10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-K

þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2008

or

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from           to

Commission File number 2-99779

National Consumer Cooperative Bank

(Exact name of registrant as specified in its charter)

United States of America (12 U.S.C. Section 3001 et. seq.)	52-1157795
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

601 Pennsylvania Avenue N.W., North Building, Suite 750, Washington, D.C. 20004
(Address of principal executive offices)  (Zip Code)

Registrant’s telephone number, including area code (202) 349-7444

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:  o Yes     þ No

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements of the past 90 days. Yes  þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

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. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act):  o Yes     þ No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the place at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: the registrant’s voting and non-voting common equity is not traded on any market.

Indicate the number of shares outstanding of each of the registrant’s classes of common
stock at December 31, 2008: Class B 1,726,718 and Class C 251,117. DOCUMENTS
INCORPORATED BY REFERENCE: None

INDEX

PART I
	Item 1	Business	1
	Item 1A	Risk Factors	7
	Item 2	Properties	17
	Item 3	Legal Proceedings	18
	Item 4	Submission of Matters to a Vote of Security Holders	18
PART II
	Item 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
	Item 6	Selected Financial Data	20
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	49
	Item 8	Financial Statements and Supplementary Data	52
	Item 9	Changes in and Disagreements with Accountants, on Accounting and Financial Disclosure	108
	Item 9A	Controls and Procedures	108
	Item 9B	Other Information	109
PART III
	Item 10	Directors, Executive Officers and Corporate Governance	110
	Item 11	Executive Compensation	114
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	132
	Item 13	Certain Relationships and Related Transactions and Director Independence	133
	Item 14	Principal Accountant Fees and Services	133
PART IV
	Item 15	Exhibits, Financial Statement Schedules	135

This Form 10-K contains certain “forward-looking statements” which may be identified by the use of words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to NCB’s financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates and most other statements that are not historical in nature. These factors include, but are not limited to, general and local economic conditions, changes in interest rates, other-than-temporary impairment evaluations, deposit flows, demand for mortgage, commercial and other loans, real estate values, performance of collateral underlying certain securities, competition, changes in accounting principles, policies, or guidelines, changes in legislation or regulation, and other economic, competitive, governmental, regulatory, and technological factors affecting NCB’s operations, pricing products and services.

PART 1

ITEM 1. BUSINESS

GENERAL

The National Consumer Cooperative Bank, which does business as NCB, is a financial institution organized under the laws of the United States. NCB (sometimes referred to herein as “Bank”) primarily provides financial services to eligible cooperative enterprises or enterprises controlled by eligible cooperatives throughout the United States. A cooperative enterprise is an organization which is owned by its members and which is engaged in producing or furnishing goods, services, or facilities for the benefit of its members or voting stockholders who are the ultimate consumers or primary producers of such goods, services, or facilities. NCB is structured as a cooperative institution whose voting stock can only be owned by its borrowers or those eligible to become its borrowers (or organizations controlled by such entities). NCB operates directly and through its wholly owned subsidiaries, NCB Financial Corporation, a holding company, and NCB, FSB, a federally chartered thrift institution. NCB, FSB provides a broad range of financial services to cooperative and non-cooperative customers. This Form 10-K provides information regarding the consolidated business of NCB and its subsidiaries and, where appropriate and as indicated, provides information specific to NCB itself, NCB Financial Corporation or NCB, FSB. In general, unless otherwise noted, references in this report to NCB or the Bank refer to NCB and its subsidiaries collectively.

In the legislation chartering NCB (the National Consumer Cooperative Bank Act or the “Act”), Congress stated its finding that cooperatives have proven to be an effective means of minimizing the impact of inflation and economic hardship on members/owners by narrowing producer-to-consumer margins and price spreads, broadening ownership and control of economic organizations to a larger base of consumers, raising the quality of goods and services available in the marketplace and strengthening the nation’s economy as a whole. To further the development of cooperative businesses, Congress specifically directed NCB (1) to encourage the development of new and existing cooperatives eligible for its assistance by providing specialized credit and technical assistance; (2) to maintain broad-based control of NCB by its voting shareholders; (3) to encourage a broad-based ownership, control and active participation by members in eligible cooperatives; (4) to assist in improving the quality and availability of goods and services to consumers; and (5) to encourage ownership of its equity securities by cooperatives and others.

The Act also directed NCB to form NCB Capital Impact, which is a non-profit organization without capital stock organized under the laws of the District of Columbia to perform only functions provided in the Act. NCB Capital Impact provides loans and technical support to cooperative enterprises. Consistent with the Act, NCB may make deductible, voluntary contributions to NCB Capital Impact.

NCB fulfills its statutory obligations in two fashions. First, NCB, directly and through its wholly-owned indirect subsidiary, NCB, FSB, makes loans and offers other financing services, which afford cooperative businesses substantially the same financing opportunities currently available for traditional enterprises. Second, NCB provides financial and other assistance to NCB Capital Impact.

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The Act was passed on August 20, 1978, and NCB commenced lending operations on March 21, 1980. In 1981, Congress amended the Act (the “Act Amendments”) to convert the Class A Preferred stock of NCB previously held by the United States to Class A notes as of December 31, 1981 (the “Final Government Equity Redemption Date”). NCB maintains its executive offices at 601 Pennsylvania Avenue, N.W., Suite 750, Washington, D.C. 20004. The telephone number of its executive offices is (202) 349-7444. NCB’s operations center is located in Arlington, Virginia. NCB also maintains regional offices in Anchorage, Alaska, New York, New York, and Oakland, California. NCB, FSB maintains its principal office in Hillsboro, Ohio and non-retail branches in New York, New York and Washington, D.C.

NCB, directly and through NCB, FSB, originates various types of loans. The following are the primary types of such loans.

• Consumer Loans	Consumer Loans, including auto loans, include unsecured or secured loans to individuals primarily for personal use. If secured, Consumer Loans are secured by collateral other than real estate.
• Commercial Loans	Commercial Loans include unsecured or secured loans to businesses (including small business “SBA Loans” and loans to retailer members of wholesaler cooperatives), franchises, community associations, cooperative housing corporations (unsecured only) and other entities to refinance debt or fund capital improvements. Commercial Loans to businesses and franchises are primarily secured by personal property, rents or other cash flows. Commercial Loans to community associations (“Community Association Loans”) are secured by an assignment of condominium or homeowner assessments, accounts and rents and the association’s rights to collect them.
	Commercial loans that are used for purposes other than the development and/or ownership of non-residential real property but are secured by non-residential real property are categorized as Real Estate — Commercial Loans.
• Real Estate — Residential Loans	Residential Real Estate Loans include Single-family Residential Loans, Share Loans, Cooperative Loans and Multifamily Loans.
	Single-family Residential Loans are loans to individuals or investors to purchase, refinance, construct or improve residential property consisting of one to four dwellings and are secured by the underlying real estate.
	Share Loans are loans to individuals or investors living in a cooperative housing corporation (created for the sole purpose of owning and managing a residential apartment property for the benefit of its resident shareholders) to finance the purchase or refinance a share within the cooperative. The share or stock certificate serves as collateral for the loan.
	Cooperative Loans are loans to cooperative housing corporations to refinance existing debt or fund capital improvements to the common areas of the entire building. Cooperative Loans are secured by the first or second mortgage in the land and buildings and by an assignment of all leases, receivables, accounts and personal property of the cooperative housing corporation.
	Multifamily Loans are loans to businesses or investors to purchase, refinance, construct or improve residential property consisting of five

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	or more dwellings (e.g. apartment housing, student housing, senior housing) and are secured by the underlying real estate.
• Real Estate — Commercial Loans	Commercial Real Estate Loans are loans to businesses (including small business “SBA Loans”) or investors to purchase, refinance, construct or improve non-residential property (e.g., retail centers, office buildings, industrial properties or self storage warehouse) and are secured by the underlying real estate.
• Leases	NCB has lease programs that it offers to customers.

LOAN REQUIREMENTS, RESTRICTIONS AND POLICIES

Eligibility Requirements

Cooperatives, cooperative-like organizations, and legally chartered entities primarily owned and controlled by cooperatives are eligible to borrow from NCB on a patronage basis under Section 108 of the Act if they are engaged in producing or furnishing goods, services or facilities primarily for the benefit of their members or voting stockholders who are the ultimate consumers of such goods, services or facilities. In addition, to be eligible to borrow from NCB under Section 108 of the Act the borrower must, among other things, (1) be controlled by its members or voting stockholders on a democratic basis; (2) agree not to pay dividends on voting stock or membership capital in excess of such percentage per annum as may be approved by NCB; (3) provide that its net savings shall be allocated or distributed to all members or patrons, in proportion to their patronage, or retain such savings for the actual or potential expansion of its services or the reduction of its charges to the patrons; and (4) make membership available on a voluntary basis, without any social, political, racial or religious discrimination and without any discrimination on the basis of age, sex, or marital status to all persons who can make use of its services and are willing to accept the responsibilities of membership. NCB may also purchase obligations issued by members of eligible cooperatives. NCB maintains member finance programs for members of distribution and purchasing cooperatives primarily in the food, franchise and hardware industries. In addition, organizations applying for loans must comply with other technical and financial requirements that are customary for similar loans from financial institutions.

Under the Act, NCB must make annual patronage dividends to its patrons, which are those cooperatives from whose loans or other business NCB derived interest or other income during the year with respect to which a patronage dividend is declared. NCB allocates its patronage dividends among its patrons generally in proportion to the amount of income derived during the year from each patron. NCB stockholders, as such, are not automatically entitled to patronage dividends. They are entitled to patronage dividends only in the years when they have patronized NCB and the amount of their patronage does not depend on the amount of their stockholding. Under NCB’s patronage dividend policy, patronage dividends may be paid only from taxable income and only in the form of cash, Class B or Class C stock, or allocated surplus.

NCB, both directly and acting through NCB, FSB, also makes certain non-patronage-based loans under the general lending authority and incidental powers provisions of Section 102 of the Act to entities and individuals other than eligible cooperatives, when NCB determines such loans to be incidental to and beneficial to lending programs designed for eligible cooperatives.

Lending Authorities

The Board of Directors establishes its policies governing the lending operations in compliance with the Act and management carries out the policies. Management in turn adopts and implements guidelines and procedures consistent with stated Board directives. The Board of Directors and management regularly review the lending policies and guidelines in order to make needed changes and amendments.

Management may approve individual credit exposures of up to 75% of the single borrower-lending limit, which is equal to 15% of NCB’s capital (using the definition of capital for national banks as set forth by the Office of the Comptroller of the Currency) without prior approval of the Board. The President may delegate authorities up to this limit to such committees and individual officers, as he may deem appropriate.

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All loan approvals require at least two manager’s signatures and the Bank’s senior management approves credit commitments that exceed an individual lending authority.

Cooperatives of Primary Producers

As provided by Section 105 of the Act the total dollar value of loans to cooperatives that produce, market and furnish goods, services and facilities on behalf of their members as primary producers (typically agricultural cooperatives) may not exceed 10% of the gross assets of NCB.

Interest Rates

NCB seeks to price its loans to yield a reasonable risk adjusted return on its portfolio in order to build and maintain its financial viability and to encourage the development of new and existing cooperatives. In addition, to ensure that NCB will have access to additional sources of capital in order to sustain its growth, NCB seeks to maintain a portfolio that is competitively priced and of sound quality.

Interest Rates for Real Estate Loans

NCB takes the following factors, among others, into consideration in pricing its Real Estate Loans: internal risk adjusted return objectives, prevailing market conditions, loan-to-value ratios, lien position, borrower payment history, reserves, occupancy level and cash flow. NCB fixes rates based on a basis point spread over U.S. Treasury securities with yields adjusted to constant maturity of one, three, five, seven or ten years. Interest rates may be fixed at the time of commitment for a period generally not exceeding 30 days. For Cooperative, Multifamily and Commercial Real Estate Loans, the rate lock commitments can extend 12 months or longer. Such loans that do rate-lock generally close absent unusual circumstances.

Interest Rates on Commercial Loans

NCB originates Commercial Loans at fixed and variable interest rates. Loan pricing is based on prevailing market conditions, income and portfolio diversification objectives and the overall assessment of risk of the transaction. Typically, Commercial Loan repayment schedules are structured by NCB with flat monthly principal reduction plus interest on the outstanding balance.

Fees

NCB assesses fees to cover its costs of consideration and handling of loan transactions, and to compensate NCB for setting aside funds for future draws under a commitment. The fees paid to outside vendors such as appraisers, environmental consultants and legal counsel retained by NCB for loan transactions are typically charged to the borrower.

Underwriting

When evaluating credit requests, NCB seeks to determine, among others, whether a prospective borrower has and will have sound management, sufficient cash flow to service debt, assets in excess of liabilities and a continuing demand for its products, services or use of its facilities, so that the requested loan will be repaid in accordance with its terms.

NCB evaluates repayment ability based upon an analysis of a borrower’s historical cash flow and conservative projections of future cash flows from operations. This analysis focuses on determining the predictability of future cash flows as a primary source of repayment.

Security

Loans made by NCB are generally secured by specific collateral. If collateral security is required, the value of the collateral must be reasonably sufficient to protect NCB from loss, in the event that the primary sources of repayment of financing from the normal operation of the cooperative, or refinancing, prove to be inadequate for debt repayment. Collateral security alone is not a sufficient basis for NCB to extend credit. Unsecured loans

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normally are made only to borrowers with strong financial conditions, operating results and demonstrated repayment ability.

Loans Benefiting Low-Income Persons

Under the Act, the Board of Directors must use its best efforts to insure that at the end of each fiscal year at least 35% of NCB’s outstanding loans are to (1) cooperatives whose members are predominantly low-income persons, as defined by NCB, and (2) other cooperatives that propose to undertake to provide specialized goods, services, or facilities to serve the needs of predominantly low-income persons. NCB defines a “low-income person,” for these purposes, as an individual whose family’s income does not exceed 80% of the median family income, adjusted for family size for the area where the cooperative is located, as determined by the Department of Housing and Urban Development. During 2008, NCB and NCB Capital Impact either directly funded or arranged the funding of over $553 million to borrowers meeting the low-income definition.

Loans to Cooperatives for Residential Purposes

Section 108 (a) of the Act prohibits NCB itself from making “any loan to a cooperative for the purpose of financing the construction, ownership, acquisition, or improvement of any structure used primarily for residential purposes if, after giving effect to such loan, the aggregate amount of all loans outstanding for such purpose would exceed 30 per centum of the gross assets of the Bank.”

To date, the 30% limitation on loans to housing cooperatives for such purposes has not restricted NCB’s ability to provide financial services to housing cooperatives. NCB has been able to maintain its position in the cooperative real estate market without increased real estate portfolio exposure by selling or securitizing real estate loans to secondary market purchasers of such loans. The preponderance of NCB real estate origination volume in recent years has been predicated upon sale to secondary market purchasers. Capital markets disruptions in 2007 and 2008 resulted in a significant reduction in the profitability of loans sold. There can be no assurance that NCB’s future lending to housing cooperatives for residential purposes will not be impaired by the statutory limit. As of December 31, 2008, approximately 5.9% of the total assets consisted of loans that are subject to the limitation.

Community Reinvestment Act

Under the Community Reinvestment Act (“CRA”) and related regulations, depository institutions such as NCB, FSB have an affirmative obligation to assist in meeting the credit needs of their market areas, including low and moderate income areas, consistent with safe and sound banking practice. Depository institutions are periodically examined for compliance with CRA and are periodically assigned ratings in this regard. Banking regulators consider a depository institution’s CRA rating when reviewing applications to establish new branches, undertake new lines of business, and/or acquire part or all of another depository institution. An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiary.

OPERATIONS OF SUBSIDIARIES

NCB attempts to fulfill its statutory mission by providing financing opportunities to cooperatives directly and through its subsidiaries.

NCB Financial Corporation (“NCBFC”) is a Delaware chartered, wholly-owned, unitary savings and loan holding company subsidiary of NCB whose sole subsidiary is NCB, FSB.

NCB, FSB is a federally chartered, federally insured savings bank located in Hillsboro, Ohio, with retail branches in Ohio and non-retail branches in New York and Washington, D.C.

COMPETITION

Congress created and capitalized NCB because it found that existing financial institutions were not making adequate financial services available to cooperative, not-for-profit business enterprises. However, NCB experiences considerable competition in lending to the most credit-worthy cooperative enterprises.

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REGULATION

NCB is organized under the laws of the United States. The Farm Credit Administration examines NCB periodically, but that agency has no regulatory or enforcement powers over NCB. In addition, the Government Accountability Office is authorized to audit NCB. Reports of such examinations and audits are to be forwarded to Congress, which has the sole authority to amend or revoke NCB’s charter. The Office of Thrift Supervision (“OTS”) regulates NCB, FSB. As a savings and loan holding company, NCB itself is subject to limited regulatory and enforcement powers of and examination by the OTS pursuant to 12 U.S.C. § 1467a.

In connection with the insurance of deposit accounts, NCB, FSB, a federally insured savings bank, is required to maintain minimum amounts of regulatory capital. If NCB, FSB fails to meet its minimum required capital, the appropriate regulatory authorities may take such actions, as they deem appropriate, to protect the Deposit Insurance Fund (DIF), NCB, FSB, and its depositors and investors. Such actions may include various operating restrictions, limitations on liability growth, limitations on deposit account interest rates, and investment restrictions. NCB, FSB is also subject to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”).

NCB and NCB, FSB are subject to a variety of federal, state and local laws, including laws relating to anti-money laundering and privacy.

The Company adopted the provisions of FIN 48 on January 1, 2007. FIN 48 applies to all tax positions accounted for in accordance with FASB Statement 109. The term tax position as used in FIN 48 refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. A tax position can result in a permanent reduction of income taxes payable, a deferral of income taxes otherwise currently payable to future years, or a change in the expected realizability of deferred tax assets.

The term tax position also encompasses, but is not limited to:

•   A decision not to file a tax return

•   An allocation or a shift of income between jurisdictions

•   The characterization of income or a decision to exclude reporting taxable income in a tax return

•   A decision to classify a transaction, entity, or other position in a tax return as tax exempt.

TAXES

The Act provides that NCB shall be treated as a cooperative within the meaning of Section 1381(a)(2) of the Internal Revenue Code. As such and pursuant to the provisions of Subchapter T of the Internal Revenue Code and the Act, NCB, in determining its taxable income for federal income tax purposes, is allowed a deduction for an amount equal to any patronage dividends in the form of cash, Class B or Class C stock, or allocated surplus that are distributed or set aside by NCB during the applicable tax period. To date, NCB has followed the policy of distributing or setting aside such patronage dividends during the applicable tax period, which has reduced NCB’s federal income tax liability.

NCB has determined that under the Internal Revenue Code as amended by the Act, all income generated by NCB and its subsidiaries, with the exception of certain income of NCB, FSB, qualifies as patronage income under the Internal Revenue Code, with the consequence that NCB is able to issue tax deductible patronage dividends with respect to all such income.

Section 109 of the Act, as amended, provides that NCB itself, including its franchise, capital, reserves, surplus, mortgages or other security holdings and income, is exempt from taxation by any state, county, municipality or local taxing authority, except that any real property held by NCB is subject to any state, county, municipal or local taxation to the same extent according to its value as other real property is taxed.

NCB’s subsidiaries are subject to state income and franchise taxes.

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TEMPORARY LIQUIDITY GUARANTEE PROGRAM

On November 21, 2008, the Board of Directors of the Federal Deposit Insurance Corporation (“FDIC”) adopted a final rule relating to the Temporary Liquidity Guarantee Program (“TLGP”). The TLGP was announced by the FDIC on October 14, 2008, as an initiative to counter the system-wide crisis in the nation’s financial sector. Under the TLGP, the FDIC will (i) guarantee, through the earlier of maturity or December 31, 2012, certain newly issued senior unsecured debt issued by participating institutions on or after October 14, 2008 and before October 31, 2009 and (ii) provide full FDIC deposit insurance coverage for noninterest bearing transaction deposit accounts, Negotiable Order of Withdrawal (“NOW”) accounts paying less than 0.5% interest per annum and Interest on Lawyers Trust Accounts (“IOLTA”) accounts held at participating FDIC-insured institutions through December 31, 2009. Coverage under the TLGP was available for the first 30 days without charge. The fee assessment for coverage of senior unsecured debt ranges from 50 basis points to 150 basis points per annum, depending on the issue date and maturity of the debt. The fee assessment for deposit insurance coverage is 10 basis points per quarter on amounts in covered accounts exceeding $250,000. NCB has elected to participate in both guarantee programs.

TROUBLED ASSET RELIEF PROGRAM

On October 3, 2008, the Troubled Asset Relief Program (“TARP”) was signed into law. TARP gave the United States Treasury Department (“Treasury”) authority to deploy up to $750 billion into the financial system with an objective of improving liquidity in capital markets. On October 24, 2008, Treasury announced plans to direct $250 billion of this authority into preferred stock investments in banks. Principal terms of this preferred stock program include payment of preferred cumulative dividends on the Treasury’s stock, restrictions on the payment of common stock dividends, restrictions on stock repurchase programs, and restrictions on executive compensation. NCB is currently evaluating the potential benefits and costs associated with participating in the preferred stock program under the TARP.

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “ARRA”) enacted by the U.S. Congress. The ARRA, among other things, imposed certain new executive compensation and corporate expenditure limits on all current and future recipients of funds under the TARP, as long as any obligation arising from the financial assistance provided to the recipient under the TARP remains outstanding, excluding any period during which the U.S. Treasury holds only warrants to purchase common stock of a TARP participation.

FURTHER INFORMATION

We make available free of charge on our internet website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after those reports have been electronically filed or submitted to the Securities and Exchange Commission (the “SEC”). These filings can be accessed on our website at www.ncb.coop. These filings are also accessible on the SEC’s website at www.sec.gov. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

ITEM 1A. RISK FACTORS

Like other financial companies, NCB is subject to a number of risks, many of which are outside of NCB’s direct control, though efforts are made to manage those risks while optimizing returns. Among the risks assumed are: (1) credit risk, which is the risk that loan and lease customers or other counterparties will be unable to perform their contractual obligations, (2) market risk, which is the risk that changes in market rates and prices will adversely affect our financial condition or results of operation, (3) liquidity risk, which is the risk that NCB will have insufficient cash or access to cash to meet its funding and operating needs, and (4) operational risk, which is the risk of loss resulting from inadequate or failed internal processes, people and systems, or external events.

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In addition to the other information included in this report, readers should carefully consider that the following important factors, among others, could materially impact our business, future results of operations, and future cash flows.

The preparation of NCB’s financial statements in conformity with the U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Further, the current volatility in the market and economic conditions may require the use of additional estimates and certain estimates may be subject to a greater degree of uncertainty.

(1) Credit Risk

Defaults in the repayment of loans may negatively impact NCB’s business.

A borrower’s default on its obligations under one or more of NCB’s loans may result in lost principal and interest income and increased operating expenses as a result of the allocation of management time and resources to the foreclosure and collection or restructuring of the loan.

In certain situations, where collection efforts are unsuccessful or acceptable workout arrangements cannot be reached, NCB may have to write-off the loan in whole or in part. In such situations, NCB may acquire real estate or other assets, if any, which secure the loan through foreclosure or other similar available remedies. In such cases, the amount owed under the defaulted loan often exceeds the value of the assets acquired.

NCB’s decisions regarding credit risk could be inaccurate and its allowance for loan losses may be inadequate, which could materially and adversely affect NCB’s business, financial condition, results of operations and future prospects. Additional loan losses will likely occur in the future and may occur at a rate greater than NCB has experienced to date.

Management periodically makes a determination of an allowance for loan losses based on available information, including the quality of NCB’s loan portfolio, certain economic conditions, the value of the underlying collateral and the level of non-accruing loans. Provisions to this allowance result in an expense for the period. The length and severity of the recession may affect NCB’s borrowers and; therefore management may determine that further increases in the allowance for loan losses are necessary. Bank regulatory agencies periodically review certain allowances for loan losses and the values they attribute to real estate acquired through foreclosure or other similar remedies. Such regulatory agencies may require NCB to adjust its determination of the value for these items. These adjustments could negatively impact NCB’s results of operations or financial condition.

In addition, NCB is engaged in making non-mortgage loans to commercial customers as well as making real estate loans and loans to individuals. Non-mortgage loans are generally considered not as safe as those loans secured by real estate.

NCB originates non-mortgage loans to small to medium-sized commercial customers primarily in the hardware, grocery, franchise, Employee Stock Ownership Plan (“ESOP”) and Alaska and Native American markets. These loans may be secured by furniture, fixtures, and equipment, inventory, and other collateral generally not considered as secure as real estate in the event of liquidation. Should market conditions or other factors impair the cashflow and operations of our small to medium-sized commercial customers, NCB could face an increase in delinquencies, increased provision requirements and/or losses that may adversely impact financial performance.

In determining the size of the allowance, NCB relies on an analysis of its loan portfolio, experience and an evaluation of general economic conditions. If NCB’s assumptions prove to be incorrect, the current allowance may not be sufficient. With the volatility of the economic decline and unprecedented nature of the events in the credit and real estate markets during the latter part of 2008, NCB made significant adjustments to its allowance in 2008 and additional adjustments may continue to be necessary if the local or national real estate markets and economies continue to deteriorate. Material additions to the allowance would materially decrease net income. In addition, federal regulators periodically evaluate the adequacy of NCB’s allowance and may require an increase in the provision for loan and lease losses or recognition of further loan charge-offs based on judgments different than those

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of NCB’s management. Any further increase in NCB’s allowance or loan charge-offs could have a material adverse effect on NCB’s results of operations.

NCB may be called upon to fund letters of credit related to municipal bonds.

Some of NCB’s outstanding letters of credit have been issued in connection with certain variable rate municipal bonds. Under these types of letters of credit, NCB can be called upon to fund the amount of tendered municipal bonds in the event the holder seeks repayment and the bond cannot be sold to another purchaser. In the third quarter of 2008, NCB provided funding for seven of these letters of credit in the amount of $4.8 million. NCB cannot guarantee that it will not have to provide further funding for these types of letters of credit which could impact its financial condition.

(2)  Market risk

Continued adverse developments in the financial markets and deterioration in global economic conditions could have a material adverse effect on NCB’s results of operations and financial condition.

Worldwide economic conditions deteriorated significantly during 2008. The highly volatile debt and equity markets, lack of liquidity, widening credit spreads and the collapse of several financial institutions have resulted in significant realized and unrealized losses in NCB’s investment portfolio. Also, this market turmoil and tightening of credit has led to increased commercial and consumer deficiencies, lack of customer confidence, increased market volatility and widespread reduction in general business activity. The resulting economic pressure on consumers and businesses and the lack of confidence in the financial markets may adversely affect NCB’s business, financial condition and results of operations.

Further deterioration or a continuation of recent market conditions may lead to a decline in the value of the assets that NCB holds or in the creditworthiness of its borrowers. In response to recent market disruptions, legislators and financial regulators implemented a number of mechanisms designed to add stability to the financial markets, including the provision of direct and indirect assistance to financial institutions, assistance by the banking authorities in arranging acquisitions of weakened banks and broker dealers, implementation of programs by the United States Federal Reserve to provide liquidity to the commercial paper markets and other matters. The overall effects of legislative and regulatory efforts on the financial markets are uncertain, and they may not have the intended stabilization effects. While these measures have been implemented to support and stabilize the markets, these actions may have unintended consequences on the financial system or NCB’s business, including reducing competition or increasing the general level of uncertainty in the markets. Should these or other legislative or regulatory initiatives fail to stabilize and add liquidity to the financial markets, NCB’s business, financial condition, results of operations and prospects could be adversely affected.

NCB does not expect that the difficult conditions in the financial markets are likely to improve in the near future. A continuation or worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on NCB and others in the financial industry. In particular, NCB may face the following risks in connection with these events:

•   Potential increase in regulation of NCB’s industry. Compliance with such regulation may increase NCB’s costs and limit its ability to pursue business opportunities.

•   The process NCB uses to estimate losses inherent in its credit exposure requires difficult, subjective and complex judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of NCB’s borrowers to repay their loans. The level of uncertainty concerning economic conditions may adversely affect the accuracy of these estimates which may, in turn, impact the reliability of the process.

•   NCB may be required to pay significantly higher premiums to the FDIC because market developments have significantly depleted the insurance fund of the FDIC and reduced the ratio of reserves to insured deposits.

•   There is no assurance that recently enacted legislation will stabilize the U.S. financial system and the impact on NCB of this legislation cannot be reasonably predicted at this time.

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NCB relies on business relationships with other financial institutions to provide funding and to hedge against interest rate risk. In particular, NCB itself is party to a revolving credit facility with a syndicate of other banks. If the credit market remains disrupted, NCB may have difficulty refinancing such facility or further amending that facility if necessary in the future. Pricing under that facility may also rise if the credit markets remain frozen. In addition, NCB, FSB relies on funding from the Federal Home Loan Bank of Cincinnati. Should that institution cease to be able to provide funding as a result of continuing market disruptions, it would negatively impact NCB, FSB’s operations.

NCB may not be able to attract and retain banking customers at current levels.

Competition in the banking industry coupled with our relatively small size may limit the ability of NCB to attract and retain real estate, commercial and retail banking customers.

In particular, NCB’s competitors include several major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns. Additionally, banks and other financial institutions with larger capitalization and financial intermediaries have larger lending limits and are thereby able to serve the credit and investment needs of larger customers. Areas of competition include interest rates for loans and deposits, efforts to obtain deposits and range and quality of services provided. NCB also faces competition from out-of-state financial intermediaries which have opened low-end production offices or which solicit deposits in their respective market areas.

Because NCB maintains a smaller staff and has fewer financial and other resources than the larger institutions with which it competes, it may be limited in its ability to attract customers. In addition, some of NCB’s current commercial banking customers may seek alternative banking sources as they develop needs for credit facilities larger than NCB can accommodate.

If NCB is unable to attract and retain banking customers, it may be unable to continue its loan growth and its results of operations and financial condition may otherwise be negatively impacted.

NCB, FSB’s deposit customers may pursue alternatives to deposits at its bank or seek higher yielding deposits causing NCB, FSB to incur increased funding costs.

Checking and savings account balances and other forms of deposits can decrease when deposit customers perceive alternative investments, such as the stock market or other non-depository investments as providing superior expected returns or seek to spread their deposits over several banks to maximize FDIC insurance coverage. Furthermore, technology and other changes have made it more convenient for bank customers to transfer funds into alternative investments including products offered by other financial institutions or non-bank service providers. Increases in short-term interest rates could increase transfers of deposits to higher yielding deposits. Efforts and initiatives NCB, FSB undertakes to retain and increase deposits, including deposit pricing, can increase its costs. When bank customers move money out of bank deposits in favor of alternative investments or into higher yielding deposits, or spread their accounts over several banks, NCB can lose a relatively inexpensive source of funds, thus increasing funding costs.

NCB’s lines of business may be less diversified than its competitors.

NCB derives a significant amount of its earnings from blanket and share loan financing to housing cooperatives and then from members thereof. To the extent that cooperatives become a less favorable form of housing, become economically disadvantaged, or are negatively impacted by changing market conditions, NCB may be unable to attract and/or retain such banking customers and thereby may be unable to maintain or grow its business in this area and its results of operations and financial condition may be negatively impacted.

Financial services companies depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions, NCB may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. NCB may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on

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inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse impact on NCB’s business and, in turn, its financial condition and results of operations.

The failure of other financial institutions could adversely affect NCB.

NCB’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships. NCB has exposure to different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, investment companies and other institutional clients. In certain of these transactions NCB is required to post collateral to secure the obligations to the counterparties. In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, NCB may experience delays in recovering the assets posted as collateral or may incur a loss to the extent that the counterparty was holding collateral in excess of the obligation to such counterparty. There is no assurance that any such losses would not materially and adversely affect NCB’s financial condition and results of operations.

In addition, many of these transactions expose NCB to credit risk in the event of a default by its counterparty or client. Also, the credit risk may be exacerbated when the collateral held by NCB cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to the NCB. There is no assurance that any such losses would not materially and adversely affect NCB’s financial condition and results of operations.

Weakness in the real estate market, particularly in New York City, could negatively impact NCB’s banking business.

The real estate portfolio contains a concentration of loans in the New York City area; however, the majority of loans are to housing cooperatives with low loan-to-value ratios compared to other Commercial Real Estate Loans.

With a loan concentration in the New York City area, a decline in local economic conditions could adversely affect the values of our real estate collateral and our operating performance. Consequently, a decline in local economic conditions in the New York City area may have a greater effect on NCB’s earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse.

In addition to considering the financial strength and cash flow characteristics of borrowers, NCB often secures loans with real estate collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If NCB is required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values in the New York City area, its earnings and capital could be adversely affected.

A significant amount of NCB’s Residential Real Estate Loans are secured by property in the New York City area. Consequently, NCB’s ability to continue to originate these loans may be impaired by adverse changes in local and regional economic conditions in the New York City area real estate markets, or by acts of nature, including earthquakes, hurricanes, flooding and terrorist acts. Due to the concentration of real estate collateral, these events could have a material adverse impact on the ability of the borrowers of NCB to repay their loans and affect the value of the collateral securing these loans.

NCB’s business is subject to interest rate risk and fluctuations in interest rates may adversely affect its earnings.

Many of NCB’s assets and liabilities are monetary in nature and subject to risk from changes in interest rates. Like most financial institutions, NCB’s earnings and profitability depend significantly on net interest income, which is the difference between interest income on interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings. NCB expects that it will periodically experience “gaps” in the interest rate sensitivities of its assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. If market interest rates should move contrary to NCB’s position, this “gap” will work against NCB and its earnings may be negatively affected. In light of NCB’s current volume and mix of interest-earning assets and

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interest-bearing liabilities, its interest rate margin could be expected to decrease during periods of rising interest rates and, conversely, to increase during periods of falling interest rates. NCB is unable to predict or control fluctuations of market interest rates, which are affected by many factors including the following:

•   Inflation;

•   Recession;

•   Changes in unemployment;

•   The money supply;

•   Disorder and instability in financial markets; and

•   Governmental actions

NCB’s asset/liability management strategy may not be able to control its risk from changes in market interest rates and it may not be able to prevent changes in interest rates from having a material adverse effect on NCB’s results of operations and financial condition. See “Quantitative and Qualitative Disclosures About Market Risk” included in Part II, Item 7A of this Form 10-K for a further discussion of NCB’s sensitivity to interest rate changes.

Increases in interest rates may reduce demand for mortgage and other loans.

Higher interest rates increase the cost of mortgage and other loans to consumers and businesses and may reduce demand for such loans, which may negatively impact the NCB’s profits by reducing the amount of loan origination income.

NCB engages in derivative transactions, which expose it to credit and market risk.

NCB is exposed to credit and market risk as a result of its use of derivative instruments. NCB maintains a risk management strategy that includes the use of derivative instruments to mitigate the risk to earnings caused by interest rate volatility. Use of derivative instruments is a component of NCB’s overall risk management strategy in accordance with a formal policy that is monitored by management.

The derivative instruments utilized include interest rate swaps, futures contracts and forward loan sales commitments. Interest rate swaps involve the exchange of fixed and variable rate interest payments between two parties based upon a notional principal amount and maturity date. Interest rate futures generally involve exchange-traded contracts to buy or sell U.S. Treasury bonds or notes in the future at specified prices. Forward loan sales commitments lock in the prices at which loans will be sold to investors. In the future NCB may also utilize other derivative instruments to mitigate other recognized risks.

NCB uses interest rate swaps, futures contracts and forward loan sales commitments to hedge loan commitments prior to actually funding a loan. During the commitment period, the loan commitments and related interest rate swaps, futures contracts and forward loan sales commitments are accounted for as derivatives and therefore recorded at fair value through the gain on sale. Once a commitment becomes a loan, the derivative associated with the commitment is designated as a hedge of the loan and is generally kept in place until such loan is committed for sale.

If the fair value of the derivative contract is positive, the counterparty owes NCB and a repayment risk exists. If the fair value of the derivative contract is negative, NCB owes the counterparty, so there is no repayment risk. NCB minimizes repayment risk by entering into transactions with counterparties that NCB believes to be financially stable that are specified by policy and reviewed periodically by management. When NCB has multiple derivative transactions with a single counterparty, the net mark-to-market exposure represents the netting of positive and negative exposures with that counterparty. The net mark-to-market exposure with a counterparty is a measure of credit risk when there is a legally enforceable master netting agreement between NCB and the counterparty. NCB uses master netting agreements with the majority of its counterparties.

NCB’s exposure to market risk is related to the impact that changes in interest rates has on the fair value of a financial instrument or expected cash flows. NCB manages the market risk associated with the interest rate hedge

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contracts by establishing formal policy limits concerning the types and degree of risk that may be undertaken. Compliance with this policy is monitored by management and reported to the Board of Directors.

Unexpected losses in future reporting periods may require NCB to adjust the valuation allowance against its deferred tax assets.

NCB evaluates the deferred tax assets for recoverability based on all available evidence. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between the future projected operating performance and the actual results. NCB is required to establish a valuation allowance for deferred tax assets if it determines, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the more-likely-than-not criterion, NCB evaluates all positive and negative available evidence as of the end of each reporting period. Future adjustments, either increases or decreases, to the deferred tax asset valuation allowance will be determined based upon changes in the expected realization of the net deferred tax assets. The realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income in either the carry back or carry forward periods under the tax law. Due to significant estimates utilized in establishing the valuation allowance and the potential for changes in facts and circumstances, it is reasonably possible that NCB will be required to record adjustments to the valuation allowance in future reporting periods. Such a charge could have a material adverse effect on our results of operations, financial condition and capital position.

NCB may be subject to a continuation of lower gains recorded from the sale of loans.

Another important source of income for NCB is gains recorded from the sale of Multifamily, Cooperative and Commercial Real Estate Loans. The gains are influenced by many variables, including changes in interest rates and the demand of investors to purchase securities backed by loans. During 2008, NCB has been negatively impacted by market changes, specifically, market conditions in the commercial mortgage-backed securities (“CMBS”) marketplace. The origination and sale of loans into the CMBS market had been a strong source of income for NCB. If current market conditions continue, NCB’s results of operations and financial condition may be negatively impacted.

NCB is subject to other-than-temporary impairment risk.

NCB recognizes an impairment charge when the declines in the fair value of equity and debt securities below their cost basis are judged to be other-than-temporary. Significant judgment is used to identify events or circumstances that would likely have a significant adverse effect on the future use of the investment. NCB considers various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, forecasted recovery, the financial condition and near-term prospects of the issuer, and NCB’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Information about unrealized gains and losses is subject to changing conditions. The values of securities with unrealized gains and losses will fluctuate, as will the values of securities that NCB identifies as potentially distressed.

Impairment is considered temporary when the fair value of the instrument has been adversely impacted by market conditions, such as changes in interest rates or investor spreads, and NCB has the intent and ability to hold the instrument until such time as it expects to have received the contractual cash flows and recovered its investment. However, NCB’s intent to hold certain of these securities may change in future periods as a result of facts and circumstances impacting a specific security. If NCB’s intent to hold a security with an unrealized loss changes, and it does not expect the security to fully recover prior to the expected time of disposition, NCB will write down the security to its fair value in the period that its intent to hold the security changes.

(3)  Liquidity risk

Adverse credit market conditions may affect NCB’s ability to meet liquidity needs.

The credit markets have recently been experiencing extreme volatility and disruption, and in the second half of 2008, the volatility and disruptions reached unprecedented levels. In some cases, the markets have exerted downward pressures on availability of liquidity and credit capacity for certain issuers.

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NCB needs liquidity to, among other things, pay its operating expenses and interest on its debt, maintain its lending activities and replace certain maturing liabilities. Without sufficient liquidity, NCB may be forced to curtail its operations. The availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit and NCB’s credit ratings and credit capacity. NCB financial condition and cash flows could be materially affected by continued disruptions in financial markets.

NCB itself relies on several sources of funding, including a revolving credit facility with a syndicate of banks. NCB, FSB has separate sources of funding unrelated to those of NCB itself. As a result of the deteriorating economy, NCB was able to secure amendments to certain financial covenants in its revolving credit facility and prudential agreements. Those amendments require NCB to pledge all of its assets as security, increased the interest rate NCB must pay, and reduced NCB’s capacity under the revolving credit facility from a total of $350 million to a total of $225 million, with further reductions scheduled through the December 2010 maturity. Continued adverse conditions in the credit markets may make it difficult for NCB to refinance or further amend the agreement should it be required to do so in the future. There is also no assurance that NCB will continue to meet certain convents required under the amended agreements. In addition, NCB’s access to funds through the agreements is dependent on the ability of its senior creditors to meet their funding commitments. If NCB cannot obtain adequate sources of credit on favorable terms, or at all, its business, operating results and financial condition would be adversely affected. Adverse market conditions may also impact liquidity at NCB, FSB, which relies principally on deposits, borrowings from the Federal Home Loan Bank of Cincinnati, loan sales to Fannie Mae and other institutions.

Prepayments of loans may negatively impact NCB’s business.

Customers with adjustable rate loans generally may prepay the principal amount of their outstanding loans at any time. The speed at which such prepayments occur, as well as the size of such prepayments, are within such customers’ discretion. If customers prepay the principal amount of their loans, and NCB is unable to lend those funds to other borrowers or invest the funds at the same or higher interest rates, interest income will be reduced. A significant reduction in interest income could have a negative impact on results of operations and financial condition.

Inability of customers to refinance loans may negatively impact NCB’s liquidity.

NCB, on a stand alone basis, has projected future funding needs based on certain assumptions regarding existing customer’s paying loans as they mature. In the event that the significant credit market disruption and the general economic downturn continues, such customers may be unable to find alternative sources of financing to payoff their loans to NCB. This could adversely affect NCB’s ability to fund new loans and meet its other operational costs.

NCB’s cost of funds for banking operations may increase as a result of general economic conditions, interest rates and competitive pressures.

NCB’s cost of funds for banking operations may increase as a result of general economic conditions, interest rates and competitive pressures. NCB has traditionally obtained funds through the capital markets but more recently it has relied on borrowings by NCB itself under a revolving credit facility with a syndicate of banks, on borrowings by NCB, FSB from the Federal Home Loan Bank of Cincinnati, and on customer deposits at NCB, FSB. As a general matter, deposits are a cheaper source of funds than borrowings, because interest rates paid for deposits are typically less than interest rates charged for borrowings. Historically and in comparison to commercial banking averages, NCB, FSB has had a higher percentage of its time deposits in denominations of $100,000 or more, in part because NCB, FSB has been positioned to serve business customers rather than retail customers, and business customers generally have higher levels of deposits. Within the banking industry, the amounts of such deposits are generally considered more likely to fluctuate than deposits of smaller denominations. If, as a result of general economic conditions, market interest rates, competitive pressures or otherwise, the value of deposits at NCB, FSB decreases relative to its overall banking operations, NCB may have to rely more heavily on borrowings as a source of funds in the future. As a result of credit market disruptions and the need to renegotiate certain financial covenants, the cost of borrowing by NCB itself under the revolving credit facility has increased, and there is no assurance that further pricing increases will not occur. The cost of borrowings by NCB, FSB from the Federal Home Loan Bank may also increase, resulting in a higher cost of funds for NCB, FSB as well.

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(4)  Operational risk

NCB is subject to extensive regulation and its business is highly regulated which could limit or restrict activities and impose financial requirements or limitations on the conduct of business.

NCB operates in a highly regulated environment and is subject to supervision and examination by federal and state regulatory agencies. The Farm Credit Administration examines NCB periodically, but that agency has no regulatory or enforcement powers over NCB. In addition, the Government Accountability Office is authorized to audit NCB. Reports of such examinations and audits are to be forwarded to Congress, which has the sole authority to amend or revoke NCB’s charter. NCB, FSB as a federal savings association is subject to regulation and supervision by the OTS.

Federal and state laws and regulations govern numerous matters including changes in the ownership or control of federal savings associations and of their holding companies, maintenance of adequate capital and the financial condition of a financial institution, permissible types, amounts and terms of extension of credit and investments, permissible non-banking activities, the level of reserves against deposits and restrictions on dividend payments. The OTS possesses cease and desist powers to prevent or remedy unsafe or unsound practices or violations of law by bank and savings associations subject to its regulation. These and other restrictions limit the manner in which we may conduct business and obtain financing.

Furthermore, NCB’s business is affected not only by general economic conditions, but also by the monetary policies of the Federal Reserve. Changes in monetary or legislative policies may affect the interest rates NCB must offer to attract deposits and the interest rates it must charge on loans, as well as the manner in which NCB offers deposits and makes loans. These monetary policies have had, and are expected to continue to have, significant effects on the operating results of depository institutions generally.

Furthermore, the recent disruptions in the financial markets and significant government involvement in financial institutions generally may lead to additional regulatory requirements. In that regard, on March 4, 2009, the Treasury and other federal agencies announced additional details relating to the Financial Stability Plan, which contains two significant programs to assist homeowners stay in their homes — the Home Affordable Refinance Program and the Home Affordable Modification Program. NCB is evaluating these programs as details emerge. In the event that NCB either elects to participate or is required to participate, the programs, and future governmental actions relating to financial institutions, may adversely affect NCB’s operations and profitability.

NCB is subject to regulatory capital adequacy guidelines, and if it fails to meet these guidelines, its financial condition would be adversely affected.

Under regulatory capital adequacy guidelines and other regulatory requirements, NCB’s subsidiary, NCB, FSB, must meet guidelines that include quantitative measures of assets, liabilities, and certain off-balance sheet items, subject to qualitative judgments by regulators about components, risk weightings and other factors. If NCB fails to meet these minimum capital guidelines and other regulatory requirements, its financial condition would be materially and adversely affected. In the future, the regulatory accords on international banking institutions to be reached by the Basel Committee on Banking Supervision may require NCB to meet additional capital adequacy measures. NCB cannot predict the final form of, or the effects of, the regulatory accords. NCB’s failure to maintain the status of “well-capitalized” under its regulatory framework could affect the confidence of its customers and banking relationships, thus compromising its competitive position. In addition, failure to maintain the status of “well-capitalized” under NCB’s regulatory framework, or “well-managed” under regulatory examination procedures, could compromise NCB’s status as a bank holding company and related eligibility for a streamlined review process for acquisition proposals. NCB’s failure to maintain the status of “well-capitalized” under its regulatory framework could also impact NCB, FSB’s ability to expand its retail branching network and its ability to comply with its servicing agreements.

The financial services industry is undergoing rapid technological changes. If NCB is unable to adequately invest in and implement new technology-driven products and services, it may not be able to compete effectively, may be subject to interruption and instability or the cost to provide products and services may increase significantly.

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The financial services industry is undergoing rapid technological changes with frequent introduction of new technology-driven products and services. In addition to providing better customer service, the effective use of technology increases efficiency and enables financial service institutions to reduce costs. NCB’s future success will depend, in part, upon our ability to address the customer needs by using technology to provide products and services to enhance customer convenience, as well as to create additional operational efficiencies. Many of NCB’s competitors have substantially greater resources to invest in technological improvements. NCB may not be able to effectively implement new technology-driven products and services, which could reduce NCB’s ability to effectively compete and, in turn, have a material adverse effect on its financial condition and results of operations.

NCB relies on technology to conduct much of its activity. NCB’s technological operations are vulnerable to disruptions from human error, natural disasters, power loss, computer viruses, spam attacks, unauthorized access and other similar events. Disruptions to or instability of NCB’s internal or external technology that allows customers to use its products and services could harm its business and reputation. In addition, technology systems, whether they be NCB’s own proprietary systems or the systems of third parties on whom it relies to conduct portions of its operations, are potentially vulnerable to security breaches and unauthorized usage. An actual or perceived breach of the security of technology could harm NCB’s business and reputation.

NCB’s business continuity plans or data security systems could prove to be inadequate, resulting in a material interruption in, or disruption to, our business and a negative impact on its results of operations.

NCB relies heavily on communications and information systems to conduct its business. Any failure, interruption or breach in security of these systems, whether due to severe weather, natural disasters, acts of war or terrorism, criminal activity or other factors, could result in failures or disruptions in general ledger, deposit, loan, customer relationship management, and other systems. While NCB has disaster recovery and other policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of our information systems could damage NCB’s reputation, result in a loss of customer business, subject NCB to additional regulatory scrutiny, or expose NCB to civil litigation and possible financial liability, any of which could have a material adverse effect on its results of operations.

NCB’s controls and procedures may fail or be circumvented which could have a material adverse effect on its business, results of operations and financial condition.

NCB regularly reviews and updates its internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on NCB’s business, results of operations and financial condition.

Environmental liability associated with commercial real estate lending could result in losses.

In the course of its business, NCB may acquire, through foreclosure, properties securing loans it has originated or purchased which are in default. Particularly in commercial real estate lending, there is a risk that hazardous substances could be discovered on these properties. In this event, NCB might be required to remove these substances from the affected properties at our sole cost and expense. The cost of this removal could substantially exceed the value of affected properties. NCB may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have a material adverse effect on NCB’s business, results of operations and financial condition.

New accounting pronouncements or interpretations may be issued by the accounting profession, regulators or other government bodies which could change existing accounting methods. Changes in accounting methods could negatively impact NCB’s results of operations and financial condition.

Current accounting and tax rules, standards, policies, and interpretations influence the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial

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reporting and disclosures. These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time. Events that may not have a direct impact on NCB, such as the bankruptcy of major U.S. companies, have resulted in legislators, regulators, and authoritative bodies, such as the Financial Accounting Standards Board, the Securities and Exchange Commission, the Public Company Accounting Oversight Board, and various taxing authorities, responding by adopting and/or proposing substantive revision to laws, regulations, rules, standards, policies, and interpretations. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. A change in accounting standards may adversely affect reported financial condition and results of operations.

NCB is exposed to reputation, legal, compliance and other risks.

NCB is exposed to many types of operational risks, including reputation risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Negative public opinion can result from NCB’s actual or alleged conduct in any number of activities, including lending practices and corporate governance and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect NCB’s ability to attract and keep customers and can expose it to litigation and regulatory action. Given the volume of transactions at NCB, certain errors may be repeated or compounded before they are discovered and successfully rectified. NCB’s necessary dependence upon automated systems to record and process its transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. NCB may also be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. NCB is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as is NCB) and to the risk that the NCB’s (or its vendors’) business continuity and data security systems prove to be inadequate.

NCB may not be able to attract and retain skilled people.

NCB’s success depends in large part on our ability to attract and retain key people and there are a limited number of qualified persons with knowledge of and experience in the banking industry in each of our markets. Furthermore, recent demand for skilled finance and accounting personnel among publicly traded companies has increased the importance of attracting and retaining these people. The unexpected loss of services of one or more of NCB’s key personnel could have a material adverse impact on its business because of their skills, knowledge of our market, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

The federal government, as part of the American Recovery and Reinvestment Act and through other legislation and regulation, has imposed certain limitations on compensation to executives of financial institutions, including limitations on bonuses and severance payments. While NCB is not currently subject to such limitations, should NCB participate in certain programs or should the federal government take further actions, NCB may become subject to such limitations, which could adversely affect its ability to attract and retain key employees.

ITEM 2. PROPERTIES

NCB leases space for its Arlington, Virginia operations center, its Washington, D.C. executive offices and for three principal regional offices located in Anchorage, Alaska, New York City, New York and Oakland, California. NCB also maintains a Disaster Recovery facility in Silver Spring, Maryland. NCB, FSB maintains its principal offices in Hillsboro, Ohio with retail branches in Ohio and non-retail branches at NCB offices in New York, New York and Washington, D.C. NCB’s operations center and executive offices are approximately 76,000 and 3,500 square feet in size, respectively and regional offices range from approximately 2,900 to 9,700 square feet.

The rental expense for the fiscal year ended December 31, 2008 was $3.2 million for all offices combined.

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ITEM 3. LEGAL PROCEEDINGS

In the normal course of business NCB is involved in various types of disputes, which may lead to litigation or other legal proceedings. NCB has determined that pending legal proceedings will not have a material impact on NCB’s financial condition or future operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NCB did not submit any matters to a vote of its security holders during 2008.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER REPURCHASES OF EQUITY SECURITIES

NCB currently has two classes of stock outstanding, the rights of which are summarized as follows:

Class B Stock — The Act permits Class B stock to be held by borrowers of NCB and requires each patronage-based borrower from NCB under Section 108 of the Act to hold Class B stock at the time the loan is made at a par value equal to 1% of its loan amount. The Act prohibits NCB from paying dividends on Class B stock. There are two series of Class B stock outstanding. Class B-1 stock is Class B stock purchased from existing holders of Class B-1 stock subsequent to May 1, 1992. Class B-1 stock previously included shares of Class B stock purchased for cash from NCB between June 28, 1984 and May 1, 1992, of which there are none outstanding. Class B-2 stock is Class B stock purchased for cash from NCB prior to June 28, 1984 and any Class B stock distributed as part of NCB’s patronage refund distribution. Class B stock is transferable to another eligible holder only with the approval of NCB. NCB does not permit any transfers of Class B-2 stock and only permits transfers of Class B-1 Stock at the stock’s $100 par value and only as are required to permit new borrowers to obtain their required holdings of Class B stock. In each instance, NCB specifies which holder(s) are permitted to transfer their stock to the new borrower, based upon which Class B stockholders with holdings of such stock beyond that required to support their loans have held such stock for the longest time. NCB also repurchased, at par value, any shares of Class B stock that it was required to repurchase from holders by the terms of the contracts under which such stock was originally sold by NCB. No such stock remains outstanding. Class B stock has voting rights, but such voting rights are limited in accordance with the weighted voting system described in Item 10.

Class C Stock — The Act permits Class C stock to be held only by cooperatives eligible to borrow from NCB (or entities controlled by such borrowers). The Act allows NCB to pay dividends on Class C stock, but so long as any Class A notes are outstanding, limits dividends on Class C stock (or any other NCB stock) to the interest rate payable on such notes, which was 4.36% in 2008 using a weighted average. In 1994, NCB adopted a policy under which annual cash dividends on Class C stock of up to 2% of NCB’s net income may be declared. The policy does not provide any specific method to determine the amount, if any, of such dividend. Whether any such dividends will be declared and if so, in what amount, rests within the discretion of NCB’s Board of Directors. NCB has allocated $7.2 million of its 2008 retained earnings for patronage dividends in the form of stock to be distributed during 2009. NCB’s Board of Directors passed a resolution in 2008 reducing the cash portion of its patronage dividends to be distributed in 2009 to zero. In 2007, a cash dividend of $1.58 per Class C share was paid. In 1996, the Board approved a dividend de minimis provision which states that Class C stock dividends shall not be distributed to a stockholder until such time as the cumulative amount of the dividend payable to the stockholder is equal to, or exceeds, twenty-five dollars ($25.00) unless specifically requested by the stockholder. Class C stock is transferable to another eligible holder only with the approval of NCB. Class C stock has voting rights, but such voting rights are limited in accordance with the weighted voting system described in Item 10.

There is no established public trading market for any class of NCB’s common equity and it is unlikely that any such market will develop in view of the restrictions on the transfer of NCB’s stock as discussed above. Holders of Class B stock may use such stock to meet the Class B stock ownership requirements established in the Act for patronage-based borrowers from NCB or NCB, FSB and may be permitted by NCB, within the limits set forth above, to transfer Class B stock to another patronage-based borrower from NCB or NCB, FSB.

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As of December 31, 2008, there were 2,556 holders of Class B stock and 471 holders of Class C stock.

Under the Act, NCB must make annual patronage dividends to its patrons, which are those cooperatives from whose loans or other business NCB derived interest or other income during the year with respect to which a patronage dividend is declared. NCB allocates its patronage dividends among its patrons generally in proportion to the amount of income derived during the year from each patron. NCB stockholders, as such, are not automatically entitled to patronage dividends. They are entitled to patronage dividends only in the years when they have patronized NCB and the amount of their patronage does not depend on the amount of their stockholding. Under NCB’s patronage dividend policy, patronage dividends may be paid only from taxable income and only in the form of cash, Class B or Class C stock, or allocated surplus.

Under NCB’s current patronage dividend policy that became effective in 1995, as amended, NCB makes the non-cash portion of the dividend in the form of Class B stock until a patron has holdings of Class B stock of 12.5% of its loan amount and thereafter in Class C stock. Historically, NCB intended to pay a minimum of 35% of the patronage dividend in cash to those patrons with stock holdings of up to 5% or less of their loan amount and up to 55% to those patrons with stock holding of 10% or more of their loan amount. In order to preserve its capital, the Board of Directors has determined that, absent changed circumstances, NCB will not distribute any cash as part of the patronage dividend for the year ended December 31, 2008.

The chart below shows the number of shares of stock issued by NCB during the past three years.

	2008		2007		2006
Class B Stock Issued		—		101,783		158,732
Class C Stock Issued		—		6,464		14,972

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Item 6.

Selected Financial Data

(Dollars in thousands)

For the Years Ended December 31,	2008			2007			2006			2005			2004
Profitability
Total interest income	$	123,701		$	135,739		$	118,454		$	96,479		$	72,442
Total interest expense		67,305			85,121			72,096			52,337			35,122
Net interest income		56,396			50,618			46,358			44,142			37,320
Net yield on interest earning assets		2.84	%		2.67	%		2.68	%		2.76	%		2.60	%
Non-interest income		24,942			11,969			33,680			37,216			33,134
Non-interest expense		58,259			63,571			55,532			53,099			44,142
Net income (loss)		3,874			(472	)		19,425			25,647			22,555
Ratios
Return on average assets		0.2	%		0.0	%		1.1	%		1.5	%		1.5	%
Return on average members’ equity		1.8	%		-0.2	%		8.7	%		12.0	%		11.2	%
Efficiency		71.6	%		101.6	%		69.4	%		65.3	%		62.7	%

At December 31,	2008			2007			2006			2005			2004
Supplemental Data
Loans held-for-sale	$	14,278		$	90,949		$	242,847		$	232,024		$	303,289
Loans and lease financing		1,957,191			1,523,958			1,380,738			1,263,703			1,114,658
Total assets		2,154,892			1,871,776			1,829,477			1,694,567			1,612,870
Subordinated debt		116,489			118,989			120,676			123,117			125,583
Junior subordinated debt		51,547			51,547			50,647			50,614			50,580
Total borrowings		589,483			574,443			743,769			679,654			748,307
Members’ equity		226,757			222,763			227,838			219,008			205,490
Loans serviced for others		5,550,592			5,346,251			4,682,056			4,086,526			3,471,926
Headcount		316			327			306			280			266
Average members’ equity as a percentage of
Average total assets		10.8	%		11.8	%		12.8	%		12.9	%		13.7	%
Average total loans and lease financing		12.1	%		13.3	%		14.3	%		14.7	%		16.1	%
Net average loans and lease financing to average total assets		87.6	%		87.6	%		88.2	%		86.3	%		83.8	%
Net average earning assets to average total assets		95.7	%		96.1	%		97.3	%		95.0	%		96.7	%
Credit Quality
Allowance for loan losses		27,067			17,714			19,480			20,193			16,991
Allowance for loan losses to loans outstanding		1.4	%		1.1	%		1.2	%		1.4	%		1.2	%
Provision for loan losses		18,650			152			3,667			470			2,511
Provision for loan losses to average loans outstanding, excluding loans held-for-sale		1.0	%		0.0	%		0.3	%		0.0	%		0.2	%
Non-accrual loans		17,434			13,324			21,600			14,200			17,758
Real estate owned		659			310			193			10			29
Non-performing assets		18,093			13,634			21,793			14,210			17,787
Non-performing assets as a percentage of total assets		0.8	%		0.7	%		1.2	%		0.8	%		1.1	%

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y

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this analysis is to provide the reader with information relevant to understanding and assessing NCB’s results of operations for each of the past three years and financial condition for each of the past two years. In order to fully appreciate this analysis, the reader is encouraged to review the consolidated financial statements and statistical data presented in this document.

Description of Business

NCB primarily provides financial services to eligible cooperative enterprises or enterprises controlled by eligible cooperatives throughout the United States. A cooperative enterprise is an organization which is owned by its members and which is engaged in producing or furnishing goods, services, or facilities for the benefit of its members or voting stockholders who are the ultimate consumers or primary producers of such goods, services, or facilities. NCB is structured as a cooperative institution, whose voting stock can only be owned by its members or those eligible to become its members.

In the Act, Congress stated its finding that cooperatives have proven to be an effective means of minimizing the impact of inflation and economic hardship on members/owners by narrowing producer-to-consumer margins and price spreads, broadening ownership and control of economic organizations to a larger base of consumers, raising the quality of goods and services available in the marketplace and strengthening the nation’s economy as a whole. To further the development of cooperative businesses, Congress specifically directed NCB (1) to encourage the development of new and existing cooperatives eligible for its assistance by providing specialized credit and technical assistance; (2) to maintain broad-based control of NCB by its voting shareholders; (3) to encourage a broad-based ownership, control and active participation by members in eligible cooperatives; (4) to assist in improving the quality and availability of goods and services to consumers; and (5) to encourage ownership of its equity securities by cooperatives and others.

2008 Summary

Worldwide economic conditions deteriorated significantly during 2008. As a result, NCB’s financial results have been substantially impacted. The highly volatile debt and equity markets, lack of liquidity, widening credit spreads and the collapse of several financial institutions have resulted in significant realized and unrealized losses for NCB.

The economic recession has adversely impacted NCB’s operating results in a number of ways including, but not limited to, 1) reduced gains from loan sales as the securitization market for commercial mortgage backed securities has all but ceased functioning; 2) deteriorating credit quality of NCB’s borrowers and a corresponding increase in the provision for loan losses as these businesses have lost revenues due to decreased economic activity; and 3) recognition of other-than-temporary impairment on NCB’s investments in collateralized mortgage obligations. For the full year 2008, NCB recognized net income of $3.9 million. Although NCB, FSB had a profit of $2.0 million in the fourth quarter of 2008, this amount fell short of the $3.5 million fourth quarter 2008 profit required for NCB, FSB under NCB’s revolving credit facility, covenant thereby causing a breach. Additionally, management believed that there was a risk that NCB would violate certain other financial covenants under the revolving credit facility and NCB’s senior note agreement with Prudential later in 2009 unless some form of covenant relief was obtained. On March 31, 2009, NCB executed an amendment to both the Prudential agreement and the revolving credit facility agreement which waives the revolving credit facility covenant violation and amends various covenant thresholds on a prospective basis. Management has completed financial projections through December 31, 2010 and believes that NCB will be in compliance with all covenants through the maturity of the credit facility and the Prudential notes.

Other provisions of the amendment to the revolving credit facility included:

•   An immediate reduction in the aggregate commitment amount to $225 million from $350 million

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•   Further reductions in the aggregate revolving commitments by $30 million on the last day of each of the fiscal quarters ending June 30, 2009, September 30, 2009, December 31, 2009, March 31, 2010, June 30, 2010, and September 30, 2010.

•   All aggregate revolving commitments will be terminated by December 15, 2010 instead of April 29, 2011.

•   Interest cost increased to LIBOR plus 3.5% from LIBOR plus 0.75%

•   The revolving loan will also be collateralized by assets of NCB, including the stock in NCB, FSB

•   A limitation on the ability of NCB itself to make additional loans

•   Consent for NCB, FSB to borrow funds from the Federal Reserve Bank or other participating member banks

•   Consent for NCB, FSB to convert from a Thrift to a national bank charter, should the Board of Directors determine such action is in the best interest of NCB

•   Consent for NCB, FSB to issue FDIC guaranteed debt under the TLGP

•   Consent for NCB, FSB or NCB Financial Corporation to participate in the Capital Purchase Program under TARP

Other provisions of the amendment to the Prudential agreement included:

•   Interest cost increased to 8.5% with further increase to 10.5% in the event that NCB’s senior credit rating falls below investment grade

•   Change in stated maturity of one note from December 28, 2009 to [August 1, 2009] and a change in the stated maturity of the second note from December 28, 2010 to no later than December 15, 2010

•   Proceeds of certain asset sales or capital raises be applied to reduce the outstanding balance of the 2010 note on a pro rata basis with the outstanding balance of the revolving credit facility

•   In 2010, minimum Cash and Cash Equivalent balances must be increased from $25 million in the first quarter to $95 million in the fourth quarter

•   NCB must maintain balances on its revolving credit facility equal to the outstanding balance of the 2010 note

Prior to the economic downturn, the origination and sale of loans into the collateralized mortgage backed securities (“CMBS”) market had been a strong source of income for NCB. Unless and until the CMBS market recovers and loan origination and sale levels return to prior year levels, NCB has the following strategies in place to meet its liquidity needs and to counter the deteriorating conditions:

1.  On November 21, 2008, the Federal Deposit Insurance Corporation (“FDIC”) Board of Directors approved the Temporary Liquidity Guarantee Program (“TLGP”). The program was created to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and by providing full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount.

Under the TLPG, the FDIC will temporarily guarantee newly issued senior unsecured debt in a total amount up to 125 percent of the par or face value of senior unsecured debt outstanding, excluding debt extended to affiliates, as of September 30, 2008, that was scheduled to mature on or before June 30, 2009. Upon a payment default, the FDIC would continue to make scheduled interest and principal payments under the terms of the debt instrument through its maturity, except that, for debt issuances whose final maturities extend beyond June 30, 2012, at any time thereafter, the FDIC may elect to make a payment in full of all the outstanding principal and interest under the debt issuance.

Another component to the TLPG is the Transaction Account Guarantee Program (“TAGP”). As of December 2008, NCB is participating in the TAGP. Under this program, through December 31, 2009, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. Coverage under the TAGP is in addition to and separate from the coverage available under the FDIC’s general deposit insurance rules.

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2.  NCB expanded its relationship with Fannie Mae, allowing NCB to continue to sell Cooperative and Multifamily Loans. In order to mitigate risk, NCB forward sells loan commitments on a loan by loan basis. During the third quarter of 2008, the federal government put Fannie Mae and Freddie Mac into conservatorship. It is difficult to predict how the recession and financial support of Fannie Mae and Freddie Mac will affect NCB’s business and results of operations. NCB nevertheless continues to sell loans to Fannie Mae and expects to continue to do so.

3.	On October 3, 2008, the Troubled Asset Relief Program (“TARP”) was signed into law. TARP gave the United States Treasury Department (“Treasury”) authority to deploy up to $750 billion into the financial system with an objective of improving liquidity in capital markets. On October 24, 2008, Treasury announced plans to direct $250 billion of this authority into preferred stock investments in banks. Principal terms of this preferred stock program include payment of preferred cumulative dividends on the Treasury’s stock, restrictions on the payment of common stock dividends, redemption provisions which (during the first three years) permit redemption only with proceeds of high-quality private capital, restrictions on stock repurchase programs, and restrictions on executive compensation. NCB is currently evaluating the potential benefits and costs associated with participating in the preferred stock program.
4.	During 2008, NCB shifted its focus to originating loans held-for-investment and focused less on originating loans held-for-sale.
5.	During 2008, NCB transferred $43.5 million of Commercial Real Estate Loans and Community Association Loans from loans held-for-sale to loans and lease financing in the first quarter of 2008 as the market for these loans was extremely limited.
6.	During the second and third quarters of 2008, NCB sold $24.5 million and $31.0 million, respectively, of Share and Single-family Residential Real Estate Loans in an effort to generate non-interest income through gain on sale of loans and reinvest the proceeds in higher earning assets. These loans had originally been held for investment.
7.	As of December 31, 2008, NCB has derivative counterparty risk relating to certain interest rate swaps it has with a counterparty. If the fair value of the derivative contract is positive, the counterparty owes NCB and a repayment risk exists. If the fair value of the derivative contract is negative, NCB owes the counterparty, so there is no repayment risk while the fair value of the contract remains negative. NCB minimizes repayment risk by entering into transactions with counterparties that NCB believes to be financially stable that are specified by policy and reviewed periodically by management. When NCB has multiple derivative transactions with a single counterparty, the net mark-to-market exposure represents the netting of positive and negative exposures with that counterparty. The net mark-to-market exposure with a counterparty is a measure of credit risk when there is a legally enforceable master netting agreement between NCB and the counterparty. NCB uses master netting agreements with the majority of its counterparties.
8.	As of December 31, 2008, NCB had outstanding letters of credit with a total commitment amount of $293.7 million of which $258.5 million related to letters of credit issued in connection with certain variable rate municipal bonds. Under those letters of credit, NCB can be called upon to fund the amount of the municipal bond in the event the holder seeks repayment and the bond cannot be sold to another purchaser. For the year ended December 31, 2008, NCB provided funding for seven letters of credit for a total amount of $4.8 million. Only one letter of credit in the amount of $22 thousand remains outstanding for municipal bonds that could not be sold to another purchaser as of December 31, 2008. In an effort to mitigate the risk of possible future fundings of this kind, NCB has greatly curtailed marketing of this product line and is actively reducing its exposure in this area.
9.	During the twelve months ended December 31, 2008, NCB sold $20.0 million of investment securities. Most of these securities were sold in an effort to reinvest those proceeds in higher earning assets. Using a portion of these proceeds, NCB purchased $28.0 million of Community Association Loans during the second quarter of 2008.

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10.	Since year-end 2007, the fair value of NCB’s collateralized mortgage obligation (“CMO”) investment portfolio has decreased as the result of conditions in the financial markets. At December 31, 2008, management determined certain investment securities were other-than-temporarily impaired based upon an evaluation of the credit quality of underlying issuers. As a result, NCB recorded a $1.7 million other-than-temporary impairment charge on three of its five CMO investments securities, previously carried at $2.0 million. After the fourth quarter impairment charges, the carrying value of NCB’s collective CMO portfolio was $5.7 million as of December 31, 2008. Management concluded none of the other CMO investment securities with an unrealized loss as of December 31, 2008, were other-than-temporarily impaired.
11.	Due to the general weakness in the economy, NCB has experienced some deterioration in its loan portfolio and therefore increased the provision for loan losses in 2008. The recession that the U.S. economy is currently facing is impacting NCB’s borrower’s and as a result, NCB is experiencing a higher frequency of loan impairments than in prior years.
12.	NCB expects to continue to focus on originating a greater portion of loans at NCB, FSB as compared with NCB itself. This is principally due to the less expensive source of funding available to NCB, FSB, which can rely on customer deposits and borrowings from the Federal Home Loan Bank of Cincinnati, both of which have lower borrowing costs than the revolving credit facility used by NCB itself. In addition, a recent amendment to NCB’s revolving credit facility limits NCB’s ability to originate loans at NCB itself. Because of the limitation on commercial lending at NCB, FSB under the federal Home Owners Loan Act, the continued migration of lending from NCB to NCB, FSB may reduce the number of Commercial Loans made by NCB. The amendment, however, also increases the potential sources of liquidity for NCB, FSB by permitting NCB, FSB to issue FDIC-guaranteed debt under the Temporary Liquidity Guarantee Program as well as to borrow under a federal funds program with the Federal Reserve and with other banks.

Despite very challenging market conditions, NCB continues to believe that:

•   Market demand for Cooperative and Multifamily Loans remains strong;

•   Due to the general weakness in the economy and the recession affecting NCB’s borrowers, NCB has experienced some deterioration in the credit quality of its loan portfolio and therefore an increase in the provision for loan losses and impaired loans during 2008. Although NCB is experiencing a higher frequency of loan impairments than in prior years, credit quality of NCB’s borrowers remains at an acceptable level;

•   Sales channels continue to exist for NCB’s loans held-for-sale;

•   NCB has no recourse obligation for losses related to loans sold to third parties; and

•   It will meet the revised debt covenants applicable to NCB itself under the amendments to the revolving credit facility and Prudential agreement and that both NCB and NCB, FSB will have adequate liquidity and will remain well-capitalized.

Financial Performance Highlights for the Twelve Months Ended December 31, 2008

•   Deposit growth of 26.5% from December 31, 2007.

•   Net income growth of $4.4 million from a loss of $0.5 million for the year ended December 31, 2007 to income of $3.9 million for the year ended December 31, 2008.

•   Increase in net yield on interest earning assets from 2.67% for the year ended December 31, 2007 to 2.84% for the year ended December 31, 2008.

•   Acceptable credit quality — Non-performing assets of 0.8% of total assets as of December 31, 2008 and 0.7% as of December 31, 2007.

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•   Loan and lease financing growth of $433.2 million or 28.4% (net of $43.5 million transfer of loans held-for-sale).

2008 and 2007 Financial Summary

NCB’s net income for the year ended December 31, 2008 was $3.9 million compared with a net loss of $0.5 million for the year ended December 31, 2007. The primary factors affecting the increase in the net income were a $13.0 million increase in non-interest income, a $5.3 million decrease in non-interest expense partially offset by a $12.7 million decrease in net interest income after provision for loan losses.

Total assets increased 15.1% or $283.1 million to $2.15 billion at December 31, 2008 from $1.87 billion at December 31, 2007. A $433.2 million increase in loans and lease financing more than offset a $76.7 million decrease in loans held-for-sale.

The return on average total assets was 0.2% and 0% for the years ended December 31, 2008 and 2007, respectively. For the years ended December 31, 2008 and 2007, the return on average members’ equity was 1.8% and -0.2%, respectively.

Net Interest Income

The largest source of revenue is net interest income, which is the difference between interest income on earning assets (primarily loans and securities) and interest expense on funding sources (including interest bearing deposits and borrowings). Earning asset balances and related funding, as well as changes in the levels of interest rates, impact net interest income. The difference between the average yield on earning assets and the average rate paid for interest-bearing liabilities is the net interest spread. Non-interest bearing sources of funds, such as demand deposits and shareholders’ equity, also support earning assets. The impact of non-interest bearing sources of funds is captured in net interest margin, which is calculated as net interest income divided by average earning assets.

Net interest income for the year ended December 31, 2008 increased $5.8 million or 11.5% to $56.4 million compared with $50.6 million for the year ended December 31, 2007.

For the year ended December 31, 2008, interest income decreased 8.8% or $12.0 million, to $123.7 million compared with $135.7 million for the year ended December 31, 2007. The total average earning balances increased by $92.3 million and aggregate yields decreased from 7.17% in 2007 to 6.23% in 2008. The decrease resulted primarily from a decrease in Real Estate, Consumer and Commercial Loan yields which more than offset an increase in Consumer and Commercial Loan balances year over year. The majority of NCB’s loan portfolio is indexed to rates that have re-priced downwards from December 31, 2007 to December 31, 2008 contributing $19.1 million to the decrease. An increase of $7.1 million in volume partially offset the $19.1 million decrease in rate.

Interest income from Real Estate (Residential and Commercial) Loans decreased $7.7 million or 10.0%. A decrease in average balances of $27.4 million or 2.4% contributed $1.7 million to the decrease, while a decrease in the yield from 6.69% in 2007 to 6.17% in 2008 contributed $6.0 million to the decrease. Consumer and Commercial Loans and Lease interest income decreased $0.9 million or 2.0%. The decrease in the yield from 8.35% in 2007 to 6.77% in 2008 contributed $9.9 million to the decrease in income, while an increase in average balances of $119.0 million or 21.0% offset $9.0 million of the year-over-year decrease. Interest income from investment securities and cash equivalents decreased by $2.6 million. A decrease in the yield from 6.06% in 2007 to 3.94% in 2008 contributed to the majority of the $2.6 million year-over-year decrease in investment securities interest income.

Other interest income, consisting only of excess yield, is generated from the Non-Certificated Interest-Only Receivables held by NCB. Emerging Issues Task Force Issue 99-20: Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets (“EITF 99-20”) and the amendments to EITF 99-20 which are disclosed in EITF 99-20-1 provides specific guidance on the treatment of this excess yield. Under paragraph 11 of EITF 99-20 NCB recognizes the excess of all cash flows attributable to the beneficial interest estimated at the transaction date over the initial investment (the accretable yield) as interest income over the life of the beneficial interest using the effective yield method. Thus, based on the terms in each Interest-Only Receivable, NCB is entitled to a cash interest payment. This is offset by the amortization of the

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Interest-Only Receivable. Non-Certificated Interest-Only Receivables are recorded in the same manner as available-for-sale investment securities in accordance with SFAS 115. Excess yield income was $1.9 million and $2.6 million for the years ended December 31, 2008 and 2007, respectively, a decrease of $0.8 million. A $6.1 million decrease in the average balance contributed $0.5 million to the decrease while a decrease in the yield from 8.24% in 2007 to 7.17% in 2008 contributed $0.3 million to the decrease.

Interest expense decreased $17.8 million or 20.9% from $85.1 million for the year ended December 31, 2007 compared to $67.3 million for the year ended December 31, 2008.

Interest expense on deposits decreased $5.8 million or 13.4% from $43.3 million in 2007 to $37.5 million in 2008. The average cost of deposits decreased by 115 basis points from 4.50% to 3.35% contributing $12.1 million to the decrease in interest expense. An increase of $160.9 million in the deposit average balance offset the decrease in expense by $6.3 million. The weighted average rates on deposits at December 31, 2008 and 2007 were 2.75% and 4.19%, respectively. The average maturity of the certificates of deposit at December 31, 2008 and 2007 were 10.9 months and 13.8 months, respectively. The growth of deposits remains a key component of NCB’s funding capability.

Interest expense on short-term borrowings decreased by $8.8 million or 50.3% from $17.5 million in 2007 to $8.7 million in 2008. The average balance on short-term borrowings decreased by $64.8 million, which was primarily driven by the decrease in FHLB advances and contributed $3.2 million to the decrease in interest expense. The average cost of short-term borrowings decreased from 6.05% to 3.87%, contributing $5.6 million to the decrease.

Interest expense on long-term debt, other borrowings and subordinated debt decreased $3.2 million or 13.3%. The average cost of long-term, subordinated and other borrowings decreased from 6.22% in 2007 to 4.84% in 2008 contributing $5.6 million to the decrease in interest expense. The average balance increased by $43.8 million or 11.2%, offsetting $2.4 million of the decrease in interest expense.

For the year ended December 31, 2008, NCB recorded a $0.1 million offset to interest income associated with its swap contracts relating to the hedging of loans and loan commitments. NCB recorded $0.3 million of interest income and $0.2 million as an offset to interest income associated with its swap contracts relating to the hedging of loans and loan commitments for the years ended December 31, 2007 and 2006, respectively. In addition, NCB recorded an offset to interest expense of $0.8 million relating to the hedging of fixed-rate liabilities. NCB recorded as interest expense $0.9 million and $0.5 million relating to the hedging of fixed-rate liabilities for the years ended December 31, 2007 and 2006, respectively.

See Table 1 and Table 2 for detailed information of the changes in interest income and interest expense for 2008 and 2007.

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Table 1
Changes in Net Interest Income
For the Years Ended December 31,
(Dollars in thousands)

	2008 Compared to 2007									2007 Compared to 2006
	Change in			Change in			Increase			Change in			Change in			Increase
	average			average			(Decrease)			average			average			(Decrease)
	volume			rate			Net*			volume			rate			Net*
Interest Income
Real Estate Loans (Residential and Commercial)	$	(1,758	)	$	(5,984	)	$	(7,742	)	$	10,174		$	3,285		$	13,459
Consumer and Commercial Loans and Leases		8,999			(9,948	)		(949	)		103			3,126			3,229
Total loans and lease financing		7,241			(15,932	)		(8,691	)		10,277			6,411			16,688
Investment securities and cash equivalents		335			(2,898	)		(2,563	)		436			498			934
Other interest income		(472	)		(312	)		(784	)		(129	)		(208	)		(337	)
Total interest income		7,104			(19,142	)		(12,038	)		10,584			6,701			17,285
Interest Expense
Deposits		6,315			(12,076	)		(5,761	)		10,095			2,950			13,045
Short-term borrowings		(3,212	)		(5,602	)		(8,814	)		(1,464	)		594			(870	)
Long-term debt, other borrowings and subordinated debt		2,420			(5,661	)		(3,241	)		884			(34	)		850
Total interest expense		5,523			(23,339	)		(17,816	)		9,515			3,510			13,025
Net interest income	$	1,581		$	4,197		$	5,778		$	1,069		$	3,191		$	4,260

* Changes in interest income and interest expense due to changes in rate and volume have been allocated to “change in average volume” and “change in average rate” in proportion to the absolute dollar amounts in each.

27

Table 2
Rate Related Assets and Liabilities
For the years ended December 31,
(Dollars in thousands)

	2008								2007								2006
	Average			Income /		Average			Average			Income /		Average			Average			Income /		Average
	Balance*			Expense		Rate/Yield			Balance*			Expense		Rate/Yield			Balance*			Expense		Rate/Yield
Assets
Interest earning assets Real Estate Loans (Residential and Commercial)	$	1,133,851		$	69,920		6.17	%	$	1,161,204		$	77,662		6.69	%	$	1,005,553		$	64,203		6.38	%
Consumer and Commercial Loans and Leases		685,843			46,405		6.77	%		566,812			47,354		8.35	%		565,537			44,125		7.80	%
Total loans and lease financing		1,819,694			116,325		6.39	%		1,728,016			125,016		7.23	%		1,571,090			108,328		6.90	%
Investment securities and cash eqivalents		140,036			5,518		3.94	%		133,333			8,081		6.06	%		125,907			7,147		5.68	%
Other interest income		25,930			1,858		7.17	%		32,060			2,642		8.24	%		33,562			2,979		8.88	%
Total interest earning assets		1,985,660			123,701		6.23	%		1,893,409			135,739		7.17	%		1,730,559			118,454		6.84	%
Allowance for loan losses		(21,254	)							(18,479	)							(19,815	)
Non-interest earning assets
Cash		12,438								10,366								18,234
Other		76,402								65,300								28,934
Total non-interest earning assets		88,840								75,666								47,168
Total assets	$	2,053,246							$	1,950,596							$	1,757,912
Liabilities and members’ equity
Interest bearing liabilities
Deposits	$	1,122,383		$	37,549		3.35	%	$	961,489		$	43,310		4.50	%	$	728,352		$	30,265		4.16	%
Short-term borrowings		224,726			8,696		3.87	%		289,496			17,510		6.05	%		314,098			18,380		5.85	%
Long-term debt, other borrowings and subordinated debt		434,676			21,060		4.84	%		390,917			24,301		6.22	%		376,699			23,451		6.23	%
Total interest bearing liabilities		1,781,785			67,305		3.78	%		1,641,902			85,121		5.18	%		1,419,149			72,096		5.08	%
Other liabilities		50,627								78,344								114,608
Members’ equity		220,834								230,350								224,155
Total liabilities and members’ equity	$	2,053,246							$	1,950,596							$	1,757,912
Net interest earning assets	$	203,875							$	251,507							$	311,410
Net interest revenues and spread				$	56,396		2.46	%				$	50,618		1.99	%				$	46,358		1.76	%
Net yield on interest earning assets							2.84	%							2.67	%							2.68	%

* Average loan balances include non-accrual loans.

28

Non-interest Income
(Dollars in thousands)

	Non-interest income
	for the years ended
	December 31,
	2008		2007
Gain (loss) on sale of loans	$	6,016	$	(1	)
Servicing fees		4,568		4,651
Letter of credit fees		4,356		3,423
SFAS 133 adjustment		3,256		(1,468	)
Commercial loan fees		1,184		428
Real estate loan fees		1,002		1,515
Prepayment fees		735		837
Other		3,825		2,584
Total non-interest income	$	24,942	$	11,969

Total non-interest income increased $12.9 million or 108.4% from $12.0 million for the year ended December 31, 2007, to $24.9 million for the year ended December 31, 2008. This was driven by an increase of $10.8 million in gain on sale of loans, including the SFAS 133 adjustment, from a loss of $1.5 million in 2007 to a gain of $9.3 million in 2008 due to the mitigation of market risk. In order to mitigate risk, NCB forward sells loan commitments on a loan by loan basis. The increase was also due to a $0.9 million increase in letter of credit income due to new letters of credit issued during 2008.

Other non-interest income includes commercial loan fees, cash management service fees, dividends on FHLB stock and other miscellaneous income NCB earns. Other non-interest income increased $1.2 million from $2.6 million for the year ended December 31, 2007 to $3.8 million for the year ended December 31, 2008. Primarily contributing to the increase is a $1.3 million increase in Commercial loan fees and a $1.3 million gain on debt swap unwinds partially offset by a $1.2 million decrease in real estate fees.

During the second quarter of 2008, NCB elected to measure, at the time of origination, certain Cooperative and Multifamily Residential Real Estate Loans that were held-for-sale at fair value pursuant to the provisions of SFAS 159. Unrealized gains and losses for these identified loans were included in earnings. Of the $4.6 million Residential Real Estate Loans held-for-sale, the contractual principal amount of loans for which NCB has elected the fair value option under SFAS 159 totaled $0.5 million as of December 31, 2008. The difference in fair value of these loans compared to their principal balance was $20 thousand and was recorded in gain on sale of loans for the year ended December 31, 2008. The fair value option was not elected for NCB’s remaining $4.1 million Residential Real Estate Loans held-for-sale. Further, NCB has not elected the fair value option for any of the $9.7 million of principal balance of Consumer and Commercial Loans held-for-sale.

In total, non-interest income amounted to 30.7% of total net revenue (net interest income plus non-interest income) for the year ended December 31, 2008 compared with 19.1% for the year ended December 31, 2007.

The percentage of gain on the sold principal balance of Cooperative, Multifamily and Commercial Real Estate Loans increased from -0.24% in 2007 to 1.85% in 2008.

NCB, in the normal course of business, enters into contractual commitments to extend credit to borrowers. The commitments become effective when the borrowers rate lock a specified interest rate within the time frames established by NCB. Market risk arises if interest rates and/or the return demanded by investors moves adversely between the time of the rate lock and the ultimate sale to an investor. These commitments are undesignated derivatives pursuant to the requirements of SFAS 133 and are accordingly marked to fair value through earnings. Effective January 1, 2008, fair value is determined pursuant to SFAS 157 (commitments existing at January 1, 2008 and new commitments subsequent to January 1, 2008) and SAB 109 (only new commitments executed subsequent to January 1, 2008).

29

Prior to the adoption of SAB 109 and SFAS 157, the fair value of the interest rate lock commitments recorded in earnings considered only the effects of market interest rate changes and changes in market spreads between the date of the rate lock and either the loan closing date or the balance sheet date. SFAS 157 and SAB 109 require, in addition to these elements of fair value, consideration of the difference between retail and secondary market or investor spreads as well as the expected cash flows from servicing activities. The application of these accounting standards had the effect of recognizing a loss on loans, loan commitments and derivatives hedging these loans and loan commitments of $55.0 thousand for loans that will not be funded or delivered to investors until a date subsequent to December 31, 2008.

The transition provisions of SFAS 157 provide for retrospective application to, amongst others, financial instruments that were measured at fair value at initial recognition using a transaction price in accordance with Emerging Issues Task Force Issue No. 02-03, “Issues involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities”. NCB’s interest rate lock commitments were measured at inception at the transaction price. Upon adoption of SFAS 157 the difference between the carrying amount and fair value of these instruments was recognized as a cumulative effect adjustment to the beginning balance of retained earnings. The amount of the cumulative effect adjustment was a credit to retained earnings of $1.2 million. But for the adoption of SFAS 157, and excluding the effects of expected changes in market interest rates and market spreads for comparable loan commitments between January 1, 2008 and the date the loan was closed and delivered to an investor, this amount would have been recorded in gain on sale of loans.

The following table shows the unpaid principal balance of loans sold for the years ended December 31 (dollars in thousands):

	2008		2007
Cooperative, Multifamily and Commercial Real Estate Loans:
Sold through securitizations	$	-	$	373,498
Other loan sales (primarily to Fannie Mae)		273,660		491,499
Total Cooperative, Multifamily and Commercial Real Estate Loans		273,660		864,997
Consumer Loans (auto loans)		357,179		220,887
Single-family Residential Loans and Share Loans		166,199		109,255
SBA Loans		9,553		9,318
Total	$	806,591	$	1,204,457

The Consumer Loan sales represent the sale, at par, of participations in auto loans. NCB purchases and sells these notes within a 30-day cycle. The primary economic benefit to NCB of this program is the net interest income it earns while these notes are on the balance sheet for this 30-day period.

During 2008, NCB made certain of its Residential Real Estate Loans held-for-investment available to investors for purchase. NCB sold $55.5 million of those Residential Real Estate Loans in an effort to reinvest the proceeds in higher earning assets. At the time of transfer from loans held-for-investment to loans held-for-sale the fair value of the loans was equal to or greater than the cost and therefore, NCB did not recognize a loss on the date of transfer.

30

Non-interest Expense
(Dollars in thousands)

	Non-interest expense
	for the years ended
	December 31,
	2008		2007
Compensation and employee benefits	$	29,815	$	32,703
Occupancy and equipment		7,470		8,057
Contractual services		5,482		5,944
Information systems		4,627		4,402
Loan costs		2,479		2,082
Net loss on other-than-temporary impairment and sale of available-for-sale securities		1,525		17
Corporate development		1,345		2,814
Travel and entertainment		1,220		1,449
Lower of cost or market valuation allowance		832		2,070
Provision for unfunded commitments		659		488
Deferred rent recognition related to lease termination		-		(1,860	)
Lease termination costs		-		3,148
Other		2,805		2,257
Total non-interest expense	$	58,259	$	63,571

Non-interest expense for the year ended December 31, 2008, decreased 8.3% or $5.3 million to $58.3 million compared with $63.6 million for the corresponding prior year period primarily due to a $2.9 million decrease in compensation and employee benefits resulting from: the decrease in regular base salary due to the reduction in headcount, a reduction in bonuses and commissions due to the economic downturn and a decrease in severance expense for employees in 2008 compared to 2007. Also contributing to the decrease in non-interest expense from 2007 to 2008 was a $1.5 million decrease in corporate development due to an overall effort to reduce corporate expenses, a $1.3 million decrease in lease termination costs from 2007, and a $1.2 million decrease in the lower of cost or market valuation resulting from implementation of SFAS 159. The decrease was partially offset by a $1.5 million increase in the loss on investments available-for-sale for CMO investments that were other than temporarily impaired as of December 31, 2008.

Credit Quality

To manage credit risk over a wide geographic area and lending in multiple industries, NCB uses a team-based approval process, which relies upon the expertise of lending teams familiar with particular segments of the industry in which we lend. Senior management approves those credit facilities exceeding delegated lending authority for each team in an attempt to ensure the quality of lending decisions. In order to keep abreast of economic events and market conditions throughout the United States, various lending teams regularly perform financial analysis of the industries and regions.

An inevitable aspect of the lending or risk assumption process is the fact that losses will be incurred. The extent to which losses occur depends on the risk characteristics of the loan portfolio. NCB emphasizes continuous credit risk management. Specific procedures have been established that seek to eliminate undue credit risk. They include a multilevel approval process, credit underwriting separate and apart from the approval process, and an ongoing assessment of the credit condition of the portfolio. In addition, a risk rating system is designed to classify each loan according to the risks unique to each credit facility.

Loans with risk characteristics that make their full and timely payment uncertain are assigned to the Risk Management Department. The Risk Management Department determines, on a case-by-case basis, the best course of action to restore a credit to an acceptable risk rating or to minimize potential losses to NCB.

31

The allowance for loan losses is increased by the provision for loan losses and decreased by the amount of charge-offs, net of recoveries. The allowance for loan losses is determined based on risk ratings, current and future economic conditions, concentrations, diversification, portfolio size, collateral and guarantee support and level of non-performing and delinquent credits, among other relevant factors.

In determining the size of the allowance, NCB relies on an analysis of its loan portfolio, experience and an evaluation of general economic conditions. If NCB’s assumptions prove to be incorrect, the current allowance may not be sufficient. With the volatility of the economic decline and unprecedented nature of the events in the credit and real estate markets during the latter part of 2008, NCB made significant adjustments to its allowance in 2008 and additional adjustments may continue to be necessary if the local or national real estate markets and economies continue to deteriorate. Material additions to the allowance would materially decrease net income. In addition, federal regulators periodically evaluate the adequacy of NCB’s allowance and may require an increase in the provision for loan and lease losses or recognition of further loan charge-offs based on judgments different than those of NCB’s management. Any further increase in NCB’s allowance or loan charge-offs could have a material adverse effect on its results of operations.

The consolidated allowance calculation on a loan-by-loan basis at December 31, 2008 was $27.1 million, which represents an increase of $9.4 million from December 31, 2007. The 2008 allowance for loan loss included net charge-offs of $9.3 million and provisions of $18.7 million. The allowance for loan losses was 1.4% and 1.1% of total loans and lease financing and was 1.4% and 1.2% of loans and lease financing, excluding loans held-for-sale, at December 31, 2008 and 2007, respectively. The allowance for loan losses was 1.50 and 1.30 times the non-performing assets at December 31, 2008 and 2007, respectively.

NCB bases credit decisions on the cash flows of its customers and views collateral as a secondary source of repayment.

The real estate portfolio contains a concentration of loans in the New York City area; however, the majority of loans are to seasoned housing cooperatives with low loan-to-value ratios. NCB also has minimal credit exposure to highly leveraged transactions, commercial real estate and construction loans. NCB has no foreign loan exposure.

Due to the general weakness in the economy, NCB has experienced some deterioration in its loan portfolio and therefore increased the provision for loan losses in 2008.

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Table 3
SUMMARY OF ALLOWANCE FOR LOAN LOSSES
For the Years Ended December 31,
(Dollars in thousands)

	2008			2007			2006			2005			2004
Balance at beginning of year	$	17,714		$	19,480		$	20,193		$	16,991		$	17,098
Charge-offs
Consumer Loans		(2,111	)		(715	)		(254	)		(118	)		—
Commercial Loans		(8,073	)		(1,737	)		(4,435	)		(380	)		(4,711	)
Real Estate Loans (Residential and Commercial)		—			—			(32	)		(9	)		—
Total charge-offs		(10,184	)		(2,452	)		(4,721	)		(507	)		(4,711	)
Recoveries
Consumer Loans		144			297			1			—			—
Commercial Loans		743			237			340			2,681			2,092
Real Estate Loans (Residential and Commercial)		—			—			—			558			1
Total recoveries		887			534			341			3,239			2,093
Net (charge-offs) recoveries		(9,297	)		(1,918	)		(4,380	)		2,732			(2,618	)
Provision for loan losses		18,650			152			3,667			470			2,511
Balance at end of year	$	27,067		$	17,714		$	19,480		$	20,193		$	16,991

The higher provision for loan losses in 2008 compared to prior periods reflects an increase in the allowance for loan losses throughout most of the year in response to changes in loan quality, coupled with increased losses as a result of declining Commercial Loan collateral values. In the fourth quarter of 2008, NCB recorded a provision for loan losses of $8.1 million, compared to $6.0 million and $38.0 thousand for the third quarter of 2008 and fourth quarter of 2007, respectively. Approximately $3.8 million, or 46.9%, of the fourth quarter 2008 provision was attributed to continued deterioration in loan quality within the Commercial Loan portfolio, while another $2.3 million, or 28.3% of the fourth quarter 2008 provision was due to continued declines in commercial real estate credit quality and collateral values.

Of the $18.7 million provision for loan losses for 2008, $16.4 million was related to Commercial Loans, $1.8 million was related to Real Estate Loans and $0.3 million was related to Consumer Loans.

Although loans and leases increased by $143.2 million from December 31, 2006 to December 31, 2007, the allowance for loan losses decreased principally due to the full repayment of one previously impaired loan with a significant reserve against it. Also, changes in the composition of loans within the portfolio led to a higher relative percentage of loans that, based on NCB’s risk rating system, are determined to have a lower credit risk.

Included within the provision for loan losses for the twelve months ended December 31, 2006 is $2.4 million related to the reclassification of a provision for unfunded commitments. The reclassification was the result of a letter of credit that was drawn on during the third quarter of 2006. Simultaneously, $2.4 million of the loan balance relating to the draw of the letter of credit was charged-off and is reflected in the $4.4 million of Commercial Loan charge-offs for the twelve months ended December 31, 2006.

Net charge offs or net recoveries were 0.5%, 0.1%, 0.3%, 0.2% and 0.2% of the average loan and lease financing balance for the years ended December 31, 2008, 2007, 2006, 2005 and 2004, respectively.

33

Table 4
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
At December 31,
(Dollars in thousands)

	2008					2007					2006					2005					2004
			Percent of					Percent of					Percent of					Percent of					Percent of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total			Amount		Total
Loan and lease financing Consumer and Commercial Loans	$	744,918		38.1	%	$	572,872		37.6	%	$	532,356		38.6	%	$	574,123		45.4	%	$	529,165		47.5	%
Real Estate Loans (Residential and Commercial)		1,211,862		61.9	%		950,512		62.4	%		847,746		61.4	%		684,951		54.2	%		569,521		51.1	%
Leases		411		0.0	%		574		0.0	%		636		0.0	%		4,629		0.4	%		15,972		1.4	%
Total loans and lease financing	$	1,957,191		100.0	%	$	1,523,958		100.0	%	$	1,380,738		100.0	%	$	1,263,703		100.0	%	$	1,114,658		100.0	%
Allocation of allowance for loan losses Consumer and Commercial Loans	$	22,601		83.5	%	$	10,907		61.6	%	$	14,430		74.1	%	$	14,780		73.2	%	$	11,023		64.9	%
Real Estate Loans (Residential and Commercial)		4,466		16.5	%		6,807		38.4	%		5,050		25.9	%		5,413		26.8	%		5,968		35.1	%
Total allowance for loan losses	$	27,067		100.0	%	$	17,714		100.0	%	$	19,480		100.0	%	$	20,193		100.0	%	$	16,991		100.0	%

Table 5
IMPAIRED ASSETS
At December 31,
(Dollars in thousands)

	2008			2007			2006			2005			2004
Real estate owned	$	659		$	310		$	193		$	10		$	29
Impaired loans		20,377			13,324			21,600			14,200			17,758
Total	$	21,036		$	13,634		$	21,793		$	14,210		$	17,787
Percentage of loans and lease financing outstanding		1.07	%		0.89	%		1.58	%		1.12	%		1.60	%

A loan is considered impaired when, based on current information, it is probable NCB will be unable to collect all amounts due under the contractual terms of the loan. Total impaired assets increased from $13.6 million at December 31, 2007 to $21.0 million at December 31, 2008. The increase of $7.4 million was primarily due to the addition of a $0.9 million Real Estate Loan, a $1.8 million Commercial Loan and a $1.5 million Commercial Loan. The increases are partially offset by the charge-off of a $4.3 million Commercial Loan that was previously in non- accrual status. As of December 31, 2008 and 2007, impaired assets as a percentage of total capital were 9.3% and 6.1%, respectively.

Of the $21.0 million of impaired loans as of December 31, 2008, $1.7 million was for a loan that was not in non-accrual status. However, the loan was deemed impaired due to the loan terms being restructured during 2007. The fair value of the collateral is greater than the current outstanding principal balance as of December 31, 2008; therefore NCB has not reserved a specific allowance for this loan. NCB will continue to classify this loan as impaired until the borrower has sufficient cash flow to support its debt.

2007 and 2006 Financial Summary

The net loss for the year ended December 31, 2007 was $0.5 million compared with a net income of $19.4 million for the year ended December 31, 2006. The primary factors affecting the decrease in the net income were a $21.7 million decrease in non-interest income, an $8.1 million increase in non-interest expense partially offset by a $7.8 million increase in net interest income after provision for loan losses.

34

Total assets increased 2.1% or $38.9 million to $1.87 billion at December 31, 2007 from $1.83 billion at December 31, 2006. A $143.2 million increase in loans and lease financing was more than offset by a $151.9 million decrease in loans held-for-sale.

The return on average total assets was 0% and 1.1% for the years ended December 31, 2007 and 2006, respectively. For the years ended December 31, 2007 and 2006, the return on average members’ equity was -0.2% and 8.7%, respectively.

Net Interest Income

Net interest income for the year ended December 31, 2007 increased $4.2 million or 9.2% to $50.6 million compared with $46.4 million for 2006.

For the year ended December 31, 2007, interest income increased 14.5% or $17.2 million, to $135.7 million compared with $118.5 million for the year ended December 31, 2006. The total average earning balances increased by $162.9 million and aggregate yields increased from 6.84% in 2006 to 7.17% in 2007. The increase resulted primarily from an increase in average Real Estate (Residential and Commercial) Loan balances as well as an increase in average yields on Real Estate (Residential and Commercial) and Commercial Loan and Lease balances.

Interest income from Real Estate (Residential and Commercial) Loans increased $13.5 million or 21.0%. An increase in average balances of $155.7 million or 15.5% contributed $10.2 million of the increase while an increase in the yield from 6.38% in 2006 to 6.69% in 2007 contributed $3.2 million. Consumer and Commercial Loans and Lease interest income increased $3.2 million or 7.32%. Average balances increased by $1.3 million, contributing $0.1 million to the increase. The increase in the yield from 7.80% in 2006 to 8.35% in 2007 contributed $3.1 million. Interest income from investment securities and cash equivalents increased $0.9 million. An $7.4 million or 5.9% increase in average balances contributed $0.4 million to the increase while the increase in yield from 5.68% in 2006 to 6.06% in 2007 contributed $0.5 million.

Interest expense increased $13.0 million or 18.1% from $72.1 million for the year ended December 31, 2006 compared to $85.1 million for the year ended December 31, 2007.

Interest expense on deposits increased $13.0 million or 43.1%. Average deposit balances grew by $233.1 million or 32.0% from 2006 to 2007, accounting for $10.0 million of the increase. Additionally, average deposit cost increased slightly by 34 basis points from 4.16% to 4.50%, accounting for $3.0 million of the increase.

Interest expense on short-term borrowings decreased by $0.9 million or 4.7%. The average balance on short-term borrowings decreased by $24.6 million, which was primarily driven by the decrease in FHLB advances and contributed $1.5 million to the decrease in interest expense. However, the average cost of short-term borrowings increased from 5.85% to 6.05%, offsetting the decrease by $0.6 million.

Interest expense on long-term debt, other borrowings and subordinated debt increased $0.9 million or 3.6%. The average balance increased by $14.2 million or 3.8%, accounting for the increase. In addition, the average cost of long-term, subordinated and other borrowings decreased slightly from 6.23% in 2006 to 6.22% in 2007.

NCB recorded, as an offset to interest income, $0.3 million, $0.2 million and $3.4 million associated with its swap contracts relating to the hedging of loans and loan commitments for the years ended December 31, 2007, 2006 and 2005, respectively. In addition and over the same respective periods, NCB recorded as interest expense $0.9 million, $0.5 million and $1.0 million relating to the hedging of fixed-rate liabilities.

See Table 1 and Table 2 for detailed information of the fluctuations in interest income and interest expense for 2007 and 2006.

Non-Interest Income

Total non-interest income decreased $21.7 million or 64.5% from $33.7 million for the year ended December 31, 2006 to $12.0 million in 2007. The decrease was primarily driven by a $19.9 million decrease in gain on loan sales from $19.9 million in 2006 to a loss of $1 thousand in 2007. The percentage of the sold principal balance of Cooperative, Multifamily and Commercial Real Estate Loans, decreased from a gain of 2.20 in 2006 to a

35

loss of -0.24% in 2007. This was due to the well publicized issues surrounding mortgage lending which had a severe negative effect on the commercial mortgage securitization market in the second half of 2007. The increased yield demanded by the ultimate purchasers of the loans during the second half of 2007 meant that many of the loans sold during this period were sold in a loss position as their pricing at the time of origination was at significantly lower levels.

In total, non-interest income amounted to 19.1% of total net revenue (net interest income plus non-interest income) for the year ended December 31, 2007 compared with 42.1% for the year ended December 31, 2006.

Non-Interest Expense

Non-interest expense for the year ended December 31, 2007 increased 14.5% or $8.1 million to $63.6 million compared with $55.5 million for the year ended December 31, 2006 primarily due to a $1.7 million increase in compensation and employee benefits resulting from increased headcount and other factors discussed below, a $1.7 million increase in information systems costs relating to an information technology reorganization and an increase in network costs, a $3.1 million lease termination expense, a $1.9 million increase in the lower of cost or market valuation allowance on loans held-for-sale and an increase of $1.6 million in the provision for unfunded commitments. The increase was partially offset by the $1.9 million deferred rent recognition related to the lease termination. Non-interest expense as a percentage of average assets was 3.3% for 2007 compared with 3.2% for 2006.

2008 and 2007 Fourth Quarter Results

NCB’s net income for the three months ended December 31, 2008 was $0.2 million. This was a $4.9 million increase compared with a net loss of $4.7 million for the three months ended December 31, 2007. For the three months ended December 31, 2008, net interest income increased 23.0% or $2.9 million to $15.5 million compared with $12.6 million for the three months ended December 31, 2007.

For the three months ended December 31, 2008, interest income decreased 3.6% or $1.2 million to $32.5 million compared with $33.7 million for the three months ended December 31, 2007. The decrease was primarily due to a $1.1 million decrease in investment securities and cash equivalent interest income resulting from the decrease in yields during the three months ended December 31, 2008 compared to the same period in 2007.

For the three months ended December 31, 2008, interest expense decreased $4.0 million or 19.0% from $21.1 million for the three months ended December 31, 2007 to $17.1 million for the three months ended December 31, 2008. The decrease in interest expense resulted primarily from a $2.4 million decrease in deposit interest expense and a $1.6 million decrease in total borrowings. The decrease in yields on deposits and the reduction in the overall balance and yields of borrowings contributed to the decrease in interest expense.

For the three months ended December 31, 2008, total non-interest income increased $9.9 million or 305.9% to a gain of $6.7 million compared to a loss of $3.2 million for the three months ended December 31, 2007. This increase resulted primarily from an $8.5 million increase in the gain on sale of loans during the three months ended December 31, 2008 compared to the same period in 2007. Also, a $1.3 million increase in other income due to a gain in a debt swap unwind partially offset a $0.3 million decrease in servicing fees.

Non-interest expense for the three months ended December 31, 2008 decreased 6.2% or $0.9 million to $13.7 million compared with $14.6 million for the same period in 2007. This decrease is primarily the result of a $3.0 million decrease in compensation and employee benefits as a result of a $1.8 million reduction in bonuses and commissions and a $1.0 million decrease in severance pay expense. Also contributing to the decrease in non-interest expense is a $0.9 million decrease in provisions for unfunded commitments partially offset by an increase of $1.2 million loss on investments available-for-sale and a $1.6 million increase in the lower of cost or market value adjustment.

The income tax provision for the three months ended December 31, 2008 was $46 thousand, compared with an income tax benefit of $0.6 million for the three months ended December 31, 2007. The increase in the tax provision in 2008 was largely due to improved results in NCB’s subsidiaries subject to federal taxation, and improved performance at NCB, FSB.

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Table 6
CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
For the Three Months Ended
(Dollars in thousands)

	2008										2007
	Dec. 31		Sept. 30			June 30		Mar. 31			Dec. 31			Sept. 30			June 30		Mar. 31
Interest income	$	32,549	$	30,448		$	30,232	$	30,473		$	33,697		$	35,106		$	32,723	$	34,213
Interest expense		17,053		16,299			15,975		17,979			21,063			22,532			20,941		20,585
Net interest income		15,496		14,149			14,257		12,494			12,634			12,574			11,782		13,628
Provision (benefit) for loan losses		8,119		6,042			2,805		1,684			38			63			438		(387	)
Income after provision (benefit) for loan losses		7,377		8,107			11,452		10,810			12,596			12,511			11,344		14,015
Non-interest income		6,635		7,120			7,164		4,024			(3,231	)		(3,122	)		8,118		10,204
Net revenue		14,012		15,227			18,616		14,834			9,365			9,389			19,462		24,219
Non-interest expense		13,749		14,773			15,256		14,481			14,634			15,186			18,640		15,111
Income (loss) before income taxes		263		454			3,360		353			(5,269	)		(5,797	)		822		9,108
Provision (benefit) for income taxes		46		456			110		(56	)		(588	)		(284	)		206		2
Net income (loss)	$	217	$	(2	)	$	3,250	$	409		$	(4,681	)	$	(5,513	)	$	616	$	9,106

Borrowings

One of NCB’s sources of funds is debt borrowings. NCB maintains credit facilities provided by a consortium of banks. As of December 31, 2008, NCB’s revolving credit agreement had a total facility of $350.0 million. As of December 31, 2008 and 2007, respectively $202.0 million and $111.0 million were outstanding under the revolving line of credit. An additional $5.4 million was issued in letters of credit thereunder as of December 31, 2008 and December 31, 2007. Therefore, as of December 31, 2008, $142.6 million was available under this facility.

During 2007, NCB entered into two separate amendments to its revolving credit agreement principally to adjust the return on assets and fixed charge coverage ratio covenants for the final two quarters of 2007 and for all of 2008. The second amendment also included an adjustment to the pricing, so that for London Interbank Offered Rate (LIBOR) loans, during 2008 and the first quarter of 2009, NCB would pay a minimum of LIBOR plus 0.75%. NCB paid $0.7 million in fees in connection with these amendments.

The economic recession has adversely impacted NCB’s operating results in a number of ways including, but not limited to, 1) reduced gains from loan sales as the securitization market for commercial mortgage backed securities has all but ceased functioning; 2) deteriorating credit quality of NCB’s borrowers and a corresponding increase in the provision for loan losses as these businesses have lost revenues due to decreased economic activity; and 3) recognition of other-than-temporary impairment on NCB’s investments in collateralized mortgage obligations. For the full year 2008, NCB recognized net income of $3.9 million. Although NCB, FSB had a profit of $2.0 million in the fourth quarter of 2008, that fell short of the $3.5 million fourth quarter 2008 profit required for NCB, FSB under NCB’s revolving credit facility, thereby causing a breach. Additionally, management believed that there was a risk that NCB would violate certain other financial covenants under the revolver and NCB’s senior note agreement with Prudential later in 2009 unless some form of covenant relief was obtained.

On March 31, 2009, NCB executed an amendment to both the Prudential agreement and the revolving credit facility agreement which waives the previous covenant violation in the credit agreement and amends various covenant thresholds on a prospective basis. Management has completed financial projections through December 31, 2010 and believes that NCB will be in compliance with all covenants through the maturity of the credit facility and the Prudential notes.

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Other provisions of the amendment to the revolving credit facility included:

•   An immediate reduction in the aggregate commitment amount to $225 million from $350 million

•   Further reductions in the aggregate revolving commitments by $30 million on the last day of each of the fiscal quarters ending June 30, 2009, September 30, 2009, December 31, 2009, March 31, 2010, June 30, 2010, and September 30, 2010.

•   All aggregate revolving commitments will be terminated by December 15, 2010 instead of April 29, 2011.

•   Interest cost increased to LIBOR plus 3.5% from LIBOR plus 0.75%

•   The revolving loan will also be collateralized by assets of NCB, including the stock in NCB, FSB

•   A limitation on the ability of NCB itself to make additional loans

•   Consent for NCB, FSB to borrow funds from the Federal Reserve Bank or other participating member banks

•   Consent for NCB, FSB to convert from a Thrift to a national bank charter, should the Board of Directors determine such action is in the best interest of NCB

•   Consent for NCB, FSB to issue FDIC guaranteed debt under the TLGP

•   Consent for NCB, FSB or NCB Financial Corporation to participate in the Capital Purchase Program under TARP

In addition, as of December 31, 2008 and 2007, NCB had $105.0 million and $155.0 million, respectively of privately placed debt issued to various institutional investors. In December of 2008, NCB prepaid all $50.0 million of the privately placed debt due in January of 2009 and paid a $63 thousand prepayment penalty in connection with the repayment.

On December 31, 2007, NCB amended its agreement with The Prudential Insurance Company of America and related entities (collectively “Prudential”) and its agreement with Metropolitan Life Insurance Company and related entities (collectively “MetLife”) principally to adjust the fixed charge coverage ratio covenants for 2008. The amendment with MetLife also increased the cap on the amount of paid-in-capital NCB may invest in NCB Financial Corporation, the parent of NCB, FSB. During the first quarter of 2008 NCB made a similar amendment with respect to paid-in-capital to the agreement with Prudential. NCB paid $0.4 million in fees in connection with these amendments. NCB prepaid the $50.0 million of debt related to the MetLife amended agreement in December 2008 and incurred a $63 thousand prepayment penalty.

Other provisions of the amendment to the Prudential agreement included:

•   Interest cost increased to 8.5% with further increase to 10.5% in the event that NCB’s senior credit rating falls below investment grade

•   Change in stated maturity of one note from December 28, 2009 to August 1, 2009 and a change in the stated maturity of the second note from December 28, 2010 to no later than December 15, 2010

•   Proceeds of certain asset sales or capital raises be applied to reduce the outstanding balance of the 2010 note on a pro rata basis with the outstanding balance of the revolving credit facility

•   In 2010, minimum Cash and Cash Equivalent balances must be increased from $25 million in the first quarter to $95 million in the fourth quarter

•   NCB must maintain balances on its revolving credit facility equal to the outstanding balance of the 2010 note

NCB, FSB is a member of the Federal Home Loan Bank of Cincinnati, Ohio (FHLB) and has a pledge agreement with FHLB requiring advances to be secured by eligible mortgages with a principal balance of 125% to 250% of such advances. As of December 31, 2008, the FHLB facility was $318.8 million. NCB, FSB had $192.1 million in available unused committed borrowing capacity with the FHLB as of December 31, 2008. NCB,

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FSB’s FHLB borrowing capacity is determined by the FHLB using several factors, including asset quality and performance, capital, earnings, liquidity and credit ratings. Changes in the factors could increase or reduce the available capacity. The amendments to the revolving credit agreement and Prudential agreement do not impact NCB’s ability to borrow from the FHLB. As of December 31, 2008, there were $113.0 million outstanding advances from the FHLB, of which $90.0 million were long-term, compared to $122.0 million at December 31, 2007, of which $50.0 million were long-term. NCB also has letter of credit availability in the FHLB facility of which $13.7 million and $15.9 million was issued as of December 31, 2008 and 2007, respectively.

NCB had no bid line availability as of December 31, 2008. As of December 31, 2007, NCB had $20.0 million of uncommitted bid lines available from several banks of which none was outstanding.

As of December 31, 2008 and 2007, under its Medium Term Note Program, NCB had authority to issue up to $151.0 and $136.0 million of medium term notes, respectively. On May 15, 2008, the most recent call date, NCB redeemed all $15.0 million of its medium term notes.

As of December 31, 2008 and 2007, NCB had authority to issue up to $50.0 million in preferred stock or subordinated debt. There was no preferred stock or subordinated debt under this authority outstanding as of December 31, 2008 and 2007.

Loans and Leases

During 2008 NCB shifted its focus to originating loans held-for-investment and focused less on originating loans held-for-sale. Loans and leases outstanding, including loans held-for-sale, increased $356.6 million or 22.1% from $1.6 billion at December 31, 2007 to $2.0 billion at December 31, 2008.

The Consumer and Commercial Loan and Lease portfolio increased 30.0% to $745.3 million at December 31, 2008 compared with $573.4 million at December 31, 2007 due principally to an increase in Consumer and Commercial Loan and Lease portfolio originations.

The Real Estate (Residential and Commercial) Loan portfolio increased 27.5% to $1.2 billion at December 31, 2008 from $950.5 million at December 31, 2007 due to an increase in portfolio Real Estate (Residential and Commercial) Loan originations during 2008. The Real Estate (Residential and Commercial) Loan portfolio is substantially composed of Multifamily Loans, Single-family Residential Loans and Share Loans.

NCB’s Consumer and Commercial Loan portfolio has a concentration in the food retailing and distribution industry. The loan types include lines of credit, revolving credits, and term loans. These loans are typically collateralized with general business assets (e.g., inventory, receivables, fixed assets, and leasehold interests). The loans will be repaid from cash flows generated by the borrower’s operating activities. NCB’s exposure to credit loss in the event of nonperformance by the other parties to the loan is the carrying amounts of the loans less the realizable value of collateral.

NCB’s loan portfolio is diversified both in terms of industry and geography. The following is the distribution of the loans outstanding at December 31:

	Commercial Loans						Real Estate Loans
	2008			2007			2008			2007
By Region:
Southeast		35.1	%		37.8	%		22.1	%		19.7	%
West		30.0	%		24.3	%		22.7	%		26.0	%
Northeast		22.6	%		25.6	%		43.1	%		40.2	%
Central		12.3	%		12.3	%		12.1	%		14.1	%
		100.0	%		100.0	%		100.0	%		100.0	%

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	Percentage of
	Total Loans
	2008			2007
By Borrower Type:
Real Estate:
Residential		42.4	%		51.0	%
Commercial		20.9	%		13.7	%
Commercial:
Community Association		7.1	%		5.8	%
Food retailing and distribution		5.4	%		6.9	%
Franchise		4.9	%		5.1	%
Employee Stock Ownership Plan		3.9	%		4.5	%
Hardware		3.3	%		3.3	%
Non-Profit		3.1	%		1.1	%
Healthcare		2.4	%		2.6	%
Mission		1.8	%		1.8	%
Other		4.8	%		4.2	%
		100.0	%		100.0	%

NCB originates Cooperative Loans to predominantly owner-occupied housing cooperatives. A significant portion of NCB’s mortgage loans is secured by real estate in New York City due to the city’s extensive cooperative market. As of December 31, 2008 and 2007, there were $469.9 million and $362.3 million of Cooperative Loans secured by real estate in New York City, respectively, representing 24% and 23% of total loans and leases outstanding, respectively. The collateral for Cooperative Loans consists of first mortgage liens on the land and improvements of cooperatively owned, multifamily and single-family residential properties and property leases. Furthermore, the Cooperative Loan portfolio includes loans secured by second mortgage liens. In addition, certain unsecured lines of credit have been issued to cooperative borrowers. The loans are repaid from operations of the cooperative. NCB’s exposure to credit loss in the event of nonperformance by other parties to the loans is the carrying amounts of the loans less the value of the collateral.

Table 7

MATURITY SCHEDULE OF LOANS
As of December 31, 2008
(Dollars in thousands)

	One Year or		One to Five		Over Five
	Less		Years		Years		Total
Consumer Loans	$	845	$	28,599	$	23,657	$	53,101
Commercial Loans		72,539		223,518		395,760		691,817
Real Estate Loans:
Residential		32,623		149,132		635,783		817,538
Commercial		27,485		169,502		197,337		394,324
Leases		36		375		—		411
Total loans and leases	$	133,528	$	571,126	$	1,252,537	$	1,957,191
Fixed interest rate loans	$	26,938	$	301,785	$	360,389	$	689,112
Variable interest rate loans		106,590		269,341		892,148		1,268,079
Total Loans	$	133,528	$	571,126	$	1,252,537	$	1,957,191

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Sources and Uses of Funds

NCB’s principal sources of funds are loan sale proceeds, loan interest and principal payment collections, deposits from customers and debt borrowings. The principal uses of funds are loan originations and purchases of investment securities.

Cash Provided by Operating Activities.  NCB’s net cash provided by operating activities for the year ended December 31, 2008 was $129.5 million compared to $154.3 million for the year ended December 31, 2007. This $24.8 million decrease in cash provided was primarily due to the decrease in net proceeds from loans held-for-sale of $387.0 million and a increase in the purchase of loans held-for-sale of $132.6 million partially offset by an decrease in loans originated for sale, net of principal collections of $481.8 million.

Cash Used in Investing Activities.  NCB’s net cash used in investing activities for the year ended December 31, 2008 was $439.9 million compared to $175.2 million for the year ended December 31, 2007. This $264.6 million increase in cash used was primarily due to a $294.5 million increase in cash used to originate loans, net of principal collections and prepayments, partially offset by a $53.6 million net decrease in cash used for investment activities (purchases, sales and maturities).

Cash Provided by Financing Activities.  NCB’s net cash provided by financing activities for the year ended December 31, 2008 was $286.5 million compared to $36.9 million for the year ended December 31, 2007 primarily due a $214.5 million change in cash from the proceeds from short-term debt and a $51.4 million year-over-year increase in cash from deposits.

Asset and Liability Management

Asset and liability management is the structuring of interest rate sensitivities of an entity’s assets and liabilities in order to manage the impact of changes in market interest rates on net interest income. NCB’s liquidity and internal rate of return are managed by the Asset Liability Committee (“ALCO”), composed of senior officers of NCB, which meets monthly. The fundamental role of the ALCO is to devise and implement business strategies designed to enhance earnings and the economic value of equity while simultaneously maintaining a prudent level of exposure to interest rate risk. The ALCO devises balance sheet strategies for managing loans, investments, deposits, borrowed funds and off-balance sheet transactions to achieve desired financial performance. The ALCO also develops strategies for pricing various products and services as well as ensuring compliance with related Board policies and established regulatory requirements.

Liquidity and Capital Resources

The following describe NCB’s primary sources and uses of liquidity as of December 31, 2008:

•   Net proceeds from activity related to the sale of $808.8 million loans held-for-sale have been realized during the twelve months ending December 31, 2008

•   Deposits, which have grown 26.5% since December 31, 2007

•   Revolving line of credit available capacity of $142.6 million as of December 31, 2008

Debt maturities:

•   $20.0 million FHLB advances due June 2009

•   $2.5 million Class A Notes due December 2009

•   $55.0 million of privately place debt due December 2009

•   $50.0 million of privately placed debt due December 2010

•   $24.0 million of Class A notes amortization due December 2010

NCB anticipates replacing the above debt maturities through a combination of continued deposit growth, loan sales, interest and principal payments on loans, the issuance of new debt (including debt under the TLGP) or the utilization of current debt facilities.

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NCB has established a liquidity plan which provides guidelines for liquidity management. For NCB’s liquidity management, it first determines the current liquidity position and then forecasts liquidity based on anticipated changes in the balance sheet. In its most current forecast, NCB expects to maintain adequate liquidity. Guidelines for the forecasted liquidity have been established. NCB believes that it has sufficient resources to meet its liquidity needs.

As described in the 2008 Summary, NCB executed amendments to both the Prudential and revolving credit facility agreements in March 2009. NCB’s liquidity forecasts remain adequate as the initial $125 million reduction and the subsequent quarterly $30 million reductions in aggregate revolving commitments are supported by loan maturities and amortization in NCB’s loan portfolio.

In addition, under the March 2009 revolving credit facility agreement amendment, NCB FSB’s potential liquidity sources increased as consent was given to issue FDIC guaranteed debt under the TLGP and to borrow funds from any Federal Reserve bank or any member of the Federal Reserve System.

FHLB available capacity of $192.1 million as of December 31, 2008. The amendments to the credit agreement and Prudential agreement do not impact NCB’s ability to borrow from the FHLB. The FHLB has the ability to increase or decrease borrowing availability based on various conditions and events.

Contractual Obligations

NCB has various financial obligations, including contractual obligations that may require future cash payments. Further discussion of the nature of each obligation is included in Notes 12 through 17 of the Notes to the Consolidated Financial Statements.

As of December 31, 2008, there were no material changes to either the type or maturity of contractual obligations from December 31, 2007.

The following table presents, as of December 31, 2008, significant fixed and determinable contractual obligations (including interest) to third parties by payment date (dollars in thousands):

	One Year or		One to Three		Three to Five		Over Five
	Less		Years		Years		Years		Total
Deposits without a stated maturity	$	346,760	$	-	$	-	$	-	$	346,760
Certificates of deposit		761,189		140,335		31,653		24,635		957,812
Short-term borrowings		225,076		-		-		-		225,076
Long-term debt		76,879		90,000		30,000		-		196,879
Subordinated debt		2,695		28,989		11,550		73,450		116,684
Junior subordinated debt		950		-		-		51,547		52,497
Operating leases		3,676		7,200		7,227		28,448		46,551
Total	$	1,417,225	$	266,524	$	80,430	$	178,080	$	1,942,259

As of December 31, 2008, NCB had one depositor with deposits in excess of 5% of NCB’s total deposits. This depositor had deposits of 8.8% of NCB’s total deposits. All of the $102.0 million of deposits from this depositor relate to certificates of deposit with early withdrawal penalties. Of the $102.0 million of certificates of deposit, $9.0 million mature within 3 months and $93.0 million has a maturity ranging from 4 months to 78 months. Thus, NCB does not consider this deposit concentration a significant liquidity risk.

Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements

Discussion of NCB’s commitments, contingent liabilities and off-balance sheet arrangements is included in Note 23 of the Notes to the Consolidated Financial Statements. Commitments to extend credit do not necessarily represent future cash requirements, as these commitments may expire without being drawn on based upon NCB’s historical experience.

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Capital

NCB’s capital position is projected to support growth and continuing access to financial markets. The average equity to average assets ratio was 10.8% for 2008 compared with 11.8% for 2007. The Act limits NCB’s outstanding debt to ten times its capital and surplus (including the subordinated debt). As of December 31, 2008, NCB, FSB maintained capital levels well in excess of regulatory requirements.

Patronage Policy

Each year, NCB, in accordance with the Act, declares patronage dividends approximately equal to its taxable net income thereby substantially reducing its Federal income tax. NCB has allocated $7.2 million of its 2008 retained earnings for patronage dividends in the form of stock to be distributed during 2009. NCB’s Board of Directors reduced the cash portion of the patronage dividend to be distributed in 2009 to zero.

In connection with the annual patronage dividend, NCB is required to distribute all patronage related income, less reserves for dividends on Class C stock, for interest on and redemption of Class A Notes, and for losses.

Provision for Income Taxes

The Company adopted the provisions of FIN 48 on January 1, 2007. FIN 48 applies to all tax positions accounted for in accordance with FASB Statement 109. The term tax position as used in FIN 48 refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. A tax position can result in a permanent reduction of income taxes payable, a deferral of income taxes otherwise currently payable to future years, or a change in the expected realizability of deferred tax assets.

The term tax position also encompasses, but is not limited to:

•   A decision not to file a tax return

•   An allocation or a shift of income between jurisdictions

•   The characterization of income or a decision to exclude reporting taxable income in a tax return

•   A decision to classify a transaction, entity, or other position in a tax return as tax exempt.

The federal income tax provision is determined on the basis of non-member income generated by NCB, FSB and reserves set aside for dividends on Class C stock. All of NCB, FSB’s income is subject to state taxation, while only certain of NCB’s subsidiaries are subject to federal taxation. The income tax provision for the year ended 2008 was $0.6 million and the income tax benefit for the year ended 2007 was $0.7 million. NCB, FSB’s effective weighted average state tax rate was approximately 5.0% as of December 31, 2008 compared to 6.2% as of December 31, 2007. The increase in the tax provision was due to an increase in NCB, FSB’s income year over year.

The income tax provision for the three months ended December 31, 2008, was $46 thousand, compared with an income tax benefit of $0.6 million for the three months ended December 31, 2007. The increase in the tax provision in 2008 was largely due to improved results in NCB’s subsidiaries subject to federal taxation, and improved performance at NCB, FSB. Net income of NCB’s subsidiaries subject to federal taxation was approximately $296 thousand for the twelve months ended December 31, 2008 compared to a net loss of $62 thousand for the twelve months ended December 31, 2007. Net income at NCB, FSB was approximately $7.9 million for the twelve months ended December 31, 2008 compared to a net loss of $4.4 million for the twelve months ended December 31, 2007.

New Accounting Standards

Statement of Financial Accounting Standards No. 161

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (“SFAS 161”), “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133.” SFAS 161 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an

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entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133. It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under SFAS 133. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. NCB has elected to early adopt and apply the provisions of SFAS 161 effective December 31, 2008. Therefore the required enhanced disclosures of NCB’s derivative instruments and hedging activities and their effects on NCB’s financial position, financial performance and cash flows are included in this Form 10K (see Note 24 — Derivative Financial Instruments).

Statement of Financial Accounting Standards No. 140-4 and FASB Staff Position FASB Interpretation No. 46(R)-8

NCB transfers Cooperative, Multifamily and Commercial Real Estate Loans to trusts that issue various classes of securities to investors. Those trusts are designed to be qualifying special purpose entities (QSPE) as defined by Statement of Financial Accounting Standards No. 140 (“SFAS 140”), “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” NCB has previously analyzed the governing pooling and servicing agreements for the commercial mortgage-backed securities (CMBS) trusts to which it transfers loans, and believes that their terms are consistent with the criteria in SFAS 140 for QSPE status. Regulators and standard setters have had discussions with industry participants and accounting firms regarding whether certain provisions that are common in CMBS structures satisfy the stringent QSPE criteria in SFAS 140.

In December 2008, the FASB amended SFAS 140 with the issuance of Statement of Financial Accounting Standards No. 140-4 (“SFAS 140-4”) and FASB Staff Position FASB Interpretation No. 46(R)-8 (“FIN 46(R)-8”), “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.” These new standards apply to transferors, sponsors, servicers, primary beneficiaries, and holders of significant variable interests in a variable interest entity (VIE) or QSPE. SFAS 140-4 and FIN 46(R)-8 are effective for the first interim period or fiscal year ending after December 31, 2008.

SFAS 140-4 requires NCB to disclose specific information related to the following matters:

1)	NCB’s continuing involvement, as transferor, with financial assets it has transferred in an asset-backed financing arrangement or securitization,
2)	The nature of any restrictions on assets reported in its balance sheet that relate to a transferred financial asset, and the carrying amounts of such assets,
3)	How servicing assets and servicing liabilities are reported under SFAS 140, and
4)	How NCB’s financial position, financial performance, and cash flows, as transferor, are affected by the transfer of financial assets that the it may continue to be involved with if the related securitization or asset-backed financing arrangements are accounted for as secured borrowings or as sales.

All required disclosures under SFAS 140-4 are included in the Consolidated Notes to the Financial Statements in this Form 10-K (see Note 27).

FIN 46(R)-8 requires NCB to disclose specific information related to the following matters:

1)	The significant judgments and assumptions NCB made in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE,
2)	The nature of restrictions on a consolidated VIE’s assets if reported in NCB’s balance sheet, and the carrying amounts of such assets,
3)	The nature of the risks associated with NCB’s involvement with a VIE and changes in those risks, and
4)	How involvement with a VIE affects NCB’s financial position, financial performance, and cashflows.

NCB does not believe FIN 46(R) — 8 is applicable as of December 31, 2008.

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Critical Accounting Policies

Fair Value Measurements

On January 1, 2008, NCB adopted Statement of Financial Accounting Standards No. 157 (“SFAS 157”), “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements (see Note 25 — Fair Value Measurements).

In October 2008, the FASB issued Staff Position No. 157-3 (“SFAS 157-3”), “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active”. SFAS 157-3 clarifies the application of SFAS 157 (see Note 25) in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that asset is not active. NCB adopted SFAS 157-3 effective July 1, 2008.

The provisions of Statement of Financial Accounting Standards No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115,” were adopted by NCB on January 1, 2008. SFAS 159 allows NCB, at specified election dates, to measure certain financial instruments at fair value. Unrealized gains and losses on financial instruments for which the fair value option has been elected are included in earnings. Electing to use fair value allows a better offset of the change in fair value of the loan and the derivative instruments used to hedge them without the burden of complying with the requirements of SFAS 133. Subsequent to the adoption of SFAS 159, loan origination costs for those loans where the fair value election was made are recognized in non-interest expense as incurred. Previously, these origination costs would have been capitalized as part of the carrying amount of the loans and recognized as a reduction of gains on loan sales.

Staff Accounting Bulletin No. 109

On January 1, 2008, NCB adopted Staff Accounting Bulletin No. 109 (“SAB 109”) “Written Loan Commitments Recorded at Fair Value through Earnings.” SAB 109 requires fair value measurements of derivatives or other written loan commitments recorded through earnings to include the future cash flows related to the loan’s servicing rights. SAB 109 also states that internally developed intangible assets should not be recorded as part of the fair value of a derivative loan commitment or to written loan commitments that are accounted at fair value through earnings.

The application of SFAS 157 and SAB 109 had the effect of recognizing a gain on loans, loan commitments and derivatives hedging these loan and loan commitments of $1.4 million for loans that will not be funded or delivered to investors until a date subsequent to December 31, 2008.

Other-Than-Temporary Impairment of Investments

NCB’s investment securities portfolio and retained beneficial interests in securitized financial assets are evaluated for impairment on a quarterly basis pursuant to the guidance in Statement of Financial Accounting Standard No. 115, as amended “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”), Emerging Issues Task Force Issue No. 99-20 “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets” (“EITF 99-20”), and the amendments to EITF 99-20 which are disclosed in EITF 99-20-1 (issued January 2009 effective as of December 31, 2008.) Each individual security is evaluated for impairment. Impairment is considered temporary when the fair value of the instrument has been adversely impacted by market conditions, such as changes in interest rates or investor spreads, and NCB has the intent and ability to hold the instrument until such time as it expects to have received the contractual cash flows and recovered its investment.

Securities that will be held for indefinite periods of time, including those that may be sold in response to changes in market interest rates and related changes in the security’s prepayment risk, needs for liquidity and changes in the availability and the yield of alternative investments are classified as available-for-sale. These assets are carried at fair value. Unrealized gains and losses are determined on an aggregate basis, excluded from earnings

45

and reported as other comprehensive income net of any tax effect. Gains and losses on the sale of available-for-sale securities are determined using the adjusted cost of the specific security sold and are included in earnings.

Securities that management has the positive intent and ability to hold until maturity are classified as held-to-maturity and are reported at amortized cost. The investment portfolio is periodically evaluated for other than temporary impairment.

NCB recognizes an impairment charge when the declines in the fair value of equity and debt securities below their cost basis are judged to be other-than-temporary. Significant judgment is used to identify events or circumstances that would likely have a significant adverse effect on the future use of the investment. NCB considers various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, forecasted recovery, the financial condition and near-term prospects of the investee, and its ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Information about unrealized gains and losses is subject to changing conditions. The values of securities with unrealized gains and losses will fluctuate, as will the values of securities that NCB identifies as potentially distressed. It is not necessary for an adverse change in cash flows to occur in order to determine that an impairment is other-than-temporary. When an investment security or retained interest is determined to be other than temporarily impaired, the carrying value is reduced to fair value and an impairment charge is recognized.

Allowance for Loan Losses

The allowance for loan losses is an estimate of known and inherent losses in our loan portfolio. The allowance is based on two basic principles of accounting: (i) Statement of Financial Accounting Standards (SFAS) No. 5 “Accounting for Contingencies,” which requires that losses be accrued when they are probable of having occurred and reasonably estimable and (ii) SFAS No. 114, “Accounting by Creditors for Impairment of a Loan,” which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the balance of loans which are impaired.

A loan is considered impaired when, based on current information, it is probable NCB will be unable to collect all amounts due under the contractual terms of the loan. Impairment is measured based upon the present value of future cash flows discounted for at the loan’s effective interest rate; or, the fair value of the collateral, less estimated selling costs, if the loan is collateral-dependent.

A risk rating system is designed to classify each loan according to the risk unique to the credit facility. The expected loss for each risk rating is determined using historical loss factors and collateral position of the credit facility. All loans are evaluated individually and assigned a risk rating.

Reserves for impaired loans are established based upon the above criteria. Reserves on all other loans are calculated on a loan-by-loan basis based upon the probability of the default and the loss in the event of default for each risk rating, based on historical experience.

NCB charges off loans, i.e. reduces the loan balance, when the loans are deemed to be uncollectible at which time the allowance for loan losses is reduced.

Servicing Assets and Interest-Only Receivables

SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” (SFAS No. 140) requires that entities that acquire servicing assets through either purchase or origination of loans and sell or securitize those loans with servicing assets retained must allocate the total cost of the loans to the servicing assets and the loans (without the servicing assets) based on their relative fair value.

Servicing assets, stated net of accumulated amortization, are amortized in proportion to the remaining net servicing revenues estimated to be generated by the underlying loans. Furthermore, servicing assets are assessed for impairment based on lower of cost or fair value. In addition, mortgage-servicing assets must be stratified based on one or more predominant risk characteristics of the underlying loans and impairment is recognized through a valuation allowance for each impaired stratum.

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Interest-only receivables are created when loans are sold and a portion of the interest retained by NCB does not depend on the servicing work being performed. The interest-only receivables are amortized to interest income using the interest method. Interest-only receivables that are certificated have been included as investment securities consistent with SFAS No. 115. Interest-only receivables that are not certificated are included as other assets.

Substantially all interest-only receivables pertain to Cooperative Loans. These mortgages are typically structured with prepayment lockouts followed by prepayment penalties, yield maintenance provisions, or defeasance through maturity. In calculating interest-only receivables, NCB discounts the cash flows through the lockout or defeasance period. Cash flows beyond the lockout or defeasance period are included in the fair value of the interest-only receivable only to the extent that NCB is entitled to receive the prepayment or yield maintenance penalty.

Gains or losses on sales and securitizations depend, in part, on the previous carrying amount of the loans involved in the transfer and are allocated between the loans sold and the retained interests based on their relative fair value at the date of sale. Since quoted market prices are generally not available, NCB estimates fair value of these interest-only receivables by determining the present value of future expected cash flows using modeling techniques that incorporate management’s best estimates of key variables, including credit losses, prepayment speeds, prepayment lockouts and discount rates commensurate with the risks involved. Gains on sales and securitizations are reported in non-interest income.

The fair value of the interest-only receivables is determined using discounted future expected cash flows at various discount rates. In an effort to maximize the value of interest-only receivables, most cooperative mortgages have very strict prepayment restrictions. The most common prepayment protection is a lockout period, followed by either a fixed percentage penalty, or some form of yield maintenance. For loans that do not have prepayment options, the related interest-only receivable is adjusted at the time of prepayment.

For certificated interest-only receivables, the discount rate of future expected cash flows is equal to a spread over the benchmark index at which the respective loans were priced. For non-certificated interest-only receivables, the discount rate of future expected cash flows is equal to a market spread over the benchmark index for similar certificated interest-only receivables adjusted by a premium to reflect the less liquid nature of the non-certificated interest-only receivable. An appropriate spread, determined by reference to what market participants would use for similar financial instruments, is added to the index to determine the current discount rate.

The weighted average life of each interest-only receivable will vary based on the average life of the underlying collateral.

Interest-only receivables that are subject to prepayment risk such that NCB may not recover substantially all of its investment are recorded at fair value with subsequent adjustments reflected in other comprehensive income or in earnings if the fair value of the interest-only receivable has declined below its carrying amount and such decline has been determined to be other than temporary.

Accounting for Derivative Instruments and Hedging Activities

NCB maintains a risk management strategy that includes the use of derivative instruments to reduce unplanned earnings fluctuations caused by interest rate volatility. Use of derivative instruments is a component of NCB’s overall risk management strategy in accordance with a formal policy that is monitored by management, which has delegated authority over the interest rate risk management function.

The derivative instruments utilized include interest rate swaps, futures contracts and forward loan sales commitments. Interest rate swaps involve the exchange of fixed and variable rate interest payments between two parties based upon a notional principal amount and maturity date. Interest rate futures generally involve exchange-traded contracts to buy or sell U.S. Treasury bonds or notes in the future at specified prices. Forward loan sales commitments lock in the prices at which loans will be sold to investors.

NCB uses interest rate swaps, futures contracts and forward loan sales commitments to offset changes in fair value associated with loan commitments prior to funding the related or underlying loan. During the

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commitment period, the loan commitments and related interest rate swaps, futures contracts and forward loan sales commitments are accounted for as derivatives and therefore recorded at fair value through income. Once funded the loan generally becomes the hedged item in a fair value hedging relationship.

NCB is exposed to credit and market risk as a result of its use of derivative instruments. If the fair value of the derivative contract is positive, the counterparty owes NCB and a repayment risk exists. If the fair value of the derivative contract is negative, NCB owes the counterparty, so there is no repayment risk. NCB minimizes repayment risk by entering into transactions with financially stable counterparties that are specified by policy and reviewed periodically by management. When NCB has multiple derivative transactions with a single counterparty, the net mark-to-market exposure represents the netting of positive and negative exposures with that counterparty. The net mark-to-market exposure with a counterparty is a measure of credit risk when there is a legally enforceable master netting agreement between NCB and the counterparty. NCB uses master netting agreements with the majority of its counterparties.

Market risk is the adverse effect that a change in interest rates, credit risk or comparative currency values has on the fair value of a financial instrument or expected cash flows. NCB manages the market risk associated with the interest rate hedge contracts by establishing formal policy limits concerning the types and degree of risk that may be undertaken. Compliance with this policy is monitored by management and reported to the Board of Directors.

All derivatives are recognized on the balance sheet at fair value. When a derivative contract is entered into, NCB determines whether or not it will be designated as a fair value hedge pursuant to provisions of FAS 133. NCB documents the relationships between the hedging instruments and the hedged items to link all derivatives that are designated as fair value hedges to specific assets and liabilities on the balance sheet. NCB assesses, both at inception and on an on-going basis, the effectiveness of all hedges in offsetting changes in fair values of hedged items. NCB discontinues hedge accounting prospectively when (1) the derivative is no longer effective in offsetting changes in fair value of a hedged item; or (2) the derivative matures or is sold, terminated or exercised.

When hedge accounting is discontinued because the derivative no longer qualifies as an effective fair value hedge, the derivative will continue to be carried on the balance sheet at its fair value and the hedged asset or liability will no longer be adjusted to reflect changes in fair value attributed to the hedged risk. In all other situations in which hedge accounting is discontinued, the derivative will be carried at fair value with the changes in fair value recognized in earnings.

For derivative instruments designated as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk is recognized in current earnings during the period of the change in fair values.

As of December 31, 2008 and 2007, NCB had not entered into any cash flow hedges.

Income Taxes

The Act provides that NCB shall be treated as a cooperative and subject to the provisions of Subchapter T of the Internal Revenue Code. Under Subchapter T and the Act, NCB issues its member-borrowers patronage dividends, which are tax deductible to NCB thereby reducing its taxable income. NCB has determined that all income generated by NCB and its subsidiaries, with the exception of certain income of NCB, FSB, qualifies as patronage income under the Internal Revenue Code as amended by the Act with respect to NCB, with the consequence that NCB is able to issue tax deductible patronage dividends with respect to all such income. The Act also provides that NCB is exempt from state and local taxes with the exception of real estate taxes. Certain NCB subsidiaries, however, are subject to federal and state income taxes.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NCB’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships. NCB also has exposure to different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, investment companies and other institutional clients. In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, NCB may experience delays in recovering the assets posted as collateral or may incur a loss to the extent that the counterparty was holding collateral in excess of the obligation to such counterparty.

In addition, many of these transactions expose NCB to credit risk in the event of a default by its counterparty or client. Also, the credit risk may be exacerbated when the collateral held by NCB cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to the NCB.

NCB’s principal market risk exposure remains interest rate risk.

NCB’s asset and liability management process manages NCB’s interest rate risk by structuring the balance sheet and derivative portfolios to maximize net interest income while maintaining an acceptable level of risk to changes in market interest rates. The achievement of this goal requires a balance between profitability, liquidity, and interest rate risk.

Interest rate risk is managed by the ALCO in accordance with policies approved by NCB’s Board of Directors. The ALCO formulates strategies designed to ensure appropriate level of interest rate risk. In determining the appropriate level of interest rate risk, the ALCO considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates and liquidity, business strategies, and other factors. The ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activity, warehouse loans and commitments to originate loans (“mortgage pipeline”), and the maturities of investments and borrowings. Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of deposits, and consumer and commercial deposit activity.

To effectively measure and manage interest rate risk, NCB uses simulation analyses to determine the impact on net interest income of various interest rate scenarios, balance sheet trends, and strategies. From these simulations, interest rate risk is quantified and appropriate strategies are developed and implemented. Additionally, duration and market value sensitivity measures are utilized to provide additional insights concerning the interest rate risk management process. Executive management and NCB’s Board of Directors review the overall interest rate risk position and strategies on an ongoing basis. NCB has traditionally managed its business to maintain limited exposure to changes in interest rates.

NCB hedges a portion of its interest rate risk by entering into certain financial instruments including interest rate swaps, caps, floors, financial options, financial futures contracts, and forward delivery contracts. A hedge is a transaction to reduce risk by creating a relationship whereby changes in the value of the hedged asset or liability are offset in whole or in part by changes in the value of the financial instrument used for hedging. The impact of all hedging relationships is included in the following analysis.

The following tables present an analysis of the sensitivity of NCB’s net interest income and economic value of portfolio equity (market value of assets, less liabilities and derivative instruments.) The interest rate scenarios presented in the table include interest rates at December 31, 2008 and December 31, 2007 as adjusted for instantaneous parallel rate changes upward and downward of up to 200 basis points.

Net interest income was reasonably well insulated against the impact of changes in market interest rates at both December 31, 2008 and December 31, 2007. The impact of changing market interest rates is nonlinear due to the existence of customer options, primarily loan prepayments options, embedded in the balance sheet.

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Since there are limitations inherent in any methodology used to estimate the exposure to changes in market interest rates, this analysis is not intended to be a forecast of the actual effect of a change in market interest rates. The net interest income variability reflects NCB’s interest sensitivity gap (defined below) and other factors.

2008
						Change In
						Economic Value
Change In			Change In Net			of Portfolio
Interest Rates			Interest Income			Equity
	+200			-9.6	%		-15.1	%
	+100			-4.4	%		-6.9	%
	-100			1.1	%		2.7	%
	-200	(1)		n/a			n/a

2007
					Change In
					Economic Value
Change In		Change In Net			of Portfolio
Interest Rates		Interest Income			Equity
	+200		-5.4	%		-9.2	%
	+100		-2.2	%		-3.7	%
	-100		1.1	%		2.2	%
	-200		1.4	%		3.2	%

(1) Due to the low level of interest rates as of December 31, 2008, it is not possible, nor meaningful to disclose results for this scenario.

Key assumptions used in the sensitivity analysis of net interest income and economic value of portfolio equity include the following:

1.	Balance sheet balances for various asset and liability classes are held constant for the net interest income simulations.
2.	Prepayment assumptions are predicated on an analysis of historical prepayment behavior and management expectations.
3.	Spread relationships between various interest rate indices and interest-earning assets and interest bearing liabilities estimated based on the analysis of historical relationships and management expectations.

The interest rate sensitivity gap (“gap”) is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. During a period of rising interest rates, a positive gap (where the amount of assets maturing and repricing within one year exceeds liabilities maturing or repricing within one year) would tend to have a positive impact on net interest income while a negative gap would tend to have a detrimental impact. During a period of declining interest rates, a negative gap would tend to have a positive impact on net interest income while a positive gap would tend to have a detrimental impact. NCB’s one-year cumulative gap analysis at December 31, 2008 was negative $351.4 or -16.31% of assets. The one-year cumulative gap analysis at December 31, 2007 was positive $79.8 million or 4.38% of assets. These variations in gaps year over year are consistent with the simulation results that show relative changes in net interest income in response to changes in market interest rates.

While the gap position is a useful tool in measuring interest rate risk, it is difficult to predict the effect of changing interest rates solely on that measure, without accounting for alterations in the maturity or repricing characteristics of the balance sheet that occur during changes in market interest rates. For example, the gap position reflects only the prepayment assumptions pertaining to the current rate environment. Assets tend to prepay more rapidly during periods of declining interest rates than during periods of rising interest rates. Because of this and other risk factors not contemplated by the gap position, an institution could have a matched gap position in the current rate environment and still have its net interest income exposed to interest rate risk.

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The tables 8 and 9 set forth the expected maturity and repricing characteristics of NCB’s consolidated assets, liabilities and derivative contracts at December 31, 2008 and 2007.

Table 8

INTEREST RATE SENSITIVITY

At December 31, 2008

(Dollars in thousands)

																Over
	Interest -			Interest -			Interest -			Interest -			Interest -			12 Months and
	sensitivity			sensitivity			sensitivity			sensitivity			sensitivity			Non-Interest
	30 days			3 month			month			12 month			Total			Sensitive			Total
Interest-earning assets
Cash and cash equivalents	$	39,971		$	-		$	-		$	-		$	39,971		$	-		$	39,971
Investment securities		2,216			2,692			7,637			10,229			22,774			45,711			68,485
Loans and leases*		342,282			268,479			122,380			220,812			953,953			990,449			1,944,402
Other assets - net		58,126			785			6,452			12,804			78,167			23,867			102,034
Total	$	442,595		$	271,956		$	136,469		$	243,845		$	1,094,865		$	1,060,027		$	2,154,892
Interest-bearing liabilities
Deposits	$	393,139		$	166,133		$	222,369		$	230,607		$	1,012,248		$	196,960		$	1,209,208
Short-term borrowings		225,000			-			-			-			225,000			-			225,000
Long-term debt		1,447			40,000			20,000			15,000			76,447			120,000			196,447
Subordinated debt		-			36,810			-			40,782			77,592			38,897			116,489
Jr. Subordinated debt		51,547			-			-			-			51,547			-			51,547
Total	$	671,133		$	242,943		$	242,369		$	286,389		$	1,442,834		$	355,857		$	1,798,691
Other
Other non-interest bearing, net	$	-		$	-		$	-		$	-		$	-		$	356,201		$	356,201
Effect of interest rate swap and financial futures		-			43,442			-			(40,000	)		3,442			(3,442	)		-
Total liabilities & members’ equity, net of derivatives	$	671,133		$	286,385		$	242,369		$	246,389		$	1,446,276		$	708,616		$	2,154,892
Repricing differences	$	(228,538	)	$	(14,429	)	$	(105,900	)	$	(2,544	)	$	(351,411	)
Cumulative gap	$	(228,538	)	$	(242,967	)	$	(348,867	)	$	(351,411	)
Cumulative gap as % of total assets		-10.61	%		-11.28	%		-16.20	%		-16.31	%

* Includes loans held-for-sale and allowance for loan losses.

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Table 9

INTEREST RATE SENSITIVITY

At December 31, 2007

(Dollars in thousands)

															Over
	Interest			Interest			Interest			Interest			Interest		12 Months and
	sensitivity			sensitivity			sensitivity			sensitivity			sensitivity		Non-Interest
	30 days			3 month			6 month			12 month			Total		Sensitive			Total
Interest-earning assets
Cash and cash equivalents	$	63,724		$	-		$	-		$	-		$	63,724	$	-		$	63,724
Investment securities		16,883			8,790			6,894			23,252			55,819		49,764			105,583
Loans and leases*		140,753			439,381			96,915			157,860			834,909		762,284			1,597,193
Other assets - net		70,523			482			703			1,407			73,115		32,161			105,276
Total	$	291,883		$	448,653		$	104,512		$	182,519		$	1,027,567	$	844,209		$	1,871,776
Interest-bearing liabilities Deposits	$	202,499		$	127,965		$	153,720		$	143,557		$	627,741	$	358,120		$	985,861
Short-term borrowings		183,000			-			-			-			183,000		-			183,000
Long-term debt		-			-			-			-			-		220,907			220,907
Subordinated debt		-			39,310			-			-			39,310		79,679			118,989
Jr. Subordinated debt		51,547			-			-			-			51,547		-			51,547
Total	$	437,046		$	167,275		$	153,720		$	143,557		$	901,598	$	658,706		$	1,560,304
Other
Other non-interest bearing, net	$	-		$	-		$	-		$	-		$	-	$	311,472		$	311,472
Effect of interest rate swap and financial futures		766			45,399			-			-			46,165		(46,165	)		-
Total liabilities & members’ equity, net of derivatives	$	437,812		$	212,674		$	153,720		$	143,557		$	947,763	$	924,013		$	1,871,776
Repricing differences	$	(145,929	)	$	235,979		$	(49,208	)	$	38,962		$	79,804
Cumulative gap	$	(145,929	)	$	90,050		$	40,842		$	79,804
Cumulative gap as % of total assets		-7.70	%		4.93	%		2.29	%		4.38	%

* Includes loans held-for-sale and allowance for loan losses.

Table 8 indicates that on December 31, 2008 NCB had gaps (as a percentage of total assets) of negative 13.65% and 14.40% at the one year and six month time horizons, respectively. Table 9 indicates that on December 31, 2007, NCB had a positive gap (as a percentage of total assets) of 4.38% and 2.29% at the one year and six month time horizons, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NCB’s financial statements and notes thereto are set forth beginning on the following page. NCB is not subject to any of the requirements for supplementary financial information contained in Item 302 of Regulation S-K.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Members of National Consumer Cooperative Bank:

We have audited the accompanying consolidated balance sheets of National Consumer Cooperative Bank and subsidiaries (the Company) as of December 31, 2008, and 2007, and the related consolidated statements of income (loss), comprehensive income (loss), changes in members’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of National Consumer Cooperative Bank and subsidiaries as of December 31, 2008, and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

/s/  KPMG LLP

McLean, Virginia

March 31, 2009

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NATIONAL CONSUMER COOPERATIVE BANK

CONSOLIDATED BALANCE SHEETS

December 31, 2008 and 2007

	2008			2007
	(Dollars in thousands)
Assets
Cash and cash equivalents	$	39,971		$	63,724
Investment securities
Available-for-sale (amortized cost of $71,869 and $107,396)		68,098			105,166
Held-to-maturity (fair value of $374 and $431)		387			417
Loans held-for-sale ($14.4 million and $0 million recorded at fair value, respectively per SFAS 159)		14,278			90,949
Loans and lease financing		1,957,191			1,523,958
Less: Allowance for loan losses		(27,067	)		(17,714	)
Net loans and lease financing		1,930,124			1,506,244
Other assets		102,034			105,276
Total assets	$	2,154,892		$	1,871,776
Liabilities and Members’ Equity
Liabilities
Deposits	$	1,300,071		$	1,027,452
Other liabilities		38,581			47,118
Borrowings
Short-term		225,000			183,000
Long-term		196,447			220,907
Subordinated debt		116,489			118,989
Junior subordinated debt		51,547			51,547
Total borrowings		589,483			574,443
Total liabilities		1,928,135			1,649,013
Members’ equity
Common stock		197,784			197,891
Retained earnings
Allocated		7,154			—
Unallocated		26,251			28,200
Accumulated other comprehensive loss		(4,432	)		(3,328	)
Total members’ equity		226,757			222,763
Total liabilities and members’ equity	$	2,154,892		$	1,871,776

The accompanying notes are an integral part of these consolidated financial statements.

54

NATIONAL CONSUMER COOPERATIVE BANK

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

For the Years Ended December 31, 2008, 2007, and 2006

	2008			2007			2006
	(Dollars in thousands)
Interest income
Loans and lease financing	$	116,325		$	125,016		$	108,328
Investment securities		5,518			8,081			7,147
Other interest income		1,858			2,642			2,979
Total interest income		123,701			135,739			118,454
Interest expense
Deposits		37,549			43,310			30,265
Short-term borrowings		8,696			17,510			18,380
Long-term debt, other borrowings and subordinated debt		21,060			24,301			23,451
Total interest expense		67,305			85,121			72,096
Net interest income		56,396			50,618			46,358
Provision for loan losses		18,650			152			3,667
Net interest income after provision for loan losses		37,746			50,466			42,691
Non-interest income
Gain (loss) on sale of loans		6,016			(1	)		19,930
Servicing fees		4,568			4,651			4,537
Letter of credit fees		4,356			3,423			3,513
SFAS 133 adjustment		3,256			(1,468	)		775
Commercial loan fees		1,184			428			463
Real estate loan fees		1,002			1,515			728
Prepayment fees		735			837			1,312
Other		3,825			2,584			2,422
Total non-interest income		24,942			11,969			33,680
Non-interest expense
Compensation and employee benefits		29,815			32,703			31,038
Occupancy and equipment		7,470			8,057			8,700
Contractual services		5,482			5,944			6,086
Information systems		4,627			4,402			2,697
Loan costs		2,479			2,082			1,609
Net loss on other-than-temporary impairment and sale of available-for-sale securities		1,525			17			29
Corporate development		1,345			2,814			3,132
Travel and entertainment		1,220			1,449			1,554
Lower of cost or market valuation allowance		832			2,070			133
Provision (credit) for unfunded commitments		659			488			(1,077	)
Deferred rent recognition related to lease termination		—			(1,860	)		—
Lease termination costs		—			3,148			—
Other		2,805			2,257			1,631
Total non-interest expense		58,259			63,571			55,532
Income (loss) before income taxes		4,429			(1,136	)		20,839
Provision (benefit) for income taxes		555			(664	)		1,414
Net income (loss)	$	3,874		$	(472	)	$	19,425
Distribution of net income (loss)
Patronage dividends	$	7,154		$	—		$	17,446
Retained earnings		(3,280	)		(472	)		1,979
	$	3,874		$	(472	)	$	19,425

The accompanying notes are an integral part of these consolidated financial statements.

55

NATIONAL CONSUMER COOPERATIVE BANK

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Years ended December 31, 2008, 2007, and 2006

	2008			2007			2006
	(Dollars in thousands)
Net income (loss)	$	3,874		$	(472	)	$	19,425
Other comprehensive income
Unrealized holding loss before tax on available-for- sale investment securities and non-certificated interest- only receivables		(1,173	)		(4,227	)		(525	)
Tax effect		69			7			7
Comprehensive income (loss)	$	2,770		$	(4,692	)	$	18,907

The accompanying notes are an integral part of these consolidated financial statements.

56

NATIONAL CONSUMER COOPERATIVE BANK

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

For the Years ended December 31, 2008, 2007, and 2006

										Accumulated
				Retained			Retained			Other			Total
	Common			Earnings			Earnings			Comprehensive			Members’
	Stock			Allocated			Unallocated			Income (Loss)			Equity
	(Dollars in thousands)
Balance, December 31, 2005	$	170,868		$	13,307		$	33,423		$	1,410		$	219,008
Net income		—			—			19,425			—			19,425
Adjustment to prior year dividends		—			4,003			(6,402	)		—			(2,399	)
Cancellation of stock		(1,008	)		60			900			—			(48	)
Other dividends paid		—			—			(512	)		—			(512	)
2005 patronage dividends distributed in stock		17,370			(17,370	)		—			—			—
2006 patronage dividends														—
To be distributed in cash		—			—			(7,118	)		—			(7,118	)
Retained in form of equity		—			10,328			(10,328	)		—			—
Unrealized loss on available-for-sale investment securities and non-certificated interest-only receivables, net of taxes		—			—			—			(518	)		(518	)
Balance, December 31, 2006		187,230			10,328			29,388			892			227,838
Net loss		—			—			(472	)		—			(472	)
Adjustment to prior year dividends		—			497			(485	)		—			12
Cancellation of stock		(164	)		—			155			—			(9	)
Other dividends paid		—			—			(386	)		—			(386	)
2006 patronage dividends distributed in stock		10,825			(10,825	)		—			—			—
Unrealized loss on available-for-sale investment securities and non-certificated interest-only receivables, net of taxes		—			—			—			(4,220	)		(4,220	)
Balance, December 31, 2007		197,891			—			28,200			(3,328	)		222,763
Net income		—			—			3,874			—			3,874
Adjustment to initially apply FAS 157		—			—			1,224			—			1,224
Cancellation of stock		(107	)		—			107			—			—
2008 patronage dividends
To be distributed in cash		—			—			—			—			—
Retained in form of equity		—			7,154			(7,154	)		—			—
Unrealized loss on available-for-sale investment securities and non-certificated interest-only receivables, net of taxes		—			—			—			(1,104	)		(1,104	)
Balance, December 31, 2008	$	197,784		$	7,154		$	26,251		$	(4,432	)	$	226,757

The accompanying notes are an integral part of these consolidated financial statements.

57

NATIONAL CONSUMER COOPERATIVE BANK

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years ended December 31, 2008, 2007, and 2006

	2008			2007			2006
	(Dollars in thousands)
Cash flows from operating activities
Net income (loss)	$	3,874		$	(472	)	$	19,425
Adjustments to reconcile net income to net cash provided by operating activities Provision for loan losses		18,650			152			3,667
Provision (credit) for losses on unfunded commitments		659			488			(1,077	)
Amortization and writedown of interest-only-receivables and servicing rights		12,369			11,402			10,260
Depreciation and amortization, other		3,790			3,150			6,349
(Gain) loss on sale of loans including SFAS 133 adjustment		(9,272	)		1,469			(20,705	)
Net loss on other-than-temporary impairment and sale of available-for-sale securities		1,525			17			29
Purchase of loans held-for-sale		(355,136	)		(222,489	)		(179,493	)
Loans originated for sale, net of principal collections		(349,825	)		(831,604	)		(899,556	)
Lower of cost or market valuation allowance		832			2,070			133
Net proceeds from sale of loans held-for-sale		808,824			1,195,830			1,091,690
Tenant improvement allowance		—			3,656			—
Lease termination costs		—			3,148			—
Lease termination incentive		—			(1,585	)		—
Deferred rent recognition related to lease termination		—			(1,860	)		—
Decrease (increase) in other assets		167			(8,368	)		(3,460	)
Decrease in other liabilities		(6,689	)		(747	)		(5,381	)
Net cash provided by operating activities		129,534			154,257			21,881
Cash flows from investing activities
Decrease (increase) in restricted cash		—			5,398			(248	)
Purchase of investment securities
Available-for-sale		(63,004	)		(77,044	)		(107,770	)
Held-to-maturity		—			—			(17	)
Proceeds from maturities of investment securities
Available-for-sale		66,803			50,375			107,034
Held-to-maturity		30			52			9
Proceeds from the sale of investment securities
Available-for-sale		24,197			1,037			2,725
Net increase in loans and lease financing		(439,678	)		(145,189	)		(131,580	)
Purchase of portfolio loans		(27,591	)		—			—
Purchase of premises and equipment		(533	)		(9,800	)		(5,036	)
Net cash used in investing activities		(439,776	)		(175,171	)		(134,883	)
Cash flows from financing activities
Net increase in deposits		272,056			220,662			69,421
Increase (decrease) in short-term borrowings		42,000			(172,500	)		39,318
Proceeds from issuance of long-term borrowings		—			—			105,000
Repayment of long-term borrowings		(25,000	)		—			(80,000	)
Repayment of subordinated borrowings		(2,500	)		(2,500	)		(2,500	)
Incurrence of financing costs		(67	)		(1,287	)		(1,053	)
Patronage dividends paid		—			(7,107	)		(11,917	)
Other dividends paid		—			(386	)		(512	)
Net cash provided by financing activities		286,489			36,882			117,757
(Decrease) increase in cash and cash equivalents		(23,753	)		15,968			4,755
Cash and cash equivalents, beginning of period		63,724			47,756			43,001
Cash and cash equivalents, end of period	$	39,971		$	63,724		$	47,756

The accompanying notes are an integral part of these consolidated financial statements.

58

NATIONAL CONSUMER COOPERATIVE BANK

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years ended December 31, 2008, 2007 and 2006

	2008			2007			2006
	(Dollars in thousands)
Supplemental schedule of non-cash investing and financing activities:
Unrealized holding loss on available-for-sale investment securities and non-certificated interest-only receivables, net of tax	$	(1,104	)	$	(4,220	)	$	(518	)
Loans transferred to other real estate owned	$	1,087		$	180		$	193
Transfer of loans held-for-sale to loans and lease financing	$	43,462		$	—		$	10,092
Transfer of loans and lease financing to loans held-for-sale	$	67,737		$	—		$	—
Common stock cancelled and loan losses recovered against allowance for loan losses	$	—		$	9		$	48
Supplemental information:
Interest paid	$	68,385		$	81,860		$	71,315
Income taxes paid	$	361		$	562		$	1,636

The accompanying notes are an integral part of these consolidated financial statements.

59

NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2008, 2007 and 2006

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

National Consumer Cooperative Bank, doing business as NCB, is a U.S. Government-chartered corporation organized under the National Consumer Cooperative Bank Act (the “Act”). NCB provides loans and financial services primarily to cooperatives. NCB Financial Corporation (“NCBFC”), a wholly owned subsidiary, is the holding company of NCB, FSB, a federally-chartered thrift institution. NCB, FSB provides a broad range of financial services to cooperative and non-cooperative customers.

The 1981 amendments to the Act also directed NCB to form NCB Development Corporation, now NCB Capital Impact, a related entity, which is a non-profit organization without capital stock organized under the laws of the District of Columbia to perform only functions provided in the Act. NCB Capital Impact provides loans and technical support to cooperative enterprises. NCB Capital Impact’s bylaws provide for a majority of the nine to fifteen members of the Board of Directors to be appointed by the members of NCB Capital Impact, who comprise the members of NCB’s Board, with a majority of directors to be appointed from among the members of the NCB Board. Consistent with the Act, NCB makes deductible, voluntary contributions to NCB Capital Impact.

Principles of Consolidation

The consolidated financial statements include the accounts of NCB and its subsidiaries. All significant inter-company balances and transactions have been eliminated. The consolidated financial statements of NCB do not include the assets, liabilities or results of operations of NCB Capital Impact or NCB Capital Trust I (“Trust”), a Delaware statutory trust formed by NCB in 2003 in connection with the issuance of trust preferred securities.

Based on the guidance in FASB Interpretation No 46R (“FIN 46R”), NCB does not consolidate its investment in the Trust.

On November 21, 2008, NCB sold its LLC units in NCB Community Works (“CCW”), in which NCB held 50% interest with the remaining 50% being owned by NCB Capital Impact, which sold its share at the same time. As part of the sale of CCW, NCB transferred some excluded assets from CCW to NCB Communities LLC, a newly formed entity in which NCB owns 50% and the remaining 50% is owned by NCB Capital Impact.

Estimates

The preparation of financial statements in conformity with the U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statements of cash flow, cash equivalents include cash on hand, amounts due from banks, overnight investments and time deposits. Although cash equivalents generally have maturities of ninety days or less, time deposits subject to early withdrawal penalties and with maturities greater than ninety days have been included in cash equivalents.

Investments

NCB’s investment securities portfolio and retained beneficial interests in securitized financial assets are evaluated for impairment on a quarterly basis pursuant to the guidance in Statement of Financial Accounting Standard No. 115, as amended “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”), Emerging Issues Task Force Issue No. 99-20 “Recognition of Interest Income and Impairment on Purchased and

60

NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Retained Beneficial Interests in Securitized Financial Assets” (“EITF 99-20”), and the amendments to EITF 99-20 which are disclosed in EITF 99-20-1 (issued January 2009 effective as of December 31, 2008.) Each individual security is evaluated for impairment. Impairment is considered temporary when the fair value of the instrument has been adversely impacted by market conditions, such as changes in interest rates or investor spreads, and NCB has the intent and ability to hold the instrument until such time as it expects to have received the contractual cash flows and recovered its investment.

Securities that will be held for indefinite periods of time, including those that may be sold in response to changes in market interest rates and related changes in the security’s prepayment risk, needs for liquidity and changes in the availability and the yield of alternative investments are classified as available-for-sale. These assets are carried at fair value. Unrealized gains and losses are determined on an aggregate basis, excluded from earnings and reported as other comprehensive income net of any tax effect. Gains and losses on the sale of available-for-sale securities are determined using the adjusted cost of the specific security sold and are included in earnings.

Securities that management has the positive intent and ability to hold until maturity are classified as held-to-maturity and are reported at amortized cost.

NCB recognizes an impairment charge when the declines in the fair value of equity and debt securities below their cost basis are judged to be other-than-temporary. Significant judgment is used to identify events or circumstances that would likely have a significant adverse effect on the future use of the investment. NCB considers various factors in determining whether an impairment is other-than-temporary, including, but not limited to, the severity and duration of the impairment, forecasted recovery of unrealized losses, the financial condition and near-term prospects of the investee, whether it becomes probable that there has been an adverse change in cash flows to NCB, and NCB’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Information about unrealized gains and losses is subject to changing conditions. The values of securities with unrealized gains and losses will fluctuate, as will the values of securities that NCB identifies as potentially distressed. When an investment security or retained interest is determined to be other-than-temporarily impaired, the carrying value is reduced to fair value and an impairment charge is recognized.

The valuation of securities for impairment is subject to risks and uncertainties and is intended to determine whether declines in fair value should be recognized in current period earnings. The risks and uncertainties include changes in general economic conditions and future changes in the factors mentioned in the proceeding paragraph. It is reasonably possible that such factors could change in the future which could result in other-than-temporary impairments.

Derivative Instruments and Hedging Activities

NCB maintains a risk management strategy that includes the use of derivative instruments to reduce unplanned earnings fluctuations caused by interest rate volatility. Use of derivative instruments is a component of NCB’s overall risk management strategy in accordance with a formal policy that is monitored by management, which has delegated authority over the interest rate risk management function.

The derivative instruments utilized include interest rate swaps, futures contracts and forward loan sales commitments. Interest rate swaps involve the exchange of fixed and variable rate interest payments between two parties based upon a notional principal amount and maturity date. Futures generally involve exchange-traded contracts to buy or sell U.S. Treasury bonds or notes in the future at specified prices. Forward loan sales commitments lock in the prices at which loans will be sold to investors.

NCB uses interest rate swaps, futures contracts and forward loan sales commitments to offset changes in fair value associated with loan commitments prior to funding the loan. During the commitment period, the loan commitments and related interest rate swaps, futures contracts and forward loan sales commitments are accounted for as derivatives and therefore recorded at fair value through the gain on sale. Once funded, loans are generally economically hedged with the related forward sale commitment or an interest rate swap. The designation of a hedge

61

NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

relationship is not necessary as most loans are recorded at fair value with the adoption of SFAS 159. However, NCB still maintains some hedge relationships for those loans for which the fair value option was not elected.

NCB is exposed to credit and market risk as a result of its use of derivative instruments. If the fair value of the derivative contract is positive, the counterparty owes NCB and a repayment risk exists. If the fair value of the derivative contract is negative, NCB owes the counterparty, so there is no repayment risk. NCB minimizes repayment risk by entering into transactions with financially stable counterparties that are specified by policy and reviewed periodically by management. When NCB has multiple derivative transactions with a single counterparty, the net mark-to-market exposure represents the netting of positive and negative exposures with that counterparty. The net mark-to-market exposure with a counterparty is a measure of credit risk when there is a legally enforceable master netting agreement between NCB and the counterparty. NCB uses master netting agreements with the majority of its counterparties.

Market risk is the adverse effect that a change in interest rates or comparative currency values has on the fair value of a financial instrument or expected cash flows. NCB manages the market risk associated with the interest rate swap contracts by establishing formal policy limits concerning the types and degree of risk that may be undertaken. Compliance with this policy is monitored by management and reported to the Board of Directors.

All derivatives are recognized on the balance sheet at fair value. When a derivative contract is entered into, NCB determines whether or not it will be designated as a fair value hedge. When entering into hedging transactions, NCB documents the relationships between the hedging instruments and the hedged items to link all derivatives that are designated as fair value hedges to specific assets and liabilities on the balance sheet. NCB assesses, both at inception and on an on-going basis, the effectiveness of all hedges in offsetting changes in fair values of hedged items.

NCB discontinues hedge accounting prospectively when (1) the derivative is no longer effective in offsetting changes in fair value of a hedged item; or (2) the derivative matures or is sold, terminated or exercised.

When hedge accounting is discontinued because the derivative no longer qualifies as an effective fair value hedge, the derivative will continue to be carried on the balance sheet at its fair value and the hedged asset or liability will no longer be adjusted to reflect changes in fair value attributable to the hedged risk. In all other situations in which hedge accounting is discontinued, the derivative will be carried at fair value with the changes in fair value recognized in earnings.

For derivative instruments designated as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk is recognized in current earnings during the period of the change in fair values. At December 31, 2008 and 2007, NCB had not designated any derivative instruments in cash flow hedge relationships.

Fair Value Measurements

On January 1, 2008, NCB adopted Statement of Financial Accounting Standards No. 157 (“SFAS 157”), “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements (see Note 25 — Fair Value Measurements).

The provisions of Statement of Financial Accounting Standards No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115,” were also adopted by NCB on January 1, 2008. SFAS 159 allows NCB, at specified election dates, to measure certain financial instruments at fair value. Unrealized gains and losses on financial instruments for which the fair value option has been elected are included in earnings. Electing to use fair value allows a better offset of the change in fair value of the loan and the derivative instruments used to hedge them without the burden of complying with the requirements of SFAS 133. Subsequent to the adoption of SFAS 159, loan origination costs for those loans where the

62

NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

fair value election was made are recognized in non-interest expense as incurred. Previously, these origination costs would have been capitalized as part of the carrying amount of the loans and recognized as a reduction of gains on loan sales.

Staff Accounting Bulletin No. 109

On January 1, 2008, NCB adopted Staff Accounting Bulletin No. 109 (“SAB 109”) “Written Loan Commitments Recorded at Fair Value through Earnings.” SAB 109 requires fair value measurements of derivatives or other written loan commitments recorded through earnings to include the future cash flows related to the loan’s servicing rights. SAB 109 also states that internally developed intangible assets should not be recorded as part of the fair value of a derivative loan commitment or to written loan commitments that are accounted at fair value through earnings.

The application of SFAS 157 and SAB 109 had the effect of recognizing a gain on loans, loan commitments and derivatives hedging these loan and loan commitments of $1.4 million for loans that will not be funded or delivered to investors until a date subsequent to December 31, 2008.

Loan Origination Fees, Commitment Fees, and Related Costs

Loan fees received and direct origination costs are accounted for in accordance with Statement of Financial Accounting Standards No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases.” Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income over the contractual life of the loans or, with respect to loans held-for-sale, as an adjustment to gain on sale of loans at the time of sale. The remaining unamortized fees on loans repaid prior to maturity are recognized as interest income. If a commitment is exercised during the commitment period, the remaining net fee or cost at the time of exercise is recognized over the life of the loan as an adjustment of yield.

Loans and Lease Financing and Loans Held-for-Sale

Loans and lease financing are carried at their principal amounts outstanding, net of deferred loans origination fees and costs and net of any discounts and premiums. Loans held-for-sale for which NCB has not elected the fair value option, are carried at the lower of cost or fair value and net of deferred origination fees and costs, discounts and premiums and the effects of hedge accounting or changes in fair value. NCB determines whether a loan would qualify as held-for-sale at the time the loan is originated.

Interest income is calculated in accordance with the terms of each individual loan and lease. NCB typically discontinues the accrual of interest on loans when principal or interest are ninety days or more in arrears or sooner when there is reasonable doubt as to collectibility. Loans may be reinstated to accrual status when all payments are brought current and, in the opinion of management, collection of the remaining balance can be reasonably expected.

When loans are sold, the gain or loss is recognized in the Consolidated Statement of Income (Loss) as the proceeds less the book value of the loan, including unamortized fees and direct origination costs.

Allowance for Loan Losses

The allowance for loan losses is an estimate of known and inherent losses in our loan portfolio. The allowance is based on two basic principles of accounting: (i) Statement of Financial Accounting Standards (SFAS) No. 5 “Accounting for Contingencies,” which requires that losses be accrued when they are probable of having occurred and reasonably estimable and (ii) SFAS No. 114, “Accounting by Creditors for Impairment of a Loan,” which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the balance of loans which are impaired.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A loan is considered impaired when, based on current information, it is probable NCB will be unable to collect all amounts due under the contractual terms of the loan. Impairment is measured based upon the present value of future cash flows discounted at the loan’s effective interest rate; or, the fair value of the collateral, less estimated selling costs, if the loan is collateral-dependent.

A risk rating system is designed to classify each loan according to the risk unique to the credit facility. The expected loss for each risk rating is determined using historical loss factors and collateral position of the credit facility. All loans are evaluated individually and assigned a risk rating.

Reserves for impaired loans are established for impaired loans based upon the above criteria. Reserves on all other loans are calculated on a loan-by-loan basis based upon the probability of default and the expected loss in the event of default for each risk rating, based on historical experience.

NCB charges off loans, (i.e. reduces the loan balance,) when the loans are deemed to be uncollectible, at which time the allowance for loan losses is reduced.

Loan Sales and Securitizations

NCB’s recognition of a gain or loss on the sale or securitization of loans is accounted for in accordance with Standards of Financial Accounting Standards No. 140 (“SFAS 140”), “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS 140 requires that a transfer of financial assets in which NCB surrenders control over the assets be accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The carrying value of the assets sold is allocated between the assets sold and the retained interests based on their relative fair values.

To receive sale accounting for an asset transfer, SFAS 140 requires a “true sale” analysis of the treatment of the transfer under state law if the company was a debtor under the bankruptcy code. The “true sale” analysis includes several legal factors including the nature and level of recourse to the transferor and the nature of retained servicing rights. The “true sale” analysis is not absolute and unconditional but rather contains provisions that make the transferred assets “bankruptcy remote” should the transferor file for bankruptcy.

Once the “true sale” criteria has been satisfied under SFAS 140 for securitizations, other factors concerning the nature of the extent of the transferor’s control over the transferred financial assets are taken into account, including whether the special purpose entity (“SPE”) has complied with rules concerning qualifying special purpose entities in order to determine if the de-recognition of financial assets is warranted.

NCB obtains a legal opinion regarding the “true sale” of the transferred financial assets as part of the securitization process. The “true sale” opinion provides reasonable assurance that the transferred assets would not be characterized as property of the transferor in the event of insolvency.

The securitization process involves the sale of loans to a bankruptcy remote special purpose entity which then sells the loans to a separate, transaction-specific trust in exchange for considerations generated by the sale of the securities issued by the securitization trust. The securitization trust issues and sells debt securities to third party investors that are secured by payments on the loans. NCB has no obligation to provide credit support to either the third party investors or the securitization trust. Neither the third party investors nor the securitization trust generally have recourse to NCB’s assets or NCB and have no ability to require NCB to repurchase their securities other than through enforcement of the standard representations and warranties. NCB does make certain representations and warranties concerning the loans, such as lien status, and if NCB is found to have breached a representation and warranty, NCB may be required to repurchase the loan from the securitization trust. NCB does not guarantee any securities issued by the securitization trust. The securitization trust represents a “qualifying special purpose entity”, which meets the criteria of SFAS 140, and therefore is not consolidated for financial reporting purposes.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Servicing Assets and Interest-Only Receivables

SFAS No. 140 requires entities to allocate the total cost of the loans to the servicing assets and the loans (without the servicing assets) based on their relative fair value upon transfer of the loan.

Servicing assets, stated net of accumulated amortization, are amortized in proportion to the remaining net servicing revenues estimated for the underlying loans. Servicing assets are assessed for impairment based on lower of cost or fair value. In addition, mortgage-servicing assets must be stratified based on one or more predominant risk characteristics of the underlying loans and impairment is recognized through a valuation allowance for each impaired stratum.

Interest-only receivables are created when loans are sold and a portion of the interest retained by NCB does not depend on the servicing work being performed. The interest-only receivables are amortized to interest income using the interest method. Interest-only receivables that are certificated have been included as investment securities consistent with SFAS No. 115. Interest-only receivables that are not certificated are included as other assets.

Substantially all interest-only receivables pertain to Cooperative Loans made to cooperative housing corporations. These mortgages are typically structured with prepayment lockouts followed by prepayment penalties, yield maintenance provisions, or defeasance through maturity. In calculating interest-only receivables, NCB discounts the cash flows through the lockout or defeasance period. Cash flows beyond the lockout period are included in the fair value of the interest-only receivable only to the extent that NCB is entitled to receive the prepayment or yield maintenance penalty.

Gains or losses on sales and securitizations depend, in part, on the previous carrying amount of the loans involved in the transfer and are allocated between the loans sold and the retained interests based on their relative fair value at the date of sale. Since quoted market prices are generally not available, NCB estimates the fair value of these interest-only receivables by determining the present value of future expected cash flows using modeling techniques that incorporate management’s best estimates of key variables, including credit losses, prepayment speeds, prepayment lockouts and discount rates commensurate with the risks involved. Gains on sales and securitizations are reported in non-interest income.

The fair value of the interest-only receivables is determined using discounted future expected cash flows at various discount rates. In an effort to maximize the value of interest-only receivables, most cooperative mortgages have very strict prepayment restrictions. The most common prepayment protection is a lockout period, followed by either a fixed percentage penalty, or some form of yield maintenance. For loans that do not have prepayment options, the related interest-only receivable is adjusted at the time of prepayment.

For certificated interest-only receivables, the discounted rate of future expected cash flows is equal to a spread over the benchmark index at which the respective loans were priced. For non-certificated interest-only receivables, the discounted rate of future expected cash flows is equal to a market spread over the benchmark index for similar certificated interest-only receivables adjusted by a premium to reflect the less liquid nature of the non-certificated interest-only receivable. For quarterly valuations, the index is adjusted to reflect market conditions. An appropriate spread, determined by reference to what market participants would use for similar financial instruments, is added to the index to determine the current discount rate.

The weighted average life of each interest-only receivable will vary with the mortgage terms that back the transaction.

Interest-only receivables that are subject to prepayment risk such that NCB may not recover substantially all of its investment are recorded at fair value with subsequent adjustments reflected in other comprehensive income or in earnings if the fair value of the interest-only receivable has declined below its carrying amount and such decline has been determined to be other than temporary.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Assets

Premises and equipment are carried at cost less accumulated depreciation. Buildings and building improvements are depreciated on a straight-line basis over either their useful lives or 39 years. Leasehold improvements are depreciated on a straight-line basis over the term of the lease. Furnishings are depreciated using an accelerated method and are depreciated over five or seven years. Equipment and software are depreciated using an accelerated method over seven, five or three years, depending on the type of equipment or software.

Income Taxes

The Act provides that NCB shall be treated as a cooperative and subject to the provisions of Subchapter T of the Internal Revenue Code. Under Subchapter T and the Act, NCB issues its member-borrowers patronage dividends, which are tax deductible to NCB thereby reducing its taxable income. NCB has determined that all income generated by NCB and its subsidiaries, with the exception of certain income of NCB, FSB, qualifies as patronage income under the Internal Revenue Code as amended by the Act with respect to NCB, with the consequence that NCB is able to issue tax deductible patronage dividends with respect to all such income. The Act also provides that NCB is exempt from state and local taxes with the exception of real estate taxes. Certain NCB subsidiaries, however, are subject to federal and state income taxes.

NCB provides for income taxes under SFAS No. 109, “Accounting for Income Taxes”. The asset and liability approach of SFAS No. 109 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial statement carrying amounts of the existing assets and liabilities and their respective tax bases.

The Company adopted the provisions of FIN 48 on January 1, 2007. FIN 48 applies to all tax positions accounted for in accordance with FASB Statement 109. The term tax position as used in FIN 48 refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. A tax position can result in a permanent reduction of income taxes payable, a deferral of income taxes otherwise currently payable to future years, or a change in the expected realizability of deferred tax assets. The adoption of FIN 48 did not impact NCB’s financial statements as NCB does not currently have any uncertain tax positions.

2.   CASH AND CASH EQUIVALENT

The composition of cash and cash equivalents at December 31 is as follows (dollars in thousands):

	2008		2007
Cash	$	25,677	$	23,224
Cash equivalents		14,294		40,500
Total	$	39,971	$	63,724

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3.   INVESTMENT SECURITIES

The composition of available-for-sale investment securities and interest-only non-certified receivables (included as a component of other assets) as of December 31 is as follows (dollars in thousands):

	2008
			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses			Fair Value
Interest-only certificated receivables	$	29,906	$	20	$	(2,072	)	$	27,854
Interest-only non-certificated receivables		28,019		619		(1,374	)		27,264
U.S. Treasury and agency obligations		18,247		388		—			18,635
Mutual funds		881		—		—			881
Mortgage-backed securities and CMO’s		22,783		—		(2,086	)		20,697
Equity securities		52		—		(21	)		31
Total	$	99,888	$	1,027	$	(5,553	)	$	95,362

	2007
			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses			Fair Value
Interest-only certificated receivables	$	35,539	$	65	$	(1,776	)	$	33,828
Interest-only non-certificated receivables		31,027		550		(1,645	)		29,932
U.S. Treasury and agency obligations		53,920		243		(117	)		54,046
Corporate notes		5,830		46		(20	)		5,856
Mutual funds		1,573		—		(115	)		1,458
Mortgage-backed securities and CMO’s		10,482		3		(625	)		9,860
Equity securities		52		66		—			118
Total	$	138,423	$	973	$	(4,298	)	$	135,098

NCB’s investment securities portfolio and retained beneficial interests in securitized financial assets are evaluated for impairment on a quarterly basis pursuant to the guidance in Statement of Financial Accounting Standard No. 115, as amended “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”), Emerging Issues Task Force Issue No. 99-20 “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets” (“EITF 99-20”) and the amendments to EITF 99-20 which are disclosed in EITF 99-20-1. Each individual security is evaluated for impairment.

NCB’s management evaluates the cause of declines in the fair value of each security within each segment of the investment portfolio. NCB’s portfolio segments include: interest-only certificated receivables; interest-only non-certificated receivables; U.S. Treasury and agency obligations; mutual funds; corporate notes; mortgage-backed securities; and equity securities. Interest-only receivables are created when NCB sells loans directly into securitizations and the portion retained by NCB does not depend on the servicing work being performed. Interest-only non-certificated receivables are created when NCB sells loans to individual investors (not into securitizations) and the portion retained by NCB does not depend on the servicing work being performed. Each of the interest-only receivables is collateralized by loans originated by NCB. Interest-only certificated receivables are included in available-for-sale investment securities on the accompanying balance sheet. Interest-only non-certificated receivables are included in other assets on the accompanying balance sheet.

The interest-only certificated and non-certificated receivables have experienced price declines because of increased pricing spreads demanded by the investor community and by illiquidity in the secondary market for these

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

types of investments. As of December 31, 2008, the unrealized losses on the interest-only certificated and non-certificated securities are considered temporary in nature. NCB has the ability and intent to hold these investments until a recovery of current fair value, which may be maturity.

For the twelve months ending December 31, 2008, NCB purchased $42.4 million of U.S. Treasury and agency obligations. Also, $59.8 million of this type of security matured and $20.0 million were sold during the twelve months ending December 31, 2008. Also, $1.8 million of mortgage-backed securities were transferred to U.S. Treasury investments during the twelve months ending December 31, 2008.

NCB determined that its mutual fund investment was other than temporarily impaired and recognized a loss of $0.2 million on the income statement for the twelve months ending December 31, 2008. NCB sold $0.5 million of mutual funds during the twelve months ending December 31, 2008.

During 2008, NCB sold its entire corporate note portfolio for proceeds of $3.3 million and recognized a gain of $8 thousand. The corporate notes were classified as available-for-sale securities. NCB decided to exit this type of investment because of the expectation of expanding distress and deterioration in the market for such notes.

As of December 31, 2008, NCB held mortgage-backed securities issued by Freddie Mac and Fannie Mae as well as collateralized mortgage obligations (“CMO’s”) issued by Morgan Stanley. Freddie Mac and Fannie Mae are now under the conservatorship of the U.S. Government. The timely payment of the principal and interest on the mortgage-backed securities are guaranteed by each issuer and now further supported by the U.S. government as the government has been providing funds to support Fannie Mae and Freddie Mac. Any decline in fair value of the mortgage-backed securities is temporary in nature as NCB expects to recover all contractual cash flows during its holding period and because these investments are now supported by the U.S. government. NCB purchased $19.3 million of mortgage-backed securities and had $4.1 million of principal repayments during the twelve months ending December 31, 2008. There were $0.3 million of principal repayments on the CMO’s during the twelve months ending December 31, 2008.

The CMO’s were issued by Morgan Stanley in 2007. Management monitors the credit support of each of the bonds held by NCB, the delinquency and default rates of the underlying collateral mortgages, and the credit ratings of each of the bonds. During the fourth quarter of 2008, and although there have been no cashflow interruptions on the CMO’s, management determined certain of its CMO investment securities were other-than-temporarily impaired as a result of deterioration in the financial condition and the credit quality of underlying issuers both indicative, that it was no longer probable that NCB would receive the contracted cash flows through maturity. As a result, NCB recorded a $1.7 million other-than-temporary impairment charge on three of its five CMO investment securities, previously carried at $2.0 million, and was recorded in the loss on sale of other assets as of December 31, 2008. After the fourth quarter impairment charges, the carrying value of NCB’s collective CMO portfolio was $5.7 million as of December 31, 2008. Given the higher subordination levels for more senior tranches none of the other CMO investment securities with an unrealized loss as of December 31, 2008, were determined to be other-than-temporarily impaired.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables present the fair value of available-for-sale investment securities and interest-only non-certificated receivables (included as a component of other assets) with unrealized losses and the related unrealized loss amounts. The tables also disclose whether these securities have had unrealized losses for less than 12 consecutive months or for 12 consecutive months or longer as of December 31 (dollars in thousands):

	2008
	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Interest-only certificated receivables	$	1,448	$	(26	)	$	25,365	$	(2,046	)	$	26,813	$	(2,072	)
Interest-only non-certificated receivables		—		—			18,044		(1,374	)		18,044		(1,374	)
Mortgage-backed securities and CMO’s		16,759		(293	)		3,641		(1,793	)		20,400		(2,086	)
Equity securities		52		(21	)		—		—			52		(21	)
Total	$	18,259	$	(340	)	$	47,050	$	(5,213	)	$	65,309	$	(5,553	)

	2007
	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Interest-only certificated receivables	$	7,192	$	(285	)	$	23,372	$	(1,491	)	$	30,564	$	(1,776	)
Interest-only non-certificated receivables		19,847		(1,047	)		5,916		(598	)		25,763		(1,645	)
U.S. Treasury and agency obligations		5,830		(110	)		3,472		(7	)		9,302		(117	)
Corporate notes		1,230		(17	)		1,497		(3	)		2,727		(20	)
Mutual funds		—		—			1,458		(115	)		1,458		(115	)
Mortgage-backed securities and CMO’s		8,451		(595	)		36		(30	)		8,487		(625	)
Total	$	42,550	$	(2,054	)	$	35,751	$	(2,244	)	$	78,301	$	(4,298	)

The maturities of available-for-sale U.S. Treasury and agency obligations and corporate note investment securities as of December 31 are as follows (dollars in thousands):

	2008
			Weighted
	Amortized		Average			Fair
	Cost		Yield			Value
Within 1 year	$	11,799		2.84	%	$	11,927
After 1 year through 5 years		4,679		3.62	%		4,881
Over 5 years		1,769		5.25	%		1,827
Total	$	18,247		3.27	%	$	18,635

	2007
			Weighted
	Amortized		Average			Fair
	Cost		Yield			Value
Within 1 year	$	43,019		4.84	%	$	42,948
After 1 year through 5 years		16,731		4.46	%		16,954
Total	$	59,750		4.73	%	$	59,902

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Mutual funds, equity securities, mortgage-backed securities, and interest-only receivables are excluded from the maturity table. Mutual funds do not have contractual maturities. Mortgage-backed securities and interest-only receivables have contractual maturities, which differ from actual maturities because borrowers may have the right to call or prepay obligations. Interest-only receivables pertain to Cooperative Loans to cooperative housing corporations.

The composition of held-to-maturity investment securities as of December 31 is as follows (dollars in thousands):

	2008
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Corporate debt securities	$	387		—	$	(13	)	$	374

	2007
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Corporate debt securities	$	417	$	14		—	$	431

The maturities of held-to-maturity investments as of December 31 are as follows (dollars in thousands):

	2008
			Weighted
	Amortized		Average			Fair
	Cost		Yield			Value
Within 1 year	$	—		0.00	%	$	—
After 1 year through 5 years		387		7.37	%		374
Total	$	387		7.37	%	$	374

	2007
			Weighted
	Amortized		Average			Fair
	Cost		Yield			Value
Within 1 year	$	—		0.00	%	$	—
After 1 year through 5 years		417		8.13	%		431
Total	$	417		8.13	%	$	431

Mortgage-backed securities have contractual maturities, which differ from actual maturities because borrowers may have the right to call or prepay obligations.

4.   LOAN SERVICING

The unpaid principal balance of loans serviced for others are not included in the accompanying consolidated balance sheets.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Changes in portfolio of loans serviced for others were as follows (dollars in thousands):

	2008			2007
Balance at January 1	$	5,346,251		$	4,682,056
Additions		449,412			983,570
Loan payments and payoffs		(245,071	)		(319,375	)
Balance at December 31	$	5,550,592		$	5,346,251

See Note 28 for an analysis of Mortgage Servicing Rights related to the above portfolio of loans serviced for others.

5.   LOANS HELD-FOR-SALE

Loans held-for-sale by category as of December 31, are as follows (dollars in thousands):

	2008		2007
Consumer Loans	$	940	$	2,983
Commercial Loans		8,766		19,487
Real Estate Loans:
Residential		4,572		53,068
Commercial		—		15,411
Total	$	14,278	$	90,949

Loans held-for-sale for which NCB has not elected the fair value option are recorded at the lower of cost or fair value. The fair value option under SFAS 159 was elected for $0.5 million Residential Real Estate Loans as of December 31, 2008. The unpaid principal balance of the Residential Real Estate Loans for which the fair value option was not elected is $4.1 million as of December 31, 2008. NCB did not early adopt SFAS 159 as of December 31, 2007, therefore NCB had not elected the fair value option for any of its loans held-for-sale as of that date. As of December 31, 2008, and December 31, 2007, respectively, NCB recorded a valuation allowance of $0.9 million and $2.3 million to reflect the current market pricing for NCB’s loans held-for-sale accounted for at the lower of cost or fair value. See Note 25 for a discussion of the valuation allowance recorded against those loans for which the fair value option has been elected.

During 2008, NCB made certain of its Residential Real Estate Loans held-for-investment available to investors for purchase. NCB sold $67.7 million of those Residential Real Estate Loans in an effort to reinvest the proceeds in higher earning assets. At the time of transfer from loans held-for-investment to loans held-for-sale the fair value of the loans was equal to or greater than the cost and therefore, NCB did not recognize a loss on the date of transfer.

During 2008, $43.5 million of loans held-for-sale were transferred, at the lower of cost or market value, to loans and lease financing. An expense of $0.3 million was charged through the lower of cost or market valuation allowance upon transfer, representing the write-down of the loans from their cost basis to fair value.

During the second half of 2007 and during 2008, NCB focused more on originating loans held-for-investment rather than loans held-for-sale primarily due to the deterioration in market conditions that have significantly impacted NCB’s ability to sell loans through securitized transactions.

On July 30, 2008, a housing bill was signed into law which grants the Treasury Department broad authority to safeguard Fannie Mae and Freddie Mac and authorizes the Federal Housing Administration to insure up to $300 billion in refinanced mortgages. It cannot be predicted whether this recent legislation will result in significant improvement in financial and economic conditions affecting the banking industry. If, notwithstanding

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the federal government’s recent fiscal and monetary measures, the U.S. economy were to remain in a recessionary condition for an extended period, this would present additional significant challenges for the U.S. banking and financial services industry and for NCB. While it is difficult to predict how long these conditions will exist and which markets and businesses of NCB may be affected, these factors could continue to present risks for some time for the industry and NCB.

Activity related to loans held-for-sale for the years ended December 31, are as follows (dollars in thousands):

	2008			2007
Balance at January 1	$	90,949		$	242,847
Originations		349,825			831,604
Purchases		355,136			222,489
Sales*		(806,591	)		(1,204,457	)
Transfer of loans and lease financing to loans held-for-sale		67,737			—
Transfer of loans held-for-sale to loans and lease financing		(43,462	)		—
Change in valuation: SFAS 133 valuation adjustment		(685	)		536
Change in valuation: lower of cost or market valuation allowance		1,369			(2,070	)
Balance at December 31	$	14,278		$	90,949

* Includes write-off of unamortized deferred fees and costs of $0.5 million

6.   LOANS AND LEASE FINANCING

Loans and leases outstanding by category as of December 31, are as follows (dollars in thousands):

	2008		2007
Consumer Loans	$	53,101	$	16,898
Commercial Loans		691,817		555,974
Real Estate Loans:
Residential		817,538		749,868
Commercial		394,324		200,644
Leases		411		574
Total	$	1,957,191	$	1,523,958

During 2008, NCB purchased $28.0 million of Community Association Loans, presented as a component of Commercial Loans, at a premium from First National Bank of Arizona.

The largest geographic concentration of Commercial Loans (held for investment and held-for-sale) was in the Southeast region and amounted to 35.1% as of December 31, 2008. The region with the largest concentration of Commercial Loans (held for investment and held-for-sale) at December 31, 2007 was the Southeast region amounting to 37.8%. The largest borrower type for Commercial Loans was community associations at 7.1% and food retailing and distribution at 6.9% as of December 31, 2008 and 2007, respectively. No other borrower type exceeds 5.4% as of December 31, 2008. Real Estate Loans had the highest geographical concentration of 43.1% as of December 31, 2008 in the Northeastern United States (primarily New York City) compared to 40.2% as of December 31, 2007.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.   IMPAIRED LOANS

A loan is considered impaired when, based on current information, it is probable NCB will be unable to collect all amounts due under the contractual terms of the loan. Total outstanding principal of loans considered impaired totaled $20.4 million and $13.3 million as of December 31, 2008 and December 31, 2007, respectively. The aggregate average balance of impaired loans was $16.3 million, $18.6 million, and $18.3 million for the years ended December 31, 2008, 2007, and 2006, respectively. The interest income that was due, but not recognized on impaired loans was $1.1 million, $2.5 million and $2.3 million for the years ended December 31, 2008, 2007 and 2006, respectively. As of December 31, 2008, NCB had an allowance of $6.3 million on the $20.4 million of impaired loans. As of December 31, 2007 NCB had an allowance of $3.3 million on the $13.3 million of impaired loans. Reserves as of December 31, 2008 were deemed to be adequate to cover the estimated loss exposure related to the impaired loans.

Although NCB is experiencing a higher level of classified loans than in prior years, the credit quality of borrowers remains at an acceptable level.

Of the $20.4 million of impaired loans as of December 31, 2008, $1.7 million was for a Commercial Loan that was not in non-accrual status. However, the loan was deemed impaired due to the debt being restructured during the second quarter of 2007. The fair value of the collateral is greater than the current outstanding principal balance as of December 31, 2008; therefore, NCB has not reserved a specific allowance for this loan. NCB will continue to classify this loan as impaired until the borrower has sufficient cash flow to support its debt.

As of December 31, 2008, there were no commitments to lend additional funds to borrowers whose loans were impaired.

8.   ALLOWANCE FOR LOAN LOSSES AND UNFUNDED COMMITMENTS

The following is a summary of the components of the allowance for loan losses as of December 31, (dollars in thousands):

	2008		2007		2006
Allowance on impaired loans	$	6,314	$	3,255	$	6,768
Allowance on other loans		20,753		14,459		12,712
Total allowance for loan losses	$	27,067	$	17,714	$	19,480

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of the activity in the allowance for loan losses during the years ended December 31 (dollars in thousands):

	2008			2007			2006
Balance at January 1	$	17,714		$	19,480		$	20,193
Charge-offs
Consumer Loans		(2,111	)		(715	)		(254	)
Commercial Loans		(8,073	)		(1,737	)		(4,435	)
Real Estate (Residential and Commercial)		—			—			(32	)
Total charge-offs		(10,184	)		(2,452	)		(4,721	)
Recoveries
Consumer Loans		144			297			1
Commercial Loans		743			237			340
Total recoveries		887			534			341
Net charge-offs		(9,297	)		(1,918	)		(4,380	)
Provision for loan losses		18,650			152			3,667
Balance at December 31	$	27,067		$	17,714		$	19,480

The higher provision for loan losses in 2008 compared to prior periods reflects an increase in the allowance for loan losses throughout most of the year in response to changes in loan quality, coupled with increased losses as a result of declining Commercial Loan collateral values. In the fourth quarter of 2008, NCB recorded a provision for loan losses of $8.1 million, compared to $6.0 million and $38.0 thousand for the third quarter of 2008 and fourth quarter of 2007, respectively. Approximately $4.2 million, or 51.8%, of the fourth quarter 2008 provision was attributed to continued deterioration in loan quality within the Commercial Loan portfolio, while another $2.3 million, or 28.3% was due to continued declines in commercial real estate credit quality and collateral values.

Of the $18.7 million provision for loan losses for 2008, $16.6 million was related to Commercial Loans, $1.8 million was related to Real Estate Loans and $0.3 million was related to Consumer Loans.

Although loans and leases increased by $143.2 million from December 31, 2006 to December 31, 2007, the allowance for loan losses decreased from 2006 to 2007 principally due to the full repayment of one previously impaired loan with a significant reserve against it. Also, changes in the composition of loans within the portfolio led to a higher relative percentage of loans that, based on NCB’s risk rating system, are determined to have a lower credit risk.

Included within the provision for loan losses for the twelve months ended December 31, 2006 is $2.4 million related to the reclassification of a provision for unfunded commitments. The reclassification was the result of a letter of credit that was drawn on during the third quarter of 2006. Simultaneously, $2.4 million of the loan balance relating to the draw of the letter of credit was charged-off and is reflected in the $4.4 million of Commercial Loan charge-offs for the twelve months ended December 31, 2006.

Unfunded Commitments

Standby letters of credit can be either financial or performance-based. Financial standby letters of credit obligate NCB to disburse funds to a third party if the customer fails to repay an outstanding loan or debt instrument. For NCB’s letters of credit issued in connection with certain variable rate municipal bonds, NCB can be called upon to fund the amount of the municipal bond in the event the holder seeks repayment and the bond cannot be sold to

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

another purchaser. Performance letters of credit obligate NCB to disburse funds if the customer fails to perform a contractual obligation, including obligations of a non-financial nature.

The following is a summary of the activity in the reserve for losses on unfunded commitments, which is included in other liabilities, during the years ended December 31 (dollars in thousands):

	2008		2007		2006
Balance at January 1	$	2,016	$	1,528	$	2,605
Provision (credit) for losses on unfunded commitments		659		488		(1,077	)
Balance at December 31	$	2,675	$	2,016	$	1,528

The $1.1 million credit for losses on unfunded commitments in 2006 includes the $2.4 million reclassification to the provision for loan losses (as discussed above) offset by other provisions for losses on unfunded commitments during 2006.

9.   TRANSACTIONS WITH RELATED PARTIES

Section 103 of the Act, as amended, requires that holders of Classes B and C stock elect twelve of the fifteen members of NCB’s Board of Directors and that they have actual cooperative experience. NCB voting stock is, by law, owned only by borrowers and entities eligible to borrow. The election rules require that candidates for the Board of Directors have experience as a director or senior officer of a cooperative organization that currently holds Class B or Class C stock. Therefore, it is not unusual for Board members to be directors or employees of NCB borrowers. NCB therefore has conflict of interest policies, which require, among other things, that a Board member be disassociated from decisions which pose a conflict of interest or the appearance of a conflict of interest. Loan requests from cooperatives with which members of the board may be affiliated are subject to the same eligibility and credit criteria, as well as the same loan terms and conditions, as all other loan requests.

In addition, NCB through its subsidiary, NCB, FSB, enters into transactions in the normal course of business with its directors, officers, employees, and their immediate family members.

For the years ended December 31, 2008 and December 31, 2007, activity related to loans and leases, including loans held-for-sale, to cooperatives affiliated with NCB’s Board of Directors and to officers, employees, and their immediate family members is as follows (dollars in thousands):

	January 1, 2008		Additions		Deductions			December 31, 2008
Outstanding balances	$	72,144	$	45,777	$	(26,052	)	$	91,869

	January 1, 2007		Additions		Deductions			December 31, 2007
Outstanding balances	$	95,493	$	27,026	$	(50,375	)	$	72,144

The majority of the above activity is related to cooperatives affiliated with NCB’s Board of Directors.

During 2008, 2007, and 2006, NCB recorded interest income of $4.7 million, $6.5 million, and $6.8 million, respectively, on loans to related parties.

As of December 31, 2008 and 2007, deposits from cooperatives affiliated with NCB’s Board of Directors and their immediate families were $64.0 million and $86.2 million, respectively. Certain officers and employees of NCB had deposits totaling $4.4 million and $6.4 million as of December 31, 2008 and 2007, respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10.   PREMISES AND EQUIPMENT

Premises and equipment are included in other assets and consist of the following as of December 31 (dollars in thousands):

	2008			2007
Leasehold improvements	$	10,819		$	10,558
Furniture and equipment		6,204			5,984
Premises		3,840			3,878
Other		626			668
Total premises and equipment		21,489			21,088
Less: Accumulated depreciation		(8,042	)		(5,957	)
Total premises and equipment, net	$	13,447		$	15,131

Depreciation of premises and equipment included in non-interest expense for the years ended December 31, 2008, 2007, and 2006 totaled $2.2 million, $2.0 million, and $2.9 million, respectively.

During 2007, NCB terminated the lease for its offices at 1725 Eye Street. The termination agreement required the payment of $1.562 million by the Arlington landlord directly to the 1725 Eye Street landlord and the payment of $1.585 million by NCB to the 1725 Eye Street landlord in 2007. Through an amendment to the Arlington Lease, NCB simultaneously received reimbursement of its payment of $1.585 million from the Arlington landlord in 2007. In accordance with the FASB’s Technical Bulletin No. 88-1, the payments made to the 1725 Eye Street landlord were recognized as a lease termination cost in the consolidated statements of income (loss) and a lease incentive liability on the consolidated balance sheet. NCB recognized the remaining deferred rent liability associated with the vacated 1725 Eye Street premises that amounted to $1.9 million in 2007.

11.   OTHER ASSETS

At December 31, 2008 and 2007, other assets consisted of the following (dollars in thousands):

	2008		2007
Interest-only non-certificated receivables	$	27,264	$	29,932
Premises and equipment, net		13,447		15,131
Mortgage servicing rights		13,252		13,420
Accrued interest receivables		11,169		11,162
Federal Home Loan Bank stock		9,651		9,274
Valuation of letters of credit		9,021		9,961
Equity method investments		3,269		2,735
Debt issuance costs		2,297		3,343
Derivative assets		2,258		982
Prepaid assets		1,231		1,635
Loan related receivables		761		2,478
Other		8,414		5,223
Total other assets	$	102,034	$	105,276

Refer to Note 3 for a discussion regarding other-than-temporary impairment assessments of the interest-only non-certificated receivables.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The decision of some Federal Home Loan Banks to reduce dividend payments and restrict redemptions of stock has not affected NCB. The Federal Home Loan Bank of Cincinnati, with whom NCB banks, has not reduced dividends or provided notice that they have suspended stock redemptions.

12.   LEASES

Minimum future rental payments on premises and office equipment under non-cancelable operating leases having remaining terms in excess of one year as of December 31, 2008 are as follows (dollars in thousands):

	Amount
2009	$	3,676
2010		3,658
2011		3,542
2012		3,618
2013		3,609
2014 and thereafter		28,448
Total payments	$	46,551

Rental expense on premises and office equipment in 2008, 2007, and 2006 was $3.2 million, $3.9 million, and $3.9 million, respectively.

NCB is obligated to take additional space in the Arlington, Virginia office space totaling approximately 10,800 rentable square feet on dates selected by the landlord in accordance with the lease between September 2012 and September 2018.

13.   DEPOSITS

Deposits as of December 31 are summarized as follows (dollars in thousands):

	2008					2007
			Average					Average
	Balance		Rate Paid			Balance		Rate Paid
Non-interest bearing demand deposits	$	90,423		—		$	41,591		—
Interest-bearing demand deposits		248,960		1.04	%		275,238		3.24	%
Savings deposits		7,376		0.31	%		6,637		0.75	%
Certificates of deposit		953,312		3.48	%		703,986		4.85	%
Total deposits	$	1,300,071		2.75	%	$	1,027,452		4.19	%

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $675.2 million and $549.4 million at December 31, 2008 and 2007, respectively.

As of December 31, the scheduled maturities of certificates of deposit with a minimum denomination of $100,000 were as follows (dollars in thousands):

	2008		2007
Within 3 months	$	176,774	$	138,179
Over 3 months through 6 months		143,744		116,228
Over 6 months through 12 months		189,644		95,969
Over 12 months		165,046		198,976
Total certificates of deposit	$	675,208	$	549,352

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NCB has a Liquidity Policy and a Liquidity Contingency Plan, both board approved and continually monitored that addresses NCB’s cashflow needs; specifically the cash flow needed to satisfy maturing certificates would be derived from the sale of loans held-for-sale, loan maturities and issuance of new certificates of deposit. Maturing certificates are further supported by unused Federal Home Loan Bank borrowing capacity which is $192.1 million at December 31, 2008.

The Emergency Economic Stabilization Act of 2008 included a provision for an increase in the amount of deposits insured by the Federal Deposit Insurance Corporation (FDIC) to $250,000. On October 14, 2008, the FDIC announced a new program — the Temporary Liquidity Guarantee Program that provides unlimited deposit insurance on funds in noninterest-bearing transaction deposit accounts not otherwise covered by the existing deposit insurance limit of $250,000. All eligible institutions will be covered under the program for the first 30 days without incurring any costs. After the initial period, participating institutions will be assessed a 10 basis point surcharge on the additional insured deposits.

Deposit interest expense for the years ended December 31 is summarized as follows (dollars in thousands):

	2008		2007		2006
Interest-bearing demand deposits	$	4,884	$	10,750	$	7,985
Savings deposits		37		81		88
Certificates of deposit		32,628		32,479		22,192
Total deposit interest expense	$	37,549	$	43,310	$	30,265

The remaining contractual maturities of certificates of deposit as of December 31 are as follows (dollars in thousands):

	2008
	Less than		$100,000
	$100,000		and Greater		Total
2009	$	246,527	$	510,162	$	756,689
2010		24,154		68,112		92,266
2011		6,146		41,923		48,069
2012		304		19,827		20,131
2013		701		10,821		11,522
2014 and thereafter*		272		24,363		24,635
Total	$	278,104	$	675,208	$	953,312

	2007
	Less than		$100,000
	$100,000		and Greater		Total
2008	$	135,060	$	350,375	$	485,435
2009		13,938		86,044		99,982
2010		4,048		35,683		39,731
2011		1,379		39,968		41,347
2012		181		19,714		19,895
2013 and thereafter*		28		17,568		17,596
Total	$	154,634	$	549,352	$	703,986

* Includes discount on certificates of deposit

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14.   SHORT-TERM BORROWINGS

Short-term borrowings include debt fundings drawn on and repaid within one year, regardless of the maturity date of the source of funding.

The carrying amounts and weighted average rates for short-term borrowings as of December 31 are as follows (dollars in thousands):

	2008					2007
			Weighted					Weighted
			Average					Average
	Outstanding		Rate			Outstanding		Rate
Lines of credit	$	202,000		1.85	%	$	111,000		5.46	%
FHLB advances		23,000		0.34	%		72,000		3.90	%
Total short-term borrowings	$	225,000		1.70	%	$	183,000		4.84	%

The average and maximum balance outstanding for short-term borrowings during the year as of December 31 are as follows (dollars in thousands):

	2008				2007
	Average		Maximum		Average		Maximum
	Balance		Balance		Balance		Balance
	Outstanding		Outstanding		Outstanding		Outstanding
Lines of credit	$	146,333	$	202,000	$	126,162	$	152,000
FHLB advances	$	88,850	$	139,700	$	163,334	$	280,400

Revolving Credit Facilities

As of December 31, 2008, NCB had a $350.0 million committed revolving line of credit of which $202.0 million was outstanding. An additional $5.4 million was issued in letters of credit thereunder as of December 31, 2008. Therefore, as of December 31, 2008, $142.6 million was available under the revolving line of credit facility.

During 2007, NCB entered into two separate amendments to its revolving credit agreement principally to adjust the return on assets and fixed charge coverage ratio covenants for the final two quarters of 2007 and for all of 2008. The second amendment also included an adjustment to the pricing, so that for London Interbank Offered Rate (LIBOR) loans, during 2008 and the first quarter of 2009, NCB will pay a minimum of LIBOR plus 0.75%. NCB paid $0.7 million in fees in connection with these amendments.

For the full year 2008, NCB recognized net income of $3.9 million. Although NCB, FSB had a profit of $2.0 million in the fourth quarter of 2008, this amount fell short of the $3.5 million fourth quarter 2008 profit required for NCB, FSB under NCB’s revolving credit facility covenants, thereby causing a breach. Additionally, management believed that there was a risk that NCB would violate certain other financial covenants under the revolving credit facility and NCB’s senior note agreement with Prudential later in 2009 unless some form of covenant relief was obtained. On March 31, 2009, NCB executed an amendment to the revolving credit facility agreement which waives the revolving credit facility covenant violation and amends various covenant thresholds on a prospective basis. Management has completed financial projections through December 31, 2010 and believes that NCB will be in compliance with all covenants through the maturity of the credit facility and the Prudential notes.

Provisions of this most current amendment include:

•   An immediate reduction in the aggregate commitment amount to $225 million from $350 million

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

•   Further reductions in the aggregate revolving commitments by $30 million on the last day of each of the fiscal quarters ending June 30, 2009, September 30, 2009, December 31, 2009, March 31, 2010, June 30, 2010, and September 30, 2010.

•   All aggregate revolving commitments will be terminated by December 15, 2010 instead of April 29, 2011.

•   Interest cost increased to LIBOR plus 3.5% from LIBOR plus 0.75%

•   The revolving loan will also be collateralized by assets of NCB, including the stock in NCB, FSB.

•   A limitation on the ability of NCB itself to make additional loans

•   Consent for NCB, FSB to borrow funds from the Federal Reserve Bank or other participating member banks

•   Consent for NCB, FSB to convert from a Thrift to a national bank charter, should the Board of Directors determine such action is in the best interest of NCB

•   Consent for NCB, FSB to issue FDIC guaranteed debt under the TLGP

•   Consent for NCB, FSB or NCB Financial Corporation to participate in the Capital Purchase Program under TARP

Interest expense from borrowings under the revolving line of credit facilities was $4.9 million, $8.0 million and $6.2 million, in 2008, 2007 and 2006, respectively.

Borrowing rates under the revolving credit facility are based on the prime rate, federal funds rate or the LIBOR and vary with the amount of borrowings outstanding. In addition, a change in agency ratings could also impact borrowing rates. Total commitment fees paid for revolving credit facilities were $0.6 million, $0.4 million, and $0.6 million, in 2008, 2007 and 2006, respectively. As part of the December 31, 2007 amendment described above, the commitment fee was increased, for 2008 and the first quarter of 2009, to a minimum of 0.25% from 0.20% of the unused commitment balance. The March 2009 facility amendment further increases the commitment fee to 0.60% of the unused commitment balance. All borrowings under the facility, which are outstanding at expiration of the facility, are due at that time.

NCB had no bid line availability as of December 31, 2008. As of December 31, 2007, NCB had $20.0 million of uncommitted bid lines available from several banks, of which none were outstanding.

Other Short-term Borrowings

NCB, FSB has a pledge agreement with the Federal Home Loan Bank of Cincinnati, Ohio (FHLB) requiring advances to be secured by eligible mortgages and securities with a principal balance of 135% — 400% of such advances. As of December 31, 2008 and 2007, respectively, the principal balance of these eligible mortgages and securities totaled $490.7 million and $451.8 million. The FHLB facility was $318.8 million at December 31, 2008 and $298.3 million at December 31, 2007. Outstanding advances at December 31, 2008 and 2007 were $113.0 million and $122.0 million, respectively, of which $90.0 million and $50 million were long-term advances as of December 31, 2008 and 2007, respectively. Short-term FHLB borrowings mature within 90 days NCB had approximately $192.1 million available capacity under its FHLB facility as of December 31, 2008. NCB, FSB also has letter of credit availability in the FHLB facility of which $13.7 million and $15.9 million was issued as of December 31, 2008 and 2007, respectively.

Interest expense on advances for the years ended December 31, 2008, 2007 and 2006 was $5.8 million, $11.3 million and $9.7 million, respectively, of which $3.8 million, $2.8 million and $1.4 million was for long-term advances at December 31, 2008, 2007 and 2006, respectively. Interest expense on commercial paper borrowings for the year ended December 31, 2006 was $2.8 million. NCB terminated its commercial paper program during 2006.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In an effort to reduce NCB’s cost of funds, NCB developed a program under which it borrows, on a short-term basis, from certain customers. As of December 31, 2008 and 2007, there were no short-term borrowings outstanding under this program.

15.   LONG-TERM DEBT

Long-term borrowings include those fundings for which the maturity was greater than one year at the time the amounts were drawn. As of December 31, 2008, the maturity of certain of these instruments is within the next twelve months.

The carrying amounts for long-term debt as of December 31, are as follows (dollars in thousands):

	2008		2007
Prudential Long-Term Private Placements
5.62% fixed rate debt due December 2009(1)	$	55,000	$	55,000
5.60% fixed rate debt due December 2010(2)		50,000		50,000
Total Prudential Long-Term Private Placements		105,000		105,000
Other Long-Term Private Placements
5.52% fixed rate debt due January 2009, prepaid December 2008		—		50,000
Total Long-Term Private Placement Notes		—		50,000
Medium Term Notes
5.67% fixed rate debt due May 2013, called May 2008		—		15,000
Total Medium Term Notes		—		15,000

FHLB Long-Term Advances
5.62% fixed rate due June 2009		20,000		20,000
5.80% fixed rate due June 2011		10,000		10,000
5.63% fixed rate due July 2011		20,000		20,000
3.55% fixed rate due June 2011		10,000		—
4.42% fixed rate due June 2012		10,000		—
4.40% fixed rate due June 2013		10,000		—
4.54% fixed rate due June 2013		10,000		—
Total FHLB Long-Term Advances		90,000		50,000
SFAS No. 133 valuation		1,447		907
Total Long Term Debt	$	196,447	$	220,907

(1)	The March 2009 amendments to the Prudential agreement amends the interest rate to 8.50% and the stated maturity to August 1, 2009 although Prudential retains the right to extend the maturity back to December 2009.
(2)	The March 2009 amendments to the Prudential agreement amends the interest rate to 8.50% and the stated maturity from December 28, 2010 to December 15, 2010.

As of December 31, 2008, the long-term advances from the FHLB constitute the only long-term debt that is secured, and except to the extent of such security, none of the long-term debt has priority over the other. In addition as of December 31, 2008, none of the long-term debt is convertible and there are no contingencies on the payments of principal and interest.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NCB entered into master shelf agreements with The Prudential Insurance Company of America and related entities (collectively “Prudential”) in 1999 and 2001, which allowed NCB to issue private placement senior note debt. NCB issued long-term, fixed rate debt on this facility in 1999, 2001, 2005, and 2006. NCB issued $50.0 million in December 2005 at a fixed rate of 5.60% and this tranche will mature in December 2010. In December 2006, NCB issued $55.0 million at a fixed rate of 5.62% that will mature in December 2009. The interest rates and stated maturity dates of both of these notes have been amended as described in the footnotes to the table above. All of these notes require semi-annual payments of interest only.

NCB entered into a note purchase agreement with Metropolitan Life Insurance Company and related entities (collectively “MetLife”) in January 2003 to issue $50.0 million in private placement note debt. The debt was issued at a fixed rate of 5.52% and had a scheduled maturity of January 2009. In December of 2008, NCB prepaid all $50.0 million of this debt and paid a penalty of $63 thousand in connection with the prepayment.

NCB has a shelf agreement in which it can issue Medium Term Notes through various agents. These notes can be issued with either a fixed or floating rate with any maturity within the shelf agreement. In May 2003 NCB issued $15.0 million of fixed rate notes through Wachovia Securities, Inc. with a fixed rate of 5.67% with a semi-annual call and maturing in May 2013. The $15.0 million fixed rate notes required semi-annual payments of interest only. On May 15, 2008, the most recent call date, NCB redeemed all outstanding Medium Term Notes.

As of December 31, 2008, NCB has a series of interest rate swap agreements, which have a combined notional amount of $40.0 million. The effect of the agreements is to convert $40.0 million of the long-term debt from a weighted average fixed rate of 5.62% to a floating rate based on the three-month LIBOR rate plus a spread, which repriced throughout the year. As of December 31, 2008, the weighted average three-month LIBOR on the swaps was 1.47% with an effective weighted average spread of 0.65%.

As of December 31, the total notional amount, related maturity date and interest rate detail are as follows (dollars in thousands):

2008
Notional Amount		Maturity Date	Libor Index
$	40,000	2009		Three month

As of December 31, 2007, NCB had a series of interest rate swap agreements, which have a combined notional amount of $100.0 million. The effect of the agreements is to convert $100.0 million of the long-term debt from a weighted average fixed rate of 5.60% to a floating rate based on the three-month LIBOR rate plus a spread, which repriced throughout the year. As of December 31, 2007, the weighted average three-month LIBOR on the swaps was 4.95% with an effective weighted average spread of 1.09%.

As of December 31, the total notional amount, related maturity date and interest rate detail are as follows (dollars in thousands):

2007
Notional Amount		Maturity Date	Libor Index
$	65,000	2009		Three month
	20,000	2010		Three month
	15,000	2013		Three month
$	100,000

On December 31, 2007, NCB amended its master shelf agreement with Prudential and its senior note agreement with MetLife principally to adjust the fixed charge coverage ratio covenants for 2008. The amendment with MetLife also increased the cap on the amount of paid-in-capital NCB may invest in NCB Financial Corporation, the parent of NCB, FSB to 35%. On February 25, 2008, NCB made a similar amendment with

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NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

respect to paid-in-capital to the senior note agreement with Prudential, increasing the same cap to 35%. NCB paid $0.4 million in fees in connection with these amendments.

In March 2009, NCB further amended its agreement with Prudential. Provisions of the amendment to the Prudential agreement amended various covenant thresholds on a prospective basis and also included:

•   Interest cost increased to 8.5% with further increase to 10.5% in the event that NCB’s senior credit rating falls below investment grade

•   Change in stated maturity of one note from December 28, 2009 to [August 1, 2009] and a change in the stated maturity of the second note from December 28, 2010 to no later than December 15, 2010

•   Proceeds of certain asset sales or capital raises be applied to reduce the outstanding balance of the 2010 note on a pro rata basis with the outstanding balance of the revolving credit facility

•   In 2010, minimum Cash and Cash Equivalent balances must be increased from $25 million in the first quarter to $95 million in the fourth quarter

•   NCB must maintain balances on its revolving credit facility equal to the outstanding balance of the 2010 note

16.   SUBORDINATED DEBT

On December 31, 1981, NCB issued unsecured subordinated debt to the U.S. Treasury (“Treasury”) in the amount of $184.3 million as provided in the Act, as amended, in the form of Class A notes in full redemption of the Class A Preferred stock previously owned by the Government.

In November 2003 NCB entered into a definitive Amended and Restated Financing Agreement (the “Amended Financing Agreement”), with the Treasury relating to repayment of and interest payable on the Class A notes maturing in 2020 that were originally issued by NCB to Treasury on December 31, 1981.

In December 2003, NCB, pursuant to the Amended Financing Agreement, made a $53.6 million payment to Treasury to prepay its 91-day renewing Class A note. Also on that date, NCB replaced the remaining three Class A notes outstanding, in the aggregate amount of $129.0 million, by issuing five new replacement Class A notes of renewing maturities.

At maturity, each note is replaced with a reissued note for the same term, with an interest rate based upon the yield on Treasury securities of comparable maturities, as of the date of repricing, plus 100 basis points, subject to the final maturity date of October 31, 2020, on which date all remaining balances under the notes are due.

During 2008, $2.5 million of the subordinated debt was paid down pursuant to the Amended Financing Agreement. During 2009, pursuant to the same agreement, $2.5 million of the subordinated debt will be paid down from the 3-year tranche repricing on December 15, 2009. The interest payments for each tranche are determined in

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accordance with the following schedule, which also includes the carrying amounts of the subordinated debt at December 31, (dollars in thousands):

2008
				Next Repricing		Carrying
Index	Rate			Date		Amount
91 - day Treasury rate		1.02	%		16-Mar-09	$	36,810
2 - year Treasury rate		4.31	%		15-Dec-09		15,718
3 - year Treasury rate		5.63	%		15-Dec-09		25,064
7 - year Treasury rate		4.79	%		15-Dec-10		32,847
10 - year Treasury rate		5.28	%		15-Dec-13		6,050
Total						$	116,489

2007
				Next Repricing		Carrying
Index	Rate			Date		Amount
91 - day Treasury rate		3.88	%		17-Mar-08	$	39,310
2 - year Treasury rate		4.31	%		15-Dec-09		15,718
3 - year Treasury rate		5.63	%		15-Dec-09		25,064
7 - year Treasury rate		4.79	%		15-Dec-10		32,847
10 - year Treasury rate		5.28	%		15-Dec-13		6,050
Total						$	118,989

The following table shows, pursuant to the Amended Financing Agreement, the amortization schedule of the five Class A notes as of December 31, 2008 (dollars in thousands):

Debt Amortization
					Periodic
Year	Beginning Balance		Annual Amortization		Amortization		Ending Balance
2008	$	118,989	$	2,500	$	—	$	116,489
2009		116,489		2,500		—		113,989
2010		113,989		—		23,989		90,000
2011		90,000		5,000		—		85,000
2012		85,000		5,500		—		79,500
2013		79,500		6,050		—		73,450
2014		73,450		6,655		—		66,795
2015		66,795		7,320		—		59,475
2016		59,475		8,053		—		51,422
2017		51,422		8,858		—		42,564
2018		42,564		9,744		—		32,820
2019		32,820		10,718		—		22,102
2020		22,102		—		22,102		—
Total			$	72,898	$	46,091

The Class A notes and all related payments are subordinate to any secured and unsecured notes and debentures thereafter issued by NCB, but the notes and subordinated debt issued by NCB, that by its terms are junior to the Class A notes, have first preference with respect to NCB’s assets over all classes of stock issued by NCB. NCB

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

currently cannot pay any dividend on any class of stock at a rate greater than the statutory interest rate payable on the Class A notes (See Note 22).

The Act also states that the amount of NCB borrowings, which may be outstanding at any time, shall not exceed 10 times the paid-in capital and surplus that, as defined by the Act, includes the subordinated debt.

17.   JUNIOR SUBORDINATED DEBT

In December 2003, NCB sold $50.0 million of trust preferred securities through a Delaware statutory business trust, NCB Capital Trust I (“Trust”). NCB owns all of the common securities of this Trust. The Trust has no independent assets or operations and exists for the sole purpose of issuing preferred securities and investing the proceeds thereof in an equivalent amount of junior subordinated debentures issued by NCB. The junior subordinated debentures, which are the sole assets of the Trust, are unsecured obligations of NCB, and are subordinate and junior in right of payment to all present and future senior and subordinated indebtedness and certain other financial obligations of NCB. This debt is based on the 3-month LIBOR rate plus 290 bps and the rate resets every 3 months.

The following is a schedule of outstanding Junior Subordinated debt as of December 31, 2008 and 2007 (dollars in thousands):

						Carrying
						Amount
Index	Index Rate			Maturity Date		2008
3-month LIBOR		4.82	%		07-Jan-34	$	51,547

						Carrying
						Amount
Index	Index Rate			Maturity Date		2007
3-month LIBOR		5.24	%		07-Jan-34	$	51,547

18.   COMMON STOCK AND MEMBERS’ EQUITY

NCB’s common stock consists of Class B stock owned by its borrowers and Class C stock owned by entities eligible to borrow from NCB.

The following relates to common stock as of December 31:

	2008				2007
	Class B		Class C		Class B		Class C
Par value per share	$	100	$	100	$	100	$	100
Shares authorized		1,900,000		300,000		1,900,000		300,000
Shares issued and outstanding		1,726,718		251,117		1,727,541		251,371

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The changes in Class B and C common stock are described below (dollars in thousands):

	Class B			Class C			Total
Balance, December 31, 2005	$	147,484		$	23,384		$	170,868
2005 patronage dividends distributed in common stock		15,873			1,497			17,370
Cancellation of stock		(621	)		(387	)		(1,008	)
Balance, December 31, 2006		162,736			24,494			187,230
2006 patronage dividends distributed in common stock		10,178			647			10,825
Cancellation of stock		(160	)		(4	)		(164	)
Balance, December 31, 2007		172,754			25,137			197,891
2007 patronage dividends distributed in common stock		—			—			—
Cancellation of stock		(82	)		(25	)		(107	)
Balance, December 31, 2008	$	172,672		$	25,112		$	197,784

Members’ equity currently includes the two classes of common stock, allocated and unallocated retained earnings, and accumulated other comprehensive income or loss. Allocated retained earnings have been designated for patronage dividend distribution, whereas unallocated retained earnings have not been designated.

Patronage-based borrowers from NCB or NCB, FSB under section 108 of the Act are required to own Class B stock in NCB. Stock owned by a borrower may be cancelled by NCB, at NCB’s sole discretion, in case of certain events, including default.

19.   REGULATORY CAPITAL AND RETAINED EARNINGS OF NCB, FSB

In connection with the insurance of deposit accounts, NCB, FSB, a federally chartered, federally insured savings bank, is required to maintain minimum amounts of regulatory capital. If NCB, FSB fails to meet its minimum required capital, the appropriate regulatory authorities may take such actions, as they deem appropriate, to protect the Deposit Insurance Fund (DIF), NCB, FSB, and its depositors and investors. Such actions may include various operating restrictions, limitations on liability growth, limitations on deposit account interest rates and investment restrictions.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NCB, FSB’s capital exceeded the minimum capital requirements as of December 31, 2008 and 2007. The following table summarizes NCB, FSB’s capital and pro-forma minimum capital requirements (ratios and dollars) as of December 31, 2008 and 2007 (dollars in thousands):

											To be Well
						For Capital					Capitalized
						Adequacy					Under Prompt Corrective
	Actual					Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2008:
Tangible Capital (to tangible assets)	$	156,775		9.89	%	$	23,783		1.50	%		N/A		N/A
Total Risk-Based Capital (to-risk-weighted assets)		173,949		11.94	%		116,571		8.00	%	$	145,713		10.00	%
Tier I Risk-Based Capital (to-risk-weighted assets)		156,316		10.73	%		N/A		N/A			87,428		6.00	%
Core Capital (to adjusted tangible assets)		156,775		9.89	%		63,421		4.00	%		79,277		5.00	%
As of December 31, 2007:
Tangible Capital (to tangible assets)	$	127,684		9.86	%	$	19,425		1.50	%		N/A		N/A
Total Risk-Based Capital (to-risk-weighted assets)		136,659		12.46	%	$	87,721		8.00	%	$	109,651		10.00	%
Tier I Risk-Based Capital (to-risk-weighted assets)		127,194		11.60	%		N/A		N/A			65,791		6.00	%
Core Capital (to adjusted tangible assets)		127,684		9.86	%	$	51,800		4.00	%		64,750		5.00	%

The Office of Thrift Supervision regulations impose limitations upon all capital distributions by a savings institution, including cash dividends. NCB, FSB must provide prior notice to the Office of Thrift Supervision of the capital distribution. If NCB, FSB’s capital were ever to fall below its regulatory requirements or the Office of Thrift Supervision notified NCB, FSB that it was in need of increased supervision, its ability to make capital distributions could be restricted. In addition, the Office of Thrift Supervision could prohibit a proposed capital distribution that would otherwise be permitted by the regulation, if the agency determines that such distribution would constitute an unsafe or unsound practice. As of December 31, 2008, no such limitations or restrictions existed.

20.   EMPLOYEE BENEFITS

Substantially all employees are covered by a non-contributory, defined contribution retirement plan. NCB contributes 6% of each employee’s salary after one year of employment. Total expense for the retirement plan for 2008, 2007, and 2006 was $1.0 million, $1.0 million, and $0.9 million, respectively.

NCB maintains an employee thrift plan organized under Internal Revenue Code Section 401(k) and matches up to 6% of each participant’s salary for every 1% the employee contributes. Participants receive vesting credit (non-forfeitable rights to the money in their 401(k) account) based on their number of years of employment with NCB. Contributions and expenses for 2008, 2007, and 2006 were $1.1 million, $1.2 million and $0.9 million, respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Participant matching contributions and earnings for the defined contribution retirement plan and the thrift plan are vested in accordance with the following schedule:

Years of Service	Vesting
less than 2 years		0	%
2		20	%
3		50	%
4		70	%
5		85	%
6		100	%

21.   INCOME TAXES

The Company adopted the provisions of FIN 48 on January 1, 2007. FIN 48 applies to all tax positions accounted for in accordance with FASB Statement 109. The term tax position as used in FIN 48 refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. A tax position can result in a permanent reduction of income taxes payable, a deferral of income taxes otherwise currently payable to future years, or a change in the expected realizability of deferred tax assets.

The term tax position also encompasses, but is not limited to:

•   A decision not to file a tax return

•   An allocation or a shift of income between jurisdictions

•   The characterization of income or a decision to exclude reporting taxable income in a tax return

•   A decision to classify a transaction, entity, or other position in a tax return as tax exempt.

Each year under the Act, NCB must declare tax-deductible patronage dividends in the form of cash, stock, or allocated surplus, which effectively reduce NCB’s federal income tax liability. Patrons of NCB receiving such patronage dividends consent to include them in their taxable income. NCB has allocated $7.2 million of its 2008 retained earnings for patronage dividends in the form of stock to be distributed during 2009. NCB’s board of directors passed a resolution to allow NCB to reduce its cash patronage dividend to be distributed in 2009 to zero which NCB has chosen to do as of December 31, 2008.

The provision (benefit) for income taxes for the years ended December 31, consists of the following (dollars in thousands):

	2008			2007			2006
Current tax expense
Federal	$	54		$	(274	)	$	495
State and local		646			(135	)		869
Total current		700			(409	)		1,364
Deferred tax (benefit) provision
Federal		46			(21	)		(197	)
State and local		(191	)		(234	)		247
Total deferred		(145	)		(255	)		50
Provision (benefit) for income taxes	$	555		$	(664	)	$	1,414

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences for the years ended December 31 (dollars in thousands):

	2008			2007			2006
Statutory U.S. tax rate	$	1,506		$	(386	)	$	7,085
Patronage dividends		(1,405	)		365			(6,982	)
State and local taxes		454			(369	)		1,115
Other		—			(274	)		196
Provision (benefit) for income taxes	$	555		$	(664	)	$	1,414

Deferred tax assets net of liabilities, included in other assets, are composed of the following at December 31, (dollars in thousands):

	2008			2007
Allowance for loan losses	$	1,021		$	486
Deferred commitment fees		311			264
Mark to market adjustments		—			201
Net operating loss carryforward		—			271
Security valuations		161			7
Other		120			121
Gross deferred tax assets		1,613			1,350
Mortgage servicing rights		(294	)		(306	)
Federal Home Loan Bank stock dividends		(632	)		(571	)
Gross deferred tax liabilities		(926	)		(877	)
Net deferred tax asset	$	687		$	473

Management has concluded that it is more likely than not that all deferred tax assets will be realized based on NCB’s history of earnings and management’s expectations that NCB will generate sufficient taxable income in future years to offset the reversal of temporary differences.

22.   INCOME AVAILABLE FOR DIVIDENDS ON STOCK

Under existing senior debt agreements, the aggregate amount of cash dividends on Class C stock, together with patronage dividends payable in cash, is limited to the sum of $15,000,000 plus 50% of NCB’s consolidated adjusted net income accumulation (or minus 100% of NCB’s consolidated adjusted net income in the case of a deficit) from January 1, 1992 through the end of the most current fiscal year ended. If the aggregate amount of cash dividends and patronage dividends payable in cash exceeds the limitation previously described, total patronage dividends payable in cash and cash dividends payable on any calendar year may not exceed 20% of NCB’s taxable income for such calendar year. As of December 31, 2008, NCB was not limited by the restrictions detailed above and thus the amount available for dividends on stock was approximately $129.2 million.

Notwithstanding the above restriction, NCB is prohibited by law from paying dividends on its Class C stock at a rate greater than the statutory interest rate payable on the subordinated Class A notes. Those rates for 2008, 2007, and 2006 are 4.36%, 5.32% and 4.88%, respectively. Consequently, the amounts available for payment on the Class C stock for 2008, 2007, and 2006 are $1.1 million, $1.3 million, and $1.2 million, respectively. In addition, under the Act and its bylaws, NCB may not pay dividends on its Class B stock.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

23.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

NCB is a party to financial instruments with off-balance sheet risk. These financial instruments may include commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the notional amount recognized in the balance sheets. The contract amounts of those instruments reflect the exposure that NCB has in particular classes of financial instruments. Unless noted otherwise, NCB does not require collateral or other security to support off-balance sheet financial instruments.

NCB’s exposure to credit loss in the event of nonperformance by the other parties to the commitments to extend credit and standby letters of credit issued is represented by the contract or notional amounts of those instruments. NCB uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. For interest rate swap transactions, forward commitments, and financial futures contracts, the contract or notional amounts do not represent exposure to credit loss.

In the normal course of business, NCB makes loan commitments to extend credit to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. NCB evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by NCB upon extension of credit, is based on management’s credit evaluation of the customer. Collateral varies, but may include accounts receivable, inventory, property, plant and equipment, and residential and income-producing commercial properties.

NCB also makes rate lock commitments to extend credit to borrowers for the origination of Single-family Residential, Share, Cooperative and Commercial Real Estate Loans. In the case of Single-family Residential and Share Loans, the rate lock commitments generally extend for a 30-day period. Some of these commitments will expire due to the transactions not being completed within 30 days. For Cooperative and Commercial Real Estate Loans, the rate lock commitments can extend for 12 months or longer, but there is generally little to no fall out prior to closing.

Standby letters of credit can be either financial or performance-based. Financial standby letters of credit obligate NCB to disburse funds to a third party if the customer fails to repay an outstanding loan or debt instrument. Performance letters of credit obligate NCB to disburse funds if the customer fails to perform a contractual obligation, including obligations of a non-financial nature. Issuance fees associated with the standby letters of credit range from 0.5% to 4.5% of the commitment amount. The standby letters of credit mature throughout 2009 to 2016. As of December 31, 2008, NCB had outstanding letters of credit with a total commitment amount of $293.7 million of which $258.5 million related to letters of credit issued in connection with certain variable rate municipal bonds. Under those letters of credit, NCB can be called upon to fund the amount of the municipal bond in the event the holder seeks repayment and the bond cannot be sold to another purchaser. For the year ended December 31, 2008, NCB provided funding for seven letters of credit for a total amount of $4.8 million. Of the $4.8 million, NCB had funds outstanding on only one letter of credit in the amount of $22 thousand remains outstanding for municipal bonds that could not be sold to another purchaser as of December 31, 2008.

In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantors, including Indirect Guarantees of Indebtedness of Others: an Interpretation of FASB Statement No. 5, 57 and 107 and rescission of FASB Interpretation No. 34.” In accordance with FIN 45, a liability of $8.7 million related to NCB’s obligation to stand ready to perform under outstanding letters of credit was recorded in other liabilities, and a corresponding asset of $9.0 million was recorded in other assets in the Consolidated Balance Sheet related to the issuance fees from the stand by letters of credit as of December 31, 2008. A liability of $9.8 million related to NCB’s obligation to stand ready to perform under outstanding letters of credit was recorded in other liabilities, and a corresponding asset of $10.0 million was recorded in other assets in the Consolidated Balance Sheet as of December 31, 2007.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The contract or commitment amounts and the respective estimated fair value of NCB’s commitments to extend credit and standby letters of credit as of December 31, are as follows (dollars in thousands):

	Contract or				Estimated
	Commitment Amounts				Fair Value
	2008		2007		2008			2007
Financial instruments whose contract amounts represent credit risk:
Undrawn commitments to extend credit	$	912,427	$	879,718	$	4,562		$	4,399
Rate lock commitments to extend credit:
Single-family Residential and Share Loans		8,661	$	5,912		144	(1)	$	(32	)
Cooperative and Commercial Real Estate Loans	$	32,585	$	38,055	$	600	(1)	$	(546	)
Standby letters of credit	$	293,711	$	280,959	$	12,131		$	13,165

(1) Effective January 1, 2008, NCB valued certain rate lock commitments (that are ultimately intended for sale after the loan was funded) in accordance with SFAS 157 and SAB 109. See Note 25.

NCB had a general reserve of $1.7 million and a specific reserve of $1.0 million as of December 31, 2008 to cover its loss exposure to unfunded commitments. As of December 31, 2007, NCB had a general reserve of $2.0 million for the same purpose.

24.   DERIVATIVE FINANCIAL INSTRUMENTS

NCB uses derivative financial instruments in the normal course of business for the purpose of reducing its exposure to fluctuations in interest rates. These instruments include interest rate swaps, financial futures contracts, and forward loan sales commitments. Existing NCB policies prohibit the use of derivative financial instruments for any purpose other than managing interest rate risk for NCB or any of its customers.

NCB enters into interest rate swaps and futures contracts and forward loan sales commitments to offset changes in fair value associated with fixed rate loans held-for-sale, rate lock commitments and debt due to changes in benchmark interest rates. Some of these interest rate swaps are designated derivatives hedging loans held-for-sale in fair value hedging relationships. NCB may use additional derivative instruments in the future.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair values of derivative instruments on the consolidated balance sheet as of December 31, 2008 are as follows (dollars in thousands):

	Asset Derivatives				Liability Derivatives
	Balance Sheet				Balance Sheet
	Location		Fair Value		Location		Fair Value
Derivatives designated as fair value hedging instruments under SFAS 133:
Interest rate swap agreements related to debt		Other assets	$	1,447		Other liabilities	$	—
Interest rate swap agreements related to loans and loan commitments		Other assets		—		Other liabilities		(848	)
Total derivatives designated as hedging instruments under SFAS 133				1,447				(848	)
Derivatives not designated as hedging instruments under SFAS 133:
Financial futures contracts		Other assets		—		Other liabilities		(10	)
Forward sales commitments
Single-family Residential and Share Loans		Other assets		4		Other liabilities		(21	)
Cooperative and Multifamily Loans		Other assets		127		Other liabilities		(85	)
Rate lock commitments to extend credit:
Single-family Residential and Share Loans		Other assets		165		Other liabilities		—
Cooperative and Commercial Real Estate Loans		Other assets		600		Other liabilities		—
Total derivatives not designated as hedging instruments under SFAS 133				896				(106	)
Total derivatives			$	2,343			$	(954	)

The effect of derivative instruments in SFAS 133 and designated as fair value hedging relationships on the consolidated statement of income (loss) for the year ended December 31, 2008 are as follows (dollars in thousands):

	Location of			Amount of		Location of			Amount of
	Gain (Loss)			Gain (Loss)		Gain (Loss)			Gain (Loss)
Derivatives	Recognized in			Recognized in		Recognized in			Recognized in
Designated as Fair Value	Income on			Income on		Income on			Income on
Hedging Relationships	Derivatives			Derivatives		Hedged Item			Hedged Item
Interest rate swap agreements related to debt		Interest income/(expense	)	$	540		Interest income/(expense	)	$	(540	)
Interest rate swap agreements related to loans and loan commitments		Other income/(expense	)		772		Other income/(expense	)		(685	)
Total				$	1,312				$	(1,225	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of derivative instruments not designated as hedging instruments under SFAS 133 on the consolidated statement of income (loss) for the year ended December 31, 2008 are as follows (dollars in thousands):

	Location of Gain (Loss)			Amount of Gain (Loss)
Derivatives Not Designated as Hedging Instruments	Recognized in Income on			Recognized in Income on
under SFAS 133	Derivatives			Derivatives
Financial futures contracts		Other income/(expense	)	$	(27	)
Forward sales commitments
Single-family Residential and Share Loans		Other income/(expense	)		106
Cooperative and Multifamily Loans		Other income/(expense	)		120
Rate lock commitments to extend credit:
Single-family Residential and Share Loans		Other income/(expense	)		175
Cooperative and Commercial Real Estate Loans		Other income/(expense	)		1,150
Interest rate swap agreements related to loans and loan commitments		Other income/(expense	)		1,268
Total				$	2,792

Interest rate swaps are executed to manage the interest rate risk associated with specific assets or liabilities. An interest rate swap agreement commits each party to make periodic interest payments to the other based on an agreed-upon fixed rate or floating rate index. There are no exchanges of principal amounts. Entering into an interest rate swap agreement involves the risk of default by counterparties and interest rate risk resulting from unmatched positions. The amounts potentially subject to credit risk are significantly smaller than the notional amounts of the agreements. NCB is exposed to credit loss in the event of nonperformance by its counterparties in the aggregate amount of $1.5 million at December 31, 2008. NCB does not anticipate nonperformance by any of its counterparties. Income or expense from interest rate swaps is treated as an adjustment to interest expense/income on the hedged asset or liability.

Financial futures are contracts for delayed delivery of specific securities at a specified future date and at a specified price or yield. NCB purchases/sells these contracts to economically hedge the interest rate risk associated with originating mortgage loans that will be held-for-sale. NCB has minimal credit risk exposure on these financial instruments since changes in market value of financial futures are settled in cash on the following business day, and payment is guaranteed by the clearinghouse. These futures contracts have not been designated as accounting hedges under SFAS 133, as amended.

Forward loan sales commitments lock in the prices at which, Single-family Residential, Share, Multifamily and Cooperative Loans will be sold to investors. Management limits the variability of a major portion of the change in fair value of these loans held-for-sale by employing forward loan sale commitments to minimize the interest rate and pricing risks associated with the origination and sale of such loans held-for-sale. NCB also participates in a cash window program with Fannie Mae to forward sell Cooperative, Residential Real Estate and Multifamily Loans. To the extent that a loan is ultimately granted and the borrower ultimately accepts the terms of the loan, these rate lock commitments expose NCB to variability in their fair value due to changes in interest rates. To mitigate the effect of this interest rate risk, NCB enters into offsetting forward loan sale commitments. Both the rate lock commitments and the forward loan sale commitments are undesignated derivatives, and accordingly are marked to market through earnings.

The estimated fair values of NCB’s financial futures contracts, interest rate swaps, interest rate lock commitments and forward sales commitments are recorded as a component of other assets and other liabilities on the consolidated balance sheet.

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The contract or notional amounts and the respective estimated fair value of NCB’s financial futures contracts, interest rate swaps and forward sales commitments as of December 31, are as follows (dollars in thousands):

	Notional Amounts				Fair Value
	2008		2007		2008			2007
Financial futures contracts	$	500	$	6,400	$	(10	)	$	17
Interest rate swap agreements related to debt	$	40,000	$	100,000	$	1,447		$	907
Interest rate swap agreements related to loans and loan commitments	$	3,442	$	70,190	$	(848	)	$	(2,888	)
Forward sales commitments
Single-family Residential and Share Loans	$	5,793	$	15,010	$	4		$	(102	)
Cooperative and Multifamily Loans	$	32,585	$	25,630	$	42		$	(78	)

25.   FAIR VALUE MEASUREMENTS

During the second quarter of 2008, NCB elected to measure, at the time of origination, certain Cooperative and Multifamily Residential Real Estate Loans that were held-for-sale at fair value pursuant to the provisions of SFAS 159. Unrealized gains and losses for these identified loans were included in earnings. Of the $4.6 million Residential Real Estate Loans held-for-sale disclosed in Note 5, the contractual principal amount of loans for which NCB has elected the fair value option under SFAS 159 totaled $0.5 million as of December 31, 2008. The difference in fair value of these loans compared to their principal balance was $20 thousand and was recorded in gain on sale of loans as of December 31, 2008. The fair value option was not elected for the remaining $4.1 million Residential Real Estate Loans disclosed in Note 5. Further, NCB has not elected the fair value option for any of the $9.7 million of principal balance of Consumer and Commercial Loans disclosed in Note 5.

On January 1, 2008, NCB adopted Statement of Financial Accounting Standards No. 157 (“SFAS 157”), “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, SFAS 157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

•   Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that NCB has the ability to access.

•   Level 2 — Financial assets and liabilities whose values are based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

•   Level 3 — Financial assets and liabilities whose values are based on inputs that are both unobservable and significant to the overall valuation.

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A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of NCB’s financial assets and financial liabilities carried at fair value effective January 1, 2008:

•   Certificated and Non-Certificated Interest-Only-Receivables — reported at fair value utilizing Level 3 inputs, as limited secondary market information is available regarding the valuation of NCB’s interest-only receivables.

•   U.S. Treasury and Agency Obligations — reported at fair value utilizing Level 1 inputs from readily observable data in active secondary fixed income markets.

•   Mutual Funds and Mortgage-Backed Securities — reported at fair value utilizing Level 2 inputs. As quoted market prices in actively traded markets are not available, fair values are estimated by using pricing models and quoted prices of securities with similar characteristics. Collateralized Mortgage Obligations, a component of Mortgage-Backed Securities that NCB holds, are not traded in active markets and there is little secondary market data that can be used. Therefore the assumptions used in the determination of the fair value of Collateralized Mortgage Obligations are considered Level 3.

•   Equity Securities — traded in active markets; therefore, the pricing inputs are considered Level 1.

•   Derivative Instruments — because NCB’s derivative contracts are not listed on an exchange and, therefore quoted market prices are not available, NCB’s derivative positions are valued using models that use readily observable market parameters and are classified within Level 2 of the valuation hierarchy. Such derivatives include basic interest rate swaps.

•   Loans Held-For-Sale — NCB’s loans held-for-sale, for which the fair value option has been elected, are reported at fair value. NCB determines the fair value of the loans-held-for sale using discounted cash flow models which incorporate quoted observable prices from market participants. Therefore, NCB classifies these loans held-for-sale as Level 2.

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The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):

	Quoted Prices in
	Active Markets for		Significant Other		Significant		Balance as of
	Identical Assets		Observable Inputs		Unobservable Inputs		December 31,
	(Level 1)		(Level 2)		(Level 3)		2008
Assets
Interest-only certificated receivables	$	—	$	—	$	27,854	$	27,854
Interest-only non-certificated receivables		—		—		27,264		27,264
U.S. Treasury and agency obligations		18,635		—		—		18,635
Mutual funds		—		881		—		881
Mortgage-backed securities and CMO’s		—		16,759		3,938		20,697
Equity securities		31		—		—		31
Derivative instruments		—		2,258		—		2,258
Loans held-for-sale		—		544		—		544
Total	$	18,666	$	20,442	$	59,056	$	98,164
Liabilities
Derivative instruments	$	—	$	879	$	—	$	879
Total	$	—	$	879	$	—	$	879

The table below summarizes the changes in fair value for all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the twelve months ended December 31, 2008 (dollars in thousands):

	Interest-Only			Interest-Only			Collateralized
	Certificated			Non-certificated			Mortgage
	Receivables			Receivables			Obligations
Assets
Balance at December 31, 2007	$	33,828		$	29,932		$	7,255
Total gains or (losses) (realized/unrealized):
Included in earnings		—			—			(1,692	)
Included in other comprehensive income		(342	)		359			(1,215	)
Purchases, issuances, settlements and fundings		—			1,494			—
Write down of asset due to prepayment		—			(28	)
Transfers in and/or out of Level 3		—			—			—
Amortization		(5,632	)		(4,493	)		(410	)
Balance at December 31, 2008	$	27,854		$	27,264		$	3,938

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis. That is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

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The following is a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis as of December 31, 2008:

•   Loans Held-For-Sale — NCB’s loans held-for-sale for which the fair value option has not been elected, are reported at the lower of cost or fair value. The principal balance of these loans was $13.8 million at December 31, 2008. NCB determines the fair value of the loans-held-for sale measured at the lower of cost or fair value using discounted cash flow models which do not incorporate readily observable market data. Therefore, NCB classifies these loans held-for-sale as Level 3.

•   Mortgage servicing rights (“MSRs”) — NCB’s MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, precise terms and conditions vary with each transaction and are not readily available. Accordingly, NCB estimates the fair value of MSRs using discounted cash flow (“DCF”) models that calculate the present value of estimated future net servicing income. The model considers and incorporates individual loan characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. NCB reassesses and periodically adjusts the underlying inputs and assumptions used in the model to reflect observable market conditions and assumptions that a market participant would consider in valuing an MSR asset. As the valuation inputs are largely unobservable, MSRs are classified within Level 3 of the valuation hierarchy. MSRs are carried at the lower of amortized cost or estimated fair value.

•   Impaired Loans — NCB’s impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or fair value. Fair value is measured based on the value of the collateral securing these loans and is classified at Level 3. Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable.

The following table summarizes the fair value of instruments measured on a non-recurring basis as of December 31, 2008 (dollars in thousands):

	Quoted Prices in
	Active Markets for		Significant Other		Significant		Balance as of
	Identical Assets		Observable Inputs		Unobservable Inputs		December 31,
	(Level 1)		(Level 2)		(Level 3)		2008
Assets
Loans held-for-sale	$	—	$	—	$	4,028	$	4,028	(1)
Mortgage servicing rights		—		—		4,351		4,351	(2)
Impaired loans		—		—		14,063		14,063	(3)
Total	$	—	$	—	$	22,442	$	22,442

(1)	Only mortgage loans with fair values below cost and for which the fair value option has not been elected, are included in the table above. The related valuation allowance represents the cumulative adjustment to fair value of those specific mortgage loans.
(2)	Mortgage servicing rights are accounted for at amortized cost and tested on a quarterly basis for impairment. The impairment test is segmented into the risk tranches, which are stratified, based upon the predominant risk characteristics of the loans. The table above only includes the fair value of the strata of mortgage servicing rights that were impaired as of the balance sheet date.
(3)	The fair value of the impaired loans only includes those loans that were evaluated under SFAS 114.

As detailed in Note 24, NCB in the normal course of business enters into rate lock commitments to extend credit to borrowers. The commitments become effective when the borrowers rate lock a specified interest rate within the time frames established by NCB. Market risk arises if interest rates and/or the return demanded by investors

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moves adversely between the time of the rate lock and the ultimate sale to an investor. These commitments are undesignated derivatives pursuant to the requirements of SFAS 133 and are accordingly marked to fair value through earnings. Fair value is determined pursuant to SFAS 157 and SAB 109, both of which NCB adopted on January 1, 2008.

The transition provisions of SFAS 157 provide for retrospective application to, amongst others, financial instruments that were measured at fair value at initial recognition using a transaction price in accordance with Emerging Issues Task Force Issue No. 02-03, “Issues involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities.” NCB’s interest rate lock commitments were measured at inception at the transaction price. Upon adoption of SFAS 157, the difference between the carrying amount and the fair value of these interest rate lock commitments was recognized as a cumulative effect adjustment to the beginning balance of retained earnings. The carrying amount of $38.1 million and the fair value amount of $39.3 million resulted in a $1.2 million cumulative effect adjustment to the beginning balance of retained earnings.

SFAS No. 107, “Disclosure about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available for identical or comparable instruments, fair values are based on estimates using the present value of estimated cash flows using a discount rate commensurate with the risks involved or other valuation techniques. The resulting fair values are affected by the assumptions used, including the discount rate and estimates as to the amounts and timing of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of year-end or that will be realized in the future.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value and for those instruments that NCB has not measured at fair value on a recurring basis as of December 31, 2008:

Cash and cash equivalents — The carrying amount approximates fair value.

Mortgage servicing rights — The fair value of mortgage servicing rights is based on discounted future net cash flows received for servicing mortgages at current market rates offered by purchasers of mortgage servicing rights.

Loans and lease financing — The fair market value of adjustable rate loans is estimated by discounting the future cash flows using the rates at which similar loans would be made to borrowers with similar credit quality and the same stated maturities. The fair value of fixed rate commercial and other loans and leases, excluding loans held-for-sale, is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit quality and for the same remaining maturities.

Loans held-for-sale — The fair value of loans held-for-sale is based on market prices for similar loans sold in the secondary market, adjusted for differences in loan characteristics.

Accrued interest receivable and accrued interest payable — The carrying value of accrued interest payable is deemed to approximate fair value.

Deposit liabilities — The fair value of demand deposits, savings accounts, and certain money market deposits is determined using estimates of the value of the customer relationship provided by the Office of Thrift Supervision. The fair value of fixed-maturity certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates of deposits of similar remaining maturities.

Short-term and other borrowings — The carrying amounts approximate fair value.

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Long-term debt — The fair value of long-term debt is estimated by discounting the future cash flows using the current borrowing rates at which similar types of borrowing arrangements with the same remaining maturities could be obtained by NCB.

Subordinated debt — The fair value of subordinated debt is estimated by discounting the future cash flows using the current borrowing rates at which similar types of borrowing arrangements with the same remaining maturities could be obtained by NCB.

Junior subordinated debt — The fair value of junior subordinated debt is estimated by discounting the future cash flows using the current borrowing rates at which similar types of borrowing arrangements with the same remaining maturities could be obtained by NCB.

Standby letters of credit and financial guarantees written — For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the customers at the reporting date.

The following table summarizes the carrying amount and fair value of the financial instruments that NCB has not measured at fair value on a recurring basis as of December 31, 2008 (dollars in thousands):

	2008				2007
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Financial Assets:
Cash and cash equivalents	$	39,971	$	39,971	$	63,724	$	63,724
Held-to-maturity investment securities		387		374		417		431
Mortgage servicing rights		13,252		14,891		13,420		18,246
Loans held-for-sale		14,278		14,396		90,949		92,708
Loans and lease financing, net		1,930,124		1,973,435		1,506,244		1,527,295
Accrued interest receivables		11,169		11,169		11,162		11,162
Financial Liabilities:
Deposits		1,300,071		1,320,529		1,027,452		1,020,396
Short-term borrowings		225,000		225,000		183,000		183,000
Long-term debt		196,447		196,673		220,907		219,035
Subordinated debt		116,489		92,252		118,989		103,103
Junior subordinated debt		51,547		33,245		51,547		50,390
Accrued interest payable		6,151		6,151		7,232		7,232

	Contract or				Contract or
	Commitment		Estimated		Commitment		Estimated
Off-Balance Sheet Financial Instruments:	Amounts		Fair Value		Amounts		Fair Value
Undrawn commitments to extend credit	$	912,427	$	4,562	$	879,718	$	4,399
Standby letters of credit	$	293,711	$	12,131	$	280,959	$	13,165

26.   SEGMENT REPORTING

NCB’s reportable segments are strategic business units that provide diverse products and services within the financial services industry. NCB has five reportable segments: Commercial Lending, Real Estate Lending, Warehouse Lending, Retail and Consumer Lending, and Other. The Commercial Lending segment provides financial services to cooperative and member-owned businesses. The Real Estate Lending segment originates and services multi-family cooperative real estate and community association loans (included in Commercial Loans in Note 6) nationally, with a concentration in New York City. The Warehouse Lending segment originates Residential

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and Commercial Real Estate Loans for sale in the secondary market. The Retail and Consumer Lending segment provides traditional banking services such as lending and deposit gathering to retail, corporate and commercial customers. The Other segment consists of NCB’s unallocated administrative income and expense, and net interest income from investments and corporate debt after allocations to segments. The Other segment assets consist mostly of unallocated cash and cash equivalents, investment securities, Federal Home Loan Bank stock, premises and equipment and equity investment securities. NCB evaluates segment performance based on earnings before taxes. The accounting policies of the segments are substantially the same as those described in the summary of significant accounting policies.

The following is the segment reporting for the years ended December 31, 2008, 2007 and 2006 (dollars in thousands):

			Real				Retail and
	Commercial		Estate		Warehouse		Consumer					NCB
2008	Lending		Lending		Lending		Lending		Other			Consolidated
Net interest income:
Interest income	$	36,103	$	46,122	$	7,883	$	30,077	$	3,516		$	123,701
Interest expense		19,764		23,469		3,980		16,251		3,841			67,305
Net interest income		16,339		22,653		3,903		13,826		(325	)		56,396
Provision (benefit) for loan losses		12,275		4,629		—		1,746		—			18,650
Non-interest income		6,585		4,384		9,759		3,186		1,028			24,942
Non-interest expense:
Direct expense		4,398		3,135		5,442		2,194		21,443			36,612
Overhead and support		6,022		4,436		7,736		3,453		—			21,647
Total non-interest expense		10,420		7,571		13,178		5,647		21,443			58,259
Income (loss) before taxes	$	229	$	14,837	$	484	$	9,619	$	(20,740	)	$	4,429
Total average assets	$	524,470	$	707,111	$	117,704	$	531,160	$	172,801		$	2,053,246
Total assets	$	577,063	$	847,259	$	68,505	$	532,424	$	129,641		$	2,154,892

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				Real					Retail
	Commercial			Estate		Warehouse			Consumer					NCB
2007	Lending			Lending		Lending			Lending		Other			Consolidated
Net interest income:
Interest income	$	40,378		$	36,496	$	23,690		$	29,579	$	5,596		$	135,739
Interest expense		22,110			20,487		18,399			19,437		4,688			85,121
Net interest income		18,268			16,009		5,291			10,142		908			50,618
(Benefit) provision for loan losses		(1,488	)		936		—			704		—			152
Non-interest income		4,331			4,478		(396	)		1,110		2,446			11,969
Non-interest expense:
Direct expense		6,455			3,205		4,837			3,197		24,067			41,761
Overhead and support		8,383			4,006		5,371			4,050		—			21,810
Total non-interest expense		14,838			7,211		10,208			7,247		24,067			63,571
Income (loss) before taxes	$	9,249		$	12,340	$	(5,313	)	$	3,301	$	(20,713	)	$	(1,136	)
Total average assets	$	462,938		$	479,066	$	370,052		$	493,498	$	145,042		$	1,950,596
Total assets	$	493,998		$	524,318	$	156,270		$	511,532	$	185,658		$	1,871,776

			Real					Retail
	Commercial		Estate			Warehouse		Consumer						NCB
2006	Lending		Lending			Lending		Lending			Other			Consolidated
Net interest income:
Interest income	$	34,735	$	30,610		$	21,176	$	27,525		$	4,408		$	118,454
Interest expense		20,028		15,661			16,698		16,226			3,483			72,096
Net interest income		14,707		14,949			4,478		11,299			925			46,358
Provision (benefit) for loan losses		5,278		(337	)		—		(1,274	)		—			3,667
Non-interest income		4,338		3,526			22,855		1,709			1,252			33,680
Non-interest expense:
Direct expense		6,206		3,981			4,517		4,813			21,168			40,685
Overhead and support		4,765		3,276			2,914		3,892			—			14,847
Total non-interest expense		10,971		7,257			7,431		8,705			21,168			55,532
Income (loss) before taxes	$	2,796	$	11,555		$	19,902	$	5,577		$	(18,991	)	$	20,839
Total average assets	$	472,553	$	321,095		$	353,341	$	480,083		$	130,840		$	1,757,912
Total assets	$	456,178	$	433,875		$	329,793	$	484,263		$	125,368		$	1,829,477

27.   LOAN SALES AND SECURITIZATIONS

NCB sells loans in the whole loan and securitization markets. When NCB sells loans, it generally retains the mortgage servicing rights and, depending on the nature of the sale, may also retain interest-only securities (retained interests).

NCB did not sell any loans through securitized transactions during the twelve months ended December 31, 2008. During the twelve months ended December 31, 2007, NCB sold loans through securitized transactions and

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retained interest-only receivables. The net proceeds from NCB’s 2007 sale of loans through securitized transactions were $370.2 million and generated a total of $3.2 million in retained interests.

During the years ended December 31, 2008 and 2007, NCB sold loans through non-securitized transactions to Fannie Mae. The net proceeds from the sale of these loans were $451.7 million and generated a total of $3.6 million in retained interests for the year ended December 31, 2008. The net proceeds from the sale of these loans were $604.7 million and generated a total of $7.1 million in retained interests for the year ended December 31, 2007.

NCB does not retain any interests on Consumer Loan sales, which generated net proceeds of $357.2 million and $220.9 million for the years ended December 31, 2008 and 2007, respectively.

In total, NCB generated a gain on the sale of loans of $6.0 million for the year ended December 31, 2008 compared with a loss of $1 thousand for the year ended December 31, 2007.

See Note 4 — Loan Servicing for a presentation of loan balances that NCB services.

Mortgage Servicing Rights (“MSRs”)

MSRs arise from contractual agreements between NCB and investors (or their agents) related to securities and loans. MSRs represent assets when the benefits of servicing are expected to be more than adequate compensation for NCB’s servicing of the related loans. Under these contracts, NCB performs loan servicing functions in exchange for fees and other remuneration. The servicing functions typically performed include: collecting and remitting loan payments, responding to borrower inquiries, accounting for principal and interest, holding custodial (impound) funds for payment of property taxes and insurance premiums, counseling delinquent mortgagors, supervising foreclosures and property dispositions, and generally administering the loans. For performing these functions, NCB receives a servicing fee generally ranging from 0.06% to 0.40% annually on the remaining outstanding principal balances of the loans. The servicing fees are collected from the monthly payments made by the borrowers. In addition, NCB generally receives other remuneration consisting of float benefits derived from collecting and remitting mortgage payments, as well as rights to various mortgagor-contracted fees such as late charges and prepayment penalties. In addition, NCB generally has the right to solicit the borrowers for other products and services.

MSRs are periodically tested for impairment. The impairment test is segmented into the risk tranches, which are stratified, based upon the predominant risk characteristics of the loans.

Activity related to MSRs for the years ended December 31, was as follows (dollars in thousands):

	Mortgage Servicing Rights
	2008			2007
Balance at January 1	$	13,420		$	9,362
Additions		2,048			5,574
Amortization		(1,829	)		(1,277	)
Change in valuation allowance		(387	)		(239	)
Balance at December 31	$	13,252		$	13,420

As of December 31, 2008 and 2007 the MSR balance relating to the servicing of Share and Single-family Residential Loans was $2.9 million. As of December 31, 2008 and 2007 the MSR balance relating to the servicing of all other loans was $10.4 million and $10.5 million, respectively.

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NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Changes in the valuation allowance for MSRs (included as a component of other assets) for years ended December 31 were as follows (dollars in thousands):

	2008			2007
Balance at January 1	$	239		$	—
Additional write-downs		716			239
Recoveries		(329	)		—
Balance at December 31	$	626		$	239

Considerable judgment is required to determine the fair value of NCB’s retained interests because these assets have Level 3 inputs under SFAS 157.

NCB’s MSR valuation process combines the use of sophisticated discounted cash flow models to arrive at an estimate of fair value at the time of the loan sale and each subsequent balance sheet date. The key assumptions used in the valuation of MSRs are mortgage prepayment speeds, the discount rate of residual cash flows and the earnings rate of P&I float, escrows and replacement reserves. These variables can and generally will change from quarter to quarter as market conditions and projected interest rates change. Multiple models are required to reflect the nature of the MSR of the different types of loans that NCB services.

Key economic assumptions used in determining the fair value of MSRs at the time of sale for the years ended December 31 were as follows:

	2008			2007			2006
Weighted-average life (in years):
Share and Single-family Residential Loans		3.8			5.6			3.9
Multifamily, Cooperative and Commercial Real Estate Loans		7.2			8.5			8.7
Weighted-average annual prepayment speed:
Share and Single-family Residential Loans		26.9	%		20.0	%		28.4	%
Multifamily, Cooperative and Commercial Real Estate Loans		6.6	%		5.0	%		4.6	%
Residual cash flow discount rate (annual):
Share and Single-family Residential Loans		10.3	%		10.0	%		10.3	%
Multifamily, Cooperative and Commercial Real Estate Loans		9.0	%		9.4	%		11.0	%
Earnings rate P&I float, escrows and replacement reserves:
Share and Single-family Residential Loans		4.05	%		5.00	%		5.00	%
Multifamily, Cooperative and Commercial Real Estate Loans		3.43	%		5.41	%		5.34	%

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NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Key economic assumptions used in measuring the period-end fair value of NCB’s MSRs as of December 31, and the effect on the fair value of those MSRs from adverse changes in those assumptions are as follows (dollars in thousands):

	2008			2007			2006
Fair value of mortgage servicing rights:
Share and Single-family Residential Loans	$	2,878		$	4,277		$	3,868
Multifamily, Cooperative and Commercial Real Estate Loans	$	12,013		$	13,969		$	8,191
Weighted-average remaining life (in years):
Share and Single-family Residential Loans		2.5			5.3			5.7
Multifamily, Cooperative and Commercial Real Estate Loans		6.8			7.3			7.9
Weighted-average annual prepayment speed:
Share and Single-family Residential Loans		33.5	%		20.2	%		19.5	%
Multifamily, Cooperative and Commercial Real Estate Loans		2.6	%		2.9	%		2.3	%
Impact on fair value of 10% adverse change:
Share and Single-family Residential Loans	$	(245	)	$	(180	)	$	(164	)
Multifamily, Cooperative and Commercial Real Estate Loans	$	(81	)	$	(69	)	$	(26	)
Impact on fair value of 20% adverse change:
Share and Single-family Residential Loans	$	(500	)	$	(343	)	$	(313	)
Multifamily, Cooperative and Commercial Real Estate Loans	$	(161	)	$	(137	)	$	(52	)
Residual cash flows discount rate (annual):
Share and Single-family Residential Loans		10.5	%		10.0	%		10.3	%
Multifamily, Cooperative and Commercial Real Estate Loans		9.0	%		9.0	%		11.0	%
Impact on fair value of 10% adverse change:
Share and Single-family Residential Loans	$	(66	)	$	(117	)	$	(112	)
Multifamily, Cooperative and Commercial Real Estate Loans	$	(384	)	$	(486	)	$	(365	)
Impact on fair value of 20% adverse change:
Share and Single-family Residential Loans	$	(129	)	$	(228	)	$	(218	)
Multifamily, Cooperative and Commercial Real Estate Loans	$	(748	)	$	(947	)	$	(705	)
Earnings Rate of P&I float, escrow and replacement:
Share and Single-family Residential Loans		3.5	%		5.0	%		5.0	%
Multifamily, Cooperative and Commercial Real Estate Loans		3.0	%		4.6	%		5.3	%
Impact on fair value of 10% adverse change:
Share and Single-family Residential Loans	$	(82	)	$	(120	)	$	(1	)
Multifamily, Cooperative and Commercial Real Estate Loans	$	(404	)	$	(597	)	$	(475	)
Impact on fair value of 20% adverse change:
Share and Single-family Residential Loans	$	(164	)	$	(240	)	$	(3	)
Multifamily, Cooperative and Commercial Real Estate Loans	$	(808	)	$	(1,194	)	$	(950	)

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NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest-Only receivables

Activity related to interest-only receivables for the years ended December 31 is as follows (dollars in thousands):

	Interest-Only
	Certificated
	Receivables
	2008			2007
Balance at January 1 at fair value	$	33,828		$	39,950
Additions		—			1,108
Amortization		(5,632	)		(5,377	)
Change in mark-to-market		(342	)		(1,770	)
Writedown of asset due to prepayment		—			(83	)
Balance at December 31 at fair value	$	27,854		$	33,828

	Interest-Only
	Non-certificated
	Receivables
	2008			2007
Balance at January 1 at fair value	$	29,932		$	33,053
Additions		1,494			3,619
Amortization		(4,493	)		(4,376	)
Change in mark-to-market		359			(2,314	)
Writedown of asset due to prepayment		(28	)		(50	)
Balance at December 31 at fair value	$	27,264		$	29,932

For interest-only receivables, NCB estimates fair value both at initial recognition and on an ongoing basis through the use of discounted cash flow models. The key assumptions used in the valuation of NCB’s interest-only receivables at the time of sale are the life and discount rate of the estimated cash flows which are as follows as of December 31:

	2008			2007			2006
Weighted-average life (in years)		9.5			8.7			9.2
Weighted-average annual discount rate		18.08	%		6.44	%		6.99	%

The increase in the discount rate from December 31, 2007 to December 31, 2008 is attributable to an increase in the investor spreads that would be demanded if these interest-only receivables were sold as of December 31, 2008.

Key economic assumptions used in subsequently measuring the fair value of NCB’s interest-only receivables as of December 31, and the effect on the fair value of those other interest-only receivables from adverse changes in those assumptions are as follows (dollars in thousands):

	2008			2007
Fair value	$	55,118		$	63,760
Weighted-average life (in years)		5.9			6.5
Weighted average annual discount rate		9.00	%		8.12	%
Impact on fair value of 10% adverse change	$	(1,372	)	$	(1,574	)
Impact on fair value of 20% adverse change	$	(2,688	)	$	(3,084	)

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NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

All of the sensitivities above are hypothetical and should be used with caution. The effect of a variation in a particular assumption on the fair value of the retained interest is calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another factor, which might compound or counteract the sensitivities.

As of December 31, 2008 and 2007 the total principal amount outstanding of the underlying loans of the interest-only receivables was $4.7 billion and $4.5 billion, respectively. As of December 31, 2008 there was $19.8 million or 0.4%, of delinquent loans. As of December 31, 2007 there was $4.9 million or 0.1%, of delinquent loans.

The following table summarizes the cash flows received from loan sale activity and retained interests for the years ended December 31, (dollars in thousands):

	2008		2007
Net proceeds from loans sold through securitizations	$	—	$	370,178
Net proceeds from auto loan sales	$	357,179	$	220,887
Net proceeds from other loan sales	$	451,645	$	604,765
Servicing fees received	$	6,781	$	5,950
Cash flows received on interest-only receivables	$	13,992	$	14,880

28.   SUBSEQUENT EVENTS

1. On March 31, 2009, NCB executed an amendment to both the Prudential agreement and the revolving credit facility agreement which waives NCB’s previous covenant violation in its prior credit agreement and amends various covenant thresholds on a prospective basis. Management has completed financial projections through December 31, 2010 and believes that NCB will be in compliance with all covenants through the maturity of the credit facility and the Prudential notes.

2. On November 21, 2008, the Federal Deposit Insurance Corporation (“FDIC”) Board of Directors approved the TLGP. The program was created to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and by providing full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount.

Under the TLPG, the FDIC will temporarily guarantee newly issued senior unsecured debt in a total amount up to 125 percent of the par or face value of senior unsecured debt outstanding, excluding debt extended to affiliates, as of September 30, 2008, that was scheduled to mature on or before June 30, 2009. Upon a payment default under debt covered by the program, the FDIC would continue to make scheduled interest and principal payments under the terms of the debt instrument through its maturity. The guarantee extends up to three years or December 31, 2012.

On February 11, 2009, under the TLGP, NCB issued $25 million of debt. The debt has a 2.74% fixed rate, requires semi-annual payments of interest and matures on February 15, 2012. The debt is backed by the full faith and credit of the United States government. NCB is eligible to issue another $50 million under the TLGP before June, 2009. NCB paid an FDIC fee of $0.8 million related to this debt issuance to be amortized over a three-year period.

NCB, FSB has separate capacity to issue $13 million in FDIC-guaranteed debt, and it is evaluating whether to participate in the guaranteed debt program.

Another component to the TLPG is the Transaction Account Guarantee Program (“TAGP”). As of December 31, 2008 NCB is participating in the TAGP. Under this program, through December 31, 2009, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. Coverage under the TAGP is in addition to and separate from the coverage available under the FDIC’s general deposit insurance rules.

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NATIONAL CONSUMER COOPERATIVE BANK

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

29.   LEGAL PROCEEDINGS

NCB is involved in various litigation arising from the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on NCB’s consolidated financial position, results of operations, or liquidity.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

NCB’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated NCB’s disclosure controls and procedures as of December 31, 2008 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, NCB’s Chief Executive Officer and Chief Financial Officer concluded that NCB’s disclosure controls and procedures are functioning effectively to provide reasonable assurance that NCB can meet its obligations to disclose in a timely manner material information required to be included in NCB’s reports under the Exchange Act.

There has been no change in NCB’s internal control over financial reporting that occurred during NCB’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NCB’s internal control over financial reporting.

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of National Consumer Cooperative Bank and subsidiaries (the Bank) is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Bank’s principal executive and principal financial officers and effected by the Bank’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (GAAP) and includes those policies and procedures that:

•   pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Bank;

•   provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Bank are being made only in accordance with authorizations of management and directors of the Bank; and

•   provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Bank’s assets that could have a material effect on its financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections or evaluations of effectiveness regarding future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate.

The Bank’s management assessed the effectiveness of its internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control — Integrated Framework.” Based on this assessment, management has concluded that the Bank’s internal control over financial reporting was effective as of December 31, 2008.

This annual report does not include an attestation report of the Bank’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Bank’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

/s/ Charles E. Snyder	/s/ Richard L. Reed
Charles E. Snyder	Richard L. Reed
President and Chief Executive Officer	Chief Financial Officer

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The directors and executive officers of NCB and the positions held by each are as follows:

		Year First
		Elected or		End of
	Position	Appointed		Term	Age
Irma Cota	Chairperson of the Board of Directors and Director		2004	2010		55
Stuart M. Saft	Vice Chairperson of the Board of Directors and Director		2007	2010		61
Charles E. Snyder	President and Chief Executive Officer		1983	-		55
Roger B. Collins	Director		2005	2011		60
Peter A. Conrad	Director		2008	2011		59
Steven F. Cunningham	Director		2005	2011		67
William F. Hampel	Director		2004	2010		57
Grady B. Hedgespeth	Director		2003	2009		52
Janis Herschkowitz*	Director		2007	2010		49
Rosemary Mahoney	Director		2003	2009		48
Stephanie McHenry	Director		2001	2009		46
Richard A. Parkinson	Director		2003	2009		59
Alfred A. Plamann	Director		2008	2011		66
Walden Swanson	Director		2007	2010		58
Nguyen Van Hanh*	Director		2007	2010		71
Steven A. Brookner	Executive Managing Director, NCB;		1997	-		45
	Chief Executive Officer, NCB, FSB
Patrick N. Connealy	Managing Director, Chief Credit Officer, NCB		1986	-		52
Frank Fasano	Chief Information Officer		1997	-		42
Mark W. Hiltz	Managing Director, Chief Risk Officer		1982	-		60
Kathleen M. Luzik	Managing Director, NCB; Chief Operating Officer, NCB, FSB		1991	-		45
James C. Oppenheimer	General Counsel and Corporate Secretary		2008	-		40
Richard L. Reed	Executive Managing Director, Chief Financial Officer, NCB;		1985	-		50
	Chief Financial Officer, NCB Financial Corporation and NCB, FSB

* Presidentially appointed Directors who will serve until their successors are appointed and confirmed.

Irma Cota is President and CEO of North County Health, a Comprehensive Community Health Center with 10 clinic sites and a staff of 500. She is a former President of California Primary Care Association and past President of the San Diego Council of Community Clinics. Ms. Cota holds a masters degree in public health from San Diego State University. Having over thirty years of experience specializing in health/medical, Ms. Cota has extensive experience in working with non-profit boards of directors. She is currently the Vice Chair of the California State University San Marcos University Council.

Stuart M. Saft is a Partner at the real estate practice of Dewey & LeBouf. Prior to that, Mr. Saft was a Partner and Chairman of the Real Estate division at Wolf Haldenstein Adler Freeman & Herz LLP. Mr. Saft holds a Doctor of Jurisprudence from Columbia University Law School.

Charles E. Snyder was named President and Chief Executive Officer of NCB in January 1992. He had been Corporate Vice President and Chief Financial Officer of NCB from 1983 to December 1991.

Roger Collins is President and Chief Executive Officer of Harp’s Food Stores, Inc., a regional grocery chain located in Arkansas, Oklahoma, and Missouri. He currently serves on the boards of directors of Associated Wholesale Grocers and the National Grocers Association. Mr. Collins has a B.S. in economics from Rice University and an MBA from the University of Texas at Austin.

Peter A. Conrad is President and Chief Executive Officer of the Cooperative Central Bank in Boston, Massachusetts. Mr. Conrad has been a trustee of the Cooperative Banks Employees Retirement Association (CBERA) and the Cooperative Banks Employees Benefit Association (CBEBA) since June, 2005.

Steven F. Cunningham is President Emeritus of IMARK Group, Inc., a purchasing cooperative of independently owned electrical suppliers and equipment wholesalers located in Oxon Hill, Maryland. He currently

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serves as President and Director of Elite Distributors Insurance Co., located in Grand Cayman. He also serves as a director of Mutual Services Cooperative and is currently chair of the National Cooperative Business Association’s Board of Directors. Mr. Cunningham has a bachelor’s degree in accounting from Lehigh University, Bethlehem, Pennsylvania.

William F. Hampel is Senior Vice President for Research and Policy Analysis and Chief Economist of Credit Union National Association located in Washington, D.C. Mr. Hampel holds a Bachelor of Arts degree in Economics from University of Dallas and a PhD in Economics from Iowa State University. Mr. Hampel was a member of the board of CUNA Credit Union from 1991 to 2004 serving as secretary, treasurer, vice president, and chair. Mr. Hampel is also a member of CUNA’s regulatory and legislative advocacy team.

Grady B. Hedgespeth is the Director of Financial Assistance for the United States Small Business Administration located in Washington, D.C. He was the founder and president of BankBoston Development Company, the nation’s first bank-owned urban investment bank. Mr. Hedgespeth is an honors graduate of the University of Virginia and the Kennedy School of Government at Harvard.

Janis Herschkowitz is President and Chief Executive Office of PRL, Inc, a group of manufacturing companies located in Cornwall, Pennsylvania. Ms. Herschkowitz holds a Bachelor of Arts degree in International Relations from Penn State University and a Masters in Business Administration in Finance from the University of Texas.

Rosemary K. Mahoney is Chief Executive Officer of Coopmetrics. Ms. Mahoney is a member of the Board of Directors of the National Cooperative Business Association, Thanexus, Inc. and the National Cooperative Grocers Association.

Stephanie McHenry is President of ShoreBank Cleveland Banking Region. Prior to the merger of ShoreBank affiliated institutions, she was President and Chief Operating Officer of ShoreBank in Cleveland, Ohio. Prior to joining ShoreBank Ms. McHenry was director of Minority Business Development of Greater Cleveland Growth Association and Executive Director of Northern Ohio Minority Business Council since 1998.

Richard A. Parkinson is the President and Chief Executive Officer of Associated Food Stores, Inc., in Salt Lake City, Utah. Mr. Parkinson also served as a member of the executive committee of the Board for Associated Food Stores.

Alfred A. Plamann was named President & Chief Executive Officer of Unified in September 1999 when Los Angeles-based Certified Grocers of California, Ltd. merged with United Grocers, Inc. of Portland, Oregon. Currently, he serves on the Board of the Food Marketing Institute as well as the National Cooperative Grocers Association. He is a member of the Los Angeles Area Chamber of Commerce (Board member), the Town Hall of Los Angeles (Board member), the George L. Graziadio School of Business & Management — Pepperdine University (Board of Visitors member), the Southern California Chapter of the National Association of Corporate Directors, Weingart Center Association, a non-profit organization that provides assistance to the homeless in Los Angeles, and is a former Chairman of the San Gabriel Valley Council of Boy Scouts of America. Mr. Plamann holds a B.S. in accounting and real estate from the University of Colorado and an M.B.A. from the University of Pennsylvania (Wharton).

Walden Swanson is a Founder and Chief Executive Officer of CoopMetrics, the first cooperative incorporated under the progressive Minnesota cooperative statutes. Mr. Swanson has served on numerous cooperative boards, including NCB Capital Impact, the National Cooperative Business Association, the Cooperative Development Fund, and the Central Committee of the International Cooperative Alliance.

Nguyen Van Hanh is an Affiliate Professor of George Mason University, specializing in international economics and higher education reform. Dr. Van Hanh holds a PhD in Economics from the University of California at Davis, having earlier received a Bachelor of Science with high honors and a Master’s of Science degree in Agricultural Science both from the University of Florida

Steven A. Brookner is the Chief Executive Officer of NCB, FSB since November 2001 and Executive Managing Director at NCB responsible for overseeing the real estate originations, capital markets, servicing and investor reporting functions of NCB. From 1997 through September 1998, he was a Managing Director responsible

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for strategic initiatives and new product development. Previously, he was a partner of Hamilton Securities Group for one year and Co-founder and Principal of BNC & Associates, a financial and management consulting firm, for five years.

Patrick N. Connealy is a Managing Director and Chief Credit Officer of NCB. Prior to joining NCB in 1986, he worked as a supervisory officer with the Farm Credit Administration in Washington, DC, and as assistant vice president and loan officer for the Farm Credit Bank of Omaha.

Frank Fasano is the Chief Information Office of NCB. Prior to becoming CIO, he served as Chief Technology Officer, Senior Vice President, and Vice President of IT Operations. Mr. Fasano joined NCB in 1997 and is a graduate of Georgetown University.

Mark W. Hiltz is a Managing Director and Chief Risk Officer of NCB. He was a Corporate Vice President and Manager of Special Assets from 1994 to 1998 and a Senior Vice President of the Special Assets Department from 1986 to 1994. Previously he was Vice President of Loan Administration from 1983 to 1986 and General Auditor from 1982 to 1983.

Kathleen M. Luzik is a Managing Director of NCB, and Chief Operating Officer of NCB, FSB. Ms. Luzik joined NCB in 1991, and has held positions as a real estate underwriter and lender, business development officer, vice president of secondary marketing, and managing director of real estate loan servicing. In 1999, she was named managing director of NCB’s Real Estate Group where she was responsible for all operational activities of the Real Estate Group, overseeing the National Real Estate and Master Servicing Teams. Prior to joining NCB, Ms. Luzik was a financial analyst for the Patrician Financial Company.

James C. Oppenheimer is the General Counsel and Secretary of NCB. Prior to joining NCB in 2008, he was a partner at Goodwin Procter LLP in Washington D.C. He graduated from the University of Chicago Law School in 1997 with honors.

Richard L. Reed is Executive Managing Director and Chief Financial Officer of NCB. He was named Senior Vice President and Chief Financial Officer in 1994. Prior to that, he was Vice President and Treasurer from 1992 to 1994. He was Vice President, Treasury from 1989 to 1992.

Non-Incumbent Nominees for Directorships

Jane Garcia

Gary A. Officer

Kenneth Rivkin

Robynn Shrader

Gail Ment

Judy Ziewacz

Jane Garcia is the Chief Executive Officer of La Clinicia de La Raza, Inc., and has served in that role since April 1983. As CEO of La Clinicia de La Raza, she oversees long-range fiscal and program planning and manages the day-to-day operations of a $62 million comprehensive health care operation in California. She is a board member of Alta Bates Summit Medical Center and the California Primary Care Association. Jane holds a Bachelor’s degree from Yale University and a Master of Public Health degree from the University of California, Berkeley.

Gary A. Officer is the President and Chief Executive Officer of Rebuilding Together, Inc., the nation’s largest non-profit home remodeling organization serving 1800 communities nationwide. In this role, he serves as the national spokesperson for the organization and serves as the lead business development and staff officer with responsibilities for the organization’s key practice areas. He is a past president of the National Credit Union Foundation (NCUF). Gary holds a Bachelor’s degree from the University of Manchester, England and a Master’s degree from the London School of Economics.

Kenneth A. Rivkin is the Managing Director of CMBS Capital Markets at Credit Suisse. For the past twenty-five years, Kenneth worked in commercial and investment banking at Credit Suisse, Bank of America, and their predecessors. He is a member of a housing cooperative and a current board director of 227 East 57^th Street

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Corporation. Kenneth holds a Bachelor’s degree from Brown University and a Master’s degree from the Sloan School of Management at MIT.

Robynn Shrader is the Chief Executive Officer of National Cooperative Grocers Association. In this role, she oversees a national trade organization/purchasing co-op representing 111 independent businesses in 32 states with over $1 billion in annual sales volume. A member of the New Pioneer Cooperative Board of Directors, she holds a Bachelor’s degree from San Diego State University.

Gail Urbas Ment is the President of Emtec Metal Products, an ESOP manufacturer of custom architectural metal products for residential and commercial products. She is a member of the Hungry Hollow Food Coop and is the President of the Board of 126 Street Condominium Association. Gail holds a Bachelor’s degree from the University of Wisconsin.

Judy Ziewacz is the Executive Director of the Office of Energy Independence of the State of Wisconsin. In this role, she helps the state expand in new markets of green energy, clean technology and new products. She is the Executive Director of the Cooperative Development Foundation and was a member of the Board of Group Health Cooperative in Madison, WI. Judy holds a Bachelor’s degree from the University of Wisconsin.

COMPOSITION OF BOARD OF DIRECTORS

The Act provides that the Board of Directors of NCB shall consist of 15 persons serving three-year terms. An officer of NCB may not also serve as a director. The President of the United States is authorized to appoint three directors with the advice and consent of the Senate. Of the Presidential appointees, one must be selected from among proprietors of small business concerns that are manufacturers or retailers; one must be selected from among the officers of the agencies and departments of the United States; and one must be selected from among persons having extensive experience representing low-income cooperatives eligible to borrow from NCB. Janis Herschkowitz is the Presidential appointee from among proprietors of small business concerns. Nguyen Van Hanh is the Presidential appointee from among persons representing low-income cooperatives. The seat for the presidential appointee from among the officers of the agencies and departments of the United States is currently vacant.

The holders of Class B and Class C stock elect the remaining 12 directors. Under the bylaws of NCB, each stockholder-elected director must have at least three years experience as a director or senior officer of the class of cooperatives that he or she represents. The five classes of cooperatives are: (a) housing, (b) consumer goods, (c) low-income cooperatives, (d) consumer services, and (e) all other eligible cooperatives. At all times each class must have at least one, but not more than three, directors representing it on the Board.

No director may be elected to more than two consecutive full terms. After expiration of the term of a director, he or she may continue to serve until a successor has been elected or has been appointed and qualified.

COMMITTEES OF THE BOARD

The Board of Directors directs the management of NCB and establishes the policies of NCB governing its funding, lending, and other business operations. In this regard, the Board has established a number of committees, such as Audit/Risk Management, Mission Banking/Low Income, Executive/Compensation, Corporate Governance and Strategic Planning Committees.

The Audit/Risk Management Committee assists the Board of Directors in fulfilling its statutory and fiduciary responsibilities. It is responsible for overseeing all examinations and audits, monitoring all accounting and financial reporting practices, determining that there are adequate administrative and internal accounting controls and assuring that NCB, its subsidiaries and affiliate are operating within prescribed policies and procedures and in conformance with the applicable conflict of interest policies. The members of the committee are Roger B. Collins (Chair), Stephanie McHenry, William F. Hampel, Richard A. Parkinson, Stuart M. Saft, and Peter Conrad. The Board of Directors has determined that Roger B. Collins, is an “audit committee financial expert” and is “independent,” as those terms are defined in applicable regulations of the Securities and Exchange Commission (Item 407) under Regulation S-K).

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The Mission Banking/Low Income Committee is responsible for evaluating NCB’s best efforts to achieve 35 percent of loans outstanding to low income cooperatives in accordance with established policies and for recommending to management ways in which NCB can further leverage its resources to have maximum impact on low income communities. The Committee is also responsible for collaborating with NCB Capital Impact to establish a plan for the creation and implementation of a development banking strategy that integrates and focuses resources across NCB and NCB Capital Impact, resulting in a range of development banking financial services that can be delivered to low income communities and other community development financial institutions. The members of the committee are Rosemary K. Mahoney (Chair), Alfred Plamann, Irma Cota, Grady B. Hedgespeth, Nguyen Van Hanh, Walden Swanson, Stephanie McHenry and Steven F. Cunningham.

The Executive/Compensation Committee exercises all powers of the Board of Directors when failure to act until the next regular meeting will adversely affect the best interests of NCB, authorizes actions on fast moving issues when authority is granted by the entire Board, reviews and approves loans in excess of management authority and loan policy exceptions, serves as the appeal authority for loan turndowns, recommends nominees to the Board to fill unexpired terms of previously elected board members and reviews and recommends the consolidated annual budget for board approval. The members are Irma Cota (Chair), Stuart Saft, Rosemary Mahoney, Richard A. Parkinson and Roger B. Collins.

The Executive/Compensation Committee is also responsible for assuring that the senior executives are compensated effectively in a manner consistent with the stated compensation strategy of NCB. The Executive/Compensation Committee also communicates the compensation policies to the members and the reasoning behind such policies, and recommends to the Board retainer and meeting fees for the Board of Directors and Committees of the Board. They also review NCB’s compensation strategy for executive council and matters relating to management succession. The Executive/Compensation Committee reviews NCB’s employee benefit programs.

The Corporate Governance Committee, formerly called the Nominating Committee, annually oversees the election for NCB directors. The committee periodically drafts election rules on behalf of the Board of Directors and reviews modifications and election materials. The Committee reviews the eligibility of nominees taking into consideration financial experience, size of constituency, organization represented, leadership and ability. The members of the committee are Grady B. Hedgespeth (Chair), Irma Cota, Janis L. Herschkowitz, Richard A. Parkinson, Stuart M. Saft, Walden Swanson and Rosemary K. Mahoney.

The Strategic Planning Committee monitors and reviews all NCB-related entities’ planning activities delegated to them by the Board. The members of the committee are Irma Cota (Chair) and the full Board of Directors.

CODE OF ETHICS

NCB has adopted a code of conduct and ethics that includes an NCB Senior Financial Officers’ Code of Ethics that applies to NCB’s principal executive officer, principal financial officer and principal accounting officer. A copy of the code is filed as an exhibit to this annual report.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Overview

NCB’s executive compensation program is designed to attract, retain, motivate and reward talented executives, including named executive officers (“NEOs”), who contribute to NCB’s growth and success. These objectives also guide NCB in establishing all of its compensation programs. As a result, the executive compensation program for NCB’s NEOs has the same overall structure as NCB’s other compensation programs.

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Compensation Philosophy and Objectives

NCB’s philosophy is that as employees, including its NEOs, progress to higher levels at NCB, an increasing proportion of their pay should be linked to NCB’s success. In keeping with that philosophy, NCB bases compensation packages on a number of factors: the level of job responsibility, individual performance, company performance and marketplace considerations. NCB’s executive compensation program rewards NEOs for sustained financial and operating performance and leadership excellence. In this way, the programs serve as a mechanism to build loyalty among NCB’s executives, including the NEOs, align their interests with NCB’s Strategic Plan and encourage them to remain at NCB for long and productive careers.

NCB is not currently participating in any federal programs under the Emergency Economic Stabilization Act or the American Recovery and Reinvestment Act that require its executive compensation programs to be modified. Should that change, NCB may be required to modify its compensation programs to ensure compliance.

Implementing NCB’s Philosophy and Objectives

The Board of Directors (the “Board”) has delegated the authority and responsibility to establish and administer NCB’s executive compensation to the Executive/Compensation Committee (the “Committee”). The Committee determines the overall compensation goals, how to implement them and who administers them, including delegating authority to the CEO and involving management to help design performance incentive compensation.

Benchmarking

NCB strives to provide competitive overall compensation for its Chief Executive Officer (“CEO”) and other NEOs and to achieve an appropriate mix between base salary, incentive compensation and other benefits. To further these goals, every other year the Committee engages independent executive compensation consultants to review CEO and other NEO compensation packages. Annually, the Committee reconsiders whether to retain an independent consultant or to rely on previously provided information. The Committee and the CEO each use these reviews as a reference to inform their judgment in setting total CEO and other NEO compensation, respectively, in line with company objectives and in a manner that is competitive with comparable organizations in the banking and financial services industry with assets of at least $2 billion and an employee population under 500. To determine significant changes in individual CEO and NEO compensation, NCB considers significant changes to a NEO’s responsibility and significant changes in the relevant market. To further its goal of fostering executive commitment and long-term service, NCB seeks to compensate NEOs with total compensation packages within the 50^th to 75^th percentile range of the relevant market data.

Compensation Decisions

Under its delegated authority, the Committee determines and administers the CEO’s compensation package, which is approved by the Board. After reviewing market data and reports from the independent consultants, the Committee meets with the CEO to discuss and determine his annual compensation package and individual performance objectives for the year. The Committee sets the CEO’s overall compensation package and reports its decision to the Board. At the end of the year, the Board conducts a performance evaluation of the CEO in light of the agreed upon objectives, his contribution to NCB performance, and other leadership accomplishments. The Committee takes the Board’s evaluation into consideration when it determines the CEO’s award under the LTIP (as defined below), and the Committee recommends to the Board an award under the STIP (as defined below) along with any other changes to the CEO’s compensation.

The Committee delegates responsibility to the CEO to evaluate and determine compensation packages for the other NEOs. The other NEOs, along with the other executives, each write a “Max Plan,” which consists of individual goals and objectives linked to the wider NCB performance goals. The executives, including the other NEOs, present them to the CEO for approval. At the end of the year, the CEO carefully evaluates each of the other NEO’s performance by reference to individual Max Plans and assesses each individual’s achievement of agreed upon objectives, contribution to NCB performance and other leadership accomplishments. After evaluation, the CEO determines any merit increases in base salary for the upcoming year and incentive compensation awards for

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the executives, including the other NEOs. For both the CEO and the other NEOs, past compensation is not a factor in determining incentive plan awards.

Components of 2008 Executive Compensation

The elements of NCB’s executive compensation programs are:

•     base salary;

•     short-term incentive compensation;

•     long-term incentive compensation;

•     core employee benefits;

•     retirement benefits; and

•     perquisites and other personal benefits.

In 2008, NCB distributed compensation among base salary, cash incentive awards and other benefits. For the CEO, these elements were paid approximately in the following percentages: 49% for base salary, 29% for incentive compensation and 22% for other benefits. The other NEOs were paid in the following approximate percentages: 63% for base salary, 24% for incentive compensation and 13% for other benefits.

Base Salary

NCB provides its employees, including its NEOs, a base salary for services performed each year. To attract, retain and motivate its employees, NCB sets base salaries at approximately the median of the market, but they vary depending on the scope of responsibilities, skill set, long-term performance and the period of time performing those responsibilities. Typically, NCB reviews base salary levels annually as part of each individual’s performance review and also upon any change in job responsibilities.

The annual salary review for the CEO and other NEOs takes into account the following factors:

•     ndividual performance;

•     market value of the NEO’s responsibility and skill set; and

•     contribution to NCB.

After review, the Committee recommends merit increases for the CEO based on individual performance and may recommend adjustments to base salary. The CEO, in turn, may implement merit increases or other adjustments to the base salaries of other NEOs based on the individual performance and other factors.

Performance-Based Incentive Compensation

NCB believes incentive compensation should represent a significant portion of executive compensation to align the interests of NCB executives, including NEOs, with the NCB Strategic Plan and reflect the fact that the performance of high-level executives impacts NCB’s success and growth. As a result, NCB has two non-equity cash incentive plans for its NEOs: the Executive Management Short-Term Incentive Plan (the “STIP”) and the Executive Long-Term Incentive Plan (the “LTIP,” collectively with the STIP, the “Incentive Plans”). In furtherance of NCB’s philosophy to reward financial operating success and to encourage long-term commitment, the Incentive Plans compensate NEOs for performance success by reference to specific company short-term and long-term performance goals, and to individual achievements with respect to the STIP only.

Executive Management Short-Term Incentive Plan

The STIP is an annual cash incentive program for certain NCB executives, including the NEOs. Each year, the Committee reviews the plan objectives, specific performance goals established for each objective, weights assigned to each of them and potential awards under the STIP. Thereafter, the Committee recommends the plan to the Board for any action and approval. Consistent with NCB’s overall compensation philosophy, the objectives in the STIP parallel those of the performance plans for teams and individuals throughout NCB, including the NEOs.

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Performance under the plan is reviewed by management quarterly and communicated to STIP participants to motivate them to achieve the performance goals.

STIP for 2008

The 2008 STIP was modified from the balanced scorecard approach of prior plans which awarded points for achieving certain objectives to a plan focused on achieving a certain level of net income and continuing to meet critical mission objectives.

In summary, under the 2008 STIP all of the following objectives had to be achieved for the CEO and other NEOs to receive any STIP for 2008:

Ø   Grow Core Profitability

•     Pretax net income must be at least $13 million

Ø   Risk Management

•     Non-performing assets must not exceed 1.5% of total assets

Ø   Mission Banking

•     Must achieve “best efforts” evaluation for low income business development

For the CEO and the other executives, including NEOs, the STIP for 2008 had a potential award of 45% and 35% of Adjusted Base Salary, respectively. The term “Adjusted Base Salary” means the salary calculated as if any increase in base salary effective February 1 of the STIP year applied retroactively since January 1 of that same year. Management reports its performance against each objective to the Board and recommends, based on that performance, that each participant be eligible for an incentive payment equal to a certain percentage of his Adjusted Base Salary. The potential maximum percentage of Adjusted Base Salary awarded for the points earned is based on a schedule set forth in the plan. The Committee then recommends the actual award for the CEO, and the CEO determines actual awards for the other NEOs, each within their discretion up to the maximum percentage available for the points earned.

If pretax net income for 2008 had equaled $13 million and the Risk Management and Mission Banking objectives were met, the STIP award for the CEO and the other NEOs would have been awarded at a maximum of 25% and 20% for the CEO and the other NEOs, respectively. If all three objectives were met and pretax income was greater than $13 million, then the award percentage would have increased proportionately to the target award levels of 45% and 35% for the CEO and the other NEOs, respectively for 2008. The target award levels may have been awarded if pretax net income had been at least $23 million.

In addition, under the 2008 STIP, if pretax net income exceeded the $23 million target and the Risk Management and Mission Banking objectives were satisfied, the CEO (or the Committee with respect to the CEO) would have have had discretion to award an Add-on award. The maximum Add-on award was 5% of Adjusted Base Salary for the CEO and 7.5% of Adjusted Base Salary for all other executives, including NEOs. For each 1% that pretax net income exceeded the target of $23 million in pretax net income, 1% of Adjusted Base Salary is added to the award earned up to a maximum award of 50% of Adjusted Base Salary for the CEO and 42.5% of Adjusted Base Salary for all other executives, including NEOs.

The Committee determines the STIP award (if any) for the CEO and submits a report of its determination to the Board. The CEO, as authorized by the Committee, determines the STIP awards (if any) for the other executives, including all of the other NEOs. The actual amounts awarded for the 2008 STIP award are reported in the Summary Compensation Table and explained in the notes to it. Because the income thresholds were not met in 2008, no STIP payments have been made.

STIP for 2009

For 2009 NCB’s STIP is designed to reward performance across a broad range of key performance targets. The targets align performance expectations with the challenging economic environment within the United States, and particularly within the Financial Services industry. It is designed to link the performance of the CEO and the

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other executives, including NEOs, to the critical areas of NCB’s performance including Earnings, Asset Quality, Liquidity, Capital Maintenance, Regulatory compliance and compliance with loan agreement covenants.

For the CEO and the other executives, including NEOs, the STIP for 2009 will have a potential award of 70% and 52% of Adjusted Base Salary, respectively. If pretax net income equals $11.7 million, the STIP award for the CEO and the other NEOs will be awarded at a maximum of 60% and 42% for the CEO and the other NEOs, respectively. If all objectives are met and pretax income is greater than $11.7 million, then the award percentage will increase proportionately to the maximum award levels of 70% and 52% for the CEO and the other NEOs, respectively for 2009. The maximum award levels may be awarded when pretax net income is at least $17.6 million.

Awards made under the 2009 STIP will be made (if any) in 2010.

Executive Management Long-Term Incentive Plan

In 1999, in furtherance of motivating and retaining executives for the long-term, NCB established the LTIP to provide long-term incentive awards for NCB’s executives, including NEOs, consistent with NCB’s long-term strategic plan. The LTIP sets forth company-wide performance goals for a three year period and establishes award levels proportionally to the stated performance goals.

In 1999, the Board delegated to the Committee the authority and responsibility to administer the LTIP and approve the participants, the measurement period, potential awards and the performance goals. Pursuant to that authority, the Committee reviews and approves LTIP awards (if any) for the CEO based on approved performance goals specified in the plan. In addition, the Committee delegated its authority to the CEO to administer the LTIP with respect to the other executives, including the other NEOs. Pursuant to that authority, the CEO determines the other executives’ awards, including the NEO awards, by reference to approved performance goals specified in the plan.

Each LTIP has a three year performance period and executives, including NEOs, receive awards, if earned, based on achievement of NCB strategic long-term performance goals but only at the end of the entire period. Awards vest at the end of the three year period and are based on a percentage of a NEO’s “Aggregate Base Salary,” which is the sum of the NEO’s base salary in years one and two of the applicable plan period. Awards, if earned, are payable more frequently than every three years; they are payable every other year because a new LTIP period commences at the beginning of the third year of the immediately preceding three year LTIP period. This structure encourages long-term commitment because executives, including NEOs, only receive long-term incentive compensation, if at all, every other year based on NCB’s previous three years of performance.

If employment terminates before an award vests due to cause or involuntary termination, then it is forfeited. In the event of death, disability or retirement before the end of a LTIP three year period, the NEO or the NEO’s beneficiary is entitled to a prorated award (if any) based upon the number of months that the NEO was employed during the plan period. If a change in control occurs, awards vest at the target performance level as of the date of the change in control, unless NCB’s actual performance exceeds the target level on such date, in which case, any awards vest at the superior performance level.

2007 to 2009 LTIP

In January 2007, the Committee approved the 2007 to 2009 LTIP for the period of January 1, 2007 through December 31, 2009. The Committee used the 2007 to 2009 Strategic Plan to set the performance goals and will evaluate performance, certify it and pay awards (if any) in 2010.

For the 2007 to 2009 LTIP, the Committee set threshold and target percentages of Aggregate Base Salary at the same level as under the previous two LTIP periods, but increased the maximum percent of Aggregate Base Salary from 81.25% to 87.5% for the CEO and from 56.25% to 62.5% for the other executives, including the NEOs. These maximum thresholds are computed by multiplying the maximum percentage available (shown on the 2007 to 2009 LTIP table below as 70% for the CEO and 50% for the other NEOs) by 25% (the increase for a low income market development adjustment) and adding those two figures for the maximum percentage. The Committee

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designated (1) financial strength; (2) value to customers; and (3) deposit growth as the overall categories of performance goals and set performance goals and weights as detailed in the LTIP 2007 to 2009 plan table below:

			Goal
PERFORMANCE GOALS
01/01/07 - 12/31/09	Weight	Awards	Threshold	Target	Superior
Financial Strength: Average ROE at NCB, FSB over three years	50%		13.5% Average ROE	15% Average ROE	16.5% Average ROE
		CEO	10% of Base Salary	25% of Base Salary	35% of Base Salary
		NEOs	7.5% of Base Salary	15% of Base Salary	25% of Base Salary
Value to Customers: Total commitments and financial transactions arranged for customers including loans, leases, letters of credit, private placements and deals closed by referral sources	25%		$5.5 billion 2007 through 2009	$6 billion 2007 through 2009	$7 billion 2007 through 2009
		CEO	5% of Base Salary	12.5% of Base Salary	17.75% of Base Salary
		NEOs	3.75% of Base Salary	7.5% of Base Salary	12.5% of Base Salary
Deposit Growth: From the base levels at 12/31/06, increase deposits over three years with at least $50 million of total deposits in non-interest bearing DDA excluding escrows for saleable real estate loans	25%		75% Increase	125% Increase	150% Increase
		CEO	5% of Base Salary	12.5% of Base Salary	17.5% of Base Salary
		NEOs	3.75% of Base Salary	7.5% of Base Salary	12.5% of Base Salary
Total	100%	CEO	20% of Base Salary	50% of Base Salary	70% of Base Salary
		NEOs	15% of Base Salary	30% of Base Salary	50% of Base Salary
Adjustment for Low Income Market Development			-15% of Total Award	+0%	+25% of Total Award

Based on the formula in the 2007 to 2009 LTIP table, the estimated award level for the CEO is 5% of Aggregate Base Salary and for the executives including the other NEOs is 3.75% of Aggregate Base Salary as of December 31, 2008. Pursuant to the plan, whether any awards are actually earned under the plan is subject to NCB’s actual performance for January 1, 2007 to December 31, 2009, which may only be determined after that time. Awards, if any, under this plan are not payable until 2010 after certification of performance. Accordingly, the elements of the performance goals in the 2007 to 2009 LTIP have not been satisfied yet. In addition, under the plan no awards vest until the end of the performance period, and even then are subject to certification and approval. Since the three year period is ongoing and no awards have been earned as of December 31, 2008, no information is included in the Summary Compensation Table with respect to the 2007 to 2009 LTIP.

In 2008, the Committee certified performance and approved cash awards for plan performance at 31.9% of Aggregate Base Salary for the CEO and 22.2% of Aggregate Base Salary for the other NEOs for the 2005 to 2007 LTIP. As a result, the Summary Compensation Table includes the award amounts paid out in 2008 for each NEO under the 2005 to 2007 LTIP.

2009 to 2011 LTIP

As of the date of filing the Compensation Committee had not approved a LTIP for the period 2009 to 2011. The Committee determined, given the severe economic conditions within the U.S, that it needed more time to establish a plan for this three year period to ensure that it would both meet the strategic objectives of NCB and be a suitable incentive to NCB’s Executives, including its NEOs.

LTIP Document

Principally in order to comply with the requirements of IRC Section 409A taking effect in 2008, the Board of Directors amended the Long Term Incentive Plan document.

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Benefits

Core Employee Benefits

NCB offers core employee benefits to all of its employees, including its NEOs, to meet their needs in the event of illness or injury and to enhance productivity and job satisfaction with programs that focus on work/life balance. NCB provides life insurance coverage and accidental death and dismemberment insurance at three times annual salary up to a maximum of $1,000,000 for the CEO and $750,000 for the other NEOs. NCB also provides travel accident insurance, worker’s compensation and retirement insurance.

Through its consumer banking program, NCB provides all of its employees, including its NEOs, and directors the opportunity to earn an extra one percent interest on deposits, reduced fees on a variety of checking and savings accounts, a one percent lower interest rate than otherwise available for consumer loans and a one percent rebate up to $10,000 annually on mortgage loans.

In keeping with NCB’s goal of rewarding long-term commitment, NCB honors employees, including its NEOs, with cash service awards for every five years of service beginning on an employee’s fifth anniversary in varying amounts depending on the length of service.

Retirement Benefits

To facilitate employee retention, NCB provides employees, including NEOs, opportunities to save for retirement under the NCB Retirement and 401(k) Plan. Employees who participate select from a variety of options to invest their retirement savings. NCB balances the savings and retirement plans’ effectiveness as a compensation and retention tool with their cost.

Employees, including NEOs, may make pre-tax contributions qualified under section 401(k) of the Internal Revenue Code (“IRC”). Each eligible employee, including the NEOs, may elect to contribute up to 60% of base salary or $15,500 (the limit prescribed by the IRC) for 2008. NCB matches employee contributions up to 6% of base salary. With continuous service, NCB’s matching contributions vest incrementally after two years and fully vest after six years.

NCB also makes non-elective retirement contributions under NCB’s plan for all of its employees, including the NEOs, beginning one year after their employment with NCB. NCB contributes approximately 6% of each eligible employee’s base salary up to $230,000, as limited by IRC. Like NCB’s 401(k) matching contributions, retirement account contributions vest incrementally after two years and fully vest after six years with continuous service.

The two plans are combined and maintained in one account. NCB’s Retirement and 401(k) Plan is a tax-qualified defined contribution plan. NCB does not have any tax-qualified defined benefit pension plans.

Deferred Compensation

NCB has also implemented an unfunded Deferred Compensation Plan to motivate and retain executives, including the NEOs, and directors by providing them with additional flexibility in structuring the timing of their compensation payments. NCB provides this benefit to allow NEOs to save for retirement in a tax-efficient manner at minimal cost to NCB. Because other similarly situated financial institutions provide deferred compensation plans, NCB believes that its Deferred Compensation Plan is an important recruitment and retention tool.

Under the Deferred Compensation Plan, NEOs may defer receipt of base salary and cash incentive compensation payments. Any amount deferred is credited with interest at a rate equal to the average yield on actively traded U.S. Treasury issues, adjusted to a constant maturity of one year plus one percent. The reported interest rate is determined in December of the prior year. In 2008 and 2006 the interest rate credited to these accounts was not “above market;” accordingly, earnings on deferred amounts under the Deferred Compensation Plan do not appear in the Summary Compensation Table. The interest rate credited to these accounts under the Deferred Compensation Plan in 2007 was “above market;” accordingly, earnings on deferred amounts that were “above market” appear in the summary compensation table. NCB pays compensation benefits deferred under the plan on July 1 or December 31 following a NEO’s retirement, disability or termination.

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Additionally, NCB entered into a deferred compensation agreement with NCB’s CEO, on November 4, 1994, in recognition of NCB’s improved financial condition and operating results during the period of his presidency beginning in January 1992. The CEO’s deferred compensation agreement is also an incentive for him to continue serving as NCB’s President. Under his deferred compensation agreement, the CEO may elect to defer an amount or percentage of his compensation. Interest is credited to the account on the last day of each quarter in an amount equal to 100 basis points above the yield on a five-year U.S. Treasury Note with a maturity date on or nearest to the date of such quarterly credit. Like the accounts under NCB’s Deferred Compensation Plan, the CEO’s account is unfunded. The interest rate credited under the CEO’s deferred compensation agreement in 2008 and 2007 was not “above market;” accordingly, those earnings do not appear on the summary compensation table. In 2006 the interest rate credited was “above market;” accordingly, those earnings on deferred amounts that were “above market” do appear in the Summary Compensation Table.

NCB does not pay compensation benefits deferred under the CEO’s compensation agreement earlier than three months after the date of the CEO’s retirement or other termination of employment. Accumulated amounts under the Deferred Compensation Plan and the CEO’s deferred compensation agreement are shown in the Nonqualified Deferred Compensation Table and are discussed in further detail under the heading “Nonqualified Deferred Compensation.”

Principally in order to comply with the requirements of IRC Section 409A taking effect in 2008, NCB amended its Deferred Compensation Plan and its deferred compensation agreement with the CEO.

Perquisites and Other Personal Benefits

NCB provides its executives, including its NEOs, with perquisites and other personal benefits that are reasonable and consistent with its overall compensation program to better enable NCB to attract and retain superior employees for key positions. These benefits are reflected in the Summary Compensation Table in the “All Other Compensation” column. These benefits include monetary service awards, discretionary spot awards for individual achievement, premiums paid on life insurance policies, in some instances payments to defray income tax incurred with respect to those life insurance premiums, and a car allowance for the CEO. The Committee annually reviews the level of perquisites and other personal benefits provided to its executives to ensure that they are consistent with NCB’s compensation philosophy and objectives.

Salary Continuation Program

NCB has a salary continuation program to assist eligible employees in transitioning to other employment. Employees, including NEOs, are eligible for the program with the approval of the applicable division head and the Managing Director of Human Resources. This program is an efficient and cost-saving way to provide extended protection and financial reassurance to NCB employees, including NEOs, and thereby facilitates NCB’s retention and productivity goals. It is competitive with the programs offered by comparable organizations.

To participate in the program employees must have at least 90 days of service at NCB. The amount of salary continuation available under the program increases with the length of service at NCB up to a maximum of one year of service and is contingent on the employee executing a release. Eligible employees, including the NEOs, also may continue to receive medical insurance benefits and will receive payment for vacation accrued as of the date of termination. Salary continuation benefits cease in certain circumstances, including when the person dies, or continues employment with NCB or an acquiring entity in a non-comparable position. Other than the salary continuation program available to NCB employees generally, NCB does not have severance agreements with its NEOs, other than the CEO.

NCB has a severance agreement with the CEO to provide reasonable and conservatively competitive payments and benefits if NCB terminates him without cause. Termination for cause includes but is not limited to the CEO’s failure to perform substantial duties, gross negligence, bad faith or willful misconduct.

The CEO’s severance agreement also provides benefits in the event of the CEO’s voluntary termination without good cause on nine months’ prior written notice. In exchange for NCB’s agreement to pay severance under this agreement, the CEO must comply with non-competition and confidentiality provisions and provide limited

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consulting services to NCB for three years up to a maximum of 15 days per year on matters to which he devotes significant time while at NCB.

Principally in order to comply with the requirements of IRC Section 409A taking effect in 2008, the severance agreement with the CEO was amended in 2008. The agreement also extended the CEO’s severance from 18 to 24 months in certain circumstances. For a more detailed description of these post-employment benefits, see the discussion under “Potential Payments upon Termination or Change in Control.”

THE COMPENSATION COMMITTEE REPORT

The Executive/Compensation Committee of NCB has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Executive/Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in NCB’s annual report on Form 10-K.

Irma Cota, Chair
Stuart Saft
Roger B. Collins
Richard Parkinson
Rosemary Mahoney

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COMPENSATION OF THE OFFICERS

The Summary Compensation Table below summarizes the total compensation earned by each of NCB’s NEOs for the years ended December 31, 2008, 2007 and 2006.

SUMMARY COMPENSATION TABLE

							Change in Pension
							Value and
					Non-Equity		Nonqualified
					Incentive Plan		Deferred		All Other
					Compensation		Compensation		Compensation
Name and Principal Position	Year		Salary		(2)		Earnings (3)		(4)		Total
Charles E. Snyder,		2008	$	524,773	$	307,567	$	—	$	245,363	$	1,077,703
President & Chief Executive Officer		2007	$	523,412	$	—	$	—	$	249,855	$	773,267
		2006	$	490,129	$	917,128	$	1,376	$	225,050	$	1,633,683
Richard L. Reed		2008	$	303,160	$	124,582	$	—	$	44,009	$	471,751
Executive Managing Director &		2007	$	302,188	$	—	$	—	$	42,796	$	344,984
Chief Financial Officer		2006	$	284,236	$	340,222	$	—	$	27,900	$	652,358
Steven A. Brookner		2008	$	395,902	$	146,546	$	—	$	142,009	$	684,457
Executive Managing Director of		2007	$	389,736	$	—	$	—	$	141,304	$	531,040
NCB & Chief Executive Officer of NCB, FSB		2006	$	324,087	$	405,605	$	—	$	125,900	$	855,592
Kathleen M. Luzik		2008	$	292,118	$	110,536	$	—	$	44,009	$	446,663
Managing Director of NCB and		2007	$	289,510	$	—	$	216	$	42,776	$	332,502
Chief Operating Officer of NCB, FSB		2006	$	254,182	$	311,755	$	—	$	27,900	$	593,837
Mark Hiltz		2008	$	251,412	$	95,058	$	—	$	38,842	$	385,312
Managing Director & Chief Risk		2007	$	242,781	$	—	$	—	$	37,551	$	280,332
Officer		2006	$	218,122	$	281,514	$	—	$	34,902	$	534,538
Charles H. Hackman		2008	$	292,310	$	116,752	$	—	$	52,533	$	461,595
Former Managing Director & Chief		2007	$	278,934	$	—	$	1,020	$	37,759	$	317,713
Credit Officer of NCB and NCB, FSB(1)		2006	$	269,060	$	355,277	$	—	$	27,900	$	652,237

(1)

Charles H. Hackman, a Managing Director and the Chief Credit Officer of NCB retired, with an effective date of June 30, 2008. Under a retirement agreement between NCB and Mr. Hackman, Mr. Hackman will receive full salary and continuation of benefits (including medical, dental, vision and life insurance) until March 10, 2010. In addition, NCB will provide a yearly bonus in lieu of employer contributions to the 401(k) and retirement plans on the following dates for the following amounts: December 31, 2008 ($24,000), December 31, 2009 ($48,000), and March 10, 2010 ($11,000). Disability benefits paid by NCB for Mr. Hackman ceased as of June 30, 2008. Health care reimbursement account benefits for Mr. Hackman ended at December 31, 2008.

(2)

For 2008 the Non-Equity Incentive Plan Compensation column reflects cash awards to the NEOs for performance in 2008 under the STIP and the 2005-2007 LTIP. The 2008 STIP specified three objectives, all of which were required to be achieved before any payment would be made. Because one of the objectives, “Grow Core Profitablity” was not achieved, no payment under the 2008 STIP was made to either the CEO or other NEOs.

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In 2008, the Committee certified performance and approved cash awards for plan performance at 31.9% of Aggregate Base Salary for the CEO and 22.2% of Aggregate Base Salary for the other NEOs for the 2005 to 2007 LTIP. As a result, the Summary Compensation Table includes the award amounts paid out in 2008 for each NEO under the 2005 to 2007 LTIP.

		2005 - 2007 LTIP
		(performance measure
Name	2008 STIP	completed February 2008)		Total
Charles E. Snyder	-	$	307,567	$	307,567
Richard L. Reed	-	$	124,582	$	124,582
Steven A. Brookner	-	$	146,546	$	146,546
Kathleen M. Luzik	-	$	110,536	$	110,536
Mark Hiltz	-	$	95,058	$	95,058
Charles H. Hackman	-	$	116,752	$	116,752

For 2007, the Non-Equity Incentive Plan Compensation column reflects cash awards to the NEOs for performance in 2007 under the STIP. The 2007 STIP specified a maximum amount that may be awarded to the CEO and the other NEOs for a given balanced score achieved for 2007 under the 2007 STIP. NCB achieved a balanced score of 80 points under the 2007 STIP scorecard. Accordingly, NCB’s score of 80 points under the plan was enough for an award of up to 40% of Adjusted Base Salary and up to 30% of Adjusted Base Salary for the CEO and the other executives, including NEOs, respectively. However, it is within the discretion of the Committee for the CEO and within the discretion of the CEO for the other executives, including the NEOs to determine the actual amount of an award (if any) under the STIP. For 2007 the Committee and the CEO exercised that discretion due to NCB’s overall financial performance and made no awards under the 2007 STIP even though the actual performance achieved permitted an award.

Also, there were no LTIP payments earned during 2007 because the certification of performance and approval of the award completing the prerequisite for awards under the LTIP did not occur until February 2008.

For 2006, the Non-Equity Incentive Plan Compensation column on the Summary Compensation Table reflects cash awards to the NEOs for performance in 2006 under the STIP and the 2003 to 2005 LTIP.

The amounts awarded under each Incentive Plan in 2006 are listed separately below in the 2006 Non- Equity Incentive Awards Table, as follows:

			Add-on 2006
Name	2006 STIP		STIP		2003 - 2005 LTIP		Total
Charles E. Snyder	$	223,256	$	24,806	$	669,066	$	917,128
Richard L. Reed	$	102,025	$	16,616	$	222,036	$	340,677
Steven A. Brookner	$	119,438	$	19,451	$	266,716	$	405,605
Kathleen M. Luzik	$	91,287	$	14,867	$	205,601	$	311,755
Mark Hiltz	$	76,681	$	12,569	$	192,264	$	281,514
Charles H. Hackman	$	94,174	$	15,337	$	245,766	$	355,277

STIP Awards 2006

The amount listed in the 2006 STIP column was earned in 2006 and paid in February 2007. NCB’s performance for 2006 earned 90 points of the 100 point maximum under the 2006 STIP. Based on that performance, NCB paid STIP awards at the maximum percentage rate available in the amount of 45% of the CEO’s Adjusted Base Salary and 35% of each of the other NEO’s Adjusted Base Salary. For 2006, the pretax net income exceeded the budget and as a result the CEO and other NEOs were eligible to receive Add-on awards in the estimated amount of 5.0% and 5.7% of Adjusted Base Salary, respectively. Those amounts are listed in the 2006 STIP Add-on column.

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2003 to 2005 LTIP Awards

NCB paid the 2003 to 2005 LTIP award (the “2006 LTIP Award”) in February 2006 for NCB’s performance over the three year period of January 1, 2003 to December 31, 2005 in proportion to the long-term performance goals achieved. Pursuant to the LTIP, the awards were based on the NEOs Aggregate Base Salary with a maximum award potential of 81.25% and 56.25% of that Aggregate Base Salary for the CEO and each NEO, respectively. Based on NCB’s performance, NCB paid an award equal to 75.53% and 50.53% of Aggregate Base Salary to the CEO and each NEO, respectively.

Add-on 2006 STIP Award

The add-on 2006 STIP award was paid in 2007 at a rate of 5.0% of the CEO’s Adjusted Base Salary and 5.9% of the Adjusted Base Salary for the other NEOs.

(3)	This amount is the “above market” interest earned on deferred compensation for 2007 and 2006. The effective interest rate for 2007 was 6.1%, which was 0.33% above the applicable market. The effective interest rate for 2006 was 5.9%, which was 0.26% above the applicable market. In 2008 the interest earned on deferred compensation was not “above market”.
(4)	For each NEO, the amount shown in the “All Other Compensation” column is comprised of the following for 2008:

NCB’s contribution of $13,800 to the retirement contribution accounts of each NEO, which is further explained in the Compensation, Discussion and Analysis under the heading “Retirement Benefits.”

NCB’s matching contribution of $13,800 to the 401(k) contribution accounts of each NEO, which is further explained in the Compensation, Discussion and Analysis under the heading “Retirement Benefits.”

NCB’s insurance premium payments in the amount of $1,920 for the CEO and $1,440 for all other NEOs, except Mr. Hackman, whose premium was $288.

NCB’s health insurance premium payments in the amount of $9,268 for Mr. Hackman and Mr. Hiltz and $14,393 for all other NEOs.

NCB’s long-term disability insurance premiums in the amount of $10,066 for the CEO and amounts ranging from $533 to $720 for all other NEOs.

The “All Other Compensation” column for Mr. Snyder and Mr. Brookner includes $183,900 and $98,000, respectively, to pay life insurance policy premiums and to defray income tax incurred with respect to those life insurance premiums; Mr. Snyder’s compensation also includes a $7,484 car allowance.

Narrative to the Summary Compensation Table

For 2008, 2007 and 2006, each of the NEOs received cash compensation in the form of a base salary, non-equity incentive compensation, retirement and savings plans contributions, and some other personal benefits as described in the footnotes (3) and (4) to the Summary Compensation Table. In addition, NCB’s NEOs participate in NCB’s core benefits programs as described in the Compensation Discussion and Analysis under the heading “Benefits.” NCB’s NEOs did not receive any payments during 2008, 2007 and 2006 that would be characterized as “Bonus,” “Stock Awards” or “Option Awards,” and as a result, NCB has not included those columns in its Summary Compensation Table.

NCB has no written employment agreements with its NEOs, except the CEO. NCB has an agreement with its CEO, pursuant to which NCB agrees to continue to employ him and the CEO agrees to devote his time, attention, skills and efforts to the performance of his duties. If NCB terminates him without cause or if he resigns, in some circumstances, the agreement provides for post-employment benefits. The CEO’s post-employment benefits are described more fully under the heading “Post-Employment Benefits” in the Compensation Discussion and Analysis and under the heading “Potential Payments on Termination of Employment or Change in Control.”

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Grants of Plan-Based Awards – 2008

								Estimated Future Payouts Under Non-
								Equity Incentive Plan Awards
	Grant		Action					Threshold		Target		Maximum
Name	Date (1)		Date (2)		Plan (3)			Amount		Amount		Amount
Charles E. Snyder		01/01/08		02/01/08		STIP(4	)	$	0 to $131,473		-	$	236,652
Richard L. Reed		01/01/08		02/01/08		STIP(4	)	$	0 to $60,632		-	$	106,106
Steven A. Brookner		01/01/08		02/01/08		STIP(4	)	$	0 to $78,829		-	$	137,950
Kathleen M. Luzik		01/01/08		02/01/08		STIP(4	)	$	0 to $58,424		-	$	102,241
Mark Hiltz		01/01/08		02/01/08		STIP(4	)	$	0 to $50,000		-	$	87,500
Charles H. Hackman		01/01/08		02/01/08		STIP(4	)	$	0 to $55,966		-	$	97,941

This table sets forth the range of potential awards available under NCB’s 2008 STIP, described in the Compensation Discussion and Analysis, under the heading “Performance-Based Incentive Compensation.” The amounts in the table above are calculated based on the NEOs salaries at December 31, 2008, which differ from the NEOs total 2008 salary reflected in the Summary Compensation Table. The STIP provides performance based cash awards. NCB has no equity incentive plans. The fact that no payments were actually awarded under this plan is reflected in the Summary Compensation Table.

(1)	The grant date is the date that begins the measurement period under the applicable Incentive Plan.
(2)	The action date listed in this column is the date NCB adopted the plan setting forth the performance goals, with the weights attributable to each goal and the corresponding potential awards.
(3)	This column indicates the plan applicable to the potential awards.
(4)	Under the 2008 STIP, NCB determined the actual award by reference to the performance by NCB over three objectives for the one year period, as described in the Compensation Discussion and Analysis under the heading “Short-Term Incentive Compensation for 2008.” The STIP only has a set maximum percentage of Adjusted Base Salary potentially available, but no stated target or minimum. In other words, even if NCB had achieved performance sufficient to earn the minimum required performance level, whether any amount and how much would have been awarded under the plan is discretionary. Accordingly, to show the fact that the minimum performance level could result in varying percentages of Adjusted Base Salary available as an award or none at all, NCB has shown the threshold under the plan as the range of potential awards up to the maximum award. In light of the structure of this plan, the “target” amount in the table is blank. Under the 2008 STIP, the threshold percentages ranged from 0% to 25% of Adjusted Base Salary and from 0% to 20%, respectively for the CEO and the other NEOs. The maximum percentages were 45% and 35%, respectively for the CEO and the other NEOs.

Nonqualified Deferred Compensation

The Deferred Compensation Table below sets forth certain information with respect to non-tax qualified deferrals of compensation by NCB’s NEOs, none of whom deferred any compensation in 2008.

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Deferred Compensation Table – 2008

					Aggregate
	Executive		Aggregate		Withdrawals/
	Contributions in		Earnings		Distributions			Aggregate Balance at
Name	2008		in 2008		in 2008			12/31/08
Charles E. Snyder	$	-	$	24,530	$	-		$	661,384
Richard L. Reed	$	-	$	-	$	-		$	-
Steven A. Brookner	$	-	$	-	$	-		$	-
Kathleen M. Luzik	$	-	$	5,400	$	-		$	130,053
Mark Hiltz	$	-	$	-	$	-		$	-
Charles H. Hackman	$	-	$	25,448	$	(40,102	)	$	574,262

Narrative to Deferred Compensation Table

Eligible participants, including NEOs, in the Deferred Compensation Plan may elect to defer up to 100% of incentive compensation payments and up to 25% of their base salary. To defer compensation under the plan, participants generally must submit an irrevocable election no later than December 31st of the year preceding the year in which the compensation to be deferred is to be earned.

NCB maintains unfunded individual accounts for each participant and credits each account with the amount deferred by the participant and interest at the rate of actively traded U.S. Treasury issues, adjusted to a constant maturity of one year, plus one percent. The reported interest rate is determined in December of the prior year. For 2008, the interest rate determined as of December 31, 2007 was 4.26%.

Payments under the Deferred Compensation Plan will commence following the NEO’s separation of service from NCB or after the NEO has reached the age of 65, if still employed by NCB. However, a NEO may be allowed to access funds in his deferred compensation account earlier than the beginning of the first month following retirement or separation from NCB under certain circumstances upon a showing of financial hardship. Distributions are made in lump sum, or in annual installments over a maximum of five (5) years, generally, at the election of the participant.

Under the CEO’s deferred compensation agreement, he may elect to defer some amount or percentage of his compensation. Interest is credited to his account on the last day of each quarter in an amount equal to 100 basis points plus the yield on a five-year U.S. Treasury Note with a maturity date on or nearest to the date of such quarterly credit.

NCB does not pay compensation benefits deferred under the CEO’s deferred compensation agreement earlier than thirty (30) days after the date of the CEO’s separation of service from NCB. At that time pursuant to the agreement, NCB makes annual payments on the anniversary of such termination date in equal amounts of $25,000 or 20% of the account balance or in a lump sum. In the event of death prior to the date of final payment, the remaining balance is paid to his beneficiary on the 60th day after his death. Like the Deferred Compensation Plan, this account is unfunded.

NCB does not make contributions to any accounts under the Deferred Compensation Plan or under the CEO’s deferred compensation agreement, other than the credited interest. Accordingly, NCB has not included a column for registrant’s contributions.

Principally in order to comply with the requirements of IRC Section 409A taking effect in 2008, NCB amended the deferred compensation agreement with the CEO in 2008. The agreement was also amended to eliminate the requirement that, absent a written election to the contrary, NCB would defer ten percent (10%) of the CEO’s salary each year. Also in 2008, NCB agreed to make the CEO whole for any tax liability he may incur in 2009 as a result of NCB’s failure to have deferred ten percent (10%) of his income in the years 2005 through 2008, during which time he did not make an election. NCB estimates his tax liability in that regard to be approximately $61,000.

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Potential Payments Upon Termination of Employment or Change of Control

The discussion and tables below describe potential payments and benefits to which each NEO would be entitled under certain circumstances (“Trigger Events”) if the NEO’s employment with NCB terminates. Trigger Events include: voluntary termination with good reason; voluntary termination without good reason; involuntary termination for cause; involuntary termination without cause; termination due to death, disability, or retirement; and termination due to change of control. The applicable Trigger Events under each agreement or program entitling the NEO to payments or benefits upon termination or change of control vary and are described in more detail below.

The payments and benefits discussed and shown in the tables below do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees upon termination generally, including continued participation in health, dental or vision insurance; salary continuation for up to one year; payment of accrued vacation leave; and 401(k) and retirement plan benefits. The amounts shown on the tables in this section assume that the effective date of each Trigger Event is December 31, 2008, and reflect the estimated amounts earned and payable as of that date. The actual amounts to be paid can only be determined at the time any such event occurs.

Regular benefits under the NCB Retirement and 401(k) Plan

See “Retirement Benefits” in the Compensation Discussion and Analysis.

Deferred Compensation

Under the Deferred Compensation Plan applicable to the NEOs (except the CEO), in the event of a separation of service, the unfunded amount credited to each NEO is payable under the terms of the plan. Assuming a Trigger Event effective December 31, 2008, the amounts are payable beginning January 1, 2009. Amounts are payable either in a lump sum or annual installments over 5 years, as elected by the NEO or the NEO’s beneficiary, subject to certain limitations in the plan.

Under the CEO’s deferred compensation agreement, if a separation of service occurred retirement or termination of employment occurred on December 31, 2008, then NCB would be obligated to make annual payments to the CEO or his beneficiary beginning on February 1, 2009 in the amount of 20% of the unfunded amount.

The amounts payable under the Deferred Compensation Plan and the CEO’s deferred compensation agreement upon separation from service are shown in the Nonqualified Deferred Compensation Table.

LTIP

The LTIP rewards performance over a three-year measurement period. The current three-year measurement period spans from January 1, 2007 through December 31, 2009 (“2007 to 2009 LTIP”). In the event of death or disability, before the end of the three-year period, the award amount is prorated based on the number of months employed during the three-year measurement period.

To determine the award for termination due to death or disability occurring on December 31, 2008, the terms of the LTIP provide for the following assumptions: (1) that the NEO received the same base salary that he or she was receiving on the date of the applicable event, and (2) that NCB achieved the target level of performance without regard to the actual level achieved. For 2008, the awards available for meeting the target performance goals were 50% of Aggregate Base Salary and 30% of Aggregate Base Salary for the CEO and the other NEOs, respectively. Under these circumstances, the amount of the award is prorated based on the number of months an employee was employed under the plan. Where the death or disability occurs on December 31, 2008, the employee would have been employed for 24 months under the 2007 to 2009 LTIP. The certification of performance and approval of awards are presumed under these circumstances and NCB is deemed to have achieved the target level of performance without regard to the actual level achieved and without any certification and approval. Under the 2007 to 2009 LTIP the amount would be prorated to two-thirds of the target level of 50% of Aggregate Base Salary. The amounts payable under the 2007 to 2009 LTIP for termination due to death or disability occurring on December 31, 2008 for each NEO is shown in the table below.

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	Amount payable under
Name	2007 - 2009 LTIP
Charles E. Snyder	$	349,768
Richard L. Reed	$	121,070
Steven A. Brookner	$	156,776
Kathleen M. Luzik	$	116,326
Mark Hiltz	$	99,508
Charles H. Hackman(1)	$	-

⁽¹⁾        As part of the retirement agreement with NCB, Mr. Hackman is not entitled to any payout from the 2007-2009 LTIP.

For termination due to change of control, the NEOs are entitled to an award based on the rate for performance meeting target goals or the rate for actual performance estimated on the applicable date, if higher. The estimatedy performance as of December 31, 2008 was below the target rate, thus the applicable rate for termination due to a change in control is at the target goal level of 50% of Aggregate Base Salary and 30% of Aggregate Base Salary for the CEO and the other NEOs, respectively. Unlike awards made for termination due to death or disability, payments for termination due to change of control are not subject to any prorating.

If employment terminated on December 31, 2008 due to cause or involuntary termination, the requisite certification of performance and approval of awards under the LTIP would not have occurred and the LTIP award would be forfeited.

	Termination Due to Death
Name	or Disability		Change in Control
Charles E. Snyder	$	349,768	$	524,653
Richard L. Reed	$	121,070	$	181,605
Steven A. Brookner	$	156,776	$	235,164
Kathleen M. Luzik	$	116,326	$	174,489
Mark Hiltz	$	99,508	$	149,263
Charles H. Hackman	$	-	$	-

STIP

In the event a NEO is terminated for cause or involuntarily terminated without cause, the STIP is forfeited. For all other Trigger Events, assuming the date of the Trigger Event is December 31, 2008 and NCB achieved all three objectives under the 2008 STIP, the CEO and the other NEOs, within the discretion of the Committee and the CEO, respectively, are eligible for an award under the plan up to 45% of 2008 Adjusted Base Salary for the CEO and 35% of 2008 Adjusted Base Salary for the other NEOs. The 2008 STIP required that each of the three objectives must be achieved before any payout could be made under the plan. Because one of the objectives in the plan, “Grow Core profitability”, was not met no awards under the 2008 STIP would be made. Therefore, these amounts are zero as of December 31, 2008.

Life Insurance Proceeds

As reflected in the Summary Compensation Table in the “All Other Compensation” column and described in the notes to it, NCB pays premiums on life insurance policies for each of its NEOs and pays premiums for additional life insurance for Mr. Snyder and Mr. Brookner. The policies available for all NEOs have a face value of $1,000,000 and $750,000 for the CEO and the other NEOs, respectively. The supplemental policies for Mr. Snyder and Mr. Brookner have with a face value of $2,640,970 and $3,076,000, respectively. All ownership rights of the supplemental policies belong to Mr. Snyder and Mr. Brookner. In the event of death, the insurer, not NCB, would pay the face value of the deceased NEO’s policy or policies, as the case may be, to the designated beneficiary. Also, in the event of Mr. Snyder’s death, NCB would be entitled to a payment of $177,823 from the proceeds to reimburse it for the initial premium paid by NCB in 2002. Due to changes in federal tax laws and the enactment of Sarbarnes-

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Oxley, NCB now pays the premiums on behalf of Mr. Snyder and treats the entire premium payment as taxable compensation to him, as described in more detail above in the section titled “Perquisites and Other Personal Benefits.”

Because all regular salaried employees of NCB are entitled to life insurance for three times base salary up to a maximum amount of $500,000, the amounts shown below reflect only the additional benefits to which the NEOs are entitled. The CEO is also entitled to continued premium payments for his additional life insurance policy for six months following termination under certain circumstances under his severance agreement, as described in more detail below in the section titled “Benefits Payable to the CEO under Severance Agreement.”

Name	Termination Due to Death
Charles E. Snyder	$	2,963,147	(1)
Richard L. Reed	$	250,000
Steven A. Brookner	$	3,326,000	(1)
Kathleen M. Luzik	$	250,000
Mark Hiltz	$	250,000
Charles H. Hackman	$	250,000

⁽¹⁾        These amounts are based upon the face value of Mr. Snyder’s and Mr. Brookner’s supplemental policies, less, in Mr. Snyder’s case, the amount payable to NCB to reimburse it for the initial premium. The policies are variable life insurance policies and the actual amount of the death benefit will vary depending on the earnings on the investment options selected by the NEO under the policy.

Benefits Payable to the CEO under Severance Agreement

NCB has no severance agreements with its NEOs, except its CEO. Under his severance agreement, the CEO receives cash payments and other employee benefits for any Trigger Event except termination for cause or for death. The severance agreement entitles him to receive continued salary payments in an amount that is the greater of (1) his base salary at the rate on the termination date, or (2) if within the 60 days prior to his termination his salary was reduced, his salary prior to such reduction, for twenty four (24) months following termination, other than for cause or as a result of death. Because regular salaried employees of NCB are entitled to salary continuation for up to one year, based on years of service, the amount shown in the table reflects the additional twelve (12) months of base salary to which the CEO would be entitled under the severance agreement.

In addition to salary continuation, the CEO is entitled to other benefits. Many of these benefits are also available to regular salaried employees of NCB under its salary continuation program. Benefits to which the CEO would be entitled under the severance agreement not otherwise available to regular salaried NCB employees are: payment of accrued sick leave; an amount equal to the cost of NCB providing the NCB Retirement and 401(k) Plan benefits as though the CEO continued to be employed by NCB during the first six months following involuntary termination other than for cause or death; premium payments for the CEO’s supplemental life insurance policy for six months following termination; and payment of additional disability buy-up insurance premiums for six months. As of December 31, 2008, the CEO had zero accrued sick leave. The estimated amounts payable for a Trigger Event except termination for cause or for death, for the remaining benefits are shown in the table below.

If both parties agree, the CEO may be paid in one lump-sum for the value of all of his severance benefits. If the CEO is terminated for a disability that renders him unable to perform his job, the benefits payable under the severance agreement are reduced by the amount of any disability benefits actually received under any other NCB employee disability benefits. If the CEO secures new employment during the payout period, then NCB’s obligation to pay benefits is terminated or reduced as follows: If the new position has a base salary plus bonus or incentive compensation (the “New Compensation”) equal to at least 90% of the CEO’s base salary plus an amount equal to his average incentive compensation for the five fiscal years preceding the termination year (the “Old Compensation”), then his severance benefit terminates. Otherwise, his severance benefit is reduced to an amount that combined with the New Compensation, equals 90% of his Old Compensation.

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In exchange for severance benefits, the CEO must execute a mutual release under which the CEO releases NCB of any obligations arising from the CEO’s employment, with the exception of the CEO’s earned deferred compensation, and NCB releases the CEO of any claims it has or may have against the CEO. Payment of severance benefits is contingent on certain provisions for the three years beginning on termination, including the non-competition and confidentiality provisions pursuant to which the CEO may not (1) become a substantial owner, employee or agent of any NCB competitor, or (2) induce any officer of NCB or an affiliate to leave NCB or engage in a competitive business. Furthermore, during that period, the CEO must provide limited consulting services to NCB upon request up to a maximum of 15 days per year, on matters to which he devoted significant time while at NCB and thereafter, cooperate with any governmental investigation or any litigation arising out of matters to which he devoted significant amounts of time while at NCB.

If the CEO voluntarily terminates employment without good reason, but provides NCB at least nine months prior notice, then the CEO is entitled to continuation of salary for one year. However, because regular salaried employees of NCB are entitled to salary continuation for up to one year, based on years of service, the CEO receives no greater payments under this provision, as reflected in the table below.

	Any Termination in
	Employment, Except		Voluntary
	Termination for		Termination Without
Name	Cause or for Death		Good Reason
Charles E. Snyder
Salary continuation	$	524,773	$	-
Accrued sick leave	$	-	$	-
Continued retirement payments	$	14,700	$	-
401(k) Pension	$	14,700	$	-
Premium payments for supplement life insurance policy	$	91,950	$	-
Premium payments for additional disability buy-up insurance	$	4,745	$	-

Director Compensation Table – 2008

	Fees Earned or
Name	Paid in Cash
Irma Cota, Chairperson	$	31,000
Stuart M. Saft	$	23,000
William F. Casey, Jr., Chairperson	$	5,750
Roger B. Collins	$	25,000
Peter Conrad	$	16,500
Steven Cunningham	$	21,500
William Hampel	$	20,000
Grady B. Hedgespeth	$	23,250
Janis Herschkowitz	$	4,877
Jeff Leonard	$	3,250
Rosemary Mahoney	$	23,250
Stephanie McHenry	$	23,000
Richard A. Parkinson	$	20,500
Alfred A. Plamann	$	18,250
Walden Swanson	$	20,500
Nguyen Van Hanh	$	4,267
David G. Nason*	$	-

* As the Presidential appointee from among the officers of the agencies and departments of the United States, Mr. Nason was not entitled to director compensation during his tenure as a member of the Board of Directors.

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Narrative to Director Compensation Table

Members of NCB’s Board of Directors (the “Board”) receive cash compensation for their Board service as shown in the preceding table. Under the Act, directors who are appointed by the President of the United States from among proprietors of small business and from persons with experience in low-income cooperatives are entitled to (1) compensation at the daily equivalent of the compensation of a GS 18 civil servant which amounted in 2008 to $610 a day, and (2) travel expenses. Typically, these directors receive compensation for no more than nine days a year. The director appointed by the President of the United States from among the employees of the United States Government is not entitled to any compensation from the Company, other than reimbursement of expenses.

Directors elected by shareholders are entitled to (1) annual retainer of $13,000, (2) $1,000 for serving as the chair of any committee, except the annual compensation for the Audit Committee Chair is $3,000, (3) $1,000 for each board meeting attended, (4) $500 for each committee meeting attended in person up to two meetings per day, (5) one-half of the above amounts for meetings if attended by conference call or webinar and (6) travel expenses. The Chair of the Board is entitled to $8,000 in compensation in addition to the above amounts. Directors of subsidiary corporations are entitled to (1) $500 for each board meeting attended and half that amount for attending such meetings via conference call or webinar and (2) travel expenses. Chairs of affiliate/subsidiary boards are entitled to an additional compensation of $3,000 per year.

NCB directors do not receive stock or option awards or non-equity incentive plan compensation for their service as directors. They are entitled to participate in some of the benefit programs, which are generally available to all NCB employees. Directors may participate in NCB’s Deferred Compensation Plan under the same terms as the NEOs as described under the heading “Nonqualified Deferred Compensation.” None of the current NCB directors have elected to participate in the Deferred Compensation Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Stock Ownership of Certain Stockholders and Management

Three of NCB’s stockholders own in excess of 5% of the outstanding shares of NCB’s Class B or Class C stock. The shareholders purchased a portion of this stock in connection with sizable loans made by NCB to them and received a portion of the stock as patronage dividends from NCB. NCB’s voting policy, however, does not allocate voting rights solely based on the number of shares of Class B or Class C stock held and prohibits any one stockholder from being allocated more than five percent of the votes allocated in connection with any stockholder action.

The following table shows those cooperatives that owned more than 5 percent of NCB’s Class B or Class C stock as of December 31, 2008.

	Class B Stock					Class C Stock
			Percent of					Percent of
Name of Shareholders	Shares		Class			Shares		Class
The Co-operative Central Bank		30,500		1.77	%		29,614		11.79	%
Greenbelt Homes, Inc.		14,440		0.84	%		29,518		11.75	%
Group Health, Inc.*		14,227		0.82	%		15,068		6.00	%

* Included in Group Health, Inc. is Central Minnesota Group Health Plan’s (who is affiliated with Group Health, Inc.) 5,469 and 3,588 shares of Class B and Class C stock, respectively.

Because the Act restricts ownership of NCB’s Class B and Class C stock to eligible cooperatives, NCB’s officers and directors do not own any Class B or Class C stock, although cooperatives with which such officers and directors are affiliated may own such stock.

132

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE

Certain Transactions

In the ordinary course of business, NCB has made loans at prevailing interest rates and terms to directors and executive officers of NCB and to certain entities to which these individuals are related. As of December 31, 2008 and 2007, loans to executive officers and current directors of the company and its affiliates, including loans to their associates, totaled $68.5 million and $20.3 million, respectively. During 2008, loan additions were $68.1 million and loan repayments were $20.0 million. There were no related party loans that were impaired, non-accrual, past due, restructured or potential problems at December 31, 2008 or December 31, 2007.

NCB had term loans with Harp’s Food Stores, Inc. of which Mr. Collins is President and CEO. As of December 31, 2008, the term loans had outstanding balances totaling $7.7 million.

NCB had a loan with Moreland Court TPC, LP. Shorebank, of which Stephanie McHenry is President of its Cleveland Banking Region, bought a participation in this loan from NCB. As of December 31, 2008, the balance of the loan was $9.5 million. NCB also had a $3.0 million line of credit with Moreland Court TPC, LP of which $2.3 million was outstanding as of December 31, 2008.

NCB entered into an agreement with Unified Western Grocers (UWG) of which Mr. Plamann is President and Chief Executive Officer, to purchase member loans originated or to originate loans directly to members of UWG. The outstanding amount of the loans as of December 2008 was $46.1 million. NCB also had a $12.9 million revolving line of credit to UWG of which there was $2.9 million outstanding as of December 31, 2008.

NCB believes that the foregoing transactions contain terms comparable to those obtainable in an arm’s length transaction. NCB has determined that these loans were made in the ordinary course of business on substantially the same terms, including interest and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present unfavorable features. The loans were made in accordance with NCB’s lending policies and regulatory requirements, properly approved and evaluated for disclosure in the financial statements.

Director Independence

Each director is considered by NCB to be an independent director. NCB uses the independence standards adopted by the NASDAQ Stock Market, Inc. (“NASDAQ”). (NCB does not have any securities listed on NASDAQ, but SEC rules require that reporting companies such as NCB select independence standards of a national securities exchange or national securities association, such as NASDAQ). Most importantly, no director is an officer of, or employed by, NCB or any of its subsidiaries. Although some cooperatives associated with directors have loan relationships with NCB (described in the section above), no director has a relationship that, in the opinion of NCB’s Board of Directors, would interfere with the exercise of independent judgment of the director in carrying out his or her responsibilities.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

NCB has paid or expects to pay the following fees to KPMG LLP for work performed in 2008 and 2007 (in thousands):

	2008		2007
Audit fees	$	520	$	463
Audit-related fees		-		29
Tax fees		-		-
All other fees		14		-
Total fees	$	534	$	492

133

Audit fees include fees for services that would normally be provided by the accountant in connection with the statutory and regulatory filings or engagements and that generally only an independent accountant can provide. In addition to fees for an audit or review in accordance with generally accepted auditing standards, this category contains fees for comfort letters, statutory audits, consents, and assistance with and review of documents filed with the SEC. Audit-related fees are assurance related services that are traditionally performed by the independent accountant, such as: employee benefit plan audits, due diligence related to mergers and acquisitions, internal control reviews, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards. Tax fees would relate to the review of corporate tax filings. No other fees have been incurred by NCB.

The audit committee has reviewed the fees paid to KPMG LLP. These policies and procedures involve annual pre-approval by the Audit Committee of the types of services to be provided by NCB’s independent auditor and fee limits for each type of service on both a per engagement and aggregate level. Additional service engagements that exceed these pre-approved limits must be submitted to the Audit Committee for further pre-approval.

134

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Item 15(a)(1) The following financial statements are filed as a part of this report.

Financial Statements as of December 31, 2008, 2007 and 2006:

Page #
42	Report of Independent Registered Public Accountants
43	Consolidated Balance Sheets
44	Consolidated Statements of Income (Loss)
45	Consolidated Statements of Comprehensive (Loss) Income
46	Consolidated Statements of Changes in Members’ Equity
47-48	Consolidated Statements of Cash Flows
49-86	Notes to the Consolidated Financial Statements

Item 15(a)(2)               Not applicable

Items 15(a)(3) and 15(b) The following exhibits are filed as a part of this report.

Exhibit No.
(a)	3.1	National Consumer Cooperative Bank Act, as amended through 1981
(c)	3.2	1989 Amendment to National Consumer Cooperative Bank Act
(kk)	3.3	Bylaws of NCB
(kk)	4.1	Election Rules of NCB. For other instruments defining the rights of security holders, see Exhibits 3.1 and 3.2
(h)	4.11	Form of Indenture for Debt Securities
(i)	4.12	Form of Fixed Rate Medium-term Note
(j)	4.13	Form of Floating Rate Medium-term Note
*(kk)	10.3	Deferred Compensation Agreement with Charles E. Snyder
*(x)	10.4	Severance Agreement with Charles E. Snyder
*(kk)	10.5	Employment Agreement with Charles E. Snyder
(b)	10.7	Subordination Agreement with Consumer Cooperative Development Corporation (now NCB Capital Impact)
*(x)	10.13	NCB Executive Long-Term Incentive Plan Approved 7/28/03
*(ii)	10.14	NCB Executive Long-Term Incentive Plan Approved 1/19/05
*(ii)	10.15	NCB Executive Long-Term Incentive Plan Approved 1/23/07
(n)	10.25	Note Purchase and Uncommitted Master Shelf Agreement with Prudential Insurance Company (Dec. 2001)
(p)	10.31	Split Dollar Agreement with Chief Executive Officer
*(x)	10.33	NCB Executive Short-Term Incentive Plan for 2004
*(ii)	10.32	NCB Executive Short-Term Incentive Plan for 2005
*(ii)	10.35	NCB Executive Short-Term Incentive Plan for 2006
*(ii)	10.36	NCB Executive Short-Term Incentive Plan for 2007
*(ii)	10.38	NCB Executive Short-Term Incentive Plan for 2008
(kk)	10.39	NCB Executive Short-Term Incentive Plan for 2009
(w)	10.37	Amended and Restated Financing Agreement with U.S. Treasury dated November 26, 2003

135

Exhibit No.
(x)	10.43	First Amendment dated December 9, 2003 to Note Purchase and Uncommitted Master Shelf Agreement with Prudential Insurance Company of America et al
(x)	10.44	Purchase Agreement relating to Trust Preferred Securities dated December 15, 2003
(x)	10.45	Indenture related to Junior Subordinated Debt Securities dated December 17, 2003
(x)	10.46	Guarantee Agreement dated December 17, 2003
*(x)	10.47	Memorandum of Understanding with Respect to Tax Treatment of Employer Payments under Split Dollar Arrangement with CEO, dated December 30, 2003
(ee)	10.48	Blanket Agreement for Advances with Federal Home Loan Bank of Cincinnati dated June 30, 2006
(z)	10.51	Second Amendment dated December 31, 2004 to Note Purchase and Uncommitted Master Shelf Agreement with Prudential Insurance Company of America et al
*(z)	10.52	Memorandum of Understanding With Respect to Tax Treatment of Employer Payments Under Split- Dollar Agreement with Charles Snyder
(ii)	10.53	First Amendment dated October 16, 2006 to Credit Agreement among NCB, various banks and SunTrust Bank, as administrative agent
*(z)	10.54	Agreement to Provide Supplemental Retirement Benefits for CEO of NCB, FSB
(bb)	10.55	Lease for 2011 Crystal Drive, Arlington, Virginia 22202
(dd)	10.56	Credit Agreement among NCB, various banks and SunTrust Bank, as administrative agent
(hh)	10.57	Second Amendment dated September 28, 2007 to Credit Agreement among NCB, various banks and SunTrust Bank, as administrative agent
(ii)	10.58	Third Amendment dated December 31, 2007 to Credit Agreement among NCB, various banks and SunTrust Bank, as administrative agent
(ii)	10.59	Second Amendment dated December 31, 2007 to Note Purchase Agreement with Metropolitan Life Insurance Company et al
(ii)	10.60	Third Amendment dated December 28, 2006 to Note Purchase and Uncommitted Master Shelf Agreement with Prudential Insurance Company of America et al
(ii)	10.61	Fourth Amendment dated December 31, 2007 to Note Purchase and Uncommitted Master Shelf Agreement with Prudential Insurance Company of America et al
(ii)	10.62	Fifth Amendment dated February 25, 2008 to Note Purchase and Uncommitted Master Shelf Agreement with Prudential Insurance Company of America et al
(jj)	13	2007 Annual Report
(kk)	14	NCB Senior Financial Officers’ Code of Ethics
(ll)	21.1	List of Subsidiaries and Affiliates of NCB
(kk)	23.1	Consent of KPMG LLP
(n)	24.11	Power of Attorney by Stephanie McHenry
(x)	24.19	Power of Attorney by Irma Cota
(x)	24.20	Power of Attorney by Grady B. Hedgespeth
(x)	24.21	Power of Attorney by Rosemary Mahoney
(x)	24.22	Power of Attorney by Richard A. Parkinson
(z)	24.26	Power of Attorney by William Hampel
(aa)	24.27	Power of Attorney of Roger Collins
(aa)	24.28	Power of Attorney of Steven Cunningham
(ii)	24.29	Power of Attorney of Janis Herschkowitz
(ii)	24.30	Power of Attorney of Nguyen Van Hanh

136

Exhibit No.
(ii)	24.31	Power of Attorney of Stuart M. Saft
(ii)	24.32	Power of Attorney of Walden Swanson
(kk)	24.33	Power of Attorney of Peter A. Conrad
(kk)	24.34	Power of Attorney of Alfred A. Plamann
(kk)	31.1	Rule 13a-14(a)/15d-14(a) Certifications
(kk)	31.2	Rule 13a-14(a)/15d-14(a) Certifications
(kk)	32	Section 1350 Certifications
(kk)	99.1	Registrant’s 2009 Election Materials

*	Exhibits marked with an asterisk are management contracts or compensatory plans.
(a)	Incorporated by reference to the exhibit of the same number filed as part of Registration Statement No. 2-99779 (Filed August 20, 1985).
(b)	Incorporated by reference to the exhibit of the same number filed as part of Amendment No. 1 to Registration Statement No. 2-99779 (Filed May 7, 1986).
(c)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 1989 (File No. 2-99779).
(d)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the three months ended June 30, 1992 (File No. 2-99779).
(e)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 1994 (File No. 2-99779).
(f)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 1995 (File No. 2-99779).
(g)	Incorporated by reference to Exhibit 10.16 filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 1989 (File No. 2-99779).
(h)	Incorporated by reference to Exhibit 4.1 filed as part of Amendment No. 1 to Registration Statement No. 333-17003 (Filed January 21, 1997).
(i)	Incorporated by reference to Exhibit 4.2 filed as part of Amendment No. 1 to Registration Statement No. 333-17003(Filed January 21, 1997).
(j)	Incorporated by reference to Exhibit 4 to the registrant’s report on Form 8-K filed February 11, 1997 (File No. 2-99779).
(k)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 1997 (File No. 2-99779).
(l)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 1999 (File No. 2-99779).
(m)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 1999 (File No. 2-99779).
(n)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 2001 (File No. 2-99779).
(o)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the quarter ended March 31, 2002 (File No. 2-99779).
(p)	Incorporated by reference to exhibit 17 filed as part of the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2002 (File No. 2-99779).
(q)	Incorporated by reference to exhibit 20 filed as part of the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2002 (File No. 2-99779).
(r)	Incorporated by reference to exhibit 28 filed as part of the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2002 (File No. 2-99779).

137

(s)	Incorporated by reference to exhibit 99 filed as part of the registrant’s quarterly report on Form 10-Q for the quarter ended September 30, 2002 (File No. 2-99779).
(t)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 2002 (File No. 2-99779).
(u)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the quarter ended March 31, 2003 (File No. 2-99779).
(v)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2003 (File No. 2-99779).
(w)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s report on Form 8-K filed December 23, 2003 (File No. 2-99779).
(x)	Incorporated by reference to the exhibit of the same number filed as part the registrant’s annual report on Form 10-K for the year ended December 31, 2003 (File No. 2-99779).
(y)	Incorporated by reference to the exhibit of the same number filed as part the registrant’s quarterly report on Form 10-Q for the quarter ended March 31, 2004 (File No. 2-99779).
(z)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the year ended December 31, 2004 (File No. 2-99779)
(aa)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report Form 10-K for the period ended December 31, 2005 (File No. 2-99779)
(bb)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s report on Form 8-K, January 30, 2006 (File No. 2-99779)
(cc)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the period ended March 31, 2006 (File No. 2-99779)
(dd)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s report on Form 8-K filed May 5, 2006 (File No. 2-99779)
(ee)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the period ended June 30, 2006 (File No. 2-99779)
(ff)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report Form 10-K for the period ended December 31, 2006 (File No. 2-99779)
(gg)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the period ended March 31, 2007 (File No. 2-99779)
(hh)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the period ended September 30, 2007 (File No. 2-99779)
(ii)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s annual report on Form 10-K for the period ended December 31, 2007 (File No. 2-99779)
(jj)	Incorporated by reference to the exhibit of the same number filed as part of the registrant’s quarterly report on Form 10-Q for the period ended March 31, 2008 (File No. 2-99779)
(kk)	Filed herewith
(ll)	Included in Part I of this report or Form 10-K

**********

Item 15(c) All other schedules are omitted because they are not applicable or the required information is shown in the financial statements, or the notes thereto.

138

SIGNATURES

Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.

NATIONAL CONSUMER COOPERATIVE BANK

DATE: March 31, 2009	BY/s/  Charles E. Snyder
	Charles E. Snyder
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates noted:

Signature	Title	Date
*/s/  William F. Casey Jr. William F. Casey Jr.	Chairperson of the Board of Directors and Director	03/31/09
*/s/  Irma Cota Irma Cota	Vice Chairperson of the Board of Directors and Director	03/31/09
*/s/  Charles E. Snyder Charles E. Snyder	President and Chief Executive Officer	03/31/09
*/s/  Peter A. Conrad Peter A. Conrad	Director	03/31/09
*/s/  Roger B. Collins Roger B. Collins	Director	03/31/09
*/s/  Steven F. Cunningham Steven F. Cunningham	Director	03/31/09
*/s/  William F. Hampel William F. Hampel	Director	03/31/09
*/s/  Grady B. Hedgespeth Grady B. Hedgespeth	Director	03/31/09
*/s/  Janis Herschkowitz Janis Herschkowitz	Director	03/31/09
*/s/  Rosemary Mahoney Rosemary Mahoney	Director	03/31/09
*/s/  Stephanie McHenry Stephanie McHenry	Director	03/31/09
*/s/  Richard A. Parkinson Richard A. Parkinson	Director	03/31/09
*/s/  Alfred A. Plamann Alfred A. Plamann	Director	03/31/09

139

Signature	Title	Date
*/s/  Stuart M. Saft Stuart M. Saft	Director	03/31/09
*/s/  Walden Swanson Walden Swanson	Director	03/31/09
*/s/  Nguyen Van Hanh Nguyen Van Hanh	Director	03/31/09
*/s/  Richard L. Reed Richard L. Reed	Executive Managing Director, Principal Financial Officer	03/31/09
*/s/  David Sanders David Sanders	Senior Vice President, Principal Accounting Officer	03/31/09
*By /s/  Richard L. Reed Richard L. Reed (Attorney-in-Fact)

140

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS, WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT

With this report, the registrant is furnishing to the Commission for its information the registrant’s election materials for its 2009 annual meeting. The registrant has not yet distributed the 2008 annual report to stockholders and will furnish such report to the Commission when it is sent to security holders.

Exhibit Index

Ex. No.	Exhibit
3.3	Bylaws of NCB
4.1	Election Rules of NCB. For other instruments defining the rights of security holders, see Exhibits 3.1 and 3.2
10.3	Deferred Compensation Agreement with Charles E. Snyder
10.5	Employment Agreement with Charles E. Snyder
10.39	NCB Executive Short-Term Incentive Plan for 2009
14	NCB Senior Financial Officers’ Code of Ethics
23.1	Consent of KPMG LLP
24.33	Power of Attorney of Peter A. Conrad
24.34	Power of Attorney of Alfred A. Plamann
31.1	Rule 13a-14(a)/15d-14(a) Certifications
31.2	Rule 13a-14(a)/15d-14(a) Certifications
32	Section 1350 Certifications
99.1	Registrant’s 2009 Election Materials

141

EX-3.3

Exhibit 3.3

February 5, 2009

NATIONAL CONSUMER COOPERATIVE BANK

CORPORATE BYLAWS

ARTICLE I

NAME, CHARTER, PURPOSES AND OFFICES

Section 1.1 Name. The name of the corporation is the National Consumer Cooperative Bank (“the Bank”). The Bank may conduct its operations under the trade name, “National Cooperative Bank” or “NCB.”

Section 1.2 Charter. The Bank is created and chartered as a body corporate by Act of the Congress of the United States, the National Consumer Cooperative Bank Act, as amended (“the Bank Act”).

Section 1.3 Purposes. The purpose of the Bank is to make available necessary financial and technical assistance to cooperative self-help endeavors and conduct other activities and operations set forth in the Bank Act.

Section 1.4 Offices. The principal office of the Bank shall be in Washington, District of Columbia. Branch or other offices may be established at such times and maintained at such places as the Board of Directors may authorize. The President of the Bank may authorize other work sites for Bank representatives as he or she may deem necessary.

ARTICLE II

BOARD OF DIRECTORS

Section 2.1 General Powers. The business and affairs of the Bank shall be conducted under the direction and control of its Board of Directors (“the Board”). The powers and responsibilities of the Board are set forth in the Bank Act and in these Bylaws. The Board shall establish the policies of the Bank governing its business and affairs and shall direct the management of the Bank. The Board may adopt such rules and regulations for the conduct of its meetings and the management of the Bank as it may deem proper, not inconsistent with these Bylaws and the Bank Act.

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Section 2.2 Board Composition. The number of directors constituting the entire Board shall be fifteen (15). Three (3) shall be appointed to the Board by the President of the United States, in the manner specified in the Bank Act and may be removed only by the President as provided in the Bank Act. Twelve (12) directors shall be elected by the holders of the Bank’s class B stock and the Bank’s class C stock in the manner specified in the Bank Act. No one of the classes of (1) housing, (2) consumer goods, (3) low-income cooperatives, (4) consumer services, or (5) all other eligible cooperatives shall be represented on the Board by less than one or more than three elected directors.

Section 2.3 Term. All directors shall serve for a term of three (3) years unless otherwise specified in the Bank Act. No director shall be eligible to be elected for more than two consecutive full three-year terms. However, any director may continue to serve until his or her successor has been elected or appointed and has been qualified and seated, in accordance with the Bank Act, these Bylaws, and the election rules adopted under section 3.3 of these Bylaws. The Board, in its sole discretion, may determine when the term of a director shall commence after any election date and the date on which a director-elect shall be seated on the Board, assuming the full authority of a director.

Section 2.4 Resignation; Removal.

     (a) Any director may resign at any time. Such resignation shall be made in writing and shall take effect on the date specified in the director’s written resignation or, if no effective date is specified in such letter, the date such written resignation is received by the Secretary. A director’s resignation shall be effective as provided without acceptance or further action by the Board.

     (b) Any elected director may be removed for Good Cause (i) by affirmative vote of a majority of votes cast at an annual or special meeting of stockholders with respect to which notice of such proposed vote for removal has been given or (ii) by affirmative vote of two-thirds (2/3) of disinterested directors following a report of the audit/risk management committee as to the existence of Good Cause. For purposes of this Section 2.4(b), “Good Cause” shall include a material violation of the Bank’s Code of Conduct and Ethics, conviction of or plea of nolo contendere to a felony or of a misdemeanor that causes material injury to the business or reputation of the Bank, willful or reckless failure or refusal to perform the duties of a director, mental or physical inability to function as a director or such other matters as the Board reasonably determines, by such affirmative vote, to result in material harm to the business or reputation of the Bank.

Section 2.5 Vacancies. A director’s seat shall be vacant upon the death of the director; or on the effective date of the

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director’s resignation; or on the effective date of an appointed director’s removal by the President of the United States or an elected director’s removal pursuant to Section 2.4(b) hereof. If a vacant seat was held by an elected director, such vacant seat may be filled by vote of the Board for the remainder of the unexpired term of such vacant seat.

Section 2.6 Compensation of Directors.

     (a) Appointed Directors. The directors appointed to the Board by the President shall be compensated as provided in the Bank Act.

     (b) Elected Directors. The directors who are elected by the holders of Class B stock and Class C stock shall be entitled to receive such compensation and reimbursement for expenses for the performance of their duties on the Board as may be provided from time to time by the Board.

Section 2.7 Officers of the Board. The Board shall, at its first meeting after each annual meeting of stockholders and at such other times as may be necessary to fill vacancies for officers of the Board, elect one director to be Chair and one director to be Vice Chair of the Board. It shall also select a Secretary of the Board, who need not be a director. The Chair, Vice Chair, and Secretary of the Board shall hold office for one year terms or until their respective successors shall be selected and take office. The Secretary of the Board shall prepare and retain minutes of all meetings of the Board and perform such other duties from time to time as may be assigned by the Board or by the President. In the absence or disability of the Secretary, the Corporate Secretary shall perform the duties of the Secretary of the Board.

Section 2.8 Regular Meetings. Regular meetings of the Board shall be held at least quarterly at places and times fixed by the Board.

Section 2.9 Special Meetings. Special meetings of the Board may be in person or telephonic and shall be held upon the call of the Chair or upon the call of any five directors. Each special in person meeting of the Board shall be held at the principal office of the Bank, unless the person calling prescribes, and the notice of such meeting specifies, another place.

Section 2.10 Notice of Meeting. The Secretary of the Board shall give each director notice of the time, place, or date of each regular meeting of the Board and notice of the purpose, time, place, date, and calling authority of any special meeting of the Board. Whenever a regular or special meeting of the Board shall be recessed, the Secretary of the Board shall give notice of when the

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meeting shall reconvene as soon as may be practical under the circumstances.

Section 2.11 Method of Giving Notice. (a) Notice shall be mailed first class postage prepaid at least ten days prior to the meeting date, or shall be sent prepaid by express mail, telegram, facsimile or cable, presented for transmission not later than five days preceding the day of the meeting, or shall otherwise be delivered to the director, including, without limitation, by email with receipt acknowledged, not later than three days before the meeting date. Notice may be waived in writing by a director before, during, or after a meeting. A director’s participation in a meeting is a waiver of notice of that meeting, unless the director participates solely for the purpose of objecting to transaction of any business because the meeting was not properly called or convened.

(b) Notwithstanding the provision of Section 2.11(a), in the event that any two directors shall certify in writing the existence of a catastrophic event or acute emergency that is likely to have a material adverse effect upon the Bank in the absence of immediate attention by the Board, such directors may call a special meeting to be held at least four hours after notice to all directors, which notice may be given by making such reasonable efforts as the circumstances may permit to notify each director of the time and the place of, or call-in information for, such special meeting. Failure of any directors to receive actual notice of such special meeting shall not affect the power of the directors present at the meeting to act.

Section 2.12 Quorum. At all meetings, the presence of a majority of the directors qualified and seated at the time of the meeting shall constitute a quorum for the transaction of business. Except as otherwise specifically provided in the Bank Act or these Bylaws, the act of a majority of the directors present at a regular or special meeting at which a quorum is present or participating shall be the act of the Board.

Section 2.13 Meeting Rules. The Board shall conduct its meetings in accordance with such rules as it may establish from time to time, including rules on the manner of submitting items for the agenda, the allocation of time of presentation and debate, and voting. If the Board has not adopted its own rules, and for matters not addressed in any rules adopted by the Board, meetings shall be conducted in accordance with the procedures for meetings described in Roberts rules of Order, latest edition, unless such procedures are otherwise inconsistent with these Bylaws or the Bank Act.

Section 2.14 Public Observation.

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     (a) Open Meetings. Except as provided in subsection (b), meetings of the Board and its committees shall be open to members or representatives of all eligible cooperatives, eligible organizations and invited persons, as observers only.

     (b) Closed Meetings. Meetings of the Board and its committees may be closed to public observation and attendance may be further limited only to directors, as provided in the Bank Act and rules established by the Board not inconsistent with the Bank Act.

     (c) Notice of Meeting. The Board and its committees shall make a public announcement of all meetings. Generally notice shall be provided at the Bank at least seven (7) days before a meeting is scheduled, but shorter notice may be provided at the earliest practicable time.

Section 2.15 Records. Copies of proceedings of regular and special meetings of the Board, the Bylaws and any amendments thereto, reports of committees of directors and proceedings of the Executive Committee, or any standing committees, shall be recorded in the minute books of the Bank. The minutes of the Board and its committees shall be signed by the Chair of the Board or the Chair of the committee or the Secretary of the Board.

Section 2.16 Action By Consent. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if written consent thereto is signed by all members of the Board or of such committee as the case may be and such written consent is filed with the minutes of proceedings of the Board or committee.

ARTICLE III

ELECTION OF DIRECTORS

Section 3.1 Record Date. The Board shall fix a date not less than ninety (90) days prior to the date of any election or special election as the record date for determining stockholders of record entitled to vote. The record date for any run-off election shall be the same record date established under this section for the original election.

Section 3.2 Notice.

     (a) The Corporate Secretary shall give notice of any election to all stockholders of record at least sixty (60) days preceding an election, special election or run-off election. Notice shall be mailed to stockholders of record at the address appearing on the Corporate Secretary’s records. An official ballot which shall

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describe the qualifications of nominees and their positions on issues, the date when ballots must be received by the Bank, and all other information necessary for participation in the election shall be mailed to stockholders of record no later than thirty days preceding an election.

     (b) Waiver. Participation by any stockholder in any election shall constitute a waiver by that stockholder of notice of such election, except where the participation is for the express purpose of objecting to the transaction of any business because the election or meeting was not properly called. A written waiver of notice of any election signed by an authorized officer or a stockholder shall be deemed equivalent to giving proper notice to such stockholder.

Section 3.3 Nominations and Election Procedures. The Board shall adopt election rules, consistent with the provisions of the Bank Act, governing nominations to vacant directorships and procedures for the conduct of elections. Such election rules may provide procedures that will cause, over the course of several succeeding elections, the arrangement of the terms of all elected directors so that the terms of no more than one-third of them will expire in the same year. Such election rules shall provide procedures for nomination of candidates by stockholders, in addition to other procedures; provided that each stockholder nominee must establish support by at least fifteen percent (15%) of the stockholders eligible to vote on the record date for the election. The decision of the Board on any matter that shall arise with regard to the election rules described in these Bylaws shall be final. No contested director shall participate in any decision with respect to such dispute.

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ARTICLE IV

BOARD COMMITTEES

Section 4.1 Executive Committee. There shall be constituted an Executive Committee which shall be accountable to the full Board and which shall also act as the Compensation Committee unless the Board votes to the contrary. The members of the Executive Committee shall be the Chair of the Board, the Vice Chair of the Board, the Chair of each Standing Committee of the Board and the Chair of NCB Capital Impact, so long as the latter person is also a member of the Board of the Bank. The Chair of the Board shall be the chair of the Executive Committee.

     (a) Duties and Responsibilities. The Executive Committee, when the Board of Directors is not in session, shall have and may exercise all of the authority of the Board of Directors except that the Executive Committee shall not have the authority of the Board of Directors with reference to: the declaration of dividends (other than patronage dividends); the amendment of these Bylaws, or recommending to the stockholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the Bank otherwise than in the usual and regular course of its business; a voluntary dissolution of the Bank; a revocation of any of the foregoing; or the approval of a transaction in which any member of the Executive Committee, directly or indirectly, has any material beneficial interest.

     (b) Committee Meetings and Minutes. The Executive Committee shall meet at stated times, at the call of the Chair or at the request of at least three (3) members of the committee. Four members of the Committee shall constitute a quorum. The Executive Committee shall keep minutes of each meeting and report the same to the Board for its information at the meeting held next after the proceedings shall have occurred.

Section 4.2 Standing Committees of the Board. The standing committees of the Board shall be (a) the Audit Committee and (b) the Compensation Committee. The chair of the Board, subject to approval of the Board, shall appoint directors to standing committees, including one director to be chair of each committee.

Section 4.3 Other Committees. The Board may by resolution establish such other committees of directors as it deems necessary or desirable. The Chair of the Board, subject to approval of the Board, shall appoint directors to committees, including one director to be chair of each committee. The Chair of the Board may establish and appoint ad hoc committees at his or her discretion.

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Section 4.4 Delegations to Committees. In addition to the authority granted to the committees in these Bylaws, the Board may by Resolution delegate to a committee the power to exercise the authority of the full Board on specified matters, provided however, that no committee, including the Executive Committee, shall have authority to take any of the following actions:

(a)	the filling of vacancies on any committee of directors;
(b)	the fixing of compensation of directors;
(c)	the amendment or repeal of these Bylaws or the adoption of new Bylaws;
(d)	the adoption of Bank policies;
(e)	the declaration of patronage refunds or dividends on stock; and
(f)	the termination or appointment of the President of the Bank.

Section 4.5 Committee Procedure, Quorum. Except as otherwise provided in these Bylaws or a resolution of the Board establishing the committee, or for ad hoc committees, a majority of a committee shall constitute a quorum thereof, the act of a majority of those present or participating at a meeting where a quorum is present shall be the act of the committee, and meetings of each committee shall be called by the chair of the committee or a majority of its members. Each committee shall provide such reports at such times as the Board may require. All committees, including the Executive Committee, may transact business by in person or telephonic meetings, in accordance with the rules applicable to Board meetings set forth in Article II of these Bylaws.

ARTICLE V

OPERATING OFFICERS, AGENTS, AND EMPLOYEES

Section 5.1 Officers. The officers of the Bank shall be the President, the Treasurer, the Corporate Secretary, and such other officers as the Board may establish, each of whom shall have such authority and perform such duties as the President may delegate.

Section 5.2 Appointment, Term of Operating Officers, and Qualifications. All officers of the Bank who report directly to the President should be appointed by the President and ratified by the Board. No officer may be a director of the Bank. The

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President shall be appointed by the Board and may be removed by the Board.

Section 5.3 The President. The President of the Bank shall be its Chief Executive Officer and shall have full responsibility and full authority for the day-to-day administration of the affairs of the Bank, under the general supervision of the Board. The President shall also have such other powers and perform such other duties as the Board may from time to time prescribe. The President shall supervise all other officers, employees and agents of the Bank. Except as otherwise provided by the Board or in these Bylaws, the President may delegate the authority of that officer among the operating officers and employees of the Bank as he or she deems necessary or convenient for the efficient operation of the Bank.

Section 5.4 The Treasurer. The Treasurer, who shall also be an officer of the Bank, shall (a) have charge and custody of, and be responsible for, all funds and securities of the Bank, and shall deposit all such funds and securities in depositories selected according to resolutions adopted by the Board; (b) receive, and give receipts for, monies due and payable to the Bank from any source whatsoever; (c) sign such documents as require the signature of the Treasurer; and (d) perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned by the Board or by the President.

Section 5.5 The Corporate Secretary. The Corporate Secretary shall be responsible for the custody of all Bank books, records and files and correspondence of the Bank, except as shall be in the charge of the Treasurer, the Secretary of the Board or of some other person authorized to have custody and possession thereof by the Board or the President. The Corporate Secretary shall have custody of the seal of the corporation and shall affix the same to all instruments requiring it. The President may appoint one or more assistant secretaries to perform such duties and to have such powers of the Corporate Secretary as shall from time to time be assigned to them by the President.

ARTICLE VI

CAPITALIZATION

Section 6.1 Class A Notes.

     On the Final Government Equity Redemption Date, as defined in the Bank Act (December 31, 1981), the Bank fully redeemed all of the Class A preferred stock held by the Secretary of the Treasury in exchange for Class A notes, which were issued by the Bank to the Secretary of the Treasury on behalf of the United States. The Class A notes have a total face value equal to the total par value

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of the Class A stock which was so redeemed, are payable as to principal and interest as provided in the Bank Act, and are subordinate to all obligations issued by the Bank after December 31, 1981, except for obligations relating to any class of stock issued by the Bank.

Section 6.2 Common Stock.

     (a) Authority to Issue. The capital stock of the Bank shall be issued by the Board under the authority of the Bank Act.

     (b) Class B Stock. Class B stock shall be common stock with voting rights as specified in these Bylaws. Class B stock shall be issued to and held only by eligible cooperatives who are recipients of loans and shall be transferable only in strict compliance with capitalization policies adopted by the Board. Borrowers under patronage-based loans shall be required to own Class B stock in an amount equal to one percent (1%) of the face amount of the loan at the time the loan is made. Class B stock shall be issued at par value as shall be determined by the Board and classified series 1 and 2, the former of which constitutes class B stock purchased for cash at par value on or after June 29, 1984, and the latter of which constitutes all other Class B stock.

     (c) Class C Stock. Class C stock shall be common stock with voting rights as specified in these Bylaws. Class C stock shall be available for purchase and shall be held only by borrowers, by organizations controlled by such borrowers or by other eligible cooperatives. Class C stock shall be issued at par value as shall be determined by the Board. Class C stock may be transferred only to another eligible cooperative. If a Class C stockholder becomes a recipient of a new loan, Class C stock, in an amount equal to one percent (1%) of the face amount of the loan commitment, may be converted to Class B stock provided that such conversion privilege shall only apply to Class C stock purchased for cash from the Bank.

     (d) Nonvoting Common Stock. The Board may authorize and issue other classes and series of nonvoting common stock with such rights, powers, privileges and preferences of the separate classes as the Board may specify. Such stock may be issued in fractional shares and sold, transferred or pledged when authorized by the Board in accordance with the Bank Act.

     (e) Preferences and Dividends. The common stock shall be subject to the prior rights of the holders of Class A notes as specified in the Bank Act. No dividend shall be paid on Class B stock. The Board may declare dividends, payable only from income, on Class C stock, at such rate and under such terms and conditions as it may determine; except that until all Class A notes have been retired, the rate of such dividends shall not exceed the statutory interest rate for Class A notes.

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     (f) Voting Rights.

          (i) Only stockholders holding shares of record with voting power will be entitled to vote. Regardless of the number of shares of stock of any class or series held by a stockholder, and as shall be further defined in election rules adopted pursuant to Section 3.3 of these Bylaws, each stockholder of record with one or more shares of voting stock shall be entitled to vote in the affairs of the Bank as hereinafter provided: (A) each borrower-stockholder of record shall be entitled to five (5) votes; (B) each non-borrower stockholder shall receive one vote; and (C) each stockholder of record shall be entitled to additional votes based upon factors as stated in the election rules, except that, notwithstanding the allocations of votes that would otherwise be made under this section, no voting stockholder shall be entitled to more than five percent (5%) of the total voting control held by all voting stockholders and no stockholder that is a developing cooperative (as that term is defined in election rules) shall receive more than five (5) votes.

          (ii) The Board may at any time alter the voting rights for certain stockholders as is provided in the Bank Act.

     (g) No Liens on Stock. No stockholder shall cause or permit the creation of any security interest or other lien or encumbrance in favor of any person (other than, by separate agreement, the Bank) with respect to any shares of any class of capital stock of the Bank. The Bank will not honor any request of any stockholder or other person to indicate in any way on its books or records the existence of any such encumbrance.

     (h) Transfer on the Books of the Bank. Transfers of shares of any class or series of stock shall not be valid unless and until registered on the books of the Bank. No transfer shall be registered on the books of the Bank without the approval of the Bank.

     (i) Involuntary Exchange. In the event the Bank shall determine, in its sole discretion, that a formerly eligible cooperative stockholder has dissolved or become inactive, or is not functioning as an eligible cooperative organization, full ownership and title to any and all of the stock of the Bank held by such stockholder as shown on the books of the Bank shall pass to and become vested in the Bank. The Bank may, in its sole discretion, authorize the involuntary exchange of shares of Class B or Class C stock for an equivalent dollar amount of any class or series of non-voting common stock as shall then be authorized for issuance. For purposes of this section, the Bank may determine the value of the stock to be purchased or exchanged without right of appraisal not to exceed par. If any holder of stock is more than sixty (60) days past due on any indebtedness to the Bank, the Bank may at its sole option and discretion apply the price or exchange value of

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that holder’s shares to reduce the total amount of such indebtedness.

     (j) Redemption or Repurchase. The Bank shall retire the Class A notes as provided in the Bank Act and these Bylaws. Class B and Class C stock are not redeemable, except that the Board may at its pleasure establish policies for the redemption or repurchase by the Bank of Class B or Class C stock at such values, not exceeding par, and under such terms and conditions as it may determine. For purposes of any such policies, the Board may treat stock purchased from the Bank differently from stock distributed as a patronage refund.

ARTICLE VII

DISTRIBUTION OF EARNINGS

     After payment of all operating expenses of the Bank, including interest on its obligations, and after setting aside appropriate funds for any dividends payable on any class of stock, for reserves for losses, for interest payments on Class A notes, and for any redemption of Class A notes, the Bank shall annually set aside the remaining earnings of the Bank for patronage refunds, under patronage refund policies that shall be adopted by the Board consistent with the Bank Act.

ARTICLE VIII

STOCKHOLDERS’ MEETINGS

Section 8.1 Annual Meeting. The Bank shall hold an annual meeting of its stockholders in each calendar year at such time and place, or at such other location as the Board may determine, to receive reports of the Bank’s activities during the year and of the Bank’s financial condition and to conduct such other business as may come before the meeting according to these Bylaws and such rules as the Board may from time to time adopt.

Section 8.2 Special Meetings. Special meetings of the stockholders may be called by the affirmative vote of two-thirds of the Board of Directors.

Section 8.3 Record Date. The record date for an annual or special meeting of stockholders shall be the ninetieth (90) day prior to the date of the meeting or such other date as is provided in the Rules adopted by the Board under Section 3.3 of these Bylaws.

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Section 8.4 Notice of Meeting.

     (a) The Secretary shall give notice of an annual or special meeting of stockholders to all stockholders of record by the ninetieth day preceding such meeting. Notice stating the date, time, place and agenda for the meeting shall be mailed to each such stockholder at the stockholder’s address appearing on the records of the Bank. Such notice shall include an official ballot for any proposals presented pursuant to Section 8.6. No notice of any recessed meeting of the stockholders need be given if the time and place to which the meeting is recessed are announced at the meeting at which the recess is taken, and provided a new record date is not set for the meeting.

     (b) Participation by any stockholder, either in person or by mail or by electronic method, in any meeting of which it is entitled to notice shall constitute a waiver by that stockholder of notice of such meeting, except where the participation is for the express purpose of objecting to the transaction of any business because the election or meeting was not properly called. A written waiver of notice of any meeting signed by an authorized officer of a stockholder shall be deemed equivalent to giving proper notice to such stockholder.

Section 8.5 Manner and Effect of Vote by Shareholders.

     (a) Representatives of the holders of voting stock may cast votes in person or by mail or by electronic method for any matter properly placed on the agenda of an annual or special meeting for advisory vote of the stockholders.

     (b) Each stockholder eligible to vote shall designate one representative who shall be entitled to cast its vote. The stockholder’s representative must be designated by presenting to the Bank a written authorization from the stockholder’s governing body in accordance with rules adopted by the Board under Section 3.3 of these Bylaws.

Section 8.6 Stockholder Proposals. The Bank’s stockholders eligible to vote shall be entitled to present written proposals for consideration and adoption by all stockholders participating in any annual or special meeting of stockholders according to rules adopted by the Board and included as an exhibit to each notice given under section 8.4 of these Bylaws.

Section 8.7 Quorum. The stockholders participating in person or by mail or by electronic method in a meeting for which a required notice has been given shall constitute a quorum.

Section 8.8 Procedures. The Chair shall preside at all meetings of stockholders. All meetings shall be conducted

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according to rules adopted by the Board. If the Board has not adopted its own rules, and as to matters not covered in any rules adopted by the Board, meetings shall be conducted in accordance with the procedures for meetings described in Roberts Rules of Order, latest edition, unless such procedures are otherwise inconsistent with these Bylaws or the Bank Act.

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ARTICLE IX

INDEMNIFICATION/INSURANCE

Section 9.1 Action, Other Than by or in the Right of the Bank. The Bank shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding, investigation, arbitration or other dispute resolution mechanism, whether civil, criminal, investigative or administrative, and whether external or internal to the Bank (an “Action”) other than a judicial action or suit brought by or in the right of the Bank, by reason of the fact that he or she is or was a director, officer, employee, or trustee of the Bank or is or was serving at the request of the Bank as a director, officer, employee or trustee of another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to hereafter as an “Agent”), against expenses (including attorneys’ and other professional fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by him or her in connection with such Action if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Bank, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any such Action by judgment, order, settlement, arbitration or similar award, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Bank, and, with respect to any criminal action or proceeding, that he or she had reasonable cause to believe that his or her conduct was unlawful.

Section 9.2 Action, by or in the Right of the Bank. The Bank shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed judicial action or suit brought by or in the right of the Bank to procure a judgment in its favor by reason of the fact that he or she is or was an Agent (as defined above) against expenses (including attorneys’ and other professional fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Bank, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Bank unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to

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indemnity for such expenses which the court shall deem proper. The termination of any such Action by judgment, order, settlement, arbitration or similar award shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Bank.

Section 9.3 Indemnification Against Expenses of Successful Party. Notwithstanding the other provisions of this Article, to the extent that an Agent has been successful on the merits or otherwise, including the dismissal of an Action without prejudice or the settlement of an Action without admission of liability, in defense of any Action, or in defense of any claim, issue or matter therein, otherwise covered by the indemnification provisions in this Article, such Agent shall be indemnified against all expenses incurred in connection therewith. If the Agent is not wholly successful in such Action but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Action, the Bank shall indemnify the Agent against all expenses actually and reasonably incurred by him or her in connection with each successfully resolved claim, issue or matter.

Section 9.4 Advances of Expenses. Except as limited by Section 9.5 of this Article, expenses incurred in any Action covered by the indemnification provisions in Section 9.1 or 9.2 shall be paid by the Bank in advance of the final disposition of such matter if the Agent shall undertake to repay such amount in the event that it is ultimately determined as provided herein that such person is not entitled to indemnification. The Agent shall not be required to post a bond as part of such undertaking. Notwithstanding the foregoing, no advance shall be made by the Bank if a determination is reasonably and promptly, and in any event within ninety (90) days, made by the Board of directors by a vote of two-thirds of a quorum of Disinterested Directors (as defined in Section 9.5 below), or (if such a quorum is not obtainable or, even if obtainable, a quorum of Disinterested Directors, so directs) by independent legal counsel in a written opinion, that, based upon the facts known to the Board or such counsel at the time such determination is made, such person acted in bad faith and in a manner that such person did not believe to be in or not opposed to the best interest of the Bank, or with respect to any criminal proceeding, that such person believed or had reasonable cause to believe his or her conduct was unlawful. In no event shall any advance be made in instances where the Board or such counsel reasonably determined that such person deliberately breached his or her duty to the Bank or its shareholders.

Section 9.5 Right of Agent to Indemnification Upon Application: Procedure Upon Application. Any indemnification under Sections 9.1, 9.2, or 9.3, or advance under section 9.4 of this Article, shall be made promptly, and in any event within ninety (90) days, upon the written request of the Agent, unless a determination

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within such time is made (i) by the Board of Directors by a vote of two-thirds of a quorum consisting of not less than half of directors who neither are nor were parties to such action, suit or proceeding (“Disinterested Directors”), or (ii) if such a quorum is not obtainable, or, even if obtainable, if a majority of such a quorum so directs, by a written opinion of independent legal counsel selected by the Board of Directors, or (iii) if neither the procedures described in clause (i) and clause (ii) are available or if directed by the Board, by the stockholders, that such person is not entitled to indemnification under the standards set forth in Sections 9.1, 9.2, 9.3 or 9.4, as applicable. The right to indemnification or advances as granted by this Article shall be enforceable by the Agent in any court of competent jurisdiction, if the Board or independent legal counsel denies the claim, in whole or in part, or if no disposition of such claim is made within ninety (90) days. The Agent’s expense incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Bank.

Section 9.6 Other Rights and Remedies. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which an Agent seeking indemnification may be entitled under any bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be an agent and shall inure to the benefit of the heirs, executors and administrators of such person. All rights to indemnification under this Article shall be deemed to be provided by a contract between the Bank and the Agent who serves in such capacity at any time while these Bylaws are in effect. Any repeal or modification thereof shall not affect any rights or obligations then existing. This Article is intended to grant the Agents at least as complete and favorable indemnification as is available under the laws of the State of Delaware, and it shall be not be construed to provide less protection to the Agents than as permitted by such laws.

Section 9.7 Insurance. Upon resolution passed by the Board, the Bank may purchase and maintain insurance on behalf of any person who is or was Agent against any liability that may be asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Bank would have the power or obligation to indemnify him or her against such liability under the provisions of this Article.

Section 9.8 Other Enterprises, Fines, Serving at Bank’s Request and Witness Expenses. For purposes of this Article, references to “other enterprise” in Section 9.1 shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the Bank” shall include

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any service as a director, officer, employee, or trustee of the Bank which imposes duties on, or involves services by, such director, officer, employee, or trustee, as a director, officer, or employee of any subsidiary of the Bank or with respect to any employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Bank” as referred to in this Article. Without limiting any of the provisions contained herein, to the extent that the Agent is, by reason of his or her status as Agent, a witness in any Action to which the Agent is not a party, he or she shall be indemnified against all expenses actually and reasonably incurred by him or her in connection therewith.

Section 9.9 Limitation on Liability. No director or officer of the Bank shall be personally liable to the Bank or its stockholders for monetary damages for breach of fiduciary duty as a director or officer (as the case may be), except for liability (i) for any breach of a duty of loyalty to the Bank or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) for any transaction from which the director or officer derived any improper personal benefit.

Section 9.10 Savings Clause. If this Article or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the Bank shall nevertheless indemnify each Agent as to expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit, proceeding or investigation whether civil, criminal or administrative, and whether internal or external, including a grand jury proceeding and an action or suit brought by or in the right of the Bank, to the full extent permitted by any application portion of this Article that shall not have been invalidated, or by any other applicable law.

ARTICLE X

AMENDMENTS

These Bylaws may be amended or repealed or new Bylaws may be adopted only by the affirmative vote of two-thirds (2/3) of the directors seated at the time of such vote. The Board shall, wherever practicable, solicit advisory stockholder comments on proposed Bylaw amendments.

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ARTICLE XI

MISCELLANEOUS

Section 11.1 Fiscal Year. The Bank’s fiscal year shall begin on the first day of January and end on the last day of December of each year.

Section 1.2 Seal. The Seal of the Bank shall be such as shall be adopted and approved by the Board of Directors. The Seal may be affixed by impression, printing, rubber stamp or otherwise.

Section 11.3 Conflict of Interest. The Board shall adopt and publish conflict of interest rules which implement Section 114 of the Bank Act. The rules shall prohibit the Bank directors, officers and employees from participation or action or the use of inside information for personal advantage on any Bank matters and shall provide procedures for enforcement of such rules.

Section 11.4 Eligible Cooperatives. An eligible cooperative is an organization the Bank determines to be eligible under the provisions of Section 105 of the Bank Act and the eligibility policies the Board may adopt from time to time to implement Section 105 of the Bank Act.

Section 11.5 Limitation on Dividends for Eligible Cooperatives. An eligible cooperative shall not pay dividends on membership capital or voting stock at a percentage rate in excess of the rate permitted under its charter or bylaws or by applicable laws of the state of its incorporation; provided that the Board reserves the right to determine and publish from time to time maximum dividend rates payable by eligible cooperatives to which the Bank extends credit.

EX-4.1

Exhibit 4.1

National Cooperative Bank
Rules for Election of Directors

Section 1: Purpose, Distribution. These election rules have been adopted by the National Cooperative Bank’s (“NCB”) Board of Directors (the “Board”) to establish procedures for the conduct of an election to fill vacant stockholder directorships on the Board, in accordance with the National Consumer Cooperative Bank Act and the bylaws of NCB. The results of the election will be announced at the next annual meeting of the Corporation.

The Corporate Secretary shall distribute a copy of these rules to all stockholders of record. Each stockholder of record shall make these rules available to its members if so requested.

Section 2: Election Officer. The Corporate Secretary shall be NCB’s election officer responsible for the conduct of the election and the interpretation of these rules. Subject to final Board review, the Corporate Secretary may designate other NCB officials to assist in the conduct of the election and the Corporate Secretary shall appoint persons outside of NCB to act as independent election tellers or to provide other assistance as will enhance and protect the integrity of the election. All questions regarding these rules and all required correspondence and submissions should be directed to:

Chad Oppenheimer
Corporate Secretary
NCB
2011 Crystal Drive, Suite 800
Arlington, VA 22202

Section 3: Record Date, Stockholder List. December 31, of the year prior to the date of any election or special election shall be the record date for determining stockholders of record entitled to vote. The record date for any run-off election shall be the same record date established under this section for the original election. Upon written request, the Corporate Secretary shall promptly make available a voting list containing the names and addresses of all stockholders of record.

Section 4: Notice of Election.

4.1 Notice. The Corporate Secretary shall give notice of any election to all stockholders of record at least sixty days preceding an election, special election or run-off election. Notice shall be mailed to stockholders of record at the address appearing on the Corporate Secretary’s records. An official ballot, which shall describe the qualifications of nominees and their positions on issues, the date when ballots must be received by NCB, and all other information necessary for participation in the election shall be mailed to stockholders of record no later than thirty days preceding an election.

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     (a) Any stockholder who has failed to provide NCB with a current address for three consecutive years will be considered an inactive member and shall not be considered an eligible participant in the election process.

4.2 Waiver of Notice. Participation by any stockholder in the election shall constitute a waiver by that stockholder of notice of such election, except where the participation is for the express purpose of objecting to the transaction of any business because the election or meeting was not properly called. A written waiver of notice of any election signed by an authorized officer or a stockholder shall be deemed equivalent to giving proper notice to such stockholder.

Section 5: Voting Procedure.

5.1 Proxies, Mail Voting, and Cumulative Voting. Voting by proxy shall not be permitted. Cumulative voting shall not be permitted. Election ballots will be accepted by mail or by electronic method.

5.2 Official Ballot. The Corporate Secretary shall prepare the official ballot for the election and such ballot shall be distributed to all stockholders of record. The official ballot shall include an appropriate form by which stockholders of record may cast their votes for nominees for election. Additional information to describe the qualifications of nominees also will be distributed with the ballot. All votes must be cast on the official ballot in order to be counted. The Corporate Secretary or other officer of the stockholder of record, who is authorized to certify its corporate documents, must certify that votes cast have been duly authorized on behalf of the stockholder of record under its governing rules.

To be counted by the election date, all ballots must be mailed and be received by the Election Teller at a designated address no later than the close of business on April 24, 2009.

5.3 Vote Final, Confidentiality. When the Election Teller receives a ballot, the votes cast by the stockholder shall be final. A ballot cannot be withdrawn or changed if a nominee withdraws or for any other reason. Upon receipt of a duly authorized request from a stockholder of record (certified by its Secretary or other appropriate officer) the Corporate Secretary will provide another official ballot to replace one that has been lost or destroyed.

5.4 Secret Ballot. NCB will conduct the election by a secret ballot process and votes by particular stockholders of record will be kept confidential at all times.

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5.5 Ballot Disqualification.

     Ballot disqualification occurs if:

(a)	Postmarked after midnight of due date;
(b)	Hand-delivered to Election Teller;
(c)	Not properly certified; and
(d)	Stockholders vote for more than four (4) candidates.

Section 6.1: Vacancies. The Board and the stockholders of record will nominate persons to fill vacant stockholder directorships that have been created by the expiration of the term of a director, by resignation or otherwise, under the Bank Act and the bylaws. Nominations may be made of persons from the following classes of cooperatives: (a) housing, (b) consumer goods,(c) low-income cooperatives, (d) consumer services, and (e) all other eligible cooperatives. All nominees shall be selected by the Board and/or the stockholders as described in subsection 6.2 and 6.3 respectively, and nominees must meet the qualifications set forth in subsection 6.4. Nominations and the election shall be conducted in a manner that will ensure, at all times, that there shall be at least one but no more than three directors representing each of the following classes of cooperatives: housing, consumer goods, low-income cooperatives, consumer services, and all other eligible cooperatives.

6.2 Board Nominations. The Board shall, upon recommendation of the chairman, elect a Corporate Governance Committee, which shall by a majority vote, nominate persons for election to fill vacant stockholder directorships. No person other than an NCB director shall serve on the Corporate Governance Committee. The Corporate Governance Committee shall solicit advice and recommendations from stockholders of record, the cooperative community, and other sources in its consideration of potential nominees. The Corporate Governance Committee shall by a majority vote select at least two (2) nominees for each vacant stockholder directorship. Nominees may present a statement of qualifications and issues to be distributed with the official ballot. Such nominees shall be listed on the official ballot, but shall not receive any preferential treatment or special use of the Bank’s resources. Statements of qualifications and issues and other materials distributed by a nominee may not use the NCB logo or confusingly similar logo and may not state or imply that NCB supports or endorses such nominee. Any elected director who has served two consecutive three-year terms shall not be eligible for re-nomination by the Corporate Governance Committee for two years after completion of the consecutive terms and shall not begin service for the new term for three years after completion of the original consecutive terms. The list of persons nominated by the Board shall be mailed to all stockholders of record with the official notice of the election.

6.3 Stockholder Nominations. In addition to the nominees selected by the Corporate Governance Committee under subsection 6.2, other persons may be nominated to fill vacant stockholder’s directorships and may be listed on the official ballot under this subsection. To qualify for the official ballot, such persons must receive support for their

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nomination from at least fifteen percent (15%) of the stockholders of record. Stockholder nominees must obtain resolutions of support (on a form to be provided by NCB) from the required number of stockholders. Such resolutions must be compiled by potential nominees and received by NCB no later than 45 days prior to the election date. The Corporate Secretary will promptly verify the qualifications of persons receiving the required support and will promptly notify all persons seeking nomination under this subsection, whether or not their efforts were successful.

Stockholder nominees also may submit a statement of qualifications and issues to be distributed with the official ballot. Statements of qualifications and issues and other materials distributed by a nominee may not use the NCB logo or confusingly similar logo and may not state or imply that NCB supports or endorses such nominee.

6.4 Qualifications.

6.4.1 Each nominee for a shareholder directorship of a particular class shall have at least three years experience as a director or senior officer in the class of cooperatives to be represented. Each nominee shall currently be associated with a voting stockholder of NCB. Each nominee shall be required to designate the particular class of cooperative, which he or she is qualified to represent. No nominee shall be allowed to run to fill vacancies in more than one class of cooperative. Further requirements are as follows:

     (a) Loans outstanding from NCB must be in good standing.

     (b) A nominee who qualified through a management position must also have demonstrated experience as a Board director.

     (c) A nominee shall have business experience in at least one of the following fields: finance, marketing, operations, or economic development.

     (d) Except for requirements in the Bank Act, the Corporate Governance Committee may make exceptions to these qualifications at its discretion.

6.4.2 All nominees shall submit (on a form provided by NCB) such information as NCB deems necessary to verify that the nominee has the required experience.

6.4.3 No NCB employee shall be qualified for nomination until three (3) years after the date such employee’s employment with NCB was terminated. If NCB determines that any nominee does not meet these qualifications, the Corporate Secretary shall report the reasons for such failure to the Board.

6.4.4 Each nominee will be required to file with the Ethics Official of NCB (on a form to be provided) and make public, a statement of the nominee’s financial interests and positions, if any, in any corporation, trust, partnership, or cooperative organization in which such nominee holds a substantial financial interest or holds a position as a Board member or senior officer, the activity of which organization might be relevant to, be competitive with, or be inconsistent with the objectives of NCB.

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6.4.5 Subject to review by the Corporate Governance Committee, the Corporate Secretary shall determine the validity of documentary evidence submitted in support of a nomination as outlined in Section 6.4.2. Nominations to fill vacancies on the Board of Directors will not be accepted from the floor at any annual or special meeting of stockholders.

Section 7: Election of Directors.

7.1 Election Order. The election shall be decided based on a plurality of votes cast by the stockholders of record who participate in the election. Directors shall be elected to fill available vacancies in the particular class for which the director is nominated and to the extent vacancies exist (see section 6.1). In the event two nominees are seeking election to a single board seat within a particular class, the nominee receiving the greatest number of votes will be elected. The unsuccessful nominee will not be considered for a seat on the Board.

7.2 Voting Power. For each election or run-off election, only stockholders of record shall be entitled to vote, but only as provided in this section. Each stockholder of record shall be entitled to cast votes for the number of nominees equal to the number of vacancies to be filled in the election or run-off election. A stockholder of record shall not be required to vote for each vacancy but may only vote once for each nominee.

7.3 Definitions. For purposes of these rules, the following definitions shall apply:

     (a) “borrowing-stockholder” shall mean any stockholder of record who has a loan outstanding from NCB at any time during the patronage period;

     (b) “non-borrower-stockholder” shall mean a stockholder of record who holds Class C stock not connected with a loan and/or any former borrower, who fully paid off loans in the calendar year preceding the patronage period;

     (c) For the purpose of voting, “patronage” shall mean the amount of interest paid to NCB, including interest paid on loans originally made by NCB which have been sold and which NCB is now servicing, and loan fees, including commitment, origination, line and letter of credit fees, paid by a current borrower during a given year;

     (d) “patronage period” shall mean the calendar year preceding the election year; and

     (e) “developing cooperative” shall mean a borrower-stockholder that is chartered on a cooperative basis and determined to be an eligible cooperative while at a developmental stage of operation and does not presently have members who are identified as ultimate consumers (or primary producers) of the goods, services and facilities provided but that, at some definite time in the future, will be controlled by and provide services to ultimate consumers (or primary producers).

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7.4 Allocations. Except as otherwise limited in this section:

     (a) Each borrower-stockholder of record shall be entitled to at least five (5) votes, except as provided under Section 7.4(e);

     (b) Each borrower-stockholder of record shall be entitled to additional votes which shall be allocated based on the proportion a particular borrower-stockholder’s patronage bears to patronage in that stockholder’s portfolio category, calculated during the patronage period which, for example, results in the following allocation:

Member Patronage	Votes
.1% — .5%	5
.6 — 1.0%	10
1.1% — 1.5%	15
1.6% — 2.0%	20
2.1% — 2.5%	25
2.6% — 3.0%	30
3.1% — 3.5%	35
3.6% — 4.0%	40
4.1% — 4.5%	45
4.6% — 5.0%	50
5.1% — 5.5%	55
5.6% — 6.0%	60
6.1% — 6.5%	65
6.6% — 7.0%	70
7.1% — 7.5%	75
7.6% — 8.0%	80
8.1% — 8.5%	85
8.6% — 9.0%	90
9.1% — 9.5%	95
9.6% — 10.0%	100
10.1% — 10.5%	105
10.6% — 11.0%	110
11.1% — 11.5%	115
11.6%	120

     (c) Each non-borrower stockholder shall be entitled to at least one vote and the non-borrower stockholder voting class shall receive a minimum of 10% of the outstanding votes allocated;

     (d) Notwithstanding any of the foregoing additional allocations of votes that would otherwise be applied to the vote of a stockholder of record, no stockholder of record shall be entitled to more than five percent (5%) of the total votes allocated to all voting stockholders of record; no stockholder of record that is a developing cooperative

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shall receive more than five (5) votes; and the total votes allocated to any one portfolio class of stockholders shall not exceed forty-five percent (45%) of the total number of votes allocated; and

     (e) The Board reserves the right to adjust the allocations of votes described in this section in order to preserve the voting balance among NCB’s stockholders of record required by the Bank Act.

7.5 Limited Voting Power—Delinquent Borrowers. NCB shall refuse to allocate additional votes on the basis of interest or fees relative to any borrower-stockholder which as of the record date is more than ninety (90) days past due under (i) any agreement between the member and NCB or NCBFSB or (ii), if a borrower-stockholders vote allocation is based in whole or in part upon one or more eligible transactions between NCB or NCBFSB with one or more of the member’s members (a “Retail Member”) under NCB’s member finance program, any agreement between the Retail Member and NCB or NCBFSB or (iii) if borrower-stockholders vote allocation is based in whole or in part upon one or more eligible transactions between NCB or NCBFSB with one or more subsidiaries of the member, any agreement between such subsidiary and NCB or NCBFSB.

Section 8. Run-off Election. If there is a tie vote and, as a result, vacancies remain in stockholder directorships after the procedures described in this section are followed, the Board shall fix a date for a run-off election. Such election shall be held not later than sixty (60) days from the original election date. The Corporate Secretary shall issue notice of the run-off election and an official ballot for the election in accordance with Section 4 and Section 5 of these rules, respectively. The official ballot for the run-off election shall include only the names of those nominees who tied on the original ballot and are qualified to fill remaining vacancies. In a run-off election, the qualified nominee receiving the highest number of votes cast for each vacancy in a particular class shall be elected.

Section 9. NCB Employee Participation. NCB employees shall not solicit votes, campaign for nominees, or use employment with NCB in any other manner to influence the outcome of any nomination or election under these rules. Violation of this section may lead to disciplinary action or termination of employment under NCB’s Code of Conduct. Nothing in this section shall be construed to prevent NCB employees from having legitimate communications with nominees, stockholders or directors as a result of their official job responsibilities.

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EX-10.3

Exhibit 10.3

DEFERRED COMPENSATION AGREEMENT
WITH CHARLES E. SNYDER

This Deferred Compensation Agreement (“Agreement”) was entered into as of the 4th day of November 1994, by and between the National Consumer Cooperative Bank, a corporation organized under the laws of the United States (“the Bank”) and Charles E. Snyder, a resident of Virginia. This Agreement is restated effective as of January 1, 2009 to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder and will be administered in good faith compliance with Section 409A and the regulations thereunder between January 1, 2005 and December 31, 2008.

Mr. Snyder has been employed by the Bank as its President since January, 1992, prior to which he was Chief Financial Officer. During the period of his presidency, the Bank’s financial condition and results operations have improved from prior periods and have been very satisfactory, and the Bank desires to provide incentives for Mr. Snyder’s continued service as its President.

It is hereby agreed as follows:

1. The Bank agrees to continue to employ Mr. Snyder as its President, and Mr. Snyder agrees to continue to serve the Bank in that capacity until such employment is terminated by the Bank in accordance with the terms of his Amended and Restated Employment Agreement, dated December 12, 2008 (the “Employment Agreement”).

2. Salary paid by the Bank pursuant to the Employment Agreement and bonuses paid by the Bank pursuant to the Bank’s Executive Management Short Term Incentive Plan (“STIP”) may be deferred by Mr. Snyder pursuant to the instant Agreement. Compensation deferred under the instant Agreement will be payable as provided in paragraphs 3 and 4 hereof.

3. The Bank, on December 31 of each full year during which Mr. Snyder is employed with the Bank, shall credit to an account (“the Deferred Compensation Account”) the amount determined pursuant to subparagraph (f), below (“the Annual Credit”). The Deferred Compensation Account shall be established and maintained, by agreement between Mr. Snyder and the Bank, in accordance with either subparagraph (a), (b) or (c) of this paragraph.

(a) The Deferred Compensation Account may be established and maintained by the Bank’s crediting a book reserve account with (i) each Annual Credit, and (ii) on the last day of each calendar quarter, an amount (“the Quarterly Credit”) equal to interest upon the total amount previously credited to the Deferred Compensation Account. Interest for purposes of a Quarterly Credit shall be computed at a rate equal to 100 basis points in excess of the yield on a five year U.S. Treasury Note with a maturity date on or nearest to the date of such Quarterly Credit, as reported in the Wall Street Journal or similar publication.

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(b) The Deferred Compensation Account may be established and maintained by the Bank’s depositing each Annual Credit in an interest-earning deposit account at a federally insured financial institution selected by the Bank, which account shall be in the name of and shall remain the property of the Bank. The Bank shall use its best efforts to obtain a yield upon such account at least equal to that stated in subparagraph (a) hereof. All interest credited to such deposit account shall become part of the Deferred Compensation Account.

(c) The Bank may establish an irrevocable trust with a third-party trustee, pursuant to Rev. Proc. 92-64 issued by the Internal Revenue Service, to provide for all or a portion of the Bank’s obligations hereunder. The assets of such trust shall be held and invested in accordance with the terms of such trust. The assets of any such trust, however, shall remain available to satisfy the claims of the Corporation’s general creditors. Mr. Snyder’s rights to those assets will be limited to the rights of a general creditor of the Bank. Neither Mr. Snyder, his spouse, or any beneficiary of Mr. Snyder may in any manner encumber, pledge, assign, transfer or dispose of the right to receive any payment under this Agreement or from any Trust established pursuant hereto.

(d) The Bank shall, promptly after the end of each calendar quarter, provide or cause to be provided to Mr. Snyder a statement of the balance contained in the Deferred Compensation Account as of the end of such quarter and of the current yield on such Account for such quarter.

(e) The Deferred Compensation Account, whether established and maintained in accordance with subparagraph (a), (b), or (c) above, shall in no event be considered as a trust or escrow account for Mr. Snyder or his Beneficiary or as creating a claim by Mr. Snyder or such Beneficiary against, or any property interest in, any specific assets of the Bank, including, without limitation, any assets maintained in such Account.

(f) Prior to January 1 of each year, Mr. Snyder will advise the Bank in writing of the amount or percentage of his salary and STIP award for the following year that shall be defined as the Annual Credit for such year. In the absence of timely receipt by the Bank of such advice from Mr. Snyder, the amount of the Annual Credit for a year shall be zero.

4. On the 30^th day after the date of Mr. Snyder’s termination of employment with the Bank and its subsidiaries that constitutes a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code with the Bank, and on the same date in each of the succeeding four years, the Bank shall make equal annual payments to Mr. Snyder of deferred compensation from the Deferred Compensation Account. Each annual payment shall be calculated by dividing the unpaid balance in the Deferred Compensation Account by the remaining number of unpaid installments. Such series of five annual installment payments shall be treated as a single payment for purposes of Section 409A(a)(4)(C) of the Internal Revenue Code, and Mr. Snyder may instead elect a lump sum payment of the deferred

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compensation account balance, provided that such election complies with the requirements of such Section 409A(a)(4)(C). In the event of Mr. Snyder’s death prior to commencement of his payments hereunder, the balance in the Deferred Compensation Account shall be paid to his beneficiary on the 60^th day after his death. In the event of Mr. Snyder’s death after the commencement but prior to the completion of his payments hereunder, his beneficiary shall continue to receive the installment payments as previously scheduled until the entire benefit has been paid. Notwithstanding anything to the contrary in this Paragraph 4, however, if Section 409A(a)(2)(B)(i) of the Code applies to this Agreement at the time when Mr. Snyder would otherwise commence receiving a distribution under this Paragraph 4 and Mr. Snyder is a “specified employee” within the meaning of such Section 409A(a)(2)(B)(i), then to the extent required by such Section 409A(a)(2)(B)(i), any payments otherwise due during the six-month period immediately following Mr. Snyder’s termination of employment shall not be paid during such six-month period but shall be paid on the first business day that occurs six months following his termination of employment.

5. For purposes of this Agreement, Mr. Snyder’s Beneficiary shall be the person or persons designated by Mr. Snyder from time to time as his Beneficiary hereunder on forms provided by the Bank; provided that, if no effective form is on file with the Bank’s personnel office, or if the designated beneficiary or beneficiaries predecease Mr. Snyder or fail to survive the payment dates hereunder, the Beneficiary shall be deemed to be Mr. Snyder’s estate. Any designation of Beneficiary hereunder may be changed without the consent of any prior Beneficiary.

6. The right of Mr. Snyder or any other person to the payment of deferred compensation hereunder shall not be assigned, transferred, pledged, or encumbered except by testamentary instrument or by the laws of descent and distribution. Any attempted assignment, transfer, encumbrance or attachment of any rights hereunder shall be null and void.

7. Any deferred compensation payable under this Agreement shall not be deemed salary or other compensation to Mr. Snyder for the purpose of computing benefits to which he may be entitled under any pension plan or other arrangement of the Bank for the benefit of its employees.

8. This Agreement shall be binding upon and inure to the benefit of the Bank, its successors and assigns and Mr. Snyder, his heirs, executors and administrators. The parties hereto may, by a writing executed by them, amend or modify this Agreement without the consent of any other person.

9. This Agreement shall be construed in accordance with and governed by the laws of the District of Columbia. It may be revoked or modified in whole or in part only by a writing signed by the parties hereto.

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In Witness Whereof the Bank has caused this amended Agreement to be duly executed and Mr. Snyder has duly executed this Agreement effective January 1, 2009.

NATIONAL CONSUMER COOPERATIVE BANK
By:
	Name:	Irma Cota
	Title:	Chairman of the Board

Charles E. Snyder 

EX-10.5

Exhibit 10.5

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

between

NATIONAL CONSUMER COOPERATIVE BANK

and

CHARLES E. SNYDER

TABLE OF CONTENTS

1.	Employment		1
2.	Position and Duties		1
3.	Compensation		2
4.	Termination of Employment		2
	(a)	Involuntary Termination Other Than For Cause, Disability or Death (Including Good Reason Termination)	2
	(b)	Unilateral Voluntary Resignation	4
	(c)	Disability	5
	(d)	Death	6
	(e)	Other Termination	6
	(f)	Full Discharge of Company Obligations	6
	(g)	Specified Employee	7
	(h)	Employee Benefit Plans	7
	(i)	Definitions	8
5.	Special Covenants of Executive		9
	(a)	Noncompetition	10
	(b)	Consultation	10
	(c)	Definition	10
6.	Arbitration		10
7.	Miscellaneous		11
	(a)	Survival	11
	(b)	Binding Effect	11
	(c)	Assignment	11
	(d)	Entire Agreement	11
	(e)	Amendments	12
	(f)	Headings	12
	(g)	Counterparts	12
	(h)	Governing Law	12
	(i)	Section 409A	12
Form of Release

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AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This AMENDED AND RESTATED EMPLOYMENT AGREEMENT, initially effective as of April 16, 1996 (the “Agreement”), is by and between NATIONAL CONSUMER COOPERATIVE BANK (the “Bank”), and CHARLES E. SNYDER, a resident of Virginia. This Agreement is amended and restated effective as of the date set forth below.

Recitals:

     A. Mr. Snyder has been employed by the Bank as its President and Chief Executive Officer since January 1992, and previously was the Bank’s Chief Financial Officer;

     B. The Bank believes that Mr. Snyder is a key employee of the Bank and that it is in the Bank’s best interests to retain the services of Mr. Snyder;

     C. The Bank therefore desires to continue this Agreement embodying the terms of such employment;

     D. Mr. Snyder desires to continue his employment with the Bank and to continue this Agreement;

     E. The Bank and Mr. Snyder have amended the original Agreement and desire to further amend the Agreement to comply with the requirements of Section 409A of the Internal Revenue Code, as amended (the “Code”), to modify the benefits to which Mr. Snyder is entitled upon his termination of employment and to otherwise clarify the terms of the Agreement; and

     F. For their convenience, the Bank and Mr. Snyder desire to restate in a single document the Agreement as initially effective as of April 16, 1996 and as amended and restated as of the date set forth below.

Agreements:

     In consideration of the premises and the mutual covenants herein contained, the Bank and Mr. Snyder hereby agree as follows:

     1. Employment. The Bank shall continue to employ Mr. Snyder and Mr. Snyder agrees to remain employed by the Bank under the terms of this Agreement until such employment is terminated by either party as provided in this Agreement.

     2. Position and Duties. During the term of his employment, Mr. Snyder shall serve as President and Chief Executive Officer of the Bank. Mr. Snyder shall devote all of the time, attention, skill and efforts to the performance of his duties for and on behalf of the Bank and its

subsidiaries as is customary for a Chief Executive Officer of a financial institution of the size of the Bank and such subsidiaries.

     3. Compensation. During the term of his employment, the Bank shall pay Mr. Snyder a base salary at the rate determined by the Board of Directors of the Bank. Additionally, during the term of his employment, Mr. Snyder shall receive such incentive compensation and related employee benefits as the Board of Directors of the Bank may reasonably determine, from time to time.

     4. Termination of Employment¹

          (a) Involuntary Termination Other Than For Cause, Disability or Death (Including Good Reason Termination). In the event of termination of Mr. Snyder’s employment by the Bank for any reason other than (i) Termination For Cause, (ii) Disability or (iii) death, the Bank shall provide to Mr. Snyder thirty (30) days advance written notice of such termination. In the event of a Good Reason Termination, Mr. Snyder shall provide to the Bank thirty (30) days advance written notice of such termination.

          In the absence of any breach of the terms of this Agreement, the following benefits shall be payable to Mr. Snyder upon his involuntary termination of employment by the Bank (including Good Reason Termination but not including termination by reason of Disability or death, or Termination for Cause), provided that such termination constitutes a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code:

     (i) Accrued Compensation, Vacation and Sick Leave. Mr. Snyder shall be paid his earned salary and accrued but unused vacation and sick leave through the date on which his termination occurs. Payment shall be made in a lump sum on the 30th day following the date of his termination. Upon termination, Mr. Snyder shall immediately cease to accrue vacation and sick leave.

     (ii) Salary Continuation. The Bank shall provide to Mr. Snyder his Base Salary at the Effective Rate for a period of twenty-four (24) months following the date on which his termination occurs, payable in accordance with the Bank’s normal payroll practices. The benefits described in this Section 4(a)(ii) shall be treated as a single payment for purposes of Section 409A(a)(4)(C) of the Code and Mr. Snyder and the Bank may mutually agree to a

¹ The capitalized terms used in Article 4 that are not elsewhere defined are defined in Section 4(i) below.

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lump sum payment if such agreement is made in the time and manner required by Section 409A(a)(4)(C) of the Code.

     (iii) Benefit Continuation. The Bank shall provide to Mr. Snyder the medical, dental and life insurance benefits offered by the Bank to active employees for a period of twenty-four (24) months following the date on which his termination occurs, except that with respect to medical benefits, beginning on the date that Mr. Snyder becomes Medicare-eligible, Medicare (parts A, B and D) shall be primary and the Bank’s medical plan shall be secondary. To receive this coverage, Mr. Snyder shall pay the employee portion of the premiums, and the Bank shall pay the employer portion of the premiums during this period. For purposes of Section 4980B(f)(3) of the Code and Section 603 of ERISA, the “qualifying event” with respect to Mr. Snyder shall be deemed to occur on the date upon which such coverage ceases pursuant to this Section 4(a)(iii).

     (iv) Qualified Plan Amounts. In lieu of the employer contributions to the Bank’s qualified retirement plans that, but for Mr. Snyder’s termination, would have been allocated to Mr. Snyder’s qualified retirement plan account(s) for the six-month period following his termination, the Bank shall pay to Mr. Snyder, on the 60th day following the date of his termination, a lump sum payment equal to six (6) percent of the lesser of Mr. Snyder’s Base Salary at the Effective Rate or the dollar limit imposed by Section 401(a)(17) of the Code for the year of termination.

     (v) Modification of Benefits. The benefits described in Sections 4(a)(ii) — (iv) shall be modified as of the effective date of Mr. Snyder’s employment in a New Executive Position. If such New Executive Position has a salary plus bonus or similar incentive compensation (the “New Compensation”) equal to at least 90 percent of Mr. Snyder’s Base Salary at the Effective Rate plus his average bonus under the Executive Management Short Term Incentive Plan for the five fiscal year average preceding the year in which his employment at the Bank terminated (“Old Compensation”), then the benefits set forth in Sections 4(a)(ii) — (iv) shall terminate. If the New Compensation equals less than 90 percent of such Old Compensation, then such benefits shall be reduced to an amount that, combined with the New Compensation, shall equal 90 percent of the Old Compensation.

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          (b) Unilateral Voluntary Resignation. Mr. Snyder agrees to provide six (6) months’ advance written notice to the Bank of any Unilateral Voluntary Resignation. In the absence of any breach of the terms of this Agreement, the following benefits shall be payable to Mr. Snyder upon his Unilateral Voluntary Resignation:

     (i) Accrued Compensation, Vacation and Sick Leave. Mr. Snyder shall be paid his earned salary and accrued but unused vacation and sick leave through the date on which his Unilateral Voluntary Resignation is effective. Payment shall be made in a lump sum on the 30th day following such effective date. Mr. Snyder shall cease to accrue vacation and sick leave immediately upon the effective date of his Unilateral Voluntary Resignation.

     (ii) Salary Continuation. The Bank shall provide to Mr. Snyder his Base Salary at the Effective Rate for a period of twelve (12) months following the effective date of his Unilateral Voluntary Resignation, payable in accordance with the Bank’s normal payroll practices. The benefits described in this Section 4(b)(ii) shall be treated as a single payment for purposes of Section 409A(a)(4)(C) of the Code and Mr. Snyder and the Bank may mutually agree to a lump sum payment if such agreement is made in the time and manner required by Section 409A(a)(4)(C) of the Code.

     (iii) Benefit Continuation. The Bank shall provide to Mr. Snyder the medical, dental and life insurance benefits offered by the Bank to active employees for a period of twelve (12) months following the date on which his Unilateral Voluntary Resignation becomes effective, except that with respect to medical benefits, beginning on the date that Mr. Snyder becomes Medicare-eligible, Medicare (parts A, B and D) shall be primary and the Bank’s medical plan shall be secondary. To receive this coverage, Mr. Snyder shall pay the employee portion of the premiums, and the Bank shall pay the employer portion of the premiums during this period. For purposes of Section 4980B(f)(3) of the Code and Section 603 of ERISA, the “qualifying event” with respect to Mr. Snyder shall be deemed to occur on the date upon which such coverage ceases pursuant to this Section 4(b)(iii).

     (iv) Modification of Benefits. The benefits described in Sections 4(b)(ii) and (iii) shall be modified as provided in Section 4(a)(v) of this Agreement as of the effective date of Mr. Snyder’s employment in a New Executive Position.

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          (c) Disability. This Agreement shall terminate immediately upon the termination of Mr. Snyder’s employment by reason of his Disability (provided that such termination of employment constitutes a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code).

          In the absence of any breach of the terms of this Agreement, the following benefits shall be payable to Mr. Snyder upon termination of his employment by reason of his Disability:

     (i) Accrued Compensation, Vacation and Sick Leave. Mr. Snyder shall be paid his earned salary and accrued but unused vacation and sick leave through the date on which his termination by reason of his Disability occurs. Payment shall be made in a lump sum on the 30th day following the date of his termination. Mr. Snyder shall cease to accrue vacation and sick leave immediately upon his termination.

     (ii) Salary Continuation. The Bank shall provide to Mr. Snyder his Base Salary at the Effective Rate for a period of twenty-four (24) months following the date on which his termination occurs by reason of his Disability, payable in accordance with the Bank’s normal payroll practices.

     (iii) Benefit Continuation. The Bank shall provide to Mr. Snyder the medical, dental and life insurance benefits offered by the Bank to active employees for a period of twenty-four (24) months following the date on which his employment with the Bank terminates by reason of his Disability, except that with respect to medical benefits, beginning on the date that Mr. Snyder becomes Medicare-eligible, Medicare (parts A, B and D) shall be primary and the Bank’s medical plan shall be secondary. To receive this coverage, Mr. Snyder shall pay the employee portion of the premiums, and the Bank shall pay the employer portion of the premiums during this period. For purposes of Section 4980B(f)(3) of the Code and Section 603 of ERISA, the “qualifying event” with respect to Mr. Snyder shall be deemed to occur on the date upon which such coverage ceases pursuant to this Section 4(c)(iii).

     (iv) Qualified Plan Amounts. In lieu of the employer contributions to the Bank’s qualified retirement plans that, but for Mr. Snyder’s termination, would have been allocated to Mr. Snyder’s qualified retirement plan account(s) for the six-month period following his termination, the Bank shall pay to Mr. Snyder, on the 60th day following the date of his termination, a lump sum payment equal to

5

six (6) percent of the lesser of Mr. Snyder’s Base Salary at the Effective Rate or the dollar limit imposed by Section 401(a)(17) of the Code for the year of termination.

     (v) Other Disability Benefits. In the event that, at the date of termination by reason of Disability, the Bank has in effect any other plan providing disability benefits that (A) covers a substantial number of Bank employees, (B) was established before Mr. Snyder became Disabled and (C) pays Mr. Snyder bona fide disability pay within the meaning of Treas. Reg. § 1.409A-1(a)(5), then to the extent permitted by Treas. Reg. § 1.409A-3(i)(1)(ii), amounts due under this Section 4(c) shall be reduced on a dollar-for-dollar basis by the amount of such bona fide disability pay received or receivable under such plan.

     (vi) Modification of Benefits. In the event that, after his termination of employment with the Bank by reason of Disability, Mr. Snyder obtains employment in a New Executive Position, the benefits described in Sections 4(c)(ii) — (iv) shall be modified as provided in Section 4(a)(v) of this Agreement as of the effective date of Mr. Snyder’s employment in a New Executive Position.

          (d) Death. This Agreement shall terminate immediately upon the death of Mr. Snyder while he is employed by the Bank. In the absence of any breach of the terms of this Agreement, the Bank shall provide to Mr. Snyder’s designated beneficiary or, in the absence of such designation, to his estate, Mr. Snyder’s earned salary and accrued but unused vacation and sick leave through the date of his death in a lump sum on the 30th day following the date of his death.

          (e) Other Termination. In the event of Mr. Snyder’s Termination for Cause, or other termination of employment with the Bank that constitutes a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code but does not entitle him to benefits under Sections 4(a), (b), (c), or (d) above, Mr. Snyder shall be paid his earned salary and accrued but unused vacation and sick leave through the date on which his termination is effective. Payment shall be made in a lump sum on the 30th day following his termination. Mr. Snyder shall cease to accrue vacation and sick leave immediately upon the effective date of his termination.

          (f) Full Discharge of Company Obligations. The amounts payable to Mr. Snyder pursuant to this Section 4 shall be in full and complete satisfaction of Mr. Snyder’s rights under this Agreement and any other claims he may have in respect of his employment

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by the Bank. Such amounts shall constitute liquidated damages with respect to any and all such rights and claims, and, upon Mr. Snyder’s receipt of such amounts, the Bank and all Releasees (as such term is defined in the Release attached hereto) shall be released and discharged from any and all liability to Mr. Snyder in connection with this Agreement or otherwise in connection with Mr. Snyder’s employment with the Bank as provided in the Release attached hereto. Notwithstanding anything else contained herein to the contrary, (i) the Bank’s obligations under this Section 4 are expressly conditioned upon the execution and nonrevocation of a general release and waiver by Mr. Snyder, substantially in the form attached hereto, of any claims he may have in connection with the termination of, or arising out of, his employment with the Bank (the “General Release”) and (ii) nothing in this Section 4(f) shall be construed to waive, release or otherwise limit any amounts required to be paid hereunder or any benefits due and payable to Mr. Snyder under the terms of any employee pension benefit plan, as defined in Section 3(2) of ERISA. In the event that Mr. Snyder has not executed the General Release or the period for revoking the General Release has not expired by the 60th day following his termination under Section 4(a), (b) or (c), any salary and benefit continuation to which Mr. Snyder is entitled pursuant to Sections 4(a)(ii), (iii) and (iv), 4(b)(ii) and (iii) or 4(c)(ii), (iii) and (iv), as the case may be, shall immediately cease and Mr. Snyder shall be required to repay to the Bank any salary continuation payments that have been made to him.

          (g) Specified Employee. Notwithstanding anything to the contrary in this Section 4, if Section 409A(a)(2)(B)(i) of the Code applies to this Agreement at the time when Mr. Snyder would otherwise commence receiving a benefit under this Section 4 and Mr. Snyder is a “specified employee” within the meaning of such Section 409A(a)(2)(B)(i), then to the extent required by such Section 409A(a)(2)(B)(i), any payments otherwise due during the six-month period immediately following Mr. Snyder’s separation from service (within the meaning of Section 409A(a)(2)(A)(i) of the Code) shall not be paid during such six-month period but shall be paid on the first business day that occurs six months following his separation from service. During such six-month period, interest on any salary continuation payments otherwise due shall accrue at the rate specified in the National Consumer Cooperative Bank Deferred Compensation Plan.

          (h) Employee Benefit Plans. Mr. Snyder shall only be entitled to the continued medical, dental and life insurance benefits described in Sections 4(a)(iii), (b)(iii) and (c)(iii) herein to the extent that the Bank continues to offer such benefits to active employees. All benefits are subject to the terms of the plans and insurance policies

7

governing such benefits, as may be amended from time to time by the Bank or by the insurance provider. The Bank reserves the right to amend or terminate all employee benefit plans, programs, and arrangements at any time.

          (i) Definitions. For purposes of this Section 4, capitalized terms have the following meanings:

     (i) “Base Salary at the Effective Rate” means Mr. Snyder’s base salary as in effect on the date of his termination of employment, or, in the event that his salary has been reduced within 60 days prior to termination, his salary in effect immediately prior to such reduction.

     (ii) “Disability” means that Mr. Snyder has been determined by the Executive Committee of the Board of Directors of the Bank to be eligible for benefits under the Bank’s short-term disability policy and he has received benefits under the Bank’s short-term disability policy for a period of ninety (90) days.

     (iii) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     (iv) “Good Reason Termination” means termination, resulting from a material diminution in Mr. Snyder’s responsibilities, the powers of his position or his salary or related compensation items, that constitutes a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code. For purposes hereof, “material diminution” means (A) with respect to aggregate compensation, a reduction of at least 10 percent that is not accompanied by a substantially identical reduction in the aggregate compensation of all or substantially all other officers at or above the level of vice president and (B) with respect to responsibilities or powers, a change in organizational structure under which any division or senior officer reporting to Mr. Snyder would no longer do so; the employment by the Bank of any senior officer over the written opposition of Mr. Snyder; a decision by the Bank to enter a new or abandon an existing product market over the written opposition of Mr. Snyder; or the adoption or rejection by the Bank, over the written opposition of Mr. Snyder, of any substantial action that could reasonably be expected to have a material impact upon the financial condition of the Bank or the results of its operations.

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     (v) “New Executive Position” means a position as an executive officer of a financial institution, manufacturing, sales or service corporation, or any other commercial or professional organization.

     (vi) “Termination For Cause” means the Bank’s termination of Mr. Snyder’s employment, which constitutes a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code, based upon the Bank’s reasonable belief, after the exercise of due diligence, that Mr. Snyder (A) consistently has failed to perform substantial duties of his position, (B) consistently has performed substantial duties of his position in a grossly negligent manner, or (C) has been guilty of bad faith or willful misconduct in performing or failing to perform substantial duties of his position and has failed to correct any such condition identified in subsections (A), (B) or (C) above, within a reasonable time after written notice by the Bank to Mr. Snyder of such condition; or (D) has been convicted of a misdemeanor that causes material injury to the business or financial condition of the Bank; or (E) has been convicted of a felony; or (F) has been the subject of an information or indictment charging a felony (provided, that he shall be entitled to reinstatement, if requested, in the event no conviction is entered). For purposes hereof, “conviction” and “convicted” mean a final judgment on a verdict or finding of guilty, a plea of guilty, or a plea of nolo contendere. In the event that Mr. Snyder knows or reasonably should know that the Bank is planning to terminate him for Cause as defined herein and, prior to such Termination For Cause he voluntarily resigns, Mr. Snyder will be treated as though he was Terminated For Cause. This Agreement shall terminate immediately upon Mr. Snyder’s Termination for Cause.

     (vii) “Unilateral Voluntary Resignation” means Mr. Snyder’s written notice of resignation from his position as President and Chief Executive Officer of the Bank, that constitutes a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code, for reasons (A) other than a reasonable belief of Mr. Snyder that the Bank desires that he resign and (B) that do not satisfy the requirements of a Good Reason Termination.

     5. Special Covenants of Executive. In order to receive the benefits described in Section 4 of this Agreement, Mr. Snyder must comply with the covenants set forth in Sections 5(a) and (b) below. In the event that Mr. Snyder breaches either of these covenants when he is receiving or has received benefits pursuant to Section 4, such benefits shall cease immediately

9

and the Bank may pursue such other remedies in law or equity as it may deem appropriate to recover amounts paid pursuant to Section 4.

          (a) Noncompetition. Mr. Snyder agrees, during the period of three (3) years beginning on the date of termination of his employment (the “Restricted Period”) (a) not to acquire a substantial ownership interest in or to become employed by any entity, or to act on behalf of any entity as an independent contractor, in any form that is reasonably determined to be in direct competition with the Bank, including, without limitation, the providing or arranging of blanket loans to housing cooperatives or the public or private securitization thereof or the securitization of loans in a manner similar to the Bank’s Capital Markets Assurance Corporation (“Cap Mac”) securitization; (b) not to entice or induce any officer of the Bank to leave the Bank for the purpose of engaging in a business that is or will become a direct competitor of the Bank; and (c) not to divulge trade secrets or any other confidential information of material significance to the Bank’s business operations.

          (b) Consultation. During the Restricted Period Mr. Snyder agrees to provide consulting services to the Bank, at the specific reasonable written requests of the Bank, for a period of no more than fifteen (15) days (or portions thereof) per year, relating to matters as to which he devoted significant amounts of his attention during the period of his service at the Bank; and, after the Restricted Period, Mr. Snyder will provide reasonable cooperation and consultation with respect to any governmental investigation or any litigation arising out of matters to which he devoted significant amounts of his attention during the period of his service at the Bank; provided that such consulting services shall not require that Mr. Snyder travel outside the Greater Washington, D.C. Metropolitan area and provided further, that such consulting services need not be performed by Mr. Snyder during regular business hours of the Bank or at the offices of the Bank.

          (c) Definition. For purposes of this Section 5, the term “Bank” shall include any affiliate of the Bank.

     6. Arbitration. Any controversy, claim or dispute under or arising out of this Agreement shall be resolved by arbitration in accordance with the commercial arbitration rules of the American Arbitration Association, and judgment upon the award rendered in such arbitration may be entered in any court of competent jurisdiction. With respect to any matter submitted to arbitration hereunder, both parties shall use their best efforts to cause such arbitration proceeding to be commenced and completed as promptly as is reasonably possible.

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     7. Miscellaneous.

          (a) Survival. Sections 5 (relating to noncompetition and consultation) and 7(b), (c) and (h) (relating, among other things, to binding effect, assignment and governing law) shall survive the termination hereof. Section 4 (relating to termination) shall survive the termination hereof to the extent that, prior thereto, Mr. Snyder (or his beneficiaries or estate) has become entitled to receive any of the benefits payable thereunder.

          (b) Binding Effect. This Agreement shall be binding on, and shall inure to the benefit of, the Bank and any person or entity that succeeds to the interest of the Bank (regardless of whether such succession does or does not occur by operation of law) by reason of the sale of all or substantially all of the Bank’s assets or a merger, consolidation or reorganization involving the Bank. Any successor in interest to the Bank shall acknowledge in writing to Mr. Snyder that it has assumed this Agreement and is responsible to Mr. Snyder for the performance of the Bank’s obligations under this Agreement. Without limiting the generality of the foregoing, the Bank shall have the right, without the consent of Mr. Snyder, to assign this Agreement and its obligations to any other entity controlled by or under common control with the Bank or resulting from the implementation of any restructuring of the Bank (the “New Entity”) or any subsidiary of any New Entity by which Mr. Snyder becomes employed, at the discretion of the Bank. Following any such assignment, such New Entity or subsidiary shall be treated as the Bank for all purposes of this Agreement. The Bank and Mr. Snyder agree that following any assignment, all covenants described herein in favor of the Bank shall, from and after the date of such assignment, inure solely to the benefit of the assignee. This Agreement shall also be binding on, and shall inure to the benefit of Mr. Snyder’s heirs, executors, administrators and legal representatives.

          (c) Assignment. Except as provided under Section 7(b), neither this Agreement nor any of the rights or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party.

          (d) Entire Agreement. This Agreement between the Bank and Mr. Snyder sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations, warranties or inducements, whether oral or written, by the parties hereto in respect of the subject matter contained herein; and any prior agreement of the parties hereto in respect of the subject matter contained herein shall be terminated and canceled, including, without limitation, Severance Agreements dated January 31, 1992 and April 16, 1996, but not including the Deferred Compensation Agreement with Charles E.

11

Snyder dated November 4, 1994 and amended and restated effective January 1, 2009; provided, that in the event of any conflict in language between such Deferred Compensation Agreement and this Agreement, this Agreement shall govern. Mr. Snyder acknowledges that he is entering into this Agreement of his own free will and accord, and with no duress, that he has read this Agreement and that he understands it and its legal consequences.

          (e) Amendments. This Agreement may not be altered, modified or amended except by a written instrument signed by each of the parties hereto.

          (f) Headings. Headings to sections in this Agreement are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation hereof.

          (g) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

          (h) Governing Law. This Agreement shall be governed by the laws of the District of Columbia, without reference to principles of conflicts or choice of law under which the law of any other jurisdiction would apply.

          (i) Section 409A. This amended and restated Agreement is intended to comply with the requirements of, and shall be administered and interpreted in accordance with, Section 409A of the Code and applicable guidance thereunder.

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     IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly executed by its Chairman, following its review and approval by the Board of Directors of the Bank, and Mr. Snyder has duly executed this Agreement, amended and restated effective as of the date set forth below.

National Consumer Cooperative Bank

By:	/s/ Irma Cota		Date: December 12, 2008
	Name:	Irma Cota
	Title:	Chairman
By:	Charles E. Snyder		Date: December 8, 2008
	Charles E. Snyder

13

Release

     By signing in the space provided below and accepting the benefits described in Section 4 of my Amended and Restated Employment Agreement effective as of                                         , 2008, with the National Consumer Cooperative Bank (the “Company”) (the “Severance Benefit”), on behalf of myself, and on behalf of my heirs, successors and assigns, I release and forever discharge the Company, its subsidiaries, successors, assigns, insurers, shareholders, directors, officers, employees, affiliates, employee benefit plans, trustees, fiduciaries, and administrators of such plans, and all of their respective heirs, successors, and assigns (collectively, “Releasees”) from any and all claims, demands, actions, debts, damages and liabilities of every name and nature, known or unknown (“Claims”) that, as of the date when I sign this Agreement, I have, ever had, now claim to have or ever claimed to have had against any or all of the Releasees. This release includes, without limitation, all Claims

• relating to my employment by or the termination of my employment with the Company, its subsidiaries, predecessors, and affiliates;

• of wrongful discharge;

• of breach of contract;

• of breach of fiduciary duty;

• of retaliation or discrimination on the basis of sex, race, national origin, gender, religion, age, sexual orientation, or handicap under federal, state or local law;

• under the federal Family and Medical Leave Act, the Civil Rights Acts of 1964 and 1991, the Fair Labor Standards Act, the Age Discrimination in Employment Act of 1967, the Older Workers Benefits Protection Act, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, Section 806 of the Sarbanes-Oxley Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act of 1974 (“ERISA”), the Genetic Information Nondiscrimination Act of 2008, the Equal Pay Act of 1963, and the National Labor Relations Act, if applicable, all as amended;

• under federal, state or local human rights laws, including but not limited to the DC Human Rights Act of 1977 and the Virginia Human Rights Act;

• under state wage and hour laws;

• of defamation, slander, infliction of emotional distress or other torts;

• of fraud or misrepresentation;

• of violation of public policy;

• for loss of future earnings;

• for workers compensation;

• for wages, bonuses, incentive compensation, stock, stock options, vacation pay or any other compensation or benefits;

• under any other federal, state, or local statute, rule or regulation or principle of common, tort or contract law; and

• for damages or other remedies of any sort, including, without limitation, compensatory damages, punitive damages, injunctive relief and attorneys’ fees;

provided, however, that this Release will not affect any vested rights I may have under any Company compensation or benefit plan or my right to continue health coverage under Section 4980B(f) of the Internal Revenue Code of 1986, as amended, or Section 603 of ERISA.

     I agree that nothing in this Release is intended or shall be construed to affect, limit or otherwise interfere with any non-waivable right that I may possess under federal, state or local law. However, if any agency or court, including but not limited to the Equal Employment Opportunity Commission, assumes jurisdiction of any such Claim against a Releasee or Releasees on my behalf, I waive my right to individual or other monetary relief, and to the extent such individual or monetary relief cannot be waived, I assign all my rights to such relief to the Company.

     I also agree not to make any statement or otherwise take any other action that would or might reasonably be interpreted as harmful to the Company, and that I remain subject to and will continue to comply with any restrictive covenants contained in any agreement that I signed prior to this release, including but not limited to my Amended and Restated Employment Agreement and the NCB Affiliated Employees Confidentiality Agreement, if applicable.

     By signing this Release, I acknowledge that I have had time to fully consider its terms, that I am accepting them knowingly and voluntarily, and that I am receiving the Severance Benefit, which is compensation to which I would not otherwise be entitled. I also acknowledge that, by signing this Release, I am relying solely on the contents of my Amended and Restated Employment Agreement describing the Severance Benefit and the Release and not on any representations or promises, either express or implied, by any representative of the Company concerning the meaning of these documents or any aspect of my termination. I further acknowledge that my decision to sign this letter does not result from any threats or other coercive activities to induce acceptance of the Severance Benefit and this Release.

     I acknowledge that I have been given a period of at least forty-five (45) days in which to consider the terms of this Release. If I have chosen to sign this Agreement in less than forty-five days, I represent that I did so voluntarily without any pressure by the Company. I understand that I have the right to revoke this Release at any time within seven (7) days after signing it, by providing written notice to Company, and that upon such revocation, I will not be entitled to the Severance Benefit, with the exception of the salary, vacation and sick leave that I have accrued through the date of my termination of employment. I understand that if I do not sign this Release, or if I revoke the Release within seven days after signing it as permitted by this agreement, I shall not be entitled to the Severance Benefit, with the exception of the salary, vacation and sick leave that I have accrued through the date of my termination of employment,

2

and shall be required to repay the Severance Benefit to the Company to the extent that I have received any payments or benefits thereunder.

     I have been advised by the Company to consult with an attorney before signing this Agreement, and I fully understand and appreciate the consequence of signing this Release.

AGREED AND ACCEPTED:
 

NAME 

DATE 

WITNESSED:
 

NAME 

DATE 

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EX-10.39

Exhibit 10.39

EXECUTIVE MANAGEMENT
2009 SHORT-TERM INCENTIVE PLAN

Category	Eligible Points		Points Awarded	Goal
Capital		7.5	—	Maintain average TRBC ratio of at least 12% at FSB
		7.5	—	Maintain leverage ratio < or = 95% of senior note agreement requirement
				Bonus: Additional 5 points for successful renegotiation of leverage limitations in senior note agreements.
Asset Quality		15.0	—	NPA Ratio1 at or below 1.5% for entire year.
				Bonus: Additional 5 points if the NPA ratio1 is 1% or less with a reduction of 5 points if net charge offs exceed .5%.
Management		10.0	—	Make substantial progress toward conversion of NCBFSB to National Bank
		5.0 10.0	— —	Achieve satisfactory evaluations from Loan Review, auditors, FCA, and OTS, including FIDICA compliance. Complete conversion to OSI by year-end.
Earnings		10.0	—	Maintain Avg. ROAE of 7% at NCBFSB and achieve FSB Earnings objectives of senior note agreements
		5.0	—	Implement Relationship Profitability System by year-end Bonus: 1 extra point for every 1% reduction in Efficiency Ratio (adjusted for one-time charges) below 68% (up to 5 extra points).
Liquidity		7.5	—	Reduce average Bank Revolver outstandings in Q4 to < $25MM.
		7.5	—	Fund 100% of net loan and investment portfolio growth at NCBFSB with Non-Brokered Deposits2 and/or FHLB advances.
				Bonus: 1 extra point for every 1% reduction in
				Brokered Deposits below 40% of total deposits (up to 5 extra points).
Sensitivity		5.0	—	Maintain all sensitivity measurements within Green or Yellow ranges. No more than 5 measurements (out of 288 total measurements for the year) in the Red range, all of which must be cured within 30 days of measurement.
Mission		10.0	—	Achieve “Best Efforts” evaluation by Board of Directors. Best Efforts to be based on performance against mission objectives set for new products, new markets, policy advocacy, strengthening of the brand and internal enhancement of operations. One of two objectives will set for each area identified above.
Total Points		100.0	—
Income Bonus Points				Bonus: 1 extra percentage point for each 5% that Actual post-tax Net Income exceeds Budget (up to 10 extra points).

1	NPA Ratio equals average Non-accruing Loans plus REO as a percentage of average Total Loans.
2	Includes CDARs Reciprocal trades.

EX-14

Exhibit 14

NCB Senior Financial Officers’ Code of Ethics

M. Proper Accounting and Financial Reporting

1.	NCB has established internal accounting controls and records-keeping policies to meet both business and legal requirements. Employees are expected to comply with these controls and policies.
2.	The accounting business records of NCB must be complete, accurate and supported in reasonable detail. Underlying transactions must be accurate, properly authorized and timely recorded. They are subject to review and audit by the Chief Auditor, Loan Review, Regulatory Compliance, external auditors and examiners. Employees are expected to fully cooperate in a candid manner with such reviews and audits. Employees of NCB authorized to incur business expenses are responsible for the accurate and timely reporting of such expenses. All expenses must be in accordance with existing policies.
3.	These standards are applicable to all employees of NCB, but the full, fair, accurate, timely and understandable preparation, reporting and disclosure of NCB’s financial condition and results of operations are particularly the responsibility of the Chief Executive Officer (CEO), Chief Financial Officer (CFO), the Controller, and any other officer performing functions in the nature of a “senior financial officer” as that term may be defined in regulations issued under the Sarbanes-Oxley Act of 2002. All senior financial officers are required, in performing their functions as financial officers:

a)	To act with honesty and integrity
b)	To avoid actual or apparent conflicts of interest
c)	To prepare and provide information that is accurate, complete, objective, relevant and understandable
d)	To comply with applicable rules and regulations of federal and state governments and other appropriate private and public regulatory bodies
e)	To act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing their independent judgment to be subordinated
f)	To proactively promote ethical behavior as responsible partners among peers
g)	To respect the confidentiality of information except when authorized or otherwise legally obligated to disclose
h)	To share knowledge and maintain skills important and relevant to the needs of NCB and its members
i)	To achieve responsible use and control of all assets and resources of NCB to the best of their ability
j)	To preserve records created or used in performance of their functions and use their reasonable best efforts to prevent destruction of such records by others, except pursuant to reasonable document retention policies not designed to hide wrongdoing
k)	To report in good faith to the Chair of the Audit Committee any violation of these provisions (a) through (j) of which they acquire notice or knowledge

The provisions of this paragraph M(2) shall be known as the “NCB Senior Financial Officers’ Code of Ethics.”

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
and Members of National Consumer Cooperative Bank:

We consent to the incorporation by reference in Registration Statement No. 333-90457 dated December 21, 1999 and Registration Statement No. 333-17003 dated January 24, 1997 of National Consumer Cooperative Bank and subsidiaries (the Company) of our report dated March 31, 2009, relating to the consolidated balance sheets of the Company as of December 31, 2008 and 2007, and the related consolidated statements of income (loss), comprehensive income (loss), changes in members’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008, which report appears in the December 31, 2008 annual report on Form 10-K of the Company.

McLean, Virginia
March 31, 2009

EX-24.33

Exhibit 24.33

POWER OF ATTORNEY

Know all men by these presents:

     That I, Peter A. Conrad, of (address) 75 Park Plaza Boston, MA, as a member of the Board of Directors of THE NATIONAL CONSUMER COOPERATIVE BANK, do hereby make, constitute and appoint as my true lawful attorney in fact Richard L. Reed or James C. Oppenheimer for me and in my name, place and stead to sign any and all of the following and amendments thereto executed on behalf of THE NATIONAL CONSUMER COOPERATIVE BANK and filed with the Securities and Exchange Commission, as follows:

Annual Reports on Form 10-K for the NATIONAL CONSUMER COOPERATIVE BANK.

IN WITNESS WHEREOF, I have hereunto set my hand this 26^th day of March, 2009.

/s/ Pater Conrad  

Signature 

State of Massachusetts	)
		)	SS:
County of Suffolk	)

     On this 26th day of March, 2009, before me personally appeared the above, to me known and known to me to be the person mentioned and described in and who executed the foregoing instrument and he duly acknowledged to me that he executed the same.

/s/  

Notary Public 

My Commission expires: 08/28/09

EX-24.34

Exhibit 24.34

POWER OF ATTORNEY

Know all men by these presents:

     That I, Alfred A. Plamann, of (address) 5200 Sheila Street, Commerce, CA 90040, as a member of the Board of Directors of THE NATIONAL CONSUMER COOPERATIVE BANK, do hereby make, constitute and appoint as my true lawful attorney in fact Richard L. Reed or James C. Oppenheimer for me and in my name, place and stead to sign any and all of the following and amendments thereto executed on behalf of THE NATIONAL CONSUMER COOPERATIVE BANK and filed with the Securities and Exchange Commission, as follows:

Annual Reports on Form 10-K for the NATIONAL CONSUMER COOPERATIVE BANK.

IN WITNESS WHEREOF, I have hereunto set my hand this 30^th day of March, 2009.

/s/ Alfred A. Plamann  

Signature 

State of California	)
		)	SS:
County of Los Angeles	)

     On this 30^th day of March, 2009, before me personally appeared the above, to me known and known to me to be the person mentioned and described in and who executed the foregoing instrument and he duly acknowledged to me that he executed the same.

/s/  

Notary Public 

My Commission expires: 04/26/10

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Charles E. Snyder, Chief Executive Officer of National Consumer Cooperative Bank, certify that:

1.	I have reviewed this annual report on Form 10-K of National Consumer Cooperative Bank;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2009

/s/ Charles E. Snyder Charles E. Snyder

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Richard L. Reed, Chief Financial Officer of National Consumer Cooperative Bank, certify that:

1.	I have reviewed this annual report on Form 10-K of National Consumer Cooperative Bank;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2009

/s/ Richard L. Reed Richard L. Reed

Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of the National Consumer Cooperative Bank (“NCB”) on Form 10-K for the year ended
December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge;

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of NCB.

/s/ Charles E. Snyder Charles E. Snyder

President and Chief Executive Officer

/s/ Richard L. Reed

Richard L. Reed

Executive Managing Director and Chief Financial Officer

March 31, 2009

EX-99.1

Exhibit 99.1

Dear Stockholder:

RE: 2009 Board of Directors Election

I am pleased to present the official ballot and information needed for your cooperative to cast its votes in the 2009 election of Directors for National Consumer Cooperative Bank, d/b/a NCB

The Board of Directors has set December 31, 2008, as the record date for the determination of stockholders entitled to vote in the 2009 election. The votes allocated to your cooperative based on your business activity with NCB in 2008 are shown on the ballot.

There are six directors on the ballot to fill the four seats on the Board. None of the Directors currently holding those four seats are eligible for re-election, and therefore the ballot presents 6 new candidates. All directors are elected to serve a three-year term.

NCB is continuing the web based ballot in addition to the traditional paper ballot. You have the option of casting your votes either in a paper form by regular mail or electronically via the web. Specific instructions for either method are enclosed. Whichever method you select, the ballots must be received by April 10, 2009.

On behalf of the board of directors, I appreciate your participation and encourage you to cast your ballot. Should you have any questions, please contact Chad Oppenheimer, NCB’s Corporate Secretary, at 202-349-7447.

Sincerely,

Irma Cota
Chair
NCB Board of Directors

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held May 7, 2009

The 2009 annual meeting of the stockholders of NCB will be held on Thursday, May 7, 2009 at 5:00 p.m., at the National Geographic Society, 1145 17^th Street, NW, Washington, D.C.

The board of directors and management look forward to personally greeting those stockholders able to attend, and will respond to questions you may have concerning NCB.

For those interested, NCB’s Annual Report will be available at www.ncb.coop on or about May 7, 2009.

Very truly yours,

Chad Oppenheimer
General Counsel and Corporate
Secretary
NCB

2009 Board of Directors
Official Election Ballot

Place an “X” next to any four (4) candidates of your choice.

Jane Garcia, MPH
Low Income

Gail Urbas Ment
Other

Gary A. Officer
Housing

Kenneth A. Rivkin
Housing

Robynn Shrader
Consumer Services

Judy Ziewacz
Other

(No incumbents in 09)

Ballot Instructions

• Members casting their vote by mail must use this original, Official Election Ballot form, no substitutes will be allowed.

• Votes should be cast by placing an “X” in the box next to the name of each selected candidate. In the event your selection needs to be changed, please cross out the incorrect selection by drawing a line through the candidate’s name.

• You may vote for four (4) of the six (6) candidates. Ballots indicating more than four (4) selections will not be counted.

• Ballots must be cast by an official of the cooperative stockholder in order to be counted.

• If you are casting this paper ballot, in order to be counted, the ballot must be received by the independent teller, Survey & Ballot Systems, PO Box 46430, Eden Prairie, MN 55344 no later than April 10, 2009. Please use. Please use the self-addressed envelope enclosed with this packet. Hand-delivered ballots will not be counted.

The undersigned officer of the cooperative casting this ballot acknowledges receipt of notification of the National Consumer Cooperative Bank annual meeting and certifies that he/she is authorized to cast ballots on behalf of the cooperative stockholder.

Signature of Authorized Representative Date

ELECTION OF DIRECTORS

The stockholders are holding an election to elect four directors among the six candidates nominated to fill four vacancies on the board of NCB.

Nominees for election are qualified as representatives of five classes of cooperatives. The election rules require that the election be conducted in such a manner so as to ensure that each of the five cooperative classes shall be represented by at least one and no more than three directors.

Listed below, by class are all of the stockholder-elected directorships currently filled by incumbent directors who will continue to serve out their terms; and the number of directorships available in each class.

Stockholder-Elected Directorships

Class of					Incumbent		Available
Cooperative	Minimum		Maximum		Seats 2009		Seats 2009
Consumer Services		1		3		2		1
Low Income		1		3		2		1
Other		1		3		1		2
Housing		1		3		1		2
Consumer Goods		1		3		2		1

Under the election rules, the four nominees receiving the highest vote shall be elected, subject to the maximum and minimum limitations imposed on each class. Stockholders may vote for any four nominees.

Voting Instructions

Voting by Mail:

• Members casting their vote by mail must use the original Official Election Ballot form, no substitutes will be allowed.

• Mark your selections by placing an X in the box next to the candidate of your choice.

• Do not mail to the NCB Office

• Detach ballot and place in the enclosed return envelope. Mail to Survey & Ballot Systems, PO Box 46430, Eden Prairie, MN 55344. Envelopes must be received no later than April 10, 2009. Please allow sufficient time for delivery.

Voting Online:

• Go to https://www.directvote.net/ncb/ to access the login page of the official 2009 NCB election.

• Above and to the left is your ID Number and your E-Signature (election passcode). Use both of these numbers to login.

• Once registered, follow the online voting instructions.

• Online voting begins March 2, 2009 and ends at 11:59 AM ET, April 10, 2009.

     If you have any problems voting online, please e-mail support@directvote.net

Low Income
Jane Garcia, MPH

Jane Garcia is the Chief Executive Officer of La Clinicia de La Raza, Inc., and has served in that role since April 1983. As CEO of La Clinicia de La Raza, she oversees long-range fiscal and program planning and manages the day-to-day operations of a $62 million comprehensive health care operation in California. She is a board member of Alta Bates Summit Medical Center and the California Primary Care Association. Jane holds a Bachelor’s degree from Yale University and a Master of Public Health degree from the University of California, Berkeley.

Thank you for the opportunity to apply for consideration to the NCB Board of Directors.

I am currently the Chief Executive Officer of La Clinica de La Raza, a non-profit community based health care center headquartered in Oakland’s Fruitvale district. Born out of the grassroots community clinic movement, La Clinica will soon be 40 years old. I have dedicated 30 years to this great organization and assumed the executive directorship 25 years ago. In the past five years alone, the organization has grown by 80%.

In the past twenty-five years, La Clinica has grown tremendously from operating out of a few buildings along Fruitvale Avenue, to providing services out of 26 different sites located in Alameda, Contra Costa and Solano counties. A major accomplishment was the construction of a 40,000 square foot, 3 story medical building within BART Fruitvale Transit Village. La Clinica received unprecedented five year financial support from the Kresge Foundation where we met and surpassed funding conditions. The budget has grown from several thousand dollars to $62 million, with revenue streams from the various levels of government, patient revenues, foundations and private contributors. Services have expanded from primary medical to full scope care that includes social services, radiology, lab and pharmacy, dental, vision, behavioral health, nutrition education and counseling.

The agency is governed by an 18 member board, the majority of whom must be consumers of services. This body meets once per month, where I provide status reports on budget, vital staffing, and overall operations. Under my leadership, the budget has consistently produced more revenue than expense.

I hope to be able to contribute to NCB’s Board from my experience as CEO of one of the largest non-profit organizations in California, from my participation on various organizational boards, with my educational training, and the accumulation of wisdom from all of the above, seasoned by life experiences.

Housing
Kenneth A. Rivkin

Kenneth A. Rivkin is the Managing Director of CMBS Capital Markets at Credit Suisse. For the past twenty-five years, Kenneth worked in commercial and investment banking at Credit Suisse, Bank of America, and their predecessors. He is a member of a housing cooperative and a current board director of 227 East 57^th Street Corporation. Kenneth holds a Bachelor’s degree from Brown University and a Master’s degree from the Sloan School of Management at MIT.

As a board member, I would add an additional perspective on (1) credit, (2) the distribution of real estate risk, (3), sources of new capital and (4) financial services. For the last twenty-five years, I have worked in commercial and investment banking (Credit Suisse and its predecessors & Bank of America and its predecessors), focused primarily on real estate finance. My roles have ranged from origination, structuring, distribution and workouts on a national footprint. My experience includes all types of real estate debt: CMBS, whole loans, participants, syndications, mezz, b-notes, servicing strips, among others. Additionally, I have worked on corporate restructurings, including financial firms such as insurance companies and thrifts.

My experience with cooperatives and condominiums is extensive. In the 1980’s, I managed a portfolio of condominium loans and originated/paced cooperative mortgages. Starting in 1987, I began my relationship with National Cooperative Bank (“NCB”), initially purchasing their loans as principal for resale. In the 1990’s, I worked on NCB’s first public securitization and continued the relationship during the next decade as contributor to larger CMBS securitizations. I am well versed with distribution channels for loan product, hedging and risk management. Moreover, I have lived in several cooperative residences and currently serve on my board.

Based on my more than twenty years of working with NCB and my knowledge of cooperatives coupled with my understanding of financial markets, I believe I can make a positive impact on the organization during the current markets. If selected, I will be committed to working with other board members and management during these challenging times.

Housing
Gary A. Officer

Gary A. Officer is the President and CEO of Rebuilding Together, Inc., the nation’s largest non-profit home remodeling organization serving 1800 communities nationwide. In this role, he serves as the national spokesperson for the organization and serves as the lead business development and staff officer with responsibilities for the organization’s key practice areas. He is a past president of the National Credit Union Foundation (NCUF). Gary holds a Bachelor’s degree from the University of Manchester, England and a Master’s degree from the London School of Economics.

The responsibility of providing effective and engaged governance to a financial institution has assumed greater importance during these uncertain times. The daily reports of our nation’s banking crisis, compounded by even greater uncertainty over the structural foundation of our nation’s economy, requires the full engagement of qualified leaders to ensure the success and stability of our financial institutions. The National Cooperative Bank (NCB) is a truly unique financial institution. While it remains exposed to the negative economic conditions that can undermine the success of even the best managed institutions, the uniqueness of its missions based cooperative principles, couple with the absence of Wall Street earnings pressure, renders NCB a banking institution that stands apart from its peers.

My candidacy for the NCB board is supported by a deep understanding of the cooperative model. My experience within the cooperative community is framed by years of leadership within institutions that embodies the very best of the cooperative spirit. During my tenure as Executive Director at the Metropolitan Boston Housing Partnership (MBHP), we financed the development of over 2,000 units of affordable multi-family housing, including over 100 units of cooperative housing. The “BHP” model truly served as a catalyst for the revitalization the city’s most distressed neighborhoods, and equally importantly, aided the maturity of the city’s community development corporations (CDCs). In addition, during my tenure as the Executive Director at the National Credit Union Foundation, an institution that represents our nation’s 9,000 Credit Unions, I oversaw the growth of the institution’s Community Investment Fund (CIF), from $34 million to $375 million in 3 years, Millions of dollars of grant funding was made available to Credit Unions and related organization throughout the United States. My role within the Credit Union community also included providing development assistance to the Confederation of Caribbean Credit Unions, and the African American Credit Union Coalition, where I established a $10 million CIF designated fund within the National Credit Union Foundation. Finally, my commitment to the cooperative movement was also expressed during my tenure

as a member of the board at the Cooperative Development Foundation, an affiliate of the National Cooperative Bank.

My candidacy, in short, is supported by my experience within the cooperative banking community via my leadership at the National Credit Union Foundation; extensive affordable housing finance and asset management experience during my years at the Metropolitan Boston Housing Partnership; and, during my current tenure as President and CEO of Rebuilding Together, Inc, our nation’s largest non-profit home remodeling organization. The common thread binding these important leadership roles is that deep seated commitment of these mission based organizations in extending programs and financial resources to low income communities. My collective experience as a leader and a manager within sizable organizations will prepare me well as a member of the board at the National Cooperative Bank if I am bestowed the opportunity to do so.

Consumer Services
Robynn Shrader

Robynn Shrader is the Chief Executive Officer of National Cooperative Grocers Association. In this role, she oversees a national trade organization/purchasing co-op representing 111 independent businesses in 32 states with over $1 billion in annual sales volume. A member of the New Pioneer Cooperative Board of Directors, she holds a Bachelor’s degree from San Diego State University.

I began working with cooperatives in a professional capacity fifteen years ago, in the development of trade relationships with coffee growing cooperatives in South and Central America. My career then led me into manufacturing, distribution and retail cooperative sector specific to the natural foods industry. In my position with the National Cooperative Grocers Association, I am involved daily with the challenges and opportunities facing retail food co-ops of varying sizes across the country.

My experience, relevant to my contribution to NCB, includes representing NCGA and its members, many of which do business with NCB as well as working directly with a variety of organizations, including National Organic Coalition, Cooperative Development Services, the National Cooperative Business Association that serve the natural, organic and cooperative communities. I believe I can contribute to a strong understanding of the challenges facing small to medium sized businesses, start-ups (including my own organization), the tensions between local and national perspectives and the appropriate balance of process and action within democratically owned enterprises.

I am interested in serving on the NCB Board of Directors from a desire to provide strong linkage to the many dozens of food co-ops that engage with NCB. Food co-ops are an important voice in today’s economic and social climate; embracing issues such as food safety and security, agricultural and environmental preservation, sustainability, economic democracy within communities and the world at large, health promotion and social justice. NCB’s unique mission to provide capital and support to the cooperatives my association represents is a critical component to their future success.

Other
Judy Ziewacz

Judy Ziewacz is the Executive Director of the Office of Energy Independence of the State of Wisconsin. In this role, she helps the state expand in new markets of green energy, clean technology and new products. She is the Executive Director of the Cooperative Development Foundation and was a member of the Board of Group Health Cooperative in Madison, WI. Judy holds a Bachelor’s degree from the University of Wisconsin.

I would contribute 35 years of knowledge about cooperatives that I have gained from service as a Chief of Staff to a U.S. Congressman who worked with rural cooperatives; staff member of cooperative trade associations at the state and national level; Member of the Board of Group Health Cooperative in Madison, WI; and, in my current responsibilities in bringing renewable energy to the market. I bring knowledge of the breadth of the existing cooperative sector and opportunities emerging in clean technology and green energy.

The specific knowledge and experience I would contribute include:

• Experience with the legislative, policy and regulatory processes at state and federal levels;

• Multiple interactions with the Farm Credit System including restructuring, legal responsibilities of a government-sponsored entity; access to Treasury and Congressional and FCA expectations of the system’s mission;

• Working familiarity with the health care, housing, agriculture, credit unions, food, mutual insurance, worker-owned, purchasing and utility cooperatives;

• Cooperative development opportunities in all regions of the country and different sectors; knowledge of the financing and equity challenges for cooperative businesses; and, appreciation of the phases from start-up to operational for new cooperatives;

• Emerging trends in clean energy and technology such as new fuel sources, aggregation opportunities for existing cooperatives, trends in job creation and overall barriers as the nation seeks to reduce its dependence on fossil fuels.

It would be an honor to serve as a Board Member of the National Cooperative Bank, a institution which I have interacted with one way or another since it was created in 1978.

Other
Gail Urbas Ment

Gail Urbas Ment is the President of Emtec Metal Products, an ESOP manufacturer of custom architectural metal products for residential and commercial products. She is a member of the Hungry Hollow Food Coop and is the President of the Board of 126 Street Condominium Association. Gail holds a Bachelor’s degree from the University of Wisconsin.

Breathtaking change has swept across both the banking industry and our political environment. The abuses of trust and single minded focus on short term profit maximization, regardless of risk has devastated not only the financial services industry, but the communities of business they were supposed to serve.

Directors with sound long term vision, personal integrity and commitment to the fundamental ideals and mission of the organization are more important than ever.

I formed my relationship with NCB in the early part of this decade when my former bank exited middle market lending to focus on mortgage collateralization. I saw clearly that their fundamental strategy was wrong and unsustainable. This could have been where quality directors with vision could have averted a disaster.

I will use my two decades of experience as a middle market entrepreneur, to support our bank as it helps employee and cooperatively owned companies, to represent the interests of our employee owned companies, and seek to expand the scope of employee ownership. I will promote the ideals of cooperative relations within and between companies to help our members function in an economic environment that has caused so much harm.

Cooperative relationships and working with organization wide common interests can make a profound change in our economy from the bottom up.

As our economy begins to recover from the calamity wrought on it by three decades of unregulated self interest run amok, new ways of structuring and growing businesses will emerge. This new era of corporate responsibility will create tremendous opportunity for those who understand how to work with it.