Edgar Filing: NEW YORK COMMUNITY BANCORP INC

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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, 2010		Commission File Number 1-31565

NEW YORK COMMUNITY BANCORP, INC.

(Exact name of registrant as specified in its charter)


Delaware		06-1377322
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

615 Merrick Avenue, Westbury, New York		11590
(Address of principal executive offices)		(Zip code)

(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 SecuritiES^SM		New York Stock Exchange
(Title of Class)		(Name of exchange on which registered)

Haven Capital Trust II 10.25% Capital Securities		The NASDAQ Stock Market, LLC
(Title of Class)		(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 x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

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 x No ¨

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. x

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 x No ¨

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

As of June 30, 2010, the aggregate market value of the shares of common stock outstanding of the registrant was $6.4 billion, excluding 15,409,295 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, 2010, $15.27, as reported by the New York Stock Exchange.

The number of shares of the registrant’s common stock outstanding as of February 22, 2011 was 437,018,830 shares.

Documents Incorporated by Reference

Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 2, 2011 are incorporated by reference into Part III.

CROSS REFERENCE INDEX


		Page

Forward-looking Statements and Associated Risk Factors			1
Glossary			3

PART I

Item 1.	Business		6
Item 1A.	Risk Factors		27
Item 1B.	Unresolved Staff Comments		38
Item 2.	Properties		38
Item 3.	Legal Proceedings		38
Item 4.	[Removed and Reserved]		38

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities		39
Item 6.	Selected Financial Data		42
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		43
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		91
Item 8.	Financial Statements and Supplementary Data		95
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		167
Item 9A.	Controls and Procedures		167
Item 9B.	Other Information		168

PART III

Item 10.	Directors, Executive Officers, and Corporate Governance		168
Item 11.	Executive Compensation		168
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		168
Item 13.	Certain Relationships and Related Transactions, and Director Independence		169
Item 14.	Principal Accountant Fees and Services		169

PART IV

Item 15.	Exhibits and Financial Statement Schedules		169

Signatures			173

Certifications

For the purpose of this Annual Report on Form 10-K, the words “we,” “us,” “our,” and the “Company” are used to refer to New York Community Bancorp, Inc. and our consolidated subsidiaries, including New York Community Bank and New York Commercial Bank (the “Community Bank” and the “Commercial Bank,” respectively, and collectively, the “Banks”).

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK FACTORS

This report, like many written and oral communications presented by New York Community Bancorp, Inc. and our authorized officers, may contain certain forward-looking statements regarding our prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of said safe harbor provisions.

Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. Our ability to predict results or the actual effects of our plans or strategies is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.

There are a number of factors, many of which are beyond our control, that could cause actual conditions, events, or results to differ significantly from those described in our forward-looking statements. These factors include, but are not limited to:

•

general economic conditions, either nationally or in some or all of the areas in which we and our customers conduct our respective businesses;

•

conditions in the securities markets and real estate markets or the banking industry;

•

changes in interest rates, which may affect our net income, prepayment penalty income, and other future cash flows, or the market value of our assets, including our investment securities;

•

changes in deposit flows and wholesale borrowing facilities;

•

changes in the demand for deposit, loan, and investment products and other financial services in the markets we serve;

•

changes in our credit ratings or in our ability to access the capital markets;

•

changes in our customer base or in the financial or operating performances of our customers’ businesses;

•

changes in real estate values, which could impact the quality of the assets securing the loans in our portfolio;

•

changes in the quality or composition of our loan or securities portfolios;

•

changes in competitive pressures among financial institutions or from non-financial institutions;

•

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;

•

our use of derivatives to mitigate our interest rate exposure;

•

our ability to retain key members of management;

•

our timely development of new lines of business and competitive products or services in a changing environment, and the acceptance of such products or services by our customers;

•

any interruption or breach of security resulting in failures or disruptions in customer account management, general ledger, deposit, loan or other systems;

•

any breach in performance by the Community Bank under our loss sharing agreements with the FDIC;

•

any interruption in customer service due to circumstances beyond our control;

•

potential exposure to unknown or contingent liabilities of companies we have acquired or target for acquisition;

•

the outcome of pending or threatened litigation, or of other matters before regulatory agencies, whether currently existing or commencing in the future;

•

environmental conditions that exist or may exist on properties owned by, leased by or mortgaged to the Company;

•

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;

•

changes in our estimates of future reserves based upon the periodic review thereof under relevant regulatory and accounting requirements;

•

changes in our capital management policies, including those regarding business combinations, dividends, and share repurchases, among others;

•

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, environmental protection, and insurance; and the ability to comply with such changes in a timely manner;

•

additional FDIC special assessments or required assessment prepayments;

•

changes in accounting principles, policies, practices or guidelines;

•

the ability to keep pace with, and implement on a timely basis, technological changes;

•

changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System;

•

war or terrorist activities; and

•

other economic, competitive, governmental, regulatory 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.

Additionally, 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.

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 the unallocated shares held by our Employee Stock Ownership Plan (“ESOP”) have been subtracted from the total number of shares outstanding. Book value per share is determined by dividing total stockholders’ equity at the end of a period by the adjusted number of shares at the same date. The following table indicates the number of shares outstanding both before and after the total number of unallocated ESOP shares were subtracted at December 31, 2010, 2009, 2008, 2007, and 2006. As there were no unallocated ESOP shares remaining at December 31, 2010, both numbers at that date were the same.


	2010		2009			2008			2007			2006
Shares outstanding		435,646,845		433,197,332			344,985,111			323,812,639			295,350,936
Less: Unallocated ESOP shares		—		(299,248	)		(631,303	)		(977,800	)		(1,460,564	)

Shares used for book value per share computation		435,646,845		432,898,084			344,353,808			322,834,839			293,890,372

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 loan losses.

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

On December 4, 2009 and March 26, 2010, we acquired certain assets and assumed certain liabilities of AmTrust Bank (“AmTrust”) and Desert Hills Bank (“Desert Hills”) in FDIC-assisted transactions (the “AmTrust acquisition” and the “Desert Hills acquisition”), respectively. The loans we acquired in the AmTrust and Desert Hills acquisitions are referred to as covered loans because they are “covered” by loss sharing agreements with the FDIC. In addition, the other real estate owned (“OREO”) we acquired in the Desert Hills acquisition is referred to as covered OREO because it is covered by loss sharing agreements with the FDIC. Please see the definition of “Loss Sharing Agreements” that appears on the following page.

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 Bank.

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 our acquisition of certain loans of AmTrust on December 4, 2009 and certain loans and OREO of Desert Hills on March 26, 2010. The agreements call for the FDIC to reimburse us for 80% of 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. All of the loans acquired in the AmTrust acquisition, and all of the loans and OREO acquired in the Desert Hills acquisition, are subject to these agreements and are referred to in this document either as “covered loans,” “covered OREO,” or when discussed together, “covered assets.”

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 ASSETS

Consists of non-accrual loans, loans over 90 days past due and still accruing interest, 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 Federal Home Loan Bank (the “FHLB”) or various brokerage firms.

RETURN ON AVERAGE ASSETS

A measure of profitability determined by dividing net income by average assets for a given period.

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 FHLB, their repurchase agreements with the FHLB 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.

PART I

ITEM 1.

BUSINESS

General

With total assets of $41.2 billion at December 31, 2010, we are the 22nd 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 in the last decade, we currently have 276 branch offices, including 209 in Metro New York and New Jersey, and 67 in Florida, Ohio, and Arizona that were primarily acquired in connection with our FDIC-assisted acquisition of certain assets and assumption of certain liabilities of AmTrust Bank (the “AmTrust acquisition”) on December 4, 2009 and to a much lesser extent, our FDIC-assisted acquisition of certain assets and assumption of certain liabilities of Desert Hills Bank (the “Desert Hills acquisition”) on March 26, 2010.

We are organized under Delaware Law as a multi-bank holding company and have two primary subsidiaries: New York Community Bank and New York Commercial Bank (hereinafter referred to as the “Community Bank” and the “Commercial Bank,” respectively, and collectively as the “Banks”).

Established in 1859, the Community Bank is a New York State-chartered savings bank with 242 branches that currently operate through seven divisional banks.

In New York, we serve our Community Bank customers through Roslyn Savings Bank, with 56 branches on Long Island, a suburban market east of New York City comprised of Nassau and Suffolk counties; Queens County Savings Bank, with 33 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 52 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 242 Community Bank branches, 223 feature weekend hours, including 59 that are open seven days a week. Of these, 43 are in-store branches that are primarily located in supermarkets in New York and New Jersey. 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, we originate commercial real estate loans, primarily in Metro New York and New Jersey, and, to a lesser extent, acquisition, development, and construction loans, and commercial and industrial loans. We also originate one-to-four family loans through our mortgage banking operation, which was acquired in the AmTrust acquisition. In 2010, all of the one-to-four family loans we originated were sold to government-sponsored enterprises (“GSEs”), servicing retained. Although the vast majority of the loans we produce for investment (i.e., our portfolio) are secured by properties or businesses in Metro New York 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.

The Commercial Bank is a New York State-chartered commercial bank and was established in connection with our acquisition of Long Island Financial Corp. (“Long Island Financial”) on December 30, 2005. Reflecting that acquisition, and our subsequent acquisitions of Atlantic Bank of New York (“Atlantic Bank”) and the New York City-based branch network of Doral Bank, FSB (“Doral”), we currently serve our Commercial Bank customers

through 34 branches in Manhattan, Queens, Brooklyn, Westchester County, and Long Island, including 17 that operate under the name “Atlantic Bank.”

The Commercial Bank competes for customers by emphasizing personal service and by addressing the needs of small and mid-size businesses, professional associations, and government agencies with a comprehensive menu of business solutions, including installment loans, revolving lines of credit, and cash management services. In addition to featuring up to 50 hours per week of in-branch service, the Commercial Bank offers 24-hour banking online and by phone.

Customers of the Community Bank and the Commercial Bank also have 24-hour access to their accounts through 262 of our 286 ATM locations in five states.

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

Loan Production

Loans are our principal asset and represented $29.0 billion, or 70.5%, of total assets at December 31, 2010. Our loan portfolio has three components:

1. Covered Loans - Covered loans refers to the loans we acquired in our FDIC-assisted AmTrust and Desert Hills acquisitions, which are covered by loss sharing agreements with the FDIC. At December 31, 2010, the balance of covered loans was $4.3 billion; of this amount, $3.9 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 - Loans held for sale refers to the one-to-four family loans that are originated for sale by our mortgage banking operation. In 2010, all such loans were agency-conforming loans that were sold to GSEs. At December 31, 2010, the portfolio of one-to-four family loans awaiting sale to GSEs totaled $1.2 billion.

3. Non-Covered Loans Held for Investment - Loans held for investment refers to the loans we originate for our own portfolio, and totaled $23.7 billion at December 31, 2010. The year-end balance consisted primarily of loans secured by multi-family buildings in New York City in which the majority of the apartments are rent-controlled or –stabilized. According to the 2010 Housing Supply Report of the New York City Rent Guidelines Board, rent-regulated apartments comprise 64.0% of the rental housing units in New York City.

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 $16.8 billion, or 70.9%, of total non-covered loans at the end of this December, and represented $2.5 billion, or 58.6%, of the total loans we originated for investment over the course of 2010.

The multi-family loans we originate are typically based on the cash flows generated by the buildings in the form of rent rolls, and are generally made to long-term property owners with a history of growing cash flows over time. The property owners typically use the funds we provide to make improvements to the apartments in their buildings, thus increasing the value of the buildings and the amount of rent they may charge. As improvements are made, the building’s rent roll increases, generally prompting the borrower to seek additional funds by refinancing the loan.

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, the average multi-family loan had an expected weighted average life of 4.1 years at December 31, 2010.

Commercial Real Estate (“CRE”) Loans

At December 31, 2010, CRE loans represented $5.4 billion, or 22.9%, of total non-covered loans. Twelve-month originations totaled $947.0 million, representing 21.9% 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 4.0 years at December 31, 2010. In addition, our CRE loans are largely secured by properties in New York City, with Manhattan accounting for the largest share.

Acquisition, Development, and Construction (“ADC”) Loans

ADC loans represented $569.5 million, or 2.4%, of total non-covered loans at the end of December, reflecting our decision to largely limit such lending since the downturn in the credit cycle began.

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.

Commercial and Industrial (“C&I”) Loans

Included in “other loans” in our Consolidated Statements of Condition, C&I loans represented $641.7 million, or 2.70%, of total non-covered loans at December 31, 2010. 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 $170.4 million at the end of this December, and consisted primarily of loans acquired in our earlier business combinations and seasoned loans we produced prior to December 1, 2000, when we adopted our practice of originating one-to-four family loans on a pass-through basis and selling them to a third-party conduit after they closed. Since late December 2010, we have been originating one-to-four family loans through several selected clients of our mortgage banking operation and aggregating them with other loans for sale to GSEs.

Funding Sources

We have four primary funding sources: the deposits we’ve added through our acquisitions or gathered organically through our branch network, 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 $21.8 billion at December 31, 2010, and included certificates of deposit (“CDs”) of $7.8 billion; NOW and money market accounts of $8.2 billion; savings accounts of $3.9 billion; and non-interest-bearing accounts of $1.9 billion.

Borrowed funds totaled $13.5 billion at the end of the year, with wholesale borrowings representing $12.5 billion, or 92.4%, of that balance and 30.3% of total assets at December 31, 2010.

Loan repayments and sales generated cash flows of $14.6 billion, while securities sales and repayments generated cash flows of $5.0 billion in 2010.

Asset Quality

The Metro New York region, where most of the properties and businesses securing our loans held for investment are located, continued to be impacted by a weak economy in 2010. Non-performing assets represented $652.5 million, or 1.58%, of total assets at the end of December, including non-performing non-covered loans of $624.4 million and non-covered other real estate owned (“OREO”) of $28.1 million. Although the respective balances were higher than the year-earlier levels, they each reflected improvement from the highs we recorded at March 31, 2010.

Net charge-offs totaled $59.5 million in 2010, representing a $29.7 million increase from the year-earlier level while also representing 0.21% of average loans. In view of the weak economy and the related rise in non-performing assets and net charge-offs, we increased our provision for losses on non-covered loans to $91.0 million in 2010 from $63.0 million in 2009. Reflecting this provision and the aforementioned net charge-offs, our allowance for losses on non-covered loans rose $31.5 million year-over-year to $158.9 million, representing 25.45% of non-performing non-covered loans at December 31, 2010.

Continued 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 provisions, either of which could have an adverse impact on our earnings in the period ahead.

Growth through Acquisitions

In March 2010, we acquired certain assets, and assumed certain liabilities, of Desert Hills. The FDIC-assisted acquisition added six branches to our franchise in Arizona, three of which were subsequently consolidated into neighboring branches we had acquired in our AmTrust acquisition. In addition to enhancing our Arizona franchise, the Desert Hills acquisition provided us, at acquisition, with assets of $444.3 million, including loans of $186.3 million and OREO of $34.1 million, all of which are subject to loss sharing agreements; and liabilities of $442.5 million, including deposits of $390.6 million.

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); 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).

While net interest income is our primary source of income, it is supplemented by the non-interest income we produce. In 2010, our largest source of non-interest income was the income generated by our mortgage banking

operation through the origination and servicing of loans for sale to GSEs. Mortgage banking income accounted for $183.9 million of total non-interest income, including income of $136.5 million relating to originations and income of $47.4 million relating to servicing. In addition, fee income from deposits and loans accounted for $54.6 million of 2010 non-interest income, while BOLI income and other income accounted for $28.0 million and $33.8 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 $1.5 billion of assets under management at December 31, 2010.

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. Notwithstanding an increase in operating expenses stemming from higher FDIC insurance premiums and the acquisition-related expansion of our staff and franchise, we continued to rank among the most efficient bank holding companies in the nation, as reported by SNL Financial, with an efficiency ratio of 35.99% in 2010.

Our Market

Our market for deposits and loans broadened significantly on December 4, 2009 as a result of our AmTrust acquisition, and was modestly extended with our Desert Hills acquisition on March 26, 2010. In addition to adding Ohio, Florida, and Arizona to our footprint and 64 branches to our current franchise, the AmTrust acquisition provided us with a mortgage banking operation that aggregates one-to-four family loans for sale to GSEs. While the loans we originate for portfolio are largely secured by properties in New York City, Long Island, and New Jersey, the loans we originate for sale are secured by properties in all 50 states.

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 375. With total deposits of $21.8 billion at year-end, 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 communities: Queens, Staten Island, Nassau, and Suffolk Counties in New York; Essex County in New Jersey; Broward and Palm Beach Counties in Florida; Cuyahoga County in Ohio; and Maricopa County in Arizona. (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 22nd 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 242 Community Bank branches and 34 Commercial Bank branches, we have 286 ATM locations, including 262 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 191 traditional branches in New York, New Jersey, Florida, Ohio, and Arizona, our Community Bank currently has 43 branches in Metro New York and New Jersey that are located in-store. Our in-store branch

network ranks among the largest in-store franchises in this region, and is also one of the largest in the Northeast. Because of the proximity of these branches to our traditional locations, our customers in New York and New Jersey have the option of doing their banking seven days a week in many of the communities we serve. This service model is a key component of our efforts to attract and maintain deposits in a highly competitive marketplace. Of the remaining Community Bank branches, five 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, our practice of originating loans in our branches on a pass-through basis enables us to offer our customers a variety of one-to-four family mortgage loans.

In addition to checking and savings accounts, Individual Retirement Accounts, and CDs for both businesses and consumers, the Commercial Bank offers a variety of cash management products to address the needs of small and mid-size businesses, municipal and county governments, school districts, and professional associations.

Another competitive advantage is our strong community presence, with April 14, 2010 having marked the 151st year of service of our forebear, Queens County Savings Bank. We have found that our longevity is especially appealing to customers seeking a strong, stable, and service-oriented bank.

Competition for Loans

Our success as a lender is substantially tied to the economic health of the cities and suburbs where our branches are located, and in 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.

Although the level of competition we face for deposits is both varied and substantial, the competition for the loans we produce has, in the past three years, been less significant.

We are a leading producer of multi-family loans in New York City, and compete for such loans on the basis of timely service and the expertise that stems from being a specialist in our field. The majority of our multi-family loans are secured by non-luxury buildings with a preponderance of rent-regulated apartments, a niche that we have focused on for more than 40 years.

With the consolidation of our industry and the downturn in the credit cycle, several of our key competitors in the multi-family arena have been acquired. In addition, several of our key competitors, including the Wall Street conduits, have opted to back away from our primary lending niche.

In 2010, as in 2009, Fannie Mae and Freddie Mac were our primary competition in the multi-family arena, although a number of other financial institutions were also active in our marketplace during this time. While we anticipate that competition for multi-family loans will continue in the future, the significant volume of multi-family loans we produced in 2010 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 2010 as in 2009. In view of the economic weakness in our local market, fewer banks chose to compete for CRE credits, enabling us to increase our production over the past 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 once the local market improves.

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.

With the addition of our mortgage banking operation, we now compete with a significant number of financial and non-financial institutions throughout the nation that also aggregate one-to-four family loans for sale to GSEs. Based on our having funded $10.8 billion of one-to-four family loans in 2010, we were ranked 18th among the nation’s top wholesale loan aggregators for the year by Inside Mortgage Finance.

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 all out-of-state multi-family loans. 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.

Subsidiary Activities

The Community Bank has formed, or acquired through merger transactions, 35 active subsidiary corporations. Of these, 22 are direct subsidiaries of the Community Bank and 13 are subsidiaries of Community Bank-owned entities.

The 22 direct subsidiaries of the Community Bank are:


Name	Jurisdiction of Organization	Purpose
DHB Real Estate, LLC	Arizona	Organized to own interests in real estate

Vineyard Mountain Ranch Homeowners Association, Inc.	Arizona	Not-for-profit homeowners association of which the Community Bank owns a majority interest.

Mt. Sinai Ventures, LLC	Delaware	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

NYCB Community Development Corp.	Delaware	Formed to invest in community development activities

NYCB Mortgage Company, LLC	Delaware	Aggregates one-to-four family loans for sale, servicing retained

Eagle Rock Investment Corp.	New Jersey	Formed to hold and manage investment portfolios for the Company

Pacific Urban Renewal, Inc.	New Jersey	Owns a branch building

Somerset Manor Holding Corp.	New Jersey	Holding company for four subsidiaries that owned and operated two assisted-living facilities in New Jersey in 2005

Synergy Capital Investments, Inc.	New Jersey	Formed to hold and manage investment portfolios for the Company

1400 Corp.	New York	Manages properties acquired by foreclosure while they are being marketed for sale

BSR 1400 Corp.	New York	Organized to own interests in real estate

Bellingham Corp.	New York	Organized to own interests in real estate

Blizzard Realty Corp.	New York	Organized to own interests in real estate

CFS Investments, Inc.	New York	Sells non-deposit investment products

Main Omni Realty Corp.	New York	Organized to own interests in real estate

NYB Realty Holding Company, LLC	New York	Holding company for subsidiaries owning interests in real estate

O.B. Ventures, LLC	New York	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

RCBK Mortgage Corp.	New York	Organized to own interests in certain multi-family loans

RCSB Corporation	New York	Owns a branch building, Ferry Development Holding Company, and Woodhaven Investments, Inc.

RSB Agency, Inc.	New York	Sells non-deposit investment products

Richmond Enterprises, Inc.	New York	Holding company for Peter B. Cannell & Co., Inc.

Roslyn National Mortgage Corporation	New York	Formerly operated as a mortgage loan originator and servicer and currently holds an interest in its former office space

There are 40 additional entities that are subsidiaries of a Community Bank-owned entity that are organized to own interests in real estate.

The 13 subsidiaries of Community Bank-owned entities are:


Name	Jurisdiction of Organization	Purpose
Columbia Preferred Capital Corporation	Delaware	A real estate investment trust (“REIT”) organized for the purpose of investing in mortgage-related assets

Ferry Development Holding Company	Delaware	Formed to hold and manage investment portfolios for the Company

Peter B. Cannell & Co., Inc.	Delaware	Advises high net worth individuals and institutions on the management of their assets

Roslyn Real Estate Asset Corp.	Delaware	A REIT organized for the purpose of investing in mortgage-related assets

Woodhaven Investments, Inc.	Delaware	Holding company for Roslyn Real Estate Asset Corp. and Ironbound Investment Company, Inc.

Ironbound Investment Company, Inc.	New Jersey	A REIT organized for the purpose of investing in mortgage-related assets that also is the principal shareholder of Richmond County Capital Corp.

Somerset Manor North Operating Company, LLC	New Jersey	Established to own or operate assisted-living facilities in New Jersey that were sold in 2005

Somerset Manor North Realty Holding Company, LLC	New Jersey	Established to own or operate assisted-living facilities in New Jersey that were sold in 2005

Somerset Manor South Operating Company, LLC	New Jersey	Established to own or operate assisted-living facilities in New Jersey that were sold in 2005

Somerset Manor South Realty Holding Company, LLC	New Jersey	Established to own or operate assisted-living facilities in New Jersey that were sold in 2005

The Hamlet at Olde Oyster Bay, LLC	New York	Organized as a joint venture, part-owned by O.B. Ventures, LLC

The Hamlet at Willow Creek, LLC	New York	Organized as a joint venture, part-owned by Mt. Sinai Ventures, LLC

Richmond County Capital Corporation	New York	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 40 additional entities that are subsidiaries of a Community Bank-owned entity that are organized to own interests in real estate.

In addition, the Community Bank maintains one inactive corporation organized in New York.

The Commercial Bank has eight active subsidiary corporations, three of which are subsidiaries of Commercial Bank-owned entities.

The three direct subsidiaries of the Commercial Bank are:


Name	Jurisdiction of Organization	Purpose
Beta Investments, Inc.	Delaware	Holding company for Omega Commercial Mortgage Corp. and Long Island Commercial Capital Corp.

Gramercy Leasing Services, Inc.	New York	Provides equipment lease financing

Standard Funding Corp.	New York	Provides insurance premium financing

The three subsidiaries of Commercial Bank-owned entities are:


Name	Jurisdiction of Organization	Purpose
Standard Funding of California, Inc.	California	Provides insurance premium financing

Omega Commercial Mortgage Corp.	Delaware	A REIT organized for the purpose of investing in mortgage-related assets

Long Island Commercial Capital Corp.	New York	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 8, “Borrowed Funds,” within Item 8, “Financial Statements and Supplementary Data,” for a further discussion of the Company’s special business trusts.

The Company also has one non-banking subsidiary that was established in connection with the acquisition of Atlantic Bank.

Personnel

At December 31, 2010, the number of full-time equivalent employees was 3,883. 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” within 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 Banking Department (the “Banking Department”), as their chartering agency, and by the Federal Deposit Insurance Corporation (the “FDIC”), as their insurer of deposits. Both institutions must file reports with the Banking Department and the FDIC concerning their activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other depository institutions. Furthermore, the Banks are periodically examined by the Banking Department and the FDIC to assess compliance with various regulatory requirements, including safety and soundness considerations. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank and a commercial bank can engage, and is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss allowances for regulatory purposes. Any change in such regulation, whether by the Banking Department, the FDIC, or through legislation, could have a material adverse impact on the Company, the Community Bank, the Commercial Bank, and their operations, and the Company’s shareholders.

The Company is required to file certain reports under, and otherwise comply with, the rules and regulations of the Federal Reserve Board of Governors (the “FRB”), the FDIC, the Banking Department, and the SEC under federal securities laws. In addition, the FRB periodically examines the Company.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), signed into law on July 21, 2010, made extensive changes in the regulation of depository institutions and their holding companies. Certain provisions of the Dodd-Frank Act are expected to have a near term impact on the regulation of the Company. For example, the Dodd-Frank Act creates a new Consumer Financial Protection Bureau as an independent bureau of the FRB. The Consumer Financial Protection Bureau will assume responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations, a function currently assigned to the prudential regulators, and have authority to impose new requirements. Institutions of $10 billion or more in assets, such as the Community Bank, and their affiliates, will be examined for compliance with consumer protection and fair lending laws and regulations by, and be subject to the enforcement authority of, the Consumer Financial Protection Bureau. The Secretary of the Treasury has subsequently announced that the

Consumer Financial Protection Bureau will assume its responsibilities on July 21, 2011. Certain additional provisions of the Dodd-Frank Act are discussed below.

Certain of the regulatory requirements applicable to the Community Bank, the Commercial Bank, and the Company are referred to below or elsewhere herein. However, such discussion is not meant to be a complete explanation of all laws and regulations and is qualified in its entirety by reference to the actual laws and regulations.

New York Law

The Community Bank and the Commercial Bank derive their lending, investment, and other authority primarily from the applicable provisions of New York State Banking Law and the regulations of the Banking Department, as limited by FDIC regulations. Under these laws and regulations, banks, including the Community Bank and the Commercial Bank, may invest in real estate mortgages, consumer and commercial loans, certain types of debt securities (including certain corporate debt securities, and obligations of federal, state, and local governments and agencies), certain types of corporate equity securities, and certain other assets. The lending powers of New York savings banks and commercial banks are not subject to percentage of assets or capital limitations, although there are limits applicable to loans to individual borrowers.

Under the statutory authority for investing in equity securities, a savings bank may directly invest up to 7.5% of its assets in certain corporate stock, and may also invest up to 7.5% of its assets in certain mutual fund securities. Investment in the stock of a single corporation is limited to the lesser of 2% of the issued and outstanding stock of such corporation or 1% of the savings bank’s assets, except as set forth below. Such equity securities must meet certain earnings ratios and other tests of financial performance. Commercial banks may invest in certain equity securities up to 2% of the stock of a single issuer and are subject to a general overall limit of the lesser of 2% of the bank’s assets or 20% of capital and surplus.

Pursuant to the “leeway” power, a savings bank may also make investments not otherwise permitted under New York State Banking Law. This power permits a bank to make investments that would otherwise be impermissible. Up to 1% of a bank’s assets may be invested in any single such investment, subject to certain restrictions; the aggregate limit for all such investments is 5% of a bank’s assets. Additionally, savings banks are authorized to elect to invest under a “prudent person” standard in a wide range of debt and equity securities in lieu of investing in such securities in accordance with, and reliance upon, the specific investment authority set forth in New York State Banking Law. Although the “prudent person” standard may expand a savings bank’s authority, in the event that a savings bank elects to utilize the “prudent person” standard, it may be unable to avail itself of the other provisions of New York State Banking Law and regulations which set forth specific investment authority.

New York State savings banks may also invest in subsidiaries under a service corporation power. A savings bank may use this power to invest in corporations that engage in various activities authorized for savings banks, plus any additional activities which may be authorized by the Banking Department. Investment by a savings bank in the stock, capital notes, and debentures of its service corporation is limited to 3% of the savings bank’s assets, and such investments, together with the savings bank’s loans to its service corporations, may not exceed 10% of the savings bank’s assets. Savings banks and commercial banks may invest in operating subsidiaries that engage in activities permissible for the institution directly. Under New York law, the New York State Banking Board has the authority to authorize savings banks to engage in any activity permitted under federal law for federal savings associations and the insurance powers of national banks. Commercial banks may be authorized to engage in any activity permitted under federal law for national banks.

The exercise by an FDIC-insured savings bank or commercial bank of the lending and investment powers under New York State Banking Law is limited by FDIC regulations and other federal laws and regulations. In particular, the applicable provision of New York State Banking Law and regulations governing the investment authority and activities of an FDIC-insured state-chartered savings bank and commercial bank have been effectively limited by the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and the FDIC regulations issued pursuant thereto.

With certain limited exceptions, a New York State-chartered savings bank may not make loans or extend credit for commercial, corporate, or business purposes (including lease financing) to a single borrower, the aggregate amount of which would be in excess of 15% of the bank’s net worth or up to 25% for loans secured by collateral having an ascertainable market value at least equal to the excess of such loans over the bank’s net worth. A commercial bank is subject to similar limits on all of its loans. The Community Bank and the Commercial Bank currently comply with all applicable loans-to-one-borrower limitations.

Under New York State Banking Law, 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 Superintendent of Banks (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 Banking Department that any director, trustee, or officer of any banking organization has violated any law, or has continued unauthorized or unsafe practices in conducting the business of the banking organization after having been notified by the Superintendent to discontinue such practices, such director, trustee, or officer may be removed from office after notice and an opportunity to be heard. The Superintendent also has authority to appoint a conservator or a receiver for a savings or commercial bank under certain circumstances.

FDIC Regulations

Capital Requirements

The FDIC has adopted risk-based capital guidelines to which the Community Bank and the Commercial Bank are subject. The guidelines establish a systematic analytical framework that makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations. The Community Bank and the Commercial Bank are required to maintain certain levels of regulatory capital in relation to regulatory risk-weighted assets. The ratio of such regulatory capital to regulatory risk-weighted assets is referred to as a “risk-based capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance-sheet items to four risk-weighted categories ranging from 0% to 100%, with higher levels of capital being required for the categories perceived as representing greater risk.

These guidelines divide an institution’s capital into two tiers. The first tier (“Tier I”) includes common equity, retained earnings, certain non-cumulative perpetual preferred stock (excluding auction rate issues) and minority interests in equity accounts of consolidated subsidiaries, less goodwill and other intangible assets (except mortgage servicing rights and purchased credit card relationships subject to certain limitations). Supplementary (“Tier II”) capital includes, among other items, cumulative perpetual and long-term limited-life preferred stock, mandatorily convertible securities, certain hybrid capital instruments, term subordinated debt, and the allowance for loan losses, subject to certain limitations, and up to 45% of pre-tax net unrealized gains on equity securities with readily determinable fair market values, less required deductions. Savings banks and commercial banks are required to maintain a total risk-based capital ratio of at least 8%, of which at least 4% must be Tier I capital.

In addition, the FDIC has established regulations prescribing a minimum Tier I leverage capital ratio (the ratio of Tier I capital to adjusted average assets as specified in the regulations). These regulations provide for a minimum Tier I leverage capital ratio of 3% for institutions that meet certain specified criteria, including that they have the highest examination rating and are not experiencing or anticipating significant growth. All other institutions are required to maintain a Tier I leverage capital ratio of at least 4%. The FDIC may, however, set higher leverage and risk-based capital requirements on individual institutions when particular circumstances warrant. Institutions experiencing or anticipating significant growth are expected to maintain capital ratios, including tangible capital positions, well above the minimum levels.

As of December 31, 2010, the Community Bank and the Commercial Bank were deemed to be well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, a bank must maintain a minimum Tier I leverage capital ratio of 5%, a minimum Tier I risk-based capital ratio of 6%, and a minimum total risk-based capital ratio of 10%. A summary of the regulatory capital ratios of the Banks at December 31, 2010 appears in Note 18, “Regulatory Matters” in Item 8, “Financial Statements and Supplementary Data.”

The regulatory capital regulations of the FDIC and other federal banking agencies provide that the agencies will take into account the exposure of an institution’s capital and economic value to changes in interest rate risk in assessing capital adequacy. According to the agencies, applicable considerations include the quality of the institution’s interest rate risk management process, overall financial condition, and the level of other risks at the institution for which capital is needed. Institutions with significant interest rate risk may be required to hold

additional capital. The agencies have issued a joint policy statement providing guidance on interest rate risk management, including a discussion of the critical factors affecting the agencies’ evaluation of interest rate risk in connection with capital adequacy. Institutions that engage in specified amounts of trading activity may be subject to adjustments in the calculation of the risk-based capital requirement to assure sufficient additional capital to support market risk.

Standards for Safety and Soundness

Federal law requires each federal banking agency to prescribe, for the depository institutions under its jurisdiction, standards that relate to, among other things, internal controls; information and audit systems; loan documentation; credit underwriting; the monitoring of interest rate risk; asset growth; compensation; fees and benefits; and such other operational and managerial standards as the agency deems appropriate. The federal banking agencies adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness (the “Guidelines”) to implement these safety and soundness standards. The Guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the Guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard, as required by the Federal Deposit Insurance Act, as amended, (the “FDI Act”). The final regulations establish deadlines for the submission and review of such safety and soundness compliance plans.

Real Estate Lending Standards

The FDIC and the other federal banking agencies have adopted regulations that prescribe standards for extensions of credit that (i) are secured by real estate, or (ii) are made for the purpose of financing construction or improvements on real estate. The FDIC regulations require each institution to establish and maintain written internal real estate lending standards that are consistent with safe and sound banking practices and appropriate to the size of the institution and the nature and scope of its real estate lending activities. The standards 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 land development, construction, and certain multi-family loans, as well as commercial real estate loans, does not establish specific lending limits but, rather, reinforces and enhances the Agencies’ existing regulations and guidelines for such lending and portfolio management.

Dividend Limitations

The FDIC has authority to use its enforcement powers to prohibit a savings bank or commercial bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Federal law prohibits the payment of dividends that will result in the institution failing to meet applicable capital requirements on a pro forma basis. The Community Bank and the Commercial Bank are also subject to dividend declaration restrictions imposed by New York law as previously discussed under “New York Law.”

Investment Activities

Since the enactment of FDICIA, all state-chartered financial institutions, including savings banks, commercial banks, and their subsidiaries, have generally been limited to such activities as principal and equity investments of the type and in the amount authorized for national banks. State law, FDICIA, and FDIC regulations permit certain exceptions to these limitations. For example, certain state-chartered savings banks, such as the Community Bank, may, with FDIC approval, continue to exercise state authority to invest in common or preferred stocks listed on a national securities exchange and in the shares of an investment company registered under the Investment Company Act of 1940, as amended. Such banks may also continue to sell Savings Bank Life Insurance. In addition, the FDIC is authorized to permit institutions to engage in state authorized activities or investments not permitted for national banks (other than non-subsidiary equity investments) for institutions that meet all applicable capital requirements if it is determined that such activities or investments do not pose a significant risk to the

insurance fund. The Gramm-Leach-Bliley Act of 1999 and FDIC regulations impose certain quantitative and qualitative restrictions on such activities and on a bank’s dealings with a subsidiary that engages in specified activities.

The Community Bank received grandfathering authority from the FDIC in 1993 to invest in listed stock and/or registered shares subject to the maximum permissible investments of 100% of Tier I Capital, as specified by the FDIC’s regulations, or the maximum amount permitted by New York State Banking Law, whichever is less. Such grandfathering authority is subject to termination upon the FDIC’s determination that such investments pose a safety and soundness risk to the Community Bank or in the event that the Community Bank converts its charter or undergoes a change in control.

Prompt Corrective Regulatory Action

Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the law establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

The FDIC has adopted regulations to implement prompt corrective action. Among other things, the regulations define the relevant capital measure for the five capital categories. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier I risk-based capital ratio of 6% or greater, and a leverage capital ratio of 5% or greater, and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level for any capital measure. An institution is deemed to be “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4% or greater, and generally a leverage capital ratio of 4% or greater. An institution is deemed to be “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a leverage capital ratio of less than 4%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier I risk-based capital ratio of less than 3%, or a leverage capital ratio of less than 3%. An institution is deemed to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%.

“Undercapitalized” institutions are subject to growth, capital distribution (including dividend), and other limitations and are required to submit a capital restoration plan. An institution’s compliance with such plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the bank’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an undercapitalized institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” Significantly undercapitalized institutions are subject to one or more additional restrictions including, but not limited to, an order by the FDIC to sell sufficient voting stock to become adequately capitalized; requirements to reduce total assets, cease receipt of deposits from correspondent banks, or dismiss directors or officers; and restrictions on interest rates paid on deposits, compensation of executive officers, and capital distributions by the parent holding company.

“Critically undercapitalized” institutions also may not, beginning 60 days after becoming critically undercapitalized, make any payment of principal or interest on certain subordinated debt, or extend credit for a highly leveraged transaction, or enter into any material transaction outside the ordinary course of business. In addition, subject to a narrow exception, the appointment of a receiver is required for a critically undercapitalized institution.

Transactions with Affiliates

Under current federal law, transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W promulgated thereunder. An affiliate of a savings bank or commercial bank is any company or entity that controls, is controlled by, or is under common control with the institution, other than a subsidiary. Generally, an institution’s subsidiaries are not treated as affiliates unless they are engaged in activities as principal that are not permissible for national banks. In a holding company context, at a minimum, the parent holding company of an institution, and any companies that are controlled by such parent holding company, are affiliates of the institution. Generally, Section 23A limits the extent to which the institution or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of the institution’s capital stock and surplus, and contains an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus. The term “covered transaction”

includes the making of loans or other extensions of credit to an affiliate; the purchase of assets from an affiliate; the purchase of, or an investment in, the securities of an affiliate; the acceptance of securities of an affiliate as collateral for a loan or extension of credit to any person; or issuance of a guarantee, acceptance, or letter of credit on behalf of an affiliate. Section 23A also establishes specific collateral requirements for loans or extensions of credit to, or guarantees, or acceptances on letters of credit issued on behalf of, an affiliate. Section 23B requires that covered transactions and a broad list of other specified transactions be on terms substantially the same as, or no less favorable to, the institution or its subsidiary as similar transactions with non-affiliates.

The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption for loans by an institution to its executive officers and directors in compliance with federal banking laws. Section 22(h) of the Federal Reserve Act, and FRB Regulation O adopted thereunder, governs loans by a savings bank or commercial bank to directors, executive officers, and principal shareholders. Under Section 22(h), loans to directors, executive officers, and shareholders who control, directly or indirectly, 10% or more of voting securities of an institution, and certain related interests of any of the foregoing, may not exceed, together with all other outstanding loans to such persons and affiliated entities, the institution’s total capital and surplus. Section 22(h) also prohibits loans above amounts prescribed by the appropriate federal banking agency to directors, executive officers, and shareholders who control 10% or more of the voting securities of an institution, and their respective related interests, unless such loan is approved in advance by a majority of the board of the institution’s directors. Any “interested” director may not participate in the voting. The loan amount (which includes all other outstanding loans to such person) as to which such prior board of director approval is required, is the greater of $25,000 or 5% of capital and surplus or any loans aggregating over $500,000. Further, pursuant to Section 22(h), loans to directors, executive officers, and principal shareholders must be made on terms substantially the same as those offered in comparable transactions to other persons. There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to executive officers over other employees. Section 22(g) of the Federal Reserve Act places additional limitations on loans to executive officers.

Enforcement

The FDIC has extensive enforcement authority over insured banks, including the Community Bank and the Commercial Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist orders, and to remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations and unsafe or unsound practices.

The FDIC has authority under federal law to appoint a conservator or receiver for an insured institution under certain circumstances. The FDIC is required, with certain exceptions, to appoint a receiver or conservator for an insured institution if that institution was critically undercapitalized on average during the calendar quarter beginning 270 days after the date on which the institution became critically undercapitalized. For this purpose, “critically undercapitalized” means having a ratio of tangible equity to total assets of less than 2%. 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 on 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. Assessment rates currently range from seven to 77.5 basis points of each

institution’s deposit assessment base. The FDIC may adjust the scale uniformly from one quarter to the next, except that no adjustment can deviate more than three basis points from the base scale without notice and comment rulemaking. No institution may pay a dividend if in default of the federal deposit insurance assessment.

The Dodd-Frank Act requires the FDIC to amend its procedures to base assessments on average consolidated total assets less average tangible equity, rather than on deposits. On February 7, 2011, the FDIC issued final rules, effective April 1, 2011, implementing changes to the assessment rules from the Dodd-Frank Act. Initially, the base assessment rates will range from 2.5 to 45 basis points. The rate schedules will automatically adjust in the future when the DIF reaches certain milestones.

The FDIC imposed on 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. That special assessment was collected on September 30, 2009. 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”) 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 between October 13, 2008 and June 30, 2009, later extended to October 31, 2009, by institutions and their holding companies 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, and the Community Bank issued $512.0 million of fixed rate senior notes with a maturity date of December 16, 2011. 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, instead leaving it to the discretion of the FDIC.

In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. That payment is established quarterly, and during the calendar year ending December 31, 2010, averaged 1.045 basis points of assessable deposits.

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. Management does not know of any practice, condition, or violation that might lead to termination of deposit insurance of either of the Banks.

Community Reinvestment Act

Federal Regulation

Under the Community Reinvestment Act (the “CRA”), as implemented by FDIC regulations, an institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the FDIC, in connection with its examinations, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution. The CRA requires public disclosure of an institution’s CRA rating and further requires the FDIC to

provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. The Community Bank’s latest CRA rating from the FDIC was “outstanding” and the Commercial Bank’s latest CRA rating was “satisfactory.”

New York Regulation

The Community Bank and the Commercial Bank are also subject to provisions of the New York State Banking Law which impose continuing and affirmative obligations upon a banking institution organized in New York to serve the credit needs of its local community (the “NYCRA”). Such obligations are substantially similar to those imposed by the CRA. The NYCRA requires the Banking Department to make a periodic written assessment of an institution’s compliance with the NYCRA, utilizing a four-tiered rating system, and to make such assessment available to the public. The NYCRA also requires the Superintendent to consider the NYCRA rating when reviewing an application to engage in certain transactions, including mergers, asset purchases, and the establishment of branch offices or ATMs, and provides that such assessment may serve as a basis for the denial of any such application. The latest NYCRA rating received by the Community Bank was “outstanding” and the latest rating received by the Commercial Bank was “satisfactory.”

Federal Reserve System

Under FRB regulations, the Community Bank and the Commercial Bank are required to maintain 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 $58.8 million or less (subject to adjustment by the FRB), the reserve requirement is 3%; for amounts greater than $58.8 million, the reserve requirement is 10% (subject to adjustment by the FRB between 8% and 14%). The first $10.7 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 Federal Home Loan Bank 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 $110.6 million of FHLB-Cincinnati stock acquired in the AmTrust acquisition and $3.6 million of FHLB-San Francisco stock acquired in the Desert Hills acquisition, the Community Bank held total FHLB stock of $437.7 million at December 31, 2010. In addition, the Commercial Bank held FHLB-NY stock of $8.3 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, 2010 and 2009, dividends from the FHLB to the Community Bank amounted to $23.3 million and $22.6 million, respectively. Dividends from the FHLB-NY to the Commercial Bank amounted to $446,000 and $473,000, respectively, in the corresponding years.

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 52 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 the States of 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 Banking Department. In the event that the Banking Department and the applicable host state regulator disagree regarding whether a particular host state law is pre-empted, the Banking Department 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 to the approval of the FRB, before any bank acquisition can be completed, prior approval thereof may also be required to be obtained from other agencies having supervisory jurisdiction over the bank to be acquired, including the Banking Department.

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, 2010, the Company’s consolidated Total and Tier I capital exceeded these requirements. The Dodd-Frank Act requires 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, when finalized, will eliminate 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, 2010, and absent any reduction in that balance over the three years ending January 1, 2016, the elimination of such instruments would be expected to reduce our capital by $418.7 million, or 11.9%, at the end of the three-year phase-in, and reduce our Tier 1 leverage ratio by 108 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 Holding Company Regulation

With the addition of the Commercial Bank, the Company became subject to regulation as a “multi-bank holding company” under New York law since it controls two banking institutions. Among other requirements, this means that the Company must receive the prior approval of the New York State Banking Board prior to the acquisition of 10% or more of the voting stock of another banking institution or to otherwise acquire a banking institution by merger or purchase.

Acquisition of the Holding Company

Federal Restrictions

Under the Federal Change in Bank Control Act (the “CIBCA”), a notice must be submitted to the FRB if any person (including a company), or group acting in concert, seeks to acquire 10% or more of the Company’s shares of outstanding common stock, unless the FRB has found that the acquisition will not result in a change in control of the Company. Under the CIBCA, the FRB generally has 60 days within which to act on such notices, taking into consideration certain factors, including the financial and managerial resources of the acquirer, the convenience and needs of the communities served by the Company, the Community Bank, and the Commercial Bank, and the anti-trust effects of the acquisition. Under the BHCA, any company would be required to obtain prior approval from the FRB before it may obtain “control” of the Company within the meaning of the BHCA. Control generally is defined to mean the ownership or power to vote 25% or more of any class of voting securities of the Company or the ability to control in any manner the election of a majority of the Company’s directors. An existing bank holding company would be required to obtain the FRB’s prior approval under the BHCA before acquiring more than 5% of the Company’s voting stock. Please see “Holding Company Regulation” earlier in this report.

New York Change in Control Restrictions

In addition to the CIBCA and the BHCA, New York State Banking Law generally requires prior approval of the New York State Banking Board before any action is taken that causes any company to acquire direct or indirect control of a banking institution which is organized in New York.

Federal Securities Law

The Company’s common stock, 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.

Regulatory Restructuring Legislation

The Dodd-Frank Act contains comprehensive changes to the regulation of banks and bank holding companies. Many of those changes may have implications for the Community Bank, the Commercial Bank, and the Company. In addition to those previously mentioned, some of the relevant provisions of the Dodd-Frank Act include:

•

The creation of 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 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 establishment of an orderly liquidation process for systemically significant failed or failing financial companies, including bank holding companies. Implementation of that process generally requires a governmental determination that, among other things, the failure of the company involved would have significant adverse effects on the nation’s financial stability. The process generally involves the appointment of the FDIC as receiver for the company with the receivership proceeding along principles similar to those applicable to FDIC depository institutions receiverships and is in lieu of the federal bankruptcy process.

•

The adoption of new restrictions and requirements for residential mortgage loan originations

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The authorization of the payment of interest on business demand accounts

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The requirement that risk retention requirements be established for securitized loans

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The requirement that the FRB set fees that may be charged for electronic debit transactions. Such fees must be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.

Many of the provisions of the Dodd-Frank Act are subject to delayed implementation dates and/or require the promulgation of implementing regulations. Therefore, the full impact of the legislation on the business and operations of the Company and the Banks will not be known for many years. However, the Dodd-Frank Act may have a material impact on operations through, among other things, increased compliance costs, heightened regulatory supervision, and higher interest expense.

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:

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.

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.

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.

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).

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.

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 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.

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 must start at, and be 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 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.

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 establishing and implementing 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 and the Board of Directors.

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 applicable ERM Committee and 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.

Risk Categories

The Company’s risk management program is organized around eight categories: credit risk, interest rate risk, liquidity risk, market risk, operational risk, legal/compliance risk, strategic risk, and reputational risk.

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.

The current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations.

Since the second half of 2007, we have been operating in a challenging and uncertain economic environment, both nationally and in the various local markets we serve. Financial institutions continue to be affected by economic weakness, high unemployment, and soft real estate values, and although we take various steps to reduce our market and credit risk exposure, we nonetheless are affected by these issues in view of our retaining a securities portfolio; retaining portfolios of multi-family, CRE, ADC, and C&I loans; our having acquired portfolios of one-to-four family and other loans in the AmTrust and Desert Hills acquisitions; and our originating one-to-four family loans for sale.

Continued 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. Continued declines in real estate values and home sales, and an increase in the financial stress on borrowers stemming from an uncertain economic environment, including high unemployment, could have an adverse effect on our borrowers or

their customers, which could adversely impact the repayment of the loans we have made. The overall deterioration in economic conditions also could subject us, and the financial services industry, to increased regulatory scrutiny. In addition, further deterioration in economic conditions in the markets we serve 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. Further deterioration in local economic conditions could drive the level of loan losses beyond the level we have provided for in our loan loss allowance, which could necessitate an increase in our provisions for loan losses, which, in turn, 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 level of revenues we generate.

We are subject to interest rate risk.

Our primary source of income is net interest income, which is the difference between the interest income generated by our interest-earning assets (consisting primarily of loans and, to a lesser extent, securities) and the interest expense produced by our interest-bearing liabilities (consisting primarily of deposits and wholesale borrowings).

The level of net interest income we produce is primarily a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board of Governors (the “FOMC”) and market interest rates.

The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, the level of which is driven by the FOMC. However, the yields generated by our loans and securities are typically driven by intermediate-term (i.e., five-year) interest rates, which are set by the market and generally vary from day to day. The level of net interest income is therefore influenced by movements in such interest rates, and the pace at which such movements occur. If the interest rates on our interest-bearing liabilities increase at a faster pace than the interest rates on our interest-earning assets, the result could be a reduction in net interest income and with it, a reduction in 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 the level of loan refinancing activity which, in turn, would impact the amount of prepayment penalty income we receive on our multi-family and CRE loans. As prepayment penalties are recorded as interest income, the extent to which they increase or decrease during any given period could have a significant impact on the level of net interest income and net income we generate during that time.

In addition, changes in interest rates could have an effect on the slope of the yield curve. A flat to inverted yield curve could cause our net interest income and net interest margin to contract, which could have a material adverse effect on our net income and cash flows, and the value of our assets.

Our use of derivative financial instruments to mitigate our interest rate exposure may not be effective and expose us to counterparty risks.

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. No strategy, however, can completely insulate us from the interest rate risks to which we are exposed and there is no guarantee that the implementation of any strategy would have the desired impact on our results of operations or financial condition. These derivatives, which are intended to limit losses, may actually adversely affect our earnings, which could reduce our capital and the cash available to us for distribution to our shareholders. 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 credit risk.

Risks stemming from our lending activities:

The loans we originate for portfolio are primarily multi-family loans and, to a lesser extent, CRE loans, as well as ADC and C&I 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.

ADC financing typically involves a greater degree of credit risk than longer-term financing on improved, owner-occupied real estate. Risk of loss on an ADC loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development, compared to the estimated costs (including interest) of construction. If the estimate of value proves to be inaccurate, the loan may be under-secured. While we seek to minimize these risks by maintaining consistent lending policies and rigorous underwriting standards, an error in such estimates or a downturn in the local economy or real estate market could have a material adverse effect on the quality of our 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 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 loan losses. Either of these events would have an adverse impact on our results of operations.

Risks stemming from the loans we acquired in our FDIC-assisted transactions, all of which may not be supported by our loss sharing agreements with the FDIC:

The credit risk associated with the loans and OREO we acquired in the AmTrust and Desert Hills acquisitions were largely mitigated by our loss sharing agreements with the FDIC, yet these assets are not without risk. Although these acquired assets were initially accounted for at fair value, there is no assurance that they will not become impaired, which may 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 correspondingly reduce our net income. These 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.

Furthermore, although the loss sharing agreements provide that the FDIC will 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 loan portfolios. Additionally, the loss sharing agreements have limited terms; therefore, any charge-offs we experience after the terms of the loss sharing agreements have ended may not be fully recoverable from the FDIC, which would negatively impact our net income.

In addition, the FDIC has the right to refuse or delay payment for loan losses if the loss sharing agreements are not managed in accordance with their terms.

Risks stemming from the loans we originate in the New York metropolitan region:

Our business depends significantly on general economic conditions in the New York metropolitan region, where the majority of the buildings and properties securing the loans we originate for investment, and the businesses of the customers to whom we make C&I loans, are located. Unlike larger national or superregional banks that serve a broader and more diverse geographic region, our lending historically has been concentrated in New York City and the surrounding markets of Nassau, Suffolk, and Westchester counties in New York, and Essex, Hudson, Mercer, Middlesex, Monmouth, Ocean, and Union counties in New Jersey.

Accordingly, the ability of our borrowers to repay their loans, and the value of the collateral securing such loans, may be significantly affected by economic conditions in 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 results of operations.

We are subject to certain risks in connection with the level of our allowance for losses on non-covered loans held for investment

A variety of factors could cause our borrowers to default on their loan payments and the collateral securing such loans to be insufficient to repay any remaining indebtedness. In such an event, we could experience significant loan losses, which could have a material adverse effect on our financial condition and results of operations.

In the process of originating a loan for investment, we make various assumptions and judgments about the ability of the borrower to repay it, based on the cash flows produced by the building, property, or business; the value of the real estate or other assets serving as collateral; and the creditworthiness of the borrower, among other factors.

We also establish an allowance for loan losses through an assessment of probable losses in each of our held-for-investment loan portfolios. Several factors are considered in this process, including the level of defaulted loans at the close of each quarter; recent trends in loan performance; historical levels of loan losses; the factors underlying such loan losses and loan defaults; projected default rates and loss severities; internal risk ratings; loan size; economic, industry, and environmental factors; and impairment losses on individual loans. If our assumptions and judgments regarding such matters prove to be incorrect, our allowance for losses on such loans might not be sufficient, and additional loan loss provisions might need to be made. Depending on the amount of such loan loss provisions, the adverse impact on our earnings could be material.

In addition, as we continue to grow our loan portfolio, it may be necessary to increase the allowance for loan losses by making additional provisions, which would adversely impact our operating results. Furthermore, bank regulators may require us to make a provision for loan losses or otherwise recognize further loan charge-offs following their periodic review of our loan portfolio, our underwriting procedures, and our loan loss allowance. Any increase in our allowance for loan losses or loan charge-offs as required by such regulatory authorities could have a material adverse effect on our financial condition and results of operations.

Reflecting the continued weakness of the economy and the level of non-performing non-covered loans and net charge-offs, we increased our allowance for such losses over the course of 2010. For more information regarding our allowance for loan losses in recent periods, please see “Allowance for Loan Losses” in the discussion of “Critical Accounting Policies” and the discussion of “Asset Quality” that appear later in this report.

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 upon long-term relationships with our customers by providing them with convenience, in the form of multiple branch locations and extended hours of service; access, in the form of alternative delivery channels, such as online banking, banking by phone, and ATMs; a broad and diverse selection of products and services; interest rates and service fees that compare favorably with those of our competitors; and skilled and knowledgeable personnel to assist our customers with their financial needs. External factors that may impact our ability to compete include changes in local economic conditions and real estate values, changes in interest rates, and the consolidation of banks and thrifts within our marketplace.

In addition, our mortgage banking subsidiary aggregates one-to-four family loans for sale to GSEs, and competes nationally with other major banks and mortgage brokers for this business.

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 the deposits we acquire in connection with our acquisitions and those we gather organically through our branch network, and brokered deposits; 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 of loans and securities; and the cash flows from the sale of loans and 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 prepayments of loans and mortgage-related securities are strongly influenced by such external factors as the direction of interest rates, whether actual or perceived; local and national economic conditions; and competition for deposits and loans in the markets we serve. Furthermore, changes to the FHLB’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. Additionally, 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 our earnings. 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.

Our goodwill may be determined to be 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.

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.

We are subject to environmental liability risk associated with our lending activities.

A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on, and take title to, properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. In addition, we own and operate certain properties that may be subject to similar environmental liability risks.

Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Although we have policies and procedures requiring the performance of an environmental site assessment

before initiating any foreclosure action on real property, these assessments may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

Our business may be adversely impacted by acts of war or terrorism.

Acts of war or terrorism could have a significant adverse impact on our ability to conduct our business. Such events could affect the ability of our borrowers to repay their loans, could impair the value of the collateral securing our loans, and could cause significant property damage, thus increasing our expenses and/or reducing our revenues. In addition, such events could affect the ability of our depositors to maintain their deposits with the Banks. Although we have established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on our business which, in turn, could have a material adverse effect on our financial condition and results of operations.

We are subject to extensive laws, regulations, and regulatory enforcement.

We are subject to regulation, supervision, and examination by the New York State Banking Department, which is the chartering authority for both the Community Bank and the Commercial Bank; by the FDIC, as the insurer of the Banks’ deposits; and by the Federal Reserve Bank of New York in accordance with objectives and standards of the U.S. Federal Reserve System.

Such regulation and supervision governs the activities in which a bank holding company and its banking subsidiaries may engage, and is intended primarily for the protection of the DIF, the banking system in general, and customers, and not for the benefit of a company’s stockholders. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including with respect to the imposition of restrictions on the operation of a bank or a bank holding company, the imposition of significant fines, the ability to delay or deny merger 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.

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. 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 2010. These increases and any future increases or required prepayments in FDIC insurance premiums or taxes may materially adversely affect our results of operations.

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 to tax law, a change in regulatory or judicial guidance, or an audit assessment which denies previously recognized tax benefits.

We are subject to risks stemming from legislation and regulation:

Recent legislation and regulation directed at the financial services industry may adversely affect our business and results of operations.

On July 21, 2010, President Obama signed the Dodd-Frank Act into law. The Dodd-Frank Act will significantly change the regulation of the financial services industry by, among other things, creating new standards relating to regulatory oversight of systemically important financial companies, derivatives transactions, asset-backed securitization, mortgage underwriting, and consumer financial protection. Among other things, the Dodd-Frank Act has provided for the creation of a Consumer Financial Protection Agency, which will have broad authority to regulate financial service providers and financial products. This agency is expected to begin exercising its authority over numerous financial services matters on July 21, 2011 and, together with the broader regulatory regime established under the Dodd-Frank Act, will directly affect our business in that new and additional regulatory oversight and standards will apply to us. Extensive regulatory guidance is needed to implement and clarify many of the provisions of the Dodd-Frank Act and, while certain U.S. agencies have begun to initiate the required administrative processes, it is still too early in those processes to assess fully at this time the impact of this legislation on our business and the rest of the mortgage industry or 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 as part of 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.

Also, the Obama 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 will 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 own business.

We are subject to certain risks in connection with our use of technology.

Risks associated with systems failures, interruptions, or breaches of security:

Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger, our deposits, and our loans. While we have established policies and procedures to prevent or limit the impact of systems failures, interruptions, and security breaches, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition, any compromise of our security systems could deter customers from using our web site and our online banking service, both of which involve the transmission of confidential information. Although we rely on commonly used security and processing systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.

In addition, we outsource certain of our data processing to certain third-party providers. If our third-party providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for customer transactions could be affected, and our business operations could be adversely impacted. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any systems failure, interruption, or breach of security could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to civil litigation and possible financial liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

Risks associated with changes in technology:

Financial products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on our ability to keep pace with technological advances and to invest in new technology as it becomes available. Many of our competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so on our part could have a material adverse impact on our business and therefore on our financial condition and results of operations.

We rely on the dividends we receive from our subsidiaries.

The Parent Company (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.

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 continue to be a key component of our business model. Accordingly, it is possible that we could acquire other financial institutions, financial service providers, or branches of banks in the future, either through negotiated transactions or FDIC-assisted acquisitions. However, our ability to engage in future mergers and acquisitions depends on our ability to identify suitable merger partners and acquisition opportunities, our ability to finance and complete such transactions on acceptable terms and at acceptable prices, our ability to bid competitively for FDIC-assisted transactions, and our ability to receive the necessary regulatory and, where required, shareholder approvals.

Furthermore, mergers and acquisitions involve a number of risks and challenges, including:

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Our ability to integrate the branches and operations we acquire, and the internal controls and regulatory functions into our current operations;

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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;

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Our ability to attract new deposits, and to generate new interest-earning assets, in geographic areas we have not previously served;

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Our success in deploying any cash received in a transaction into assets bearing sufficiently high yields without incurring unacceptable credit or interest rate risk;

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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;

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Our ability to retain and attract the appropriate personnel to staff the acquired branches and conduct any acquired operations;

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Our ability to earn acceptable levels of interest and non-interest income, including fee income, from the acquired branches;

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The diversion of management’s attention from existing operations;

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Our ability to address an increase in working capital requirements; and

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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 earnings and financial condition, perhaps materially.

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.

We are subject to risks related to our common stock:

The price of our common stock may fluctuate.

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:

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operating results that vary from the expectations of our management or of securities analysts and investors;

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developments in our business or in the financial services sector generally;

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regulatory or legislative changes affecting our industry generally or our business and operations;

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operating and securities price performance of companies that investors consider to be comparable to us;

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changes in estimates or recommendations by securities analysts or rating agencies;

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announcements of strategic developments, acquisitions, dispositions, financings, and other material events by us or our competitors; and

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changes or volatility in global financial markets and economies, general market conditions, interest or foreign exchange rates, stock, commodity, credit, or asset valuations.

Furthermore, the market price of our common stock may be subject to significant market fluctuations. The weakness of the economy has continued to have an adverse impact on real estate values; in addition, foreclosure filings and unemployment remain unusually high. These factors have negatively affected the credit performance of mortgage and other loans, and resulted in significant write-downs of asset values by financial institutions. The resulting economic pressure on property owners and other borrowers, and the lack of confidence in the financial

markets in general, has adversely affected, and may continue to adversely affect, our business and results of operations.

Although the U.S. and other governments continue to take action to restore confidence in the financial markets and to promote job creation and economic growth, continued or further market and economic turmoil could occur in the near or long term, which could negatively affect our business, financial condition and results of operations, and volatility in the price and trading volume of our common stock.

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.

Our common stock is equity and is subordinate to our existing and future indebtedness and preferred stock.

Shares of our common stock are equity interests and do not constitute indebtedness. Accordingly, shares of our common stock rank junior to all indebtedness of, and other non-equity claims on, the Company with respect to assets available to satisfy claims. Additionally, holders of our common stock are subject to the prior dividend and liquidation rights of the holders of any series of preferred stock we may issue.

Various factors could make a takeover attempt of the Company more difficult to achieve.

Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws, in addition to certain federal banking laws and regulations, could make it more difficult for a third party to acquire the Company without the consent of our Board of Directors, even if doing so were perceived to be beneficial to our stockholders. These provisions also make it more difficult to remove our current Board of Directors or management or to appoint new directors, and also regulate the timing and content of stockholder proposals and nominations, and qualification for service on our Board of Directors. In addition, we have entered into employment agreements with certain executive officers and directors that would require payments to be made to them in the event that their employment was terminated following a change in control of the Company or the Banks. These payments may have the effect of increasing the costs of acquiring the Company. The combination of these provisions could effectively inhibit a non-negotiated merger or other business combination, which could adversely impact the market price of our common stock.

If we defer payments on our trust preferred capital debt securities or are in default under the related indentures, we will be prohibited from making distributions on our common stock.

The terms of our outstanding trust preferred capital debt securities prohibit us from declaring or paying any dividends or distributions on our capital stock, including our common stock, or purchasing, acquiring or making a liquidation payment on such stock, if an event of default has occurred and is continuing under the applicable indenture, we are in default with respect to a guarantee payment under the guarantee of the related trust preferred securities, or 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 purchase or pay dividends or distributions on 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 10 to the Consolidated Financial Statements, “Commitments and Contingencies: Lease and License Commitments” in Item 8, “Financial Statements and Supplementary Data”). We believe that our facilities are adequate to meet our present and immediately foreseeable needs.

ITEM 3.

LEGAL PROCEEDINGS

In the ordinary course of our business, we are defendants in or parties to a number of legal proceedings. We believe we have meritorious defenses with respect to these cases and intend to defend them vigorously.

ITEM 4.

[REMOVED AND RESERVED]

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, 2010, the number of outstanding shares was 435,646,845 and the number of registered owners was approximately 13,700. 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 2010 and 2009:


	Dividends
	Declared per		Market Price
	Common Share		High		Low		Close
2010
1st Quarter		$0.25	$	17.44	$	14.24	$	16.54
2nd Quarter		0.25		18.19		14.40		15.27
3rd Quarter		0.25		17.81		14.93		16.25
4th Quarter		0.25		19.32		16.09		18.85


2009
1st Quarter		$0.25	$	14.10	$	7.69	$	11.17
2nd Quarter		0.25		12.55		9.90		10.69
3rd Quarter		0.25		11.89		9.98		11.42
4th Quarter		0.25		14.81		10.35		14.51

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 6, 2010, 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, 2005 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 Bank and Thrift Index, which currently is comprised of 502 bank and thrift institutions, including the Company. The data for the indices included in the graph were provided by SNL Financial.

Comparison of 5-Year Cumulative Total Return

Among New York Community Bancorp, Inc.,

S&P Mid-Cap 400 Index, and SNL Bank and Thrift Index

LOGO

ASSUMES $100 INVESTED ON DEC. 31, 2005

ASSUMES DIVIDEND REINVESTED

FISCAL YEAR ENDING DEC. 31, 2010


	12/31/2005		12/31/2006		12/31/2007		12/31/2008		12/31/2009		12/31/2010

New York Community Bancorp, Inc.	$	100.00	$	103.53	$	119.86	$	86.63	$	114.80	$	158.39

S&P Mid-Cap 400 Index	$	100.00	$	110.32	$	119.12	$	75.97	$	104.36	$	132.18

SNL Bank and Thrift Index	$	100.00	$	116.85	$	89.10	$	51.24	$	50.55	$	56.44

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, 2010, we allocated $1.2 million toward share repurchases, as outlined in the following table:


Period	(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⁾
Month #1: October 1, 2010 through October 31, 2010		170	$	16.40		170		1,053,885
Month #2: November 1, 2010 through November 30, 2010		1,815		17.13		1,815		1,052,070
Month #3: December 1, 2010 through December 31, 2010		64,465		17.86		64,465		987,605

Total		66,450	$	17.83		66,450

(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, 987,605 shares were still available for repurchase at December 31, 2010. Under said authorization, shares may be repurchased on the open market or in privately negotiated transactions until completion or the Board’s earlier termination of the repurchase authorization.

ITEM 6.

SELECTED FINANCIAL DATA


	At or For the Years Ended December 31,
*(dollars in thousands, except share data)*	2010⁽¹⁾			2009⁽²⁾			2008			2007⁽³⁾			2006⁽⁴⁾
EARNINGS SUMMARY:
Net interest income ⁽⁵⁾	$	1,179,963		$	905,325		$	675,495		$	616,530		$	561,566
Provision for loan losses		102,903			63,000			7,700			—			—
Non-interest income		337,923			157,639			15,529			111,092			88,990
Non-interest expense:
Operating expenses		546,246			384,003			320,818			299,575			256,362
Debt repositioning charges		—			—			285,369			3,190			26,477
Termination of interest rate swaps		—			—			—			—			1,132
Amortization of core deposit intangibles		31,266			22,812			23,343			22,758			17,871
Income tax expense (benefit)		296,454			194,503			(24,090	)		123,017			116,129
Net income		541,017			398,646			77,884			279,082			232,585
Basic earnings per share		$1.24			$1.13			$0.23			$0.90			$0.82
Diluted earnings per share		1.24			1.13			0.23			0.90			0.81
Dividends paid per common share		1.00			1.00			1.00			1.00			1.00
SELECTED RATIOS:
Return on average assets		1.29	%		1.20	%		0.25	%		0.94	%		0.83	%
Return on average stockholders’ equity		10.03			9.29			1.86			7.13			6.57
Operating expenses to average assets		1.31			1.15			1.03			1.01			0.91
Average stockholders’ equity to average assets		12.89			12.89			13.41			13.21			12.60
Efficiency ratio ⁽⁵⁾		35.99			36.13			46.43			41.17			39.41
Interest rate spread ⁽⁵⁾		3.45			2.98			2.25			2.11			2.02
Net interest margin ⁽⁵⁾		3.45			3.12			2.48			2.38			2.27
Dividend payout ratio		80.65			88.50			434.78			111.11			123.46
BALANCE SHEET SUMMARY:
Total assets	$	41,190,689		$	42,153,869		$	32,466,906		$	30,579,822		$	28,482,370
Loans, net of allowance for loan losses		29,041,595			28,265,208			22,097,844			20,270,454			19,567,502
Allowance for losses on non-covered loans		158,942			127,491			94,368			92,794			85,389
Securities available for sale		652,956			1,518,646			1,010,502			1,381,256			1,940,787
Securities held to maturity		4,135,935			4,223,597			4,890,991			4,362,645			2,985,197
Deposits		21,809,051			22,316,411			14,375,648			13,235,801			12,693,740
Borrowed funds		13,536,116			14,164,686			13,496,710			12,915,672			11,880,008
Stockholders’ equity		5,526,220			5,366,902			4,219,246			4,182,313			3,689,837
Common shares outstanding		435,646,845			433,197,332			344,985,111			323,812,639			295,350,936
Book value per share ⁽⁶⁾		$12.69			$12.40			$12.25			$12.95			$12.56
Stockholders’ equity to total assets		13.42	%		12.73	%		13.00	%		13.68	%		12.95	%
ASSET QUALITY RATIOS: ⁽⁷⁾
Non-performing loans to total loans		2.63	%		2.47	%		0.51	%		0.11	%		0.11	%
Non-performing assets to total assets		1.58			1.41			0.35			0.07			0.08
Allowance for loan losses to non-performing loans		25.45			22.05			83.00			418.14			402.72
Allowance for loan losses to total loans		0.67			0.55			0.43			0.46			0.43
Net charge-offs to average loans		0.21			0.13			0.03			0.00			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 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 2, 2007; the acquisition of Doral Bank, FSB’s branch network in New York City and certain assets and liabilities on July 26, 2007; and the acquisition of Synergy Financial Group, Inc. on October 1, 2007. Accordingly, the Company’s 2007 earnings reflect nine months, five months, and three months of combined operations with the respective institutions.

(4)

The Company acquired Atlantic Bank of New York on April 28, 2006. Accordingly, the Company’s 2006 earnings reflect eight months of combined operations with Atlantic Bank.

(5)

The 2008 amount/measure reflects the impact of a $39.6 million debt repositioning charge that was recorded in interest expense.

(6)

Excludes unallocated Employee Stock Ownership Plan (“ESOP”) shares from the number of shares outstanding. Please see “book value per share” in the Glossary earlier in this report.

(7)

Excludes covered loans and covered OREO.

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

In 2010, a confluence of factors, both strategic and external, resulted in our delivering a strong financial performance, highlighted by significant revenue growth, greater efficiency, substantially higher loan production, above-average asset quality, and increased capital strength.

Among the factors contributing to our 2010 financial results were:

•

The full-year benefit of our FDIC-assisted acquisition of certain assets and assumption of certain liabilities of AmTrust Bank (“AmTrust”) on December 4, 2009, which added 64 branches in Ohio, Florida, and Arizona to our current Community Bank franchise;

•

The full-year operation of our mortgage banking platform in Cleveland, which ranks among the top 20 wholesale aggregators of one-to-four family loans for sale in the United States, and generates mortgage income through both originations and servicing;

•

The nine-month benefit of our FDIC-assisted acquisition of certain assets and assumption of certain liabilities of Desert Hills Bank (“Desert Hills”) on March 26, 2010, which added six branches to our Community Bank franchise in Arizona at the time of acquisition (three after consolidation), expanding our locations in that state to 14;

•

Reductions in the balance of certificates of deposit (“CDs”) and the balance of wholesale borrowings through the deployment of cash received in the AmTrust acquisition, and from the sale of securities and loans;

•

A significant increase in loans produced for investment, reflecting an increase in property transactions and refinancing activity;

•

A significant decline in losses on the other-than-temporary impairment (“OTTI”) of securities, which had a meaningful adverse impact on our earnings in 2009; and

•

The maintenance of the target federal funds rate at an historically low range of zero to 25 basis points, which enabled us to further reduce our retail funding costs, grow our net interest income, and expand our net interest margin.

While the preceding factors contributed to our 2010 financial performance, the following factors tempered the growth of our earnings during the year:

•

A mid-year increase in FDIC insurance premiums to replenish the Deposit Insurance Fund, which increased our general and administrative expense;

•

Continued economic weakness, as indicated by the still-high rate of unemployment, declining real estate values, and an increase in foreclosure filings and bankruptcies:

The national unemployment rate declined from 9.9% in December 2009 to 9.4% at the end of this December, a measure last seen in May 2009, and prior to that, in July 1983. Closer to home, the

unemployment rate improved to 8.6% from 10.4% in New York City, and to 8.7% from 9.7% in New Jersey, while holding firm at 7.0% on Long Island. While the unemployment rate improved to 9.3% from 10.7% in Ohio, it held steady at 11.6% in Florida and increased from 8.8% to 9.1% in Arizona over the course of the year.

Real estate values fell 4.1% year-over-year on a nationwide level, and also declined in the markets where most of the properties collateralizing our loans are based. Specifically, real estate values fell 2.3% in the New York Metropolitan region; 4.0% in greater Cleveland; 3.7% in greater Miami; and 8.3% in greater Phoenix.

On a more encouraging note, the office vacancy rate in Manhattan improved to 11.9% in December 2010 from 13.1% in December 2009.

Although the number of foreclosure filings rose 1.7% in 2010, to 2,871,891, that increase was far more modest than the 23.2% increase reported for 2009. However, during this time, the number of bankruptcies rose 8.1% to 1.6 million, as a 7.5% reduction in the number of business bankruptcy filings was exceeded by a 9.0% increase in bankruptcy filings by individuals.

•

Against this backdrop, we experienced an increase in net charge-offs and non-performing assets, which led us to increase our provision for losses on non-covered loans in 2010. In addition, the increase in non-performing assets led to an increase in legal and other expenses in connection with the management and operation of other real estate owned (“OREO”).

Reflecting all of these factors, we reported 2010 earnings of $541.0 million, representing a $142.4 million, or 35.7%, increase from the year-earlier level and an $0.11, or 9.7%, increase in diluted earnings per share to $1.24. Total revenues (the sum of net interest income and non-interest income) rose $454.9 million, or 42.8%, year-over-year, to $1.5 billion, far exceeding the impact of a $162.2 million increase in operating expenses to $546.2 million. As a result, our efficiency ratio improved to 35.99% from 36.13% in 2009.

Net interest income accounted for $274.6 million of the year-over-year increase in total revenues, having risen 30.3%, to $1.2 billion, while non-interest income rose $180.3 million to $337.9 million from the year-earlier amount. The same factors that contributed to the growth of our net interest income contributed to the expansion of our net interest margin, which rose 33 basis points to 3.45% in 2010.

Loans originated for investment rose $937.1 million, or 27.6%, year-over-year, to $4.3 billion, including a $609.9 million, or 31.6%, increase in multi-family loans to $2.5 billion and a $273.2 million, or 40.5%, increase in commercial real estate loans to $947.0 million. Multi-family loans represented $16.8 billion, or 70.9%, of total non-covered loans held for investment at the end of this December, with commercial real estate loans representing $5.4 billion, or 22.9%, the next largest amount.

Although non-performing non-covered assets rose to $652.5 million at December 31, 2010, representing 1.58% of total non-covered assets, this balance was substantially lower than the balances we recorded at March 31, June 30, and September 30, 2010. In the twelve months ended December 31, 2010, net charge-offs rose to $59.5 million, representing 0.21% of average loans. During this time, we increased our provision for losses on non-covered loans to $91.0 million, representing a year-over-year increase of $28.0 million.

The growth of our earnings in 2010 contributed to an increase in our capital measures, as stockholders’ equity rose $159.3 million to $5.5 billion, and tangible stockholders’ equity rose $187.6 million to $3.0 billion, after dividends totaling $434.4 million were distributed to our shareholders over the course of the year. At December 31, 2010, tangible stockholders’ equity represented 7.79% of tangible assets, signifying a year-over-year improvement of 66 basis points. (Please see the discussion and reconciliations of our 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 25, 2011, the Board of Directors declared a quarterly cash dividend of $0.25 per share, payable on February 16, 2011 to shareholders of record at the close of business on February 7, 2011.

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 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 allowance for loan losses on non-covered loans held for investment; the determination of whether an impairment of securities is other than temporary; the determination of the amount, if any, of goodwill impairment; and 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.

Allowance for Loan Losses

For the purposes of this discussion, “allowance for loan losses” refers to the allowance for losses on non-covered loans held for investment and “loans” refers to non-covered loans held for investment.

The allowance for loan losses is increased by provisions for loan losses that are charged against earnings, and is reduced by net charge-offs and/or reversals, if any, that are credited to earnings. Loans are held by either the Community Bank or the Commercial Bank, and a separate loan loss allowance is established for each. In addition, except as otherwise noted below, the process for establishing the allowance for loan losses 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 conservative guidelines established by the respective Boards of Directors with regard to credit limitations, loan approvals, underwriting criteria, and loan workout procedures.

The allowances for loan losses are established based on our evaluation of the probable inherent losses in our portfolio in accordance with United States generally accepted accounting principles (“GAAP”). The allowances for loan losses are comprised of both specific valuation allowances and general valuation allowances which are determined in accordance with Financial Accounting Standards Board (“FASB”) accounting standards.

Specific valuation allowances are established based on our 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 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 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 homogenous loans and loans carried at the lower of cost or fair value are evaluated for impairment on a collective rather than an individual basis. We generally measure impairment on an individual loan and 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 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 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. Our 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, the following:

•

Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices;

•

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;

•

Changes in the nature and volume of the portfolio and in the terms of loans;

•

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;

•

Changes in the quality of our loan review system;

•

Changes in the value of the underlying collateral for collateral-dependent loans;

•

The existence and effect of any concentrations of credit, and changes in the level of such concentrations;

•

Changes in the experience, ability, and depth of lending management and other relevant staff; and

•

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 recent 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 loan loss allowance by considering the loss experience in the current calendar year.

The process of establishing the loan loss allowances also involves:

•

Periodic inspections of the loan collateral by qualified in-house property appraisers/inspectors, as applicable;

•

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;

•

Assessment by the pertinent members of the Boards of Directors of the aforementioned factors when making a business judgment regarding the impact of anticipated changes on the future level of loan losses; and

•

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.

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 estimate of the fair value of the underlying collateral and/or an assessment of the financial condition and repayment capacity of the borrower.

The level of future additions to the respective 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.

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 to maturity” and carried at amortized cost, less the non-credit portion of other than temporary impairment 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 increase. 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.

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 amount of the write-down was charged to earnings. A decline in fair value of an investment was deemed to be other than temporary if we did not have the intent and ability to hold the investment to its anticipated recovery. Effective April 1, 2009, with the adoption of revised 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. As each of the Company’s operating segments is comprised of only one component, goodwill is tested for impairment at the segment level. 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 was 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. As of December 31, 2010, all of our recorded goodwill had resulted from prior acquisitions and, accordingly, was attributed to Banking Operations. There is no goodwill associated with Residential Mortgage Banking, as it was acquired in our FDIC-assisted 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 as 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. Please see Note 19, “Segment Reporting,” in Item 8, “Financial Statements and Supplementary Data,” for a detailed discussion of the Residential Mortgage Banking segment.

We performed our annual goodwill impairment test as of December 31, 2010 and found no indication of goodwill impairment at that date.

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 feasibility of tax planning strategies and the realizability of tax loss carryforwards. Valuation allowances related to deferred tax assets can be affected by changes to tax laws, statutory tax rates, and future taxable income levels. In the event that we were to determine that we would not be able to realize all or a portion of our net deferred tax assets in the future, we would reduce such amounts through a charge to income 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 for calendar year 2009. In general, these laws conformed the New York City tax rules to those of New York State. Included in these new tax laws is a provision which 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. As a result of certain earlier business combinations, we currently have six REIT subsidiaries. The law provided for 25% of such income to be excluded from tax in 2009 and 2010. Starting in 2011, the new tax law will be fully phased in, meaning that 100% of the income earned by a subsidiary taxed as a REIT will be taxed.

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. The laws apply retroactively to the determination of tax liability for calendar year 2010 as well as to subsequent years.

FINANCIAL CONDITION

Balance Sheet Summary

At December 31, 2010, our assets totaled $41.2 billion, as compared to $42.2 billion at December 31, 2009. Although loans, net, rose $776.4 million year-over-year, to $29.0 billion, the increase was exceeded by a $953.4 million reduction in the balance of securities to $4.8 billion, and by the deployment of cash towards the repayment of wholesale borrowings.

Wholesale borrowings fell $580.1 million year-over-year, to $12.5 billion, contributing to a $1.1 billion reduction in total liabilities to $35.7 billion. The remainder of the reduction in total liabilities was largely due to a $507.4 million decline in total deposits to $21.8 billion, as a $711.4 million increase in core deposits was exceeded by a $1.2 billion decline in CDs. 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 $159.3 million year-over-year, to $5.5 billion, representing 13.42% of total assets and a book value per share of $12.69. The December 31, 2010 ratio was 69 basis points higher than the year-earlier measure, while book value per share rose $0.29 year-over-year.

Tangible stockholders’ equity rose $187.6 million year-over-year, to $3.0 billion, representing 7.79% of tangible assets and a tangible book value per share of $6.91 at December 31, 2010. This ratio of tangible stockholders’ equity to tangible assets was 66 basis points higher than the year-earlier measure, while tangible book value per share rose $0.38 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.)

Loans

Loans are our principal asset, and represented $29.2 billion, or 70.9%, of total assets at the end of this December, as compared to $28.4 billion, or 67.4%, of total assets at December 31, 2009. Included in the balance at December 31, 2010 were covered loans, non-covered loans held for sale, and non-covered loans held for investment, with the latter representing the largest share.

Covered Loans

“Covered loans” refers to the loans we acquired in our FDIC-assisted AmTrust and Desert Hills acquisitions, and totaled $4.3 billion at December 31, 2010. Covered loans are referred to as such because they are subject to, or “covered by,” our respective loss sharing agreements with the FDIC.

One-to-four family loans represented $3.9 billion of total covered loans at the end of this December, with all other types of covered loans representing $423.4 million, combined. Covered one-to-four family loans include both fixed and adjustable rate loans. Covered other loans consist of commercial real estate loans; acquisition, development, and construction loans; multi-family loans; commercial and industrial loans; home equity lines of credit; and consumer loans.

The AmTrust loss sharing agreements 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 the covered loans. The Desert Hills loss sharing agreements 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 the covered loans and OREO we acquired.

Please see Note 3, “Business Combinations,” in Item 8, “Financial Statements and Supplementary Data” for a more detailed discussion of the FDIC loss sharing agreements to which all the covered loans and covered OREO in our portfolio are subject.

Non-Covered Loans Held for Investment

Non-covered loans held for investment totaled $23.7 billion at the end of this December, representing a year-over-year increase of $334.2 million and 81.2% of the total loan portfolio. In addition to multi-family loans and commercial real estate (“CRE”) loans, the held-for-investment portfolio includes substantially smaller balances of acquisition, development, and construction (“ADC”) loans; one-to-four family loans; and other loans. Commercial and industrial (“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.

In the twelve months ended December 31, 2010, we originated loans for investment of $4.3 billion, representing a $937.1 million, or 27.6%, increase from the year-earlier amount. As market conditions began to improve, property transactions and refinancing activity also increased in Metro New York, where the vast majority

of properties securing our held-for-investment loans are located. Despite the significant increase in loan originations for investment, portfolio growth was limited by an increase in repayments over the course of the year.

Multi-Family Loans

Multi-family loans are our principal asset, and non-luxury residential apartment buildings with below-market rents in the Metro New York region constitute our primary lending niche. Consistent with our emphasis on multi-family lending, multi-family loan originations represented $2.5 billion, or 58.6%, of the loans we produced for investment in 2010, a $609.9 million, or 31.6%, increase from the volume produced in the prior year. Notwithstanding the substantial increase in originations, the balance of multi-family loans rose a modest $70.2 million year-over-year to $16.8 billion, representing 70.9% of total non-covered loans held for investment at December 31, 2010. 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 59.8%, based on appraisals that primarily were received at the time of origination.

Our multi-family loans are typically made to long-term owners of buildings with apartments that are subject to certain rent-control and rent-stabilization laws. 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 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. Alternately, 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.

Prior to January 2009, the optional fixed rate was tied to the five-year Constant Maturity Treasury rate (the “five-year CMT”). The decision to tie the fixed rate in years six through ten to the five-year fixed advance rate of the FHLB-NY rather than the five-year CMT was made in late 2008 by the Mortgage Committee as a result of changes in the interest rate environment at that time. In effect, the rate on existing loans tied to the five-year CMT were adjusting to a coupon rate that was below the then-offered market rate for new originations. Although movements in the five-year fixed advance rate of the FHLB-NY Index are positively correlated with movements in the previously used index, the five-year FHLB-NY Index is generally priced at a premium relative to the five-year CMT. By changing the index, we limited the risk of a fixed-rate repricing in year six that would result in our loans having a rate of interest that was lower than our current offered rate. The impact of this change on the interest income generated by our loan portfolio has been immaterial.

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. While this cycle has repeated itself over the course of many decades, regardless of market interest rates and conditions, refinancing activity had been constrained by the uncertainty in the real estate market that began in mid-2007 and continued through the better part of 2010. The expected weighted average life of the multi-family loan portfolio was 4.1 years at the end of this December, as compared to 4.2 years at December 31, 2009.

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.

Our success in our primary lending niche 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 taking four to six weeks to process, and the related expenses being substantially reduced.

At December 31, 2010, virtually all of our multi-family loans were secured by rental apartment buildings. In addition, 76.0% 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 that are outside New York City, the State of New York was home to 6.4% of our multi-family credits, with New Jersey and Pennsylvania accounting for 8.3% and 3.4%, respectively. The remaining 5.9% of multi-family loans were secured by buildings outside our primary market.

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 in our specific niche. Notwithstanding an increase in non-performing multi-family loans in the current credit cycle, charge-offs of multi-family loans have been limited. We attribute the difference between the amount of non-performing loans we record and the actual losses we take on such loans to our underwriting standards and the generally conservative LTV ratios on the multi-family loans we produce.

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.

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 J-51 tax benefits (partial property tax exemptions and abatement benefits offered through the NYC Department of Housing Preservation and Development and the Department of Finance) received by the property owners; accordingly, our business model is based on conservative cash flows.

Commercial Real Estate Loans

In 2010, CRE loans represented $947.0 million, or 21.9%, of loans originated for investment, as compared to $673.8 million, or 19.9%, in 2009. While the growth of the portfolio was somewhat tempered by the level of repayments, CRE loans rose $451.0 million from the year-earlier balance to $5.4 billion, representing 22.9% of the total held-for-investment portfolio. At December 31, 2010, the average CRE loan had a principal balance of $3.1 million, and the portfolio had an average LTV ratio at origination of 53.8%.

At December 31, 2010, 63.6% of our CRE loans were secured by properties in New York City, primarily in Manhattan, with properties on Long Island and in New Jersey accounting for 16.5% and 10.0%, respectively. 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.

The pricing of our CRE loans is structured along the same lines as our multi-family credits, i.e., with a fixed rate of interest for the first five years of the loan that is generally 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. Prior to January 2009, the optional fixed rate was tied to the five-year CMT, as previously discussed under “Multi-Family Loans.”

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. Accordingly, the expected weighted average lives of the portfolio were 4.0 years and 3.9 years, respectively, at December 31, 2010 and 2009. 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

ADC loans represented $569.5 million, or 2.4%, of total non-covered loans held for investment at the end of this December, representing a $96.9 million reduction from the balance at December 31, 2009. In the past few years, we have generally limited our ADC loan originations to advances that were committed prior to the onset of the credit crisis in mid-2007, and to loans with limited market risk and low LTV ratios that have been made to reputable borrowers with significant collateral. Accordingly, in 2010 and 2009, ADC loan originations totaled $127.2 million and $117.9 million, representing 2.9% and 3.5%, respectively, of total loans produced for our portfolio.

At December 31, 2010, 62.1% of the loans in our ADC portfolio were for land acquisition and development; the remaining 37.9% 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 of interest tied to prime, and a floor. They also generate origination fees that are recorded as interest income and amortized over the lives of the loans.

In addition, 66.9% 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 21.0% of our ADC loans, with other parts of New York State and New Jersey accounting for 8.2%, combined. Reflecting the limited extent to which ADC loans have been originated beyond our immediate market, 3.9% of 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. As of December 31, 2010, we had not collected on any personal guarantees. 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. At December 31, 2010, 16.1% of the loans in our ADC loan portfolio were non-performing, a reflection of the downward credit cycle turn.

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

Prior to the acquisition of our mortgage banking operation in the AmTrust acquisition, it was our practice to originate one-to-four family loans on a pass-through basis and to sell the loans to a third-party conduit shortly after they closed. This practice enabled us to provide our customers with an extensive range of one-to-four family loan products while, at the same time, reducing our exposure to both interest and credit risk, and enhancing our revenue stream.

Reflecting this practice, as well as repayments of seasoned loans that were either produced before its adoption or acquired in our pre-AmTrust business combinations, non-covered one-to-four family loans held for investment declined $45.7 million year-over-year to $170.4 million, and represented less than 1.0% of total non-covered loans held for investment at December 31, 2010.

Although we continue to originate one-to-four family loans on a pass-through basis, we began, in late December, to originate such loans through several selected clients of our mortgage banking operation, rather than the single third-party conduit with which we previously worked. The agency-conforming one-to-four family loans produced for our customers are now aggregated with loans produced by our mortgage banking clients throughout the nation, and sold to government-sponsored enterprises (“GSEs”), servicing retained. 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

At December 31, 2010, other loans represented $727.2 million, or 3.06%, of total loans held for investment, and were down $44.4 million from the balance at December 31, 2009. C&I loans accounted for $641.7 million of the year-end 2010 total, signifying an $11.5 million reduction from the prior year-end amount. Of the $711.0 million of other loans originated for investment over the past four quarters, C&I loans represented $703.7 million, or 99.0%.

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. In 2010, the vast majority of the C&I loans we produced were floating with a floor rate of interest. In 2011, the decision to require a floor rate of interest on C&I loans will likely depend 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 do not offer home equity loans or lines of credit at this time.

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 2010, 66 loans of $10.0 million or more were originated by the Banks, with an aggregate loan balance of $1.6 billion at origination. In 2009, 52 such loans were originated by the Banks, with an aggregate loan balance at origination of $1.2 billion.

We also place a limit on the amount of loans that may be made to one borrower. At December 31, 2010, the largest concentration of loans to one borrower consisted of a $480.3 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 originated on September 30, 2004 at an interest rate of 5.20% which subsequently increased to 6.20% at October 1, 2009. As of December 31, 2010, the loan has been current since its origination.

Loan Origination Analysis

The following table summarizes our loan production for the years ended December 31, 2010 and 2009:


	For the Years Ended December 31,
	2010					2009
*(dollars in thousands)*	Amount		Percent of Total			Amount		Percent of Total
Mortgage Loan Originations for Investment:
Multi-family	$	2,537,145		16.70	%	$	1,927,240		45.02	%
Commercial real estate		946,982		6.23			673,814		15.74
Acquisition, development, and construction		127,154		0.84			117,926		2.76
One-to-four family		6,711		0.04			340		0.01

Total mortgage loan originations for investment		3,617,992		23.81			2,719,320		63.53

Other Loan Originations for Investment:
Commercial and industrial		703,716		4.63			656,008		15.32
Other		7,271		0.05			16,563		0.39

Total other loan originations for investment		710,987		4.68			672,571		15.71

Total loan originations for investment	$	4,328,979		28.49	%	$	3,391,891		79.24	%
One-to-four family loan originations for sale		10,864,188		71.51			888,527		20.76

Total loan originations	$	15,193,167		100.00	%	$	4,280,418		100.00	%

Loan Portfolio Analysis

The following table summarizes the composition of our loan portfolio at each year-end for the five years ended December 31, 2010:


	At December 31,
	2010									2009									2008						2007						2006
*(dollars in* *thousands)*	Amount			Percent of Total Loans			Percent of Non- Covered Loans			Amount			Percent of Total Loans			Percent of Non- Covered Loans			Amount			Percent of Total Loans			Amount			Percent of Total Loans			Amount			Percent of Total Loans

Non-Covered Mortgage Loans:
Multi-family	$	16,807,913			57.52	%		67.44	%	$	16,737,721			58.94	%		71.59	%	$	15,728,264			70.85	%	$	14,052,298			69.00	%	$	14,529,097			73.93	%
Commercial real estate		5,439,611			18.62			21.83			4,988,649			17.57			21.34			4,553,550			20.51			3,828,334			18.80			3,114,440			15.85
Acquisition, development, and construction		569,537			1.95			2.29			666,440			2.35			2.85			778,364			3.51			1,138,851			5.59			1,102,732			5.61
One-to-four family		170,392			0.58			0.68			216,078			0.76			0.92			266,307			1.20			380,824			1.87			230,508			1.17

Total non-covered mortgage loans		22,987,453			78.67			92.24			22,608,888			79.62			96.70			21,326,485			96.07			19,400,307			95.26			18,976,777			96.56

Non-Covered Other Loans:
Commercial and industrial		641,663			2.20			2.58			653,159			2.30			2.79			713,099			3.21			705,810			3.47			643,116			3.27
Other loans		85,559			0.29			0.34			118,445			0.42			0.51			160,340			0.72			259,395			1.27			33,677			0.17

Total non-covered other loans		727,222			2.49			2.92			771,604			2.72			3.30			873,439			3.93			965,205			4.74			676,793			3.44

Loans held for sale		1,207,077			4.13			4.84			—			—			—			—			—			—			—			—			—

Total non-covered loans	$	24,921,752			85.29			100.00	%	$	23,380,492			82.34			100.00	%	$	22,199,924			100.00		$	20,365,512			100.00		$	19,653,570			100.00

Covered loans		4,297,869			14.71						5,016,100			17.66						—			—			—			—			—			—

Total loans	$	29,219,621			100.00	%				$	28,396,592			100.00	%				$	22,199,924			100.00	%	$	20,365,512			100.00	%	$	19,653,570			100.00	%

Net deferred loan origination fees		(7,181	)								(3,893	)								(7,712	)					(2,264	)					(679	)
Allowance for losses on non-covered loans		(158,942	)								(127,491	)								(94,368	)					(92,794	)					(85,389	)
Allowance for losses on covered loans		(11,903	)								—									—						—						—

Total loans, net	$	29,041,595								$	28,265,208								$	22,097,844					$	20,270,454					$	19,567,502

Loan Maturity and Repricing Analysis: Non-Covered Loan Portfolio

The following table sets forth the maturity or period to repricing of our portfolio of non-covered loans held for investment at December 31, 2010. 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, 2010
*(in thousands)*	Multi-Family		Commercial Real Estate		Acquisition, Development, and Construction		One-to- Four Family		Other		Total Loans
Amount due:
Within one year	$	2,253,958	$	745,558		$527,217	$	41,251	$	533,196	$	4,101,180
After one year:
One to five years		9,925,753		3,090,801		41,992		41,836		134,969		13,235,351
Over five years		4,628,202		1,603,252		328		87,305		59,057		6,378,144

Total due or repricing after one year		14,553,955		4,694,053		42,320		129,141		194,026		19,613,495

Total amounts due or repricing, gross	$	16,807,913	$	5,439,611		$569,537	$	170,392	$	727,222	$	23,714,675

The following table sets forth, as of December 31, 2010, the dollar amount of all non-covered loans held for investment that are due after December 31, 2011, and indicates whether such loans have fixed or adjustable rates of interest:


	Due after December 31, 2011
*(in thousands)*	Fixed		Adjustable		Total
Mortgage Loans:
Multi-family	$	4,952,815	$	9,601,140	$	14,553,955
Commercial real estate		1,452,654		3,241,399		4,694,053
Acquisition, development, and construction		42,320		—		42,320
One-to-four family		116,754		12,387		129,141

Total mortgage loans		6,564,543		12,854,926		19,419,469
Other loans		184,061		9,965		194,026

Total loans	$	6,748,604	$	12,864,891	$	19,613,495

Outstanding Loan Commitments

At December 31, 2010, we had outstanding loan commitments of $1.7 billion, including commitments to originate loans for investment of $984.2 million. Of the latter amount, multi-family and CRE loans represented $516.0 million; ADC loans represented $105.8 million; and other loans represented $362.5 million. Commitments to originate one-to-four family loans for sale totaled $716.2 million at December 31, 2010, as compared to $474.4 million at December 31, 2009.

In addition to loan commitments, we had commitments to issue financial stand-by, performance, and commercial letters of credit totaling $133.6 million at December 31, 2010. The commitments featured terms ranging from one to three years and were collateralized.

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.

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, 2010:


	At December 31, 2010
	Multi-Family Loans					Commercial Real Estate Loans					Acquisition, Development, and Construction Loans
*(dollars in thousands)*	Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total
New York City:
Manhattan	$	5,510,671		32.79	%	$	2,203,439		40.51	%	$	201,649		35.40	%
Brooklyn		2,998,046		17.84			407,136		7.49			81,711		14.35
Bronx		2,399,990		14.28			203,038		3.73			23,406		4.11
Queens		1,729,646		10.29			571,021		10.50			58,230		10.22
Staten Island		139,714		0.83			71,880		1.32			16,274		2.86

Total New York City	$	12,778,067		76.03	%	$	3,456,514		63.55	%	$	381,270		66.94	%

Long Island		598,193		3.56			898,609		16.52			119,421		20.97
Other New York State		469,395		2.79			122,426		2.25			7,458		1.31
New Jersey		1,399,080		8.32			543,557		9.99			39,365		6.91
Pennsylvania		573,836		3.41			261,134		4.80			—		—
All other states		989,342		5.89			157,371		2.89			22,023		3.87

Total	$	16,807,913		100.00	%	$	5,439,611		100.00	%	$	569,537		100.00	%

(1)	The vast majority of one-to-four family loans and other loans held for investment are secured by properties and/or businesses in the Metro New York region.

Geographical Analysis of the Covered Loan Portfolio ⁽¹⁾

The following table presents a geographical analysis of our covered loan portfolio at December 31, 2010 ⁽¹⁾:


*(in thousands)*
California	$	743,231
Florida		698,674
Arizona		484,035
Ohio		259,993
Massachusetts		188,776
Michigan		184,513
Illinois		146,320
New York		120,002
Nevada		118,787
Texas		117,214
Maryland		97,368
Colorado		96,734
Washington		94,054
All other states		948,168

Total covered loans	$	4,297,869

(1)	At December 31, 2010, $3.9 billion, or 90.1%, of the covered loan portfolio consisted of one-to-four family loans. The remaining $423.4 million, or 9.9%, of the covered loan portfolio consisted of multi-family, CRE, ADC, C&I, consumer loans, and home equity lines of credit.

Non-Covered Loans Held for Sale

Among the many benefits of our AmTrust acquisition was the addition of a mortgage banking operation that aggregates one-to-four family loans for sale to GSEs. More than 1,000 clients, including community banks, credit unions, mortgage companies, and mortgage brokers, utilize our proprietary web-accessible mortgage banking platform to originate one-to-four family loans in all 50 states. In 2010, all of the loans funded through this platform were agency-conforming and all were full-documentation, prime credit loans.

The volume of loans aggregated for sale by our mortgage banking operation totaled $10.8 billion in 2010. At December 31st, non-covered one-to-four family loans held for sale totaled $1.2 billion and represented 4.1% of the total loan portfolio.

We also originate and acquire new production one-to-four family loans from other banks, savings institutions, credit unions, and mortgage companies (collectively, our “clients”) throughout the country. Such loans are then packaged and sold to institutional investors as whole loans or in the form of mortgage-backed securities issued and guaranteed by GSES. To mitigate the risks inherent in the activities of originating, acquiring, 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 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 originate. Collectively, these tools and processes are known internally as our proprietary “Gemstone” system. By mandating usage of Gemstone for all 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 insurances, 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 (credit decision), and various other pre-funding and post-funding quality control reviews.

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”) collateralized with mortgage loans 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. We estimate the fair value of the MSR asset based upon a number of factors, some of which are 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. MSRs are recorded at fair value, with changes in fair value recorded as a component of non-interest income.

In addition, all of the one-to-four family loans we originated for sale in 2010 were underwritten to GSE standards. Certain representations and warranties with regard to the underwriting, documentation, and legal/regulatory compliance of these loans are made by the Company, 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.

As governed by our agreements with the GSEs, these representations and warranties relate to, among other factors, 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. In such cases, we would be exposed to any subsequent credit loss on the mortgage loans, which might or might not be realized in the future.

We have recorded 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 included in “general and administrative expense” in the accompanying Consolidated Statements of Income and Comprehensive Income. At December 31, 2010 and 2009, the respective liabilities for estimated possible future losses relating to these representations and warranties were $3.5 million and $120,000. 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 severity of default associated with prior repurchased loans, probability that a repurchase request will be received, and the probability that a loan will be required to be repurchased.

There may be a range of reasonably possible losses in excess of the estimated liability that cannot be estimated with confidence. 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 liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment.

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, 2010. Loans that have adjustable rates are shown as being due in the period during which the interest rates are next subject to change.


	Covered Loans at December 31, 2010
*(in thousands)*	One-to-Four Family		All Other Loans		Total Loans
Amount due:
Within one year	$	1,667,810	$	353,558	$	2,021,368
After one year:
One to five years		888,124		64,220		952,344
Over five years		1,318,515		5,642		1,324,157

Total due or repricing after one year		2,206,639		69,862		2,276,501

Total amounts due or repricing, gross	$	3,874,449	$	423,420	$	4,297,869

The following table sets forth, as of December 31, 2010, the dollar amount of all covered loans due after December 31, 2011, and indicates whether such loans have fixed or adjustable rates of interest.


	Due after December 31, 2011
*(in thousands)*	Fixed		Adjustable		Total
One-to-four family	$	1,557,535	$	649,104	$	2,206,639
All other loans		19,826		50,036		69,862

Total loans	$	1,577,361	$	699,140	$	2,276,501

Asset Quality

Non-Covered Loans and Non-Covered OREO

The following discussion pertains only to our non-covered loans, non-covered OREO, and allowance for losses on non-covered loans held for investment.

Although market conditions began to improve in 2010 in Metro New York, where most of the properties and businesses collateralizing our loans are located, real estate values remained well below pre-2007 levels and unemployment remained high. Against this backdrop, total delinquencies declined $75.6 million, or 8.8%, year-over-year, to $775.5 million, as a $59.2 million increase in non-performing assets to $652.5 million was exceeded by a $122.0 million decline in loans 30 to 89 days past due to $151.0 million at December 31, 2010.

Non-performing assets represented 1.58% of total assets at the end of this December, a 17-basis point increase from the measure at December 31, 2009. The increase in non-performing assets stemmed from a $46.4 million rise in non-performing loans to $624.4 million, and a $12.9 million rise in OREO to $28.1 million.

Non-accrual mortgage loans accounted for $600.0 million of non-performing loans at the end of this December, and were up $42.8 million year-over-year. Although the balance of non-performing multi-family loans declined $65.2 million during this time, to $327.9 million, that reduction was exceeded by a $91.8 million increase in CRE loans, to $162.4 million. In addition, non-performing ADC and one-to-four family loans rose $12.6 million and $3.6 million, respectively, to $91.9 million and $17.8 million, and non-accrual other loans rose $3.5 million year-over-year, to $24.5 million, primarily reflecting an increase in non-accrual C&I loans.

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.

The difference between the balances of non-performing loans at December 31, 2010 and 2009 was primarily due to larger credits that became non-performing loans over the course of the year.

In the twelve months ended December 31, 2010, new non-accrual loans included a large relationship in the amount of $99.5 million, consisting of multi-family properties, land and development parcels, condominiums, and commercial real estate. The collateral properties are primarily located in New York City and on Long Island. An impairment analysis was performed on this relationship and it was determined that a specific loan loss allowance was not needed, based on the estimated net realizable value of the collateral.

Also included in new non-accrual loans were a $33.1 million relationship consisting of a multi-family property in Philadelphia, Pennsylvania and a $16.8 million relationship consisting of a multi-family property in Atlantic City, New Jersey. Impairment analyses were performed on both of the properties and, in each case, it was determined that a specific loan loss allowance was not needed, based on the estimated net realizable value of the collateral.

The remaining new non-accrual loans consisted of various smaller relationships, primarily with borrowers whose multi-family and commercial real estate properties are located in Metro New York.

The increase in non-performing loans in 2010 was partly offset by troubled debt restructurings (“TDRs”) that were returned to accrual status and by non-performing loans that were either brought current, satisfied, or transferred to OREO. TDRs returned to accrual status in 2010 totaled $135.2 million, primarily reflecting one relationship with an outstanding balance of $128.5 million. That relationship is secured by multi-family properties in Hartford, Connecticut and the Bronx, New

York. An impairment analysis was performed on this relationship and it was determined that a specific loan loss allowance was not needed, based on the estimated net realizable value of the collateral.

Non-performing loans that were either brought current, satisfied, or transferred to OREO consisted of many smaller credit relationships, primarily with borrowers in Metro New York.

Non-performing loans are reviewed regularly by management and reported on a monthly basis to the Mortgage Committee or the Credit Committee, as applicable, and to the Boards of Directors of the Banks. When necessary, 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.

The reduction in loans 30 to 89 days past due (“past-due loans”) was attributable to declines in four loan categories. Specifically, past-due multi-family loans declined $34.6 million year-over-year, to $121.2 million, while past-due CRE loans fell $34.1 million to $8.2 million, and past-due ADC loans fell $43.6 million to $5.2 million at year-end 2010. Similarly, the balance of past-due other loans declined by $10.3 million, to $10.7 million at December 31st. These improvements more than offset a modest increase in past-due one-to-four family loans to $5.7 million from $5.0 million at December 31, 2009.

Although the reasons for a loan to default will vary from credit to credit, our multi-family and CRE loans, in particular, have not typically resulted in significant losses. Such loans are generally originated at conservative LTV ratios; furthermore, in the case of multi-family loans, the cash flows generated by the properties generally have significant value.

To mitigate the potential for credit risk, we underwrite our loans in accordance with prudent credit standards. In the case of multi-family and CRE loans, we look first at the consistency of the cash flows being generated to determine the property’s economic value, and then at the market value of the property that collateralizes the loan. The amount of the loan is then based on the lower of the two values, with the economic value 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 originated in excess of $4.0 million. Similarly, a member of the Mortgage or Credit Committee participates in inspections on CRE loans in excess of $2.5 million. Furthermore, independent appraisers, whose appraisals are carefully reviewed by our experienced in-house appraisal officers, perform appraisals on collateral properties.

In addition, we work with a select group of mortgage brokers who are familiar with our credit standards and whose track record with our lending officers is typically greater than ten years. In addition, in New York City, where 76.0% of the buildings securing our multi-family loans are located, the rents that tenants may be charged on the apartments in certain buildings is restricted under certain rent-control or rent-stabilization laws. As a result, the average rents that tenants pay in such apartments are generally lower than current market rents. Buildings with a preponderance of such rent-regulated apartments are therefore 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 were well below those amounts at December 31, 2010, as previously noted. Exceptions to these LTV ratio limitations are reviewed on a case-by-case basis, requiring the approval of the Mortgage or Credit Committee, as applicable.

To further minimize the credit risk on CRE loans, we originate such loans in adherence with conservative underwriting standards, and require that the loans qualify on the basis of the property’s current income stream and debt service coverage ratio. The approval of a CRE loan also depends on the borrower’s credit history, profitability, and expertise in property management; in addition, the origination of CRE loans typically requires an assignment of the rents and/or leases.

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 worked with us or our merger partners 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 ADC 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 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 non-performing, 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 CRE transaction-based value index to determine the extent of impairment until an updated appraisal is received.

While we strive to originate loans for investment that will perform fully, the severity of the prolonged credit cycle downturn has resulted in a higher level of charge-offs than we have experienced in the past. Nonetheless, there continues to be a significant difference between the volume of loans that transition to non-performing and the volume of loans on which we realize a loss.

In 2010, we recorded net charge-offs of $59.5 million, representing 0.21% of average loans, as compared to $29.9 million, representing 0.13% of average loans, in 2009. The year-over-year increase in net charge-offs stemmed from all five loan categories, with multi-family loans and CRE loans accounting for net charge-offs of $9.9 million and $3.3 million, respectively; ADC loans and one-to-four family loans accounting for net charge-offs of $26.4 million and $931,000, respectively; and other loans accounting

for net charge-offs of $19.0 million. These amounts reflected year-over-year increases of $11.1 million, $2.8 million, $3.9 million, $609,000, and $11.3 million, respectively.

As a result of the year-over-year increase in non-performing loans and the rise in net charge-offs, we increased our allowance for losses on non-covered loans by $31.5 million from the December 31, 2009 balance to $158.9 million at December 31, 2010. The latter amount was equivalent to 0.67% of total non-covered loans, representing a 12-basis point increase, and to 25.45% of non-performing non-covered loans, representing a year-over-year increase of 340 basis points.

The manner in which the allowance for loan losses is established, and the assumptions made in that process, are considered critical to our financial condition and results. Such assumptions are based on judgments that are difficult, complex, and subjective regarding various matters of inherent uncertainty. The current economic environment has increased the degree of uncertainty inherent in these judgments. Accordingly, the policies that govern our assessment of the allowance for loan losses are considered “Critical Accounting Policies” and are discussed under that heading earlier in this report.

Based upon all relevant and available information, management believes that the allowance for loan losses at December 31, 2010 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 residential apartment buildings in the New York Metropolitan region that feature below-market rents); and to our conservative underwriting practices that require, among other things, low LTV ratios.

Notwithstanding the level of non-performing multi-family loans at the end of December, we would not expect to see a comparable level of losses in this lending niche. This is primarily due to the strength of the underlying collateral for these loans and the collateral structure upon which these loans are based. Low LTV ratios provide a greater likelihood of full recovery and reduce the possibility of incurring a severe loss on a loan. 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 the loan to performing status.

Similarly, an increase in non-performing CRE loans would not necessarily be expected to result in a corresponding increase in losses. At December 31, 2010, CRE loans represented 22.9% of total non-covered loans held for investment, while charge-offs of CRE loans represented 5.5% of total charge-offs in 2010 and 1.8% in 2009. We believe this favorable loan loss experience is due to our historical practice of underwriting CRE loans in accordance with standards similar to those we follow in underwriting our multi-family loans.

In 2010, we continued to de-emphasize the production of ADC and other loans, as well as one-to-four family loans for portfolio, in order to reduce our exposure to credit risk. At December 31, 2010, ADC, other loans, and one-to-four family loans represented 2.40%, 3.06%, and 0.72%, respectively, of total non-covered loans held for investment, as compared to 2.85%, 3.30%, and 0.92%, respectively, at December 31, 2009. At December 31, 2010, 16.1%, 3.4%, and 10.5% of ADC, other, and one-to-four family loans were non-performing, respectively.

Although ADC and other loans each represented a smaller percentage of total non-covered loans at December 31, 2010 than they did at December 31, 2009, the allowances for losses applicable to such loans increased year-over-year. These increases reflect the trend in non-performing loans, the amount of losses within these loan categories, and our ongoing assessment of the risks inherent in these portfolios.

In view of these factors, we believe that a significant increase in non-performing non-covered loans will not necessarily result in a comparable increase in loan losses and, accordingly, will not necessarily require a significant increase in our non-covered loan loss allowance or the provision for losses on non-covered loans recorded in any given period. As indicated, while non-performing non-covered loans represented 2.63% of total non-covered loans at December 31, 2010, the ratio of net charge-offs to average loans for the twelve months ended at that date was 0.21%. The allowance for losses on non-covered loans is determined in accordance with the methodology described earlier in this report under “Critical Accounting Policies.”

The following table presents information about our five largest non-performing loans at December 31, 2010, all of which are non-covered loans:


	Loan #1			Loan #2			Loan #3			Loan #4			Loan #5
Type of loan	CRE			Multi-Family			Multi-Family			Construction			Construction
Origination date		11/14/2006			6/29/2005			1/12/2006			10/14/2005			12/21/2005
Origination balance	$	50,000,000		$	41,116,000		$	35,680,000		$	25,000,000		$	21,462,500
Full commitment balance		50,000,000			41,698,570			35,680,000			25,000,000			21,462,500
Balance at 12/31/2010		50,000,000			42,003,117			33,155,000			25,000,000			21,452,576
Associated loan loss allowance		None			None			None			5,905,000			None
Non-accrual date		7/2010			2/2009			4/2010			6/2009			2/2010
LTV at origination		43	%		76	%		85	%		54	%		83	%
Current LTV		62			97			95			83			95
Last appraisal		8/2010			12/2010			5/2010			9/2010			3/2010

The following is a description of the five loans identified in the preceding table. It should be noted that no allocation for the loan loss allowance was needed for loans 1, 2, 3, or 5, as determined by using the fair value of collateral method defined in ASC 310-10 and -40.

No. 1:

The borrower is an owner of real estate and is based in New York. This loan is collateralized by vacant land and air rights in Manhattan, New York.

No. 2:

The borrower is an owner of real estate throughout the nation and is based in New Jersey. This loan is collateralized by a complex of four multi-family buildings containing 672 residential units and four commercial units in Washington, D.C.

No. 3:

The borrower is an owner of real estate and is based in New York. This loan is collateralized by a multi-family complex containing 494 residential units and 12 commercial retail units in Philadelphia, Pennsylvania.

No. 4:

The borrower is an owner of real estate and is based in New York. This loan is collateralized by a 95,000 square foot industrial building that is fully occupied and has been rezoned for residential development. “As of right” buildable area for the subject site is 267,966 square feet. By adjusting the appraisal for certain assumptions using the fair value of collateral method of ASC 310-10 and -40, it was determined that a $5,905,000 allocation to the non-covered loan loss allowance was necessary.

No. 5:

The borrower is an owner of real estate and is based in New York. This loan is collateralized by a vacant loft building in Manhattan, New York, which is prime for development.

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 in 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 a period of at least six months.

Loans modified in a TDR totaled $357.5 million at December 31, 2010, including accruing loans of $152.7 million and non-accrual loans of $204.8 million.

In an effort to proactively deal with delinquent loans, we have selectively extended to certain borrowers concessions such as rate reductions, extension of maturity dates, forbearance agreements, and conversion from

amortizing to interest-only payments. At December 31, 2010, concessions made with respect to rate reductions amounted to $251.7 million; maturity extensions amounted to $65.7 million; and forbearance agreements amounted to $40.1 million.

Most of our TDRs involve rate reductions and/or forbearance of arrears, which thus far have proven the most successful in enabling selected borrowers to emerge from delinquency and keep their loans current.

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 our personnel regarding the likelihood that the concession will result in the maximum recovery for the Company.

Analysis of Troubled Debt Restructurings

The following table presents information regarding our TDRs as of December 31, 2010:


*(in thousands)*	Accruing		Non-Accrual		Total
Multi-family	$	148,738	$	123,435	$	272,173
Commercial real estate		3,917		56,814		60,731
Acquisition, development, and construction		—		17,666		17,666
Commercial and industrial		—		5,381		5,381
One-to-four family		—		1,520		1,520

Total	$	152,655	$	204,816	$	357,471

We monitor non-accrual loans both within and beyond our primary lending area in the same manner. Monitoring loans generally includes 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 exceeds 90 days past due, and if the most recent appraisal on file for the property is more than one year old. Annual appraisals are ordered until such time as the loans become performing and are 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.

The most significant increase in non-accrual loans in 2010 occurred within the CRE loan portfolio. Non-accrual CRE loans totaled $162.4 million at the end of this December, as compared to $70.6 million at December 31, 2009. The increase was primarily due to a single loan of $50.0 million to a borrower based in New York (more fully discussed in the summary of our five largest non-performing loans) and to a relationship involving several CRE properties totaling $22.7 million, also located in New York.

During this time, the balance of non-accrual multi-family loans declined to $327.9 million from $393.1 million. The reduction was primarily due to a relationship in the amount of $128.5 million that was returned to accrual status during 2010.

The following tables present the number and amount of non-accrual CRE and multi-family loans by originating bank at December 31, 2010 and 2009:


As of December 31, 2010	Non-Performing Commercial Real Estate Loans				Non-Performing Multi-Family Loans
*(dollars in thousands)*	Number		Amount		Number		Amount
New York Community Bank		53	$	130,132		128	$	323,751
New York Commercial Bank		12		32,268		3		4,141

Total for New York Community Bancorp		65	$	162,400		131	$	327,892


As of December 31, 2009	Non-Performing Commercial Real Estate Loans				Non-Performing Multi-Family Loans
*(dollars in thousands)*	Number		Amount		Number		Amount
New York Community Bank		45	$	38,219		142	$	380,029
New York Commercial Bank		6		32,399		4		13,084

Total for New York Community Bancorp		51	$	70,618		146	$	393,113

Geographic Analysis of Total Non-Performing Loans (Covered and Non-Covered)

The following table presents a geographical analysis of our non-performing loans at December 31, 2010:


*(in thousands)*
New York	$	598,371
Florida		96,164
Arizona		76,435
California		36,200
New Jersey		28,044
Massachusetts		24,129
Nevada		18,771
Ohio		17,892
Maryland		12,921
Michigan		11,632
All other states		64,699

Total non-performing loans	$	985,258

Covered Loans and Covered OREO

Although the AmTrust and Desert Hills acquisitions increased our loan portfolio and, in the case of Desert Hills, added OREO, the credit risk associated with these acquired assets 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 for each acquisition and reimburse us for 95% of any losses (and share in 95% of any recoveries) above that threshold with respect to the acquired loans and OREO. The loss sharing (and reimbursement) agreements applicable to one-to-four family mortgage loans and home equity lines of credit are effective for a ten-year period. The loss sharing agreements applicable to other loans and OREO provide for the FDIC to 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 FASB Accounting Standards Codification (“ASC”) Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”). ASC Topic 310-30 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 are no longer classified as non-performing because, at the respective dates of acquisition, we believed that we would fully collect the new carrying value of these 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 Topic 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 loss sharing agreements, we established FDIC loss share receivables of $740.0 million with regard to AmTrust and $69.6 million with regard to Desert Hills, 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 respective agreements). The loss share receivables may increase if the losses increase, and may decrease if the losses are less than 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 loans is recognized. In the fourth quarter of 2010, an $11.3 million benefit was recorded in “non-interest income” as a result of an increase in expected reimbursements from the FDIC under our loss sharing agreements.

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 $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 2010, we received FDIC reimbursements of $54.6 million, which resulted in a decrease in the combined balance of the FDIC loss share receivables.

Asset Quality Analysis (Excluding Covered Loans, Covered OREO, and Non-Covered Loans Held for Sale)

The following table presents information regarding our consolidated allowance for losses on non-covered loans, non-performing non-covered assets, and non-covered loans 30 to 89 days past due at each year-end in the five years ended December 31, 2010. Covered loans are considered to be performing due to the application of the yield accretion method, as discussed elsewhere in this report. Therefore, covered loans are not reflected in the 2010 or 2009 amounts or ratios provided in this table.


	At December 31,
*(dollars in thousands)*	2010			2009			2008			2007			2006
Allowance for Losses on Non-Covered Loans:
Balance at beginning of year	$	127,491		$	94,368		$	92,794		$	85,389		$	79,705
Provision for losses on non-covered loans		91,000			63,000			7,700			—			—
Charge-offs:
Multi-family		(27,042	)		(15,261	)		(175	)		—			—
Commercial real estate		(3,359	)		(530	)		(16	)		—			—
Acquisition, development, and construction		(9,884	)		(5,990	)		(2,517	)		—			—
One-to-four family		(931	)		(322	)		—			—			—
Other loans		(19,569	)		(7,828	)		(3,460	)		(431	)		(420	)

Total charge-offs		(60,785	)		(29,931	)		(6,168	)		(431	)		(420	)
Recoveries		1,236			54			42			—			—
Allowance acquired in merger transactions		—			—			—			7,836			6,104

Balance at end of year	$	158,942		$	127,491		$	94,368		$	92,794		$	85,389


Non-Performing Non-Covered Assets:
Non-accrual non-covered mortgage loans:
Multi-family	$	327,892		$	393,113		$	53,153		$	3,061		$	—
Commercial real estate		162,400			70,618			12,785			3,293			2,583
Acquisition, development, and construction		91,850			79,228			24,839			2,939			11,375
One-to-four family		17,813			14,171			11,155			5,598			4,114

Total non-accrual non-covered mortgage loans		599,955			557,130			101,932			14,891			18,072
Other non-accrual non-covered loans		24,476			20,938			11,765			7,301			3,131
Loans 90 days or more past due and still accruing interest		—			—			—			—			—

Total non-performing non-covered loans ⁽¹⁾		624,431			578,068			113,697			22,192			21,203
Other real estate owned ⁽²⁾		28,066			15,205			1,107			658			1,341

Total non-performing non-covered assets	$	652,497		$	593,273		$	114,804		$	22,850		$	22,544


Asset Quality Measures:
Non-performing non-covered loans to total non-covered loans		2.63	%		2.47	%		0.51	%		0.11	%		0.11	%
Non-performing assets to total assets		1.58			1.41			0.35			0.07			0.08
Allowance for losses on non-covered loans to non-performing non-covered loans		25.45			22.05			83.00			418.14			402.72
Allowance for losses on non-covered loans to total non-covered loans		0.67			0.55			0.43			0.46			0.43
Net charge-offs during the period to average loans outstanding during the period		0.21			0.13			0.03			0.00			0.00


Loans 30-89 Days Past Due:
Multi-family	$	121,188		$	155,790		$	37,266		$	15,461		$	15,545
Commercial real estate		8,207			42,324			29,090			1,762			4,191
Acquisition, development, and construction		5,194			48,838			21,380			2,870			19,301
One-to-four family		5,723			5,019			4,885			4,875			4,440
Other loans		10,728			21,036			10,170			9,333			6,926

Total loans 30-89 days past due ⁽³⁾	$	151,040		$	273,007		$	102,791		$	34,301		$	50,403

(1)

The December 31, 2010 and 2009 amounts exclude loans 90 days or more past due of $360.8 million and $56.2 million, respectively, that are covered by FDIC loss sharing agreements.

(2)

The December 31, 2010 amount excludes OREO totaling $62.4 million that is covered by an FDIC loss sharing agreement.

(3)

The December 31, 2010 and 2009 amounts exclude loans 30 to 89 days past due of $130.5 million and $110.1 million, respectively, that are covered by FDIC loss-sharing agreements.

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, 2010 and 2009, including covered loans and covered OREO (collectively, “covered assets”):


	December 31,
*(dollars in thousands)*	2010			2009
Covered Loans 90 Days or More Past Due:
Multi-family	$	410		$	—
Commercial real estate		12,060			—
Acquisition, development, and construction		12,664			—
One-to-four family		310,929			55,796
Other		24,764			370

Total covered loans 90 days or more past due		360,827			56,166
Covered other real estate owned		62,412			—

Total covered non-performing assets	$	423,239		$	56,166


Total Non-Performing Assets (including covered assets):
Non-performing loans:
Multi-family	$	328,302		$	393,113
Commercial real estate		174,460			70,618
Acquisition, development, and construction		104,514			79,228
One-to-four family		328,742			69,967
Other non-performing loans		49,240			21,308

Total non-performing loans		985,258			634,234
Other real estate owned		90,478			15,205

Total non-performing assets (including covered assets)	$	1,075,736		$	649,439


Ratios (including covered loans and the allowance for losses on covered loans):
Total non-performing loans to total loans		3.52	%		2.23	%
Total non-performing assets to total assets		2.61			1.54
Allowance for loan losses to total non-performing loans		17.34			20.10
Allowance for loan losses to total loans		0.61			0.45


Covered Loans 30-89 Days Past Due:
Multi-family	$	402		$	—
Commercial real estate		9,095			—
Acquisition, development, and construction		1,172			—
One-to-four family		108,691			100,291
Other loans		11,182			9,768

Total covered loans 30-89 days past due	$	130,542		$	110,059


Total Loans 30-89 Days Past Due (including covered loans):
Multi-family	$	121,590		$	155,790
Commercial real estate		17,302			42,324
Acquisition, development, and construction		6,366			48,838
One-to-four family		114,414			105,310
Other loans		21,910			30,804

Total loans 30-89 days past due (including covered loans)	$	281,582		$	383,066

Summary of the Allowance for Losses on Non-Covered Loans Held for Investment

The following table sets forth the allocation of the consolidated allowance for losses on non-covered loans held for investment at each year-end in the five years ended December 31, 2010. At December 31, 2008, 2007, and 2006, all of our loans were non-covered loans.


	2010					2009					2008					2007					2006
*(dollars in thousands)*	Amount		Percent of Loans in Each Category to Total Non- Covered Loans Held for Investment			Amount		Percent of Loans in Each Category to Total Non- Covered Loans Held for Investment			Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans
Multi-family loans	$	75,314		70.88	%	$	75,567		71.59	%	$	43,908		70.85	%	$	43,066		69.00	%	$	46,525		73.93	%
Commercial real estate loans		42,145		22.94			32,079		21.34			29,622		20.51			29,461		18.80			23,313		15.85
Acquisition, development, and construction loans		20,302		2.40			8,276		2.85			10,289		3.51			10,243		5.59			9,089		5.61
One-to-four family loans		1,190		0.72			1,530		0.92			1,685		1.20			1,884		1.87			1,048		1.17
Other loans		19,991		3.06			10,039		3.30			8,864		3.93			8,140		4.74			5,414		3.44

Total loans	$	158,942		100.00	%	$	127,491		100.00	%	$	94,368		100.00	%	$	92,794		100.00	%	$	85,389		100.00	%

The preceding allocation is based upon an estimate of various factors, as discussed in “Critical Accounting Policies” earlier in this report, and a different allocation methodology may be deemed to be more appropriate in the future. In addition, it should be noted that the portion of the allowance for losses on non-covered loans held for investment allocated to each non-covered loan category does not represent the total amount available to absorb losses that may occur within that category, since the total loan loss allowance is available for the entire non-covered loan portfolio.

Securities

Securities represented $4.8 billion, or 11.6%, of total assets at December 31, 2010, as compared to $5.7 billion, or 13.6%, of total assets at December 31, 2009.

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, 2010, 91.7% of our securities portfolio consisted of GSE obligations, comparable to 91.8% at December 31, 2009. 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 $653.0 million, or 13.6%, of total securities at the end of this December, a reduction from $1.5 billion, or 26.4% of total securities, at December 31, 2009. Included in the respective year-end amounts were mortgage-related securities of $485.2 million and $774.2 million, and other securities of $167.8 million and $744.4 million. The estimated weighted average lives of the available-for-sale securities portfolio were 3.8 years and 2.2 years, respectively, at December 31, 2010 and 2009.

Held-to-maturity securities represented $4.1 billion, or 86.4%, of total securities at the end of this December and $4.2 billion, or 73.6%, of total securities at December 31, 2009. At December 31, 2010, the fair value of securities held to maturity represented 100.52% of their carrying value as compared to 100.62%, the year-earlier percentage. Mortgage-related securities accounted for $3.0 billion and $2.5 billion, respectively, of the year-end 2010 and 2009 totals, with other securities representing the remaining $1.2 billion and $1.8 billion. Included in the latter year-end amounts were GSE obligations of $3.9 billion and $1.5 billion; capital trust notes of $145.5 million and $167.1 million; and corporate bonds of $86.5 million and $101.1 million, respectively. The estimated weighted average lives of the held-to-maturity securities portfolio were 4.8 years and 6.2 years at the corresponding dates.

In accordance with OTTI accounting requirements adopted by the FASB on April 1, 2009, we recognize the OTTI of a security as a realized loss on the income statement to the extent that the decline in fair value of the security is credit-related, unless we have the intent to sell, or it is more likely than not that we will be required to sell, the security before recovery. The decline in value attributable to factors other than credit is charged to AOCL. However, if there is a decline in fair value of a security below its carrying amount and we have the intent to sell, or it is more likely than not that we will be required to sell, the security before recovery, the entire amount of the decline in fair value is charged to the income statement.

OTTI losses declined to $26.5 million in the current twelve-month period from $106.2 million in 2009. Included in the 2010 amount were $13.7 million of OTTI losses on trust preferred securities ($1.1 million of which was recognized in earnings), and $12.8 million of OTTI losses related to preferred stock ($826,000 of which was recognized in earnings).

We also recorded a $12.6 million after-tax net unrealized gain on available-for-sale securities at the end of this December, in contrast to an after-tax net unrealized loss of $457,000 at December 31, 2009.

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, 2010, the value of our stock in the FHLB-Cincinnati and the FHLB-San Francisco was $25.3 million and $3.2 million, respectively.

Including FHLB-NY stock of $417.5 million, the Community Bank and the Commercial Bank held total FHLB stock of $437.7 million and $8.3 million, respectively, at December 31, 2010. FHLB stock continued to be valued at par, with no impairment required.

For the fiscal year ended December 31, 2010, dividends from the FHLB to the Community Bank and the Commercial Bank respectively amounted to $23.3 million and $446,000; in 2009, such dividends amounted to $22.6 million and $473,000, respectively.

Bank-Owned Life Insurance

At December 31, 2010, our investment in bank-owned life insurance (“BOLI”) was $742.5 million, as compared to $716.0 million at December 31, 2009. The increase in our investment reflects the rise in the cash surrender value of the underlying policies during 2010.

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 acquired in the AmTrust acquisition and the loans and OREO acquired in the Desert Hills acquisition, we recorded an FDIC loss share receivable at December 31, 2010 and 2009. The loss share receivable represented the present value 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, 2010 and 2009, goodwill totaled $2.4 billion. CDI declined $28.0 million year-over-year, to $77.7 million, reflecting amortization.

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 the deposits we acquire in our business combinations or gather through our branch network, and brokered deposits; the use of 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 2010, our funding was modestly enhanced by the infusion of deposits and cash in the Desert Hills acquisition.

In 2010, loan repayments and sales totaled $5.7 billion, as compared to $3.3 billion in 2009. Included in the 2010 amount were repayments and sales of $1.7 billion and $4.0 billion, respectively, as compared to $2.4 million and $835.7 million, respectively, in the prior year. The significant increase in sales reflects the first full-year operation of our mortgage banking platform.

Cash flows from the repayment and sale of securities totaled $5.0 billion and $23.1 million, respectively, in 2010, and were partially offset by purchases of securities totaling $4.0 billion. In 2009, securities repayments and sales generated cash flows of $2.7 billion and $10.3 million, respectively, and were somewhat offset by purchases of $1.8 billion.

Consistent with our business model, the cash flows from loans and securities were primarily deployed into loan production and, to a lesser extent, GSE obligations.

Deposits

Our ability to retain and attract new 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 loan demand.

In view of the cash infusion we received in connection with our AmTrust and Desert Hills acquisitions, we