Edgar Filing: NEW YORK COMMUNITY BANCORP INC

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011

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)

(Registrant’s telephone number, including area code) (516) 683-4100

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 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 “large accelerated filer,” “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 Exchange Act). Yes ¨ No x

437,348,593

Number of shares of common stock outstanding at

May 3, 2011

NEW YORK COMMUNITY BANCORP, INC.

FORM 10-Q

Quarter Ended March 31, 2011


INDEX		Page No.

Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Condition as of March 31, 2011 (unaudited) and December 31, 2010		1

	Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2011 and 2010 (unaudited)		2

	Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2011 (unaudited)		3

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 (unaudited)		4

	Notes to the Unaudited Consolidated Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		77

Item 4.	Controls and Procedures		77

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings		78

Item 1A.	Risk Factors		78

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		78

Item 3.	Defaults Upon Senior Securities		78

Item 4.	Removed and Reserved		78

Item 5.	Other Information		78

Item 6.	Exhibits		79

Signatures			80

Exhibits

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data)


	March 31, 2011			December 31, 2010
	(unaudited)
ASSETS:
Cash and cash equivalents	$	2,351,729		$	1,927,542
Securities:
Available-for-sale ($365,342 and $500,811 pledged, respectively)		490,779			652,956
Held to maturity ($4,084,011 and $3,881,139 pledged, respectively) (fair value of $4,326,541 and $4,157,322, respectively)		4,304,218			4,135,935

Total securities		4,794,997			4,788,891

Non-covered loans held for sale		507,461			1,207,077
Non-covered loans held for investment, net of deferred loan fees and costs		24,024,733			23,707,494
Less: Allowance for losses on non-covered loans		(146,306	)		(158,942	)

Non-covered loans held for investment, net		23,878,427			23,548,552
Covered loans		4,141,082			4,297,869
Less: Allowance for losses on covered loans		(11,903	)		(11,903	)

Covered loans, net		4,129,179			4,285,966

Total loans, net		28,515,067			29,041,595
Federal Home Loan Bank stock, at cost		422,731			446,014
Premises and equipment, net		246,975			233,694
FDIC loss share receivable		777,183			814,088
Goodwill		2,436,159			2,436,159
Core deposit intangibles, net		70,349			77,734
Bank-owned life insurance		749,369			742,481
Other real estate owned (includes $81,197 and $62,412 covered by FDIC loss sharing agreements, respectively)		113,254			90,478
Other assets		569,131			592,013

Total assets	$	41,046,944		$	41,190,689


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Deposits:
NOW and money market accounts	$	8,919,226		$	8,235,825
Savings accounts		3,949,970			3,885,785
Certificates of deposit		7,453,547			7,835,161
Non-interest-bearing accounts		1,875,404			1,852,280

Total deposits		22,198,147			21,809,051
Borrowed funds:
Wholesale borrowings:
Federal Home Loan Bank advances		7,859,163			8,375,659
Repurchase agreements		4,125,000			4,125,000

Total wholesale borrowings		11,984,163			12,500,659
Junior subordinated debentures		426,903			426,992
Other borrowings		608,496			608,465

Total borrowed funds		13,019,562			13,536,116
Other liabilities		288,649			319,302

Total liabilities		35,506,358			35,664,469

Stockholders’ equity:
Preferred stock at par $0.01 (5,000,000 shares authorized; none issued)		—			—
Common stock at par $0.01 (600,000,000 shares authorized; 437,341,143 shares and 435,646,845 shares issued and outstanding, respectively)		4,373			4,356
Paid-in capital in excess of par		5,290,868			5,285,715
Retained earnings		295,866			281,844
Accumulated other comprehensive loss, net of tax:
Net unrealized gain on securities available for sale, net of tax		7,010			12,600
Net unrealized losses on the non-credit portion of other-than-temporary impairment (“OTTI”) losses on securities, net of tax		(20,552	)		(20,572	)
Net unrealized loss on pension and post-retirement obligations, net of tax		(36,979	)		(37,723	)

Total accumulated other comprehensive loss, net of tax		(50,521	)		(45,695	)

Total stockholders’ equity		5,540,586			5,526,220

Total liabilities and stockholders’ equity	$	41,046,944		$	41,190,689

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except share data)

(unaudited)


	For the Three Months Ended March 31,
	2011			2010
INTEREST INCOME:
Mortgage and other loans	$	415,942		$	413,675
Securities and money market investments		54,981			68,703

Total interest income		470,923			482,378


INTEREST EXPENSE:
NOW and money market accounts		11,154			16,431
Savings accounts		4,127			5,745
Certificates of deposit		26,974			37,553
Borrowed funds		125,416			128,065

Total interest expense		167,671			187,794

Net interest income		303,252			294,584
Provision for losses on non-covered loans		26,000			20,000
Provision for losses on covered loans		—			—

Net interest income after provisions for loan losses		277,252			274,584


NON-INTEREST INCOME:
Total loss on OTTI of securities		—			(13,185	)
Less: Non-credit portion of OTTI recorded in other comprehensive income (before taxes)		—			12,462

Net loss on OTTI recognized in earnings		—			(723	)
Fee income		11,899			13,965
Bank-owned life insurance		6,889			7,401
Net gain (loss) on sales of securities		9,992			(8	)
Gain on debt repurchase		—			293
Mortgage banking income		19,938			27,533
Other income		9,892			6,583

Total non-interest income		58,610			55,044


NON-INTEREST EXPENSE:
Operating expenses:
Compensation and benefits		72,068			66,900
Occupancy and equipment		21,940			21,665
General and administrative		45,309			40,290

Total operating expenses		139,317			128,855
Amortization of core deposit intangibles		7,385			7,892

Total non-interest expense		146,702			136,747

Income before income taxes		189,160			192,881
Income tax expense		65,984			68,732

Net income		123,176			124,149

Other comprehensive income, net of tax:
Net change in unrealized losses on securities and non-credit portion of OTTI losses on securities		(5,570	)		(4,783	)
Change in pension and post-retirement obligations		744			834

Total comprehensive income, net of tax	$	118,350		$	120,200


Basic earnings per share	$	0.28		$	0.29

Diluted earnings per share	$	0.28		$	0.29

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


	Three Months Ended March 31, 2011
COMMON STOCK (Par Value: $0.01):
Balance at beginning of year	$	4,356
Shares issued for exercise of stock options (85,294 shares)		1
Shares issued for restricted stock awards (1,609,004 shares)		16

Balance at end of period		4,373


PAID-IN CAPITAL IN EXCESS OF PAR:
Balance at beginning of year		5,285,715
Shares issued for restricted stock awards, net of forfeitures		(43	)
Compensation expense related to restricted stock awards		3,612
Exercise of stock options		(55	)
Tax effect of stock plans		1,639

Balance at end of period		5,290,868


RETAINED EARNINGS:
Balance at beginning of year		281,844
Net income		123,176
Dividends paid on common stock ($0.25 per share)		(109,154	)

Balance at end of period		295,866


TREASURY STOCK:
Balance at beginning of year		—
Purchase of common stock (128,010 shares)		(2,381	)
Exercise of stock options (126,514 shares)		2,354
Shares issued for restricted stock awards (1,496 shares)		27

Balance at end of period		—


ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX:
Balance at beginning of year		(45,695	)
Other comprehensive (loss) income, net of tax:
Change in net unrealized gain/loss on securities available for sale, net of tax of $2,578		(3,837	)
Amortization of the non-credit portion of OTTI losses recognized in other comprehensive income, net of tax of $14		20
Change in pension and post-retirement obligations, net of tax of $501		744
Less: Reclassification adjustment for sales of available-for-sale securities, net of tax of $1,178		(1,753	)

Total other comprehensive income loss, net of tax		(4,826	)

Balance at end of period		(50,521	)


Total stockholders’ equity	$	5,540,586

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	123,176		$	124,149
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		26,000			20,000
Depreciation and amortization		5,891			4,935
Amortization of premiums, net		278			1,881
Amortization of core deposit intangibles		7,385			7,892
Net (gain) loss on sale of securities		(9,992	)		8
Net gain on sale of loans		(15,902	)		(7,558	)
Stock plan-related compensation		3,612			4,057
Loss on OTTI of securities recognized in earnings		—			723
Changes in assets and liabilities:
Decrease in deferred tax asset, net		16,625			1,235
Decrease (increase) in other assets		16,703			(22,767	)
(Decrease) increase in other liabilities		(29,408	)		98,575
Origination of loans held for sale		(1,500,836	)		(1,349,160	)
Proceeds from sale of loans originated for sale		2,211,232			911,038

Net cash provided by (used in) operating activities		854,764			(204,992	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayment of securities held to maturity		224,978			332,077
Proceeds from repayment of securities available for sale		51,551			420,315
Proceeds from sale of securities held to maturity		227,039			—
Proceeds from sale of securities available for sale		103,956			660
Purchase of securities held to maturity		(613,191	)		(565,524	)
Net redemption of Federal Home Loan Bank stock		23,283			56,211
Net (increase) decrease in loans		(193,966	)		86,544
Purchase of premises and equipment, net		(19,172	)		(2,284	)
Net cash acquired in business combination		—			140,895

Net cash (used in) provided by investing activities		(195,522	)		468,894

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		389,095			24,168
Net decrease in short-term borrowed funds		(500,000	)		—
Net decrease in long-term borrowed funds		(16,554	)		(333,340	)
Tax effect of stock plans		1,639			657
Cash dividends paid on common stock		(109,154	)		(108,157	)
Treasury stock purchases		(2,381	)		(1,706	)
Net cash received from stock option exercises		2,300			2,573
Proceeds from issuance of common stock, net		—			28,935

Net cash used in financing activities		(235,055	)		(386,870	)

Net increase (decrease) in cash and cash equivalents		424,187			(122,968	)
Cash and cash equivalents at beginning of period		1,927,542			2,670,857

Cash and cash equivalents at end of period	$	2,351,729		$	2,547,889

Supplemental information:
Cash paid for interest	$	171,491		$	203,198
Cash (received from) paid for income taxes		(10,134	)		18,819
Non-cash investing and financing activities:
Transfers to other real estate owned from loans		46,218			1,634

Note:

Excluding the core deposit intangible and FDIC loss share receivable, the fair values of non-cash assets acquired, and of liabilities assumed, in the acquisition of Desert Hills Bank on March 26, 2010 were $230.5 million and $442.5 million, respectively.

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Organization and Basis of Presentation

Organization

Formerly known as Queens County Bancorp, Inc., New York Community Bancorp, Inc. (on a stand-alone basis, the “Parent Company” or, collectively with its subsidiaries, the “Company”) was organized under Delaware law on July 20, 1993 and is the holding company for New York Community Bank and New York Commercial Bank (hereinafter referred to as the “Community Bank” and the “Commercial Bank,” respectively, and collectively as the “Banks”). In addition, for the purpose of these Consolidated Financial Statements, the “Community Bank” and the “Commercial Bank” refer not only to the respective banks but also to their respective subsidiaries.

The Community Bank is the primary banking subsidiary of the Company. Founded on April 14, 1859 and formerly known as Queens County Savings Bank, the Community Bank converted from a state-chartered mutual savings bank to the capital stock form of ownership on November 23, 1993, at which date the Company issued its initial offering of common stock (par value: $0.01 per share) at a price of $25.00 per share. The Commercial Bank was established on December 30, 2005.

Reflecting nine stock splits, the Company’s initial offering price adjusts to $0.93 per share. All share and per share data presented in this report have been adjusted to reflect the impact of the stock splits.

The Company changed its name to New York Community Bancorp, Inc. on November 21, 2000 in anticipation of completing the first of eight business combinations that expanded its footprint well beyond Queens County to encompass all five boroughs of New York City, Long Island, and Westchester County in New York, and seven counties in the northern and central parts of New Jersey. The Company expanded beyond this region to south Florida, northeast Ohio, and central Arizona through its FDIC-assisted acquisition of certain assets and its assumption of certain liabilities of AmTrust Bank (“AmTrust”) in December 2009, and extended its Arizona franchise through its FDIC-assisted acquisition of certain assets and its assumption of certain liabilities of Desert Hills Bank (“Desert Hills”) in March 2010.

Reflecting this strategy of growth through acquisitions, the Community Bank currently operates 242 branches, four of which operate directly under the Community Bank name. The remaining 238 branches operate through seven divisional banks—Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, and Roosevelt Savings Bank (in New York), Garden State Community Bank in New Jersey, AmTrust Bank in Florida and Arizona, and Ohio Savings Bank in Ohio.

The Commercial Bank currently operates 34 branches in Manhattan, Queens, Brooklyn, Westchester County, and Long Island (all in New York), including 17 branches that operate under the name “Atlantic Bank.”

Basis of Presentation

The following is a description of the significant accounting and reporting policies that the Company and its wholly-owned subsidiaries follow in preparing and presenting their consolidated financial statements, which conform to U.S. generally accepted accounting principles (“GAAP”) and to general practices within the banking industry. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates that are particularly susceptible to change in the near term are used in connection with the determination of the allowance for loan losses; the evaluation of goodwill for impairment; the evaluation of other-than-temporary impairment (“OTTI”) on securities; and the evaluation of the need for a valuation allowance on the Company’s deferred tax assets. The current economic environment has increased the degree of uncertainty inherent in these material estimates.

The unaudited consolidated financial statements include the accounts of the Company and other entities in which the Company has a controlling financial interest. All inter-company accounts and transactions are eliminated

in consolidation. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2010 Annual Report on Form 10-K. The Company currently has unconsolidated subsidiaries in the form of nine wholly-owned statutory business trusts, which were formed to issue guaranteed capital debentures (“capital securities”). Please see Note 6, “Borrowed Funds,” for additional information regarding these trusts.

When necessary, certain reclassifications have been made to prior-year amounts to conform to the current-year presentation.

Note 2. Computation of Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Weighted-average common shares are adjusted to exclude unallocated Employee Stock Ownership Plan (“ESOP”) shares. Diluted EPS is computed using the same method as basic EPS, however, the computation reflects the potential dilution that would occur if outstanding in-the-money stock options were exercised and converted into common stock.

Unvested stock-based compensation awards containing non-forfeitable rights to dividends are considered participating securities and therefore are included in the two-class method for calculating EPS. Under the two-class method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. The Company grants restricted stock to certain employees under its stock-based compensation plans. Recipients receive cash dividends during the vesting periods of these awards (i.e., including on the unvested portion of such awards). Since these dividends are non-forfeitable, the unvested awards are considered participating securities and will have earnings allocated to them.

The following table presents the Company’s computation of basic and diluted EPS for the periods indicated:


	Three Months Ended March 31,
(in thousands, except share and per share amounts)	2011			2010
Net income	$	123,176		$	124,149
Less: Dividends paid on and earnings allocated to participating securities		(890	)		(748	)

Earnings applicable to common stock	$	122,286		$	123,401

Weighted average common shares outstanding		435,563,415			432,131,304

Basic earnings per common share	$	0.28		$	0.29

Earnings applicable to common stock	$	122,286		$	123,401

Weighted average common shares outstanding		435,563,415			432,131,304
Potential dilutive common shares ⁽¹⁾		849,934			315,370

Total shares for diluted earnings per share computation		436,413,349			432,446,674

Diluted earnings per common share and common share equivalents	$	0.28		$	0.29

(1)

Options to purchase 2,617,993 and 5,310,729 shares, respectively, of the Company’s common stock that were outstanding as of March 31, 2011 and 2010, at respective weighted average exercise prices of $19.29 and $17.72, were excluded from the respective computations of diluted EPS because their inclusion would have had an antidilutive effect.

Note 3: Securities

The following table summarizes the Company’s portfolio of securities available for sale at March 31, 2011:


	March 31, 2011
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE⁽¹⁾ certificates	$	163,923	$	6,560	$	58	$	170,425
GSE CMOs⁽²⁾		186,399		7,198		—		193,597
Private label CMOs		40,875		166		9		41,032

Total mortgage-related securities	$	391,197	$	13,924	$	67	$	405,054

Other Securities:
GSE debentures	$	619	$	—	$	5	$	614
State, county, and municipal		1,306		31		21		1,316
Capital trust notes		38,843		3,798		4,539		38,102
Preferred stock		18,124		454		11,964		6,614
Common stock		42,076		1,678		4,675		39,079

Total other securities	$	100,968	$	5,961	$	21,204	$	85,725

Total securities available for sale⁽³⁾	$	492,165	$	19,885	$	21,271	$	490,779

(1)	Government-sponsored enterprises

(2)	Collateralized mortgage obligations

(3)	As of March 31, 2011, the non-credit portion of OTTI recorded in accumulated other comprehensive loss, net of tax (“AOCL”) was $12.5 million (before taxes).

As of March 31, 2011, the amortized cost of marketable equity securities included perpetual preferred stock of $18.1 million and common stock of $42.1 million. Perpetual preferred stock consisted of an investment in a Florida-based diversified financial services firm that provides a variety of banking, wealth management, and outsourced business processing services to high net worth clients and premier financial institutions. Common stock primarily consisted of an investment in a large cap equity fund and certain other funds that are Community Reinvestment Act (“CRA”) eligible.

The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2010:


	December 31, 2010
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	203,480	$	8,067	$	32	$	211,515
GSE CMOs		213,839		8,464		—		222,303
Private label CMOs		51,657		110		405		51,362

Total mortgage-related securities	$	468,976	$	16,641	$	437	$	485,180

Other Securities:
U.S. Treasury obligations	$	57,859	$	694	$	—	$	58,553
GSE debentures		620		—		—		620
Corporate bonds		4,814		—		564		4,250
State, county, and municipal		1,304		41		11		1,334
Capital trust notes		38,843		8,550		5,389		42,004
Preferred stock		30,574		2,129		11,964		20,739
Common stock		42,044		3,786		5,554		40,276

Total other securities	$	176,058	$	15,200	$	23,482	$	167,776

Total securities available for sale	$	645,034	$	31,841	$	23,919	$	652,956

The following tables summarize the Company’s portfolio of securities held to maturity at March 31, 2011 and December 31, 2010:


	March 31, 2011
(in thousands)	Amortized Cost		Carrying Amount		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	230,641	$	230,641	$	10,838	$	1,861	$	239,618
GSE CMOs		2,385,741		2,385,741		37,818		19,329		2,404,230
Other mortgage-related securities		6,722		6,722		—		—		6,722

Total mortgage-related securities	$	2,623,104	$	2,623,104	$	48,656	$	21,190	$	2,650,570

Other Securities:
GSE debentures	$	1,452,108	$	1,452,108	$	5,404	$	15,275	$	1,442,237
Corporate bonds		83,495		83,495		5,952		—		89,447
Capital trust notes		167,358		145,511		14,382		15,606		144,287

Total other securities	$	1,702,961	$	1,681,114	$	25,738	$	30,881	$	1,675,971

Total securities held to maturity⁽¹⁾	$	4,326,065	$	4,304,218	$	74,394	$	52,071	$	4,326,541

(1)	Held-to-maturity securities are reported at a carrying amount equal to amortized cost less the non-credit portion of OTTI recorded in AOCL. As of March 31, 2011, the non-credit portion recorded in AOCL was $21.8 million (before taxes).


	December 31, 2010
(in thousands)	Amortized Cost		Carrying Amount		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	208,993	$	208,993	$	12,206	$	1,094	$	220,105
GSE CMOs		2,763,545		2,763,545		47,352		28,345		2,782,552
Other mortgage-related securities		6,777		6,777		—		—		6,777

Total mortgage-related securities	$	2,979,315	$	2,979,315	$	59,558	$	29,439	$	3,009,434

Other Securities:
GSE debentures	$	924,663	$	924,663	$	4,524	$	10,592	$	918,595
Corporate bonds		86,483		86,483		8,647		13		95,117
Capital trust notes		167,355		145,474		11,410		22,708		134,176

Total other securities	$	1,178,501	$	1,156,620	$	24,581	$	33,313	$	1,147,888

Total securities held to maturity	$	4,157,816	$	4,135,935	$	84,139	$	62,752	$	4,157,322

The Company had $422.7 million and $446.0 million of Federal Home Loan Bank (“FHLB”) stock, at cost, at March 31, 2011 and December 31, 2010, respectively. The Company is required to maintain this investment in order to have access to funding resources provided by the FHLB.

The following table summarizes the gross proceeds, gross realized gains, and gross realized losses from the sale of available-for-sale securities during the three months ended March 31, 2011 and the year ended December 31, 2010:


(in thousands)	For the Three Months Ended March 31, 2011			For the Year Ended December 31, 2010
Gross proceeds		$	103,956		$	660
Gross realized gains			2,941			—
Gross realized losses			11			8

In addition, during the three months ended March 31, 2011, the Company sold held-to-maturity securities with gross proceeds totaling $227.0 million and gross realized gains of $7.1 million. These sales occurred as the Company either had collected a substantial portion (at least 85%) of the initial principal balance or there was evidence of significant deterioration in the issuer’s creditworthiness.

Included in the capital trust note portfolio held at March 31, 2011 were three pooled trust preferred securities. The following table details the pooled trust preferred securities that had at least one credit rating below investment grade as of March 31, 2011:


	INCAPS Funding I			Alesco Preferred Funding VII Ltd.			Preferred Term Securities II
(dollars in thousands)	Class B-2 Notes			Class C-1 Notes			Mezzanine Notes
Book value	$	14,964		$	553		$	627
Fair value		18,465			725			1,076
Unrealized gain		3,501			172			449
Lowest credit rating assigned to security		CCC-			C			C
Number of banks/insurance companies currently performing		26			62			24
Actual deferrals and defaults as a percentage of original collateral		5	%		29	%		36	%
Expected deferrals and defaults as a percentage of remaining performing collateral		25			28			0
Expected recoveries as a percentage of remaining performing collateral		0			0			0
Excess subordination as a percentage of remaining performing collateral		10			0			0

As of March 31, 2011, after taking into account the Company’s best estimates of future deferrals, defaults, and recoveries, two of its pooled trust preferred securities had no excess subordination in the classes it owns and one had excess subordination of 10%. Excess subordination is calculated after taking into account the deferrals, defaults, and recoveries noted in the table above, and indicates whether there is sufficient additional collateral to cover the outstanding principal balance of the class owned, after taking into account these projected deferrals, defaults, and recoveries.

The following table presents a roll-forward, from December 31, 2010 through March 31, 2011, of the credit loss component of OTTI on debt securities for which a non-credit component of OTTI was recognized in AOCL. The beginning balance represents the credit loss component for debt securities for which OTTI occurred prior to January 1, 2011. For credit-impaired debt securities, OTTI recognized in earnings after that date is presented as an addition in two components, based upon whether the current period is the first time a debt security was credit-impaired (initial credit impairment) or is not the first time a debt security was credit-impaired (subsequent credit impairment). There were no changes in the credit loss component of credit-impaired debt securities in the three months ended March 31, 2011:


(in thousands)		For the Three Months Ended March 31, 2011
Beginning credit loss amount as of December 31, 2010		$	201,854
Add:	Initial other-than-temporary credit losses		—
	Subsequent other-than-temporary credit losses		—
Less:	Realized losses for securities sold		—
	Securities intended or required to be sold		—
	Increases in expected cash flows on debt securities		—

Ending credit loss amount as of March 31, 2011		$	201,854

OTTI losses on securities totaled $13.2 million in the three months ended March 31, 2010 and consisted entirely of trust preferred securities. The OTTI losses that were related to credit and, therefore, were recognized in earnings totaled $723,000 during this period, and were determined through a present-value analysis of expected cash flows on the securities. The significant inputs that the Company used to determine these expected cash flows were the anticipated magnitude and timing of interest payment deferrals, if any, and the underlying creditworthiness of the individual issuers whose debt acts as collateral for these trust preferred securities. The discount rate used to estimate the fair value was determined by considering the weighted average of certain market credit spreads, as well as credit spreads interpolated using other market factors. The discount rate used in determining the credit portion of OTTI, if any, is the yield on the position at the time of purchase.

The following table summarizes the carrying amount and estimated fair value of held-to-maturity debt securities, and the amortized cost and estimated fair value of available-for-sale debt securities, at March 31, 2011 by contractual maturity. Mortgage-related securities held to maturity and available for sale, all of which have prepayment provisions, are distributed to a maturity category based on the ends of the estimated average lives of such securities. Principal and amortization prepayments are not shown in maturity categories as they occur, but are considered in the determination of estimated average life.


	Carrying Amount at March 31, 2011
(dollars in thousands)	Mortgage- Related Securities		Average Yield			U.S. Treasury and GSE Obligations		Average Yield			State, County, and Municipal		Average Yield⁽¹⁾			Other Debt Securities⁽²⁾		Average Yield			Fair Value
Held-to-Maturity Securities:
Due within one year	$	—		—	%	$	—		—	%	$	—		—	%	$	8,763		7.79	%	$	8,956
Due from one to five years		—		—			—		—			—		—			23,981		5.80			24,563
Due from five to ten years		83,961		5.27			1,452,108		3.89			—		—			20,024		5.98			1,548,175
Due after ten years		2,539,143		3.87			—		—			—		—			176,238		7.29			2,744,847

Total debt securities held to maturity	$	2,623,104		3.92	%	$	1,452,108		3.89	%	$	—		—	%	$	229,006		7.04	%	$	4,326,541

Available-for-Sale Securities:⁽³⁾
Due within one year	$	3		2.78	%	$	—		—	%	$	125		5.39	%	$	—		—	%	$	128
Due from one to five years		10,534		7.20			—		—			630		6.10			—		—			11,264
Due from five to ten years		3,684		3.33			—		—			551		6.56			—		—			4,416
Due after ten years		376,976		4.69			619		5.26			—		—			38,843		4.88			429,278

Total debt securities available for sale	$	391,197		4.75	%	$	619		5.26	%	$	1,306		6.22	%	$	38,843		4.88	%	$	445,086

(1)	Not presented on a tax-equivalent basis.

(2)

Includes corporate bonds and capital trust notes. Included in capital trust notes are $15.5 million and $627,000 of pooled trust preferred securities available for sale and held to maturity, respectively, all of which are due after ten years. The remaining capital trust notes consist of single-issue trust preferred securities.

(3)	As equity securities have no contractual maturity, they have been excluded from this table.

The Company had no commitments to purchase securities at March 31, 2011.

The following tables present held-to-maturity and available-for-sale securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of March 31, 2011:


At March 31, 2011	Less than Twelve Months				Twelve Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Held-to-Maturity Debt Securities:
GSE debentures	$	1,075,857	$	15,275	$	—	$	—	$	1,075,857	$	15,275
GSE certificates		83,647		1,861		—		—		83,647		1,861
GSE CMOs		975,867		19,329		—		—		975,867		19,329
Capital trust notes		—		—		73,798		15,606		73,798		15,606

Total temporarily impaired held-to-maturity debt securities	$	2,135,371	$	36,465	$	73,798	$	15,606	$	2,209,169	$	52,071

Temporarily Impaired Available-for-Sale Securities:
Debt Securities:
GSE certificates	$	5,341	$	58	$	—	$	—	$	5,341	$	58
Private label CMOs		7,729		9		—		—		7,729		9
GSE debentures		614		5		—		—		614		5
State, county, and municipal		390		21		—		—		390		21
Capital trust notes		2,042		48		9,645		4,491		11,687		4,539

Total temporarily impaired available-for-sale debt securities	$	16,116	$	141	$	9,645	$	4,491	$	25,761	$	4,632
Equity securities		79		11		25,296		16,628		25,375		16,639

Total temporarily impaired available-for-sale securities	$	16,195	$	152	$	34,941	$	21,119	$	51,136	$	21,271

The twelve months or longer unrealized losses of $16.6 million relating to available-for-sale equity securities primarily consisted of two security positions. The first is a perpetual preferred stock of a Florida-based diversified financial services firm, which was evaluated under the debt model described earlier in this report. The second was a large cap equity fund. The respective twelve months or longer unrealized losses on the preferred stock and the large cap equity fund were $12.0 million and $4.0 million, respectively.


At December 31, 2010	Less than Twelve Months				Twelve Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Held-to-Maturity Debt Securities:
GSE debentures	$	569,361	$	10,592	$	—	$	—	$	569,361	$	10,592
GSE certificates		54,623		1,094		—		—		54,623		1,094
GSE CMOs		1,251,850		28,345		—		—		1,251,850		28,345
Corporate bonds		4,987		13		—		—		4,987		13
Capital trust notes		—		—		66,698		22,708		66,698		22,708

Total temporarily impaired held-to-maturity debt securities	$	1,880,821	$	40,044	$	66,698	$	22,708	$	1,947,519	$	62,752

Temporarily Impaired Available-for-Sale Securities:
Debt Securities:
GSE certificates	$	12,809	$	28	$	779	$	4	$	13,588	$	32
Private label CMOs		—		—		35,511		405		35,511		405
Corporate bonds		—		—		4,250		564		4,250		564
State, county, and municipal		399		11		—		—		399		11
Capital trust notes		1,988		102		8,848		5,287		10,836		5,389

Total temporarily impaired available-for-sale debt securities	$	15,196	$	141	$	49,388	$	6,260	$	64,584	$	6,401
Equity securities		79		11		25,339		17,507		25,418		17,518

Total temporarily impaired available-for-sale securities	$	15,275	$	152	$	74,727	$	23,767	$	90,002	$	23,919

An OTTI loss on impaired securities must be fully recognized in earnings if an investor has the intent to sell the debt security or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost. However, even if an investor does not expect to sell a debt security, it must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event that a credit loss occurs, only the amount of impairment associated with the credit loss is recognized in earnings. Amounts relating to factors other than credit losses are recorded in AOCL. Financial Accounting Standards Board (“FASB”) guidance also requires additional disclosures regarding the calculation of credit losses as well as factors considered by the investor in reaching a conclusion that an investment is not other than temporarily impaired.

Available-for-sale securities in unrealized loss positions are analyzed as part of the Company’s ongoing assessment of OTTI. When the Company intends to sell such available-for-sale securities, the Company recognizes an impairment loss equal to the full difference between the amortized cost basis and the fair value of those securities. When the Company does not intend to sell available-for-sale equity or debt securities in an unrealized loss position, potential OTTI is considered based on a variety of factors, including the length of time and extent to which the fair value has been less than the cost; adverse conditions specifically related to the industry, the geographic area, or financial condition of the issuer, or the underlying collateral of a security; the payment structure of the security; changes to the rating of the security by a rating agency; the volatility of the fair value changes; and changes in fair value of the security after the balance sheet date. For debt securities, the Company estimates cash flows over the remaining life of the underlying collateral to assess whether credit losses exist and, where applicable, to determine if any adverse changes in cash flows have occurred. The Company’s cash flow estimates take into account expectations of relevant market and economic data as of the end of the reporting period. As of March 31, 2011, the Company did not intend to sell the securities with an unrealized loss position in AOCL, and it was more likely than not that the Company would not be required to sell these securities before recovery of their amortized cost basis. The Company believes that the securities with an unrealized loss in AOCL were not other than temporarily impaired as of March 31, 2011.

Other factors considered in determining whether a loss is temporary include the length of time and the extent to which fair value has been below cost; the severity of the impairment; the cause of the impairment; the financial condition and near-term prospects of the issuer; activity in the market of the issuer that may indicate adverse credit conditions; and the forecasted recovery period using current estimates of volatility in market interest rates (including liquidity and risk premiums).

Management’s assertion regarding its intent not to sell, or that it is not more likely than not that the Company will be required to sell the security before its anticipated recovery, considers a number of factors, including a quantitative estimate of the expected recovery period (which may extend to maturity) and management’s intended strategy with respect to the identified security or portfolio. If management does have the intent to sell, or believes it is more likely than not that the Company will be required to sell the security before its anticipated recovery, the unrealized loss is charged directly to earnings in the Consolidated Statement of Income and Comprehensive Income.

The unrealized losses on the Company’s GSE debentures and GSE CMOs at March 31, 2011 were primarily caused by movements in market interest rates and spread volatility, rather than credit risk. The Company purchased these investments either at par or at a discount relative to their face amount, and the contractual cash flows of these investments are guaranteed by the GSEs. Accordingly, it is expected that these securities would not be settled at a price that is less than the amortized cost of the Company’s investment. Because the Company does not have the intent to sell the investments and it is not more likely than not that the Company will be required to sell the investments before anticipated recovery of fair value, which may be at maturity, the Company did not consider these investments to be other than temporarily impaired at March 31, 2011.

The Company reviews quarterly financial information related to its investments in capital securities as well as other information that is released by each financial institution to determine the continued creditworthiness of the issuer of the securities. The contractual terms of these investments do not permit settling the securities at prices that are less than the amortized costs of the investments; therefore, the Company expects that these investments would not be settled at prices that are less than their amortized costs. The Company continues to monitor these investments and currently estimates that the present value of expected cash flows is not less than the amortized cost of the securities. Because the Company does not have the intent to sell the investments and it is not more likely than

not that the Company will be required to sell them before the anticipated recovery of fair value, which may be at maturity, it did not consider these investments to be other-than-temporarily impaired at March 31, 2011. It is possible that these securities will perform worse than is currently expected, which could lead to adverse changes in cash flows from these securities and potential OTTI losses in the future. Events that may occur in the future at the financial institutions that issued these securities could trigger material unrecoverable declines in fair values for the Company’s investments and therefore could result in future potential OTTI losses. Such events include, but are not limited to, government intervention, deteriorating asset quality and credit metrics, significantly higher levels of default and loan loss provisions, losses in value on the underlying collateral, deteriorating credit enhancement, net operating losses, and further illiquidity in the financial markets.

The unrealized losses on the Company’s private label CMOs were insignificant at March 31, 2011. Current characteristics of each security owned, such as delinquency and foreclosure levels, credit enhancement, and projected losses and coverage, are reviewed periodically by management. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment. Because the Company does not have the intent to sell the investments and it is not more likely than not that the Company will be required to sell the investments before anticipated recovery of fair value, which may be at maturity, the Company did not consider these investments to be other than temporarily impaired at March 31, 2011. It is possible that the underlying loan collateral of these securities will perform worse than is currently expected, which could lead to adverse changes in cash flows from these securities and future OTTI losses. Events that could trigger material unrecoverable declines in fair values, and therefore potential OTTI losses for these securities in the future, include, but are not limited to, deterioration of credit metrics, significantly higher levels of default, loss in value on the underlying collateral, deteriorating credit enhancement, and further illiquidity in the financial markets.

At March 31, 2011, the Company’s equity securities portfolio consisted of perpetual preferred and common stock, and mutual funds. The Company considers a decline in fair value of available-for-sale equity securities to be other than temporary if the Company does not expect to recover the entire amortized cost basis of the security. In analyzing its investments in perpetual preferred stock for OTTI, the Company uses an impairment model that is applied to debt securities, consistent with guidance provided by the SEC, provided that there has been no evidence of deterioration in the creditworthiness of the issuer. The unrealized losses on the Company’s equity securities were primarily caused by market volatility. In addition, perpetual preferred stock was impacted by widening interest rate spreads across market sectors related to the continued illiquidity and uncertainty in the marketplace. The Company evaluated the near-term prospects of a recovery of fair value for each security in the portfolio, together with the severity and duration of impairment to date. Based on this evaluation, and the Company’s ability and intent to hold these investments for a reasonable period of time sufficient to realize a near-term forecasted recovery of fair value, the Company did not consider these investments to be other than temporarily impaired at March 31, 2011. Nonetheless, it is possible that these equity securities will perform worse than is currently expected, which could lead to adverse changes in their fair values or the failure of the securities to fully recover in value as presently forecasted by management, causing the Company to record OTTI losses in future periods. Events that could trigger material declines in the fair values of these securities include, but are not limited to, deterioration in the equity markets; a decline in the quality of the loan portfolios of the issuers in which the Company has invested; and the recording of higher loan loss provisions and net operating losses by such issuers.

The investment securities designated as having a continuous loss position for twelve months or more at March 31, 2011 consisted of 13 capital trust notes and five equity securities. At December 31, 2010, the investment securities designated as having a continuous loss position for twelve months or more consisted of two mortgage-related securities, one corporate debt obligation, eleven capital trust notes, and seven equity securities. At March 31, 2011 and December 31, 2010, the combined market value of these securities represented unrealized losses of $36.4 million and $46.5 million, respectively. At March 31, 2011, the fair value of securities having a continuous loss position for twelve months or more was 23.9% below their collective amortized cost of $152.2 million. At December 31, 2010, the fair value of such securities was 24.0% below their collective amortized cost of $193.5 million.

Note 4: Loans

The following table sets forth the composition of the loan portfolio at March 31, 2011 and December 31, 2010:


	March 31, 2011						December 31, 2010
(dollars in thousands)	Amount			Percent of Non-Covered Loans Held for Investment			Amount			Percent of Non-Covered Loans Held for Investment
Non-Covered Loans Held for Investment:
Mortgage Loans:
Multi-family	$	16,898,020			70.32	%	$	16,807,913			70.88	%
Commercial real estate		5,702,677			23.73			5,439,611			22.94
Acquisition, development, and construction		554,761			2.31			569,537			2.40
One-to-four family		155,813			0.65			170,392			0.72

Total mortgage loans held for investment		23,311,271			97.01		$	22,987,453			96.94

Other Loans:
Commercial and industrial		639,207			2.66			641,663			2.70
Other		79,668			0.33			85,559			0.36

Total other loans held for investment		718,875			2.99			727,222			3.06

Total non-covered loans held for investment	$	24,030,146			100.00	%	$	23,714,675			100.00	%

Net deferred loan origination fees		(5,413	)					(7,181	)
Allowance for losses on non-covered loans		(146,306	)					(158,942	)

Non-covered loans held for investment, net		23,878,427						23,548,552
Covered loans		4,141,082						4,297,869
Allowance for losses on covered loans		(11,903	)					(11,903	)

Total covered loans, net		4,129,179						4,285,966
Loans held for sale		507,461						1,207,077

Total loans, net	$	28,515,067					$	29,041,595

Non-Covered Loans

Non-Covered Loans Held for Investment

The majority of the loans the Company originates for investment are multi-family loans, most of which are collateralized by non-luxury apartment buildings in New York City that feature below-market rents.

The Company also originates the following types of loans for investment: commercial real estate (“CRE”) loans, primarily in New York City, Long Island, and New Jersey; and, to a lesser extent, acquisition, development, and construction (“ADC”) loans and commercial and industrial (“C&I”) loans. ADC loans are primarily originated for multi-family and residential tract projects in New York City and Long Island, while C&I loans are made to small and mid-size businesses in New York City, Long Island, New Jersey, and Arizona, on both a secured and unsecured basis, for working capital, business expansion, and the purchase of machinery and equipment.

Payments on multi-family and CRE loans generally depend on the income produced by the underlying properties which, in turn, depends on their successful operation and management. The ability of the Company’s borrowers to repay these loans may be impacted by adverse conditions in the local real estate market and the local economy. While the Company generally requires that such loans be qualified on the basis of the collateral property’s current cash flows, appraised value, and debt service coverage ratio, among other factors, there can be no assurance that its underwriting policies will protect the Company from credit-related losses or delinquencies.

ADC loans typically involve a higher degree of credit risk than financing on improved, owner-occupied real estate. The risk of loss on an ADC loan is largely dependent upon the accuracy of the initial appraisal of the property’s value upon completion of construction or development; the estimated cost of construction, including interest; and the estimated time to complete and/or sell or lease such property. The Company seeks to minimize these risks by maintaining consistent lending policies and rigorous underwriting standards. However, if the estimate of value proves to be inaccurate, the cost of completion is greater than expected, the length of time to complete

and/or sell or lease the collateral property is greater than anticipated, or if there is a downturn in the local economy or real estate market, the property could have a value upon completion that is insufficient to assure full repayment of the loan. This could have a material adverse effect on the quality of the ADC loan portfolio, and could result in significant losses or delinquencies.

The Company seeks to minimize the risks involved in C&I lending by underwriting such loans on the basis of the cash flows produced by the business; by requiring that such loans be collateralized by various business assets, including inventory, equipment, and accounts receivable, among others; and by requiring personal guarantees. However, the capacity of a borrower to repay a C&I loan is substantially dependent on the degree to which his or her business is successful. In addition, the collateral underlying such loans may depreciate over time, may not be conducive to appraisal, or may fluctuate in value, based upon the results of operations of the business.

The markets served by the Company have been impacted by widespread economic weakness and high unemployment, which have contributed to a rise in charge-offs and non-performing assets. The ability of the Company’s borrowers to repay their loans, and the value of the collateral securing such loans, could be further adversely impacted by continued or more significant economic weakness in its local markets as a result of increased unemployment, declining real estate values, or increased residential and office vacancies. This not only could result in the Company experiencing a further increase in charge-offs and/or non-performing assets, but also could necessitate an increase in the provision for loan losses. These events, if they were to occur, would have an adverse impact on the Company’s results of operations and its capital.

One-to-Four Family Loans Originated for Sale

The Community Bank’s mortgage banking subsidiary, NYCB Mortgage Company, LLC, is one of the 20 largest aggregators of one-to-four family loans for sale to GSEs in the United States. Approximately 1,000 community banks, credit unions, mortgage companies, and mortgage brokers use the subsidiary’s proprietary web-accessible mortgage banking platform to originate one-to-four family loans in all 50 states.

Prior to December 2010, the Company originated one-to-four family loans in its branches and on its web site on a pass-through, or conduit, basis, and would sell the loans to the third-party conduit shortly after they closed. Since December 2010, the Company has been originating one-to-four family loans in its branches and on its web site through several selected clients of its mortgage banking operation, rather than through the single third-party conduit with which it previously worked. The agency-conforming one-to-four family loans produced for its customers are now aggregated with loans produced by its mortgage banking clients throughout the nation, and sold.

The Company also services mortgage loans for various third parties. At March 31, 2011, the unpaid principal balance of serviced loans amounted to $11.2 billion. At December 31, 2010, the unpaid principal balance of serviced loans amounted to $9.5 billion.

Asset Quality

The following table presents information regarding the quality of the Company’s non-covered loans at March 31, 2011:


(in thousands)	30-89 Days Past Due		Non- Accrual		90 Days or More Delinquent and Still Accruing Interest		Total Past Due Loans		Total Current Loans		Total Loans Receivable
Multi-family	$	18,510	$	388,352	$	—	$	406,862	$	16,491,158	$	16,898,020
Commercial real estate		7,824		106,915		—		114,739		5,587,938		5,702,677
Acquisition, development, and construction		14,874		85,626		—		100,500		454,261		554,761
One-to-four family		2,586		16,625		—		19,211		136,602		155,813
Commercial and industrial		4,266		16,933		—		21,199		618,008		639,207
Other		652		2,353		—		3,005		76,663		79,668

Total	$	48,712	$	616,804	$	—	$	665,516	$	23,364,630	$	24,030,146

At December 31, 2010, non-covered loans 30-89 days past due totaled $151.0 million and non-covered non-accrual loans totaled $624.4 million.

In accordance with GAAP, the Company is required to account for certain loan modifications or restructurings as troubled debt restructurings (“TDRs”). In general, a modification or restructuring of a loan constitutes a TDR if the Company grants a concession to a borrower experiencing financial difficulty. Loans modified in TDRs are placed on non-accrual status until the Company determines that future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate performance according to the restructured terms for a period of at least six months.

The following table presents additional information regarding the Company’s TDRs as of March 31, 2011:


(in thousands)	Accruing		Non-Accrual		Total
Multi-family	$	124,149	$	157,878	$	282,027
Commercial real estate		3,885		62,280		66,165
Acquisition, development, and construction		—		17,666		17,666
Commercial and industrial		—		3,917		3,917
One-to-four family		—		1,520		1,520

Total	$	128,034	$	243,261	$	371,295

In an effort to proactively manage delinquent loans, the Company has selectively extended to certain borrowers concessions such as rate reductions, extension of maturity dates, and forbearance agreements. As of March 31, 2011, loans on which concessions were made with respect to rate reductions amounted to $258.8 million; loans on which maturities were extended amounted to $55.8 million; and loans in connection with which forbearance agreements were reached amounted to $56.7 million.

Most of the Company’s 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 Company personnel regarding the likelihood that the concession will result in the maximum recovery for the Company.

The following table summarizes the Company’s non-covered loan portfolio by credit quality indicator at March 31, 2011:


(in thousands)	Multi-Family		Commercial Real Estate		Acquisition, Development, and Construction		One-to-Four Family		Total Mortgage Segment		Commercial and Industrial		Other		Total Other Loan Segment
Credit Quality Indicator:
Pass	$	16,316,748	$	5,511,559	$	448,921	$	143,866	$	22,421,094	$	597,549	$	77,316	$	674,865
Special mention		56,236		63,713		6,650		—		126,599		19,909		—		19,909
Substandard		524,941		126,771		99,190		11,947		762,849		21,747		2,352		24,099
Doubtful		95		634		—		—		729		—		—		—
Loss		—		—		—		—		—		2		—		2

Total	$	16,898,020	$	5,702,677	$	554,761	$	155,813	$	23,311,271	$	639,207	$	79,668	$	718,875

The preceding classifications follow regulatory guidelines and can be generally described as follows: pass loans are of satisfactory quality; special mention loans have a potential weakness or risk that may result in the deterioration of future repayment; substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged (these loans have a well defined weakness and there is a distinct possibility that the Company will sustain some loss); doubtful loans, based on existing circumstances, have weaknesses that make collection or liquidation in full highly questionable and improbable. In addition, residential loans are classified utilizing an inter-regulatory agency methodology that incorporates the extent of delinquency and the loan-to-value ratios. These classifications are the most current available and were generally updated within the last twelve months.

Covered Loans

The following table presents the balance of covered loans acquired in the AmTrust and Desert Hills acquisitions as of March 31, 2011:


(dollars in thousands)	Amount		Percent of Covered Loans
Loan Category:
One-to-four family	$	3,735,103		90.2	%
All other loans		405,979		9.8

Total covered loans	$	4,141,082		100.0	%

The Company refers to the loans acquired in the AmTrust and Desert Hills acquisitions as “covered loans” because the Company will be reimbursed for a substantial portion of any future losses on these loans under the terms of the FDIC loss sharing agreements. Covered loans are accounted for under FASB Accounting Standards Codification (“ASC”) 310-30, and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the lives of the loans. Under ASC 310-30, purchasers are permitted to aggregate acquired loans into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

At March 31, 2011 and December 31, 2010, the outstanding balance of covered loans (representing amounts owed to the Company) totaled $5.0 billion and $5.2 billion, respectively. The carrying values of such loans were $4.1 billion and $4.3 billion, respectively, at March 31, 2011 and December 31, 2010.

At the respective acquisition dates, the Company estimated the fair values of the AmTrust and Desert Hills loan portfolios, which represented the expected cash flows from the portfolios discounted at market-based rates. In estimating such fair value, the Company (a) calculated the contractual amount and timing of undiscounted principal and interest payments (the “undiscounted contractual cash flows”); and (b) estimated the amount and timing of undiscounted expected principal and interest payments (the “undiscounted expected cash flows”). The amount by which the undiscounted expected cash flows exceed the estimated fair value (the “accretable yield”) is accreted into interest income over the lives of the loans. The difference between the undiscounted contractual cash flows and the undiscounted expected cash flows is referred to as the “non-accretable difference.” The non-accretable difference represents an estimate of the credit risk in the loan portfolios at the acquisition date.

The accretable yield is affected by changes in interest rate indices for variable rate loans, changes in prepayment assumptions, and changes in expected principal and interest payments over the estimated lives of the loans. Prepayments affect the estimated life of covered loans and could change the amount of interest income, and possibly principal, expected to be collected. Changes in the expected principal and interest payments over the estimated life are driven by the credit outlook and actions taken with borrowers. The Company periodically evaluates the estimates of cash flows expected to be collected. Expected future cash flows from interest payments are based on the variable rates at the time of the periodic evaluation. Estimates of expected cash flows that are impacted by changes in interest rate indices for variable rate loans and prepayment assumptions are treated as prospective yield adjustments included in interest income.

Changes in the accretable yield for acquired loans were as follows for the three months ended March 31, 2011:


(in thousands)	Accretable Yield
Balance at beginning of period	$	1,356,844
Reclassification from accretable yield		(16,036	)
Accretion		(51,708	)

Balance at end of period	$	1,289,100

In connection with the Desert Hills acquisition, the Company also acquired OREO, all of which is covered under an FDIC loss sharing agreement. Covered OREO was initially recorded at

its estimated fair value on the acquisition date, based on independent appraisals less the estimated selling costs. Any subsequent write-downs due to declines in fair value will be charged to non-interest expense, with a partially offsetting non-interest income item for the loss reimbursement under the FDIC loss sharing agreement. Any recoveries of previous write-downs are credited to non-interest expense with a corresponding charge to non-interest income for the portion of the recovery that is due to the FDIC.

The FDIC loss share receivable represents the present value of the estimated losses on covered loans to be reimbursed by the FDIC. The estimated losses were based on the same cash flow estimates used in determining the fair value of the covered loans. The FDIC loss share receivable will be reduced as losses are recognized on covered loans and loss sharing payments are received from the FDIC. Realized losses in excess of acquisition-date estimates will result in an increase in the FDIC loss share receivable. Conversely, if realized losses are less than acquisition-date estimates, the FDIC loss share receivable will be reduced.

The following table presents information regarding the Company’s covered loans 90 days or more past due at March 31, 2011 and December 31, 2010:


(in thousands)	March 31, 2011		December 31, 2010
Covered Loans 90 Days or More Past Due:
One-to-four family	$	321,145	$	310,929
Other loans		52,945		49,898

Total covered loans 90 days or more past due	$	374,090	$	360,827

The following table presents information regarding the Company’s covered loans that were 30 to 89 days past due at March 31, 2011 and December 31, 2010:


(in thousands)	March 31, 2011		December 31, 2010
Loans 30-89 Days Past Due:
One-to-four family	$	106,409	$	108,691
Other loans		12,385		21,851

Total loans 30-89 days past due	$	118,794	$	130,542

At March 31, 2011, the Company had $118.8 million of covered loans that were 30 to 89 days past due, and covered loans of $374.1 million that were 90 days or more past due but considered to be performing due to the application of the yield accretion method under ASC 310-30. The remaining portion of the Company’s covered loan portfolio totaled $3.6 billion at March 31, 2011 and is considered current. ASC 310-30 allows the Company to aggregate credit-impaired loans acquired in the same fiscal quarter into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Accordingly, loans that may have been classified as non-performing loans by AmTrust or Desert Hills are no longer classified as non-performing because, at the respective dates of acquisition, the Company believed that it would fully collect the new carrying value of these loans. The new carrying value represents the contractual balance, reduced by the portion expected to be uncollectible (referred to as the “non-accretable difference”) and by an accretable yield (discount) that is recognized as interest income. It is important to note that management’s judgment is required in reclassifying loans subject to ASC 310-30 as performing loans, and is dependent on having a reasonable expectation about the timing and amount of the cash flows to be collected, even if the loan is contractually past due.

There was no provision for or recovery on losses on covered loans during the three months ended March 31, 2011. The Company determined that there was no change in the expected underlying cash flows that was attributable to credit deterioration or impairment.

Note 5: Allowance for Loan Losses

The following tables provide additional information regarding the Company’s allowance for loan losses, based upon the method of evaluating loan impairment:

		$26,861,902		$26,861,902		$26,861,902
(in thousands)	Mortgage		Other		Total
Allowance for Loan Losses at March 31, 2011:
Individually evaluated for impairment	$	10,354	$	1,017	$	11,371
Collectively evaluated for impairment		117,963		16,972		134,935
Loans acquired with deteriorated credit quality		11,903		—		11,903

Total	$	140,220	$	17,989	$	158,209


(in thousands)	Mortgage		Other		Total
Allowance for Loan Losses at December 31, 2010:
Individually evaluated for impairment	$	15,877	$	130	$	16,007
Collectively evaluated for impairment		124,957		17,978		142,935
Loans acquired with deteriorated credit quality		11,903		—		11,903

Total	$	152,737	$	18,108	$	170,845

The following tables provide additional information regarding the methods used to evaluate the Company’s loan portfolio for impairment:

		$26,861,902		$26,861,902		$26,861,902
(in thousands)	Mortgage		Other		Total
Loans Receivable at March 31, 2011:
Individually evaluated for impairment	$	659,522	$	10,325	$	669,847
Collectively evaluated for impairment		22,651,749		708,550		23,360,299
Loans acquired with deteriorated credit quality		3,735,103		405,979		4,141,082

Total	$	27,046,374	$	1,124,854	$	28,171,228


(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2010:
Individually evaluated for impairment	$	747,869	$	12,929	$	760,798
Collectively evaluated for impairment		22,239,584		714,293		22,953,877
Loans acquired with deteriorated credit quality		3,874,449		423,420		4,297,869

Total	$	26,861,902	$	1,150,642	$	28,012,544

Non-Covered Loans

The following table summarizes activity in the allowance for losses on non-covered loans for the three months ended March 31, 2011:

		$26,861,902			$26,861,902			$26,861,902
(in thousands)	Mortgage			Other			Total
Beginning balance at December 31, 2010	$	140,834		$	18,108		$	158,942
Charge-offs		(34,091	)		(4,845	)		(38,936	)
Recoveries		287			13			300
Provision for loan losses		21,287			4,713			26,000

Ending balance at March 31, 2011	$	128,317		$	17,989		$	146,306

Non-accrual loans amounted to $616.8 million and $624.4 million, respectively, at March 31, 2011 and December 31, 2010. There were no loans over 90 days past due and still accruing interest at either of these dates.

The following table presents additional information regarding the Company’s impaired loans at or for the three months ended March 31, 2011:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	441,534	$	470,381	$	—	$	444,335	$	2,281
Commercial real estate		63,916		68,510		—		92,002		902
Acquisition, development, and construction		59,936		65,523		—		62,695		—
One-to-four family		3,984		4,080		—		3,798		5
Commercial and industrial		4,318		3,109		—		7,618		—

Total impaired loans with no related allowance	$	573,688	$	611,603	$	—	$	610,448	$	3,188

Impaired loans with an allowance recorded:
Multi-family	$	29,631	$	29,878	$	2,979	$	39,892	$	56
Commercial real estate		27,541		27,948		654		26,621		24
Acquisition, development, and construction		32,980		34,268		6,722		34,167		—
One-to-four family		—		—		—		186		—
Commercial and industrial		6,007		10,118		1,017		4,009		139

Total impaired loans with an allowance recorded	$	96,159	$	102,212	$	11,372	$	104,875	$	219

Total Impaired Loans:
Multi-family	$	471,165	$	500,259	$	2,979	$	484,227	$	2,337
Commercial real estate		91,457		96,458		654		118,623		926
Acquisition, development, and construction		92,916		99,791		6,722		96,862		—
One-to-four family		3,984		4,080		—		3,984		5
Commercial and industrial		10,325		13,227		1,017		11,627		139

Total impaired loans	$	669,847	$	713,815	$	11,372	$	715,323	$	3,407

The following table presents additional information regarding the Company’s impaired loans at December 31, 2010:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
Loans with no related allowance:
Multi-family	$	447,137	$	464,011	$	—
Commercial real estate		120,087		122,486		—
Acquisition, development, and construction		65,453		71,541		—
One-to-four family		3,611		3,707		—
Commercial and industrial		10,919		15,197		—

Total impaired loans with no related allowance	$	647,207	$	676,942	$	—

Loans with an allowance recorded:
Multi-family	$	50,153	$	52,209	$	6,756
Commercial real estate		25,700		25,894		1,555
Acquisition, development, and construction		35,355		37,634		7,553
One-to-four family		373		373		13
Commercial and industrial		2,010		2,010		130

Total impaired loans with an allowance recorded	$	113,591	$	118,120	$	16,007

Total Impaired Loans:
Multi-family	$	497,290	$	516,220	$	6,756
Commercial real estate		145,787		148,380		1,555
Acquisition, development, and construction		100,808		109,175		7,553
One-to-four family		3,984		4,080		13
Commercial and industrial		12,929		17,207		130

Total impaired loans	$	760,798	$	795,062	$	16,007

The interest income recorded on these loans was not materially different from cash-basis interest income.

Covered Loans

Under the loss sharing agreements with the FDIC, covered loans are reported exclusive of the FDIC loss share receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions are, and will continue to be, reviewed for collectability based on the expectations of cash flows from these loans. As a result, if there is a decrease in expected cash flows due to an increase in estimated credit losses compared to the estimates made at the respective acquisition dates, the decrease in the present value of expected cash flows will be recorded as a provision for covered loan losses charged to earnings, and an allowance for covered loan losses will be established. A related credit to non-interest income and an increase in the FDIC loss share receivable will be recognized at the same time, and will be measured based on the loss sharing agreement percentages.

The following table summarizes activity in the allowance for losses on covered loans for the three months ended March 31, 2011 and the twelve months ended December 31, 2010:


(in thousands)	March 31, 2011		December 31, 2010
Balance, beginning of period	$	11,903	$	—
Provision for loan losses		—		11,903

Balance, end of period	$	11,903	$	11,903

Note 6: Borrowed Funds

The following table summarizes the Company’s borrowed funds at March 31, 2011 and December 31, 2010:


(in thousands)	March 31, 2011		December 31, 2010
FHLB advances	$	7,859,163	$	8,375,659
Repurchase agreements		4,125,000		4,125,000
Junior subordinated debentures		426,903		426,992
Senior notes		601,896		601,865
Preferred stock of subsidiaries		6,600		6,600

Total borrowed funds	$	13,019,562	$	13,536,116

At March 31, 2011, the Company had $426.9 million of outstanding junior subordinated deferrable interest debentures (“junior subordinated debentures”) held by nine statutory business trusts (the “Trusts”) that issued guaranteed capital securities. The capital securities qualified as Tier 1 capital of the Company at that date. The Trusts are accounted for as unconsolidated subsidiaries in accordance with GAAP. The proceeds of each issuance were invested in a series of junior subordinated debentures of the Company and the underlying assets of each statutory business trust are the relevant debentures. The Company has fully and unconditionally guaranteed the obligations under each trust’s capital securities to the extent set forth in a guarantee by the Company to each trust. The Trusts’ capital securities are each subject to mandatory redemption, in whole or in part, upon repayment of the debentures at their stated maturity or earlier redemption. However, with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) in July 2010, the qualification of capital securities as Tier 1 capital is expected to be phased out over a three-year period beginning January 1, 2013 and ending January 1, 2016.

The following table provides a summary of the outstanding capital securities issued by each trust and the carrying amounts of the junior subordinated debentures issued by the Company to each trust as of March 31, 2011:


Issuer	Interest Rate of Capital Securities and Debentures⁽¹⁾			Junior Subordinated Debenture Carrying Amount		Capital Securities Amount Outstanding		Date of Original Issue		Stated Maturity		First Optional Redemption Date
				(dollars in thousands)
Haven Capital Trust II		10.250	%	$	23,333	$	22,550		May 26, 1999		June 30, 2029		June 30, 2009⁽²⁾
Queens County Capital Trust I		11.045			10,309		10,000		July 26, 2000		July 19, 2030		July 19, 2010⁽²⁾
Queens Statutory Trust I		10.600			15,464		15,000		September 7, 2000		September 7, 2030		September 7, 2010⁽²⁾
New York Community Capital Trust V		6.000			143,667		137,316		November 4, 2002		November 1, 2051		November 4, 2007⁽³⁾
New York Community Capital Trust X		1.910			123,712		120,000		December 14, 2006		December 15, 2036		December 15, 2011⁽⁴⁾
LIF Statutory Trust I		10.600			7,732		7,500		September 7, 2000		September 7, 2030		September 7, 2010⁽²⁾
PennFed Capital Trust II		10.180			12,472		12,100		March 28, 2001		June 8, 2031		June 8, 2011⁽²⁾
PennFed Capital Trust III		3.560			30,928		30,000		June 2, 2003		June 15, 2033		June 15, 2008⁽⁴⁾
New York Community Capital Trust XI		1.957			59,286		57,500		April 16, 2007		June 30, 2037		June 30, 2012⁽⁴⁾

				$	426,903	$	411,966

(1)	Excludes the effect of acquisition accounting adjustments.

(2)	Callable at a premium from this date forward.

(3)	Callable subject to certain conditions as described in the prospectus filed with the SEC on November 4, 2002.

(4)	Callable from this date forward.

Note 7: Mortgage Servicing Rights

The Company had mortgage servicing rights (“MSRs”) of $133.7 million at March 31, 2011. MSRs are included in “other assets” in the Consolidated Statements of Condition. The Company has two classes of MSRs (residential and securitized) for which it separately manages the economic risk.

Residential MSRs are carried at fair value, with changes in fair value recorded as a component of non-interest income in each period. The Company uses various derivative instruments to mitigate the income statement-effect of changes in fair value due to changes in valuation inputs and assumptions regarding its residential MSRs. MSRs do not trade in an active open market with readily observable prices. Accordingly, the Company utilizes a valuation model that calculates the present value of estimated future cash flows. The model incorporates various assumptions, including estimates of prepayment speeds, discount rates, refinance rates, servicing costs, and ancillary income. The Company reassesses and periodically adjusts the underlying inputs and assumptions in the model to reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset.

The value of MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining interest rates, the value of MSRs declines due to increasing prepayments attributable to increased mortgage refinancing activity. Conversely, during periods of rising interest rates, the value of MSRs generally increases due to reduced mortgage refinancing activity.

Securitized MSRs are carried at the lower of the initial carrying value, adjusted for amortization or fair value, and are amortized in proportion to, and over the period of, estimated net servicing income. Such MSRs are periodically evaluated for impairment based on the difference between the carrying amount and current fair value. If it is determined that impairment exists, the resultant loss is charged against earnings.

The following table sets forth the changes in residential and securitized MSRs for the three months ended March 31, 2011 and the year ended December 31, 2010:


	For the Three Months Ended March 31, 2011					For the Year Ended December 31, 2010
(in thousands)	Residential		Securitized			Residential			Securitized
Carrying value, beginning of year	$	106,186	$	1,192		$	8,617		$	1,965
Additions		26,118		—			100,767			—
Change in fair value		344		—			(3,198	)		—
Amortization		—		(161	)		—			(773	)

Carrying value, end of period	$	132,648	$	1,031		$	106,186		$	1,192

Note 8. Pension and Other Post-Retirement Benefits

The following table sets forth certain disclosures for the Company’s pension and post-retirement plans for the periods indicated:


	For the Three Months Ended March 31,
	2011						2010
(in thousands)	Pension Benefits			Post-Retirement Benefits			Pension Benefits			Post-Retirement Benefits
Components of net periodic (credit) expense:
Interest cost	$	1,491		$	180		$	1,515		$	198
Service cost		—			1			—			1
Expected return on plan assets		(3,133	)		—			(2,866	)		—
Unrecognized past service liability		—			(62	)		49			(62	)
Amortization of unrecognized loss		1,190			103			1,286			78

Net periodic (credit) expense	$	(452	)	$	222		$	(16	)	$	215

As discussed in the notes to the consolidated financial statements presented in the Company’s 2010 Annual Report on Form 10-K, the Company expects to contribute $1.4 million to its post-retirement plan to pay premiums and claims for the fiscal year ending December 31, 2011. The Company does not expect to contribute to its pension plan in 2011.

Note 9: Stock-Based Compensation

At March 31, 2011, the Company had 2,995,358 shares available for grant as options, restricted stock, or other forms of related rights under the New York Community Bancorp, Inc. 2006 Stock Incentive Plan (the “2006 Stock Incentive Plan”), which was approved by the Company’s shareholders at its Annual Meeting on June 7, 2006. During the three months ended March 31, 2011, 1,643,000 shares of restricted stock were granted under the 2006 Stock Incentive Plan, with average fair values of $18.40 per share on the respective grant dates. The shares of restricted stock that were granted vest over a period of five years. Compensation cost related to the restricted stock grants is recognized on a straight-line basis over the vesting period, and totaled $3.6 million and $2.9 million for the three months ended March 31, 2011 and 2010, respectively.

A summary of activity with regard to restricted stock awards in the three months ended March 31, 2011 is presented in the following table:


	For the Three Months Ended March 31, 2011
	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of year		2,636,700		$	14.17
Granted		1,643,000			18.40
Vested		(236,500	)		15.39
Cancelled		(22,800	)		16.45

Unvested at end of period		4,020,400			15.81

As of March 31, 2011, unrecognized compensation cost relating to unvested restricted stock totaled $58.8 million. This amount will be recognized over a remaining weighted average period of 3.8 years.

In addition, the Company had nine stock option plans at March 31, 2011: the 1993 and 1997 New York Community Bancorp, Inc. Stock Option Plans; the 1993 Haven Bancorp, Inc. Stock Option Plan; the 1998 Richmond County Financial Corp. Stock Compensation Plan; the Roslyn Bancorp, Inc. 1997 and 2001 Stock-based Incentive Plans; the 1998 Long Island Financial Corp. Stock Option Plan; and the 2003 and 2004 Synergy Financial Group Stock Option Plans (all nine plans collectively referred to as the “Stock Option Plans”). All stock options granted under the Stock Option Plans expire ten years from the date of grant.

The Company uses the modified prospective approach to recognize compensation costs related to share-based payments at fair value on the date of grant, and recognizes such costs in the financial statements over the vesting period during which the employee provides service in exchange for the award. As there were no unvested options at any time during the three months ended March 31, 2011 or the year ended December 31, 2010, the Company did not record any compensation and benefits expense relating to stock options during those periods.

Currently, the Company issues new shares of common stock to satisfy the exercise of options. The Company may also use common stock held in Treasury to satisfy the exercise of options. In such event, the difference between the average cost of Treasury shares and the exercise price is recorded as an adjustment to retained earnings or paid-in capital on the date of exercise. At March 31, 2011, there were 12,120,663 stock options outstanding. The number of shares available for future issuance under the Stock Option Plans was 10,400 at March 31, 2011.

The status of the Stock Option Plans at March 31, 2011 and changes that occurred during the three months ended at that date are summarized below:


	For the Three Months Ended March 31, 2011
	Number of Stock Options			Weighted Average Exercise Price
Stock options outstanding, beginning of year		12,443,676		$	15.75
Exercised		(259,013	)		12.23
Forfeited		(64,000	)		14.95

Stock options outstanding, end of period		12,120,663			15.83
Options exercisable, end of period		12,120,663			15.83

The intrinsic value of stock options outstanding and exercisable at March 31, 2011 was $22.8 million. The intrinsic values of options exercised during the three months ended March 31, 2011 and 2010 were $1.6 million and $597,000, respectively.

Note 10: Fair Value Measurements

The FASB has issued guidance that, among other things, defined fair value, established a consistent framework for measuring fair value, and expanded disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. The standard clarified that fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is thus a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 – Inputs to the valuation methodology are significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants use in pricing an asset or liability.

A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables present assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2011 and December 31, 2010, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at March 31, 2011 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustments		Total Fair Value
Mortgage-Related Securities Available for Sale:
GSE certificates	$	—	$	170,425	$	—	$	—	$	170,425
GSE CMOs		—		193,597		—		—		193,597
Private label CMOs		—		41,032		—		—		41,032

Total mortgage-related securities	$	—	$	405,054	$	—	$	—	$	405,054

Other Securities Available for Sale:
GSE debentures	$	—	$	614	$	—	$	—	$	614
Corporate bonds		—		—		—		—		—
U. S. Treasury obligations		—		—		—		—		—
State, county, and municipal		—		1,316		—		—		1,316
Capital trust notes		—		16,869		21,233		—		38,102
Preferred stock		—		300		6,314		—		6,614
Common stock		39,079		—		—		—		39,079

Total other securities	$	39,079	$	19,099	$	27,547	$	—	$	85,725

Total securities available for sale	$	39,079	$	424,153	$	27,547	$	—	$	490,779

Other Assets:
Loans held for sale	$	—	$	507,351	$	—	$	—	$	507,351
Mortgage servicing rights		—		—		132,648		—		132,648
Derivative assets		1,319		1,831		1,524		—		4,674
Liabilities:
Derivative liabilities	$	307	$	3,538	$	—	$	—	$	3,845


	Fair Value Measurements at December 31, 2010 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting Adjustments		Total Fair Value
Mortgage-Related Securities Available for Sale:
GSE certificates	$	—		$	211,515		$	—	$	—	$	211,515
GSE CMOs		—			222,303			—		—		222,303
Private label CMOs		—			51,362			—		—		51,362

Total mortgage-related securities	$	—		$	485,180		$	—	$	—	$	485,180

Other Securities Available for Sale:
GSE debentures	$	—		$	620		$	—	$	—	$	620
Corporate bonds		—			4,250			—		—		4,250
U. S. Treasury obligations		58,553			—			—		—		58,553
State, county, and municipal		—			1,334			—		—		1,334
Capital trust notes		—			16,134			25,870		—		42,004
Preferred stock		—			14,468			6,271		—		20,739
Common stock		40,276			—			—		—		40,276

Total other securities	$	98,829		$	36,806		$	32,141	$	—	$	167,776

Total securities available for sale	$	98,829		$	521,986		$	32,141	$	—	$	652,956

Other Assets:
Loans held for sale	$	—		$	1,203,844		$	—	$	—	$	1,203,844
Mortgage servicing rights		—			—			106,186		—		106,186
Derivative assets		152			14,067			53		—		14,272
Liabilities:
Derivative liabilities	$	(210	)	$	(3,908	)	$	—	$	—	$	(4,118	)

The Company reviews and updates the fair value hierarchy classifications for its assets on a quarterly basis. Changes from one quarter to the next that are related to the observability of inputs to a fair value measurement may result in a reclassification from one hierarchy level to another.

A description of the methods and significant assumptions utilized in estimating the fair value of available-for-sale securities follows:

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and exchange-traded securities.

If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, models incorporate transaction details such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy and primarily include such instruments as mortgage-related securities and corporate debt.

The Company carries loans held for sale originated by the Residential Mortgage Banking segment at fair value, in accordance with applicable accounting guidance (the “Fair Value Option”). The fair value of held-for-sale loans is primarily based on quoted market prices for securities backed by similar types of loans. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage loans held for sale. Loans held for sale are classified within Level 2 of the valuation hierarchy.

In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. In valuing collateralized debt obligations (“CDOs”), which

include pooled trust preferred securities and income notes, and certain single-issue capital trust notes, each of which are classified within Level 3, the determination of fair value may require benchmarking to similar instruments or analyzing default and recovery rates. Therefore, CDOs and certain single-issue capital trust notes are valued using a model based on the specific collateral composition and cash flow structure of the securities. Key inputs to the model consist of market spread data for each credit rating, collateral type, and other relevant contractual features. In instances where quoted price information is available, that price is considered when arriving at the security’s fair value. Where there is limited activity or less transparency around the inputs to the valuation of preferred stock, the valuation is based on a discounted cash flow model.

MSRs do not trade in an active open market with readily observable prices. Accordingly, the Company utilizes a valuation model that calculates the present value of estimated future cash flows. The model incorporates various assumptions, including estimates of prepayment speeds, discount rates, refinance rates, servicing costs, and ancillary income. The Company reassesses and periodically adjusts the underlying inputs and assumptions in the model to reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset. MSR fair value measurements use significant unobservable inputs and, accordingly, are classified as Level 3.

Exchange-traded derivatives valued using quoted prices are classified within Level 1 of the valuation hierarchy. The majority of the Company’s derivative positions are valued using internally developed models that use as their basis readily observable market parameters. These are parameters that are actively quoted and can be validated by external sources, including industry pricing services. Where the types of derivative products have been in existence for some time, the Company uses models that are widely accepted in the financial services industry. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, volatility, and the credit quality of the counterparty. Further, many of these models do not contain a high level of subjectivity, as the methodologies used in the models do not require significant judgment, and inputs to the models are readily observable from actively quoted markets, as is the case for “plain vanilla” interest rate swaps and option contracts. Such instruments are generally classified within Level 2 of the valuation hierarchy. Derivatives that are valued based on models with significant unobservable market parameters, and that are normally traded less actively, have trade activity that is one-way, and/or are traded in less-developed markets, are classified within Level 3 of the valuation hierarchy. For interest rate lock commitments (“IRLCs”) for residential mortgage loans that the Company intends to sell, the fair value is based on internally developed models. The key model inputs primarily include the sum of the value of the forward commitment based on the loans’ expected settlement dates and the projected value of the MSRs, loan level price adjustment factors, and historical IRLC fall-out factors. Such derivatives are classified as Level 3.

While the Company believes its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair values of certain financial instruments could result in different estimates of fair values at the reporting date.

The Company had no transfers in or out of Level 1 or 2 during the three months ended March 31, 2011.

Changes in Level 3 Fair Value Measurements

The tables below include a roll-forward of the balance sheet amounts for the three months ended March 31, 2011 and 2010 (including the change in fair value) for financial instruments classified in Level 3 of the valuation hierarchy:


			Total Realized/Unrealized Gains/(Losses) Recorded in						Purchases, Issuances, and Settlements, Gross						Change in Unrealized Gains and (Losses) Related to Instruments Held at March 31, 2011
(in thousands)	Fair Value January 1, 2011		Income			Comprehensive Income					Transfers into Level 3		Fair Value at Mar. 31, 2011
Available-for-sale capital securities and preferred stock	$	32,141	$	—		$	(4,594	)	$	—	$	—	$	27,547	$	(4,594	)
Mortgage servicing rights		106,186		739			—			25,723		—		132,648		739
Derivatives, net		53		1,471			—			—		—		1,524		1,471

			Total Realized/Unrealized Gains/(Losses) Recorded in						Purchases, Issuances, and Settlements, Gross						Change in Unrealized Gains and (Losses) Related to Instruments Held at March 31, 2010
(in thousands)	Fair Value January 1, 2010		Income			Comprehensive Income					Transfers into Level 3		Fair Value at Mar. 31, 2010
Available-for-sale capital securities and preferred stock	$	31,232	$	(398	)	$	2,635		$	—	$	—	$	33,469	$	2,237
Mortgage servicing rights		8,617		41			—			9,353		—		18,011		41
Derivatives, net		32		1,564			—			—		—		1,596		1,564

Assets Measured at Fair Value on a Non-Recurring Basis

Certain assets are measured at fair value on a non-recurring basis. Such instruments are subject to fair value adjustments under certain circumstances (e.g., when there is evidence of impairment). The following tables present assets and liabilities that were measured at fair value on a non-recurring basis as of March 31, 2011 and December 31, 2010, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at March 31, 2011 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Loans held for sale	$	—	$	110	$	—	$	110
Certain impaired loans		—		—		222,028		222,028

	$	—	$	110	$	222,028	$	222,138


	Fair Value Measurements at December 31, 2010 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Loans held for sale	$	—	$	3,233	$	—	$	3,233
Certain impaired loans		—		—		237,975		237,975

	$	—	$	3,233	$	237,975	$	241,208

The fair values of collateral-dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate market data.

Other Fair Value Disclosures

Certain FASB guidance requires the disclosure of fair value information about the Company’s on- and off-balance-sheet financial instruments. Quoted market prices, when available, are used as the measure of fair value. In cases where quoted market prices are not available, fair values are based on present-value estimates or other valuation techniques. Such fair values are significantly affected by the assumptions used, the timing of future cash flows, and the discount rate.

Because assumptions are inherently subjective in nature, estimated fair values cannot be substantiated by comparison to independent market quotes. Furthermore, in many cases, the estimated fair values provided would not necessarily be realized in an immediate sale or settlement of such instruments.

The following table summarizes the carrying values and estimated fair values of the Company’s financial instruments at March 31, 2011 and December 31, 2010:


	March 31, 2011				December 31, 2010
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	2,351,729	$	2,351,729	$	1,927,542	$	1,927,542
Securities held to maturity		4,304,218		4,326,541		4,135,935		4,157,322
Securities available for sale		490,779		490,779		652,956		652,956
FHLB stock		422,731		422,731		446,014		446,014
Loans, net		28,515,067		28,833,655		29,041,595		29,454,199
Mortgage servicing rights		133,679		133,679		107,378		107,378
Derivatives		4,674		4,674		14,272		14,272
Financial Liabilities:
Deposits	$	22,198,147	$	22,229,496	$	21,809,051	$	21,846,984
Borrowed funds		13,019,562		14,143,657		13,536,116		14,801,131
Derivatives		3,845		3,845		4,118		4,118

The methods and significant assumptions used to estimate fair values for the Company’s financial instruments are as follows:

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and federal funds sold. The estimated fair values of cash and cash equivalents are assumed to equal their carrying values, as these financial instruments are either due on demand or have short-term maturities.

Securities Held to Maturity and Available for Sale

If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, pricing models also incorporate transaction details such as maturity and cash flow assumptions.

Federal Home Loan Bank Stock

The fair value of FHLB stock approximates the carrying amount, which is at cost.

Loans

The loan portfolio is segregated into various components for valuation purposes in order to group loans based on their significant financial characteristics, such as loan type (mortgages or other) and payment status (performing or non-performing). The estimated fair values of mortgage and other loans are computed by discounting the anticipated cash flows from the respective portfolios. The discount rates reflect current market rates for loans with similar terms to borrowers of similar credit quality. The estimated fair values of non-performing mortgage and other loans are based on recent collateral appraisals.

The methods used to estimate the fair value of loans are extremely sensitive to the assumptions and estimates used. While management has attempted to use assumptions and estimates that best reflect the Company’s loan portfolio and current market conditions, a greater degree of subjectivity is inherent in these values than in those determined in active markets. Accordingly, readers are cautioned in using this information for purposes of evaluating the financial condition and/or value of the Company in and of itself or in comparison with any other company.

In addition, these methods of estimating fair value do not incorporate the exit-price concept of fair value described in ASC Topic 820-10, “Fair Value Measurements and Disclosures.”

Loans Held for Sale

Fair value is based on independent quoted market prices, where available, and adjusted as necessary for such items as servicing value, guaranty fee premiums, and credit spread adjustments.

Mortgage Servicing Rights

MSRs do not trade in an active market with readily observable prices. Accordingly, the Company utilizes a valuation model that calculates the present value of estimated future cash flows. The model incorporates various assumptions, including estimates of prepayment speeds, discount rates, refinance rates, servicing costs, and ancillary income. The Company reassesses and periodically adjusts the underlying inputs and assumptions in the model to reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset.

Derivative Financial Instruments

For exchange-traded futures and exchange-traded options, the fair value is based on observable quoted market prices in an active market. For forward commitments to buy and sell loans and mortgage-backed securities, the fair value is based on observable market prices for similar securities in an active market. For IRLCs for one-to-four family mortgage loans that the Company intends to sell, the fair value is based on internally developed models. The key model inputs primarily include the sum of the value of the forward commitment based on the loans’ expected

settlement dates, the value of MSRs arrived at by an independent MSR broker, government agency price adjustment factors, and historical IRLC fall-out factors.

Deposits

The fair values of deposit liabilities with no stated maturity (i.e., NOW and money market accounts, savings accounts, and non-interest-bearing accounts) are equal to the carrying amounts payable on demand. The fair values of certificates of deposit (“CDs”) represent contractual cash flows, discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. These estimated fair values do not include the intangible value of core deposit relationships, which comprise a significant portion of the Company’s deposit base.

Borrowed Funds

The estimated fair value of borrowed funds is based either on bid quotations received from securities dealers or the discounted value of contractual cash flows with interest rates currently in effect for borrowed funds with similar maturities and structures.

Off-Balance-Sheet Financial Instruments

The fair values of commitments to extend credit and unadvanced lines of credit are estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the creditworthiness of the potential borrowers. The estimated fair values of such off-balance-sheet financial instruments were insignificant at March 31, 2011 and December 31, 2010.

Note 11: Derivative Financial Instruments