to Exhibits to the Company’s 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 by reference to Exhibits to Form S-8, Registration Statement filed on October 4, 2007,
Registration No. 333-146512
Incorporated by reference to Exhibits filed with the Company’s Registration Statement on Form S-1,
Registration No. 33-66852
(10) Incorporated by reference to Exhibits to Form S-8, Registration Statement filed on October 27, 1994,
Registration No. 33-85684
(11) Incorporated by reference to Exhibits to Form S-8, Registration Statement filed on October 27, 1994,
Registration No. 33-85682
(12) Incorporated by reference to Exhibits filed with the 1995 Proxy Statement for the Annual Meeting of
Shareholders held on April 19, 1995
(13) Incorporated by reference to Exhibit A 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 by reference to Exhibits to Form S-8, Registration Statement filed on July 31, 2001, Registration
No. 333-66366
(15) Incorporated by reference to Exhibits to Form S-8, Registration Statement filed on November 10, 2003,
Registration No. 333-110361
(16) Incorporated by reference to Exhibits to Form S-8, Registration Statement filed on January 9, 2006,
Registration No. 333-130908
(17) Incorporated by reference to Exhibits to Form S-8, Registration Statement filed on December 15, 2000,
Registration No. 333-51998
(18) Incorporated by reference to Exhibits filed with the 2006 Proxy Statement for the Annual Meeting of
Shareholders held on June 7, 2006
160
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, 2012
New York Community Bancorp, Inc.
(Registrant)
/s/ Joseph R. Ficalora
Joseph R. Ficalora
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
President, Chief Executive Officer,
and Director
(Principal Executive Officer)
/s/ John J. Pinto
John J. Pinto
Executive Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
/s/ Dominick Ciampa
Dominick Ciampa
Chairman of the Board of Directors
/s/ Hanif W. Dahya
Hanif W. Dahya
Director
/s/ Max L. Kupferberg.
Max L. Kupferberg
Director
/s/ Hon. Guy V. Molinari
Hon. Guy V. Molinari
Director
/s/ Ronald A. Rosenfeld
Ronald A. Rosenfeld
Director
/s/ Spiros J. Voutsinas
Spiros J. Voutsinas
Director
/s/ Thomas R. Cangemi
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
2/29/12
/s/ Maureen E. Clancy
Maureen E. Clancy
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
Senior Executive Vice President, Chief
Operating Officer, and Director
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
2/29/12
161
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,
2010
2011
2009
$ 734,577
$ 837,471
$ 593,149
157,173
509,070
9,892
$ 676,135
$1,410,712
2.09x
216,540
517,291
12,016
$ 745,847
$1,583,318
2.12x
212,815
516,472
9,369
$ 738,656
$1,331,805
1.80x
$ 734,577
$ 837,471
$ 593,149
509,070
9,892
$ 518,962
$1,253,539
517,291
12,016
$ 529,307
$1,366,778
516,472
9,369
$ 525,841
$1,118,990
2.42x
2.58x
2.13x
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 (Nos. 333-146512, 333-135279, 333-
130908, 333-110361, 333-105901, 333-89826, 333-66366, 333-51998, and 333-32881) on Form S-8, and the
registration statements (Nos. 333-129338, 333-105350, 333-100767, 333-86682, 333-150442, 333-152147, and 333-
166080) on Form S-3 of New York Community Bancorp, Inc. (the “Company”) of our reports dated February 29,
2012 relating to (i) the consolidated statements of condition of New York Community Bancorp, Inc. and subsidiaries
as of December 31, 2011 and 2010, 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,
2011, and (ii) the effectiveness of internal control over financial reporting as of December 31, 2011, which reports
appear in the December 31, 2011 annual report on Form 10-K of New York Community Bancorp, Inc.
Our report refers to a change in the Company’s method of evaluating other-than-temporary impairments of debt
securities due to the adoption of new accounting requirements issued by the Financial Accounting Standards Board,
as of April 1, 2009.
New York, New York
February 29, 2012
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, 2012
BY: /s/ Joseph R. Ficalora
Joseph R. Ficalora
President and Chief Executive Officer
(Duly Authorized Officer)
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, 2012
BY: /s/ Thomas R. Cangemi
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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, 2011 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, 2012
BY: /s/ Joseph R. Ficalora
Joseph R. Ficalora
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)
2011 Annual Report
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 during the third or fourth week of January, April, July, and
october and announced in our earnings releases. As declaration, record, and payable dates
are subject to change, you may wish to confirm them by visiting ir.mynycb.com and clicking
on “Dividend History.”
Dividend Reinvestment and Stock Purchase Plan
under our Dividend reinvestment and stock Purchase Plan (the “Plan”), registered
shareholders may purchase additional shares of new york community bancorp by reinvest-
ing their cash dividends, and by making optional cash purchases ranging from a minimum
of $50 to a maximum of $10,000 per transaction—up to a maximum of $100,000 per calendar
year. in addition, new investors may purchase their initial shares through the Plan. the Plan
brochure is available from computershare and may also be accessed by clicking on “Dividend
reinvestment and stock Purchase Plan” at ir.mynycb.com.
Direct Deposit of Dividends
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,
please contact computershare or click on “shareholder services” at ir.mynycb.com.
AnnuAL MeetinG oF sHAreHoLDers
our 2012 Annual Meeting of shareholders will be held at 10:00 a.m. eastern time on
thursday, June 7th, at the sheraton LaGuardia east Hotel, 135-20 39th Avenue, in Flushing,
new york. shareholders of record as of April 9, 2012 will be eligible to receive notice of, and
to vote at, the 2012 Annual Meeting.
inDePenDent reGistereD PubLic AccountinG FirM
kPMG LLP
345 Park Avenue
new york, ny 10154-0102
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. trading information may also be found at ir.mynycb.com under
“stock information” or by visiting www.nyse.com and entering our trading symbol.
the bifurcated option note unit securitiessM (“bonuses 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 Pru.”
in addition, the 10.25% capital securities issued through Haven capital trust ii, another
company subsidiary, trade on the nAsDAQ stock Market, LLc, under the symbol “HAvnP.”
trading information for each of these securities may be found at ir.mynycb.com under
“stock information.”
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neW YoRK CoMMunItY
BAnCoRp, InC.
615 Merrick Avenue, Westbury, neW york 11590
www.mynycb.com ir@mynycb.com
(516) 683 - 4420
2 011 A n n u A l R e p o R t