Buy Pitch: New York Community Bancorp, Inc.

(NYB)
HFAC Financials Comp Group Stock Pitch Fall 2008

Company Summary
Regional bank based in the New York suburbs

and New York City Offers fairly traditional banking products A large portion of its loans are for multifamily homes, including those under rent control Latest price: $12.50

Thesis
We are pitching a buy for New York Community

Bank common stock. Like many financial institutions, it has been hit hard by the financial market meltdown and credit crisis. However, its favorable location and customer base coupled with limited exposure to the subprime mortgage market leave it in good shape and a strong position to return to profitability as the financial crisis blows over.

Porters Five Forces

Supplier Power: Depositors (around 50% of inputs) have negligible power Other lenders to banks (50% again) have a lot of power (esp.

because of credit crisis)

Buyer Power: Product is loans to individuals and small businesses, so buyer

power is negligible Credit crisis fewer available loans less refinancing higher switching costs
Rivalry High since deregulation of banking industry, but failures/mergers

due to credit crisis and reregulation should diminish this threat

Barriers to entry Enormous due to regulations & capital requirements Threat of Substitutes Manufacturers creative financing (e.g. Best Buy, GMAC), but this

doesnt apply to mortgages and small business loans Mortgage Lenders like Countrywide Financial are on their way out

SWOT Analysis: Strengths

Located in the metro New York Region which has largely

withstood the housing crisis Many of the loans that NYB hold are based on rent-stabilized buildings which in New Yorks market will always have renters. Only 6-7 times leveraged. Nonperforming assets were only .19% of total assets --FinancialContent.com October 2008. Provides traditional banking products which will always be needed, even in turbulent market conditions Have not had to sell any assets to the US Treasury because of the financial crisis. 7.70% Dividend yield (5.00% five-year average) Forward P/E of 10 versus trailing P/E of 44

SWOT Analysis: Weaknesses

A bank in these uncertain economic times.

Not geographically diverse.

Volatile Stock.

SWOT Analysis: Opportunities

As banks consolidate in this financial market NYB can

either buy up smaller banks at a a discount or take advantage of fewer competitors. Investors fleeing the stock market are apt to put money in FDIC insured banks and buy products such as CDs from banks like NYB. Growth in the lending sector/banking sector after the housing crisis dissipates. Deflated stock price due to the financial crisis. 52 week low of $10.31 and high of $22.00, currently trading at $12.50 on the lower end of the 52 week spreadlikely

SWOT Analysis: Threats

The housing crisis could reach NY resulting in losses

for NYB as a result of having to foreclose on homes. A prolonged recession and financial sector weakness. Decrease in realty prices (NYB has a $200+ million portfolio of real estate) The credit markets freeze up completely. How will the tax change affect them? What is their portfolio composition? Will they participate in the bailout?

Risk Compensation: CAPM

Beta Alpha Annualized Alpha Total Percentage Return for NYB
Total Percentage Return for Market Standard Deviation for NYB Standard Deviation for Market

1.0532 0.0012 0.352857071 4.31%

-34.94% 0.027014908 0.017203318

Discounted Cash Flow Model

Assumptions Yearly Growth Expenses -10% to 0% in next few years, approaching 14% into year 2018 47% for first five years, decreasing to 45% over following five 32% for first five years, increasing to 34% over following five 31% this year, rising to 40% under Obama administration, dropping to 33% in 2013 10% 13.60 12.50 6% 25.26 3.06% 62.62

Net Interest Expense Tax Rate

Discount Rate DCF Modeled Price Current Price

Buy Pitch: New York Community Bancorp, Inc. (NYB)

HFAC Financials Comp Group Stock Pitch Fall 2008