##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C.
20549
 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the period ended:
    
    March 31, 2004
 NORTH FORK BANCORPORATION, INC.   DELAWARE
    
    36-3154608(State or other Jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 275 BROADHOLLOW ROAD, MELVILLE, NEW YORK
    
    11747(Address of principal executive offices)
    
    (Zip Code)
 (631) 844-1004
(Companys telephone number, including area code) Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: (X) Yes (  ) No Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). (X)Yes (  ) No Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date. CLASS OF COMMON STOCK
    
    NUMBER OF SHARES OUTSTANDING 5/6/04$.01 Par Value
    
    152,973,497




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##### Table of Contents



North Fork Bancorporation, Inc. Form 10-Q INDEX PagePART 1. FINANCIAL INFORMATION (unaudited)Item 1. Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Consolidated Statements of Changes in Stockholders Equity
    
    
    6Consolidated Statements of Comprehensive Income
    
    
    7Condensed Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    29PART 2. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    30Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities
    
    
    30Item 6. Exhibits and Reports on Form 8-K
    
    
    30COMPUTATION OF NET INCOME PER COMMON SHARECERTIFICATIONCERTIFICATIONCERTIFICATIONCERTIFICATION
 2




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Item 1. Financial Statements 
 Consolidated Balance Sheets (Unaudited) March 31,
    
    December 31,
    
    March 31,(in thousands, except per share amounts)
    
    2004
    
    2003
    
    2003Assets:Cash & Due from Banks
    
    $
    407,025
    
    
    $
    510,354
    
    
    $
    376,355Money Market Investments
    
    
    239,081
    
    
    
    21,037
    
    
    
    47,693Securities:Available-for-Sale ($1,915,308, $1,911,586 and $4,287,274 pledged at
March 31, 2004, December 31, 2003 and March 31, 2003, respectively)
    
    
    7,706,879
    
    
    
    7,136,275
    
    
    
    9,516,955Held-to-Maturity ($40,470, $52,808 and $113,647 pledged at
March 31, 2004, December 31, 2003 and March 31, 2003, respectively)
    
    
    169,264
    
    
    
    190,285
    
    
    
    252,364Total Securities
    
    
    7,876,143
    
    
    
    7,326,560
    
    
    
    9,769,319Loans:Held-for-Sale
    
    
    3,209
    
    
    
    4,074
    
    
    
    17,565Held-for-Investment, Net of Unearned Income & Deferred Costs
    
    
    12,655,744
    
    
    
    12,341,199
    
    
    
    11,417,858Total Loans
    
    
    12,658,953
    
    
    
    12,345,273
    
    
    
    11,435,423Less: Allowance for Loan Losses
    
    
    124,364
    
    
    
    122,733
    
    
    
    115,087Net Loans
    
    
    12,534,589
    
    
    
    12,222,540
    
    
    
    11,320,336Goodwill
    
    
    410,494
    
    
    
    410,494
    
    
    
    410,494Identifiable Intangibles
    
    
    11,984
    
    
    
    12,765
    
    
    
    15,441Premises & Equipment
    
    
    160,151
    
    
    
    150,875
    
    
    
    140,517Accrued Income Receivable
    
    
    92,375
    
    
    
    88,722
    
    
    
    107,549Other Assets
    
    
    242,295
    
    
    
    226,027
    
    
    
    211,929Total Assets
    
    $
    21,974,137
    
    
    $
    20,969,374
    
    
    $
    22,399,633Liabilities and Stockholders Equity:Deposits:Demand
    
    $
    4,233,526
    
    
    $
    4,080,134
    
    
    $
    3,359,885Savings
    
    
    3,846,837
    
    
    
    3,770,683
    
    
    
    3,532,326NOW & Money Market
    
    
    5,126,883
    
    
    
    4,519,476
    
    
    
    3,376,108Time
    
    
    1,743,679
    
    
    
    1,784,408
    
    
    
    1,932,743Certificates of Deposits, $100,000 & Over
    
    
    992,563
    
    
    
    961,414
    
    
    
    1,171,386Total Deposits
    
    
    15,943,488
    
    
    
    15,116,115
    
    
    
    13,372,448Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase
    
    
    1,905,362
    
    
    
    2,171,154
    
    
    
    4,527,000Federal Home Loan Bank Advances
    
    
    1,050,000
    
    
    
    1,050,000
    
    
    
    1,550,000Subordinated Debt
    
    
    488,402
    
    
    
    476,499
    
    
    
    499,162Junior Subordinated Debt
    
    
    273,942
    
    
    
    266,977
    
    
    
    276,672Due To Brokers
    
    
    303,604
    
    
    
    31,095
    
    
    
    178,076Accrued Expenses & Other Liabilities
    
    
    425,560
    
    
    
    379,045
    
    
    
    464,188Total Liabilities
    
    $
    20,390,358
    
    
    $
    19,490,885
    
    
    $
    20,867,546Stockholders Equity:Preferred Stock, par value $1.00; authorized 10,000,000 shares, unissued
    
    $
    
    
    
    $
    
    
    
    $
    Common Stock, par value $0.01; authorized 500,000,000 shares;
issued 174,580,778 shares at March 31, 2004
    
    
    1,746
    
    
    
    1,746
    
    
    
    1,746Additional Paid in Capital
    
    
    376,408
    
    
    
    378,793
    
    
    
    375,513Retained Earnings
    
    
    1,872,989
    
    
    
    1,816,458
    
    
    
    1,651,882Accumulated
Other Comprehensive Income/(Loss), net of tax effect
    
    
    31,855
    
    
    
    (2,044
    )
    
    
    30,916Deferred Compensation
    
    
    (88,502
    )
    
    
    (91,789
    )
    
    
    (68,307
    )Treasury Stock at cost; 21,566,242 shares at March 31, 2004
    
    
    (610,717
    )
    
    
    (624,675
    )
    
    
    (459,663
    )Total Stockholders Equity
    
    
    1,583,779
    
    
    
    1,478,489
    
    
    
    1,532,087Total Liabilities and Stockholders Equity
    
    $
    21,974,137
    
    
    $
    20,969,374
    
    
    $
    22,399,633
 See accompanying notes to consolidated financial statements 3




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Consolidated Statements of Income (Unaudited) Three Months EndedMarch 31,
    
    March 31,(in thousands, except per share amounts)
    
    2004
    
    2003Interest Income:Loans
    
    $
    194,200
    
    
    $
    196,921Mortgage-Backed Securities
    
    
    59,137
    
    
    
    82,228Other Securities
    
    
    9,599
    
    
    
    13,605State & Municipal Obligations
    
    
    4,524
    
    
    
    3,789Money Market Investments
    
    
    203
    
    
    
    174Total Interest Income
    
    
    267,663
    
    
    
    296,717Interest Expense:Savings, NOW & Money Market Deposits
    
    
    15,011
    
    
    
    14,760Time Deposits
    
    
    6,643
    
    
    
    10,053Certificates of Deposits, $100,000 & Over
    
    
    4,093
    
    
    
    5,103Federal Funds Purchased & Securities Sold Under Agreements to Repurchase
    
    
    16,281
    
    
    
    28,658Federal Home Loan Bank Advances
    
    
    12,322
    
    
    
    18,957Subordinated Debt
    
    
    4,545
    
    
    
    7,225Junior Subordinated Debt
    
    
    1,939
    
    
    
    2,511Total Interest Expense
    
    
    60,834
    
    
    
    87,267Net Interest Income
    
    
    206,829
    
    
    
    209,450Provision for Loan Losses
    
    
    6,500
    
    
    
    6,250Net Interest Income after Provision for Loan Losses
    
    
    200,329
    
    
    
    203,200Non-Interest Income:Customer Related Fees & Service Charges
    
    
    21,771
    
    
    
    20,166Investment Management, Commissions & Trust Fees
    
    
    3,924
    
    
    
    3,124Mortgage Banking Income
    
    
    1,160
    
    
    
    2,818Check Cashing Fees
    
    
    1,189
    
    
    
    996Other Operating Income
    
    
    5,797
    
    
    
    4,546Securities Gains, net
    
    
    7,888
    
    
    
    2,597Total Non-Interest Income
    
    
    41,729
    
    
    
    34,247Non-Interest Expense:Employee Compensation & Benefits
    
    
    51,077
    
    
    
    47,340Occupancy & Equipment, net
    
    
    17,625
    
    
    
    15,521Other Operating Expenses
    
    
    17,946
    
    
    
    16,817Amortization of Identifiable Intangibles
    
    
    781
    
    
    
    892Total Non-Interest Expense
    
    
    87,429
    
    
    
    80,570Income Before Income Taxes
    
    
    154,629
    
    
    
    156,877Provision for Income Taxes
    
    
    52,110
    
    
    
    53,338Net Income
    
    $
    102,519
    
    
    $
    103,539Earnings Per Share  Basic
    
    $
    0.69
    
    
    $
    0.67Earnings Per Share  Diluted
    
    
    0.68
    
    
    
    0.67
 See accompanying notes to consolidated financial statements 4




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Consolidated Statements of Cash Flows (unaudited) For the Three Months Ended March 31,(in thousands)
    
    2004
    
    2003Cash Flows from Operating Activities:Net Income
    
    $
    102,519
    
    
    $
    103,539Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:Provision for Loan Losses
    
    
    6,500
    
    
    
    6,250Depreciation
    
    
    4,209
    
    
    
    3,644Amortization of Deferred Compensation
    
    
    3,501
    
    
    
    2,887Amortization of Identifiable Intangible
    
    
    781
    
    
    
    892Amortization of Premiums
    
    
    9,177
    
    
    
    23,165Accretion of Discounts and Net Deferred Loan Fees
    
    
    (3,903
    )
    
    
    (9,811
    )Securities Gains, net
    
    
    (7,888
    )
    
    
    (2,597
    )Gains on Sales of Loans Held-for-Sale
    
    
    (289
    )
    
    
    (1,538
    )Originations of Loans Held-for-Sale
    
    
    (25,054
    )
    
    
    (134,791
    )Proceeds from Sales of Loans Held-for-Sale
    
    
    24,478
    
    
    
    123,221Purchases of Trading Assets
    
    
    (13,911
    )
    
    
    Sales of Trading Assets
    
    
    14,015
    
    
    
    Other, Net
    
    
    45,359
    
    
    
    (83,223
    )Net Cash Provided by Operating Activities
    
    
    159,494
    
    
    
    31,638Cash Flows from Investing Activities:Purchases of Securities Held-to-Maturity
    
    
    
    
    
    
    (14,280
    )Maturities, Redemptions, Calls and Principal Repayments on
Securities Held-to-Maturity
    
    
    20,844
    
    
    
    69,408Purchases of Securities Available-for-Sale
    
    
    (989,590
    )
    
    
    (2,447,545
    )Proceeds from Sales of Securities Available-for-Sale
    
    
    282,329
    
    
    
    71,035Maturities, Redemptions, Calls and Principal Repayments on
Securities Available-for-Sale
    
    
    452,159
    
    
    
    1,600,566Net Change in Loans Held-for-Investment
    
    
    (314,375
    )
    
    
    (53,691
    )Transfers to Other Real Estate, Net of Sales
    
    
    220
    
    
    
    Purchases of Premises and Equipment, net
    
    
    (13,485
    )
    
    
    (11,633
    )Net Cash Used in Investing Activities
    
    
    (561,898
    )
    
    
    (786,140
    )Cash Flows from Financing Activities:Net Increase in Customer Deposit Liabilities
    
    
    827,373
    
    
    
    179,918Net (Decrease)/Increase in Borrowings
    
    
    (265,792
    )
    
    
    676,000Purchase of Treasury Stock
    
    
    
    
    
    
    (61,731
    )Exercise of Options and Common Stock Sold for Cash
    
    
    1,378
    
    
    
    2,731Cash Dividends Paid
    
    
    (45,840
    )
    
    
    (42,706
    )Net Cash Provided by Financing Activities
    
    
    517,119
    
    
    
    754,212Net Increase/(Decrease) in Cash and Cash Equivalents
    
    
    114,715
    
    
    
    (290
    )Cash and Cash Equivalents at Beginning of the Period
    
    
    531,391
    
    
    
    424,338Cash and Cash Equivalents at End of the Period
    
    $
    646,106
    
    
    $
    424,048Supplemental Disclosures of Cash Flow Information:Cash Paid During the Period for:Interest Expense
    
    $
    61,363
    
    
    $
    94,378Income Taxes
    
    ($
    737
    )
    
    $
    569
 See accompanying notes to consolidated financial statements 5




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Consolidated Statements of Changes in Stockholders Equity (unaudited) Common
    
    Additional Paid
    
    Retained(Dollars in thousands, except per share amounts)
    
    Stock
    
    In Capital
    
    EarningsBalance, December 31, 2002
    
    $
    1,746
    
    
    $
    377,311
    
    
    $
    1,590,594Net Income
    
    
    
    
    
    
    
    
    
    
    103,539Cash Dividends ($.27 per share)
    
    
    
    
    
    
    
    
    
    
    (42,251
    )Issuance of Stock (41,630 shares)
    
    
    
    
    
    
    252
    
    
    
    Restricted Stock Activity, net
    
    
    
    
    
    
    142
    
    
    
    Stock Based Compensation Activity, net
    
    
    
    
    
    
    (2,192
    )
    
    
    Purchases of Treasury Stock (1,877,500 shares)
    
    
    
    
    
    
    
    
    
    
    Accumulated Other Comprehensive Income, net of tax effect
    
    
    
    
    
    
    
    
    
    
    Balance, March 31, 2003
    
    $
    1,746
    
    
    $
    375,513
    
    
    $
    1,651,882Balance, December 31, 2003
    
    $
    1,746
    
    
    $
    378,793
    
    
    $
    1,816,458Net Income
    
    
    
    
    
    
    
    
    
    
    102,519Cash Dividends ($.30 per share)
    
    
    
    
    
    
    
    
    
    
    (45,988
    )Issuance of Stock (31,541 shares)
    
    
    
    
    
    
    485
    
    
    
    Restricted Stock Activity, net
    
    
    
    
    
    
    77
    
    
    
    Stock Based Compensation Activity, net
    
    
    
    
    
    
    (2,947
    )
    
    
    Purchases of Treasury Stock
    
    
    
    
    
    
    
    
    
    
    Accumulated
Other Comprehensive Income, net of tax effect
    
    
    
    
    
    
    
    
    
    
    Balance, March 31, 2004
    
    $
    1,746
    
    
    $
    376,408
    
    
    $
    1,872,989
   [Continued from above table, first column(s) repeated] AccumulatedOtherComprehensive
    
    Deferred
    
    Treasury(Dollars in thousands, except per share amounts)
    
    Income
    
    Compensation
    
    Stock
    
    TotalBalance, December 31, 2002
    
    $
    17,991
    
    
    ($
    70,562
    )
    
    ($
    403,027
    )
    
    $
    1,514,053Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103,539Cash Dividends ($.27 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,251
    )Issuance of Stock (41,630 shares)
    
    
    
    
    
    
    
    
    
    
    1,144
    
    
    
    1,396Restricted Stock Activity, net
    
    
    
    
    
    
    2,255
    
    
    
    424
    
    
    
    2,821Stock Based Compensation Activity, net
    
    
    
    
    
    
    
    
    
    
    3,527
    
    
    
    1,335Purchases of Treasury Stock (1,877,500 shares)
    
    
    
    
    
    
    
    
    
    
    (61,731
    )
    
    
    (61,731
    )Accumulated Other Comprehensive Income, net of tax effect
    
    
    12,925
    
    
    
    
    
    
    
    
    
    
    
    12,925Balance, March 31, 2003
    
    $
    30,916
    
    
    ($
    68,307
    )
    
    ($
    459,663
    )
    
    $
    1,532,087Balance, December 31, 2003
    
    ($
    2,044
    )
    
    ($
    91,789
    )
    
    ($
    624,675
    )
    
    $
    1,478,489Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,519Cash Dividends ($.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,988
    )Issuance of Stock (31,541 shares)
    
    
    
    
    
    
    
    
    
    
    893
    
    
    
    1,378Restricted Stock Activity, net
    
    
    
    
    
    
    3,287
    
    
    
    131
    
    
    
    3,495Stock Based Compensation Activity, net
    
    
    
    
    
    
    
    
    
    
    12,934
    
    
    
    9,987Purchases of Treasury Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated Other Comprehensive Income, net of tax effect
    
    
    33,899
    
    
    
    
    
    
    
    
    
    
    
    33,899Balance, March 31, 2004
    
    $
    31,855
    
    
    ($
    88,502
    )
    
    ($
    610,717
    )
    
    $
    1,583,779
 See accompanying notes to consolidated financial statements 6




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##### Table of Contents



Consolidated Statements of Comprehensive Income (Unaudited) Three Months EndedMarch 31,
    
    March 31,(in thousands)
    
    2004
    
    2003Net Income
    
    $
    102,519
    
    
    $
    103,539Other Comprehensive IncomeUnrealized Gains On Securities:Changes in Unrealized Gains Arising During The Period
    
    $
    67,100
    
    
    $
    17,892Less: Reclassification Adjustment For Gains Included in Net Income
    
    
    (7,888
    )
    
    
    (2,597
    )Changes in Unrealized Gains Arising During the Period
    
    
    59,212
    
    
    
    15,295Related Tax Effect on Unrealized Gains During the Period
    
    
    (25,462
    )
    
    
    (6,576
    )Net Change in Unrealized Gains Arising During the Period
    
    
    33,750
    
    
    
    8,719Unrealized Losses On Derivative Instruments:Changes in Unrealized Losses Arising During the Period
    
    
    (2,464
    )
    
    
    (2,984
    )Add: Reclassification Adjustment for Expenses/Losses Included in Net Income
    
    
    2,725
    
    
    
    10,364Changes in Unrealized Losses Arising During the Period
    
    
    261
    
    
    
    7,380Related Tax Effect on Unrealized Losses During the Period
    
    
    (112
    )
    
    
    (3,174
    )Net Change in Unrealized Losses Arising During the Period
    
    
    149
    
    
    
    4,206Net Other Comprehensive Income
    
    $
    33,899
    
    
    $
    12,925Comprehensive Income
    
    $
    136,418
    
    
    $
    116,464
 See accompanying notes to consolidated financial statements 7




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##### Table of Contents



North Fork Bancorporation, Inc.


CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 2004 and 2003 In this quarterly report filed on Form 10-Q, where the context requires, the
Company, North Fork, we, us, and our refer to North Fork
Bancorporation, Inc. and its subsidiaries. Note 1 - Summary of Significant Accounting Policies Nature of Operations We are a $22 billion bank holding company incorporated in Delaware since
1980 and registered as a bank holding company under the Bank Holding Company
Act. We are headquartered in Melville, New York, and our principal subsidiary,
North Fork Bank, is a New York state chartered bank. North Fork Bank operates
180 retail banking branches in the New York Metropolitan area, including one
branch in New Jersey. North Fork Banks assets and revenues represent
approximately 95% of our consolidated assets and revenues. North Fork Bank
provides banking and financial services to middle market and small businesses,
local government units and retail customers in our service area. Our non-bank
subsidiaries offer financial services such as asset management, trust,
securities brokerage, and related annuity and mutual fund products. Our other
bank subsidiary, Superior Savings of New England, N.A., is a nationally
chartered bank, headquartered in Connecticut, which operates from two locations
and focuses on gathering deposits throughout the northeast. Basis of Presentation Our accounting and reporting policies are in conformity with accounting
principles generally accepted in the United States of America. The preparation
of these unaudited interim consolidated financial statements, in conformity
with accounting principles generally accepted in the United States of America,
requires that management make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the unaudited interim consolidated financial
statements and the reported amounts of income and expenses during the reporting
period. Such estimates are subject to change in the future as additional
information becomes available or previously existing circumstances are
modified. Actual results could differ from those estimates. In managements
opinion, all adjustments have been made for a fair presentation of the
financial position and results of operations in these unaudited consolidated
interim financial statements. On January 1, 2004, we were required to adopt the accounting provisions of
FASB Interpretation No. 46, Consolidation of Variable Interest Entities
(revised December 2003), (FIN 46R). In accordance with the provisions of
FIN 46R, we were required to deconsolidate the wholly-owned statutory business
trusts (collectively, the Trusts) that were formed to issue Capital
Securities (or Trust Preferred Securities). This deconsolidation resulted in
the re-characterization of the underlying consolidated debt obligation from the
Capital Securities to the Junior Subordinated Debt securities that exist
between the Company and the Trusts that issued the Capital Securities. The
re-characterization was reflected for all periods presented in this report. The
adoption of FIN 46R had no effect on net income or stockholders equity. These unaudited interim consolidated financial statements and related
managements discussion and analysis should be read together with the
consolidated financial information in our 2003 Annual Report on Form 10-K/A,
previously filed with the United States Securities and Exchange Commission
(SEC). The purpose of the amended 2003 Annual Report filed on Form 10-K/A was
to clarify and enhance certain disclosures following a standard review by the
SEC. Our consolidated statements of financial position and consolidated
results of operations for the periods presented in our 2003 Annual Report filed
on Form 10-K/A were not restated from the consolidated financial position and
consolidated results of operations originally reported in our 2003 Annual
Report filed on Form 10-K. In reviewing and understanding the financial information contained herein
you are encouraged to read the significant accounting policies contained in
Note 1 - Summary of Significant Accounting Policies of our 2003 Annual Report
on Form 10-K/A. There have not been any significant changes in the factors or
methodology used in determining accounting estimates or applied in our critical
accounting policies since December 2003 that are material in relation to our
financial condition or results of operations. Of these policies, we believe
the most critical is the accounting for the allowance for loan losses (See
Critical Accounting Estimates  below). Results of operations for the three months ended March 31, 2004 are not
necessarily indicative of the results of operations which may be expected for
the full year 2004 or any future interim period. Critical Accounting Estimates Our policy with respect to the methodology used in the determination of
our periodic provisioning and the adequacy of the allowance for loan losses
involves a higher degree of complexity and requires us to make difficult and
subjective estimates about highly uncertain matters or the susceptibility of
such matters to change. The impact of the estimates and assumptions used in
assessing the adequacy of the allowance for loan losses could have a material
impact on our financial condition or results of operations. 8




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The allowance for loan losses is available to cover probable losses
inherent in the current loan portfolio. Loans, or portions thereof, deemed
uncollectible are charged to the allowance for loan losses, while recoveries,
if any, of amounts previously charged off are added to the allowance. Amounts
are charged off after giving consideration to such factors as the customers
financial condition, underlying collateral values and guarantees, and general
economic conditions. The evaluation process for determining the adequacy of the allowance for
loan losses and the periodic provisioning for estimated losses is undertaken on
a quarterly basis, but may increase in frequency should conditions arise that
would require our prompt attention. Conditions giving rise to such action are
business combinations or other acquisitions or dispositions of large quantities
of loans, dispositions of non-performing and marginally performing loans by
bulk sale or any development which may indicate an adverse trend. Recognition
is also given to the changed risk profile resulting from previous business
combinations, customer knowledge, results of ongoing credit-quality monitoring
processes and the cyclical nature of economic and business conditions. The loan portfolio is categorized according to collateral type, loan
purpose or borrower type (i.e. commercial, consumer). The categories used
include Multi-Family Mortgages, Residential Mortgages, Commercial Mortgages,
Commercial, Consumer, and Construction and Land, which are more fully described
in the section entitled Managements Discussion and Analysis  Loan
Portfolio. An important consideration is our concentration of real estate
related loans located in the New York Metropolitan area. The methodology employed for assessing the appropriateness of the
allowance consists of the following criteria:   Establishment of reserve amounts for specifically identified criticized
loans, including those arising from business combinations and those
designated as requiring special attention by our internal loan review
program, bank regulatory examinations or our external auditors
(specific-allowance method).   An allocation to the remaining loans giving effect to historical losses
experienced in each loan category, cyclical trends and current economic
conditions which may impact future losses (loss experience factor method). The initial allocation or specific-allowance methodology commences with
loan officers and underwriters grading the quality of their loans on a risk
classification scale ranging from 1 - 8. Loans identified as below investment
grade are referred to our independent Loan Review Department (LRD) for
further analysis and identification of those factors that may ultimately affect
the full recovery or collectibility of principal and/or interest. These loans
are subject to continuous review and monitoring while they remain in a
criticized category. Additionally, LRD is responsible for performing periodic
reviews of the loan portfolio independent from the identification process
employed by loan officers and underwriters. Loans that fall into criticized
categories are further evaluated for impairment in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 114,
Accounting by Creditors for Impairment of a Loan. The portion of the
allowance allocated to impaired loans is based on the most appropriate of the
following measures: discounted cash flows from the loan using the loans
effective interest rate, the fair value of the collateral for collateral
dependent loans, or the observable market price of the impaired loan. The remaining allocation applies a category specific loss experience
factor to loans which have not been specifically reviewed for impairment,
including smaller balance homogeneous loans that we have identified as
residential and consumer, which are not specifically reviewed for impairment.
These category specific factors give recognition to our historical loss
experience, as well as that of acquired businesses, cyclical trends, current
economic conditions and our exposure to real estate values. These factors are
reviewed on a quarterly basis with senior lenders to ensure that the factors
applied to each loan category are reflective of trends or changes in the
current business environment which may affect these categories. Upon completion of both allocation processes, the specific allowance and
loss experience factor allocations are combined, producing the allocation of
the allowance for loan losses by loan category. Other factors used to evaluate
the adequacy of the allowance for loan losses include the amount and trend of
criticized loans, results of regulatory examinations, peer group comparisons
and economic data associated with the relevant markets, specifically the local
real estate market. Because many loans depend upon the sufficiency of
collateral, any adverse trend in the relevant real estate markets, particularly
real estate in the New York Metropolitan area, could have a significant adverse
effect on the quality of our loan portfolio. This may lead management to
consider that the overall allowance level should be greater than the amount
determined by the allocation process described above. Accounting for Stock-Based Compensation We account for our stock-based compensation plans in accordance with the
requirements specified in SFAS No. 123 Accounting for Stock-Based
Compensation (SFAS 123), as amended by SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure (SFAS 148). As
permitted under these statements, we have elected to apply the intrinsic value
method in accounting for option-based stock compensation plans. Accordingly,
compensation expense has not been recognized in the accompanying consolidated
financial statements for stock-based compensation plans, other than for
restricted stock awards. Restricted stock awards are recorded as deferred
compensation, a component of stockholders equity, at the fair value of these
awards at the date of grant and are amortized to compensation expense over the
awards specified vesting periods. Since the intrinsic value method is used,
we are required to disclose the pro-forma impact on net income and earnings per
share that the fair value-based method would have had, if it was applied rather
than the intrinsic value method. Stock options are typically awarded at year
end and contain a nominal vesting period. Since the pro forma effect on net
income of expensing stock options during the three months ended March 31, 2004
and 2003 is nominal, we have not included such pro forma 9




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compensation expense and its related effect on net income. There would
be no related effect on pro forma earnings per share for the three months ended
March 31, 2004 and 2003. Segment Reporting SFAS
NO. 131 Disclosure about Segments of an Enterprise and
Related Information (SFAS 131) requires public
companies to report certain financial information about operating
segments for which such information is available and utilized by the
chief operating decision maker in deciding how to allocate resources
and in assessing performance. Specific information to be reported for
individual operating segments includes a measure of segment profit
and loss, total revenues, and segment assets. As a retail bank,
substantially all of our operations involve the issuance of loans and
the acceptance of customer deposits. Our Financial Services Division,
or Private Asset Group, includes discount brokerage,
investment management, insurance and annuity sales, and trust and
estate administration. The products in this segment are directed
toward existing bank customers and non-customers. Management has
segregated the budgeting and reporting of this segment from its
commercial bank, utilizing separate plans and measurements to
evaluate performance. The Private Asset Groups total revenues,
net income and total assets were approximately $4 million,
$1 million and $7.7 million for the period ended
March 31, 2004 and $3.2 million, $.5 million and
$5.3 million, respectively for the period ended March 31,
2003. The private asset groups total revenues, net income and
total assets comprise approximately 1%, 0.7% and 0.03%, respectively
of the consolidated totals for all period presented. NOTE 2  PENDING BUSINESS COMBINATIONS The Trust Company of New Jersey On December 16, 2003, we entered into a definitive agreement to acquire
The Trust Company of New Jersey (TCNJ) in an all stock transaction valued at
$726 million. Under the terms of the agreement, in a tax-free exchange of
shares, TCNJ shareholders will receive a fixed exchange ratio of one share of
our common stock for each common share of TCNJ held. TCNJ is a New Jersey state
chartered bank and is the fourth largest commercial bank headquartered in New
Jersey. TCNJ currently operates 95 retail bank branches, including 43
in-store supermarket branches, located principally in the affluent and
densely populated Northern New Jersey market. TCNJ recently closed 8
unprofitable in-store branches and is in the process of closing 20 additional
in-store branches prior to the merger date. TCNJ will be merged with and into
North Fork Bank. As of March 31, 2004 TCNJ reported $4.2 billion in total
assets, $2.2 billion in loans and $3.2 billion in deposits. We have received
all necessary regulatory approvals. A special meeting of TCNJ shareholders to
approve the merger will be held on May 13, 2004. The merger requires the
affirmative vote of 66 2/3% of shares outstanding; holders of approximately 42%
of TCNJ shares held by insiders have been committed to vote in favor of the
merger. We expect to complete the merger on May 14, 2004 and simultaneously
convert all systems. For additional information regarding the terms of the
merger and its pro forma impact on our financial statements, see amendment No.
2 to Form S-4 filed on April 12, 2004 with the Securities and Exchange
Commission. Additionally, we have filed TCNJs Form 10-Q for the period ended
March 31, 2004 on a Form 8-K dated May 4, 2004. GreenPoint Financial Corp. On February 15, 2004, we entered into a definitive agreement to acquire
GreenPoint Financial Corp. (GreenPoint) in an all stock transaction valued at
$6.3 billion. Under the terms of the agreement, in a tax-free exchange of
shares, GreenPoint shareholders will receive a fixed exchange ratio of 1.0514
shares of North Fork common stock for each common share of GreenPoint held.
GreenPoint operates two primary businesses, a retail bank (GreenPoint Bank) and
a national mortgage company (GreenPoint Mortgage Corp.). GreenPoint Bank is a
New York state chartered savings bank and the second largest thrift in the
Metropolitan New York area, where it operates through 90 retail bank branches.
GreenPoint Mortgage Corp. is a national mortgage company headquartered in
California. GreenPoint Mortgage Corp. originates a wide variety of A quality
residential mortgage loans. Their product menu includes agency qualifying
loans, Jumbo A mortgages and Specialty Alternative A mortgages. GreenPoint
Mortgage Corp. reported loan originations of $39 billion in 2003 through 29
office facilities located throughout the United States. Pursuant to the
agreement, GreenPoint will merge with and into North Fork Bancorporation, Inc.
and GreenPoint Bank will merge with and into North Fork Bank. As of March 31,
2004, GreenPoint reported $23.8 billion in total assets, $14.7 billion in loans
and $12.6 billion in customer deposits. The transaction is expected to close in
the third quarter of 2004, following receipt of all regulatory approvals and
certain other customary closing conditions. The merger agreement is also
subject to approval by the GreenPoint and North Fork shareholders. NOTE 3  SECURITIES PORTFOLIO The amortized cost and estimated fair values of available-for-sale and
held-to-maturity securities are as follows: March 31, 2004
    
    December 31, 2003
    
    March 31, 2003Available-for-Sale
    
    Amortized
    
    Fair
    
    Amortized
    
    Fair
    
    Amortized
    
    Fair(in thousands)
    
    Cost
    
    Value
    
    Cost
    
    Value
    
    Cost
    
    ValueCMO Agency Issuances
    
    $
    3,147,345
    
    
    $
    3,161,028
    
    
    $
    3,129,005
    
    
    $
    3,110,430
    
    
    $
    4,990,814
    
    
    $
    5,076,100CMO Private Issuances
    
    
    1,679,583
    
    
    
    1,688,505
    
    
    
    1,278,205
    
    
    
    1,276,049
    
    
    
    2,406,016
    
    
    
    2,379,669Agency Pass-Through Certificates
    
    
    1,249,088
    
    
    
    1,266,341
    
    
    
    1,240,897
    
    
    
    1,246,994
    
    
    
    652,134
    
    
    
    670,765State & Municipal Obligations
    
    
    706,583
    
    
    
    714,308
    
    
    
    700,307
    
    
    
    707,015
    
    
    
    407,814
    
    
    
    413,702Equity Securities (1)
    
    
    173,238
    
    
    
    176,950
    
    
    
    185,757
    
    
    
    194,345
    
    
    
    325,349
    
    
    
    326,563U.S. Treasury Securities
    
    
    103,604
    
    
    
    103,947
    
    
    
    55,750
    
    
    
    55,765
    
    
    
    35,975
    
    
    
    35,930U.S. Government Agencies Obligations
    
    
    5,984
    
    
    
    6,033
    
    
    
    2,310
    
    
    
    2,325
    
    
    
    80,460
    
    
    
    80,487Other Debt Securities
    
    
    572,313
    
    
    
    589,767
    
    
    
    534,114
    
    
    
    543,352
    
    
    
    532,973
    
    
    
    533,739$
    7,637,738
    
    
    $
    7,706,879
    
    
    $
    7,126,345
    
    
    $
    7,136,275
    
    
    $
    9,431,535
    
    
    $
    9,516,955
 (1) Amortized cost and fair value includes $68.2 million, $68.2 million and
$200 million in Federal Home Loan Bank stock at March 31, 2004, December 31,
2003 and March 31, 2003, respectively. 10




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March 31, 2004
    
    December 31, 2003
    
    March 31, 2003Held-to-Maturity
    
    Amortized
    
    Fair
    
    Amortized
    
    Fair
    
    Amortized
    
    Fair(in thousands)
    
    Cost
    
    Value
    
    Cost
    
    Value
    
    Cost
    
    ValueAgency Pass-Through Certificates
    
    $
    73,425
    
    
    $
    75,851
    
    
    $
    81,759
    
    
    $
    83,989
    
    
    $
    107,964
    
    
    $
    112,502State & Municipal Obligations
    
    
    53,494
    
    
    
    57,065
    
    
    
    54,732
    
    
    
    57,848
    
    
    
    64,921
    
    
    
    68,647CMO Private Issuances
    
    
    27,628
    
    
    
    27,789
    
    
    
    38,389
    
    
    
    38,129
    
    
    
    69,949
    
    
    
    71,302Other Debt Securities
    
    
    14,717
    
    
    
    14,678
    
    
    
    15,405
    
    
    
    15,346
    
    
    
    9,530
    
    
    
    9,530$
    169,264
    
    
    $
    175,383
    
    
    $
    190,285
    
    
    $
    195,312
    
    
    $
    252,364
    
    
    $
    261,981
 During the second and third quarters of 2003, we repositioned the balance
sheet to change our interest rate risk profile by reducing the
available-for-sale portfolio and related short term collateralized borrowings.
This decision reduced our exposure to extension risk and the potential for
significant unrealized losses in a rising interest rate environment. The
portfolio was reduced from its interim period high by approximately $3.0
billion, of which $1.1 billion was accomplished through sales and the remainder
through portfolio cash flows. (See Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations  Net Interest Income
Section for additional Information) We maintain a Bank Owned Life Insurance trust (commonly referred to as
BOLI). The BOLI trust, which insures consenting officer level employees, was
formed to offset future employee benefit related costs and to provide
additional benefits due to its tax-exempt nature. Approximately $238.7 million
in assets support the program, $223.4 million of which are included in the
available-for-sale portfolio. The BOLIs impact on net income has not been
significant through the first quarter of 2004. At March 31, 2004, securities carried at $3.5 billion were pledged to
secure securities sold under agreements to repurchase, other borrowings, and
for other purposes as required by law. Securities pledged under agreements
pursuant to which the collateral may be sold or repledged by the secured
parties approximated $2.0 billion, while securities pledged under agreements
pursuant to which the secured parties may not sell or repledge approximated
$1.5 billion at March 31, 2004. NOTE 4  LOANS The following table represents the components of the loan portfolio as of the
dates indicated: March 31,
    
    % of
    
    December 31,
    
    % of
    
    March 31,
    
    % of(dollars in thousands)
    
    2004
    
    Total
    
    2003
    
    Total
    
    2003
    
    TotalMulti-Family Mortgages
    
    $
    3,658,070
    
    
    
    29
    %
    
    $
    3,634,533
    
    
    
    29
    %
    
    $
    3,652,430
    
    
    
    32
    %Commercial Mortgages
    
    
    2,836,434
    
    
    
    22
    
    
    
    2,814,103
    
    
    
    23
    
    
    
    2,221,014
    
    
    
    19Residential Mortgages
    
    
    2,506,316
    
    
    
    20
    
    
    
    2,403,306
    
    
    
    20
    
    
    
    2,418,156
    
    
    
    22Commercial
    
    
    2,248,285
    
    
    
    18
    
    
    
    2,145,798
    
    
    
    17
    
    
    
    1,856,843
    
    
    
    16Consumer
    
    
    1,113,982
    
    
    
    9
    
    
    
    1,095,529
    
    
    
    9
    
    
    
    1,038,195
    
    
    
    9Construction & Land
    
    
    326,703
    
    
    
    2
    
    
    
    283,243
    
    
    
    2
    
    
    
    273,924
    
    
    
    2Total
    
    $
    12,689,790
    
    
    
    100
    %
    
    $
    12,376,512
    
    
    
    100
    %
    
    $
    11,460,562
    
    
    
    100
    %Less:Unearned Income & Deferred Costs
    
    
    30,837
    
    
    
    
    
    
    
    31,239
    
    
    
    
    
    
    
    25,139Loans, Net
    
    $
    12,658,953
    
    
    
    
    
    
    $
    12,345,273
    
    
    
    
    
    
    $
    11,435,423
 The loan portfolio is concentrated primarily in loans secured by real
estate located in the New York Metropolitan area. The segments of the real
estate portfolio are diversified in terms of risk and repayment sources. The
underlying collateral includes multi-family apartment buildings, residential 1
- 4 family homes and owner occupied/non-owner occupied commercial properties.
The risks inherent in this portfolio are dependent on both regional and general
economic stability, which affect property values and the financial well being
and creditworthiness of the borrowers. Included in residential mortgages are
loans held for sale totaling $3.2 million, $4 million and $17.6 million at
March 31, 2004, December 31, 2003 and March 31, 2003, respectively. 11




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Non-Performing Assets Non-performing assets include loans ninety days past due and still
accruing, non-accrual loans and other real estate. Other real estate consists
of properties acquired through foreclosure or deed in lieu of foreclosure.
Other real estate is carried at the lower of the recorded amount of the loan or
the fair value of the property based on the current appraised value adjusted
for estimated disposition costs. The following table presents the components of non-performing assets as of the
dates indicated: March 31,
    
    December 31,
    
    March 31,(in thousands)
    
    2004
    
    2003
    
    2003Loans Ninety Days Past Due and Still Accruing
    
    $
    2,153
    
    
    $
    2,268
    
    
    $
    2,776Non-Accrual Loans
    
    
    9,149
    
    
    
    11,072
    
    
    
    10,094Non-Performing Loans
    
    
    11,302
    
    
    
    13,340
    
    
    
    12,870Other Real Estate
    
    
    93
    
    
    
    313
    
    
    
    295Non-Performing Assets
    
    $
    11,395
    
    
    $
    13,653
    
    
    $
    13,165Allowance for Loan Losses to Non-Performing Loans
    
    
    1100
    %
    
    
    920
    %
    
    
    894
    %Allowance for Loan Losses to Total Loans, net
    
    
    .98
    
    
    
    .99
    
    
    
    1.01Non-Performing Loans to Total Loans, net
    
    
    .09
    
    
    
    .11
    
    
    
    .11Non-Performing Assets to Total Assets
    
    
    .05
    
    
    
    .07
    
    
    
    .06
 Future levels of non-performing assets will be influenced by prevailing
economic conditions and the impact of those conditions on our customers,
prevailing interest rates, unemployment rates, property values, pending
acquisitions and other internal and external factors. The following table represents the components of non-performing loans as of the
dates indicated: March 31,
    
    December 31,
    
    March 31,(in thousands)
    
    2004
    
    2003
    
    2003Commercial
    
    $
    5,471
    
    
    $
    5,632
    
    
    $
    5,603Residential Mortgages
    
    
    4,230
    
    
    
    4,808
    
    
    
    4,055Consumer
    
    
    1,568
    
    
    
    2,343
    
    
    
    2,472Commercial Mortgages
    
    
    33
    
    
    
    557
    
    
    
    634Multi-Family Mortgages
    
    
    
    
    
    
    
    
    
    
    106Construction and Land
    
    
    
    
    
    
    
    
    
    
    Total Non-Performing Loans
    
    $
    11,302
    
    
    $
    13,340
    
    
    $
    12,870
 Interest forgone on non-accrual loans, or the amount of income that would have
been recorded had these loans been current in accordance with their original
terms, aggregated approximately $.3 million for the quarter ended March 31,
2004. The amount of interest income included in net income on non-accrual
loans during the most recent quarter was not significant. As of March 31, 2004, there were no commitments to lend additional funds
to borrowers whose loans are non-performing. Additionally, there were no
restructured accruing loans outstanding as of the dates indicated above. 12




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##### Table of Contents



NOTE 5  ALLOWANCE FOR LOAN LOSSES The following table is a summary of the changes in the allowance for loan
losses and reflects charge-offs and recoveries by loan type for the periods
indicated: Three Months EndedMarch 31,
    
    December 31,
    
    March 31,(dollars in thousands)
    
    2004
    
    2003
    
    2003Balance at Beginning of Period
    
    $
    122,733
    
    
    $
    119,907
    
    
    $
    114,995Loans Charged-off:Consumer
    
    
    5,046
    
    
    
    3,846
    
    
    
    4,147Commercial
    
    
    2,430
    
    
    
    2,815
    
    
    
    4,037Commercial Mortgages
    
    
    
    
    
    
    
    
    
    
    1Residential Mortgages
    
    
    6
    
    
    
    28
    
    
    
    24Multi-Family Mortgages
    
    
    
    
    
    
    
    
    
    
    Construction and Land
    
    
    
    
    
    
    
    
    
    
    Total Charge-Offs
    
    
    7,482
    
    
    
    6,689
    
    
    
    8,209Recoveries of Loans Charged-Off:Consumer
    
    
    1,596
    
    
    
    1,696
    
    
    
    1,490Commercial
    
    
    517
    
    
    
    595
    
    
    
    372Commercial Mortgages
    
    
    500
    
    
    
    224
    
    
    
    Residential Mortgages
    
    
    
    
    
    
    
    
    
    
    189Multi-Family Mortgages
    
    
    
    
    
    
    
    
    
    
    Construction and Land
    
    
    
    
    
    
    
    
    
    
    Total Recoveries
    
    
    2,613
    
    
    
    2,515
    
    
    
    2,051Net Loans Charged-Off
    
    
    4,869
    
    
    
    4,174
    
    
    
    6,158Provision for Loan Losses
    
    
    6,500
    
    
    
    7,000
    
    
    
    6,250Balance at End of Period
    
    $
    124,364
    
    
    $
    122,733
    
    
    $
    115,087Annualized Net Charge-Offs to Average Loans, net
    
    
    0.16
    %
    
    
    0.14
    %
    
    
    0.22
    %
 NOTE 6  FEDERAL HOME LOAN BANK ADVANCES AND REPURCHASE AGREEMENTS The maturity or repricing frequency of Repurchase Agreements (Repos) and
Federal Home Loan Bank (FHLB) advances at March 31, 2004 is as follows: (in thousands)
    
    FHLB
    
    Average
    
    Repurchase
    
    Average
    
    
    
    
    
    Total AverageMaturity
    
    Advances
    
    Rate (1)
    
    Agreements
    
    Rate (1)
    
    Total
    
    Rate (1)2004
    
    $
    300,000
    
    
    
    2.47
    %
    
    $
    655,362
    
    
    
    1.45
    %
    
    $
    955,362
    
    
    
    1.77
    %2005
    
    
    400,000
    
    
    
    5.83
    
    
    
    300,000
    
    
    
    5.10
    
    
    
    700,000
    
    
    
    5.522006
    
    
    200,000
    
    
    
    4.67
    
    
    
    350,000
    
    
    
    2.57
    
    
    
    550,000
    
    
    
    3.332007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    50,000
    
    
    
    5.62
    
    
    
    400,000
    
    
    
    5.59
    
    
    
    450,000
    
    
    
    5.60Thereafter
    
    
    100,000
    
    
    
    5.90
    
    
    
    200,000
    
    
    
    6.02
    
    
    
    300,000
    
    
    
    5.98Total
    
    $
    1,050,000
    
    
    
    4.65
    %
    
    $
    1,905,362
    
    
    
    3.58
    %
    
    $
    2,955,362
    
    
    
    3.96
    %
  (1)
    
    Includes the effects of interest rate swaps. Interest rate swaps were used to convert certain FHLB advances and Repos
from variable rates to fixed rates. These swaps, which qualify as cash flow hedges are
explained in more detail in Notes to Consolidated Financial Statements
Note 9  Derivative Financial Instruments. The total average rate excluding
these swaps was 3.59%. 13




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##### Table of Contents



NOTE 7  SUBORDINATED DEBT The following table is a summary of Subordinated Notes outstanding as of the
dates indicated: March 31,
    
    December 31,
    
    March 31,(in thousands)
    
    2004
    
    2003
    
    20035.875% Subordinated Notes due August 15, 2012
    
    $
    349,252
    
    
    $
    349,229
    
    
    $
    349,1625.0% Subordinated Notes due August 15, 2012
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000Total Subordinated Debt
    
    
    499,252
    
    
    
    499,229
    
    
    
    499,162Fair Value Hedge Adjustment
    
    
    (10,850
    )
    
    
    (22,730
    )
    
    
    Carrying Amount
    
    $
    488,402
    
    
    $
    476,499
    
    
    $
    499,162
 We issued $350 million aggregate principal amount of 5.875% Subordinated
Notes and $150 million aggregate principal amount of 5% Fixed Rate/Floating
Rate Subordinated Notes in 2002. Both series of notes mature in 2012 and
qualify as Tier II capital for regulatory purposes. The 5.875% subordinated
notes bear interest at a fixed rate through maturity, pay interest
semi-annually and are not redeemable prior to maturity. The Fixed Rate/Floating
Rate Notes bear interest at a fixed rate of 5% per annum for the first five
years, and convert to a floating rate thereafter until maturity based on
three-month LIBOR plus 1.87%. Beginning in the sixth year, we have the right to
redeem the fixed rate/floating rate notes at par plus accrued interest. In 2003, $500 million in pay floating swaps, designated as fair value
hedges, were used to convert the stated fixed rate on the subordinated notes to
variable rates indexed to three-month LIBOR. (See Notes to Consolidated
Financial Statements Note 9  Derivative Financial Instruments for further
details). NOTE 8  JUNIOR SUBORDINATED DEBT The following table is a summary of Junior Subordinated Debt outstanding as of
the dates indicated: March 31,
    
    December 31,
    
    March 31,(in thousands)
    
    2004
    
    2003
    
    20038.70% Junior Subordinated Debt  North Fork Capital Trust I due December 15, 2026
    
    $
    102,818
    
    
    $
    102,815
    
    
    $
    102,8068.00% Junior Subordinated Debt  North Fork Capital Trust II due December 15, 2027
    
    
    102,788
    
    
    
    102,785
    
    
    
    102,7748.17% Junior Subordinated Debt  Reliance Capital Trust I due May 1, 2028
    
    
    46,547
    
    
    
    46,547
    
    
    
    46,547Total Junior Subordinated Debt  Capital Trusts
    
    
    252,153
    
    
    
    252,147
    
    
    
    252,127Fair Value Hedge Adjustment
    
    
    21,789
    
    
    
    14,830
    
    
    
    24,545Carrying Amount
    
    $
    273,942
    
    
    $
    266,977
    
    
    $
    276,672
 The Capital Trusts (Wholly-Owned Statutory Trusts) were formed with
initial capitalizations in common stock and for the exclusive purpose of
issuing Capital Securities (or Trust Preferred Securities) and using the
proceeds of both the common stock and Capital Securities to acquire Junior
Subordinated Debt Securities (Junior Subordinated Debt ) issued by the
Company. The Capital Securities are obligations of the Wholly-Owned Statutory
Business Trusts. The Junior Subordinated Debt and Capital Securities bear the
same interest rates, are due concurrently and are non-callable at any time in
whole or in part for ten years from the date of issuance, except in certain
circumstances. They may be redeemed annually thereafter, in whole or in part,
at declining premiums to maturity. The costs associated with these issuances
have been capitalized and are being amortized to maturity using the
straight-line method. On January 1, 2004, FIN 46R required us to deconsolidate our investment in
the Wholly-Owned Statutory Business Trusts. This deconsolidation resulted in
the re-characterization of the underlying consolidated debt obligation from
Capital Securities and the equity investment to the Junior
Subordinated Debt obligation that
existed between the Company and the Trusts that issued the securities.
Additionally, we were required to re-designate the $245 million of interest
rate swaps that were hedging the Capital Securities to a corresponding amount of
Junior Subordinated Debt. Interest rate swap agreements continue to be designated as fair value
hedges and based on this re-designation are being used to change the repricing
characteristics of $245 million in Junior Subordinated Debt from their stated
fixed rates to variable rates indexed to three-month LIBOR. (See Notes to
Consolidated Financial Statements  Note 9  Derivative Financial Instruments
for further details.) 14




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##### Table of Contents



The Capital Securities currently qualify as Tier I capital for regulatory
purposes, however, there can be no assurance that the Federal Reserve will
continue to allow institutions to include Capital Securities as a component of
Tier 1 Capital. As of March 31, 2004, we would still exceed the well
capitalized threshold under the regulatory framework for prompt corrective
action assuming the exclusion of these Capital Securities. NOTE 9  DERIVATIVE FINANCIAL INSTRUMENTS As part of our interest rate risk management process, we periodically
enter into interest rate derivative contracts. These derivative interest rate
contracts may include interest rate swaps, caps, and floors and are used to
modify the repricing characteristics of specific assets and liabilities. We
did not enter into or maintain interest rate caps/floors and collars as part of
our risk management strategy during the periods presented. The following table details the interest rate swaps and the associated hedged
liabilities outstanding as of March 31, 2004: Swap
    
    Swap(dollars in thousands)
    
    Hedged
    
    Notional
    
    Fixed
    
    VariableMaturity
    
    Liability
    
    Amounts
    
    Interest Rates
    
    Interest RatesPay Fixed Swaps2004
    
    FHLB Advances
    
    $
    100,000
    
    
    
    5.23
    %
    
    
    1.12
    %2005
    
    Repurchase Agreements
    
    
    100,000
    
    
    
    4.24%-4.26
    
    
    
    1.122008
    
    Repurchase Agreements
    
    
    75,000
    
    
    
    6.14
    
    
    
    1.13$
    275,000Pay Floating Swaps2007
    
    5.00%    Subordinated Notes
    
    $
    150,000
    
    
    
    5.00
    %
    
    
    3.42%-3.43
    %2012
    
    5.875%  Subordinated Notes
    
    
    350,000
    
    
    
    5.875
    
    
    
    3.422026
    
    8.70%    Junior Subordinated Debt
    
    
    100,000
    
    
    
    8.70
    
    
    
    2.812027
    
    8.00%    Junior Subordinated Debt
    
    
    100,000
    
    
    
    8.00
    
    
    
    2.182028
    
    8.17%    Junior Subordinated Debt
    
    
    45,000
    
    
    
    8.17
    
    
    
    3.91$
    745,000
 At March 31, 2004, $275 million in pay fixed swaps, designated as cash
flow hedges, were outstanding. These agreements change the repricing
characteristics of certain term borrowings, requiring us to make periodic fixed
rate payments and receive periodic variable rate payments indexed to
three-month LIBOR, based on a common notional amount and identical payment and
maturity dates. These swaps had original maturities of up to 10 years and, as
of the end of the period, had an unrealized loss of $13.3 million, which is
recorded as a component of other liabilities (the net of tax balance of $7.6
million is reflected in stockholders equity as a component of accumulated
other comprehensive income). The use of pay fixed swaps outstanding increased
interest expense by $2.7 million and $10.4 million in the first quarters of
2004 and 2003, respectively. The decline in swap related interest expense is
primarily due to the maturity of $850 million of these
interest rate swaps in June 2003. Based upon the current interest rate
environment, approximately $3.3 million of after tax loss is expected to be
reclassified from accumulated other comprehensive income during the next twelve
months. In June 2003, $350 million in pay floating swaps designated as fair value
hedges were used to convert the stated fixed rate on the 5.875% subordinated
notes to variable rates indexed to three-month LIBOR. The swap term and payment
dates match the related terms of the subordinated notes. In July 2003, $150
million in pay floating swaps designated as fair value hedges were used to
convert the stated fixed rate on the 5% subordinated notes to variable rates
indexed to three-month LIBOR. The swap term is for five years, matching the
period of time the subordinated notes pay a fixed rate. Beginning in the sixth
year, we have the right to redeem the fixed rate/floating rate notes at par
plus accrued interest or the interest rate converts to a spread over three
month LIBOR. At March 31, 2004, the negative fair value adjustment of $11.2
million (unrealized loss) on the swap agreements hedging $350 million of
subordinated notes is reflected as a component of other liabilities. The
carrying amount of the $350 million in subordinated notes was decreased by an
identical amount. The positive fair value adjustment of .4 million (unrealized
gain) on the swap agreements hedging $150 million of subordinated notes is
reflected as a component of other assets. The carrying amount of the $150
million in subordinated notes was increased by an identical amount. These swaps
reduced interest expense by approximately $2.7 million in the first quarter of
2004. There was no hedge ineffectiveness recorded in the Consolidated Statement
of Income on these transactions for all periods reported. Interest rate swap agreements were used to change the repricing
characteristics of $245 million in Junior Subordinated Debt from their stated
fixed rates to variable rates indexed to three-month LIBOR. The swaps,
designated as fair value hedges, contain payment dates, maturity dates and
embedded call options held by the counterparty (exercisable in approximately
four years), which are identical to the terms and call provisions contained in
the Junior Subordinated Debt. At March 31, 2004, the positive fair value
adjustment on the swap agreements hedging $200 million of Junior Subordinated
Debt was an unrealized gain totaling $22.5 million and is reflected as a
component of other assets. The carrying amount of the $200 million in Junior
Subordinated Debt was increased by an identical amount. The negative fair value
adjustment on the swap agreements hedging $45 million of Junior Subordinated
Debt was an unrealized loss totaling $.7 million and is reflected as a
component of other liabilities. The carrying amount of the $45 million in
Junior Subordinated Debt was decreased by an identical amount. 15




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##### Table of Contents



These swaps decreased interest expense by $3.4 million and $2.8 million in the
first quarter of 2004 and 2003, respectively. There was no hedge
ineffectiveness recorded in the Consolidated Statements of Income from these
transactions for all periods reported. As previously mentioned these swaps were
re-designated from Capital Securities to the Junior Subordinated Debt due to
the adoption of FIN 46R. All prior periods have been adjusted to reflect the re-designation. The use of derivative financial instruments creates exposure to credit
risk. This credit exposure relates to losses that would be recognized if the
counterparties fail to perform their obligations under the contracts. To
mitigate this exposure to non-performance, we deal only with counterparties of
good credit standing and establish counterparty credit limits. NOTE 10  OTHER COMMITMENTS AND CONTINGENT LIABILITIES Credit Related Commitments We extend traditional off-balance sheet financial products to meet the
financing needs of our customers. They include commitments to extend credit and
letters of credit. Funded commitments are reflected on the consolidated balance
sheets. Commitments to extend credit are agreements to lend to customers in
accordance with contractual provisions. These commitments usually have fixed
expiration dates or other termination clauses and may require the payment of a
fee. Total commitments outstanding do not necessarily represent future cash
flow requirements, since many commitments expire without being funded. Management evaluates each customers creditworthiness prior to issuing
these commitments and may also require certain collateral upon the extension of
credit based on managements credit evaluation. Collateral varies but may
include accounts receivable, inventory, property, plant and equipment, and
income-producing properties. Fixed rate commitments are subject to interest
rate risk based on changes in prevailing rates during the commitment period. We
are subject to credit risk in the event that the commitments are drawn upon and
the customer is unable to repay the obligation. Letters of credit are irrevocable commitments issued at the request of
customers. They authorize the beneficiary to draw drafts for payment in
accordance with the stated terms and conditions. Letters of credit substitute a
banks creditworthiness for that of the customer and are issued for a fee
commensurate with the risk. We typically issue two types of letters of credit: Commercial
(documentary) Letters of Credit and Standby Letters of Credit. Commercial
Letters of Credit are commonly issued to finance the purchase of goods and are
typically short term in nature. Standby letters of credit are issued to back
financial or performance obligations of a bank customer, and are typically
issued for periods up to one year. Due to their long-term nature, standby
letters of credit require adequate collateral in the form of cash or other
liquid assets. In most instances, standby letters of credit expire without
being drawn upon. The credit risk involved in issuing letters of credit is
essentially the same as extending credit facilities to comparable customers. The following table presents total commitments and letters of credit
outstanding at March 31, 2004: (in thousands)Commitments to Extend Credit
    
    $
    1,856,916Standby letters of Credit (1)
    
    
    221,892Commercial letters of Credit
    
    
    19,200
 (1) Standby letters of credit are considered guarantees in accordance with
the criteria specified by FIN 45. Standby letters of credit are reflected in
other liabilities in the accompanying consolidated balance sheet at their
estimated fair value of $1.3 million as of March 31, 2004. The fair value of
these instruments is recognized in income over the initial term of the
guarantee. NOTE 11  RETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS The components of net periodic benefit costs for the three months ended March
31, Pension Benefits
    
    Post-Retirement Benefits(in thousands)
    
    2004
    
    2003
    
    2004
    
    2003Components of Net Periodic Benefit Cost:Service Cost
    
    $
    953
    
    
    $
    875
    
    
    $
    183
    
    
    $
    144Interest Cost
    
    
    1,390
    
    
    
    1,386
    
    
    
    327
    
    
    
    312Expected Return on Plan Assets
    
    
    (1,815
    )
    
    
    (1,701
    )
    
    
    
    
    
    
    Amortization of Prior Service Cost
    
    
    (66
    )
    
    
    (66
    )
    
    
    (20
    )
    
    
    (20
    )Amortization of Transition Asset
    
    
    (107
    )
    
    
    (107
    )
    
    
    73
    
    
    
    73Recognized Actuarial Loss
    
    
    258
    
    
    
    212
    
    
    
    81
    
    
    
    59Net Periodic Benefit Cost
    
    $
    613
    
    
    $
    599
    
    
    $
    644
    
    
    $
    568
 16




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##### Table of Contents



As previously disclosed in our consolidated financial statements for the
year ended December 31, 2003 filed on Form 10-K/A, we do not expect to make a
contribution to the pension plan during 2004, but we do expect to make a $1.2
million contribution to the post-retirement plan during 2004. NOTE 12  RECENT ACCOUNTING PRONOUNCEMENTS Consolidation of Variable Interest Entities As described in Note 1, on January 1, 2004, we were required to adopt the
accounting provisions of FIN 46R and deconsolidate our Wholly-Owned Statutory Business Trusts
previously formed to issue Capital Securities (or Trust Preferred
Securities). This deconsolidation resulted in the re-characterization of the
underlying consolidated debt obligation from the Capital Securities and the related equity investments to
Junior Subordinated Debt obligations that exist between the Company and the
three wholly-owned trust entities that issued the securities. The adoption of
FIN 46R had no effect on net income or stockholders equity. In July 2003, the Board of Governors of the Federal Reserve issued
a supervisory letter instructing bank holding companies to continue to include
Trust Preferred Securities in Tier 1 capital for regulatory capital purposes
until further notice. On May 6, 2004, the Board of Governors of
the Federal Reserve System issued a notice of proposed rulemaking in
regards to Trust Preferred Securities and the definition of capital.
In general, the Board of Governors proposed to allow the continued
inclusion of outstanding and prospective issuances of Trust Preferred
Securities in Tier 1 capital of bank holding companies, subject
to stricter quantitative limits and qualitative standards. The
quantitative limits would become effective after a three year
transition period (See Federal Reserve System 12 CFR
Parts 208 and 225 for further details). As of March 31, 2004, assuming
we no longer included the Capital Securities issued by North Fork Capital Trust
I, North Fork Capital Trust II, and Reliance Capital Trust I in Tier 1 capital,
we would still exceed the well capitalized threshold under the regulatory
framework for prompt corrective action. (See Notes to Consolidated Financial
Statements  Footnote 8  Junior Subordinated Debt for additional
information). Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity (SFAS 150).
SFAS 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. SFAS 150 requires that an issuer classify a financial instrument that
is within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. SFAS 150 was effective
immediately for financial instruments entered into or modified after May 31,
2003; otherwise, it was effective for all existing contracts on July 1, 2003.
However, the effective date of the statements provisions related to the
classification and measurement of certain mandatorily redeemable
non-controlling interests has been deferred indefinitely by the FASB, pending
further Board action. Adoption of SFAS 150 did not have a material effect on
our consolidated financial statements. Application of Accounting Principles to Loan Commitments In March, 2004, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 105, Application of Accounting Principles to Loan
Commitments (SAB 105). SAB 105 provides recognition guidance for entities
that issue loan commitments that are required to be accounted for as derivative
instruments. SAB 105 indicates that the expected future cash flows related to
the associated servicing of the loan and any other internally-developed
intangible assets should not be considered when recognizing a loan commitment
at inception or through its life. SAB 105 also discusses disclosure
requirements for loan commitments and is effective for loan commitments
accounted for as derivatives and entered into subsequent to March 31, 2004.
Currently, loan commitments that we would be required to account for as
derivative instruments under SAB 105 are insignificant. However, due to the
pending acquisition of GreenPoint Financial Corp., which includes GreenPoint
Mortgage Corp., a national mortgage company, we are presently
evaluating the potential impact of applying the requirements of SAB 105. 17




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations Forward-Looking Statements This document, including information incorporated by reference, contains
forward-looking statements (as that term is defined in the Private Securities
Litigation Reform Act of 1995). In addition, senior management may make
forward-looking statements orally to analysts, investors, the media, and
others. These forward looking statements may be identified by the use of such
words as: believe, expect, anticipate, intend, plan, estimate, or
words of similar meaning, or future or conditional terms such as will,
would, should, could, may, likely, probably, or possibly. Examples of forward-looking statements include, but are not limited to,
estimates or projections with respect to our future financial condition,
expected or anticipated revenues, results of operations and our business, with
respect to:  
    
    projections of revenues, income, earnings per share, capital
expenditures, assets, liabilities, dividends, capital structure, or
other financial items;
    
    statements regarding the adequacy of the allowance for loan
losses or other reserves;
    
    descriptions of plans or objectives of management for future
operations, products, or services, including pending acquisition
transactions;
    
    costs or difficulties related to the integration of the business
of The Trustcompany of New Jersey (TCNJ) and GreenPoint Financial
Corp. (GreenPoint) may be greater than expected;
    
    expected cost savings and revenue enhancements from the pending
acquisitions may not be fully realized or realized within the expected
time frame;
    
    forecasts of future economic performance; and
    
    descriptions of assumptions underlying or relating to any of the foregoing. By their nature, forward-looking statements are subject to risks and
uncertainties. There are a number of factors, many of which are beyond our
control, that could cause actual conditions, events, or results to differ
significantly from those described in the forward-looking statements. Factors which could cause or contribute to such differences include, but
are not limited to:  
    
    general business and economic conditions on both a regional and national level;
    
    worldwide political and social unrest, including acts of war and terrorism;
    
    competitive pressures among financial services companies may increase significantly;
    
    changes in the interest rate environment may reduce interest margins;
    
    changes may occur in the securities and bond markets;
    
    legislative or regulatory changes may adversely affect the businesses in which we are engaged;
    
    technological changes, including the impact of the Internet;
    
    monetary and fiscal policies of the U.S. Government, including
policies of the U.S. Treasury and the Federal Reserve Board and;
    
    accounting principles, policies, practices or guidelines. Any forward-looking statements made in this report or incorporated by reference
in this report are made as of the date of this report, and, except as required
by applicable law, we assume no obligation to update the forward-looking
statements or to update the reasons why actual results could differ from those
projected in the forward-looking statements. You should consider these risks
and uncertainties in evaluating forward-looking statements and you should not
place undue reliance on these statements. 18




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##### Table of Contents



Financial Summary Overview Selected financial highlights for the three months ended March 31, 2004 and
2003 are set forth in the table below. The succeeding discussion and analysis
describes the changes in components of operating results. Three Months EndedMarch 31,
    
    March 31,(in thousands, except ratios & per share amounts)
    
    2004
    
    2003Earnings:Net Income
    
    $
    102,519
    
    
    $
    103,539Per Share:Earnings Per Share  Basic
    
    $
    .69
    
    
    $
    .67Earnings Per Share  Diluted
    
    
    .68
    
    
    
    .67Cash Dividends
    
    
    .30
    
    
    
    .27Dividend Payout Ratio
    
    
    45
    %
    
    
    41
    %Book Value
    
    $
    10.35
    
    
    $
    9.75Average Equivalent Shares  Basic
    
    
    148,269
    
    
    
    153,929Average Equivalent Shares  Diluted
    
    
    150,246
    
    
    
    155,476Selected Ratios:Return on Average Total Assets
    
    
    1.96
    %
    
    
    1.94
    %Return on Average Stockholders Equity
    
    
    26.58
    
    
    
    27.22Yield on Interest Earning Assets
    
    
    5.57
    
    
    
    6.12Cost of Funds
    
    
    1.62
    
    
    
    2.15Net Interest Margin
    
    
    4.33
    
    
    
    4.36Efficiency Ratio (1)
    
    
    35.41
    
    
    
    32.60
 (1) The efficiency ratio is used by the financial services
industry to measure an organizations operating efficiency. The
efficiency ratio represents non-interest expense excluding
amortization of identifiable intangible assets to net interest
income on a tax equivalent basis and non-interest income,
excluding securities gains. Net Income Net income for the current quarter was $102.5 million or diluted earnings per
share of $.68 compared to $103.5 million or $.67 diluted earnings per share in
2003. Returns on average equity and assets during the quarter were 26.6% and
1.96%, respectively, compared to 27.2% and 1.94% in 2003. Net Interest Income Net interest income is the difference between interest income earned on assets,
such as loans and securities and interest expense incurred on liabilities, such as
deposits and borrowings. Net interest income constituted 83% of total revenue (defined as net
interest income plus non-interest income) for the period. Net interest income
is affected by the level and composition of assets, liabilities and equity, as
well as the general level of interest rates and changes in interest rates. Net interest margin is determined by dividing tax equivalent net interest
income by average interest-earning assets. The interest rate spread is the
difference between the average equivalent yield earned on interest-earning
assets and the average rate paid on interest-bearing liabilities. The net
interest margin is generally greater than the interest rate spread due to the
additional income earned on those assets funded by non-interest-bearing
liabilities, primarily demand deposits, and stockholders equity. 19




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##### Table of Contents



The following table presents an analysis of net interest income (on a tax
equivalent basis) by each major category of interest earning assets and
interest-bearing liabilities for the three months ended March 31,: 2004
    
    2003Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    Average(dollars in thousands )
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    RateInterest Earning Assets:Securities (1)
    
    $
    7,212,411
    
    
    $
    78,963
    
    
    
    4.40
    %
    
    $
    8,592,607
    
    
    $
    105,249
    
    
    
    4.97
    %Loans, net (2)
    
    
    12,474,528
    
    
    
    194,615
    
    
    
    6.27
    
    
    
    11,397,521
    
    
    
    197,269
    
    
    
    7.02Money Market Investments
    
    
    81,144
    
    
    
    241
    
    
    
    1.19
    
    
    
    58,218
    
    
    
    254
    
    
    
    1.77Total Interest Earning Assets
    
    
    19,768,083
    
    
    
    273,819
    
    
    
    5.57
    %
    
    
    20,048,346
    
    
    
    302,772
    
    
    
    6.12Non Interest Earning Assets:Cash and Due from Banks
    
    
    533,395
    
    
    
    
    
    
    
    
    
    
    
    409,424Other Assets (1)
    
    
    759,254
    
    
    
    
    
    
    
    
    
    
    
    1,205,844Total Assets
    
    $
    21,060,732
    
    
    
    
    
    
    
    
    
    
    $
    21,663,614Interest Bearing Liabilities:Savings, NOW & Money Market Deposits
    
    $
    8,515,206
    
    
    $
    15,011
    
    
    
    .71
    %
    
    $
    6,819,813
    
    
    $
    14,760
    
    
    
    .88
    %Time Deposits
    
    
    2,794,364
    
    
    
    10,736
    
    
    
    1.55
    
    
    
    3,125,404
    
    
    
    15,156
    
    
    
    1.97Total Savings and Time Deposits
    
    
    11,309,570
    
    
    
    25,747
    
    
    
    .92
    
    
    
    9,945,217
    
    
    
    29,916
    
    
    
    1.22Federal Funds Purchased & Securities Sold
Under Agreements to Repurchase
    
    
    1,975,446
    
    
    
    16,281
    
    
    
    3.31
    
    
    
    4,168,852
    
    
    
    28,658
    
    
    
    2.79Federal Home Loan Bank Advances
    
    
    1,050,000
    
    
    
    12,322
    
    
    
    4.72
    
    
    
    1,550,000
    
    
    
    18,957
    
    
    
    4.96Subordinated Debt (4)
    
    
    476,511
    
    
    
    4,545
    
    
    
    3.84
    
    
    
    499,151
    
    
    
    7,225
    
    
    
    5.87Junior Subordinated Debt (4)
    
    
    266,980
    
    
    
    1,939
    
    
    
    2.92
    
    
    
    276,661
    
    
    
    2,511
    
    
    
    3.68Total Borrowings
    
    
    3,768,937
    
    
    
    35,087
    
    
    
    3.74
    
    
    
    6,494,664
    
    
    
    57,351
    
    
    
    3.58Total Interest Bearing Liabilities
    
    
    15,078,507
    
    
    
    60,834
    
    
    
    1.62
    
    
    
    16,439,881
    
    
    
    87,267
    
    
    
    2.15Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.95
    %
    
    
    
    
    
    
    
    
    
    
    3.97
    %Non-Interest Bearing LiabilitiesDemand Deposits
    
    $
    4,077,535
    
    
    
    
    
    
    
    
    
    
    $
    3,281,234Other Liabilities
    
    
    353,261
    
    
    
    
    
    
    
    
    
    
    
    399,779Total Liabilities
    
    
    19,509,303
    
    
    
    
    
    
    
    
    
    
    
    20,120,894Stockholders Equity
    
    
    1,551,429
    
    
    
    
    
    
    
    
    
    
    
    1,542,720Total Liabilities and Stockholders Equity
    
    $
    21,060,732
    
    
    
    
    
    
    
    
    
    
    $
    21,663,614Net Interest Income and Net Interest Margin (3)
    
    
    
    
    
    
    212,985
    
    
    
    4.33
    %
    
    
    
    
    
    
    215,505
    
    
    
    4.36
    %Less: Tax Equivalent Adjustment
    
    
    
    
    
    
    (6,156
    )
    
    
    
    
    
    
    
    
    
    
    (6,055
    )Net Interest Income
    
    
    
    
    
    $
    206,829
    
    
    
    
    
    
    
    
    
    
    $
    209,450
  (1)
    
    Unrealized gains/(losses) on available-for-sale securities are
recorded in other assets.(2)
    
    For purposes of these computations, non-accrual loans are included in
average loans.(3)
    
    Interest income on a tax equivalent basis includes the additional amount
of income that would have been earned if investments in tax exempt money
market investments and securities, state and municipal obligations,
non-taxable loans, public equity and debt securities, and U.S. Treasuries
had been made in securities and loans subject to Federal, State, and Local
income taxes yielding the same after-tax income. The tax equivalent
amount for $1.00 of those aforementioned categories was $1.77, $1.68,
$1.55, $1.18, and $1.17 for the three months ended March 31, 2004; and
$1.77, $1.65, $1.55, $1.23, and $1.06 for the three months ended March 31,
2003.(4)
    
    For purposes of these computations, the fair value adjustments from
hedging activities are included in the average balance of the related
hedged item and the impact of the hedge is included as an adjustment of
interest expense. 20




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##### Table of Contents



The following table highlights the relative impact on tax equivalent net
interest income brought about by changes in average interest earning assets and
interest bearing liabilities as well as changes in average rates on such assets
and liabilities. Due to the numerous simultaneous volume and rate changes
during the periods analyzed, it is not possible to precisely allocate changes
to volume or rate. For presentation purposes, changes which are not solely due
to changes in volume or rate have been allocated to these categories based on
the respective percentage changes in average volume and average rates as they
compare to each other. Three Months Ended March 31,2004 vs.
2003Change inAverage
    
    Average
    
    Net Interest(in thousands)
    
    Volume
    
    Rate
    
    IncomeInterest Income from Earning Assets:Securities
    
    ($
    14,960
    )
    
    ($
    11,326
    )
    
    ($
    26,286
    )Loans, net
    
    
    18,633
    
    
    
    (21,287
    )
    
    
    (2,654
    )Money Market Investments
    
    
    84
    
    
    
    (97
    )
    
    
    (13
    )Total Interest Income
    
    
    3,757
    
    
    
    (32,710
    )
    
    
    (28,953
    )Interest Expense on Liabilities:Savings, NOW & Money Market Deposits
    
    $
    3,368
    
    
    ($
    3,117
    )
    
    $
    251Time Deposits
    
    
    (1,450
    )
    
    
    (2,970
    )
    
    
    (4,420
    )Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase
    
    
    (17,117
    )
    
    
    4,740
    
    
    
    (12,377
    )Federal Home Loan Bank Advances
    
    
    (5,769
    )
    
    
    (866
    )
    
    
    (6,635
    )Subordinated Debt
    
    
    (310
    )
    
    
    (2,370
    )
    
    
    (2,680
    )Junior Subordinated Debt
    
    
    (83
    )
    
    
    (489
    )
    
    
    (572
    )Total Interest Expense
    
    
    (21,361
    )
    
    
    (5,072
    )
    
    
    (26,433
    )Net Change in Net Interest Income
    
    $
    25,118
    
    
    ($
    27,638
    )
    
    ($
    2,520
    )
 The following table summarizes the net interest margin components over the last
several quarters. Factors contributing to the net interest margin are outlined
in the succeeding discussion and analysis. 2004
    
    20031st Qtr
    
    4th Qtr
    
    3rd Qtr
    
    2nd Qtr
    
    1st QtrInterest Earning Assets:Securities
    
    
    4.40
    %
    
    
    4.29
    %
    
    
    3.84
    %
    
    
    4.15
    %
    
    
    4.97
    %Loans, net
    
    
    6.27
    
    
    
    6.47
    
    
    
    6.62
    
    
    
    6.73
    
    
    
    7.02Money Market Investments
    
    
    1.19
    
    
    
    .93
    
    
    
    1.34
    
    
    
    1.54
    
    
    
    1.77Total Interest Earning Assets
    
    
    5.57
    %
    
    
    5.64
    %
    
    
    5.56
    %
    
    
    5.60
    %
    
    
    6.12
    %Interest Bearing Liabilities:Total Savings and Time Deposits
    
    
    .92
    %
    
    
    .95
    %
    
    
    1.01
    %
    
    
    1.12
    %
    
    
    1.22
    %Total Borrowings
    
    
    3.74
    
    
    
    3.72
    
    
    
    3.30
    
    
    
    3.31
    
    
    
    3.58Total Interest Bearing Liabilities
    
    
    1.62
    %
    
    
    1.66
    %
    
    
    1.67
    %
    
    
    1.97
    %
    
    
    2.15
    %Interest Rate Spread
    
    
    3.95
    %
    
    
    3.98
    %
    
    
    3.89
    %
    
    
    3.63
    %
    
    
    3.97
    %Net Interest Margin
    
    
    4.33
    
    
    
    4.39
    
    
    
    4.23
    
    
    
    4.00
    
    
    
    4.36
 The current quarters net interest income declined $2.6 million compared
to the first quarter of 2003 while the net interest margin declined
modestly from
4.36% to 4.33% and we reduced our reliance on wholesale borrowings. Commencing
the second half of 2002 through May 2003, we implemented a strategy to leverage
our excess capital by adding approximately $3 billion in mortgage-backed
securities funded principally with short-term borrowings and $500 million in
subordinated debt proceeds. This decision capitalized on the prevailing
interest rate environment and attractive spreads between these assets and
liabilities and increased our net interest income. However, the sustained
nature of the lowest interest rate environment experienced in over 40 years led
to an accelerated contraction of our net interest margin during the second
quarter of 2003. This was due primarily to increased prepayment activity
experienced in all earning asset categories and the impact of replacing these
earning assets with new origination volumes at lower interest rates. In June
2003, the prospect of a near term economic recovery coupled with the
historically low returns on reinvestment opportunities led us to reevaluate our
capital management strategy. To improve our net 21




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interest margin and strengthen our interest rate risk profile, we revised
our capital management strategy and repositioned our balance sheet by
reducing our securities portfolio by approximately $3 billion through sales and
portfolio cash flows. The securities proceeds received during the third quarter
of 2003 were used to reduce short-term borrowings. Our balance sheet
repositioning strategy was completed during the third quarter 2003 and, as
depicted in the quarterly net interest margin table above, contributed to the
improvement in our net interest margin for the second half of 2003 and into
2004. In addition, as part of this June 2003 plan, the Board of Directors
approved an increase in our share repurchase program, authorizing the
repurchase of up to 8 million shares, or 5% of the shares outstanding (See
Managements Discussion & Analysis  Capital for further details). Interest income in the first quarter of 2004 declined $29 million to
$267.7 million compared to $296.7 million in 2003. During this same period, the
yield on average interest earning assets declined 55 basis points from 6.12% to
5.57%. Loans averaged $12.5 billion in the current quarter representing a $1.1
billion increase or 9.4% when compared to 2003, while yields declined 75 basis
points to 6.27%. This yield compression offset the positive effects of higher
average loan balances. Factors contributing to the overall decline in yields
include new originations and refinancing activity occurring at lower market
rates, increased prepayment activity, and adjustable rate loans resetting
downward. While we have experienced loan growth in all categories it has been
concentrated in higher yielding commercial loans which also contributed to core
commercial deposit growth. As of March 31, 2004, the loans-to-deposits ratio
was 79%, demonstrating that sufficient liquidity exists to fund further loan
growth with deposits. We anticipate that organic loan growth for the remainder
of 2004 will approximate prior years experience. Securities averaged $7.2 billion in the current quarter representing a
$1.4 billion or 16% decrease when compared to 2003, yields also declined 56
basis points to 4.40%. The decrease in average securities is a direct result of
our June 2003 balance sheet restructuring strategy, partially offset by the
investment of funds derived from our strong deposit growth. Portfolio yields
and interest income were negatively impacted as portfolio cash flows and
security purchases were invested at lower yields. To mitigate extension risk,
we have been purchasing short duration securities that by their nature have
lower yields. During the first quarter of 2003, yields and income were
negatively impacted by a significant increase in prepayment activity, which
shortened the anticipated lives and accelerated premium amortization; however,
this had less of an impact in 2004 when net premium amortization affected
security yields by 48 basis points compared to 90 basis points in 2003. As
market interest rates continue to stabilize or rise in the future, prepayment
activity should continue to decline, extending the anticipated lives of
mortgage backed securities and reducing related premium amortization. These
factors have had and continue to have a positive effect on securities portfolio
yield. Average interest bearing liabilities decreased $1.4 billion to $15.1
billion, while overall funding costs declined 53 basis points to 1.62%. The
negative effects of lower asset yields were offset by a decrease in our cost of
funds, a direct result of the replacement of short-term borrowings with lower
costing core deposits. Average demand deposits grew $796 million or 24% to $4.1 billion during
the first quarter of 2004 and had a positive impact on our net interest margin.
Total demand deposits contributed 68 basis points to our net interest margin
this quarter compared to 46 basis points in the same period of 2003. At period
end, demand deposits represented 27% of total deposits. Average Savings, NOW
and Money Market deposits increased $1.7 billion or 25% to $8.5 billion, while
the corresponding cost of funds declined 17 basis points to .71%. Core deposits
(defined as Demand, Savings, NOW and Money Market deposits) have traditionally
provided us with a low cost funding source, which benefits our net interest
margin and income. The benefits of growing core deposits have been mitigated by
the sustained low interest rate environment. However, these deposits enhance
the value of our franchise and should mitigate the potential effects rising
interest rates may have on our net interest income and the margin. Average time
deposits and their related cost declined $331 million and 42 basis points,
respectively from the prior year quarter. We believe that certain time deposit
customers are only attracted by rate and not customer service. We do not
actively compete in our market for these time deposits since their average cost
is significantly higher than our average core deposit costs. Average total borrowings declined $2.7 billion to $3.8 billion in the
first quarter 2004 compared to 2003, while the related cost of funds increased
16 basis points to 3.74%. Average borrowings represented 25% of total interest
bearing liabilities as compared to 40% during the first quarter of 2003. The
decline in average borrowings is a direct result of our June 2003 balance sheet
restructuring strategy and the growth in core deposits. At March 31, 2004,
collateralized borrowings (repurchase agreements and FHLB advances) maturing or
repricing in less than one year totaled $1.3 billion and had a weighted average
cost of 1.87%. Collateralized borrowings with a weighted average maturity of
3.2 years totaled $1.7 billion and had a weighted average cost of 5.50%.
Certain collateralized borrowings were extended and their costs fixed through
the use of interest rate swaps, which increased interest expense by
approximately $2.7 million and $10.4 million for the first quarter of 2004 and
2003, respectively. The decline in swap related interest expense is primarily
due to the maturity of $850 million of these interest rate swaps in June 2003.
(See Notes to Consolidated Financial Statements  Note 9  Derivative
Financial Instruments for additional information). During the latter part of 2003, we used interest rate swaps to convert
$500 million of Subordinated Debt from fixed to floating indexed
to three-month
LIBOR. For the first quarter of 2004, these swaps decreased interest expense
by approximately $2.7 million. Interest rate swaps were also used to convert
$245 million in Junior Subordinated Debt from fixed to floating indexed to
three-month LIBOR. For the first quarter of 2004 and 2003, these swaps
decreased interest expense by approximately $3.4 million and $2.8 million,
respectively (See Notes to Consolidated Financial Statements  Note 9 
Derivative Financial Instruments for additional information). 22




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##### Table of Contents



Provision and Allowance for Loan Losses The provision for loan losses totaled $6.5 million for the first quarter
of 2004, an increase of $.3 million when compared to the same period of 2003.
As of March 31, 2004, the ratio of the allowance for loan losses to
non-performing loans was 1100% and the allowance for loan losses to total loans
was .98%. Net Charge-offs, as an annualized percentage of average loans, was
16 basis points in the 2004 first quarter. The increases in both the provision
and the allowance for loan losses are consistent with the overall growth in the
loan portfolio and our provisioning policy. (See Notes to the Consolidated
Financial Statements Note-1 - Summary of Significant Accounting Policies 
Critical Accounting Estimates for additional information). Non-Interest Income Non-Interest Income increased $7.5 million or 22% to $41.7 million in the
first quarter of 2004 compared to $34.2 million in 2003. Contributing to this
growth was a $1.6 million improvement in customer related fees and service
charges to $21.8 million resulting from continued growth in core deposits
(primarily demand deposits), expansion of both our retail and commercial
customer base and a broadened use of fee based services. Investment
management, commissions and trust fees increased $ .8 million or 26%, as we
benefited from increased customer demand for mutual funds and annuity products.
Other operating income increased $1.3 million or 28% from the sale of other
real estate owned. Securities gains recognized during the first quarter of
2004 were $7.9 million as compared to $2.6 million in prior year period. Gains
recognized during 2004 were derived principally from the sale of equity
securities in a publicly traded financial institution while gains recognized
during 2003 were derived primarily from the sale of certain corporate debt
securities. Growth in other income was partially offset by a $1.7 million
decline in mortgage banking income reflecting decreased origination and
refinancing activity from record highs during 2003. Non-Interest Expense Non-interest expense increased $6.9 million or 8.5% to $87.4 million in
the first quarter of 2004 compared to $80.6 million for the first quarter of
2003. Contributing to the increase was an additional $3.7 million in employee
compensation and benefits and $2.1 million in occupancy and equipment costs.
Employee compensation and benefits rose 7.9% due to the hiring of additional
employees to support new business initiatives, including de novo branches,
annual merit increases, increased health insurance and pension costs and growth
in incentive based compensation linked to deposit and fee income generation.
Total incentive based compensation represented approximately 25% of total
employee compensation and benefits during the period. Increases in occupancy
and equipment costs are due to the opening of new branches, investments in
existing facilities, technology upgrades, the implementation of new business
initiatives and support systems. We have made, and will continue to make,
significant capital investments in technology and delivery channels to provide
our customers with a wide array of easy to use and competitively priced
products and services. For the three months ended March 31, 2004, we have
invested approximately $8.8 million in facilities and $4.7 million in
technology and equipment. The efficiency ratio, representing the ratio of non-interest expense
excluding amortization of identifiable intangible assets to net interest income
on a tax equivalent basis and non-interest income, excluding securities gains,
was 35.41% in the first quarter of 2004, as compared to 32.60% for the same
period of 2003. Income Taxes Our effective tax rates for the three months ended March 31, 2004 and 2003
were 33.7% and 34%, respectively. We anticipate that the effective tax rate
for the full year of 2004 will approximate the current quarters level. Financial Condition Loan Portfolio Loans grew $1.2 billion or 10.7% to $12.7 billion for the quarter ended
March 31, 2004, compared to $11.4 billion at March 31, 2003. We have
experienced strong loan demand despite slow paced growth in the local economy.
The commercial and commercial mortgage portfolios, which increased $1.0 billion
or 25% during the period, have benefited from our expanded presence in the New
York City market, our small business lending initiatives, and robust equipment
and lease financing activity. We focus on these higher yielding and interest
rate sensitive loans that also generate core deposit relationships.
Multi-family loan balances have remained constant due to our decision not to
compete with the more liberal underwriting terms and rate structures offered by
certain competitors, as we maintain rigorous underwriting standards.
Residential mortgages growth has been tempered as the majority of fixed rate
originations during 2003 were sold into the secondary market, generating
additional mortgage banking income during 2003. Consumer loans have benefited
from the expansion of the geographic footprint of our automobile financing
activities. We believe that organic loan growth for the balance of 2004 will be
consistent with 2003 levels. We extend loans almost exclusively within the New York Metropolitan area,
and do not participate in nationally syndicated loan arrangements. Mortgage
loans are secured by real estate in the New York Metropolitan area. The
segments of the real estate portfolio are diversified in terms of risk and
repayment sources. The underlying collateral includes multi-family apartment
buildings, residential 1 - 4 family homes and owner occupied/non-owner occupied
commercial properties. The risks inherent in these portfolios are dependent on
both regional and general economic stability, which affect property values, and
our borrowers financial well being and creditworthiness. 23




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##### Table of Contents



The risk inherent in the mortgage portfolio is minimized by prudent
underwriting standards and diversification in loan collateral type and
location. Multi-family mortgages, collateralized by various types of apartment
complexes located in the New York Metropolitan area, are largely dependent on
sufficient rental income to cover operating expenses. They may be affected by
rent control or rent stabilization regulations, which could impact future cash
flows of the property. Most multi-family mortgages do not fully amortize;
therefore, the principal outstanding is not significantly reduced prior to
contractual maturity. Residential mortgages represent first liens on owner
occupied 1  4 family residences located primarily in our market area.
Commercial mortgages are secured by professional office buildings, retail
stores, shopping centers and industrial developments. Real estate underwriting standards include various limits on loan-to-value
ratios based on property types, real estate location, property condition,
quality of the organization managing the property, and the borrowers
creditworthiness. They also include the viability of the project including
occupancy rates, tenants and lease terms. Additionally, underwriting standards
require appraisals, periodic property inspections and ongoing monitoring of
operating results. Commercial loans are made to small and medium sized businesses and loans
collateralized by security interests in lease finance receivables. The
commercial mortgage and commercial loan portfolios contain no foreign loans to
developing countries (LDC). Consumer loans consist primarily of new and used
automobile loans originated through a network of automobile dealers. The credit
risk in auto lending is dependent on the borrowers creditworthiness and
collateral values. The average consumer loan is generally between $15  $25
thousand and has a contractual life of approximately 60 months. The consumer
loan portfolio does not contain higher risk credit card or sub prime loans.
Land loans are used to finance the acquisition of vacant land for future
residential and commercial development. Construction loans finance the building
and rehabilitation of residential and multi-family projects, and to a lesser
extent, commercial developments. The construction and land development
portfolios do not contain any high-risk equity participation loans (AD&C
loans). We are selective in originating loans, emphasizing conservative lending
practices and fostering customer deposit relationships. Our success in
attracting new customers while leveraging our existing customer base, coupled
with over-consolidation within our market area and the current interest rate
environment have contributed to sustained loan demand. We periodically monitor our underwriting standards to ensure that the
quality of the loan portfolio and commitment pipeline is not jeopardized by
unrealistic loan to value ratios or debt service levels. To date, there has
been no deterioration in the performance or risk characteristics of our real
estate loan portfolio. Securities Portfolio At March 31, 2004, Mortgage Backed Securities (MBS) represented 79% of
total securities, providing continuous sources of cash flow that are affected
by changes in interest rates. MBSs represent pass-through certificates
guaranteed by GNMA, FHLMC or FNMA and collateralized mortgage-backed
obligations (CMOs) backed by government agency pass-through certificates or
whole loans. CMOs, by virtue of the underlying collateral or structure, are
AAA rated and conservative current pay sequentials or PAC structures. Our strategy for managing the current MBS portfolio is to maintain a short
weighted average life and duration. This short average life provides us with
cash flows to proactively manage as market conditions change. Cash flows may be
reinvested in securities at current market rates, utilized to pay off short
term borrowings, and/or fund loan growth. The weighted average life and
duration of the MBS portfolio was 2.5 and 2.3 years, respectively at March 31,
2004. At April 30, 2004, the MBS portfolios unrealized loss,
weighted average life and duration was $67 million, 4.0 years and 3.3 years, respectively. The yield and fair value of securities, specifically the MBS portfolio,
are impacted by changes in market interest rates and related prepayment
activity. Given our current portfolio composition, related prepayment activity
should decrease in a rising interest rate environment, extending the
portfolios weighted average life. Accordingly, net premiums on the portfolio
would be amortized into income over a longer period of time, generating
increased MBS portfolio yields and net interest income. Conversely, the
opposite would occur in a declining interest rate environment. At March 31,
2004, net premiums total $56 million and represented approximately 1% of the
outstanding balance of MBSs. Municipal securities represent a combination of short term debentures
issued by local municipalities (purchased as part of a strategy to expand
relationships with these governmental entities) and highly rated obligations of
New York State and related authorities. Equity securities held in the
available-for-sale portfolio include Federal Home Loan Bank common stock, and
common and preferred stock of certain publicly traded companies. Other
securities held in the available-for-sale portfolio include capital securities
(trust preferred securities) of certain financial institutions and corporate
bonds. When purchasing securities, we consider the overall interest-rate risk
profile as well as the adequacy of expected returns relative to risks assumed,
including prepayments. In managing the securities portfolio, we may sell
securities as a result of changes in interest rates and spreads, actual or
anticipated prepayments, credit risk associated with a particular security,
and/or following the completion of a business combination. 24




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##### Table of Contents



Deposits Total deposits increased $2.6 billion or 19% to $15.9 billion at March 31,
2004, compared to the same period in 2003, despite a $368 million decline in
time deposits. We have focused our efforts on growing core deposits (demand,
savings, NOW and money market deposits). We do not actively compete for higher
costing time deposits as we believe that customers seeking these products are
only attracted by rate and not customer service. Excluding time deposits, core
deposits at March 31, 2004 increased $2.9 billion or 29% when compared to March
31, 2003. The primary factors contributing to core deposit growth include: (I)
the continued expansion of our retail branch network, (II) the ongoing branch
upgrade program providing for greater marketplace identity, accessibility and
convenience, (III) commercial loan growth and (IV) incentive based compensation
linked to deposit growth. Over the past several years, our goal has been to expand in Manhattan
where growth has outpaced all other regions. These deposits comprised 24% of
total deposits and accounted for 52% of deposit growth over the 12 month period
ended March 31, 2004. We believe that this over-consolidated, yet fragmented
market provides opportunities to grow our commercial banking business. The
following table presents the composition of total deposits and highlights
Manhattan activity at the dates indicated: March 31,
    
    December 31,
    
    March 31,(in thousands)
    
    2004
    
    2003
    
    2003ManhattanDemand
    
    $
    1,113,988
    
    
    $
    1,027,017
    
    
    $
    705,742Interest Bearing
    
    
    2,701,020
    
    
    
    2,267,543
    
    
    
    1,783,522Total
    
    $
    3,815,008
    
    
    $
    3,294,560
    
    
    $
    2,489,264All Other LocationsDemand
    
    $
    3,119,538
    
    
    $
    3,053,117
    
    
    $
    2,654,143Interest Bearing
    
    
    9,008,942
    
    
    
    8,768,438
    
    
    
    8,229,041Total
    
    $
    12,128,480
    
    
    $
    11,821,555
    
    
    $
    10,883,184TotalDemand
    
    $
    4,233,526
    
    
    $
    4,080,134
    
    
    $
    3,359,885Interest Bearing
    
    
    11,709,962
    
    
    
    11,035,981
    
    
    
    10,012,563Total
    
    $
    15,943,488
    
    
    $
    15,116,115
    
    
    $
    13,372,448
 Commercial demand deposit balances aggregated $2.8 billion or 67% of total
demand deposits as compared to $2.2 billion or 64% of total demand deposits at
March 31, 2003. Once again, these advances were fueled by our expanded branch
network, especially the Manhattan locations, and our strong commercial loan
growth. At
March 31, 2004, we operated from 180 branch locations, 27 located in
Manhattan. Our expansion strategy coupled with the continued maturity of
existing branches and our commercial loan growth, should result in continued
deposit growth during 2004. Asset/Liability Management The net interest margin is directly affected by changes in the level of
interest rates, the shape of the yield curve, the relationship between rates,
the impact of interest rate fluctuations on asset prepayments, the level and
composition of assets and liabilities, and the credit quality of the loan
portfolio. Our asset/liability objectives are to maintain a strong, stable net
interest margin, to utilize our capital effectively without taking undue risks,
and to maintain adequate liquidity. The risk assessment program includes a coordinated approach to the
management of liquidity, capital, and interest rate risk. This process is
governed by policies and limits established by senior management, which are
reviewed at least annually by the Board of Directors. The Asset/Liability
Committee of the Board of Directors (ALCO) provides guidance for asset/
liability activities. ALCO periodically evaluates the impact of changes in
market interest rates on interest earning assets and interest bearing
liabilities, net interest margin, capital and liquidity, and evaluates
managements strategic plan. The balance sheet structure is primarily
short-term with most assets and liabilities repricing or maturing in less than
five years. We monitor the sensitivity of net interest income by utilizing a
dynamic simulation model complemented by a traditional gap analysis. The simulation model measures the volatility of net interest income to
changes in market interest rates. Simulation modeling involves a degree of
estimation based on certain assumptions that we believe to be reasonable.
Factors considered include contractual maturities, prepayments, repricing
characteristics, deposit retention and the relative sensitivity of assets and
liabilities to changes in market interest rates and cash flows from derivative
instruments. The Board has established certain policy limits for the potential
volatility of net interest income as projected by the simulation model.
Volatility is measured from a base case where rates are assumed to be flat and
is expressed as the percentage change, from the base case, in net interest
income over a twelve-month period. As of March 31, 2004, we were operating
within policy limits. 25




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##### Table of Contents



The simulation model is kept static with respect to the composition of the
balance sheet and, therefore does not reflect our ability to proactively manage
in changing market conditions as demonstrated by our June 2003 balance sheet
restructuring (See Managements Discussion and Analysis  Net Interest Income
for further details). We may choose to extend or shorten the maturities of our
funding sources. We may also choose to redirect cash flows into assets with
shorter or longer durations or repay borrowings. As part of our overall
interest rate risk management strategy, we periodically use derivative
instruments to minimize significant unplanned fluctuations in earnings and cash
flows caused by interest rate volatility. The interest rate risk management
strategy can involve modifying the repricing characteristics of certain assets
and liabilities utilizing interest rate swaps, caps and floors. We did not
enter into or maintain interest rate caps/floors and collars as part of our
risk management strategy during this period. (See Notes to Consolidated
Financial Statements  Note 9  Derivative Financial Instruments for
additional information on all derivative transactions). The assumptions used are inherently uncertain and, as a result, we cannot
precisely predict the impact of changes in interest rates on net interest
income. Actual results may differ significantly from those presented due to the
timing, magnitude and frequency of interest rate changes, changes in market
conditions and interest rate differentials (spreads) between maturity/
repricing categories, prepayments, and any actions we may take to counter such
changes. The specific assumptions utilized in the simulation model include:  
    
    Parallel yield curve shifts for market rates (i.e. treasuries, LIBOR, swaps, etc.) with an assumed floor of 50 basis points.
    
    Maintenance of our current asset and liability spreads to market interest rates.
    
    Savings and money market deposit rates experience a 40% impact of
market interest rate movements after 3 months and have a floor of 15 and
25 basis points, respectively.
    
    Now deposit rates experience a 15% impact of market interest rate
movements immediately and have a floor of 10 basis points. The following table reflects the estimated change in projected net
interest income for the next twelve months assuming a gradual increase or
decrease in interest rates over a twelve-month period: Changes in Net Interest Income(dollars in millions)
    
    $Change
    
    % ChangeChange in Interest Rates+ 200 Basis Points
    
    $
    (6.3
    )
    
    
    (0.71
    )%+ 100 Basis Points
    
    
    (1.2
    )
    
    
    (0.13
    )- 100 Basis Points
    
    
    (5.1
    )
    
    
    (0.57
    )Board Policy Limit
    
    
    N/A
    
    
    
    (10.00
    )
 Our philosophy for interest rate risk management is to limit the
variability of net interest income in future periods under various interest
rate scenarios. Another measure we monitor is based on market risk. Market risk
is the risk of loss from adverse changes in market prices primarily driven by
changes in interest rates. We calculate the value of assets and liabilities
using net present value analysis with upward and downward changes (shocks) of
200 basis points to market interest rates. The net changes in the calculated
values of the assets and liabilities are tax affected and reflected as an
impact to the market value of equity. The following table reflects the estimated change in the market value of
equity assuming an immediate increase or decrease in interest rates. Market Value of Equity(dollars in millions)
    
    $ Change
    
    % ChangeChange in Interest Rates+ 200 Basis Points
    
    
    (152
    )
    
    
    (3.6
    )%Flat Interest Rates
    
    
    
    
    
    
    - 200 Basis Points
    
    
    (167
    )
    
    
    (4.0
    )%Board Policy
Limit
    
    
    N/A
    
    
    
    (40
    )%
 The market value of equity changes exhibits a lack of symmetry (i.e.
market values decline in both rising and declining rate scenarios) due to the
current low interest rate environment as our short term liability rates do not
benefit from the full impact of rate decreases. Therefore, these liabilities do
not experience the same price decline as our assets. 26




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##### Table of Contents



Liquidity Risk Management The objective of liquidity risk management is to meet our financial obligations
and capitalize on new business opportunities. These obligations include the
payment of deposits on demand or at their contractual maturity, the repayment
of borrowings as they mature and the ability to fund new and existing loans and
investments as opportunities arise. Our primary funding source is dividends from North Fork Bank. There are
various federal and state banking laws and guidelines limiting the extent to
which a bank subsidiary can finance or otherwise supply funds to its holding
company. At March 31, 2004, dividends for North Fork Bank were limited under
such guidelines to $854 million. From a regulatory standpoint, North Fork
Bank, with its current balance sheet structure, had the ability to dividend
approximately $475 million, while still meeting the criteria for designation
as a well-capitalized institution under existing regulatory capital guidelines.
Additional sources of liquidity for the Company include borrowings, the sale of
available-for-sale securities, and funds available through the capital markets. Customer deposits are the primary source of liquidity for our banking
subsidiaries. Other sources of liquidity at the bank level include loan and
security principal repayments and maturities, lines-of-credit with certain
financial institutions, the ability to borrow under repurchase agreements,
Federal Home Loan Bank (FHLB) advances utilizing unpledged mortgage backed
securities and certain mortgage loans, the sale of available-for-sale
securities and the securitization or sale of loans. Our banking subsidiaries currently have the ability to borrow an
additional $6.5 billion on a secured basis, utilizing mortgage related loans
and securities as collateral. At March 31, 2004, our banking subsidiaries had
$1.3 billion in advances and repurchase agreements outstanding with the FHLB. We also maintain arrangements with correspondent banks to provide
short-term credit for regulatory liquidity requirements. These available lines
of credit aggregated $2.1 billion at March 31, 2004. We continually monitor our liquidity position as well as the liquidity
positions of our bank subsidiaries and believe that sufficient liquidity exists
to meet all of our operating requirements. Capital We are subject to the risk based capital guidelines administered by bank
regulatory agencies. The guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and
bank holding companies, to account for off-balance sheet exposure and to
minimize disincentives for holding liquid assets. Under these guidelines,
assets and certain off-balance sheet items are assigned to broad risk
categories, each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk weighted assets and certain
off-balance sheet items. The guidelines require all banks and bank holding
companies to maintain a minimum ratio of total risk based capital to total risk
weighted assets (Total Risk Adjusted Capital) of 8%, including Tier 1 capital
to total risk weighted assets (Tier 1 Capital) of 4% and a Tier 1 capital to
average total assets (Leverage Ratio) of at least 4%. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly additional
discretionary actions by regulators, that, if undertaken, could have a direct
material effect on us. The regulatory agencies have amended the risk-based capital guidelines to
provide for interest rate risk consideration when determining a banking
institutions capital adequacy. The amendments require institutions to
effectively measure and monitor their interest rate risk and to maintain
capital adequate for that risk. As of March 31, 2004, the most recent notification from the various
regulators categorized the Company and our subsidiary banks as well capitalized
under the regulatory framework for prompt corrective action. Under the capital
adequacy guidelines, a well capitalized institution must maintain a Total Risk
Adjusted Capital Ratio of at least 10%, a Tier 1 Capital Ratio of at least 6%,
a Leverage Ratio of at least 5%, and not be subject to any written order,
agreement or directive. Since such notification, there are no conditions or
events that management believes would change this classification. On
May 6, 2004, the Board of Governors of the Federal Reserve
System issued a notice of proposed rulemaking in regards to Trust
Preferred Securities and the definition of capital. In general, the
Board of Governors proposed to allow the continued inclusion of
outstanding and prospective issuances of Trust Preferred Securities
in Tier 1 capital of bank holding companies, subject to stricter
quantitative limits and qualitative standards. The quantitative
limits would become effective after a three year transition period
(See Federal Reserve System 12 CFR Parts 208 and
225 for further details). As of March 31, 2004, we
would still exceed the well capitalized threshold under the regulatory
framework for prompt corrective action assuming the exclusion of Capital
Securities from Tier 1 Capital. 27




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##### Table of Contents



The following table sets forth our risk-based capital amounts and ratios as of: March 31, 2004
    
    March 31, 2003(dollars in thousands )
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTier 1 Capital
    
    $
    1,373,865
    
    
    
    10.61
    %
    
    $
    1,319,631
    
    
    
    10.94
    %Regulatory Requirement
    
    
    517,873
    
    
    
    4.00
    %
    
    
    482,523
    
    
    
    4.00
    %Excess
    
    $
    855,992
    
    
    
    6.61
    %
    
    $
    837,108
    
    
    
    6.94
    %Total Risk Adjusted Capital
    
    $
    1,998,159
    
    
    
    15.43
    %
    
    $
    1,934,426
    
    
    
    16.04
    %Regulatory Requirement
    
    
    1,035,745
    
    
    
    8.00
    %
    
    
    965,045
    
    
    
    8.00
    %Excess
    
    $
    962,414
    
    
    
    7.43
    %
    
    $
    969,381
    
    
    
    8.04
    %Risk Weighted Assets
    
    $
    12,946,817
    
    
    
    
    
    
    $
    12,063,065
 Our Leverage Ratio at March 31, 2004 and 2003 was 6.66% and 6.22%,
respectively. North Fork Banks Tier 1, Total Risk Based and Leverage Ratios
were 12.77%, 13.75%, and 8.00%, respectively, at March, 31, 2004. Superior
Savings of New Englands Tier 1, Total Risk Based and Leverage Ratios were
16.33%, 16.91% and 7.04%, respectively, at March 31, 2004. On March 23, 2004, the Board of Directors declared its regular quarterly
cash dividend of $.30 per common share. The dividend will be payable on May 17,
2004 to shareholders of record at the close of business on April 30, 2004. In June 2003, the Board of Directors approved an increase in our share
repurchase program from the previously authorized level of 4 million shares to
8 million shares, representing 5% of the shares outstanding at such time. As of
March 31, 2004, we had purchased 5.2 million shares at an average cost of
$34.58 per share under this program. Total shares repurchased during 2003 under
existing repurchase programs aggregated 7.8 million shares at an average cost
per share of $33.80. Repurchases are made in the open market or through
privately negotiated transactions. There were no shares repurchased during the
first quarter of 2004. There are various federal and state banking laws and guidelines limiting
the extent to which a bank subsidiary can finance or otherwise supply funds to
its holding company. Federal Reserve Board policy provides that, as a matter of prudent
banking, a bank holding company generally should not maintain a rate of cash
dividends unless its net income available to common stockholders is sufficient
to fund the dividends, and the prospective rate of earnings retention appears
to be consistent with the holding companys capital needs, asset quality and
overall financial condition. In addition, among other things, dividends from a
New York-chartered bank, such as North Fork Bank, are limited to the banks net
profits for the current year plus its prior two years retained net profits. Under federal law, a depository institution is prohibited from paying a
dividend if the depository institution would thereafter be undercapitalized
as determined by the federal bank regulatory agencies. The relevant federal
regulatory agencies and the state regulatory agency, the Banking Department,
also have the authority to prohibit a bank or bank holding company from
engaging in what, in the opinion of such regulatory body, constitutes an unsafe
or unsound practice in conducting its business. Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act passed in 2002 imposes significant new responsibilities
on publicly held companies, particularly in the area of corporate governance.
We have responded to the various requirements of the Act and the implementing
regulations issued by the Securities and Exchange Commission and The New York
Stock Exchange. We have taken those steps to reinforce our corporate governance
structure and financial reporting procedures that are mandated under the Act
and will continue to observe full compliance in upcoming periods. We have
always emphasized best practices in corporate governance as the most effective
way of assuring stockholders that their investment is properly managed and
their interests remain paramount. Future Legislation From time to time legislation is introduced in Congress and state legislatures
with respect to the regulation of financial institutions. Such legislation may
change our operating environment and the operating environment of our
subsidiaries in substantial and unpredictable ways. We cannot determine the
ultimate effect that potential legislation, if enacted, or implementing
regulations, would have on our financial condition or results of operations or
on our shareholders. 28




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk The information required by this item is contained throughout Item 2,
Managements Discussion and Analysis of Financial Condition and Results of
Operations and is incorporated by reference herein. 
 Item 4. Controls and Procedures (a) Disclosure Controls and Procedures. The Companys management, with
the participation of the Companys Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Companys disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of
the end of the period covered by this report. Based on such evaluation, the
Companys Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Companys disclosure controls and
procedures are effective in recording, processing, summarizing and reporting on
a timely basis, information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act, including this report. (b) Internal Control Over Financial Reporting. There have not been any
changes in the Companys internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
the fiscal quarter to which this report relates that have materially affected,
or are reasonably likely to materially affect, the Companys internal control
over financial reporting. 29




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##### Table of Contents



PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings The Company is commonly subject to various pending and threatened legal actions
relating to the conduct of its normal business activities. In the opinion of
management, the ultimate aggregate liability, if any, arising out of any such
pending or threatened legal actions will not be material to the consolidated
financial position or results of operations of the Company. 
 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities The following table provides common stock repurchases made by us or on our
behalf during the period: Average
    
    Total Number of
    
    Maximum Number ofTotal Number of
    
    Price
    
    Shares Purchased as
    
    Shares that May YetShares Purchased
    
    Paid Per
    
    Part of Publicly
    
    Be Purchased UnderPeriod
    
    (1)
    
    Share
    
    Announced Program
    
    the Program (2)January 1, 2004  January 31, 2004
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    2,829,100 SharesFebruary 1, 2004 - February 29, 2004
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    2,829,100 SharesMarch 1, 2004 - March 31, 2004
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    2,829,100 Shares
  (1)
    
    We did not repurchase shares of our common stock during the first
quarter of 2004, pursuant to the repurchase program (the Program) that
we publicly announced in June 2003.(2)
    
    In June 2003, our board of directors approved the repurchase of up to
8 million shares of our common stock, which represented 5% of the shares
outstanding at such time. Unless terminated earlier by resolutions of
our board of directors, the Program will expire when we have repurchased
all shares authorized for repurchase under the program. 
 Item 6. Exhibits and Reports on Form 8-K  (a)
    
    The following exhibits are submitted herewith: Exhibit Number
    
    Description of Exhibit(11)
    
    Statement Re: Computation of Net
Income Per Common and Common Equivalent Share(31.1)
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(31.2)
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(32.1)
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(32.2)
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  (b)
    
    Reports on Form 8-K We filed the following Current Reports on Form 8-K during the period from
January 1, 2004 to the date of the filing of this Report:  
    
    On May 4, 2004, we filed a Current Report on Form 8-K, dated
May 4, 2004 announcing that The Trust Company of New Jersey filed its
quarterly report on Form 10-Q for the quarter ended March 31,
2004.
    
    On April 23, 2004, we filed a Current Report on Form 8-K, dated
April 23, 2004 announcing that The Trust Company of New Jersey
declared a dividend of $.18 cents per share, payable May 12, 2004 to TCNJ
shareholders as of April 30, 2004.
    
    On April 15, 2004, we filed a Current Report on Form 8-K, dated
April 15, 2004 announcing our operating results for the first quarter
ended March 31, 2004.
    
    On April 2, 2004, we filed a Current Report on Form 8-K, dated
April 2, 2004 announcing that we received regulatory approval from
the New York State Banking Department to acquire The Trust Company of
New Jersey.
    
    On March 31, 2004, we filed a Current Report on Form 8-K, dated
March 31, 2004 announcing that portions of the proxy statement of The
Trust Company of New Jersey were incorporated by reference in The
Trust Company of New Jerseys Annual Report Form 10-K for the year
ended December 31, 2003.
    
    On March 9, 2004, we filed a Current Report on Form 8-K, dated
March 9, 2004 announcing we will be presenting at the Sandler ONeill
& Partners West Coast Financial Services Conference. 30




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##### Table of Contents




    
    On March 8, 2004, we filed a Current Report on Form 8-K, dated
March 8, 2004 announcing that we filed by consent, consolidated
financial statements for GreenPoint Financial Corp. for the years
ended December 31, 2003, 2002 and 2001.
    
    On March 4, 2004, we filed a Current Report on Form 8-K, dated
March 4, 2004 announcing that we filed pro forma financial
information and consent of independent accountants for The Trust
Company of New Jersey.
    
    On March 2, 2004, we filed a Current Report on Form 8-K, dated
March 2, 2004 announcing that we will be presenting at the KBW
Eastern Regional bank Symposium on March 3, 2004.
    
    On February 17, 2004, we filed a Current Report on Form 8-K,
dated February 17, 2004 announcing that we have signed a definitive
agreement to acquire GreenPoint Financial Corp. in a deal valued at
$6.4 billion.
    
    On February 11, 2004, we filed a Current Report on Form 8-K,
dated February 11, 2004 announcing that we will be presenting at the
Credit Suisse First Boston 2004 Financial Services Conference on
February 11, 2004 at 1:30 pm (ET)
    
    On January 26, 2004, we filed a Current Report on Form 8-K,
dated January 26, 2004 announcing that we will be presenting at the
Smith Barney Financial Services Conference on January 27, 2004 at 2:45 pm
(ET)
    
    On January 15, 2004, we filed a Current Report on Form 8-K,
dated January 15, 2004 announcing our operating results for the
quarter ended December 31, 2003. 31




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. Date:May 10, 2004
    North Fork Bancorporation, Inc./s/ Daniel M. HealyDaniel M. HealyExecutive Vice President and
Chief Financial Officer 32